TMI Blog2008 (11) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... spite of differences between the two groups, the Company has been performing very well and the financial position of the Company is very sound. The Company has made huge profits in the past and has grown by leaps and bounds. Even if the Court were to consider the issue of mismanagement of the Respondent No. 1 Company as has been found earlier, that even if all the acts complained of are taken into account as it is, singularly or together, no case is made out that it is just and equitable to wind up the Respondent Company. As already adverted to all the grounds complained of by the Petitioners which according to them constitute case of oppression and mismanagement. As aforesaid, even if the said acts constituted oppression or mismanagement, were not sufficient to hold that the Respondent Company be wound up on the ground that it is just and equitable to do so within the meaning of section 433(1)(f) of the Act. W.P. fails - COMPANY PETITION NO. 77 OF 1990 - - - Dated:- 14-11-2008 - A.M. KHANWILKAR, J. Kevic Setalvad, Cyrus Bharucha, Nusrat Hassan and Sidhartha Srivastava for the Petitioner. Vinod Bobde, Kumar Desai, Shyam Mudaliar, Shehzad A.K. Najam-es-Sani, Reza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The respondent No. 1 had a paid-up capital of 2,000 shares of Rs. 100 each (total Rs. 2,00,000). The holding of the erstwhile three partners, predecessor of the present petitioners (Rutton Kavasmaneck), the respondent No. 2 (Dr. Keki Hormusji Gharda) and the third partner (Mrs. Coomi Warden) was 600 shares, 1,100 shares and 300 shares respectively. In terms of percentage, they respectively, held 30:55:15 shares of the Company. When the respondent No. 1-company was incorporated, the predecessor of the present petitioners had credit balance in Rutton Kavasmaneck s capital account with the partnership firm in the sum of Rs. 2,90,000 (Rupees Two Lakhs Ninety Thousand). However, he chose to invest only Rs. 60,000 (Rupees Sixty Thousand) for purchasing 600 shares towards his capital contribution in the respondent No. 1-company. He deposited Rs. 1,80,000 (Rupees One Lakh Eighty Thousand) with the respondent No. l-company on interest basis. That deposit was later on returned by the respondent No. l-company on 30-6-1968. The predecessor of the present petitioners (Rutton Kavasmaneck) withdrew the balance amount of Rs. 50,000 (Rupees Fifty Thousand) lying in his capital account of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to section 293 of the Act) to the extent of Rs. 20 crores. However, no notice of the purported meeting was given to the petitioners or any of them. Besides, it is stated that company had huge free reserves and had no expansion plan or proposal which would warrant any borrowing by the company as purportedly authorised. In other words, the purported Resolution was not in the interests of the company, for which reason, the Resolution was void and of no effect. It is then stated that the company issued a notice dated 4-12-1989 informing the shareholders that the Annual General Meeting of the Company would be convened on 29-12-1989 to consider the Accounts as on 30-6-1989, to declare the dividend and to reappoint the third Respondent Director who had retired by rotation and eligible for reappointment, to appoint Auditors. According to the petitioners, the original second petitioner and one Dr. Rebello (the father of petitioners 6 and 7) who held shares in the company jointly with petitioners 6 and 7, had attended the Registered Office of the Company on 29-12-1989 where the meeting was to be held. But found that neither respondent No. 2 nor respondent No. 3 were present nor any shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the second respondent to introduce abovesaid items to be considered in the Extraordinary General Meeting convened on 15-2-1990 was to achieve indirectly which he could not do directly in 1989. This conduct of the second respondent was by reason of his brute majority in mala fide and fraudulent exercise of majority powers. It is then stated that the Company is in effect a glorified partnership promoted by the second respondent and deceased Rutton Kavasmaneck predecessor of the present Petitioners. Such acts of the respondent No. 2 destroyed the fundamental basis of the Company on which the Company was incorporated and registered. The Petitioners assert that there was loss of mutual confidence and trust between the Petitioners group (minority group) and the second respondent and his management of the first respondent-company. The second respondent was bent upon to rest complete control of the company by systematically excluding the Petitioners group from the management of the Company and even from the membership thereof and by diluting/nullifying the value of the shares already held by the Petitioners group. On these assertions, the Petitioners prayed that it would be just and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f oppression of minority would, by itself, indicate mismanagement and be viewed accordingly. 7. The present petitioners have filed elaborate written submissions besides making oral arguments through counsel. During the submissions, the thrust of reliefs pressed on behalf of the present petitioners was that to meet the ends of justice, this Court should pass appropriate order under section 402 directing the majority shareholders to buy out the shares held by them at such value as the Court may deem fit. In the alternative, the Court may consider granting relief in terms of prayer clauses ( c ) to ( f ), ( h ) to ( hhh ) ( v ); ( hhh ) ( xix ); ( xx ); ( xxii ) and ( xxiii ) and prayers ( i )-( i ) to ( 5 ). This position is restated even in the concluding part of the written submissions filed on behalf of the present petitioners. 8. I would, therefore, think it apposite to consider the entire matter only in the context of reliefs pressed on behalf of the present petitioners and in particular the grounds referred to in the written submissions, while dealing with individual instances referred to in the Petition as amended. 9. Ordinarily, as the allegation is one of opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no relevance after the Respondent No. 1 Company has admittedly become a Public Limited Company. For, restriction of maximum number of 50 members which may apply to a Private Limited Company, will be of no relevance any more. Notably, even in respect of a Private Company which limits the number of its members to 50, as provided in the definition of "Private Company" in section 3(1)( iii ) of the Act, it would not include persons who are in the employment of the Company and persons who, having been formerly in the employment of the Company were members of the Company while in that employment and have continued to be member after the employment ceased. Indubitably, the Company will be bound to process the share transfer request of the present petitioners keeping in mind the regulations on the subject applicable at the relevant time as and when occasion arises. 10. Suffice it to observe that even if the present petitioners were to succeed in establishing that it is a case of oppression and mismanagement, direction that could be issued against the majority of the members, is to buy out the shares held by the present petitioners at a fair value, keeping in mind parameters provided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Extraordinary General Meeting on 15-2-1990 and/or transacting any business thereat whether as set forth in the said notice dated 16-1-1990 (Ex. S hereto) or otherwise. ( hh )( i ) that it may be ordered and declared that the purported transfer of the said 4 shares described in Exhibit Q-42 hereto from the name of Respondent Nos. 11 and 12 to the name of Respondent No. 13 is contrary to the Articles of Association of the 1st Respondent Company and, therefore, illegal, null and void and is liable to be set aside; ( hh )( ii ) that the register of the members of the 1st Respondent Company be rectified by deleting the name of Respondent No. 13 from the register of members in respect of the said 4 shares described in Exhibit Q-42 hereto and by restoring the names of Respondent Nos. 11 and 12 in respect of the said 4 shares. ( hh )( iii ) that Respondent No. 1 and Respondent Nos. 11 and 12 be ordered and directed to take all such steps as may be necessary, including the execution of transfer forms, etc., in order to transfer the said four shares from the names of Respondent Nos. 11 and 12 to the name of the Petitioners or any of them. ( hhh )( i ) this Hon ble Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of Respondent No. 39 (Gharda Consultants Private Limited) is contrary to the Articles of Association of the 1st Respondent Company and contrary to the Companies Act, 1956 and is illegal null and void and is liable to be set aside; ( hhh )( xxiii ) that the Register of Members of the 1st Respondent Company be rectified by deleting the name of Respondent No. 39 (Gharda Consultants Private Limited) from the Register of members in respect of the said 5,492 shares and by restoring the names of the respective transferors in respect of the said 5,492 shares; [the aforesaid numbering is given on the basis that the prayers proposed in Company Application No. 130 and as communicated vide letter dated 26th July, 1993 will be sanctioned.] ( i ) in the alternative to prayers ( a ) and ( b ) above ( i ) for appropriate orders and directions under sections 397, 398 and 402 of the Companies Act, 1956 including appointment of an Administrator or Special Officer of the 1st Respondent with all powers of the Board of Directors for a period of 5 years or for such other period as this Hon ble Court may deem fit and proper for managing the affairs of the 1st Respondent and the Board o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mulate the issues that have been agitated in the context of the abovesaid reliefs : ( 1 ) Whether the present Petitioners (original Petitioner Nos. 4 and 5) who have only less than 7 per cent of the shareholding in the share capital of the Respondent No. 1-company are entitled to pursue the claim under section 397 of the Act ? ( 2 ) Whether the instances pressed into service by the present Petitioners indicate that the affairs of the Respondent No. 1-company is being conducted in the manner prejudicial to public interest or in a manner oppressive to any member or members ? If yes, whether the said facts would justify making of a winding up order on the ground that it is just and equitable to wind up the Company and whether the winding up of the Respondent No. 1-company would or would not unfairly prejudice such members ? ( 3 ) Whether the present petitioners have established that affairs of the Respondent No. 1-company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to interests of the Company ? ( 4 ) Whether it is just and equitable to wind up the Respondent No. 1-company ? Issue No. 1 : 13. Reverting to the first issue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly only 6.66 per cent. On this finding, the Petition should necessarily fail. 15. To get over this position, Counsel for the Petitioners, however, would rely on the exposition in the reported cases that the Court will have to consider the validity of the Petition on the facts as they were at the time of its presentation and the Petition which was valid when presented, does not become invalid on account of events subsequent to its presentation. Reliance is placed on the decision in Rajahmundry Electric Supply Corpn. Ltd. v. A. Nageshwara Rao AIR 1956 SC 213. That decision was rendered in the context of an application filed by the 1st Respondent under section 162( v ) and ( vi ) of the Act for an order that the Rajahmundry Electric Supply Corporation Ltd. be wound up. One of the contention canvassed before the Apex Court was that out of the 80 persons who had consented to the institution of the application, 13 were not shareholders at all and that two members had signed twice. Besides 13 of the members who had given their consent to the filing of the application had subsequently withdrawn their consent. It was argued that excluding these 28 members, the number of pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Kamal Kumar Dutta v. Ruby General Hospital Ltd. [2006] 70 SCL 222, in particular, paragraph 41. Keeping the abovesaid principle in mind, the grievance of the "present Petitioners" alone can be enquired into to find out whether it would constitute "continuing oppression" qua them, albeit holding only 6.66 per cent of the shares of the 1st Respondent Company and no one else. Issue No. 2 : 17. Be that as it may, reverting to the second issue, it needs to be noted that no case has been made out in the Petition that the affairs of the Company are being conducted in a manner prejudicial to the "public interest". Therefore, the discussion will have to be confined to the question as to whether the alleged affairs of the company are such that it would result in prejudice or oppression of minority shareholders. 18. According to the Petitioners, the company is a closely-held family company in the nature of glorified partnership, in which the personal relationships and mutual trust and confidence was flowing from the special underlying agreement which was the fundamental basis of the incorporation and continued existence of the Company and was an essential part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the oppressive attitude of the 2nd Respondent towards the deceased to contend that the deceased was unable to have a say in the management of the 1st Respondent. 23. In the first place, this assertion has not been substantiated. Indeed, the Petitioners have relied on letter sent by deceased to 2nd Respondent dated 27-6-1975. This letter has come on record for the first time along with the affidavit of Darium Rutton Kavasmaneck dated 3-8-2005. Besides this letter, reliance is also placed on proceedings in Suit No. 6360 of 1975. No reference of the contents of these documents are found in the original Petition. 24. The differences which have led to the writing of the said letter or for that matter for filing the Suit, if any, is a tall claim put up by the Petitioners to establish the fact that there has been continuous oppression of minority shareholders. As a matter of fact, it is noticed that till the deceased Rutton Kavasmaneck was alive, he acted as Chairman of the Board of Directors and exercised all his powers in that behalf. The issues raised in the letter or the Suit do not suggest that the Respondent No. 2 was instrumental in oppressing the deceased Rutton Kav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther able and suitable person as Director. The decision of the Company in appointing in the first place Respondent No. 4 and later on replacing him by Respondent No. 7, cannot be viewed as oppression of the minority shareholders. 27. That leaves us with the instance or acts for period after the heirs of deceased Rutton Kavasmaneck were enlisted as members on account of transmission of shares in their favour. Although Petition deals with several aspects, in my opinion, it would be appropriate to consider the matter in the context of the grounds canvassed during the arguments and in particular, the relevant reliefs pressed by the present Petitioners at the hearing, to which reference has been made hitherto. 28. Insofar as reliefs ( c ) and ( d ) are concerned, the same are in the context of 3,000 shares held by 5th Respondent which were sold to 2nd Respondent on 26-11-1988. The said shares were sold by the 5th Respondent for a consideration of Rs. 12,00,000 (Rupees Twelve Lakhs). According to the present Petitioners, the said transaction was not in conformity with the provisions of article 57 of the AOA, whereunder the shares were required to be offered to the other existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original offer in proportion as the holding of each of such members bears to the total number of shares held by them and they shall be entitled within fifteen days of the offer to apply for the purchase and transfer of a pro rata number of the said untaken shares and the company shall be bound, upon payment to the transfer for the fair value of such shares, to transfer the shares to the member applying; ( e )The proposing transferor shall be bound to execute a transfer in respect of any shares so sold and in default thereof be deemed to have executed such a transfer. The Company shall thereupon cause the names of the members who have purchased the shares to be entered in the Register as the holders of such shares and thereafter the validity of the proceedings shall not be questioned by any person; ( f )In case no member shall apply for any of the shares included in the transfer notice or in case any are untaken after compliance with the foregoing provisions of this Article the intending transferor shall have the right (which right shall endure for the period of one year from the date of transfer notice) to sell and dispose of his shares to any person and at any price and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision will have to be strictly construed. On reading Article 57 of the A.O.A., either clause by clause or as a whole, there is absolutely no indication to infer that before effecting transfer of shares between member to member, it is necessary to offer the shares to other existing members on pro rata basis. The Respondents have justly pressed into service decision of Court of Appeal in the case of Greenhalgh v. Mallard [1943] 2 All ER 234, where similar controversy has been considered. The question considered in that case was of construction of A.O.A. of that Company which provided that no share in the Company shall be transferred to a person not a member of the Company so long as any member of the Company may be willing to purchase such shares at a fair value to be ascertained in accordance with sub-clause ( b ) of the relevant Article. The Court went on to hold that on reading the said provision, it cannot be suggested that sub-clause ( a ) contains any prohibition express or implied against transfers to persons who are members of the Company. It further held that the object of the said Article was quite clear. It is to put a clog upon the power of transfer outside the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred 50 shares to original Petitioner No. 1, which was a transfer of shares between member to member of the Company. The same was approved by the predecessor of the present Petitioners (deceased Rutton Kavasmaneck) in his capacity as Chairman. Those shares were not offered to any other existing member on pro rata basis to comply with the regime of Article 57. Similar position obtained when original Petitioner No. 3 transferred 120 shares in favour of original Petitioner No. 2 when it was once again a case of transfer of shares between member to member of the Company, duly approved by the said deceased Rutton Kavasmaneck as Chairman without offering those shares to other existing members of the company. Even in January 1982, original Petitioner No. 1 sold 120 shares directly to Respondent No. 2 which was transfer of shares between member to member of the Company without following the regime of Article 57 about first offering the same to other existing members. Taking any view of the matter, therefore, by no standards, it can be suggested that the transfer of 3,000 shares by Respondent No. 5 directly to Respondent No. 2-transfer of shares between member to member of the Company wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts based on Aniline apart from Anilopos Technical, Ortho Phenylene Diamine (OPDA) Vanillin etc. at its new factory site at Lote Parshuram, Chiplun, District Ratnagiri, Maharashtra State. The Respondent Company has stated on affidavit that the Company has borrowed a sum of Rs. 410 lakhs from ICICI and Rs. 175 lakhs from Commercial Banks to finance the capital expenditure already incurred at the Lote site during the relevant period. That the total capital expenditure envisaged has been to the tune of Rs. 15 crores for which the Company had already obtained sanction. The total amount disbursed till the filing of the affidavit was Rs. 445 lakhs and the balance was expected to be disbursed. In substance, elaborate information has been provided by the Company as to the circumstances in which it became imperative for enhancing the borrowing powers of the Board of Directors. The basis on which relief ( e ) is claimed is wholly unsubstantiated by the present Petitioners. In the circumstances, I have no hesitation in taking the view that by this act of the Respondent Company, which was in the interests of the Company, there was any oppression of minority shareholders at all. In any case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioners were required to shell out substantial amount towards tax liability leaving almost no income in their hands. Instead, the Petitioners were required to sell the shares to meet their liability. It is the case of the Petitioners that on account of low dividends, the value of the shares was affected, thereby causing oppression of the minority shareholders. The basis on which the grievance regarding low dividend is made has been addressed by the Respondent Company. The Respondent Company has relied on the tabular chart to indicate that the rate of dividend in fact has been growing from 1984 to 1990. After the year of filing of present Petition, i.e., 1990, dividend paid has been progressively increased from 14 per cent to 50 per cent and thereafter, increased from 50 per cent to 90 per cent in 1997. Material produced by the Respondent shows that the Company had a lean period from 1998 to 2002. However from 2003, dividend paid once again increased from 200 per cent to 400 per cent. The explanation offered by the Respondent Company seems to be plausible. There is no deliberate intention to declare inadequate dividends. 36. Insofar as dividend amount is concerned, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision Bench of the Calcutta High Court rejected similar grievance of the shareholders by observing thus: "It is then argued that the board of directors controlled by the managing agents has not been properly declaring dividends. In fact what is said in paragraph 21 of the petition is that dividend which is much below the actual profit earned by the company has been declared. I fail to see how this is an act of oppression to any member or members within the meaning of section 397 of the Companies Act. The board of directors has a discretion to declare dividend and the rate of such dividend. There is no company law that I know which obliges a board of directors to use up all its profits by declaring dividend. No company law lays down that all profits must be declared and exhausted in paying dividends. Surely, failure to do so could not be a ground for an application for oppression under section 397 of the Companies Act. Besides, that will also not be a ground for winding up a company as indicated by Lord Blanesburgh in the observation quoted above in the Privy Council decision of Ripon Press Sugar Mill Co. Ltd. v. Gopal Chetty [1932] 2 Comp. Cas. 70 (PC)." (p. 212) 38. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( supra ) wherein at page 129 of the report, the Division Bench of that Court had observed that: "wide as the power of the Court" is flowing from the words of the expression "such order as it thinks fit". It is nevertheless controlled by the overall objective of this section which must be kept strictly in view that the order must be directed "to bringing" an end to the matter complained of. It is further observed that marginal note of section 397 of the Act shows also that the purpose of the order of the Court in this section is to give relief in case of oppression . The Single Judge of the Calcutta High Court then proceeded to distinguish the exposition in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd. [1981] 51 Comp. Cas. 743 (SC). After elaborately considering the circumstances in which the observations were made by the Apex Court in Needle Industries (India) Ltd. s case ( supra ), the Court went on to hold that in the case before it, the Respondents had never expressed any willingness to purchase the shares of the Petitioners. That there is also no act of inequity in the case as the illegal meeting in Needle Industries (India) Ltd. s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Apex Court in the case of Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla [1976] 3 SCC 259. In Paragraph 32 of this decision, our Apex Court has expounded that although the Indian Companies Act is modelled on the English Companies Act, the Indian Law is developing on its own lines. Our law is also making significant progress of its own as and when necessary. It is further observed that where the words used in both the Acts are identical, the English decisions may throw good light and reasons may be persuasive. But then the Court added word of caution relying on the exposition of the Privy Council in the case of Mt. Ramanandi Kuer v. Mt. Kalawati Kuer AIR 1928 PC 2 which reads thus : "...It has often been pointed out by this Board that where there is a positive enactment of the Indian Legislature, the proper course is to examine the language of that statute and to ascertain its proper meaning - uninfluenced by any considerations derived from the previous state of the law - or of the English law upon which it may be founded." (p. 4) 45. This decision of the Apex Court was also pressed into service in the context of the argument of deadlock in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of continuous act of Respondent No. 2 in keeping out the Petitioners group from the affairs of the Respondent No. 1 Company. It was a case of incompatibility between the Petitioners group and the Respondent No. 2. In the first place, it is only the present Petitioners who can make such grievance. Insofar as other original Petitioners are concerned, they have already withdrawn from the proceedings and given up all their claim. This authority is also concerning the issue of declaration of low dividend and of benefiting only one group. The Court on facts found that the same was done unilaterally, as no notice was given to the Respondents, as shareholders of particular piece of business being contemplated and no notice was given of what had been done. Similarly, no accounts were provided and the minority group was kept in ignorance. That is not the case on hand. 47. Reverting to the grievance regarding declaration of low dividend, notably, the prerogative to recommend the rate of dividend is exclusively in the Board of Directors of a Company in terms of section 205 of the Act. Even the shareholders at the Annual General Meeting cannot increase the rate of dividend recommend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n would be in a position to defeat the Resolution which is supported and in any case now accepted by members having majority of over 93 per cent shareholding. Had it been a case where the ground pressed into service by the present Petitioners would end up in a finding that the conduct of the said meeting was void, it would be worthwhile for the Court to examine each of such ground elaborately. Be that as it may, the grounds which are pressed are that the proposed Resolutions were for the personal benefit of the 2nd Respondent and were sought to be passed with a view to oppress the minority. That the purpose of the amendment was to overcome the restriction and permit transfer of shares to the Foundation/other persons/company s control by the 2nd Respondent and to exert Petitioners to sell their shares by depriving them of adequate price. The purpose of the Resolution was to gain complete control of the 1st Respondent. It is stated that the 2nd Respondent was interested in the proposed Resolutions for which it was incumbent to disclose in the explanatory statement annexed to the notice dated 16-1-1990 the nature of interest of the 2nd Respondent in the proposed Resolution as also his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s group who on the one hand were opposed to increase of authorised share capital-resulting in Respondent No. 1 not being able to declare bonus shares; and on the other hand were acting against the interests of the Company by committing themselves to sell their shares to person who happens to be the competitor of Respondent Company. According to the Respondents, the present Petition is a speculative Petition, for which reason also the grievance made at the instance of Petitioners with regard to meeting dated 15-2-1990 cannot be countenanced. 50. The fact that even the present Petitioners were party to Memorandum of Understanding and have committed themselves to espouse the cause of the alleged competitor of the Company and in fact transferred part of the shares to an outsider, have come to the notice of the Respondents only in February 2005. Those material facts have been suppressed by the Petitioners. For this reason alone, the Petitioners deserve to be non-suited. It is well-established that no indulgence can be shown to a litigant who approaches the Court with unclean hands. In any case, as observed earlier, after the withdrawal of other Petitioners from the present proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The shares were offered only to five shareholders of the 1st Respondent. It is not in dispute that the letter of offer was also received by original Petitioner Nos. 2 and 3. The original Petitioners 2 and 3 registered their protest about the proposed transfer being contrary to Article 57 of the A.O.A. The Petitioners had moved Company Application No. 104 of 1991 to prevent the 1st Respondent from registering any transfer of the said shares except in accordance with the procedure set out in Article 57. The Court directed the Respondent No. 1 Company to follow unamended Article 57 of the A.O.A. before registering the transfer of shares. The controversy brought before this Court is only in respect of four shares out of the said 400 shares. It is not in dispute that out of 400 shares, 395 shares were already purchased by the Petitioners group. In fact, the present Petitioners have purchased 93 shares out of the shares offered to them. The Petitioners may be justified in asserting that in spite of order dated 21-3-1991 passed by this Court, the "four shares" out of the 400 shares offered by Respondent Nos. 11 and 12 were transferred in favour of Respondent No. 13 in violation of unam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Body on 15-2-1990, whereas the proposal for transfer of shares by Respondents 11 and 12 in favour of Respondent No. 13 in relation to the stated "four shares" was obviously subsequent, to be governed by the amended provision. Taking any view of the matter the controversy regarding four shares can be no basis to rule that it is a case of oppression of minority. Thus understood, the Petitioners are not entitled to any of the relief under consideration. 53. Insofar as reliefs ( hhh )( i ) to ( hhh )( iii ), these reliefs will have to be denied to the present Petitioners. Inasmuch as, the same are in relation to 22 shares offered by Respondents 5 and 6 referred to in Para 14(A)( vii ) of the Petition. The case made out is specific to original Petitioner No. 2. It is the original Petitioner No. 2 who alone was willing to purchase the said 22 shares offered by Respondents 5 and 6. It is nowhere mentioned in the Petition that the said offer given by original Petitioner No. 2 was for himself and for and on behalf of other original Petitioners, much less, the present Petitioners. It is admitted position that original Petitioner No. 2 has withdrawn from the present proceedings and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those shares to the existing members. From the events that have unfolded from the inception of the Company, it is noticed that transfer of shares in favour of lineal descendant though not a member was always granted. There are more than one such instance referred to by the Respondents. In that, on 3-11-1967, deceased Rutton Kavasmaneck, predecessor of the present Petitioners transferred his 150 shares to Maharukh Murad Oomrigar (original Petitioner No. 3), 150 shares to Dr. Percy Rutton Kavasmaneck (lineal descendant) Petitioner No. 4/present Petitioner No. 1 and 70 shares to Jer Rutton Kavasmaneck (not a lineal descendant-original Petitioner No. 1)-which transfers were approved by the deceased Rutton Kavasmaneck as Chairman himself. The Respondents would also rely on the instance of 1968 when A.M.C. Rebello transferred his 85 shares to joint names of herself and her husband (not a lineal descendant). Even this transfer was approved by the said deceased Rutton Kavasmaneck as Chairman. Instance of another transfer by Respondent No. 2 of 100 shares on 4-2-1969 to his wife/Respondent No. 4 (not a lineal descendant) was also approved by deceased Rutton Kavasmaneck as Chairman. Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al measures including to amend its AOA so as to record the transfer within a reasonable time. As a matter of fact, it is common ground that the Company has now assumed the hat of a Public Limited Company from 5-5-2001. On account of this transformation, the apprehension of the Petitioners that the possibility of denying transfer of shares to outsiders at a real value is misplaced. I may clarify that this is not an expression of opinion either way in relation to transfers already effected in favour of non-members by the Petitioners group and still not recognised by the Company. All issues in relation to the said transaction will have to be answered on its own merits on case to case basis in appropriate proceedings. Suffice it to observe that the splitting of shares belonging to Respondent Nos. 33 to 36 cannot be the basis to take the view that it was done with the purpose of oppressing the minority shareholders, in particular, the present Petitioners. In the circumstances, even these reliefs under consideration cannot be granted to the present Petitioners. 56. That takes me to the prayer clauses ( hhh )( xix ) and ( hhh )( xx ). The same pertain to transfer of five shares of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omi Patel being an employee of the Respondent No. 1 Company, which was permissible under the AOA. It cannot be overlooked that the transfer is only in respect of five shares which is insignificant number and cannot be the basis to hold that it is a case of oppression of minority shareholders. In any case, on account of the amendment of Article 57 in terms of General Body Resolution dated 15-2-1990, transfer of five shares in favour of Dr. Bomi Patel by Respondents 2 and 4 were perfectly valid. Accordingly, even the reliefs under consideration cannot be granted at the instance of the present Petitioners. 58. The next reliefs pressed are ( hhh )( xxii ) and ( hhh )( xxiii ) in relation to transfer of 5,492 shares in favour of Respondent No. 39 being contrary to AOA. According to the Petitioners, the Respondent No. 1 Company surreptitiously and without giving notice to other shareholders of the Respondent Company transferred the stated 5,492 shares, approximately 8.5 per cent of the issued and paid up capital of Respondent No. 1, in favour of Respondent No. 39. That was not only a case of oppression of minority shareholders but also a case of mismanagement. Grievance with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove allegations. It is denied that Gharda Consultants have no income and were incapable of purchasing the said shares. It is also denied that the purchase of shares exceed Rs. 10 crores or that they were founded by any diversion of funds of the company as alleged. The Respondents have also denied the charge of siphoning of any monies from Respondent company to Gharda Consultants Pvt. Ltd. or utilising any such money for purchasing the shares. According to the Respondents, transfer of shares in favour of Respondent No. 39 was one of member-to-member transfer which did not require observing regime of Article 57. Insofar as that argument is concerned, the same has already been answered in favour of the Respondents in the earlier part of this judgment. 60. What is intriguing is that the principal prayer of the present Petitioners during the argument was that direction be issued to the majority shareholders to buy out the shares held by the present Petitioners. On the one hand, the present Petitioners are keen to walk out of the company by selling their shares to the majority shareholders at a price to be determined by this Court. I have already adverted to the provisions of the AOA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 3 : 63. That takes me to the 3rd issue as to whether the affairs of the Company have been conducted in manner prejudicial to the interests of the Company. At the cost of repetition, it is relevant to note that no case has been made out in the Petition that the affairs of the Company are being carried on in a manner prejudicial to the "public interest". Even with regard to the ground that the affairs of the Company have been conducted in manner prejudicial to the interests of the Company, on reading the Petition as a whole, and more particularly, upon considering the arguments of the present Petitioners canvassed at the time of hearing, no such case has been presented. As recorded at the outset, counsel for the Petitioners fairly stated that initially the grievance regarding mismanagement of the Company ascribable to section 398 was given up but the amendment was once again introduced. Nevertheless, the present Petitioners would confine the ground only of oppression of the minority and the facts indicated for that purpose be construed as mismanagement of the Company. In my view, none of the facts pressed into service would persuade me to hold that either singular or all of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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