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TMI Blog2011 (8) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company and directing holding of an extraordinary general meeting ('EGM') of the R-1-company under a chairman appointed by the Company Law Board ('CLB') in accordance with the provisions of the Act and in accordance with the articles of association of the company. 2. The R-1-company, namely, Amber Commercial (P.) Ltd., was incorporated on 11th August, 1988 to carry on the business as exporters, importers, traders, dealers, distributors, buyers, sellers, agents, brokers, processors, laminators, and manufacturer of Jute, Jute goods, bags, laminated jute cloth, corrugated products, packaging materials and of plants, machinery and to carry on business of distributors tea, coffee and textiles, cotton cellulosic or synthetic fibre, silk, yarn, wool and woollen goods, handicrafts, marble and other stones, etc. The R-1-company is an investment company having its registered office at 1/2, Darpanarayan Tagore Street, Kolkata-700 006. The authorised capital of the company is Rs. 20,00,000 divided into 2,00,000 equity shares of Rs. 10 each. The subscribed capital of the company as per the annual return filed for the year 2004 was Rs. 19,45,000. 3. The petitioners' case is that they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an exercise the voting rights, through R-1-company, in RMG Med. Ltd. to control the affairs in RMC Med. Ltd. It has been pointed out that P-1 came to know from inspection of the records of Registrar of Companies ('RoC') that the R-2 and R-3 have unlawfully appointed the R-4 as well as the R-5 to R-11 as the directors of the R-1-company with effect from 1st July, 2004 and 5th July, 2004 respectively without convening any Board meeting of the R-1-company, and Form 32 was dated 27th July, 2004 and annual general meeting ('AGM') was allegedly held on 30th July, 2004 as stated in annual return 2004 by the R-2 and another director. It was argued that it is not understood as to why the alleged appointment of the R-4 as well as the R-5 to R-11 was made on 1st and 5th July, 2004 respectively when the ensuing AGM was convened on 30th July, 2004 and even Form 32 was also filed around the date of AGM not before. The petitioners never approved the alleged appointment of the R-4 as well as the R-5 to 11 as directors of the R-1-company. My attention was drawn to article 54 of the articles of association pertaining to appointments of director by the Board of directors and also to article 50 to sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etings of the R-1-company. 6. The petitioners' contention is that the respondent No. 3 has not filed the specific para-wise reply to the above petition deliberately to present vague, distorted and misleading reply to mislead the CLB. The petitioners have stated all the continuous acts of oppression and mismanagement which manifestly show that there is lack of probity and loss of confidence and faith between the petitioners and the respondents and the above petition deserves to be allowed though the continuous acts which are oppressive justify the making of a winding up order on just and equitable grounds but winding up of the R-1-company shall not be in the interest of the petitioners. 7. Responding to the R-3's defence that there was heavy rain in Kolkata late in the year 1999 and the roof of the premises at 8, Akshay Bose Lane, Kolkata collapsed and the entire records of the R-1-company stored in the said premises were destroyed, it was argued that the exact dates of heavy rain in Kolkata and the date when the roof of the premises collapsed was not disclosed, the exact description of the records kept in the said ill-fated premises has not been disclosed. It was argued that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original share certificates belonging to the P-1, 3, 4, and 6, these were stolen in the year 2004 and first information report ('FIR') was registered against the R-3 and others for theft of all the share certificates belonging to the P-1, 3, 4 and 6. It was pointed out that the R-3 has now filed additional affidavit dated 23rd April, 2011 contradicting his earlier allegation under solemn oath and now alleging that he had only photocopies of the share certificates in his possession which nullifies his own earlier stand that the original share certificates of all the shareholders of the R-1-company were in his possession. It is argued that the R-3 cannot be allowed to file two affidavits to contradict his stand before the CLB. 10 Further, the petitioners pointed out that in the FIR against the R-3 and others for theft of securities including equity shares held by the petitioners before Police Station, Jaipur and the Police has filed enquiry report before Addl. Chief Judicial Magistrate, Jaipur vindicating the averments of the petitioners in the present petition. 11. Petitioners' case is that the respondents have not given para-wise specific reply to the averments made by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to say that a person can be permitted to totally resile therefrom " - Gautam Sarup v. Leela Jetley [2008] 7 SCC 85 refers. 12. It was contended that the respondents have been involved in continuous acts of oppression and mismanagement against the petitioners and the present petition deserved to be allowed in favour of the petitioners. It was pointed out that summing up the scope of sections 397 and 398 considered in extenso in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp. Cas. 743 (SC); M.S. Madhusoodhanan v. Kerala Kaumudi (P.) Ltd. [2003] 46 SCL 695 (SC); Dale & Carrington Investment (P.) Ltd. v. P.K. Prathapan [2004] 54 SCL 601 (SC); Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 57 SCL 476 (SC) and Kamal Kumar Dutta v. Ruby General Hospital Ltd. [2006] 70 SCL 222 (SC) in the case of V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd. [2008] 142 Comp. Cas. 235/83 SCL 44 the Apex Court has held that : "..It is clear that oppression would be made out : (a) Where the conduct is harsh, burdensome and wrong. (b) Where the conduct is mala fide and is for a collateral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoppel seems to be when, in consequences of some previous act or statement to which he is either party or privy, a person is precluded from showing the existence of a particular state of facts. Estoppel is based on the maxim allegans contraria non est audiendus (a party is not to be heard to allege the contrary) and is that species of presumption juries et de jure (absolute or conclusive or irrebuttable presumption), where the fact presumed is taken to be true, not as against all the world, but against a particular party, and that only by reason of some act done, it is in truth a kind of argumentum ad hominem." - B L Sreedhar v. K.M. Munireddy [2003] 2 SCC 355 refers. 14. It was contended that in the present petition, the respondents have signed and filed the annual return of the respondent 1-company for the year 2002 which clearly shows the names and equity shares held by the petitioners in the annual returns of the respondent 1-company. The respondents being businessmen cannot take any plea contrary to the same and are acquiescenced from denying the position of the petitioners being as shareholders, of the respondent 1-company while the respondents have shown the petitioners as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. 6. A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation, if he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court as well as on the opposite party." - S.P. Chengalvaraya Naidu v. Jagannath [1994] 1 SCC 1 refers. 16. The petitioners have contended that the respondents have made frivolous pretext and no plausible reason is given for non-production of statutory records of the R-1-company before the CLB. Reliance was placed on the case law as under : "The second respondent is falsely claiming that the minutes book and other statutory records of the company were lost. This would show the conduct of the second respondent, depriving the petitioners of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. Further, reliance was placed on the case law as under : "35. As regards the rival contentions pertaining to the allegations of acts of oppression and mismanagement, it is noted that the petitioners' contentions regarding depletion of the reserves of R-1 company remain incontroverted. On the other hand, the respondents' contention that the P-l had attended the Board meeting of the R-1-company regularly and particularly the Board meetings held on 1st September, 2004 and on 1st September, 2005, respectively, and that the P-l had approved the annual accounts for the year 2003-04 and 2004-05, respectively, of R-1-company also remain uncontroverted." - Nagesh Kumar v. Nagesh Hosiery Exports Ltd. [2009] 93 SCL 233 (CLB - New Delhi). 19. Responding to the case laws relied upon by the respondents it was contended that the cases of Smt. Abha Puri v. Amethi Hume Pipes (P.) Ltd. [2009] 93 SCL 263 (CLB - New Delhi); S.P Nachiappan v. AEE Castings Ltd. [2010] 155 Comp. Cas. 267 (CLB - Chennai); Jagdish Mills Ltd., In re [1954] 24 Comp. Cas. 241 (Bom.); Martin Castelino v. Alpha Omega Ship Management (P.) Ltd. [2001] 33 SCL 210 (CLB); Jayanthilal Purshottamdas Patel v. Gordhandas Desai (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees. In this letter Shri V.K. Rungta was warned by the P-l for all the consequences if the cheque book of Hodoti Cement was not handed over and balance payment from Bangur did not come. Further, it was pointed out that the mother of Shri Rajendra Prasad Rungta, Shri Budhi Prakash Rungta, Sh. Vinod Kumar Rungta, Sh. Suresh Kumar Rungta and Dr. Narendra Rungta died on 28th September, 2003. During the mourning period all of them were present and had cordial interaction among themselves Shri Rajendra Prasad Rungta took the advantage of the atmosphere and induced Shri Suresh Kumar Rungta for entering into the MoU dated 18th October, 2003. 21. As regards P-2, namely, Roadco (India) (P.) Ltd. and P-5, it was pointed out, are not the shareholders in R-1-company and cannot maintain the present petition. 22. The respondents have contended that the petitioner's claim that they are holding 67.39 per cent of the entire shareholding of R-1-company and are in majority is completely false and incorrect. The petitioners have only relied upon the annual return of R-1-company filed for the year 2002. The petitioners were in control of the books of account and the statutory registers of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., has been shown in the petition as a private limited company, whereas the name of which has been changed by petitioners from Roadco (India) Ltd. to Roadco India (P.) Ltd., by fabricating the documents and it has been decided that the conversion of P-2 company from Roadco India Ltd. to Roadco India (P.) Ltd. is null and void. However, the petitioners' appeal is pending. 24. Responding to the petitioner's allegation that the respondents have illegally transferred petitioner's shares as mentioned in the annual return of 2002 and their names are not reflecting in the annual return of 2004, it was contended that the annual return for the year 2002 was prepared by P-1 himself and got signed by R-3 in good faith, the P-l prepared the annual return as per his own wish and not as per record or document of R-1-company and he had shown the shareholding of his own family and associates as per his own wish, since all the records of the R-1-company were destroyed in the rain during 1999 and petitioners took the advantage of the situation and filed the wrong details of shareholders in the annual return for the year 2002, in 2004 when respondents came to know about the fraud played by P-l by ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of section 41(2) of the Act, a person can become the member of the company by subscribing to the memorandum, by allotment of shares, and by the transfer of shares. As far as the case of the petitioner is concerned, admittedly, their case is transfer of shares. Their contention is that they have purchased the shares from different sellers, but they have not talked about the transfer of shares in the name of the purchasers. There is no compliance of the provisions of section 108 of the Act. Reliance was placed on the cases of Jayantilal Purshottamdas Patel (supra) and Radha Krishan Menon in Mathrubhvmi Printing & Publishing Co. Ltd. (supra) to support their contentions. It was contended that the petitioners have not pointed out whether any transfer deed was executed between the seller and the purchaser, whether these transfer deeds have been delivered to the company for affecting the transfer, and whether they had received the share certificate back duly certified from the R-1-company. 27. As regards the petitioners' contention that their share certificates were stolen, in support of which they had filed copy of FIR and investigation report through an additional affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegation of the petitioners that the appointment has been made in order to defeat the purpose of the notice of the petitioners under section 169 is absolutely false and incorrect, the article 50 of articles of association provides that the directors are not required to hold any qualification shares, therefore, the contention that the directors are required to hold qualification shares is baseless. 31. I have considered the rival submissions and the case law relied upon by the parties. There is no dispute with the case law cited. Each case turns on its own facts. The petitioners' case is that R-3 has wrongfully deleted their shareholding as evidenced in the annual returns of 2002/2003 and added the same in the name of the respondents in the annual return of 2004 hereby reducing the majority shareholders to a minority and creating a new majority to gain control and management of the R-1 with an oblique motive. It has been alleged that immediately after the CLB passed an interim injunction ordering status quo in RMC Med. Ltd. (CP No. 37/2004) on 13th July, 2004, the respondents, to circumvent that order, appointed more directors in back date, however, Form 32 for alleged appointm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and is one of the group companies of Rungta family. Like several other group companies the R-1-company holds shares in RMC-Med. Ltd. (CP No. 37/2004) is the flagship company of the Rungta family. It is noticed that out of 15 respondents only one respondent, namely, Shri S.K. Rungta (R-3) alone has filed counter affidavit to the company petition. Only when the arguments commenced in 2011, the R-1-company has adopted the reply filed by R-3. Other respondents have avoided entering appearance and filing any reply affidavit. The petitioners' contention that after the CLB ordered status quo to be maintained in its order dated 13th July, 2004 in the flagship company of Rungta family (RMC Med. Ltd. - CP No. 37/2004), the respondents, to circumvent the CLB's orders, appointed directors in back date exceeding the limit of total number of directors as provided for in articles of association is found to be correct. The petitioners have rightly observed that the R-1-company has convened AGM in 2004 during last week of July 2003 first week of August 2004 while earlier AGM was convened in the last week of September. Respondents have failed to explain as to why the directors were appointed in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey revised the annual returns of 2002/2003. The petitioners have relied upon their shareholding as reflected in the annual return for the year 2002/2003 and earlier years as filed by the R-1 with the 'RoC. The annual return for the 2002/2003 has been signed by R-3. Though the respondents, after having signed the annual returns, have attempted to find certain defects and discrepancies to disbelieve the petitioners' claim of being the shareholders and are now raising objections to the effect that there are no transfer deeds and the petitioners have not proved as to when did they apply to the R-1-company for transfer of the shares as per requirement of the provisions of section 108 of the Act, it is not understood as to why the original share certificates are not produced by the respondents to substantiate their claim as per the annual return of 2004. It was first stated by the respondents that the share certificates are available, and the same can be produced as well, but when the petitioners referred to the FIR and the investigation report regarding their shares having been stolen, and that even the sellers have given statement before the police during investigation that the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ima facie evidence which the respondents have failed to rebut. No statutory records, giving the pretence of rain (though that too relates to an earlier period) have been produced, no proper procedure has been followed to change the shareholding in the annual returns of 2004, there is no evidence of service of any notice on the petitioners for passing any resolutions, original share certificates have not been produced. When compared with the evidence produced by the petitioners, the respondents' claim has credential value, nor supported on facts and in law. In view of the above, the change of shareholding as reflected in the annual return of R-1-company for the year 2004 cannot be relied upon. 34. The fiduciary capacity within which directors have to act enjoins upon them a duty to act on behalf of the company with utmost care and skill and due diligence and in the interest of the company. More so, in a family company. They have a duty to make full and honest disclosures to shareholders regarding all important matters relating to the company. Shares issued for maintenance and acquision of control over the company is an extraneous purpose, and, therefore, cannot be upheld. The motiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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