TMI Blog2015 (6) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... RT OF INDIA]. As regards the limitation, it is an established proposition of law as held in the cases of Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad (dead) through L.Rs [2005 (1) TMI 409 - SUPREME COURT OF INDIA] that an act of oppression is a continuous wrong until it is brought to end by passing an appropriate order. The causes of action lastly arose in his favour in the year 2013 when he came to know that the company has not shown him as a shareholder. Therefore, the petition since is filed well within 3 years, it is well within the limitation. From the narration of the facts by the Respondents as stated in the preceding paras, it is evident that the Respondents have not disputed that the Petitioner initially was holding 50% shares. Subsequently, his shareholding was reduced to 36.1% for the reason that he had become an NRI. It is further admitted that the Petitioner was holding 1950 shares constituting 26.7% shareholding in the Company. However, as discussed hereinbefore, the Respondents have failed to prove the factum of gift of the said number of shares in favour of the Respondent No. 2. Their plea that these shares were gifted by the Petitioner thus has not been prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol of the Company. It appears that the disputes arose between the parties relating to the conduct of affairs of the Company as well as on other issues. The Petitioner, therefore, approached this Board by way of filing the instant petition complaining therein the following acts of oppression and mismanagement purportedly committed by the Respondent Nos. 2 and 3 in the affairs of the Respondent No. 1 Company. 2.4 The main grievances ventilated by the Petitioner are that at his behind, the Respondent No. 2 unilaterally, in contravention of the provisions of the Companies Act, and the Articles of Association of the Company and without convening a valid shareholders' meeting and without notice to the Petitioner with mala fide purpose to gain control over the affairs of the Company, issued further shares from time to time. According to the Petitioner, his shareholding has thus reduced from 50% to 30% in the Company. a. on 29/8/1993, the Respondent No. 2 to fulfil his ill-designed motives had appointed one Mr. Mautik Gandhi as the director on the Board of Directors of the Company without the knowledge of the Petitioner and without following due process as laid down in the Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever in the affairs of the Respondent No. l. f. To restrain the Respondent Nos. 2 and 3 from drawing any further remuneration/commission from the Respondent No. 1. g. To restrain the Respondent Nos. 2 and 3, their officers, agents etc. from drawing up or withdrawing from or in any other manner operating the bank accounts of the Respondent No. 1 without the prior approval of this Board and on such terms and conditions as this Board may deem fit. h. To direct the Respondent No. 2 and 3, Respondent No. l, its officers, agents etc. to deposit the daily cash receipt received by the Respondent No. 1 from its various sources to a separate bank account and further to permit operation of such bank account on such terms and conditions as this Board may deem fit. i. To restrain the Respondent Nos. 2 and 3, the Respondent No. l, its officers, servants, agents etc. from allotting any further equity shares of the Respondent No. l and to further restrain from appointing any further Directors of the Respondent No. 1. j. To appoint an independent Chartered Accountant to prepare afresh the books of account of the Respondent No. l and to place the report before this Board. k. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged acts of oppression and mismanagement. It is also submitted that the conduct of the Petitioner is mala fide. It is further alleged that the Petitioner's own actions have been detriment to the interest of the Company. Therefore, the petition deserves to be dismissed on this ground also. 4. To the reply, a Rejoinder was filed by the Petitioner on 17/10/2014. The Respondents filed their Sur- Rejoinder on 24/11/2014. 5. I have heard the Ld. Counsel appearing for the parties and perused the record. 6. Before I proceed to consider the rival submissions, it is pertinent to mention here that the Respondents had filed a Company Application, being CA No. 195 of 2014, challenging the maintainability of the petition and seeking its dismissal contending that the Petitioner has no locus under Section 399 of the Act, to file the present petition under Section 397/398 of the Act. After completion of the pleadings in the above mentioned CA an order dated 25/09/2014 came to be passed by the CLB and the CA was dismissed having found no merits in it. Against the said order, an Appeal was preferred by the Respondents before the Hon'ble High Court, being Company Appeal No. 87 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions of the parties open, including the one raised by the Respondents in the Application to the effect that the Petitioner is not competent to maintain the said petition being not a shareholder of the Company as on the date of filing of the petition. The Ld. Counsel further submitted that the Petitioner had gifted the shares held by him in the Company in 1976-77 in favour of the Respondent No. 2 and, therefore, the Respondents may be given an opportunity to lead evidence to prove the factum of gift. The Ld. Counsel submitted that, as per the settled proposition of law, this Board has power to record oral evidence, and the principles of natural justice also require that an opportunity be given to the Respondents to prove their case by documentary as well as oral evidence. Therefore, the Respondents submitted that they may be granted liberty to prove the fact by giving an opportunity to lead evidence to this effect and permitting them to cross examine the Petitioner that he had gifted his shares to the Respondent No. 2. The Ld. Counsel further submitted that on the date of filing of the petition the Petitioner did not hold any shares and hence, the petition deserves to be dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2 in 1976-77 by way of gift. In addition to the above, it is a well settled law that for a lawful transfer of shares the execution of transfer deeds, as provided in Section 108(1) of the Act, is a must, as held in the case of Manalal Khetan v. Kedar Nath Khetan [1977] 185 SCC 47. In the present case, the Respondents have failed to produce any transfer deeds to show that the Petitioner has transferred the shares in favour of the Respondent No. 2, as alleged by them. The compliance of Section 108 of the Act is mandatory. In the case of its non-compliance, the transfer of shares cannot be held valid in the eye of law. Furthermore, it is also a well established proposition of law that, while determining the maintainability of the petition in terms of provisions contained in Section 399 of the Act, the last disputed position is required to be examined by the CLB. As stated hereinabove, until 2012, according to the own showing of the Company, the Petitioner was holding 1950 shares in the total paid-up capital of the Company which constitutes 26.7% shareholding of the Company. I, therefore, hold that the Petitioner is competent under Section 399 of the Act to file the petition under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason that he was staying in USA and had become a Non- Indian resident, and therefore, to avoid the violation of the FERA and FEMA Regulations, he had to resign as a Director. However, the Petitioner continued to be a 50% shareholder in the Company. According to Ld. Counsel, the Petitioner's main grievance is that the Respondents, without convening a valid shareholders meeting and without notice to the Petitioner, issued further equity shares thereby reducing his shareholding from 50% to 26.7%, The Ld. Counsel submitted that this reduction in the shareholding of the Petitioner was made by the Respondents with oblique and mala fide motive to gain control over the affairs of the Company, It is further submitted that the Petitioner, thereafter, came to know recently that the Respondents have, in collusion with each other, now transferred his entire shareholding and he has not been shown as a shareholder of the Company in the latest Annual Returns filed with the ROC, The Ld. Counsel appearing for the Petitioner pointed out that the Petitioner was holding 1950 shares of ₹ 100/- of the total paid-up capital of the Company during the period 2006-2012, as per own showing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005] 11 SCC 314 that an act of oppression is a continuous wrong until it is brought to end by passing an appropriate order. In the case of Pearson Education Inc. v. Perntice Halt India (P.) Ltd. [2006] DLT 450, it was held that if the act complained off amounting to oppression has a continuing effect, in that case, the question of limitation does not arise. In the case of Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd. AIR 1966 Cal. 512 it was held that a petition under Section 397 would be maintainable if the effect of the alleged act of oppression persists indefinitely. In the case of Suhasini P. Kurkure v. Metaturgical Laboratories (P.) Ltd. [2012] SCC 112 (CLB) it has been laid down as follows : The doctrine of laches is based on equitable consideration and depends on general principles of justice and fair play. There is no presumption that delay is deliberate. To be the laches delay should be such that it could be said that the petitioner is not entitled to relief on account of gross negligence or inaction or for want of bona fide imputable to him or that he has give up (waived) his right by acquiescence or by his conduct or neglect. Further, this Board has consistentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nied by the Respondent in their pleadings and it has been contended that since 1976-1977 after the gift of the said shares the Petitioner did not remain even as a shareholder and, therefore, no notices of the meetings and/or Annual Reports were forwarded to him from 1977. This proves and supports the Respondent No. 2's case of the gift, because if the Petitioner has not received any notices of AGM so many years he was not supposed to sleep over the matter for all those years and ignored the same from 1977, but on the contrary, he ought to have protested against the same from 1977, and taken some actions against the Respondents which he did not do so, but instead he filed the present petition for the first time in March 2014. This, itself shows that the Petition is filed for ulterior motives as an abuse of process of law as will be discussed hereinafter. 19. It is than argued that the grounds of oppression and management, as alleged are 1977, 1993 and February 2010 but till March 2014 he did not to do anything in that respect and he filed the Petition in March 2014 as a pressurizing tactic for ulterior motive and this is apparent from the fact that for the first time he tried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r evidence satisfying the ingredients of Sections 397 and 398 under Companies Act, and this aspect of making bald allegations without documentary evidence also shows that the Petition is filed as an abuse of the process of law. 21. Refuting the aforesaid submission, it was argued on behalf of the Petitioner that he has approached this Bench by way of filing this petition under Section 397/398 of the Act on account of infringement of his rights as shareholder of the company. The Ld. Counsel submitted that the Petition is bona fide and the Petitioner has sought the reliefs as contained therein from this Bench under Section 402 of the Act, which are well within the power of the CLB. 22. I have considered the rival submission. In my view, the contentions of the Respondents are misplaced. On a bare perusal of the petition, it is evident that the Petitioner has invoked his right as a shareholder. He has expressed various grievances and has made complaints in the capacity of he being a shareholder of the Company. There may be certain family disputes, but 1 am not inclined to accept that on account of these disputes the Petitioner has filed the instant petition The Respondents have f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned which would not have been granted if the correct and true facts were pleaded. In this regard, the following decisions and the relevant observations therein are relevant to be cited :- (i)Enercon Gmbh v. Enercon (India) Ltd. [2008] 143 Comp Cas 687 (CLB). ''In the present case, no relief has been granted as yet and whether the documents which are alleged to have been not been disclosed are material documents is a matter yet to be determined. Once the other side has produced all the documents, then, the question of suppression of material documents to apply the decision of the Supreme Court does not arise ....... (ii)Dhanraj Mills (P.) Ltd. v. Global Trust Bank Ltd. [2003] 105 BOM.LR 609. But it is not the law that if particular document is not filed court should immediately draw an inference that there is intention to suppress. This document is before the Court. No order interim or otherwise was even sought nor obtained by Respondent No. 1 G.T.B. by suppression of this document. (iii)Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 11 SCC 314 where the Supreme Court has held: 196. The Court in an application under Sections 397 and 398 may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the misconduct on his part. 26. In my opinion, non- disclosure of the shares of the Company by the Petitioner is not fatal to the case. The explanation offered by the Petitioner that he did not disclose his shareholding in the proceeding before the USA Insolvency Court thinking that the Company was a defunct Company, is a good reason. Moreover, this is not a case where this Board was misled by the Petitioner by suppression of the said fact in order to obtain an interim order/ protection in this case. Furthermore, the insolvency proceedings filed by the Petitioner before the USA court have no bearing on the outcome of this petition. This objection as to suppression of vital facts and documents, therefore, rejected accordingly. 27. Now, I enter into adjudication of the issues arising out of the pleadings of the parties in respect of the acts of oppression and mismanagement. Inviting my attention to the Exhibit C of the petition, i.e. Form No. 20B filed by the company in respect of Respondent No. l Company, the Ld. Counsel appearing for the Petitioner pointed out that the authorised share capital of the Company was ₹ 30,00,000/- as in the year 2006. The Petitioner since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany within the permissive limits of the FERA provisions. 30. It is further submitted on behalf of the Respondents that the further shares were issued on 17/3/1975, 22/9/1975, 21/1/1977 and 18/2/1977 as tabulated here under, within the knowledge, approval and consent of the Petitioner and this is evident from the fact that he never raised any objection to the above position since 1971. Date No. of shares issued to the Respondent No. 2 No. of shares issued to the Petitioner Total as of 1974 3450 1950 17/03/1975 600 - 22/09/1975 1000 - 21/1/1977 100 - 18/02/1977 200 - Total as of 1977 5350 1950 % of Shareholding as of 1974 73.3% 26.7% 31. It is submitted that all aforesaid shares were issued only to the Respondent No. 2 with consent of the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to Respondent No. 2. In as much as if the Petitioner was the shareholder, as on that date, he ought to have declared the said shares as his property before the Bankruptcy Court in U.S.A. He has failed to do so. This itself proves on his admission that he had no stake in the Company as shareholder or otherwise, and he had no shareholding in the said company as he has already gifted the said shares to Respondent No. 2, in the circumstances as stated above. 33. Furthermore, according to the Ld. Counsel for the Respondent No. 2, the very same fact has been once again reiterated and admitted by him even subsequently in his Affidavit dated 28th August 2009 filed by him before the Superior Court, Guilford County-North Carolina, in which he has clearly and unambiguously stated that the Company belongs to Respondent No. 2 and the Petitioner was permitted to stay in the Apartment belonging Company because of his old age and difficult financial circumstances faced by the Respondent No. 2. This statement of his own on solemn affirmation even on 28/8/2009 reiterates that he has no shareholding in the Company and he was not a shareholder. It is submitted that this is because of the conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 36. Now coming to the aspect of siphoning off funds alleged by the Petitioner. In this regard, the Petitioner has alleged that the Respondent No 2 diverted the siphoned funds and the Business of the Company to the sole proprietary firm M/s Aquarius Impex, owned by the wife of Respondent No. 2. The business carried out by the said Company is also similar to that of the Respondent No. l, whereby the Company started incurring huge losses. The Respondents in their reply to the Company Petition have admitted the fact that the firm, M/s Aquarius Impex, owned by the wife of Respondent No. 2 is being run in the premises of the Company since last 30 years. The Petitioner's Counsel submitted that the office premises, plant and machinery of the Company is also being used by the Respondent No. 2'swife for her business without paying any compensation and rent to the Company. Furthermore, the staff of the Company was made to work for M/s Aquarius Impex under the directions of the Respondent No. 2. According to the Ld. Counsel, the Respondents in their Reply to the Company Petition admitted that the Company premises is used by M/s Aquarius Impex since 1983. 37. It was submitted o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 12 crores borrowed from the Central Bank of India for business purpose. The Petitioner submits that due to non-repayment of the loan amount to Central Bank of India, the Bank auctioned the Company's factory premises situated at Vapi, Gujarat and the plant and machinery lying therein, below the market value. 40. Responding to the aforesaid allegations, on behalf of the Respondents it was argued that the said allegation is incorrect. It is the Petitioner who mismanaged the assets of the company and he was privy to the act for the sale of properties of the company for his own benefits. 41. I have considered the submissions. Since the Petitioner has not impleaded M/s Aquaries Impex and the purchaser of the property i.e. M/s Millennium Developers Pvt. Ltd., the allegation with respect to siphoning off the funds, in my opinion, cannot be looked into at this stage. This issue is answered accordingly. 42. Lastly, it was alleged on the behalf of the Petitioner that the Respondents have not served statutory notice for the meetings. There is nothing on record to show that the petitioner was served any notice, with respect to the General meetings, or EOGM held by the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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