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M/s NEO FINANCE PVT. LTD. AND OTHERS Versus MR. RAKESH SONI AND OTHERS

2015 (12) TMI 1193 - COMPANY LAW BOARD MUMBAI

Oppression and mismanagement - transmission of shares - Petitioner has sought a declaration to the effect that he is owner and title holder of 7083.8 shares being the successor of the Estate of Mrs. Jayshree Soni who passed away intestate on 31/12/2012 - increasing the authorized share capital of the Respondent No.1 Company - Held that:- It is declared that the petitioner is entitled to l/5th share i.e. 7083 shares from the shares left by late Smt. Jayshree Soni. The Company is, therefore, direc .....

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ntly, the allotment of further shares made on 23/10/2013 or any time thereafter is also void, bad in law and is accordingly set aside. Appropriate Forms in this regard shall be filed by the Company with the ROC, Gwalior. It is, however, clarified that the company is not precluded from increasing its authorized share capital in accordance with the law and pursuant thereto the Company may allot further shares to all the shareholders including legal heirs of Late Smt. Jayshree Soni as per law.

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to the Company. The parties are directed to extend their co-operation to the said Auditors. The fees of the said Auditors shall be paid by the Company. The Special Auditors shall submit their report to the Company after completion of the audit within six weeks with effect from the date of receipt of the copy of this order.

In future, all the notices to the Petitioner shall be served through R.P.A.D by the Company. The Petitioner shall inform the Company his address on which the notice .....

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A SURESH, ADVOCATE JUDGMENT 1. The Petitioner has filed this composite Company Petition invoking the provisions contained in Sections 58, 59, of the Companies Act, 2013 and Sections 397 and 398 read with Section 402 of the Companies Act, 1956. The Petitioner has sought a declaration to the effect that he is owner and title holder of 7083.8 shares being the successor of the Estate of Mrs. Jayshree Soni who passed away intestate on 31/12/2012, He has further sought transmission of the aforesaid sh .....

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am also considering the Company Application, being C.A. No.291 of 2014, filed in the Company Petition thereby assailing its maintainability and seeking Its dismissal on the grounds stated therein. 3. The facts of the case, in brief, are as follows:- 3.1 The Petitioner is the son of Mr. Janakraj Soni (deceased) and Mrs. Jayshree Soni; (deceased). The Petitioner is one of the successors to the Estate of Mrs. Jayshree Soni, who passed away, intestate on 31/12/2012. The Petitioner is thus legally e .....

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f the petition. The Company has, since inception, been a holding company and owns the property located at 10/11, Chain Singh Ka Bagicha, New Palasia, Indore. 3.3 The Respondent No.2 is a Director of the Company and is the wife of Respondent No.5. The Respondent Nos.3 and 4 are the sons of the Respondent Nos.2 and 5 and also purport to be Directors of the Company. The Respondent No.5 is the brother of the Petitioner. The Respondent No,5 is also one of the successors to the Estate of Mrs. Jayshree .....

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ni were appointed as Directors of the Company. 3.5 After the demise of Mrs. Jayshree Soni, the Petitioner as well as Respondent No. 5 repeatedly called upon the company, through Respondent No. 2, to transfer their respective 1/5th shares held by the Late Mrs. Jayshree Soni to them. However, though Respondent No. 2 kept assuring the Petitioner that she would do so very soon, under the pretext or the other failed and omitted to do so. 3.6 Since the Petitioner and Respondent Nos. 2 to 5 are closely .....

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sequently learnt, after the demise of Mrs. Jayshree Soni, and sometime around September/October, 2013, that the Respondent No. 2 has purportedly fraudulently made the appointment of the Respondent Nos. 3 and 4 as additional directors of the Company with retrospective effect i.e. from 3/9/2010, and 1/9/2011, respectively. However, Form 32s with respect to the appointment as additional Directors were filed with the ROC on 3/9/2013, after the demise of Mrs. Jayshree Soni in order to effectuate the .....

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No. 1 Company were also filed only on 11/10/2013. Further, no resolution passed for confirming such re-designation, and which are the requirements of law, were annexed to any of the Form 32s filed with the Registrar of Companies. 3.9 It is further case of the Petitioner that after the death of Mrs. Jayshree Soni, the Respondent No. 2 was the only surviving Director of Company. In the circumstances, the Respondent No. 2 ought to have appointed the Petitioner and/or the other legal heirs of late J .....

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he as the sole surviving Director, also did not call for a general meeting of the members of the Company for the purposes of appointing a director of otherwise. 3.10 It is further alleged that thereafter, on 9/9/2013, the Company purportedly passed a special resolution, inter alia for increasing the authorized share capital of the Company from INR 5,000,000 to INR 15,000,000 by amending the Memorandum and Articles of Association of the Company. It is alleged that a notice calling EGM, whereat th .....

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Form 32s pertaining to their appointment as Directors with effect from 29/9/2010 and 29/9/2011, respectively, had not yet been filed, and were subsequently filed on 11/10/2013. 3.11 It is further stated that on 17/10/2013 the Petitioner addressed a letter to the ROC, Gwalior complaining therein that the appointment of the Respondent Nos.3 and 4 as Directors of the Company was illegal and that the Company had refused to transfer his entitlement of the shares of late Jayshree Soni. 3.12 It is fur .....

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hree Soni, and the Respondents refused to transmit the said shares in order to deny and avoid offering the Petitioner and other legal representatives of late Jayshree Soni an opportunity to subscribe to these additional allotment of shares, and so that the Respondent Nos.2 to 4 could take control of the Company by converting their minority shareholding into a controlling majority shareholding. After the above impugned allotment of shares to these Respondents, their combined shareholding went fro .....

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the Company was required to file the balance-sheets, annual returns and compliance report for the said Financial Years at the relevant time, they did not do so. This delay was because the documents submitted along with the said Form 23AC filing, including Directors' Reports, Auditors' Report, Secretarial Compliance Certificate have been hurriedly prepared, ante-dated and fabricated to reflect the appointments of the Respondent Nos.3 and 4 as Directors of the Company. 3.15 It is further .....

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r, the Company did not address the question of backdated and illegal appointment of the Respondent Nos.3 and 4 or its failure to register the shares of the Petitioner despite his requests. It is further stated that the said reply of the company, which is signed by the Respondent No.3 as the Director of the Company, also falsely stated that the Respondent No.2 had transferred 10 shares each to the Respondent Nos 3 and 4 on 4/10/2010. According to the Petitioner, this was a blatant false statement .....

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ny such transfer of 10 shares by the Respondent No. 2 in October 2010, and all documents in support thereof are just another addition to the long list of documents brazenly fabricated by Respondent Nos. l to 4. 3.16 It is the case of the Petitioner that he, vide his letter dated 12/12/2013, replied to the aforesaid letter received from the ROC, inter alia contending that no board resolution showing transfer of shares has been produced on record for appointment of the Respondent Nos. 3 and 4 as D .....

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illfully not transmitted to him after the demise of Jayshree Soni in order to enable the Respondent No. 2, in collusion and connivance with the Respondent Nos. 3 to 5, to do so as they wish in the Company, including fabricating and ante-dating the records and documents, and inter alia in order to try and legitimize the illegal, fraudulent and back dated appointments of the Respondent Nos. 3 and 4 as Additional Directors/Directors. This was solely for the benefit and self-aggrandizement of the Re .....

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of 2 shares for every one share held by the members of the Company. Further, the Respondent Nos. 2 to 4, knowing fully well that Mrs. Jayshree Soni had expired, and by deliberately not transmitting the shares held by her to her legal representatives, denied to them the opportunity to subscribe to the additional shares allotted on rights basis in the ratio of 2:1 for every share held by the members. Further, it is crucial to note that the Company was not and could not have been in any need of fu .....

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prejudicial to the legal representatives of late Jayshree Soni. 3.19 It is further stated that by virtue of the alleged special resolution and consequent actions, the entitlement of the Petitioner and the Respondent Nos 5 to 8 each in the one-fifth (1/5th) share in the shareholding of late Jayshree Soni in the Company is sought to be reduced as follows :- Sr.No. Name of Legal Heir of Jayshree Soni Entitlement in the Company upon demise of Jayshree Soni Reduction in entitlement upon passing of sp .....

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directions u/s 58/59 of the Companies Act, 2013, for recording the transmission in favour of the Petitioner and the Respondent Nos. 6 to 8 and to rectify the Register of members of the Company to a status quo ante as on 1st January, 2013. (b) To pass appropriate orders, reliefs and directions under Sections 397, 398, 402 and 403 of the Companies Act, 1956 to bring an end to the acts of oppressions and mismanagement perpetrated by the Respondent Nos. 2 to 5 and for necessary orders and reliefs in .....

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s this Bench may deem fit. (d) To pass an order thereby removing the present auditors and appointing an independent auditors for carrying out special audit of the books and accounts of the Compay, in a manner as this Bench deems fit and proper, particularly with regards to the issue of shares by the compay. (e) To pass an order, without prejudice to payer (c) above, to remove and/or supersede the present Board of Directors and appoint such number of persons as may be deemed fit and proper to hol .....

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bad in law, contrary to and/or in violation of the interest of the Company and/or the Petitioner, and that the same is not binding on the Company and/or the Petitioner. (h) To pass an order thereby declaring that the impugned special resolution passed by the members of the Company for increasing the authorized share capital of the Company and consequent allotment of shares is void, bad in law, contrary to and/or in violation of the interest of the Company and/or the Petitioner, and that the sam .....

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ith, transferring, conveying and/or otherwise transferring/licensing, the immovable property of the Company. (k) To pass a permanent order thereby restraining the Respondent Nos.2 to 6, their servants, agents and assigns from in any manner :- (i) increasing, issuing and/or allotting any further shares in any form or manner whatsoever in the Company, save and except with the prior written consent of the Petitioner; (ii) investing, selling, disposing off, encumbering or alienating any property or .....

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a perpetual order and injunction restraining them from in manner whatsoever making any false and incorrect records in respect of the Company and/or filing any false and incorrect statutory records in respect of the Company with the Registrar of Companies, Gwalior and/or addressing any correspondence whatsoever for and on behalf of the Company. (m) To pass an order thereby declaring that all or any acts done by the Respondent No. 3 and/or the Respondent No. 4, as Additional Director(s) and/or as .....

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. 3 and 4, respectively, on or around 4th October, 2013. (o) To provide costs of and incidental to this petition from the Respondents. (p) To pass such further or other orders and/or direction or directions as this Bench may deem fit and proper. 5. Pursuant to the notice, the Respondents appeared. The Respondent Nos. 1 to 4 filed a common Reply. The Respondent No.5 has filed his Reply separately. The said Respondents have denied all the allegations made by the Petitioner in the petition. None ap .....

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ovisions contained in Section 399 of the Act. The second preliminary objection taken by the Respondents is that the Respondent No.6 and the Petitioner as well have filed civil suits in the Civil Courts at Indore and Gwalior, respectively, seeking similar kind of reliefs and, therefore, the petition deserves to be dismissed. The third preliminary objection taken by the Respondents is that the Petitioner is indulging in forum shopping by filing several cases in different forums and hence the petit .....

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dents, the said transfer of shares is made in accordance with law. They have also justified the appointment of the Respondent Nos.3 and 4 as directors on the Board of the Company. They have also denied the charge levelled by the Petitioner as to fabrication of balance sheets and Annual reports. Based on the above they have sought dismissal of the petition. 6. The Respondent No.5 has also filed an identical reply. 7. Thereafter, the parties exchanged the affidavits in support of their respective .....

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ve also perused the record and other material available on record. 9. At the outset, the Ld. Sr. Counsel appearing on behalf of the Respondents, raising preliminary issues, challenged the maintainability of the Petition. The Ld. Counsel contended that the Petitioner is not a shareholder and member of the company as on the date of the filing of Company Petition and, therefore, it deserves to be dismissed at the threshold stage, without entering into merits of the case being not maintainable. In a .....

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42/2010, and (ii) Ram Gopal Patwari and Ors. Vs. Patwari Exports Pvt. Ltd. and Ors. (2010) 160 Comp Cas.116 (CLB) and MANU/CL/0025/2010. 10. In continuation of aforesaid contention, referring to the cases of (i) Shanti Prasad Jain v. Kalinga Tubes Ltd. (Supreme Court) AIR 1965 SC 1535; (ii) Mohta Bros. (P) Ltd. and Vs. Calcutta Land and Spinning Co. Ltd. and Ors. (Calcutta High Court) MANU/WB/0108/1969 (1970) 40 COMP CAS 119 (Cal); (iii) Palghat Exports Pvt. Limited V. T.V. Chandran and Ors. (Ke .....

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(2010) 53 CompCas152 (Bom), the Ld. Sr. Counsel for the Respondents next contended that the Board is required to test the maintainability of the Petition on the basis of facts and pleadings as on the date of its filing and the subsequent facts, events/pleadings are not to be taken into consideration for the purpose of the deciding the present Petition including the issue of maintainability. 11. I have considered this argument and I am in full agreement with the law laid down in the aforesaid dec .....

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petition can be taken into consideration. I proceed accordingly. 12. Elaborating the first preliminary issue as to maintainability of the petition, the Ld. Sr. Counsel submitted that pre-conditions for filing a Petition under Sections 397 and 398 are set out in Section 399 of the 1956 Act. Under the said Section, only members representing, not less than l/10th of its total number of members or holding not less than 1/10th of the total issued share capital of the company, are entitled to maintai .....

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any and on its registration shall be entered as a member in its Register of Members. Sub-Article(2) thereof states that every other person who agrees in writing to become a member of the company and whose name is entered in its Register of Members, shall be a member of the company. 14. Based on the above, it was argued that since Petitioner is not a member as on the date of filing of the Petition, the Petition is not maintainable. In support of his contention, the Ld. Sr. Counsel for the Respond .....

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a combined Petition filed under Sections 58 and 59 of the 2013 Act read with Sections 397 and 398 of the 1956 Act, would be maintainable only if the conditions precedent for filing an application under the Sections 58 and 59 of the 2013 Act are met, prior to the Petition being filed. According to him, under Sections 58 and 59 of the 2013 Act, the Applicant has the right to challenge the refusal of transmission/transfer of shares within 30 days of receipt of notice of such refusal by the Responde .....

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he Petition, therefore the question of refusal thereof does not arise. He pointed out that no application or intimation for transmission of shares was communicated in writing to the Company prior to filing of the present Petition by the Petitioner and, hence, the petition, being pre-mature, deserves to be dismissed on this ground. 17. The Ld. Counsel further submitted that assuming, whilst denying, an oral application or transmission is permissible, the Respondents have denied any such request h .....

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matter in such circumstances needs to be adjourned for recording oral evidence. The Ld. Counsel further pointed out that no application for transmission was served on the Company, according to the Respondents, and the Petitioners deliberately sent the application at the wrong address. Further, the service of the application on the erstwhile Advocates cannot be presumed as a sufficient service on the Company as it does not meet the requirement of the provisions. He, therefore, contended that the .....

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te on the basis of intestacy. It is claimed that his name ought to have been transmitted as a member to respect of the aforesaid 1/5th share viz. 7083.8 shares. b. Because, the question as to whether the deceased member died testate or intestate is a matter which only a Civil Court can decide and the said question is pending adjudication before the XIth Civil Court in Indore, Madhya Pradesh C.O.S. N0.176-A/2014 as well as the latest Civil suit No 65A of 2015 filed by the Respondent No.6 before t .....

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e empowered to insist on the production of aforesaid documents. 19. Referring to Article 77 of the AOA of the Company, the learned Senior Counsel Mr, Joshi appearing for Respondents submitted that as per the said Article, the discretion whether to accept the request for transmission or not without Letter of Administration/Probate/Succession Certificate is vested exclusively in the Board of Directors. According to the Ld. Sr. Counsel, there is no compulsion on the Board to transmit such shares wi .....

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estate etc. The decision of the Board of Directors was, therefore, bona fide decision and cannot be challenged in the present proceedings. According to the Ld. Sr. Counsel for the Respondent, on the death of the deceased, all the legal representatives of the deceased member, whose name is still on the Register ought to have obtained Letters of Administration/Probate/Succession Certificate in respect of the estate of the deceased or an order of the testamentary Court for division/partition, in r .....

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behalf of or through the deceased member or representing her estate. It was, therefore, contended that the Petitioner has no locus to file the instant Petition and on this ground alone, the Petition is liable to be dismissed. 21. In order to substantiate the aforesaid contentions, the Ld. Counsel also relied upon the provisions of the Hindu Succession Act, 1956 providing the mechanism for succession of the estate of the deceased to his legal heirs as tenants-in-common. In this connection, it was .....

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ndu Succession Act lays down that if two or more heirs succeed together to the property of an intestate, they shall take the property as tenants-in-common and not as joint tenants. 22. Referring to Section 19 of the Hindu Succession Act, and Black's Law Dictionary providing definition of "tenants-in-common" and a "joint tenancy", it was argued that a "joint tenancy" differs from a "tenancy-in-common", because each joint tenant has a right of survivorsh .....

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the 5 heirs. According to the Ld. Sr. Counsel, in the instant Petition, the Petitioner has claimed the relief of rectification of the Register of members of the Company by seeking to add his name in it by transmitting 7083.8 shares in his name. Mr. Joshi submitted that there can be no transmission of only a part of the shares. The Ld. Sr. Counsel further pointed out that, the Petitioner in the instant Petition has effectively sought a relief of partition of the estate and transfer of 7083.8 shar .....

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he Ld, Counsel further pointed out that the Petitioner is in effect seeking a partition and administration of the estate of the deceased which cannot be done by this Board and the jurisdiction whereof is exclusively with the Civil Court only. He, therefore, contended that Petition deserves to be dismissed being not maintainable. In support of these submissions the Ld. Counsel relied upon the following decisions : i. Hemlata Saha v. Stadmed P. Ltd. AIR 1965 Cal 436; ii. Kalyani Sundaram v. Shardl .....

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he instant Petition. The Ld. Counsel further submitted that inter se disputes between heirs cannot be decided by the Board. It is not the case here that all the heirs had jointly applied to the company for transmission of the shares jointly in their favour. The Ld. Sr. Counsel further submitted that the facts and circumstances of the case are clearly distinguishable from the case of "Margarat Desor". The Applicants therein had obtained a Letter of Administration under Section 290 of th .....

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to the Ld. Sr. Counsel, in the present case, none of the aforesaid conditions viz. the requirement of a joint petition by all the legal heirs supported with a Letter of Administration/Probate/Succession Certificate or a Petition through an Administrator, are satisfied as required under the law laid down in the Margarat Desor's case (supra). In view of the aforesaid, the present Petition is not maintainable. 25. Apart from the above, it was argued on behalf of the Respondents that, the issue .....

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ld by the Respondent Company are not the only property in the estate of the deceased. There are other properties for which the partition suit is pending between the parties. Further, there is a single share certificate pertaining to the shares held by the deceased. The said certificate is not traceable in the records of the Company or by the Respondent Nos. 1 to 4. In absence of the said share certificate, there is no way of finding out whether or not the shares of the deceased are encumbered. I .....

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vil Court, and therefore, the Petitioner cannot claim separate right in respect of 7083.8 shares in absence of partition/administration of the entire estate of the deceased made under an order of a civil court. The Petitioner also relied upon the following decisions in support of the above contentions: a. National Insurance Co. Vs. Glaxo India Ltd. 1999 Vol. 101(2) Bom. L.R. 331; b. Rao Saheb Manilal Gangaram Sindore & Ans. Vs. M/s. Western India Theatres Ltd. & Ors. AIR 1963 Bom.40; c. .....

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sed mother, Mrs. Jayshree Soni, and hence, he is entitled to 7083.8 shares (14.17%) in the Company i.e. 1/5th of the 35,419 shares held by her at the time of her death. Furthermore, Article 27 of the Articles of Association clearly states that transmission of shares of a deceased member shall be done without production of any probate/letters of administration/succession certificate by the legal heirs. According to the Petitioner, he, along with Respondent No.6, had orally applied for transmissio .....

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ares. 27. It was next argued on behalf of the Petitioner that pursuant to an order dated 17/10/2013 passed by the Board, the Petitioner had applied for transmission of the shares to the Company as explained in paragraph 2.15 hereinabove. However, the Petitioner's claim was rejected on the pretext that in the proceedings initiated by the Respondent No. 6 before Indore District Court 'it was alleged' that Late Mrs. Jayshree Soni had left a 'Will' and thus, in absence of letters .....

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succession certificate for transmission of shares. No reply was received to the Petitioner's response. This issue was raised by the Respondent Nos. 1 to 5 once again in their First reply in Paragraphs 10 and 18, which was clarified by the Petitioner in his First Rejoinder in Paragraph 8. Thereafter, in Paragraph 5 of Respondent No. 5's Affidavit in reply, it was alleged that till date, none of the legal heirs have found any will of Late Mrs, Jayshree Soni. It is also pertinent to mention .....

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Company after the death of Late Mrs. Jayshree Soni. 29. In addition to the above, it was urged on behalf of the Petitioner that a legal heir of a deceased member of a company is to be treated as a 'member' for the purposes of Section 399 of the Companies Act, 1956 as held in the cases of (i) M/s. World Wide Agencies Pvt. Ltd. & Anr V. Mrs. Margarat T. Desor & Ors. 1990 1 SCC 536, (ii) Serum Institute of India v. Inderjit Properties Pvt. Ltd 2006 129 Comp Cas 757 CLB, (iv) Rajesh .....

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facts and circumstances and hence are not applicable to the present case. 31. The Ld. Counsel appearing for the Petitioner further contended that the present petition is a composite petition filed by the Petitioner under Sections 397, 398 of the Companies Act, 19S6 read with Sections 58 & 59 of the Companies Act, 2013. The Ld. Counsel submits that the issues of transmission and rectification are the issues which fail within the exclusive jurisdiction of the Company Law Board and, hence, ough .....

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e Petitioner, It is also an undisputed fact that she has not left any Will, Therefore, according to the Hindu Succession Act, her five children are entitled to 1/5th share each of the shares left by her by operation of law. The shares of the deceased are movable property and are divisible. As far as immovable properties are concerned, in case of any dispute, it requires division by metes and bound, despite the fact that all the successors get the shares in the property as per the Hindu Successio .....

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y. It is binding between members inter-se as held in the case of V. V. Ranga Raj v. V. B. Gopalkrishnan [1991] 6 CLA 211 (SC). In the case of instant company, Article 27 of the AOA is relevant in this context which is being reproduced for the sake of easy reference. Article 27 "Any person becoming entitled to or to the transfer of any shares in consequence of the death or insolvency of any sole holder thereof or any way other than by transfer upon producing such evidence of his title theret .....

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to such person as aforesaid, it shall be subject to the same restrictions as those hereinbefore." 33. On a plain reading of the Article 27 it is clear that, any person becoming entitled to or to the transfer of any shares in consequence of the death or insolvency of any sole holder thereof or any way other than by transfer upon producing such evidence of his title thereto or that he substains the character in respect of which he proposes to act under this article as the Director (which the .....

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esitation to hold that in absence of any Will, the petitioner has already become entitled to 1/5th share as provided in the said Article. The production of Letter of Administration, probate, or succession certificate is required only when there is some Will left by the Deceased. In such situation, the entire arguments advanced by the Ld. Counsel for the Respondents and various decisions cited by him in support of his contentions, in my opinion, are misconceived and baseless. As stated above, to .....

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2013 Act read with Section 397/398 of the 1956 Act for transmission of shares and rectification of Register of Members and for oppression and mismanagement and he is qualified to file the petition in terms of Section 399 of the Act. 35. In addition to the above, I would like to refer to the pleadings of the Respondents from their reply(s) that they have themselves admitted the Petitioner is a member of the Company, being legal heir of late Smt. Jayshree Soni. According to the Respondents' o .....

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e Hall India (P.) Ltd. [2006] 134 DLT 450 it has been held that a composite petition filed under Sections 58, 59 read with Section 397/398 of the Act, would be maintainable. 36. In so far as the decisions cited by the Respondents are concerned, in my opinion, thev do not apply having regard to the facts of the case in hand. It may be mentioned here that in the case of (a) Ved Parkash (supra), the Petitioner was removed from the register of members by the Board of Directors of the Company, in the .....

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ster of members. Therefore, all these case arebased on different facts and do not apply having regard to the facts of the case in hand. 37. On the other hand, the decision in the cases of (i) Mrs. Margarat T. Desor (supra), (ii) Serum Institute (supra), (iii) Rajesh Patil (supra) and (iv) Gulabrai Kalidas Naik (supra), it has been held that the legal heir of the deceased member of the company is to be treated as a member for the purpose of Section 399 of the Act. 38. I have also taken into consi .....

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tion of Register of Members is with the CLB exclusively. It has been further held that on examination of the material available on record, if it comes to the conclusion that the serious question of facts and law are involved, in that eventuality the CLB may refer and/or relegate parties to the civil court for adjudication of their claims by way of filing a civil suit. I may like to reproduce the relevant part of the said decision;- "All the above indicates the limitation and the peripheral .....

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elay takes place, in entering on the register the fact of any person having become, or ceased to be a member; 31, the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register. 32 Sub-section (1) (a) of Section 155 refers to a case where the name of any person without sufficient cause entered or omitted, in the register of members of a company. The word 'sufficient cause' is to be tested in relation to the Act and the Rules. .....

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d to be summary in nature. So, whenever a question is raised court has to adjudicate on the facts and circumstance of each case. If it truly is rectification all matter raised in that connection should be decided by the court under Section 155 and if it finds adjudication of any matter not falling under it., it may direct a party to get his right adjudicated by civil court. Unless jurisdiction is expressly or implicitly barred under a statute, for violation or redress of any such right civil cou .....

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s impliedly barred. For what is not covered as aforesaid the civil court would have jurisdiction. Similarly we find even under Sec 446(1) its words itself indicate jurisdiction of civil court is not excluded. This sub-section states, '.....no suit or legal proceedings shall be commenced ... or proceeded with ...except by leave of the court'. The words 'except by leave of the court itself indicate on leave being given the civil court would have jurisdiction to adjudicate one's rig .....

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verting to the second limb of submission by learned counsel for the appellant that court should not have directed for seeking permission to file suit only because a party for dispute sake states that the dispute raised is complicated question of facts including fraud to be adjudicated. The Court should have examined itself to see whether even prima facie what is said is complicated question or not. Even dispute of fraud, if by bare perusal of the document or what is apparent on the face of it on .....

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led by Respondent No.6, which is not binding on the Petitioner herein. Secondly, as held in the case of Ammonia Supplies Corpn (P.) Ltd. (supra) the exclusive jurisdiction for rectification of Register of Members is with the CLB only, therefore, in other words the civil court is not competent court to grant any relief with respect to the rectification of Register of Members. Furthermore, in so far as the suit filed by the Petitioner is concerned, the major reliefs sought by him are different and .....

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that since there was no application for transfer of shares, the company could not have decided/ determined the application for transmission of shares and rectification of Register of Member and, therefore, in absence of refusal by a company, the petition being premature deserves to be dismissed. In my opinion, this contention is also without any basis. There is ample evidence that the Petitioner had applied for transmission of shares and the Company did not pay any heed to the request of the Pet .....

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urse of law, clearly prove the case of the Petitioner that despite his consistent request, the Company refused to transmit the shares in question in his favour. The company Itself was obligated in law to transmit the shares having come to know that late Jayshree Soni is no more and she has left 5 legal heirs, who, in the absence of a Will, are entitled to equal shares by operation of law. Having not done so, it does not lie in the mouth of the Respondents that in the absence of any refusal by th .....

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and deserves to be dismissed. This point Is answered accordingly. 43. Assailing the maintainability of the Petition, the next point argued by the Ld. Sr. Counsel appearing on behalf of the Respondents, is that the Petitioner, in connivance of the Respondent No.6, who is his real brother, has indulged in forum shopping and hence, the petition is not maintainable. In this regard, it was argued that prior to the filing of the present Petition, the Respondent No.6 had on or about November, 2013, fil .....

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t is only after refusal of such interim reliefs, that the Petitioner has filed this Petition in the month of February, 2014. The Ld. Sr. Counsel contended that this makes it abundantly clear that the Petitioner, in collusion with Respondent No.6, has indulged in forum shopping, 44. I have also given my thoughts to the contention of the Respondents that the succession of shares of a deceased shareholders between his legal heirs is akin to succession as tenants-in-common. I have also gone through .....

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same is to be governed according to the relevant/ applicable Articles of the Company and not in the manner the "tenants in common acquire rights". I am, therefore, of the view that the said contention also lacks merits and liable to be rejected. The facts of the aforesaid cases referred to by the Respondents' Counsel do not apply having regard to the facts of the instant case. This point is answered accordingly. 45. The Ld. Sr. Counsel further pointed out that the Petitioner during .....

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hat filing of such proceedings by the Petitioner and Respondent No.6 amount to forum shopping and on this ground the Petition deserves to be dismissed, being not maintainable. 46. Having considered the rival submission and on examination of record, I have come to the conclusion that this preliminary objection too is devoid of force. The Respondent No. 6 In his individual capacity has filed a civil suit which, in my opinion, is not binding on the Petitioner. It cannot be said that on account of t .....

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ng for the Respondent is that the present petition should be stayed in view of the proceedings pending in Civil Court at Indore filed by the Respondent No.6 and another Civil Suit filed by the Petitioner himself, wherein the prayers sought in said Civil Suit are almost identical to the relief sought for by the Petitioner in the case in hand and in this regard he has relied upon the dicision of (i) Swagath Marine Products Pvt. Ltd. v/s. Shri K. Muthusamy reported in (2006) 134 Comp Cas 182 (CLB) .....

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have also gone through the decisions cited by the Respondents- Counsel in this regard. In my opinion, facts of the decisions cited by the Respondents and the facts of the case in hand are altogether different, and therefore, those cases are not applicable. Moreover, the said civil suits are later in time. They have been filed after this petition and, therefore, the principles analogous to Section 10 of the CPC, do not apply to this petition. This preliminary objection is also rejected, being wit .....

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egally issuing the Rights shares without offering proportionate shares to the Petitioner behind his back with an ulterior motive to increase their shareholding and reduce the shareholding of the Petitioner with a view to sideline the Petitioner from the management of the Company. The Ld. Counsel for the Petitioner submitted that after the demise of Mrs. Jayshree Soni, upon inquiry regarding the affairs of the Company, the Petitioner learnt that the contesting Respondents by way of an alleged Rig .....

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ity shares of ₹ 100/- each for cash at par to all existing members In the ratio of 2:1 equity shares for every one equity share held by them on 9/9/2013. The Ld. Counsel submitted that pursuant to the allotment, the shareholding of the Respondent Nos. 2 to 4 was increased from 29,16% to 76,39%. Thus, Respondent Nos. 2 to 4 converted their minority shareholding into a controlling majority shareholding and the entitlement of the Petitioner and other legal heirs to the shares of Late Mrs. Jay .....

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illegal and therefore, the alleged Rights issue ought to be set aside, 53. In addition to the above, it was submitted on behalf of the Petitioner that, the Petitioner never received an offer letter to participate in the alleged rights issue. The Ld. Counsel submits that during hearing on 17/2/2014 before this Board, the Respondent Nos. 2 to 5 for the first time alleged that letter dated 11/10/2013 was sent to the Petitioner inviting him as legal heir of Mrs. Jayshree Soni to subscribe to the Rig .....

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ant caution and to show its bona fides, dispatched a notice of EOGM to the Petitioner, and the Respondent Nos. 5 and 6 by 'hand delivery', which was allegedly received by a security guard, Munna Singh. It was further alleged that reminders were sent to the legal heirs of late Jayshree Soni by the Company since no reply was received to the so-called notice of EGM dated 14/8/2013. 54. According to the Ld. Counsel, from the above allegations made by the contesting Respondents, it is clear t .....

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by the Respondent Nos. 3 and 4 themselves. 55. The Ld. Counsel next argued that the contesting Respondents did not disclose that the address of Respondent No. 6 is also shared by Respondent Nos. 2 to 4. According to the Petitioner, the Respondent Nos. 2 to 5 were aware at all times that he is residing at Gwalior for 28 years. 56. The Ld, Counsel drew my attention to an order dated 17/2/2014 passed by this Board, wherein the Board had directed Respondents to file proof of service of notice of the .....

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during the intervening period. The Ld. Counsel contended that even assuming that the notice was issued to the Petitioner, yet the intimation did not allow for 30 days although the minutes of EOGM specifically provided for such period. In this regard, the Petitioner relies upon the case of Martin Castelino v. Alpha Omega Ship Management Ltd. 2001 104 Comp Cas 687 CLB wherein an EOGM was held to be invalid on account of non-issue of notices, Consequently, increase in share capital and allotment wa .....

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entions to control the management of the Company and oust the Petitioner and other legal heirs of Late Mrs. Jayshree Soni, ought to be set aside. Further, in the Explanatory Statement dated 9/9/2013, it was stated that the resolution proposed for increase in share capital as the Company needed long term financial resources for liquidating company's liabilities, acquiring new assets, expanding business and meeting Company's expenses. 58. Justifying the Rights Issue, Mr, Joshi, Ld. Sr. Cou .....

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y, the Respondents' Counsel submitted that in the year 1999, only fixed asset of the company viz. the building owned by the Company was leased out to Metalman Industries Ltd. (Metalman) and a security deposit of ₹ 80 lacs was taken. M/s. Metalman being a listed company is promoted by the members of the Soni Family, The Respondent No.6, one of the legal heirs of the deceased, used to occupy the said premises as the Joint Managing Director of Metalman. The Ld. Sr. Counsel pointed out tha .....

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luding the deceased, Mrs. Jaishree Soni. It is, therefore, not open for the Petitioner to raise an objection with regard to the transaction entered into with Metalman, that too at such a belated stage. 59. It was further submitted that the said rent paid by Metalman and liabilities towards Metalman had always been reflected in the Balance Sheet of the Company, even at the time when the deceased was alive and signing the Balance Sheets of the Respondent Company. Further, as on 31/3/2013, there wa .....

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mating him about the change of its address to 602B, Devdarshan Apartment, AB Road, Indore - 452001. Further, Metalman also informed the Tehsitdar, Indore that it had ceased to be a lessee of the Respondent Company. 60. Taking me through the record, the Respondent's Counsel submitted that the Petitioner has admitted that Metalman was in possession of the building of the Respondent Company and that a sum of ₹ 80 lakhs was paid by Metalman on behalf of Respondent Company. However, the Pet .....

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es. Moreover, the Petitioner admits that an amount of approx. ₹ 80 lakhs was due from the company to Metalman as it had purportedly taken over a liability payable by the company to a third party. The Ld. Sr. Counsel submits that though no documents have been produced in support of their contentions, since the Petitioners themselves admit the liability of the Company to Metalman, the monies had to be admittedly repaid. According to him, this requirement to refund the monies owed to Metalman .....

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way of the said Rights issue for this purpose. 63. The Ld. Sr. Counsel pointed out that the transfer forms in respect of the said cars were signed by the deceased herself as is admitted by the Petitioner In his pleadings. It was, therefore, argued that the Petitioners have no locus to question the decision taken by the deceased during her lifetime. 64. Lastly, according to the Respondents, the Company was also in the urgent need of funds for the repairs of its building. The unutilized FSI in res .....

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hareholding of these Respondents. 66. Further, denying the Petitioner's allegation that Rights issue was made at a ridiculously low price and only with a view to capture the premises of the Respondent Company, it was argued on behalf of the Respondents that the directors have power to Issue shares at par even if the market price is higher, being primarily a matter of policy. The Ld. Counsel submits that the judgment of the Hon'ble Supreme Court in Sangrams Singh's case (supra) reiter .....

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ounsel further argued that the if the company is in the need of funds, then the Court will not interfere with the discretion exercised by its directors, because the principle is obvious that if new shares have been issued because the company needs funds, then it cannot be said that the discretion vested in the directors has been exercised not in the interest of the company or for the purpose of the company. It is only when that discretion is exercised solely for the personal ends of directors, f .....

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otherwise it was not obligatory upon the Respondent Company to give any notice or intimation to the Petitioner or the other legal heirs of the deceased for want of membership to the Respondent Company, it still issued such notice/intimation out of abundant caution. 69. According to the Respondents' Counsel, the intimation of the Extra Ordinary General Meeting along with an explanatory statement in respect of the Rights issue was sent to the Petitioner and Respondent No. 6. This intimation wa .....

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ved by Mr. Muna Singh or that Mr. Munna Singh was not the watchman. It is further submitted that the Petitioner has raised a disputed question of fact and for proving the same, he will have to lead oral evidence as is held in the case of Dr. Mahesh Batra (supra). It is pertinent to note that the Petitioner and the Respondent Nos. 2 to 5 five in the same premises and, therefore, it should not be a matter of surprise that any service on the Petitioner and Respondent No. 6 gets accepted by the watc .....

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ning documents in English language. 70. In Rejoinder arguments, the Ld, Counsel appearing on behalf of the Petitioner, denied the alleged bona fide requirement of funds suggested by the Respondents for the purpose of Rights issue. As regards Metalman issue, it was that in 1999, the Company was leasing the Property i.e. premises at New Palasia, Indore to Metalman Industries Limited (Metalman). On 1/4/2013, the Company vacated the premises and became liable to refund the Security Deposit of ₹ .....

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eferred to in the balance sheets. Further, the lease agreement with Metalman produced by the Respondents was not registered. 71. The Petitioner's Counsel then took me to the Reply and submitted that it is alleged that there was a mutual arrangement of the Company with Metalman where Metalman paid property tax on behalf of the Company and the Company adjusted the same against rent payable by Metalman. Thus, no separate rent was paid by Metalman to the Company. It is alleged that on 31/3/2013, .....

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n to the second rejoinder, the Ld. Counsel for the Petitioner submitted that Metalman is managed by Respondent No. 5 who has not made filings with ROC for several years. Respondent No. 5 continues to occupy premises. The Soni family had purchased Property from Metalman Finance Limited to operate office of Metalman in 1999. ₹ 11,66,480/- was paid by Metalman to Metalman Finance which was further transferred to Respondent No. 2 to be transferred to the sellers of the Property. In addition, M .....

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ans in question were not purchased by the Company but only transferred by Amulya in order to avoid attachment of the cars by the DRT, Jabalpur. The cars in question were then personally utilized by the Respondent Nos. 2 to 4. 74. As regards repairs and further constructions, it was argued by the Petitioners' Counsel that the contesting Respondents have alleged that the Property was in need of repairs and renovation and the building had unutilized FSI, which could be utilized by undertaking f .....

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allotted additional shares to the Respondent Nos. 2 to 4. In this regard, it was pointed out that it was only at the time of the rights issue that a bank account was opened by the Company for the first time, the rights issue was completed in less than 30 days. Further, demand drafts for subscribing to the rights issue were prepared on 19/10/2013 i.e. even before bank accounts were opened on 21/10/2013. It is, therefore, contended on behalf of the Petitioner that the allotment of additional share .....

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e alleged rights issue is prejudicial to the Petitioners' interest as a shareholder as the effect of the alleged rights issue was to reduce the Petitioners' shareholding in the Company and to enable the Respondent Nos. 2 to 4 to gain majority shareholding in the Company. The Petitioner's Counsel also submitted that the alleged rights issue was oppressive and done with mala fide intentions to upset the existing shareholding to the detriment of one group, such allotment of shares is an .....

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(CLB), NanalalZaver v. Bombay Life Insurance Co. Ltd. 1950 SCR 391, B.M. Jain & Sons Co. (P.) Ltd. v. Bombay Cable Car Co. (P.) Ltd. [2002] 30 SCL 140, Pushpa Prabhu Das Vohra v. Vohra Exclusive Tools P. Ltd., Tea Brokers (P.) Ltd. v. Hemendru Prasad Barooah [1998] 5 CLJ 463 (Cal.), Sangramsinb Gaekwad v. 2005 AIR SC 809, Bajaj Auto Limited v. N.K. Firodia (1970) 2 SCC 550, Harinagar Sugar Mills Limited v. Shyam Sundar Jhunjhunwala (1962) 2 SCR 339 & Alexander v. Automatic Telephone Comp .....

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dditional shares is relatable to proper purpose thereof. If the purpose is proper and the action of the Director is bona fide, the ratio should not be extended so as to hold that such a duty of the Director towards the shareholder is absolute despite the fact that there is no legal requirement therefore. Duty of disclosure to shareholders in that case had a strong nexus with the affairs of the Company. Dale & Carrington is not an authority for the proposition that the purported fiduciary dut .....

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wer of the Company to issue new shares but the legal effect thereof was not considered in detail. The Directors have the power to issue additional capital shares and in the process may obtain some pecuniary gain but only when such pecuniary gain is obtained through ulterior motive, they would be answerable to the shareholders. 64. It is also interesting to note that while applying the "extraneous purpose test" or "ulterior motive test", the Court noticed Piercy v. S. Mills &a .....

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as categorically held that the Directors have power to issue shares at par even if their market price is higher, which is primarily a matter of policy. 66. "Proper purpose" doctrine and the doctrine of "fairness" vis-a-vis the doctrine of "Bona fide" was considered in view of its findings that the allotment of all additional shares was gained by Ramanujam through manipulations and commission of acts of fraud upon becoming the Managing Director of the Company with a .....

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Carrington would be inconsistent with the duty of a Director vis-a-vis the Company and the settled law that the statutory duty of a Director is primarily to look after the interest of the Company, 68. In Bajaj Auto Ltd v. N. K. Firodia the Court was concerned with the discretionary exercise of power by the Directors in terms of Section 111(3) of the Companies Act. In the fight of refusal by the Director to register a transfer, the Court held that it is necessary for the Directors to act bona fid .....

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he general interest of the shareholders because the Directors are in a fiduciary position both towards the Company and towards every shareholder. The Directors are therefore required to act bona fide and not arbitrarily and not for any collateral motive." 69. This Court therein also applied the bona fide test of the Director and for the benefit of the Company as a whole. In that case, the Directors assigned reasons which were tested from three angles viz. (i) whether the Directors acted in .....

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lants against the first respondent was that he planned to acquire total control of the Company at virtually no cost to himself by means of selling the Strand-Coburg and other properties of the Company and making use of its liquid capital reserve; that his inside knowledge of the Company's affairs and the advice he obtained, showed him that there were good prospects of accomplishing this, leaving him sole owner of an unencumbered asset worth some Millions; and that he not only refrained from .....

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ich in a real and practical sense he has assumed. 72. In Pennington's Company Law, at p, 609, on Coleman, it is commented; "It is uncertain whether his reasoning can be extended to other situations where Directors owe duties to the Company but the relevant decision has to be made by its members individually or collectively, and the Directors advise them as to the decision they should make. Such situations would include a proposed sale or disposal of the Company, assets and undertaking, .....

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he contention of Mr. Desai, counters his, views. 75. It is interesting to note that in Needle Industries this Court said even in certain cases the Directors' attempt to maintain their control over the Company or in newly acquiring control over the Company may not amount to abuse of their fiduciary power stating: "Applying this principle, it seems to us difficult to hold that by the issue of rights shares the Directors of NIIL interfered in any manner with the legal rights of the majorit .....

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e fact that while discharging that duty they incidentally trenched upon the interests of the majority cannot invalidate their action. The conversion of the existing majority into a minority was a consequence of what the Directors were lawfully obliged to do. Such conversion was not the motive force of their action." 76. No argument in this case was advanced as regards the purported breach of fiduciary duty on the part of Appellant I in the mattes of increase of shares during the lifetime of .....

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e standard of conduct expected of a Director in relation to a transaction with the shareholders will differ and would necessarily depend upon the circumstances and the nature of the responsibility. 78. It is, thus, not possible to lay down a law which will have universal application. No authority has been brought to our notice which states that there exists a duty in a Director to advise the shareholders as to whether they should purchase the share of the Company or avail the benefit of an offer .....

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nter alia in exceptional situations when the Director take upon themselves the task of advising the shareholders who may be their family members, or when a transaction of purchase or sale is entered into by and between the Director and the shareholders, wherein the former takes undue benefit or has ill or improper or ulterior motive or mala fide acts solely to make a pecuniary benefit and gain for himself and to the detriment of such shareholders. If a general fiduciary duty of a Director vis-a- .....

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uciary position and must exercise their powers for the benefit of the Company and for that alone and that the Court can intervene to prevent the abuse of a power whenever such abuse is held proved, but it is equally settled that where directors have a discretion and a bona fide acting in the exercise of it, it is not the habit of the Court to interfere with them. When the Company is in no need of further Capital, directors are not entitled to use their power of issuing shares merely for the purp .....

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nd where their action is for the benefit of the Company, them merely because in promoting the interests it cannot be held that they have not acted bona fide As it has been said in Hirsche V. Sims, if the true effect of the whole evidence is that the defendants truly and reasonably believed at the time that they did was for the interest of the Company, they are not chargeable with dolus malus or breach of trust merely because in promoting the interest of the Company they were also promoting their .....

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equirement, Hence, if the shares are issued in the larger interest of the Company, the decision cannot be struck down on the ground that it has incidentally benefited the Directors in their capacity as shareholders. What is objectionable is the use of such power simply or solely for the benefit of Directors or merely for an extraneous purpose like maintenance or acquisition of control over the affairs of the Company. Where the Directors seek, entering into an agreement to issue new shares, to pr .....

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the directors may exercise their powers bona fide and in the interest of Company. If the directors exercise their powers of allotment of shares bona fide and in the interest of the Company, the said exercise of powers must be held to be proper and valid and the said exercise of powers will not be questioned and invalidated merely because they have any subsidiary additional motive even though this is to promote their advantage. An exercise of power by the directors In the matter of allotment of .....

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er's employee, in my view, is not reliable. Therefore, the EOGM-in-question is non-est, illegal and void. 83. On the basis of submissions advanced by the Ld. Counsels for rival parties, and the law discussed above, the next question that arises for consideration is as to whether the allotment of shares under the Rights Issue was for the best interests of the Company and for proper purpose or it is a deliberate attempt to sideline the Petitioners by reducing their shareholding. 84. In this co .....

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rs purchased from Amulya Exports Ltd. and for the urgent repairs of the building funds were needed. 1 have carefully examined all these three grounds, which in my opinion, are unreliable. The Metalman is also a family company of the parties. The Metalman was not paying any rent to the company. It was only paying the property tax in lieu of the use and occupation of the company's property, Similarly, the Amulya Exports Ltd. is also a company of the Respondent No. 5 and it is the case of the P .....

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issue was launched deliberately to sideline the Petitioner from the affairs of the company by reducing their shareholding and correspondingly increasing the shareholding of the Respondents. I, therefore, hold that the EOGM held on 9/9/2013 by the company. In absence of the Petitioner, without valid and proper service of notice, is bad in law, and deserve to be set aside. Similarly, the allotment of further shares is also bad in law and deserves to be set aside. I have also gone through the deci .....

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ent No. 2 has illegally gifted the shares to the Respondents Nos. 3 and 4. It was in this connection argued on behalf of the Petitioner by the Ld. Counsel as stated below. 86. Dealing with the said issue, the Petitioner's Counsel urged that for the first time, the Respondent No. 2 in her reply to the Petitioners complaint to the ROC alleged that she had gifted 10 shares each to her sons, the Respondent Nos. 3 and 4. The Ld. Counsel then pointed out from reply that the Respondent No. 2 allege .....

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ore. The Sub-Registrar replied that there was no entry found in the register of stamps on 4/10/2010 in respect of stamp paper bearing nos. 6780 and 67800 on which the alleged gift deeds were executed. In fact, the said stamp papers were issued to Arpit Gupta and Akansha Gupta on 31/3/2011. Morever, the alleged Gift Deeds I were not notarized. 87. The Ld. Counsel then took me to the reply of the Petitioner's application for perjury filed before this Board, wherein it was alleged that the two .....

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under the RTI Act, 2005 with Sub-Registrar of Stamps at Indore to verify authenticity of the alleged Gift Deeds II. It was revealed that there was no record in the daily register of the stamp papers dated 6.10.08 being sold to the vendor Banarasi Dass. Further, there was no explanation whatsoever given for the sudden change from the alleged Gift Deeds I to alleged Gift Deeds II. The two documents produced by them are prima facie backdated and fabricated. The Petitioner's Counsel submitted t .....

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pondent No. 4 needs to be set aside. 89. Responding to the said allegations of illegal transfer of shares by the Respondent No. 2 in favour of the Respondent Nos. 3 and 4, the Ld. Counsel appearing on behalf of the Respondents submitted that the Respondent No. 2 transferred 10 shares each to Respondent Nos. 3 and 4 on 4/10/2010 by executing share Transfer Forms in their favour, respectively. 90. According to the Ld. Counsel, the Respondent No. 2, being the mother of Respondent Nos. 3 and 4, tran .....

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o executing the share transfer forms. The execution of gift deeds was not a legal requirement in view of the execution of the share transfer forms. According to the Ld. Counsel, it is sufficient to note that the transfer of shares took place during the lifetime of the deceased Jayshree Soni and therefore, it is now not open to the Petitioner (who is claiming to be the heirs of the deceased) to challenge the said transaction. 91. Referring to the order dated 1/9/2014, the Ld. Counsel submitted th .....

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for the Respondents further submitted that dehors the Gift Deeds, the Respondents have brought on record the share transfer forms duly executed and submitted to the Respondent company as per the provisions of the Companies Act, 1956, and all formalities with respect to effecting the transfer of shares have been duly completed in accordance with law. 93. In view of the aforesaid, the Respondents' Counsel submitted that the issue as to whether or not the Gift Deeds are fabricated, need not be .....

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tern India Theatres Ltd.ds & Ors. Reported in AIR 1963 Bom. 40 (d) Jayshree Shantaram Vankudre Vs. Rajkamal Kalamandir Pvt. Ltd. reported in AIR 1960 Bom 136; (e) Bipin Jain & Ors. Vs. Savik Vijay Engineering Pvt. Ltd. & Ors. Reported in (1998) 91 Com Cas 835 (CLB). (f) Dr. Mahesh Batra Vs. Gajraj Beverages Pvt. Ltd. & Ors. Reported in MANU/CL0092/2002. 95. Having considered the submissions advanced by the Ld. Counsels appearing for the rival parties and upon a close scrutiny of .....

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f from rendering any finding on this issue. This issue is answered accordingly. 96. The next instance cited by the Petitioner as an art of oppression is that the Respondents have illegally appointed Respondent Nos. 3 and 4 as the Directors on the Board of the Company without following due course of law in order to gain majority and thereby control the affairs of the Company. In this regard, the Petitioner's Counsel submitted that on 3/10/2010, FORM 32 for appointment of Respondent No. 3 as a .....

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29/9/2010. Further, on 11/10/2013, FORM 32 for appointment of the Respondent No. 4 as director of the Company was filed with the ROC for retrospective appointment with effect from 29/9/2011. According to the Ld. Counsel, these FORM 32s were filed by the Respondent Nos. 2 to 4 after three years without offering any explanation whatsoever. Further, it may be noted that these FORM 32s were filed after the death of Mrs. Jayshree Soni. 97. The Ld. Counsel for the Petitioner pointed out that there was .....

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ing the Respondent No. 2 to file the Forms have not been produced by the contesting Respondents. All board resolutions produced have been signed by the Respondent No. 2 alone. The board resolutions were not annexed at the time of filing Forms which was rectified by paying penalties after the same was pointed out by the Petitioner. The Petitioner's Counsel submitted that if the appointments were done during lifetime of Mrs. Jayshree Soni, notices of meetings would have been received by her. T .....

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at the Respondent Nos. 3 and 4 were appointed as additional directors with effect from 3/9/2010 and 1/9/2011, respectively. Further, they were confirmed as permanent directors on 29/9/2010 and 29/9/2011 respectively, all of which happened during the lifetime of the deceased Jayshree Soni and the same was known to her. 100. The Ld. Sr. Counsel for the Respondents submitted that merely because there was a delay in filing Form 32 In respect of appointment of directors, it cannot be said that the sa .....

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appointment of Respondent Nos. 3 and 4 as directors in accordance with law. In view of the aforesaid, the contention of the Petitioner that the appointment of Respondent No. 3 and Respondent No. 4 as directors of the company being illegal, is wholly misplaced. In any event, the Form 32s were filed by the Respondent Company much prior to the filing of the present Petition which was filed on or around 2/2/2014. This fact unequivocally obviates any malpractice on the part of the Respondent Company. .....

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for the Respondents that this issue requires oral evidence, is misconceived and baseless. It may be mentioned here that in a petition under Section 397/398 of the Act, the test is not legality or illegality in the action of the oppressor party, but the test, in fact, is the probity, fair dealing and bona fides. Although, the facts and circumstances of the case is that the Respondent Nos. 3 and 4 has been appointed by the Respondent No. 2 to gain majority on the Board of Directors with the sole p .....

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Section 398 of the Act. In this regard, it was argued that between 8/11/2013 and 12/11/2013, the Company filed FORM 23ACs with the ROC submitting balance sheets, annual returns and compliance certificates for the Financial Years 2009 to 2012. 104. The Petitioner's Counsel submitted that as explained in paragraph 15.5 of the First Rejoinder, pursuant to order dated 17/2/2014 passed by this Bench, the Petitioner took inspection of annual returns, balance sheets etc. and the Petitioner observed .....

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ed together in a span of 1 week after demise of Mrs. Jayshree Soni. The Petitioner states that not a single balance sheet is signed by Mrs. Jayshree Soni. The Petitioner states that Balance Sheets for the period 2009-2011, when Mrs. Jayshree Soni was alive and director of the Company, are not signed by Respondent Nos. 2, 3 and 4. The Ld. Counsel for the Petitioner pointed out that the Director's Report for the year ending 31/3/2010 is signed by Respondent No. 3 on 4/9/2010, a day after his a .....

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gations and contended that all documents are genuine and were duly filed in accordance with the provisions of Law. 106. Having analysed the allegations made above with respect to the act of management, I am of the view that the documents referred to above, reveal certain manipulations committed by the Respondents. In my opinion, this dispute can be resolved by appointing an Auditor to conduct a special audit of the company after the death of Smt. Jayshree Soni. This issue is answered accordingly .....

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the share capital of the company and have allotted shares to the Respondent Nos. 2 to 4 only without following due course of law behind the back of the Petitioner and did not allot the shares to the Petitioner on the proportionate basis in terms of the provisions of the Companies Act and the law laid down by the Hon'ble Apex Court. This further amounts to acts of gross oppression. The appointment of the Respondent Nos. 3 and 4 as directors on the Board of the Company is another instance of o .....

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in isolation, but as part of a continuous story; (d) it must be shown as a preliminary to the application of Section 397 that there are just and equitable grounds for winding up the company; (e) the conduct complained of can be said to be oppressive only if it can be said that it is burdensome, harsh and wrongful and the oppression involves at least elements of lack of probity and fair dealing to a member in matters of proprietary right as a shareholder. For the reasons discussed hereinabove, i .....

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rs and, accordingly, to mould relief with a view to put an end to the matters complained of. 110. It is a settled proposition of law that where any shareholder is denied his most valuable rights in utter disregard of the statutory provisions, the making of a winding up order, on the ground that it is just and equitable would be justified. Therefore, having regard to the facts of the case in hand, the necessary ingredients of the provision contained in Section 397 which provides that: "to wi .....

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titioner is entitled to l/5th share i.e. 7083 shares from the shares left by late Smt. Jayshree Soni. The Company is, therefore, directed to transmit the shares to the Petitioner. The Company is further directed to rectify its Register of Member by entering the name of the Petitioner to the extent of aforesaid 7083 shares of the Respondent No.1 Company. c. It is declared that the impugned special resolution dated 9/9/2013 passed by the Company thereby increasing the authorized share capital of t .....

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