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2016 (2) TMI 134 - DELHI HIGH COURT

2016 (2) TMI 134 - DELHI HIGH COURT - TMI - Director competing the business of company in which he/she is already a Director - Infringement of goodwill - declaration, rendition of account, damages, permanent and mandatory injunctions seeked - violation of Section 166 of the Companies Act, 2013 and Section 88 of the Trusts Act, 1882 by defendant No.1 - Held that:- Defendant No.1 being the Director of defendant No.3 is entitled to 50% net-profit of the Company but at the same time, as she has viol .....

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at large that he/she has any association or affiliation of the Company in which he/she is still a Director.

Subject to the condition and by filing of an affidavit of undertaking that (i) the defendants No.1 and 2 shall not use the mark PARAMOUNT, its goodwill in any manner in its Company defendant No.2 and shall not poach teachers, students or staff members of defendant No.3 and within two weeks shall remove the word PARAMOUNT from all hoardings, advertisements, brochures and other .....

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.3 and shall not create any hindrance of running business of defendant No.3 directly or indirectly.

In case of above said compliance and undertaking, the defendants No.1 and 2 are allowed to continue with the business of defendant No.2. In case of any breach, the plaintiff is entitled to move before Court for modification of order and then the Court may pass any appropriate orders.

Mr.Abhimanyu Mahajan, Advocate (Mobile No.9811103447) is appointed as a Local Commissioner to .....

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till December, 2015 and continue to file the same every quarterly so that actual figures of profits of defendant No.2 and defendant No.3 be ascertained after trial for adjustment purposes. The fee of the Local Commissioner is fixed at ₹ 60,000/- per visit at this stage which shall be paid by both the parties in equal proportion from the account of defendant No.3, subject to final adjustment. - I.A. No.17545/2015 in CS(OS) No.2528/2015 - Dated:- 27-1-2016 - MR. MANMOHAN SINGH, J. For The P .....

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ampus Pvt. Ltd. (iii) M/s. Paramount Coaching Centre Pvt. Ltd. 2. By way of this order, I propose to decide the pending application being I.A. No.17545/2015, under Order XXXIX Rules 1 and 2 CPC filed by the plaintiff. 3. The defendant No.3 is a private limited company incorporated under the Companies Act, 1956 vide certificate of incorporation dated 8th December, 2009. The plaintiff and his wife, defendant No.1 are holding 50% share each of defendant No.3 who is involved in the business of impar .....

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The plaintiff has pointed out few documents in order to show that prior to incorporation of defendant No.3 in the year 2005, the plaintiff opened a bank account with the Bank of Maharashtra as the sole proprietor of Paramount Coaching Centre. On the other hand, defendant No.1 in support of her claim for ownership of the name PARAMOUNT has relied upon a document in order to show the use of the name Paramount prior to 2005 of her reply to the plaintiff s injunction application. The plaintiff submi .....

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livelihood. The plaintiff allowed the defendant No.1 to take English Classes in his coaching centre. He was a bachelor and earning handsome amount at that time. After expiry of approximately 8-9 months, defendant No.1 expressed her willingness to get married with the plaintiff. She confirmed that she was spinster and unmarried; her father had expired and there was an old widow mother having six daughters and one brother. Believing upon her statement, the plaintiff got married with defendant No. .....

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tion of defendant No.3 also formed an educational society in 2007 under the name Paramount Zenith Society . 6. The main reason for the present litigation is that defendant No.1 who is the wife of the plaintiff incorporated another company being the Director of defendant No.3-Company under the name of K.D. Campus Pvt. Ltd. (defendant No.2). She is the founder and director of the company for the purposes of competing with defendant No.3. The said company of defendant No.2 was incorporated by defen .....

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her relatives including her sisters (i.e. Maya Chaudhary as CEO of defendant No.3 and Director of defendant No.2) and brother-in-laws hatched a conspiracy to set up a competing business with defendant No.3 while still working as Director/ employees of defendant No.3 to divert the business, future business opportunities, staff and students to their own private companies. 8. She holds 99.99% shares and her sister Maya Chaudhary s daughter holds 0.01% share for the purposes of carrying on competin .....

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o.3 has been printing, publishing, selling and providing the books, Journals and other study material in the name of defendant No.3 for various competitive and other examinations on various subjects like Reasoning, physics, Chemistry, English, Maths, etc. Defendant No.1 has been indulging in causing wrongful loss to the defendant No.3 and wrongful gain for her individual one-person company namely M/s. Paramount Reader Publication OPC Pvt. Ltd. The plaintiff on behalf of the defendant No.3 as wel .....

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trict Court granted an injunction restraining inter-alia defendant No.1 from using the name PARAMOUNT for her personal and individual benefit or in any of her publications, or in any soft copy or in online material and further from indulging in competing business. 11. The plaintiff submits that defendant No.1 is creating confusion and deception in the minds of ordinary persons to believe that KD Campus is a part of defendant No.3 or somehow it is associated with defendant No.3 or it is doing bus .....

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dant No.3. The plaintiff has and is continuing to use her position as Director to usurp business of defendant No.3 s business. 13. The plaintiff says that after incorporating defendant No.2, which in itself is a breach of fiduciary duty owed to defendant No.3, defendant No.1 made all efforts to capitalise on the goodwill generated by defendant No.3 and mislead the public to believe that defendant No.2 is a part of defendant No.3 so as to divert all its business to herself and defendant No.2. In .....

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.3 in violation of the Companies Act, 2013. 14. In order to restrain defendant No.1 from indulging in the aforesaid wrongful actions, the plaintiff on 26th May 2015 had instituted a suit being CS(OS) No.1592 of 2015 along with an application under Order XXXIX Rules 1 and 2 CPC. By an order dated 26th May, 2015, the learned Single Judge issued notice. For completion of service and pleadings, the matter was listed before Joint Registrar on 7th October, 2015. Being aggrieved by the said order, the .....

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le the fresh one. As far as litigation in this Court is concerned, it is submitted that though the plaintiff initially instituted the suits in his personal name, owing to technical defects, both the suits were withdrawn with leave to file fresh suits, which was granted. Accordingly, fresh derivative suits were instituted. The earlier suit being CS(OS) No.1592/2015 was withdrawn by order dated 9th September, 2015 which was already filed. He was allowed to withdraw the said suit. In order to save .....

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ous personal allegations against the plaintiff. The same would be referred at a later stage. The main defences, on merit, raised reads as under:- (i) The plaintiff has no right or authority to file such an action. The company has not authorized the plaintiff to file any such action. The derivative action filed by him is not maintainable. (ii) The suit of the plaintiff is without any cause of action, as he has filed the suit as shareholder to the extent of 50% in the shareholding of defendant No. .....

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CLB is already seized with the acts of omission and commission of the plaintiff. The parallel proceedings before the two different forums cannot continue as it may result in conflicting orders. The present suit and the present application are also barred by Section 41(h) & (i) of Specific Relief Act. (iv) It is not open for the plaintiff to allege that the defendant No.1 is disentitled to do business in defendant No.2-Company. The plaintiff has concealed from this Court that the plaintiff h .....

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endant No.1. He has taken physical control over the business, affairs and belongings of defendant No.3-Company and is now seeking to prevent the defendant No.1 from carrying on her lawful business in defendant No.2-Company. He has no right or interest in defendant No.2-Company. He is jealous that the defendant No.1 has been able to set up the defendant No.2-Company and provides good service in the market. Unable to deal with the defendant No.1 in the market, the plaintiff has filed the present s .....

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s barred under Order 2 Rule 2 CPC, as mere a comparison of the contents of the plaint of three suits would show that all the paras of all the plaints are identical. The foundation facts of all the suits are substantially identical. The cause of action is the same. The plaintiff is indulging in multiple litigations. Thus, the suit of the plaintiff is barred under Order II Rule 2 CPC and is liable to be rejected under Order VII Rule 11(d) of CPC. (vii) The suit of the plaintiff is without cause of .....

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ng the IAS Academy in the name and style of "Arohan" and he offered the defendant No.1 to start her "Paramount Coaching Centre" from his space of "Arohan" and the offer was accepted by the defendant No.1 and as such the defendant No.1 ran her "Paramount Coaching Centre" at the place of plaintiff where he was running his IAS Academy "Arohan". (ix) The plaintiff has shown himself to be the "Proprietor" of "Arohan" in the Profit .....

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wn to be running by the defendant No.1 from the same place. (x) The share of the defendant No.1 was reduced by 9% in the financial year 2013-14 by the plaintiff by forging the signatures of the defendant No.1 in collusion with the previous account care-taker Mritunjay Singh who had impersonified himself as C.A. The Form-II was filed for this purpose bears his signatures both digital as well as normal. The returns of the year 2012-13 was filed using the forged signatures of the defendant No.1 and .....

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d a deceptively similar magazine "Paramount Current Affairs" and the students are being compelled to take the magazine edited and published by the plaintiff and despite the demands made by the students, the plaintiff is not allowing distribution of Magazine "Paramount Readers" which is against the interest and welfare of the students in general and against the interest of the company in particular. 16. Apart from the merit of the case, both parties have made personal allegati .....

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o his marriage with defendant No.1, it appears from her resume on Jeevansaathi.com that she was awaiting divorce . At the time of marriage, she represented to the plaintiff that she was a spinster and in fact, swore an affidavit stating the same but later on, the plaintiff learned that she was still married to one Capt. Bachchan Singh Chauhan at the time of her marriage with the plaintiff and she had with a pre-planned motive to usurp the plaintiff s business and money misrepresented to him that .....

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he temple authority specifically asked the plaintiff as well as the defendant No.1 to furnish their respective affidavits on oath stating their age, marital status, religion, intention etc. The defendant No.1 had wrongly deposed on oath that she was spinster at the time of marriage with the plaintiff. Although, the brother, sister and brother-in-law of defendant No.1 used to visit the plaintiff even before the marriage. They were aware that defendant No.1 was already married with one Bachhan Sin .....

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n appointed Director of the defendant No.3-Company, defendant No.1 started appointing her family members to key positions in defendant No.3, with intent to be go gain assistance and control in the process of diverting the plaintiff s business. The defendant No.1 appointed her sister and brother in law, Maya Chaudhary and R.K. Chaudhary as CEO s of defendant No.3, her nephews for looking after books and magazine section of defendant No.2 and her other sister Manju Singh, in another key position a .....

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he Company: (b) gaining an unfair advantage by breaching duties owed to the Company, (c) failing to act in the best interest of the company. The defendant No.1 failed to inform or obtain the plaintiff s consent prior to incorporating defendant No.2. Further, defendant No.1 is still a Director in defendant No.3. She has used this position as Director of defendant No.3 to divert defendant No.3 s business to defendant No.2 and confuse the public to believe that defendant No.2 is part of defendant N .....

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No.3 to defendant No.2 by misleading the public into believing that the two companies are associated, defendant No.1 has been soliciting students that approach defendant No.3 to take admission in defendant No.2. To lure them into abandoning defendant No.3, she has been providing a concessional special fee rate for Paramount students to join defendant No.2. The sisters of defendant No.1, Manju Singh and Maya Chaudhary and brother in law, R.K. Chaudhary are assisting the defendant No.1 in the pro .....

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defendant No.3 and the plaintiff. 17. The defendants No.1 and 2 have denied all the allegations made by the plaintiff, rather the counter-allegations are made by defendant No.1 who stated that the plaintiff has started taking unilateral decisions of defendant No.3-Company regarding appointment, termination, enhancing salaries of the employees and without calling any board meetings. He had hired the musclemen and lady bouncers in order to prevent the defendant No.1 in the affairs of the defendant .....

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y namely Swaraj Gupta of his own choice and sent her to the Uttam Nagar Centre of the company in order to create chaos in the said centre and when the defendant No.1 interfered, a false and fabricated case was got registered by the Police of Bindapur Police Station at the instance of plaintiff but later on, on preliminary enquiry of the police, it was found that the said lady has been illegally trespassed in the premises of the company and upon the complaint of the defendant No.1, FIR No.1063 da .....

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aining and embezzling the funds and collections of Paramount Coaching Centre Pvt. Ltd. (defendant No.3), of which he is a Director. While earning ₹ 5 lac and then after increment ₹ 7 lac per month, it was highly impossible to go for mountaineering expedition with a friend to all the continents of the world, each costing not less than ₹ 30-40 lac per person and bearing the entire cost of the friend. He has failed in his three expeditions and successful in five and with this, he .....

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Editor of a Magazine Paramount Reader which is extremely famous among the aspirants. Not only this, even the other institutes and business houses have great regards for the plaintiff and he is known as Neetu s husband. 18. It is also submitted on behalf of defendant No.1 that in the present case, both the plaintiff and defendant No.1 had equal shareholdings of 50% and were equally responsible for the affairs of the Company for all purposes. The plaintiff chose to ignore any sort of contribution .....

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om defendant No.3 as per averments made in the written statement. It is argued that defendant No.1 has started the independent business under the compelling circumstances and the reasons as explained in the written statement. She has placed reliance on the following judgments:- (i) Heena Dutt v. Chavi Designs Pvt. Ltd. & another, (2008) 141 Comp Cas 172 (CLB) (ii) Foster v. Bryant, 2007 EWCA Civ. 200 20. The next submission is that there are numerous pending litigations between the two share .....

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t is also submitted on behalf of defendants No.1 and 2 that the plaintiff has disregard to the financial condition and future of the company, defendant No.3. The proceedings for oppression and mismanagement, under Section 397 and 398 of the Companies Act, 1956, were the efficacious remedy enacted under the Special Act, in the Company Law Board. The said proceedings have not progressed due to the dilatory tactics adopted by the plaintiff. Defendant No.1 is constrained to file the winding-up proce .....

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ere has been no ousting of the defendant No.1, is without any substance and false. By relying upon the judgment in Heena Dutt v. Chavi Designs Pvt. Ltd., 2008 (141), Comp.Cas 172 CLB, Ms.Luthra submits that the said decision directly applies to the facts of the present case, as in the present case, the plaintiff has been taking unilateral decisions for more than 2 years and has already taken over the control of the company by his strong arm tactics. The plaintiff has removed the name and photogr .....

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not even getting her salary from Paramount Coaching Centre Pvt. Ltd for the last 2/3 months. She has been denied access to the account books. The whole Account Section of Paramount Coaching Centre Pvt. Ltd has been shifted to some unknown destination, the address of which is unknown to the defendant No.1. 22. It is stated that one of the petitions filed by defendant No.1 against the plaintiff is already pending before the Company Law Board, thus, the present suit is not maintainable. The plainti .....

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ions 397, 398, 402 and 408 of the Act is twofold - to set right the wrongs and take remedial action to prevent occurrence of wrongs in future. Thus both preventive and curative action can be taken by the Company Law Board to regulate the conduct of the Company's affairs in future and to bring to an end the matters complained of. To do substantial justice between the parties, I hereby direct the respondent No.2 to restore the sale consideration received in respect of the discounted sales and .....

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direct that both the parties to be present in the CLB Court Room along with their counsels on August 23, 2007, at 11.30 a.m., to bid for the shares and the party which bids the higher price for the shares, should purchase the shares of the other party at that price. 23. Let me now deal with the submissions of the parties. It is undisputed fact, that is, a material placed on the record that the defendant No.1 has made many statements publically by way of advertisements and messages on mobile pho .....

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ebook, she has made statements such as Congratulations to all well wishers cases against K.D. Pvt. Ltd. and Paramount Reader Publication have been decided in favour . The defendant No.1 has also used the name PARAMOUNT along with the name of defendant No.2 K.D. Campus Pvt. Ltd. in order to make promotion of her own Company. The conclusive and cogent evidence has been produced by the plaintiff in the shape of photographs of sign-boards having the name of PARAMOUNT with the advertisement of K.D. C .....

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ts reads as under:- Section 166 of the Companies Act, 2013 (1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company. (2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment. (3) A director of a company shall exercise his .....

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ue gain, he shall be liable to pay an amount equal to that gain to the company. (6) A director of a company shall not assign his office and any assignment so made shall be void. (7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. Section 88 of the Indian Trusts Act 88. Advantage gained by fiduciary.- Where a trustee, executor, partner, agent, .....

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n 16 of the Partnership Act 16. Personal profits earned by partners.-Subject to contract between the partners,- (a) if a partner derives any profit for himself from any transaction of the firm, or from the use of the property or business connection of the firm or the firm name, he shall account for that profit and pay it to the firm; (b) if a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him .....

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argument of the plaintiff about violation of Section 166 of the Companies Act, 2013 and Section 88 of the Trusts Act, 1882 by defendant No.1, it is urged on behalf of defendant No.1 that the same is without any substance. It is submitted that Section 166(5) of the Companies Act, 2013 provides for relief that is more of a personal remedy, whereas Section 88 of the Trusts Act, 1882 provides for the pecuniary advantage to be held in benefit of such other person, to whom the other person is bound u .....

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There cannot be a breach in fiduciary duty, when it exists on paper and not in reality, as she had already been ousted as a Director No.3 and for the sole reason of survival, she laid the foundation of defendant No.2 Company. The remedy provided under Section 166(7) of the Companies Act, 2013 is a fine not less than that of ₹ 1 lakh and the legislative intent could not have been to introduce the remedy of the magnitude provided under Section 88 of the Trusts Act, 1882 or that of an injunc .....

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no other option but to do some business in order to survive and being an expert in the line, therefore, the plaintiff cannot suffer any harm. In support, she has referred the judgment of Darius Rutto Kavasmaneck v. Gharda Chemicals Ltd. (2015) 191 CompCas 52(Bom), wherein the principle as laid down is as simple as under:- Derivative action is subject to the doctrine of clean hands, it is an equitable invention and cannot be used to do injustice , Palmer s Company Law, 24th Edition, page 978. A p .....

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observed that The Courts should be alert in dealing with such speculative suits and shoot down such bogus litigations at an early stage and the action of the plaintiff, it is quite obvious is inspired by vexatious motives….. It is stated that the said direction of the Bombay High Court is a guideline for all such frivolous suits, instituted to create pressure and strong arm innocent citizens. 28. It is argued by Ms.Luthra that the injunction is an equitable relief and the party invoking t .....

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appearing on behalf of the plaintiff has refuted the argument of defendant No.1 to the effect that under the compelling circumstances, defendant No.1 started her own independent business as she was ousted from the company of defendant No.3 by the plaintiff and his persons. He says that the facts of the present case are dissimilar to the case of Heena Dutt (supra). Thus, the question of bid of shares does not arise, as the defendant No.1 has already established very well handsome parallel busine .....

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1 under no circumstances could have started competing business, as she was never ousted from the business of defendant No.3. It is the admitted fact in the first written statement filed by defendant No.1 in the suit being CS(OS) No.1592/2015 (which was withdrawn by plaintiff to file fresh present suit), it was never her stand that she had been ousted from the business of defendant No.3. However, in the written statement filed in the present suit, she has taken a different stand about ouster. Mr. .....

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(OS) No.1592/2015, her assertion was otherwise, it was rather stated that she is only the Active Director and Active Member of defendant No.3. However, in the written statement filed in the present case, she has pleaded ouster and is trying to withdraw an admission already made. 31. Mr.Kapur, learned Senior counsel has referred documents in order to show that she was not ousted as the defendant No.1 has been visiting and involved in the running business of defendant No.3, as on 24th September 20 .....

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tions 184 read with Section 167 of the Companies Act, 2013). She is also enjoying the cheque-signing authority as appeared from the document filed along with I.A. No.23408/2015. 32. It fortifies from the fact that in the present suit, the defendant No.1 has pleaded 'ouster' in the written statement, but at the same time in the Company Law Board, she is alleging plaintiff s removal as a Director of defendant No.2 as the plaintiff is taking decisions unilaterally; he should be restrained f .....

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rovisions of Section 88 of the Indian Trusts Act and Section 166 of the Companies Act, 2013 have not been discussed or dealt with. From the material placed on the record, it appears that the ouster pleaded by her is after-thought and the plea is contrary to the written statement filed in CS(OS) No.1592/2015. Therefore, prima-facie, the defence raised by defendant No.1 cannot be allowed at this stage. 34. With regard to reliance on Foster Bryant s case (supra), in paragraph 8 of the judgment the .....

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it has never laid down that under the similar circumstances as in the present case, a director can start a competing business while remaining a Director. In fact, if overall judgment is read, the said judgment supports the case of the plaintiff. The findings and observations do not help the case of defendant No.1. 35. Even otherwise, if the plea raised by defendant No.1 is taken on its face value, it is settled law that equity cannot overrule the law, but on the contrary, the law would prevail. .....

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language of the statute is not clear or ambiguous or there is some conflict, etc. or the plain language leads to some absurdity that one can depart from the literal rule of interpretation. A perusal of the proviso to Section 6 shows that the language of the proviso is clear. Hence the literal rule of interpretation must be applied to it. When there is a conflict between the law and equity it is the law which must prevail. As stated in the Latin maxim dura lex sed lex which means the law is hard .....

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as the positivist jurists Bentham and Austin pointed out. (iii) Abdul Basit v. Abdul Kadir Choudhary, 2014 (10) SCC 754 - at pg. 766, para 25 25. It is a well-settled proposition of law that what cannot be done directly, cannot be done indirectly . While exercising a statutory power a court is bound to act within the four corners of the statute. The statutory exercise of the power stands on a different pedestal than the power of judicial review vested in a court. The same has been upheld by thi .....

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ecord to show that defendant No.1 had tried to divert the business of defendant No.3 by setting up competing businesses despite of remaining a Director of defendant No.3. The same is even apparent from the messages sent by defendant No.1 which does not demonstrate any ouster, rather the said messages would give indication about competing with the business of defendant No.3-Company - "Tumko sadak par utar ke zinda rakhna bhi zaroori hai". She is luring defendant No.3 students by offerin .....

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ce of defendant No.2 adjacent to defendant No.3 with hoardings that state A new venture by Neetu Singh, founder/director of Paramount Coaching Centre . Excellent Quality at Less Fees and special discounts are given to Paramount (defendant No.3) students so that they should leave defendant No.3 and join promotional material of defendant No.2 such as Hindi and English pamphlets, brochures, and the banner message on official website of defendant No.2 advertising it with the same phrase. 38. Also, d .....

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alia, in violation of her fiduciary duty as a Director and also as 50% majority shareholder of defendant No.3 and also being violative of Section 166 of the Companies Act, 2013 and Section 88 of the Indian Trusts Act, 1882. 40. In the CLB Petition filed by defendant No.1, it is mentioned that she started a new venture for setting up a coaching institute. She has also filed the complaint filed by employee of defendant No.3 against defendant No.1 who is alleging regarding that she is trying to poa .....

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ector of Paramount Coaching Centre', Receipts of books sold in the last two years (till 15th December 2015) under the banner of Paramount Reader, by Neetu Singh. b) Magazine cover says 'a new venture by Neetu Singh, founder/director of Paramount Coaching Centre'. c) The defendant No.3 continues to pay the rent for two premises which are in the possession and are being used by defendant No.1 for running/promoting her competing business d) Hindi pamphlets saying 'a new venture by N .....

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urses offered by the said Company are the same as those of the defendant No.3-Company. 42. The proximity of the defendant No.3-Company's existing centres with those subsequently opened by the defendant No.2-Company is a matter of fact as the same is not disputed by defendant No.1. Even new centres are opened by defendant No.1 during the pendency of the litigation, which are also in close proximity to the centres of defendant No.3-Company. The defendant No.1 had appointed various relatives at .....

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iness and the plaintiff is envious; the defendant No.2 was admittedly incorporated on 21st February, 2015, it appears to the Court that defendant No.1 being the Director of the Company has not acted in good faith. It is obvious done by her in order to promote the object of the Company, in the best interest of the Company, its employees and for protection of environment; she has not exercised her duty with due and reasonable care, diligence and she was involved in the situation in which there was .....

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vested in the company by any of the parties, the same became the property of the company unless there is an agreement in writing to the effect that the other party/Director shall not claim any right to the same name. Such agreement or consent has not been pleaded by defendant No.1. 43. Now, I shall deal with the next submissions addressed on behalf of defendants No.1 and 2 that the suit filed by the plaintiff as derivative action is not maintainable. It is submitted on behalf of the plaintiff th .....

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name. The plaintiff has also instituted the present suit in his own capacity as a shore-holder having 50% share-holding in defendant No.3, for violation of his individual membership rights that arises from a contract between himself and defendant No.3 by virtue of its Memorandum of Association (MOA) as also under the common law. (i) In the case of Starlite Real Estate (ASCOT) Mauritius Limited and Ors. v. Jagrati Trade Services Private Limited and Ors., decided on 14th May, 2015 by the High Cour .....

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tings of members, to receive dividends which have been duly declared, to exercise pre-emption rights conferred by the articles, and to have his capital returned in proper order of priority on a winding up or on a properly authorized reduction of capital. Under the general law he is entitled to restrain the company from doing acts which are ultra vires, to have a reasonable opportunity to speak at meetings of members and to move amendments to resolutions proposed at such meetings to transfer his .....

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ance distinct from the general interest which every member has in the company adhering to the terms of its constitution. In an action for violation of personal rights a single shareholder suing alone and not even on behalf of other shareholders may make the company a defendant and obtain his reliefs. Where a wrong has been done to the company and an action is brought to restrain its continuance or to recover the company's property or damages or compensation due to it, it is a derivative acti .....

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wn behalf nor on behalf of the members generally but on behalf of the company itself. In a derivative action, in the framing of the suit for the purpose of compliance of the formalities the plaintiff had to describe himself as a representative suing for and on behalf of all the members other than the wrong-doers. In a true derivative action the plaintiff shareholder is not acting as a representative of the other shareholders but is really acting as a representative of the company. The expression .....

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mstances that the derivative action by some shareholders (even if they are in a minority) becomes necessary to protect the interest of the company. The minority shareholders sue on behalf of themselves and all other shareholders except those who are defendants, and may join the company as a defendant. The directors are usually defendants. This action is brought instead of an action in the name of the company. The form of the action is always: 'A.B. (a minority shareholder) on behalf of himse .....

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of shareholders to decide the manner in which the affairs of the company are to be conducted. This principle was laid down in the celebrated case of Foss v. Harbottle. The court held that in the case of an injury to the corporation, it is for the corporation to sue in its own name and individual shareholders cannot assume to themselves the right of suing in the name of corporation. The effect of the rule is that the majority shareholders cannot complain of any irregular act which the majority a .....

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All ER 56] 33. This type of action is a derivative action, i.e. the right to sue and enforce the right are derived from the company. The shareholders as such have no such right. If their own personal rights are being infringed they may bring a representative action. The reliefs in such an actions would be essentially, primarily and solely for the benefit of the company as opposed to vindication and enforcement of the personal rights of the named plaintiffs though there could be a thin dividing .....

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n such a way that they cannot or will not take steps to seek redress for the wrong done to the company, the majority of the share-holders must in such a case be entitled to take steps to redress the wrong. There is no provision in the articles of association to meet the contingency, and therefore the rule which has been laid down in a long line of cases that in such circumstances the majority of the share-holders can sue in the name of the company must apply. In MacDougall v. Gardiner, (1875) 1 .....

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d. v. Cunninghame, (1906) 2 Ch. 34: (75 L.J. Ch. 437), it was recognised that "misconduct" on the part of the director provided an exception to the rule laid down in that case." 34. In Jhajharia Bros. (supra) the form of a derivative actions was discussed and it was held that if a wrong is done to the company a special form of suit can be adopted as a matter of machinery to obtain relief under special and peculiar circumstances. It states:- "I propose, as shortly as I can wit .....

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it to restrain acts ultra vires and suits to restrain certain acts about to be discussed notwithstanding that the acts have the support of the majority of shareholders, are both exceptions to the rule that the Court will not interfere in the affairs of the company or with the decision of the majority. The Court interferes in cases of an ultra vires act, because it is not an act within the constitution. In the other class of cases the Court interferes upon a different basis. They have been referr .....

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n. The minority may take the risk and boldly use the company's name. The other course, and what has been thought to be the better course, where the wrongful act is supported by the majority, is for the minority shareholders to sue in their own name or, as a matter of convenience, for a shareholder to sue on behalf of himself and all the other share-holders. If, however, as generally happens and must happen logically, the wrong-doers are also shareholders, these shareholders as a matter of co .....

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ion by a minority qua minority against a majority qua majority, I disagree. There can be no such thing as a legal war of parties. Brown v. British Abrasive Wheel Co. is in my opinion not an authority for such a theory nor did Mr. Sanyal cite it as such. In that case, if I remember rightly, the Court would not allow an alteration of articles so that the majority could appropriate a small minority. It was not allowed as being contrary to justice. The real significance of it, in my opinion, is that .....

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ng-doers are themselves the majority. I can conceive, however, of cases where the distinction may become apparent, in other words, where the primary wrong-doers, those committing the fraud or the wrongful act, are not themselves the majority but get the support of the majority." 39. The pleadings in the suit if taken, as a whole, would clearly indicate that the plaintiffs are seeking to enforce their personal cause of action as opposed to derivative action. The same would be further clear f .....

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dispute with regard to the internal management of the Company and as to who would represent the company and/or authorize to represent the company, the proper course is to file a suit for declaration and injunction and to seek appropriate remedy against the miscreant directors and for persons asserting their right as directors. In the instant case, it appears that there are disputes with regard to the internal management of the proforma defendant company. The orders disclosed in this proceeding w .....

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said defendants for long years have ceased to become directors and since 2009 the said defendants were not entitled to hold themselves as directors but the plaintiffs did not take recourse to any legal proceeding to prevent the said defendants from asserting their rights as directors since even thereafter the said defendants continued to assert their right as directors that had resulted in various litigation. Even if it is assumed that the defendant No. 1 is aware of the inter se disputes betwee .....

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nd the said award is required to be set aside, in my view, having regard to the frame of the suit is not maintainable and barred by law. The challenge to the award has now become barred by limitation. It is settled law that what cannot be done directly cannot be permitted to be done indirectly. It is not been alleged that the proforma defendant was prevented by the said defendants Nos. 3 to 5 to challenge the award. 44. Ms.Geeta Luthra, learned Senior counsel has also strongly relied upon anothe .....

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at page 250, paragraph 6 it was held: "6. The shareholder will be allowed to sue on behalf of the Company if he is bringing the action bona fide for the benefit of the Company for wrongs to the Company for which no other remedy is available. Conversely if the action is brought for an ulterior purpose or if another adequate remedy is available, the court will not allow the derivative action to proceed. ......... First on the necessity for the absence of an ulterior purpose, the words of Law .....

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enefit of the Company and not for some other purpose. It follows that the court has to satisfy itself that the person coming forward is a proper person to do so'." Further at page 256 it was held: "I can well understand that Mrs. Barrett is upset at what has occurred between Christopher and Carol and that she is indignant at the supplanting of Carol by Janet. But her partiality shows through all her evidence, and it is by her behaviour in relation to the claims against Carol, in co .....

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e in Gerrards Cross and the proceeds of The Noakes in each of which Carol retains her interest. Mr. Guy sought to assure us that now that the decision had been made to sue Carol, the action would proceed against her. I am afraid that I simply do not believe that Mrs. Barrett would pursue any claim against her daughter to the point of enforcing judgment: to my mind it is improbable in the extreme that she would force her daughter and grandchildren out of their home and I quite understand why she .....

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nces in the present case are materially different. Hence, the decision is not applicable to the facts of the present case as already mentioned in earlier part of my order. In the case in hand, the defendant No.1 was not ousted from defendant No.3 and there was no such situation as in Darius Rutton Kavasmaneck (supra) case, rather in the present case, the defendant No.1 being a director in running the business in which she was participating in all activities still chose to start her independent b .....

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ny of which he is Director unless the Company gives its consent in writing. Even if his/her company may or may not be benefitted from the same, the said party is under a duty to pay over to the company which he or she has betrayed by disloyalty. Without the need of any proven breach, the Court may set-aside a transaction entered into in the shadow of such a conflict. In an appropriate case, it may also restrain entry into such a transaction or restrain the Director from involving in a conflict c .....

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e case, and the promoter has the burden to prove that he or she has been true to his or her fiduciary duties. Subscribers to stock may, in the case of fraud or breach of trust resulting in injury to them individually, maintain an action against the promoters to compel them to return or to account for any funds which they have received and misappropriated, and for a proper share of any secret profits. 46. In the case of Dr. Satya Charan Law and others v. Rameshwar Prasad Bajoria and others, AIR ( .....

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ompany, the majority of the shareholders must in such a ease be entitled to take steps to redress the wrong. There is no provision in the articles of association to meet the contingency, and therefore the rule which has been laid down in a long line of cases that in such circumstances the majority of the shareholders can sue in the name of the company must apply. In MacDougall v. Gardiner, (1875) 1 Ch D. 13 and Pender v. Lushington, (1877) 6 Ch. D. 70 , specific reference was made to the fact th .....

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to the rule laid down in that case. 47. The Kerala High Court in the case of Joseph v. Jos, AIR 1965 Ker 68, observed as under:- ......The only point argued before me was that the suit was not maintainable, since the matter related to and was entirely concerned with the internal management of an incorporated company. In order to decide the question whether the ruling of the chairman that the plaintiff has no right to stand as a candidate for election to the post of a Director raised a justiciab .....

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ll the rights and privileges appertaining to that status. This right implies that the individual shareholder can insist on the strict observance of the legal rules, statutory provisions and provisions in the memorandum and articles which cannot be waived by a bare majority of shareholders. 48. In case the above said decisions are read in a meaningful manner, the circumstances would clearly go in favour of the plaintiff and against the submission of defendant No.1 and 2 that the suit filed by the .....

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ts No.1 and 2. 50. Next objection of the defendants No.1 and 2 is that the company has not authorized the plaintiff to file any such action. The suit of the plaintiff is without any cause of action, as he has filed the suit as shareholder to the extent of 50% in the shareholding of defendant No.3-Company for violation of his individual membership rights. The remedy for the plaintiff, if any, is a petition under Section 397/398 of the Companies Act, 1956 before Company Law Board. 51. There is no .....

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nt No.2 is associated with the defendant No.3 or a branch of it or the same is authorized by defendant No.3. The relatives of defendant No.1 are also the Directors and working in the company of defendant No.2, at the same time, her real sister is employed with defendant No.3. Whether the civil common remedy is maintainable in view of earlier discussion in the matter? The common law remedy is one of the facets of tort. 52. Let the issue mentioned above be examined. The language of Section 399 (19 .....

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share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one-tenth of the total number of its members. (2) For the purposes of sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (3) Where any members of a company are entitled to make an application in virtue of sub-section (1), any .....

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ernment may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the [Tribunal] dealing with the application may order such member or members to pay to any other person or persons who are parties to the application. Section 241 (2013 Act) 241. Application to Tribunal for relief in cases of oppression, etc.-(1) Any member of a company who complains t .....

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an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under Section 244, for an order under this Chapter. (2) The Centr .....

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e Company itself. As the Company is prevented from passing a resolution, the suit has been instituted in the name of the plaintiff on behalf of the Company. The Company in the present circumstances itself is not in a position to file the suit or any petition before the Company Law Board. Therefore, the Court is to read the plaintiff to be the company and not Mr.Rajeev Saumitra in view of peculiar facts and circumstances in the present case. The language of Sections 397 and 398 of 1956 Act is qui .....

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ted with great clarity by Willes J. in Wolverhampton New Water Works Co. v. Hawkesford, 6 C.B. (N.S.) 336, 356 in the following passage :- "There are three classes of cases in which a liability may be established founded upon statute. One is where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law; there, unless the statute contains words which expre .....

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g it...... The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to." The rule laid down in this passage was approved by the House of Lords in Neville v. London Express News Paper Limited (1919) A.C. 368 and has been reaffirmed by the Privy Council in Attorney-General of Trinidad and Tobago v. Gordons Grant & Co. (1935) A.C. 532 and .....

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termediate stage. 55. During the course of hearing, Ms.Luthra has argued that there is bar to Civil Court under Sections 291 (1956 Act) and 430 (2013 Act). Section 291 stipulates the general powers of the Board. As regards Section 430, the same has not been notified, which fact is not denied by the counsel. i) In the case of K. Saravanan and another v. Cosmopolis Properties (P) Ltd. and others, (2013) 1 Comp LJ 343 (Mad), in para 27, it was observed as under:- 27. As stated supra, in the decisio .....

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Court, section 10GB of the Companies Act, as on date is unconstitutional and therefore, the contention of the learned Senior Counsel for the petitioners that the civil court has no jurisdiction as per the provisions of section 10GB cannot be accepted. ii) Yet in other case titled as Ravindra Veer Singh v. TBH Breweries India Private Limited, MFA No.475/2015 and others, decided on 20th February, 2015, in para 15, it was held as under:- 15. On a plain reading of Section 430 of the Companies Act, .....

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ng the equitable relief of permanent injunction about the day-to-day management of the company and its affairs is maintainable. iii) In another case titled as Avanthi Explosives P. Ltd. v. Principal Subordinate Judge, Tirupathi, and another, [1987] 62 CompCas 301 (AP), it was observed as under:- It may be seen that there are various provisions in the Act which refer to "the court", such as sections 107, 155, 163(6), 237, 391, 394, 395 and 397 to 407, 425, etc. The Central Government is .....

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istrar; and where a power is vested in a court, that court has to be specified. Beyond so specifying the court competent to deal with a matter arising under the Act, section 10 does not purport to invest the company court with jurisdiction over every matter arising under the Act. It may be that, in view of the elaborate provisions contained in the 1956 Act in regard to the management and the conduct of a company's affairs including important internal matters of administration, the court' .....

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acts of those directors, but at the general meeting, the majority resolved that no action should be taken against them. Two of the minority shareholders took legal proceedings against the directors and others to compel them to make good the losses to the company. The court dismissed the action on the ground that, as the acts of the directors were capable of confirmation by the majority of members, the court should not interfere. it was thus left to the majority to decide what was for the benefit .....

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le. The reasoning on which the rule is founded is that in these cases, it is for the company to complain. by suing the alleged wrongdoer. The company is thus the proper plaintiff and the company is ruled by the majority. However, the following exceptions to the rule in Foss v. Harbottle, [1843] 2 Hare 461, are admitted as pointed out by Jenkins L. J. in Edwards v. Halliwell [1950] 1 All ER 1064, namely, the majority cannot confirm - (1) an act which is ultra vires the company or illegal; (2) an .....

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mpany as a whole or is intended to discriminate between the majority shareholders and the minority shareholders, is illegal and can be questioned by a separate action in the civil court. The reason for this is that if the minority were denied that right, their grievance could never reach the court because the wrongdoers themselves being in control, do not allow the company to sue. In some cases, it has been held that further exceptions to the rule in Foss v. Harbottl, [1843] 2 Hare 461, are perm .....

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gh Courts in our country. K.K. Mathew J. (as he then was) was dealing in Joseph v. Jos, [1964] 34 Comp Cas 931 (Ker), with a suit for a declaration that the proceedings of the meeting regarding the election of certain directors was null and void and for a permanent injunction restraining defendants Nos. 3 to 5 therein from functioning as director and for directing the defendant-company to hold a meeting for re-electing three directors. After referring to the rule in Foss v. Harbottle, [1843] 2 h .....

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rs; c.f.s. 20) the shareholder undertakes with respect to some - and , in fact, most rights which his membership carries, to accept as binding upon him, the decision of the majority of shareholders, if arrived at in accordance with the law and the articles; these membership rights are known as corporate membership rights. Other rights of the shareholder, according to his contract with the company, cannot be taken away from him unless he consents ; if such rights is in question, a single sharehol .....

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ivil courts where allegations pertaining to oppression and mismanagement partake the character of a civil dispute. Thus, it was the duty of the plaintiff to have made averments in the plaint or in the injunction application, giving material particulars of the dispute pending before the company law board. In particular, plaintiff ought to have disclosed about CA No. 39/2006 filed under signatures of Shri Gautam Khandelwal. 57. In another case titled as CDS Financial Services (Mauritius) Limited v .....

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. In Dhulabhai vs. State of Madhya Pradesh: [1968] 3 SCR 662 a five-judge Bench of the Supreme Court considered the earlier decisions on this aspect and laid down the following propositions: "(1). Where the statute gives finality to the orders of the special tribunals, the civil courts jurisdiction must be held to be excluded, if there is adequate remedy to do what the civil courts would normally do in a suit. Such a provision, however, does not exclude those cases where the provisions of t .....

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e of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case, it is necessary if the statute creates a special right or liability and provides for the determination of the right or liability and further lays downs that all questions about the said right or liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with action in civil courts are prescribed by the said statute or .....

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ery for the enforcement of the right, both the right and the remedy having been created uno flatus and a finality is intended to the result of the statutory proceedings, then, even in the absence of an exclusionary provision the civil courts jurisdiction is impliedly barred. If, however, a right pre-existing in common law is recognised by the statute and a new statutory remedy for its enforcement provided, without expressly excluding the civil courts jurisdiction, then both the common law and th .....

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law right, it can be enforced through civil court, even though the forum under the statute also will have jurisdiction to enforce that right. 57.1 In the case of Ganga Ram Hospital Trust v. Municipal Corporation of Delhi, 2001(60) DRJ 549, para 16, it was held as under:- 16. Section 169 provides for a remedy of appeal against levy or assessment of any tax under the Act while section 170 lays down conditions subject to which the right of appeal conferred by section 169 can be exercised. Neither .....

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words it may be the case of a plaintiff that the authorities under the Act have not acted in accordance with the provisions of the Act while levying and assessing tax and, therefore, it is entitled to exercise its inherent right to challenge such a levy and assessment by way of a civil suit. Availability of an alternative remedy may be treated as a bar by the court while exercising its writ jurisdiction because writ jurisdiction under Article 226 of the Constitution of India is a matter of exer .....

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appearing on behalf of defendants No.1 and 2 has also addressed his submissions by stating that even the suit is barred under Section 166 of the 2013 Act. He says that the common law remedy is not available. The plaintiff has no privity with K.D. Campus Pvt. Ltd. He referred the decision of the Court in the case of HB Stockholding Ltd. v. DCM Shriram Industries Ltd. and Ors., decided on 25th August, 2009. 59. Section 166 stipulates Duties of a Director to a Company and not Rights of Shareholders .....

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of the facts of the present case. The common law does not prevent the plaintiff to take protection of common law rights, even if the statute excludes it specifically. Reliance is placed on Avanthi (supra). The decision referred by Mr.Sethi does not help the case of defendants No.1 and 2. i) In the case of Sangramsinh P. Gaekwad and others v. Shantadevi P. Gaekwad (Dead) through LRs. And others, (2005) 11 SCC 314, in para 39, it was held as under:- 39. By reason of Section 88 of the Indian Trusts .....

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should keep. When a person makes a pecuniary gain by reason of a transaction, the cestui qui trust created thereunder must be restored back. In any case, even promoter/majority shareholders are fiduciaries to the company as well as the other shareholders because they control the assets of the other shareholders who cannot play a fraud on the minority. ii) Kossoy and Filco v. Bank Feuchtwanger Ltd., CA 817/79, P.D., vol. 38(3) 253, paras 55-58 whereof reads as under:- Filco: Shareholder's Lia .....

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general, and a controlling shareholder in particular, bound by any duty towards the company? The starting point of the principle of English common law is that a shareholder is entitled to do whatever he wishes with his shares, and is not bound by any duty, neither to the company nor to the other shareholders. A share is property, and the shareholder is entitled to do whatever he wishes with his property (see Gower, supra, at 615). This approach has never been absolute, since English common law r .....

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g shareholder is under a duty of loyalty both in wielding control within the company and in the sale of his shares, and this duty is incumbent upon him towards the company and towards the minority shareholders (see H.G. Henn and J.R. Alexander, Laws of Corporations (St. Paul, 3rd ed., 1983) at 653). Israeli case law has yet to deal with this matter at length, although it has been ruled that in a private company, which is similar to a partnership in this regard, a shareholder may owe a duty of tr .....

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ng with a new matter, with extensive practical and theoretical implications, and we will therefore do well if we act cautiously in developing this matter, answering any concrete questions arising and aiming to formulate an over-all approach on the basis of past experience. For the purpose of the appeal before us, the following proposition will suffice: a controlling shareholder who wishes to sell his shares owes a duty of loyalty to the company with respect to the sale, and must act in good fait .....

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al terms could be viewed as a series, its entirety can also be viewed as a single entity in legal terms. Accordingly, a breach of loyalty can also be attributed to a shareholder with regard to actions which are to take place in the future, provided that they are foreseeable and constitute a part of the entire scheme, or series of actions (see Pepper v. Litton (1939) [25]). The basis of this duty rests on the fundamental principle discussed earlier: the controlling shareholder wields power in the .....

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" 91 Yale L.J. 698; A.A. Berle, "Corporate Powers as Powers in Trust" 44 Harv. L. Rev. 1049 (1930-31); D.C. Bayne, "A Philosophy of Corporate Control" 112 U. Pa. L. Rev. (1963-64) 22). It is true that a share is property, which its owner may treat in any way he desires. These options, however, are not unlimited. Shares may not be used to create a disposition which will, to the vendor's knowledge, lead to the company being stripped. The shareholder may not act with th .....

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f loyalty, which are designed to limit the one in control from abusing his power. This principle is expressed in many branches of the law, and is also expressed in corporate law. Accordingly, the duty of loyalty is incumbent upon the promoter and upon the director. By virtue of the self-same principle, the duty of loyalty also rests upon the holder of the controlling shares with regard to their sale. The promoter, director and controlling shareholder wield power, which they hold in trust, as Pro .....

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suit our needs. An example of another field in which there has been a similar development is the field of negligence in torts, in which from time to time this court recognizes new duties of care in regard to negligence - this on the basis of the general principle of negligence as recognized by our system. This being so, we are no longer required to examine whether the very same result could be arrived at on the basis of the application of the principle of good faith specified in Section 39 of t .....

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general law of title, he is entitled to do whatever he pleases with his property. This freedom is not unrestricted, since one of the restrictions derives from the fact that the holding of the share gives him control of the company and this control requires him to act honestly, in good faith and for the good of the company. This conduct - which is part of the general regime of the duty of loyalty - is the result of a suitable balance of the right of ownership on the one hand, and control of the .....

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priate in the case of a controlling shareholder? This question has many facets, and we are interested in the balance appropriate to the sale of shares. In the matter at hand, it may be said that the controlling shareholder is free to sell his shares to any purchaser. unless he knows that the purchaser is about to acquire control of the company and strip it of its assets. This provides the appropriate balance between the prerogative of ownership on the one hand, and the protection of the good of .....

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in the literature (see A. Hill, "The Sale of Controlling Shares," 70 Harv. L. Rev. 986 (1956-57); A.A. Berle, " 'Control' in Corporate Law," 58 Colum. L. Rev. (1958) 1212; Comment, "Sales of Corporate Control and the Theory of Overkill," 31 U. Chi. L. Rev. (1963-64) 725) and in case law (see Insuranshares [22]; Levy v. American Beverage Corporation (1942) [26]; Gerdes v. Reynolds (1941) [27]; Dale [24]). Note: I do not mean to say that we must adopt the bal .....

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ot;price" of control; whether the consideration for the sale of control belongs to the company itself, and whether a basis for the formation of the duty is the vendor's actual knowledge of the purchaser's intentions, or whether it suffices that he did not know in a case where a reasonable shareholder should have known; and other similar questions which have been raised in the United States - we will deal with them when, as and if they arise. 60. The defendant No.1 in the present cas .....

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behalf of defendants No.1 and 2 about the reduction of shareholding, Mr.P.V.Kapur submits that the allegation of defendant No.1 that her equity was reduced by 9%, is incorrect and in any event very belated. The incident occurred in 2013 and she knew about it. It happened because she had less balance on the company account and it was restored. Hence, there is no much relevance in deciding the issue in hand. As far as the allegations of embezzlement are concerned, Mr.Kapur has mentioned that she t .....

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y duty. 62. The next submission of Ms.Luthra is that the facts of this nature of the case would establish that it should be treated as quasi-partnership dispute. The Supreme Court in the case of Kilpest Pvt. Ltd. and others v. Shekhar Mehra, (1996) 10 Supreme Court Cases 696, in para 11 has held as under:- 11. The promoters of a company, whether or not they were hitherto partners elect to avail of the advantages of forming a limited company. They voluntarily and knowingly bind themselves by the .....

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e and they have only one child. For the purpose of settlement, the matter was discussed many times in Chamber as well as in open Court, but it could not be resolved despite final proposed settlement of terms handed over to the defendant No.1 who although agreed to many major terms. Copy of the same and the comments and modification made by the defendant No.1 has been placed on record. As it could not finally materialize, both the parties submit that let the interim application be decided on meri .....

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ayer in the present suit was not made earlier, the present suit is barred under Order II Rule 2 CPC. 64. As far as Rohini suits are concerned, admittedly, earlier the plaintiff filed the Civil Suit No.78/2015 titled as Rajiv Saumitra v. Neetu Singh, seeking inter-alia the relief restraining the defendant from using the initial name of PARAMOUNT from M/s Paramount Coaching Centre Pvt. Ltd., for her personal and individual benefits in publication of books, journals including Paramount Reader Publi .....

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me cause of action, the plaintiff filed another suit being Civil Suit No.217/2015 titled as Rajeev Saumitra v. Neetu Singh & Ors., which is pending in the Court of Sh.Satish Kumar, ADJ, Rohini Courts, New Delhi. The interim order has been passed on 15th September, 2015 restraining inter-alia, defendant No.1 from using the name PARAMOUNT for her personal and individual benefit or in any of her publications, or in any soft copy, or in online material and further from indulging in competing bus .....

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clear that if the Court is satisfied that it is a formal defect and there are sufficient grounds for allowing the application to institute a fresh suit for the subject-matter of a suit or part of a claim, the plaintiff can be permitted to withdraw his claim as a whole or part, but he cannot be precluded from suing again on the same cause of action by filing a fresh suit after obtaining leave from the Court. 15. In the present case, it is apparent from the statement made by the plaintiff in the s .....

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ff from the Courts. Prima facie valid reasons have been given to file the fresh suit. The interim order was neither passed in the first suit nor in the second suit, the plaintiff has pressed for an ex parte order without withdrawing the first suit filed by the plaintiff. In the second suit, even the summons and notice were not issued. On the first date itself, when the suit was listed, the learned counsel for the plaintiff had informed the Court that the first suit was listed before Hon ble the .....

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fendants that there is no bonafide on the part of the plaintiff to file the second suit in order to enhance the pecuniary jurisdiction and the second suit is hit by Order II Rule 2 CPC are concerned, the said submissions cannot be considered while deciding the present application. However, the defendants are granted liberty to raise the said objections in the second suit filed by the plaintiff. Therefore, at the present moment the bonafide of the plaintiff cannot be doubted. As far as the object .....

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dismissed as withdrawn. Pending applications also stand disposed of. 18. I.A. No.17610/2015 is disposed of. 66. As mentioned above, it is the admitted position that the present suit was filed before any order was passed in the application filed by the plaintiff under Order 23 Rule 1 CPC for withdrawal on formal defect as alleged by the plaintiff. 67. In the present application under Order XXXIX Rules 1 & 2 CPC, the temporary injunctions and directions as prayed for be granted for the followi .....

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to that gain to the company. Additionally, Section 88 of the Indian Trusts Act also provides that a Director/Partner who in violation of his fiduciary character gains for himself any pecuniary advantage or enters into any dealing in which his own interest is adverse to the interest of the Company and thereby gains a pecuniary advantage to himself, he will hold such advantage gained for the benefit of the Company. It appears that the prayer sought in the present suit and in the Rohini suit is no .....

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and Another, reported in AIR 1997 SC 1398, it was held as under: 20.……..It is now well settled that an action for passing off is a common law remedy being an action in substance of deceit under the Law of Torts. Wherever and whenever fresh deceitful act is committed the person deceived would naturally have a fresh cause of action in his favour. Thus every time when a person passes off his goods as those of another he commits the act of such deceit. Similarly whenever and wherever a .....

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g fresh acts of infringement and passing off with impunity without being subjected to any legal action against such future acts. 68. The said order dated 24th September, 2015 has not been challenged by the defendant No.1 and 2 as alleged. Reliance is placed upon the case titled as K.S. Bhoopathy and Others v. Kokila and Others, (2000) 5 Supreme Court Cases 458, paras 12 & 13, wherein it was held as under:- 12. The law as to withdrawal of suits as enacted in the present Rule may be generally .....

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(3), be permitted by the court to withdraw from a suit with liberty to sue afresh on the same cause of action. Such liberty being granted by the court enables the plaintiff to avoid the bar in Order II Rule 2 and Section 11 CPC. 13. The provision in Order XXIII Rule 1 CPC is an exception to the common law principle of non-suit. Therefore on principle an application by a plaintiff under sub-rule (3) cannot be treated on a par with an application by him in exercise of the absolute liberty given to .....

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ch two alternatives are provided; first where the court is satisfied that a suit must fail by reason of some formal defect, and the other where the court is satisfied that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim. Clause (b) of sub-rule (3) contains the mandate to the court that it must be satisfied about the sufficiency of the grounds for allowing the plaintiff to institute a fresh suit for the same cla .....

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rder to avoid delay, the present suit was filed disclosing about the pendency of the earlier suit and application under Order XXIII Rule 1 CPC. 70. Thus, prima facie, at this stage, this Court felt that the present suit is not barred under Order II Rule 2 CPC, as it was merely a formal defect in the suit. Nothing on merit was abandoned or decided on merit. Full disclosure was made by the plaintiff who has not taken any advantage of interim order or concealed any fact from the Court. Thus, the ob .....

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, 2013. She has failed to assign any valid reason or justification as to why she being the Director of defendant No.3 has started parallel business of defendant No.2. If she had any grievances or the plaintiff is trying to control the business of defendant No.3 or she was ousted as alleged by her, she had the remedy and rightly so, she was availing the remedy, but there is hardly any justification to start parallel/similar to the business of defendant No.3. Normally, the injunction should have b .....

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endant No.3-Company like his proprietorship. In the month of June, 2015 the plaintiff had appointed CEO & Chief Advisor of the defendant No.3-Company which was against the memorandum and articles of association of the company which was objected to by the defendant No.1 and upon the interference of the police the CEO and Chief Advisor were asked to leave the office. Recently keeping aside the memorandum and articles of association of the company, the plaintiff has appointed many staffs and bo .....

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o Cars and one Car by using the funds of the company which is also against the company norms. The Counsellor, namely, Rashmi of Bindapur Centre of the company was forced to resign as she was threatened by two lady bouncers sent by the plaintiff and she had no option than to resign because the defendant No.1 being director of the company was brutally assaulted by the same lady bouncer. The plaintiff is having no respect for lady staffs of the company as he is harassing the centre head of Uttam Na .....

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the lady staff of the company has compelled so many lady staffs namely Firdous, Sweta, Ritika, Poonam, Jessica etc. to resign from the company, which attitude of the plaintiff is not in the interest of the company. 74. It is also stated that the lady bouncer namely Kiran who had brutally assaulted the defendant No.1 at Munirka Branch has been promoted and awarded by the plaintiff along with two more bouncers and she has been functioning as a security head in the head office of the company becau .....

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ning instructions at the end of his arguments has made the fair statement on her behalf that defendant No.1 is now determined to remove the mark PARAMOUNT from all the promotional material and sign-boards and she will not use the said mark directly or indirectly in any manner in relation of imparting education and training. She shall not approach any student, staff member, teacher or any person of defendant No.3 in this regard or to pouch the business of defendant No.3. She is also agreeable if .....

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be appointed who after having gone through the business of all centers owned by defendant No.3 and after assessing the value of the goodwill of name of Paramount business within a period of 12 months would give the report and thereafter, both parties should agree for bidding and the highest bidder should purchase the shares of another party. Mr.P.V.Kapur, learned Senior counsel for the plaintiff did not agree for appointment of Chartered Accountant. He says that why his client should suffer bec .....

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an alternative safeguard for the preservation of rights of the challenging party cannot at all be thought of. 77. The grant or non-grant of injunction has to be measured within the parameters of three tests laid down by this court. However, the court must weigh the comparative hardship of one party as against the another and has to decide whether the injunctory relief is warranted or whether interim directions would suffice. Injunctions should not result in extreme prejudice to the defendant. T .....

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% shareholding of defendant No.3-Company. Both are still Directors. They have a small child. 79. Both companies, i.e. defendant No.3 and defendant No.2 have hundreds of centres where the large number of students are studying. They have paid their fees. Careers of teachers and staff members are also involved. Many centres of defendant No.2-Company are on rent. Lease deeds are executed. Advance amount has been paid. Thus, there are many stakeholders. 80. From the allegations made by the defendant .....

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in hand: Scenario 1: That the defendants No.1 and 2 accept the terms and conditions for the purpose of settlement of matter in hand suggested by the plaintiff. Under such a situation, the defendant No.1 not only to continue with the business of defendant no.2 subject to disclaimer as suggested by Mr.Sethi as mentioned para 71 of my order and at the same time, she would also get ₹ 25 crores from the plaintiff within the period of four years as per details mentioned in the proposed settleme .....

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the name of Paramount in a peaceful manner for which the plaintiff has no objection. The said offer is not acceptable to the defendant No.1 who stated that it is she who has not only been able to establish the defendant No.3 but also acquired a name and goodwill in the defendant No.2 and there is no guarantee or safety if centers are merged with defendant No.3, the plaintiff may not harass her. She is not sure that she can continue with any active business with the plaintiff anymore in the way .....

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the said case states as under:- …..It is settled law that the grant of injunction is a discretionary relief. The exercise thereof is subject to the Court satisfying that; (1) There is a serious disputed question to be tried in the suit and that an act, on the facts before the court, there is probability of his being entitled to the relief asked for by the plaintiff/defendant. (2) The court s interference is necessary to protect the party from the species of injury. In other words, irrepa .....

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na fide, which needs investigation and a decision on merits. Satisfaction that there is a prima facie case by itself is not sufficient to grant injunction. The court further has to satisfy that non-interference by the court would result in irreparable injury to the party seeking relief and that there is no other remedy available to the party except one to grant injunction and he needs protection from the consequence of apprehended injury or dispossession of apprehended injury or dispossession. I .....

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y to be caused to the parties, if the injunction is refused and compare it with that it is likely to be caused to the other side if the injunction is granted. If on weighing competing possibility or probabilities of likelihood of injury and if the court considers that pending the suit, the subject matter should be maintained in status quo, an injunction would be issued. Thus the court has to exercise its sound judicial discretion in granting or refusing the relief of ad interim injunction pendin .....

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need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated. The court must weigh one need against another and determine where the 'balance of convenience' lies...... 85. This Court is conscious about the fact that defendant No.1 being the Director of defendant No.3 is entitled to 50% net-profit of the Company but at the same time, as she has violated her fiduciary dut .....

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has any association or affiliation of the Company in which he/she is still a Director. 86. As mentioned earlier, Mr.Sandeep Sethi at the end of arguments has suggested that the defendant No.1 has decided not to exploit the name Paramount in any manner and/or to do anything which may harm the continuous business of defendant No.3. However, it is also directed that the defendant No.3 shall keep the share of net profit of defendant No.1 in a separate non-lien account and the same shall be withdrawn .....

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hoardings, advertisements, brochures and other materials and shall not open any new centre within the range of 100 meters where the centre of defendant No.3 already exists; (ii) she shall furnish the true account from February, 2015 till December, 2015 and every quarterly till the decision of the suit; the first statement would be filed by 15th February, 2016; (iii) she will not create any hurdle in smoothly going of defendant No.3 and she shall perform her fiduciary duties under the Act and sig .....

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