TMI Blog2016 (2) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... the properties of the 'BBPL' He may also depute counsels, if so desired, to defend litigation initiated by Petitioner No. 1 at the Bombay High Court and suit filed by 'BCDP' and Respondent No. 4 in City Civil Courts at Bangalore as well as in the High Court of Karnataka or any other litigation. The aforesaid course has been adopted as Petitioner No. 1 and Respondent No. 2 are not only real brothers but appears to be very close to each other at least in the past. With immediate effect Petitioners and Respondents are restrained from operating the bank accounts of 'BBPL'. The bank account shall be operated only by the learned Administrator and none else. Any cash in hand with the Petitioners and/or Respondents belonging to BBPL be deposited with Ld. Administrator within one week from today. The Learned Administrator shall be entitled to remuneration which may be fixed by his Lordship himself. The meetings of the Board of Directors dated 22.02.2011 and 09.08.2014 along with resolutions passed therein are suspended at this stage instead of declaring them invalid. Likewise JDA dated 29.03.2011, Rectification Deed dated 15.04.2011 and GPA dated 29.03.2011 are also suspended inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Respondent Nos. 2, 3 5, their family members and Respondent No.9 to render account for the profits earned by them and direct the said Respondents to compensate BBPL to the extent of the said profits. (f) Direct forensic audit and/or investigation into the affairs and business of BBPL. (g) Direct Respondent Nos. 2, 3 and 9 to render accounts of all dealings they had in relation to the business of BBPL and upon such accounts being rendered, pass appropriate orders to make good any loss that may have been caused to BBPL. (h) Declare Article 31 of the Articles of Association of the BBPL contrary to s.291 of the Act and declare it to be Null and Void. 3. The Petitioner No. 1 and Respondent Nos. 2 3 are the subscribers to the Memorandum of Articles of Association of BBPL. It is a closely held family company. The extent of shareholding, their percentage and the relationship of the parties become discernible and clear from the following tables: DETAILS OF THE PETITIONERS SL No. Name or the shareholder Shares % Relationship 1. Petitioner No. 1 Aji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i 25 0.009 He is grandson (daughter's son) of Respdt. No.2 3. 9. Respondent No.9 B.C.D.P, - - Newly incorporated company by Respondent No.2 3, Later on shareholding handed over to Respondent No.4 10. Respondent No. 10 Amrit Singh HUP 29070 10.83 Respondent No. 10 HUF Amrit Singh 11. Respondent No. 1 Parcrunder Tripat Singh 1600 0.6 Respdt. No. 11 sister of Petitioner No. 3 and respdt. No.2 Total shares of Respondents 131368 48.94% TOTAL SHARES 266736 The authorized share-capital of the company is ₹ 5 crores divided into 5 lacs equity share of ₹ 100/- share each. The issued, subscribed and paid-up capital of BBPL is ₹ 2,68,33,600/- i.e. divided into 268336 equity shares of ₹ 100/- each. 4. The dispute in the present proceeding emerges from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g serious prejudice to the interest of BBPL. For the meeting dated 22.02.2011 Petitioner No.1 who is the only other Director on the Board of BBPL was not issued any notice to attend at Board Meeting. According to the minutes of the meeting the JDA was entered into whereas the JDA was signed only on 29.03.2011 which demonstrates that the minutes were fabricated as an after-thought by Respondent Nos.2 and 3. The Petitioners have highlighted that both 'BBPL' and 'BCDP' were represented by Respondent No. 2 which clearly shows mala fide and conflict of interest of related transaction between Respondent No.2 and 'BBPL', Respondent No.2 has further appointed himself as a Dispute Resolving Authority under the 'JDA'. 6. On 29.03,2011 Respondent No.2 executed a General Power of Attorney (for brevity 'GPA') purportedly on behalf of BBPL in favour of BCDP his grandson Sh. Angad Singh Bedi (Respondent No.4) for development of the said land. Again Respondent No.2 signed the GPA on behalf of both BBPL and BCDP. According to the allegations the Power of Attorney was executed with clear ill-motive to benefit Respondent Nos.2 and 3, their associates and BCD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L wherein it was decided that the assets of BBPL would be disposed off and/ or transferred only in consultation with Petitioner No.1. Thus both Petitioner No.1 and Respondent No.2 were required to agree to any such proposal. 9. After a period of three years in May 2014, Respondent Nos.2 and 3 contrary to the promises made in the EGM an 02.05.2011 started raising construction on the Shettigere land and proceeded with the implementation of the JDA. As a reaction to the aforesaid mala fide activities of Respondent Nos.2 3, the shareholders of BBPL decided to correct the wrong done by Respondent Nos.2 3 and tried to take the whole matter in their own hands. Accordingly Petitioner Nos.1 3 issued notices alongwith explanation to call EGM for setting aside the illegalities being committed by Respondent No.2 and his associates. 10. On 09.08.2014 Respondent No.2 held a meeting with Respondent No.3 and illegally decided not to hold the EGM as requested by shareholders vide their notice dated 21,07.2014 alongwith explanatory statement. On 19.08.2014 a corrigendum to the notice dated 21.07.2014 was sent to the Board of Directors by Petitioner Nos. 1 3 clarifying that resolutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid land which was the subject matter of the impugned JDA. 13. Respondent No.6 Ms. Jasmeet Bedi filed a Company Petition with the allegation of oppression and mis-management in furtherance of dilatory tactics and mala fide intentions of Respondent Nos.2 and 3. The aforesaid petition has never been pressed on account of the interim order passed by the High Court of Bombay and the same has not been pursued. 14. The grand-son of Respondent Nos.2 3 Sh. Angad Singh Bedi (Respdt. No.4) issued a notice on behalf of BCDC to BBPL on 18.12.2014 in which huge monetary claim of ₹ 100 crorcs as compensation has been made. A demand has also been made for appointment of an Arbitrator to enter reference to adjudicate the alleged disputes in the matter concerning JDA as mentioned in the letter. 15. The majority shareholders of BBPL rejected the Balance-sheet/Profit and Loss Statement for the financial year ending 31.03.2014 in respect of BBPL. 16. BCDP - Respondent No.9 through Respondent No.4 initiated proceedings against BBPL under section 11 of the Arbitration Conciliation Act, 1996 before Hon'ble High Court of Karnataka and obtained a collusive order appointing a Sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary intention of all the parties to develop the land jointly with 'BBPL'. 20. It has farther been highlighted by Respondent No.5 that Respondent No.2 without obtaining consent of majority shareholders of BBPL signed 'JDA' on 29.03.2011 involving Mr. G.S. Lamba, Mr. D.S. Lamba and Mr. M.S. Puri with 'BCDP' - Respondent No.9 and appointed himself as a Dispute Resolving Authority as per terms of JDA. He signed both on behalf of 'BBPL' and 'BCDP' despite clear conflict of interest. A reference has also been made to an illegal meeting dated 22.02.2011 held by Respondent No.2 and no notice as per requirements of s.286 of the Act was given to Petitioner No. 1. No shareholder has been told about the execution of JDA'. Likewise the stand of the petitioner with regard to 'GPA' and Rectification Deed (15.04.2011) has been supported by Respondent No. 5 with further allegation that all this was done to benefit Respondent Nos. 2, 3, 4, 5, 6, 7, 8 9 and against the interest of 'BBPL' and its shareholders. A reference has also been made to the proceedings of E.G.M and it is asserted that E.G.M. resolved unanimously to keep JDA on ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the creator of Bhandari Group of companies with the flag company Bhandari Builders Private Ltd. (BBPL) R-1. It is he who has built up the Bhandari empire during the last 40 years by working day and night taking to Bhandari group to its unprecedented height. In sum and substance it has been pointed out that after the death of his father he raised Petitioner No. 1 and all of his sisters by involving them in business activities and granting them dividend of over 42 crores with bonus shares equal to ₹ 2,59,35,100/-. He has asserted that in the evenings of his life how he is sought to be ousted from the management of the company at the instance of Petitioner No.1 who has been helped and brought up from the scratch by Amrik Singh Bhandari R-2. On the other issue respondents have pointed out unnecessary hue and cry for entering into related party transactions in the form of JDA, GPA and Rectification Deed has been created because such like related party transactions have always been entered into. The reason for the complaint in the present proceedings is avaricious and greedy attitude of the Petitioners for not including their land in the JDA. Such like transactions had been ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of construction has been taken up by it after 2003. The land of the company situated at various places was being sold which include the agricultural land at Village Rithoj (Distt Gurgaon) and sold on 26.02.2015; agricultural land at Posari Village Shelarpada, (Distt. Thane) and sold on 14.06.2013; part of land at Village Ganaur (Distt. Sonipat, Haryana) and sold on 21.05.2012. 26, It is claimed that the JDA has been executed in absolute compliance of sections 297, 299 and 300 of the Companies Act yet assuming without admitting that there is some irregularity but that per-se is not illegal and is in the interest of the shareholders and the company which is the sole consideration in equitable jurisdiction of this Board.. J.D.A. IS VALID: 27. The land at Shettigere, Bangalore measuring 2.9 acres was purchased by BBPL from 1996-1998 and separate sale deeds were executed. The land is non- contiguous and was sandwiched between the lands of the persons like M/s. MS Puri, DS Lamba, GS Lamba and personal land of Respondent No. 2 himself. It did not have any approach road. There was dispute with regard to 1.25 acres of land as a minor was claiming a portion of the land. Anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sale Consideration amount 4,75,000 per acre Krishnanpa others Bhandari Builders Pvt. Ltd. 6. Sy. No .83/2 Measuring 0 acre 26 guntas Sale Deed Document No.4140/96-97 presented on 23/12/96 but Registered on 20/3/98 Sale Consideration amount 4,75,000 Krishnappa others Bhandari Builders Pvt. Ltd. 7. Sy. No. 81/3 82/2 of Shettigere village. Measuring 0 acre 22 guntas out of land measuring 1 acre 26 guntas. Sale Document N0.4515/98-99 document presented on 25/11/98 but registered on 23/12/98. Sale Consideration amount 8,50,000 per acre Jairamalah Others Bhandari Builders Pvt. Ltd. 28. The land had remained idle and no proposal was moved by the shareholders/Directors to either develop the land or sell the same. The land of 'BEPL' could not have been developed in isolation and it could have been developed by involving the other land owners. The land was proposed to be developed by BCDP as Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Out of the land measuring 1 acre and 11.5 guntas in survey No.83/2 a case has been filed by a minor who has been demanding 2/5 share in land which was registered as Case No.506/6, Thus till the aforementioned litigation was resolved 'BBPL' could not develop that portion of the land and it has remained unable to resolve this from 2006 till 2011 when it entered into JDA with 'BCDP'. (c) The BIAPPA Regulations clearly contemplate that 1 hectare of land has to be there as a contiguous piece for Group Housing to be developed as Group Housing which BBPL' does not have as their land is non- contiguous in three parcels. Further an existing road must have a minimum width of 12 m which 'BBPL' does not have leave alone as on date. Copy of the aforementioned BIAPPA Regulation has been annexed as Annexure R/14. (d) Further an area of 0.4 acres is of no commercial value as it will eventually yet acquired by Government and 'BBPL' is effectively left, only with 2.5 acres of land and also The Government of Karnataka is not going to pay any TDR/Compensation/Value for the 0.4 acres under acquisition. (e) Even assuming if 'BBPL' took a call on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n hold. The Petitioner was present in the meeting held on 09.08.2014 where the issue of JDA was discussed in detail . CONFLICT OF INTEREST OF PETITIONER NO. 1: 31. Respondents have also highlighted that there is a conflict of interest between Petitioner No.1 and his family with the interest of BBPL. In OS 401/2014 the Petitioner had made a categorical statement that if the construction is permitted then he would have no road for ingress and egress whereas in the approved master-plan there are roads of ingress and egress to his properties. Out of his personal and selfish interest such issues are not been raised by filing the Company Petition. The second mala fide intention is to grab the flat of BBPL situated at Mumbai. Petitioner No.1 has always acted against the interest of BBPL. Petitioner No.2 visited Kingdom of Saudi Arabia (KSA) in 2000 and started a local Saudi Company named as Bhandari Engineers and Builders Saudi Arabia Limited (BEBSAL) He had 65% share in his personal name, 25% in the name of one Mr. Mohd Bin Mutlaq Al Gadhi and 10% in the name of Mr. Udaya Bhanu. The Letter of Intent was issued with the consideration of submitting a bank guarantee of approxima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No.58/2015 (Arbitration proceedings initiated by 'BCDP' against 'BBPL' inter alia, seeking leave of the Hon'ble Tribunal to produce sufficient documents to enable the Tribunal to decide who should represent the 'BBPL'. The Memo was rejected by the Hon'ble Tribunal vide order dated 10.06.2015. The said rejection has not been challenged by the Petitioners and has attained finality. (d) Another objection raised is that there is a delay in filing the petition and that since 24.01.2012 the JDA was in force and construction activities were in progress in pursuance of JDA. (e) The Respondents have further submitted that no petition would be competent as construction on land other than the land of BBPL could not be the subject matter of the C.P. The persons whose land is part of the JDA like Mr. Mahinder Puri, DS Lamba, GS Lamba are not made parties to the proceedings in the present petition. STAND OF 'BCDP' - RESPONDENT NO.9 AND RESPONDENT NO.4: 33. A separate reply by respondent No.4 and BCDP Respondent No.9 has been filed contesting the case of the petitioner and that of Respondent No. 5. It is significant to note that Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harm to respondent No. 4 BCDP. 35. The respondents have pointed out that after the execution of JDA on 29.3.2011 a number of steps for development of the contemplated group housing project have been taken by 'BCDP' which are totally irreversible and the delay in filing this petition would result in collusive loss if the irreversible steps are taken into account. Those steps have been elaborated in the reply and read as under:- (i) Amalgamation of land as one unit:- As per the requirement for Group Housing projects, the total land measuring 16.5 acres were amalgamated into one unit in the relevant land records by execution of deed of amalgamation which is duly registered with the appropriate government authorities. The copy of amalgamation Deed dated 7.6.2012 alongwith typed copy is annexed hereto as Annexure D, (ii) Relinquishment Deed: An area of 5.7 acre was relinquished to the Government. As per government requirement, the parks, open spaces, civic amenities and portion of road, including a significant portion of the land of 'BBPL' was relinquished to the Government by a registered relinquishment deed to an extent of 5.7 acres. The cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'BCDP' has deployed labour on daily wage that are dependent on 'BCDP' for their livelihood and 200 such labourers are sitting idle on site and are presently suffering due to the uncertainty in employment. A copy of muster roll is on record (Annexure H), (viii) Construction work has commenced on site and it is at an advance Stage. The construction work has already commenced and major ground work for the same has been completed, the same is evidenced from photographs of the construction site which are annexed. The photographs evidencing the constructions at advance stage is evident from Annexure-1. (ix) Expenses incurred by answering Respondent 'BCDP' has incurred expenses on various heads including construction expenses, Architect fee, taxes, government deposits, litigations, salaries, office expenses, site expenses, advertisements, broachers, wages for labourers, material costs etc. to the tune of ₹ 9.30 crores as has been certified by S Whig and Co., Charted Accountants. The certificate of Chartered Accountant has been placed on record as Annexure-J. (x) Contracts with various service providers 'BCDP' has also e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.6.2015 Arbitrator has refused the application of Petitioner No.1 to represent BBPL instead of Respondent No.2. In that Court a review petition has also been filed being No. 674 of 2015 with a request to review order. 37. The respondents have also pointed out that this Board does not enjoy jurisdiction to entertain the lis between two different companies which is closely held by the members of their family. 38. The respondents have categorically denied that there is collusion between respondents No.2, 3, 6 ,7 ,8 10 to act against the interest of BBPL or they are treating BBPL as their proprietorship concern. There is no conflict of interest of Respondent No.2 /3 with BCDP or BBPL. The proceedings before City Civil Court Bangalore u/s 9 of the Act were initiated against BBPL for stay of the proposed EGM as well as for stay on cancellation of JDA. The respondents have repeated the facts with regard to JDA, Power of Attorney and rectification deed. 39. The background events leading to the dispute. Respondents have stated that there was no understanding between the petitioner and Shri. H.S. Bedi and others to develop the entire part of land in a consolidated manner i.e. th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has three staggered pieces of land. The layout developed could notice formation of parks, open spaces, parking, civic amenities and road and for that reason there is no proposal by a buyer for it. A 'Skylark Mansions Private Limited' conducted a physical test of property of BBPL and reported that it was not feasible to develop. Such like circumstances have been explained by the respondents. It has also been explained that a housing project of such a huge magnitude has been undertake under the JDA and various irreversible steps have already been taken. Those steps have been noticed in the preceeding paras. The JDA entered into by BCDP with BBPL is on the same terms and conditions as the one entered between BCDP Shri DS Lamba, GS Lamba and MS Puri. The Lambas were given less super built up area as compared to others and to compensate for the same. They were given security deposit of ₹ 1.75 erores and their detail is as follows:- Name JDA Land JDA Land (Sq ft.) (a) Super Built up Area (SBA) (b) SBA/ JDA land C=b/a Amiik Singh Bhandari 5 Acre 21 Gunt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company Law Board is actively seized of the matter, the next date of hearing being tomorrow, i.e., 14.10.2015, it would be in the fitness of things to permit the learned Company Law Board to go into the matter, which concerns the land of the company, on merits and to pass appropriate orders thereon, preferably within four weeks of filing of the rejoinder by the respondents before the Company Law Board. The reply will be filed by the appellants before the Company Law Board within one week from today with an advance copy to counsel for the respondents, who may file their rejoinder thereto within one week thereafter. 45. I have heard ld. Counsel for the parties at a considerable length. 1 perused the paper-book and synopsis with the able assistance of the Id. Counsel. SUBMISSIONS ON BEHALF OF THE PETITIONER: 46. Shri U.K. Chaudhary and Mr. Krishnendu Datta, Ld. Sr. Counsel appearing for the Petitioners have canvassed before me the following propositions:: 46.1 BBPL is wholly mis-managed and the Petitioners have been oppressed because an attempt has been made to deprive the BBPL and 'AOP' to develop more than 23 acres of land which was extremely lucrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to transfer the residential project at Shettigire to BCDP which was a company exclusively owned by Respondent Nos.2 3 in 2011. It is appropriate to mention that the company was incorporated on 30.01.2009. On the basis of the aforesaid fact Mr. U.K. Chaudhary has vehemently argued that Respondent Nos.2 3 were obvious beneficiary of the JDA and no such resolution should have been passed as it violates fiduciary relationship and also violates the provisions of sections 299 and 300. Mr. Chaudhary has submitted that there is no categorical denial of service of notice. In the letter dated 23.08.2011 (R-10 with rejoinder) nothing was said about issuance of notice. The aforesaid letter has been sent to Petitioner No. 1 in response to his representation dated 09.08.2011 which was the first available opportunity for the Respondent No.2 to show that notice was in fact sent. 46.3 Referring to the reply filed by respondents No. 1 to 3, ld. Counsel has submitted that it is an after-thought to assert that Notice was given. There is no grain of truth in the aforesaid stand. The Respondents should have produced on record a copy of the notice and the mode adopted for communicating that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -7 with the rejoinder). From the minutes of the EGM dated 02,05.2011 Mr. Chaudhary has been pointed out that Respondent No.2 tried to project JDA as beneficial to BBPL and that this issue was also kept on hold. The same was to be considered after a few months. There was thus no authority for Respondent No.2 to convene any meeting on 25.03.2011. Therefore the JDA dated 23.09.2011 is not available in the eyes of law. The minutes of meeting dated 02.05.2011 further shows that Respondent No.2 in his capacity as Chairman informed the members that BBPL is a private limited company, a family company started by two brothers who have trust and confidence in each other. Since the family have gone grown and second generation is also matured therefore it is essential to safeguard the interest of both the groups whether future interests of each group are protected and not infringed upon by the other group .It was further felt desirable that since the company was not pursuing any business at that time, a scheme of management should be developed under the active control of both the groups and if one group does not agree to a proposition then the same should not be resolved. The shareholders requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Resignation of R-2 and R-3 - 01.10.2014 (ii) Appointment of R-4 : 01.03.2011 (iii) Date of transfer of 54.74% shares to R-4 : 07.09.2011 (iv) R-2 was 22.4% shareholder even in September 2015. (v) Change of designation of R-2 from MD to Director : 18.11.2012 (vii) Change of designation of R-4 as MD : 18.12.2012. 46.6 Mr. Chaudhary has then argued that JDA is not in the interest of BBPL (R- 1). There was understanding between the association of persons that 23 acres of land was to be developed by BBPL. However the developmental activities have been taken away causing ₹ 73 crores worth business to BBPL In that regard a reference has been made to page 90-91 of the petition. 46.7 The BBPL is a company backed by experienced for more than 40 years whereas BCDP has been incorporated in the year 2009 and virtually has no experience. In fact R-2 has been passing on expertise and experience of BBPL because of the projects mentioned by BCDP in its brochure have in fact were executed by BBPL. 46.8 It is then argued that the boggies of construction raised by BCDP on the sites is absolutely false. The construction is not at an advanced stage and no harm is likel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the Petitioner to faithfully disclose all the relevant facts and the failure to do so must result in forfeiture of his rights of hearing on merits and dismissal of the petition on that ground alone, 47.2 Ld. Sr. Counsel has further argued that M.S. Puri and D.S. Lamba are parties to the JDA and they were necessary and proper parties. In their absence no adjudication can take place because it will directly affect their rights. Another objection raised is that multiple litigations are pending and it would not be proper and conducive for this Board to adjudicate on the issue which are pending before other forum as there would be a over-lap in respect of the subject matter. My attention has been drawn to the suit bearing No. 881/2014 pending before the Hon'ble High Court of Bombay filed by Petitioner No. 1 against Respondent Nos. 1 to 3 with a prayer for specific performance for an alleged agreement to sell of a flat situated in Mumbai owned by BBPL. The Petitioner No. 1 has challenged the resolution passed in the meeting dated 09.08.2014 and 01.09.2014 as null and void and the resolution dated 09.08.2014 is also the subject matter of challenge in the instant petition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted area belongs to private persons like Petitioners and Respondents in addition to their own shareholding in BBPL. Therefore in respect of private land no petition under sections 397 and 398 would be applicable. 47.4 Mr. Tripathi has submitted that during the interregnum period 2011 - 2015 BBPL and BCDP have taken irreversible steps by incurring huge expenses. The following steps have been taken, namely (i) Amalgamation of land as one unit ,(ii) An area of 5.7 acres was relinquished to the Government (iii) Suit No. OS 849/2012 and police complaint was filed by BCD-obtained stay - got possession of land. (iv)Got statutory approvals - got the plan sanctioned and has paid deposits worth 5 crores for approvals. (v)OS 506/2006 was pending against respondent No.1 for one portion of the land. It was compromised by BCD. (vi) The property which was situated between the land of Lamba and Respondent No. 1 was bought, (viii) Sold flats - received sale consideration. (viii)Payments of taxes architects, clearances etc. (ix)Deployed labour - muster roll. (x)Entered into different service providers. (xi)Work has commenced on site - advance stage. (xii) Expenses incurred - CA Certificate. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable with regard to passing of resolution although issuance of notice as per the requirement of s.286 of the Act would be necessary. In such like cases rigour of law must be deemed to be blunted and mitigated because in a closely held family company strict procedure envisaged in the Companies Act is not always expected to follow. There is no denial of meeting dated 22.02.2011. Respondents No. 2 3 have been informing all concerned with regard to incorporation of BCDP which was floated in the year 2009. Ld. counsel has placed reliance on various documents and their efforts justifying the passing of resolution for JDA and other related things which are enumerated as under; viz, (i)They do not deny holding of the meeting, (ii) P-1 was aware about the Board meeting dated 22.02.2011 (Letter dated 23.08.2011 by R-2 to P-1). (iii)Compliance certificate (filed with ROC by the Company Secretary of BBPL) - proper notices were given, (iv) Regular disclosures with respect to related parties have been made by Respondent Nos. 2 and 3 since the 2011. (v) Disclosure regarding BCDP was made by R-2 and R-3 in this meeting, (v) Be that as it may, formal notice in writing in a family company is gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.9 acres which was land- locked. It did not have any approach-road which is evident from the site- plan of the land. There was a suit pending before the Court and claim was made to a portion of the land which was settled by the efforts of Respondent No.2 and 'BCDP' Respondent No.9. The reason for filing the present petition is that the land belonging to the Petitioner and other interested persons have not been included in this development project. Mr. Tripathi has read an affidavit filed by the Petitioner No. 1 acknowledging various acts of generosity by Respondent No. 2 to safeguard Bhandari family. 48. Mr. Jayant Mehta learned counsel for respondent Nos. 4 and 9 has submitted that he adopts the argument advanced by Mr. Tripathi on behalf of respondent Nos.1 3. Ld. counsel submitted that irrevocable steps have been taken under 'JDA' and now the parties would suffer irreparable loss if 'JDA' and related documents are declared invalid. My attention has been drawn to the site plan to highlight that construction is at advance stage and third parties' rights have come into being. Some flats have already been sold, labour contracts have been signed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts in Kingdom of Saudi Arabia. 2. Design and Construction of Township at LA Vigie, Mauritius in 1988, Execution was abandoned by the employer. 3. Construction of 800 houses along with Schools, Commercial complex. Shopping Centres, Day Care Centres all constitutes a neighbourhood along with complete electrification, Water supply, Sewerage disposal, internal External Roads on turnkey basis. 800 Unit, 102,000 sqm. For State Organization of Housing, Ministry of Housing and Construction, Govt. of Iraq at Najaf (Iraq). 4. Design Construction of Townships, Turnkey Project at Al Najaf and High Rise Apartments at Basra for Govt. of Iraq with British Standard specification during 1981-87. 5. Laid complete asphalt road after consolidating sandy soil in the Desert of Iraq for the complete township at Najaf for and on behalf of the Govt. of Iraq. Total length of road constructed was 20 kms. 6. Sewage Treatment Plant for the city of Al-Najaf in Iraq for the Ministry of Housing, Govt. of lraq. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. Sagar Apartment Complex at 6 Tilak Marg, New Delhi during 1972-74. 21. High Court Building, New Delhi during 1972-74. A RCC-framed construction with basement laid on RCC mezzanine raft with total built in area of 23500 sq,m, built to the design and specification of C.P.W.D. 22. Egyptian Embassy, New Delhi during 1972-74. 23. USIS Library Building at Curzon Road, New Delhi during 1971-74, A six storied RCC framed structure having area of 17000 sqm. With one basement built on driven RCC piles, complete civil, electrical, sanitary, mechanical, air-conditioning, and water treatment plant. It has a small auditorium, cafeteria and reading area, built to international specification and architect. 24. USIS Residential House at Bhagwan Das Road, New Delhi, during 1971- 74. 25, US Aid Residential Complex at Mehrauli, New Delhi to house all American employees of US AID in India. The building was constructed with concrete bricks and with super fine finishes with, all facilities like swim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract with himself by wearing two different caps particularly when there was a possibility of avoiding such an ugly situation. On the contrary para 16 helps the petitioner. 51. The act of misconduct of Respondent No. 2 for BBPL further becomes evident from the brochure issued by 'BCDP' which is his related company shows that it has undertaken a large number of projects and reference has been made to all the projects undertaken and executed by BBPL, Some of these projects have already been mentioned in the precceding para. It shows extreme misuse of his position by Respondent No. 2 by treating BBPL as finance and supporting company of BCDP and by transferring the interest of BBPL to BCDP. Thus it is a classic case of diverting the business of BBPL to BCDP. 52. It has also come on record and it has remained undisputed that no notice of the meeting dated 22.02.2011 was given to the Petitioner No. 1. In this meeting Respondent Nos.2 3 are stated to have approved the JDA which in fact was entered into on 29.03.2011. It is well settled that the failure to issue notice under section 286 of the Act results into an illegality and any resolution passed in such a meeting is lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board of Directors. An individual Director has no power to act on behalf of a company of which he is a Director unless by some resolution of the Board of Directors of the company specific power is given to him/her. Whatever decisions are taken regarding running the affairs of the company, they are taken by the Board of Directors. The Directors of companies have been variously described as agents, trustees or representatives, but one thing is certain that the Directors act, on behalf of a company in a fiduciary capacity and their acts and deeds have to be exercised for the benefit of the company, They are agents of the company to the extent they have been authorized to perform certain acts on behalf of the company. In a limited sense they are also trustees for the shareholders of the company. To the extent the power of the Directors are delineated in the Memorandum and Articles of Association of the company. The Directors are bound to act accordingly. As agents of the company they must act within the scope of their authority and must disclose that they are acting on behalf of the company. The fiduciary capacity within which the Directors have to act enjoins upon them a duty to act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gains or ulterior motive. I do not see reason why these observations would not be attracted while considering the provisions of sec. 300 of the Act which also excludes its applicability to private limited company. Therefore a duty was cast on the Respondent Nos. 2 3 not only to issue notice to Petitioner No. 1 but also to disclose the intention of executing the JDA on behalf of BBPL with BCDC. 55. The argument of Mr. Tripathi that notice was not issued to Petitioner No. 1 as it is a family company (BBPL) comprising of Petitioner No. 1 Respondent Nos.2 3 who are its Jt. Managing Director, Managing Director and Director respectively. Mr. Tripathi has pointed out that in the course of business the practice of issuing notice in accordance with section 286 of the Act has always been avoided and therefore notice under section 286 is deemed to be discontinued. Firstly this argument does not emerge from the pleadings where the stand taken is different namely, that the Petitioner was aware of the meeting and in fact notice was given. Secondly no course of business has been shown or pleaded which may provide a fair opportunity to the Petitioners to counter such a claim. After ail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 2 who was more than 82 years at that time and there could be lack of art in recording the minutes. According to the Id. counsel only financial matters were put on hold. There is not even a whisper in the minutes about any financial matter. The argument is completely devoid of merits and in fact the JDA was kept on hold in the meeting of EGM held on 02.05.2011. The stand to the contrary is hereby rejected. The subsequent event of commencing the construction at Shettigere would show complete disregard to the view expressed by the shareholders in the EGM on 02.05.2011 where JDA was put on hold. The decision taken by shareholder in the EGM is binding on all the members, directors and the company. 59. Effort of the shareholders to convene EGM through Petitioner Nos. 1 2 started on 21.07.2014 when they circulated a notice with explanatory statement. The object to convene EGM was to set aside illegality being committed by Respondent Nos. 2 3. On 19.08.2014 a corrigendum to the notice was also issued clarifying that the resolutions proposed for the EGM were not special resolutions but were ordinary resolutions. The conduct of Respondent No. 2 is questionable because he called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 11 of the Arbitration Act to adjudicate the claim of ₹ 100 crores made by BCDP from 'BBPL'. The act of Respondent No. 2 and 3 are patently against the law. A Constitution Bench or the Supreme Court has laid down in categorical terms that the shareholders have absolute right to call EGM. (See Life Insurance Corporation of India v. Escorts Ltd. [1986] 1 SCC 264. It has been observed that the shareholders have absolute right to call EGM either to alter the Articles of Association, or remove/change Directors. It cannot be interfered with even by the courts. 62. The pertinent observation made by the Constitution Bench reads as under:- Thus, we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Company Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. How are the reasons for the resolutions subject to judicial review. It is true that under s. 173(2) of the Companies Act, there shall be annexed to the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f and not to condone mismanagement and oppression. In fact these principles have been repeatedly approved by the Hon'ble Supreme Court by following the well known judgment of the House of Lords in the case of Solomon v. Solomon Co [1897] AC 22, Therefore, the argument lacks substance and I do not feel persuaded to accept the same. 65. In fact in the matters under sec. 397, 398 and 402 the interests of the company and the shareholders are paramount and once it is found that acts of the management are prejudicial and harmful to the company and/or its shareholders then interference in exercise of powers under s. 402 of the Act is imperative (see Sangramsinh P. Gaekwad others v. Shanta Devi P. Gaekwad (2005) 11 SCC 314. It is also true that one illegal may not be oppressive (see Needle Industries (India) (P.) Ltd. v. Needles Industries Newey (India) Holding Ltd. [1981] 3 SCC 333. But once series of act proves to the satisfaction of the court that the management in a systematic manner is causing financial harm to a company then this court has an obligation to rescue such a company and find a solution to keep it alive. 66. I further find that there was some understanding be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at rectifying mismanagement and oppression as contemplated by s. 402 of the Act. It is only material facts which need to be disclosed and it is not such a material fact the non-disclosure of which would cause prejudice to the respondents. Moreover there is no pleading raising this preliminary objection as is required by the law laid down in para 14 of the judgment of the Supreme Court in the case of Larsen and Toubro Ltd. v. CCE [2007] 9 SCC 617. It has been held that 'allegations in regard to suppression of facts must be clear and explicit so as to enable the noticee to reply thereto effectively.' Mr. Chaudhary in his rebuttal submission also relied on the provisions of Order VI Rule 4 CPC to strengthen his argument that facts concerning suppression need to be specifically pleaded. Having failed to do so then such an argument would not be available. Therefore I do not find any force in this argument and reject the same. 70. Another submission of Mr. Tripathi is that there is forum shopping. The allegation of forum shopping is only in context of proceedings initiated u/s. 9 of the Arbitration Act and attempt of the Petitioner No. 1 to represent 'BBPL' before i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of 'BBPL' in conducting affairs of the company. All concerned shall assist the Learned Administrator. Further the Administrator may take all necessary steps to preserve and protect the properties of the 'BBPL' He may also depute counsels, if so desired, to defend litigation initiated by Petitioner No. 1 at the Bombay High Court and suit filed by 'BCDP' and Respondent No. 4 in City Civil Courts at Bangalore as well as in the High Court of Karnataka or any other litigation. The aforesaid course has been adopted as Petitioner No. 1 and Respondent No. 2 are not only real brothers but appears to be very close to each other at least in the past. (b) With immediate effect Petitioners and Respondents are restrained from operating the bank accounts of 'BBPL'. The bank account shall be operated only by the learned Administrator and none else. Any cash in hand with the Petitioners and/or Respondents belonging to BBPL be deposited with Ld. Administrator within one week from today. (c) The Learned Administrator shall be entitled to remuneration which may be fixed by his Lordship himself. (d) The meetings of the Board of Directors dated 22.02.2011 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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