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2016 (3) TMI 466 - DELHI HIGH COURT

2016 (3) TMI 466 - DELHI HIGH COURT - TMI - Inspection of the statutory records of the concerned companies in which shares held - Held that:- The appellants will have the right to inspect the statutory records of FKIPL and KIPL. The information so derived will be placed before the CLB. The CLB will, thereafter, ascertain as to the manner and the forum before which the appellants wish to use the information.

In case the CLB, on receipt of such information, if inclined to injunct the ap .....

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f the 1956 Act. - CO. A (SB) 4/2014, CO.A(SB) 69/2014 - Dated:- 11-3-2016 - Rajiv Shakdher, J. For the Appellants : Mr Arun Kathpalia, Mr Sourabh Gupta & Mr Puneet Yadav, Advs. versus For the Respondents : Mr Jayant T., & Mr N. N. Sareen, Advs. for R- 1 & 3. Mr B.K.V. Subrahmanyam, Adv. for R-2. Mr Jayant Bhushan, Sr. Adv. with Ms Aankhi Ghosh & Mr Kartik Prasad, Advs ORDER Rajiv Shakdher, J CO.A(SB) 4/2014 & CA 207/2014 CO.A(SB) 69/2014 & CA 3025/2014 & 3062/2015 1. .....

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s, briefly, in each of the appeals. 2.1 Before, I proceed further, I must indicate that the three appellants in CO.A. (SB) 4/2014 and the appellant in CO.A.(SB) 69/2014, will be collectively referred to hereafter as appellants . CO.A.(SB) 4/2014 3. The appellants herein had filed a petition under Section 397, 398 and 402 of the Companies Act, 1956 (in short the 1956 Act), alleging oppression and mismanagement by the respondents. This petition was filed before the CLB. The petition was numbered a .....

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oned before the CLB. Notice issued in that petition was accepted on behalf of the respondents. Time was sought to file a reply in the said petition. On that date, on behalf of the respondents, an undertaking was given, that, no Board of Directors (BOD) meeting of respondent no.1 company shall be held without approval of the CLB. The matter was posted for hearing qua interim relief, on 19.11.2013. 3.2 The appellants, however, apprehending that the respondents would fabricate the statutory record .....

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pection of the statutory record. This application was to be moved on 25.09.2013. The CLB, however, observed that if inspection was refused, a reply would be filed by the respondents wherein, they would state reasons. The respondents were required to do the needful within three days. Liberty was, however, given to the appellants to mention the said application on 01.10.2013 at 4.00 p.m. 3.4 On 01.10.2013, the CLB passed the following order .....Counsel appearing for respondents, files a letter da .....

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appellants, albeit, for the very first time that unless an undertaking was furnished that the information derived during the course of inspection shall be only used for prosecuting CP 106(ND)/2013 and, before no other forum, inspection, would not be given. 3.6 The appellants, being aggrieved, by this communication, on 09.10.2013, brought this aspect to the notice of the CLB via an additional affidavit. 3.7 After completion of pleadings in the application i.e. CA 51/C-I/2013, it was taken up for .....

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other company petition filed before the CLB, the appellant prayed for various reliefs, including, for issuance of an interim direction to respondents to allow inspection of the statutory records, in the presence of a CA. The petition was mentioned on 18.09.2014, when arguments were heard by the CLB. The CLB, after hearing arguments, passed the impugned order dated 18.09.2014. 4.2 On the said date (i.e. 18.09.2014), the CLB, while giving time to the respondents to file a reply to the main compan .....

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he, Respondents does not oppose the prayer on condition that the information gathered after inspection of records, shall be kept confidential and shall not be used to the detriment of the company before any other forum or authority without seeking prior approval of this Board. In view of the multiple litigation going on between the parties and to protect the interest of the company, I direct the Respondents to give inspection of the records of the company to the Petitioner after a written undert .....

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s within a week from the date of receipt of such communication.... 4.3 Aggrieved by the impugned order dated 18.09.2014, the appellant, filed the captioned appeal qua the said order. 5. Arguments on behalf of the appellants in both the appeals, were addressed by Mr Arun Kathpalia, Advocate. On the other hand, on behalf of the respondents in CO.A.(SB) 69/2014 arguments were advanced by Mr Jayant Bhushan. However, the learned counsel, appearing for the respondents in CO.A(SB) 4/2014, adopted the s .....

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d illegal activity can only come to fore, once, inspection is granted. (v) The aspect with regard to conditions being put forth was not articulated by the respondents in the hearing held before the CLB on 24.09.2013 and 01.10.2013 qua CA No. 51/C-I/2013. The conditions were put forth by the respondents, for the first time, in their communication dated 05.10.2013. (vi) The CLB has no jurisdiction and/or power to injunct the appellants from instituting any proceedings which otherwise, the said per .....

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eport with regard to such offence to the police. The police, after registration of the case, based on that report, in accordance with Section 154 of the Code of Criminal Procedure, 1973 (in short the Code) can investigate the matter. If the investigation, reveals that an offence has been committed, the police are required to file a challan in the concerned court, whereupon, trial of the case would commence. This submission was sought to be supported by relying on a judgement of a Single Judge of .....

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everal complaints with statutory authorities, including the Economic Offence Wing (EOW). It was submitted that the purpose of the complaints, was to impede the business of the concerned companies i.e. KFIPL and KIPL. It was further submitted that the appellants before this court had sought inspection only as a counter blast to directions issued by CLB in CP No. 34(ND)/2012, titled: Jang Bahadur Singh vs Frick India Ltd. & Ors. 7.1 It was stated that in the aforementioned company petition the .....

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. 7.2 It was thus, the submission of the learned senior counsel that the right of the appellants to seek inspection of the statutory record of the concerned companies was not unfettered, especially, where there was a serious apprehension of injury and/or damage being caused to the concerned companies. In support of this submission, learned counsel sought to place reliance on a judgement of a Single Judge of this court in the matter of: D. Ross Porter vs Pioneer Seed Co. Ltd. (1989) ILR I Del. 15 .....

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been conferred the said right. 8. Having heard the learned counsels for the parties, and perused the record, what has come to fore is briefly as follows: (i) That while the petitions under Section 397, 398 and 402 of the 1956 Act were pending adjudication, request was made both by the appellants in CO.A.(SB) 4/2014 as also the appellants in CO.A.(SB) 69/2014, to seek inspection of the statutory records. (ii) By virtue of the impugned orders, referred to above, dated 13.01.2014 and 18.09.2014, in .....

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ndertaking is given by the Petitioners that the information elicited during inspection shall not be used by the petitioners to the detriment of the company and before any forum other than the Company Law Board without seeking prior approval of this Board..... (iv) The order dated 18.09.2014, is substantially the same as is evident from the extract set forth in paragraph 4.2 above. (v) In so far as CO.A.(SB) 4/2014 is concerned, the respondents did not raise any issue with regard to conditions be .....

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ned orders, it is only the use of information, so derived upon the inspection, that is, at the heart of the contest in the two appeals. Mr Bhushan, therefore, contended before me that the appellants could not use the information derived to the detriment of the concerned companies and, therefore, if there was such an apprehension, the concerned forum, in this case the CLB, could pass appropriate directions to protect their interests. 9.1 To my mind, quite clearly, this stage can only arise, once .....

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ion to pass such a direction, which in effect restrains them from pursuing their legal rights, before a forum which is not subordinate to CLB, has not even been touched upon in the impugned order. 10. Therefore, in my view, the impugned orders will have to be set aside with the following directions: (i) The appellants will have the right to inspect the statutory records of FKIPL and KIPL. The information so derived will be placed before the CLB. The CLB will, thereafter, ascertain as to the mann .....

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