TMI Blog2017 (1) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholding, therefore when Sanjay as director could not discharge his fiduciary obligations effectively in the company, he cannot seek a relief by owning this family concept. Whether non-payment of statutory dues by the Company be treated as an act done by the Respondents causing oppression to the Petitioners or to the Company? - Held that:- Respondents placed voluminous material, employees writing letters to R2 and R3 that P1 directly taking out cash from the cash counter on his own, but whereas for third party’s statement cannot be taken as evidence unless it is proved before Court of Law, such material cannot therefore have any legs to say that Sanjay siphoned the monies of the Company by taking cash from the cash counter. Hence, the same is not taken into consideration. It is also pertinent to point out that when R2 and R3 went to PNB to withdraw money from PNB account for medical treatment of R2, P1 wrote a letter to the authorities of PNB not to allow them to withdraw money from the account. It is a fact that this Company is bread and butter to R2, R3 and to P1 as well. In the Order passed by the Hon’ble High Court of Bombay, the Hon’ble High Court itself passed an Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner : Mr. Abhinav Chandrachud, Mr. Siddesh Bhole and Ms. Apurva Manvani, Advocates. For The Respondent : Mr. Mayur Khandeparkar, Mr. Rahul D Oak, Advocates. ORDER It is a Company Petition revolving around three players, mother and two sons, in relation to the affairs of R1 Company, namely M/s. Ajit Scanning and Diagnostic Centre Pvt. Ltd., which is wholly owned by the mother, two sons and their wives, wherein, mother having more than 98% shareholding. Wife being natural allay of husband, P2 (Shortly called Vishakha ) being the wife of P1 (Shortly called Sanjay ) and by holding some fraction of shareholding in her name, they together filed this CP against Sanjay s mother (R2- Shortly called Savita or mother ) and his brother (R3- shortly called Rajiv ) u/ss. 397, 398, 399, 402, 403 406 of Companies Act, 1956 primarily on two grounds - one, R2 R3 proposing to hold EGM on 31.10.2015 for ouster of Sanjay from the post of director, two, R2 R3 non-cooperating with Sanjay for clearance of all statutory dues, which the petitioners claim oppressive against the petitioners and detrimental to the interest of the Company. 2. For the sake of brevity, this Bench, ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , henceforth the company landed up in this litigation. 4. Until before this Company Petition has been filed, there were only three directors in the Board, Sanjay, Vishakha and Rajiv, meaning thereby, the Petitioners were in the majority on the Board as on the date of filing. The Company has two Bank accounts, one in PNB Branch and another in SBI Branch solely operated by Sanjay. As to PNB account, it was in joint operation of Sanjay and Rajiv. Sanjay and his family has been availing second floor of the building as their residence where the Company carrying its functions on the ground floor and the first floor. There are allegations and counter allegations against each other, Sanjay saying that the mother and Rajiv not co- operating to clear the statutory dues and bent upon to oust Sanjay as director of the Company despite he is a permanent director by virtue of Clause 21 of Articles of Association, by mother giving a requisition notice dated 6.10.2015 for holding EGM on 30th October, 2015 to appoint herself and Bavana (wife of Rajiv) as directors and to oust Sanjay from the directorship without even putting it to the notice of Board of Directors for considering the request of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on notice on 6.10.2015 for holding EGM on 31st October, 2015 for appointment of herself and Bavana as directors and for removal of Sanjay as director without even sending requisition to the Board of directors. The mother gave requisition notice on the footing that for the Board of Directors failed to act upon the requisition letter dated 1.9.2015 given by her, therefore she has given requisition notice for EGM on 6.10.2015. The petitioner counsel says that the requisitionist first has to give notice to the Board for holding EGM, if the Board fails to hold EGM on the request made by the requisitionist, then can give notice for holding EGM by giving 45 days notice to the members of the Company, then in such meeting, if it is for the removal of a director, he has to be given fair hearing before approving resolution. The Petitioners contention is that this requisitionist neither has given a notice to the Board requesting for holding EGM nor given 45 days notice for holding EGM on requisition, therefore, the petitioners sought for a declaration that EGM proposal to be held invalid. The Petitioners further submit that no notice has come to them informing the Board to hold EGM on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry provisions. Likewise, the audited accounts, if any, available with the Respondents shall be kept at the office and shall be open to inspection. A direction was also given that cash collection and deposition of it shall be done by a party other than the Petitioners and the Respondents. 10. Again the Hon ble Company Law Board, on 9th December, 2015, passed another Order allowing the Company to hold EGM on 19th December, 2015 with a direction that issuance of notice to the Petitioners stands waived in the light of the ratio decided by the Hon ble Supreme Court in case of LIC v. Escorts Ltd. AIR 1986 SC 1370. When the Petitioners filed an Appeal over the aforesaid Order, the Hon ble High Court held on 18th December, 2015 that the expenses for running the Company and statutory expenses would be spent from PNB account with the joint signatures of Sanjay and Rajiv. That apart, the Hon ble High Court recorded the undertaking of the Petitioners that they would not operate SBI account and would give copies of SBI statements of the Account from 1st August, 2015 onwards. The Order was passed on the consent given by Sanjay and Rajiv. In the order dated 18.12.2015, it was also recorded tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation and hearing it on merits, this Bench with a view to dispose of main CP expeditiously as directed by Hon ble High Court, dismissed this CA giving liberty to the Petitioners to file an Additional Affidavit within 15 days including events, which are considered to be oppressive and which are not on record so far, then liberty to the Respondents to file Reply to the Additional Affidavit so that the subsequent events could also be in for consideration while disposing main Company Petition. And time of this Bench in adjudication of this CA would also be saved. Somehow, the Petitioners have not filed any Additional Affidavit as directed by this Bench. 14. Since this Bench is of the opinion that disposal of CAs from time to time do cause inordinate delay in disposing main Company Petitions, sometimes main application will never come for hearing, if one application is disposed of, order will travel up to Honourable Apex Court, once that application has visited from original court to Apex Court, one of the parties land up with another application to redo the same exercise, of course with another application with apparently different cause of action. When the company is a running con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (photocopy) admittedly being hand written by Sanjay and filed by Sanjay, this Bench put it to Sanjay, who was in the court hall, as to whether he would be in a position to bring the original of the photocopy, Sanjay initially said he would produce the original if two days time is given, when this Bench put to him he has to abide by the word given by him, he went out of the court for a couple of minutes, then came back and wised up saying that he lost the said document some days before therefore he could not produce it. When he was asked any police report has been given, he said no report has been given. 18. It is apparent to naked eye that this annexure is Xerox of the original handed up by the respondents, but those interpolations made to Xerox of the original are not there in the original. Dark shades present on the annexure makes it ex facie clear that Sanjay brazenly made an attempt to make this Bench believe that Satish signed over the said document and money in the safe custody of their brother is only ₹ 52 lacs, not more than that. It, therefore, could not even be believed that this document by oversight has become part of the annexure, because there is a pleading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, the Hon ble High Court of Bombay, on 18.12.2015, passed an order on consent allowing the company to hold EGM on 19.12.2015 as ordered by the Principal Bench, CLB on 9th December, 2015, but not to give effect to the same until 16.01.2016, i.e., one day after following date of hearing. In the same order, the petitioners undertook not to operate SBI Account and to give copies of Bank statements from 1.8.2015 onwards. In fact, the Hon ble High Court, while disposing appeal on 22.4.2016, recorded the consent terms of the parties that the mother would continue as chairman of the Board of Directors with a casting vote by mentioning the list of events upon which the Board will not take a decision. Therefore, the argument of the Petitioners Counsel saying that EGM held on 19th December, 2015 and on 31st October, 2015 to be held invalid pales into insignificance because the Hon ble CLB itself heard at length from both sides and passed Orders for holding EGMs on 31st October, 2015 and 19th December, 2015 though it has been said that all these decisions taken in the EGMs are subject to the outcome of Main Petition, For there being an opportunity to the Petitioners to raise their grievances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners. 23. The petitioners counsel relied upon Sangramsingh Gaekwad and Others v. Shanta Devi P. Gaekwad (dead) through LRs and Others [(2005) 1 SCC 314] and A H Ahmed Jaffer v. Ace Rubber and Allied Products Pvt. Ltd and Another [(2004) 123 Comp Cas 743 (CLB)] to say that when the company is found to be family company and always managed by both the groups, the removal of the petitioner as director is oppressive and prejudicial to the interest of the company, he says since it is a family company run by two groups, then qua removal of the petitioner as director itself tends to oppressive notwithstanding the fact whether that act is otherwise prejudicial to the said petitioner or not. One point we should not get lost sight of that directorial complaint will not become grievance of a shareholder u/s 397 398; it is a grievance of an individual, in this niche, an exception is carved out saying if it is a family company or a company conceived on partnership lines, then this grievance will become a ground to be considered under sections 397 398. But the general fulfilment to meet u/s 397 398 is that the act complained of shall be unfair to the aggrieved or the company and lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en solely maintained by the Petitioners themselves. Even if it is assumed that the Respondents did not co-operate for paying statutory dues of the Company, the Petitioners being in majority on the Board; there being two directors from their side and there being an account that being fully operated by the Petitioners, we wonder what hindrance had been there to these Petitioners to clear the statutory dues on their own because two directors are enough to hold Board Meeting to pass Resolutions, to sign Balance Sheets. Therefore, at any stretch of imagination, these Petitioners could not throw this blame upon the Respondents. Moreover, there has not been even a single instance directly mentioning to Rajiv that cheques have been signed by Sanjay for clearance of statutory dues and asking Rajiv to sign upon the cheques or not even any instance saying that Rajiv refused to sign upon the cheques tendered by P1, except third party statements which do not carry any weight unless tested. Therefore, we are of the view that there is no point in elaborating this point any further to say that Petitioners have set up this allegation against the Respondents to dress up this Company Petition to impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of half of the shareholding held by her mother out of the shareholding of their father transmitted to his mother (R2). Since the Petitioners themselves raised this issue before Civil Court, this Bench cannot lay its hands over the said issue on two grounds, one - Civil Court is in seisin of this issue, two - it is between individuals, not derivative action questioning the conduct of the Respondents on the company s behalf. Normally, quasi partnership principle is applied in the cases where investment is equally made by all the parties continuing as shareholders of the Company. This principle is invoked in the cases where two / three families come together or friends come together to incorporate a Company with a pre-existing understanding to participate and share the profits commensurate with the investments they put into the Company. The same principle is applied in family companies as well. But, to invoke this principle in family companies and partnership Companies, the shareholder or director making a claim has to prove that the conduct of persons in the management is oppressive against the interest of the person complained. It has been said that orders passed u/s 402 shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, as to what contribution the shareholder purportedly aggrieved of put in the company. Here in this case though Sanjay has been continuing as permanent director, the right of removal of any director of the company as per articles is still with the shareholders of the company, and it is not the case of anybody that special efforts of any of these brothers prospered the company. It is evident that the efforts of the deceased Srikanth (father) are mainstay in the growth of the company. Perhaps for that reason alone, the entire shareholding of the husband transmitted to his wife (R2). It is not even the case of anybody that there is an exponential raise in the company after the demise of their father, even the case of the petitioners itself is that two three branches work has been closed. When did they close? They were closed when these two petitioners and R3 continuing as directors of the company. That time, the petitioners were majority in the Board. By reading the petition, reply and material thereof, it appears all are living on the prosperity given to them by their father. If they go by this bickering, the substratum of the company would go down; it will be like killing a goose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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