TMI Blog2017 (5) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 namely, S.Gursimran Singh Grewal (R-3), S.Paramvir Singh Grewal (R-4), S.Saminder Singh Grewal (R-6), S.Mandeep Singh Grewal (R-10) and Mrs.Harsimran Dutta (R-11) are required to refund to the respondent company, the amount paid to them in excess of the permissible limits u/s 314 along with interest payable at the bank rate enhanced by 2% within 30 days of receipt of this order. For this purpose, the bank rate applicable as on 31st March of each of the financial year shall be taken. M/s Ernst & Young New Delhi is appointed from out of the list of valuers submitted by the petitioners and agreed to by the respondents, as an independent valuer for fair value of the shares held by the petitioners of the company. Other procedures to be strictly adhered to. - CP No. 49/2007 RT No. 17/2016 WITH CAs. Nos. 163/2007, 164/2007, 272/2008, 442/2008, 605/2008, 606/2008, 648/2008, 309/2008, 434/2009, 618/2010, 228/2011, 779/2011, 193/2011, 653/2011, 27/2012, 135/2012, 136/2012, 159/2012, 383/2012, 393/2012, 49/20 - - - Dated:- 1-3-2017 - MR. R.P. NAGRATH, AND MS. DEEPA KRISHAN, JJ. For The Petitioners : Mr. A.S. Narang Mr. Ankush Anand, Advocates For The Respondents : Ms. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each and 20 lakh redeemable preference shares of ₹ 10 each. Thus, the total authorised capital of the company is ₹ 12 crores. The paid-up capital of the company is ₹ 11.60 crores, comprising of 96 lakhs'equity shares of ₹ 10 each and 20 lakhs redeemable preference shares of ₹ 10 each. 4.2. The following table gives the details of the shareholding of each of the petitioners and respondents. List of Shareholders who are parties to the petition S. No Name of Shareholder Shareholding Director since 1. S. Gurlal Singh Grewal (P1) 2.71% 1974 2. Mrs. Ranjeet Grewal (P2) 1.3% 3. S. Randeep Singh Grewal (P3) 1.7% 4. Ms. Seerat Grewal (P4) 0.2% 5. Master Rayaan Grewal (P5) 0.15% 6. Mrs. Pooja Grewal (P6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.3% 30. Mrs. Gretchen Ann Grewal (P30) 4.1% 31. Warren Stuart Grewal (P31) 2% 32. Ms. Gurdeep Kaur (P32) 1.60% 33. Ms. Gurmit Kaur (P33) 1.92% 34. Ms. Kanwal Lehl (P34) 0.12% 35. Lt. Col. Charanjiv Singh Lehl (P35) 0.12% 36. S. Sarabmeet Singh Lehl (P36) 0.12% 37. S. Pritpal Singh Grewal (R2) 3% 1970 38. S. Gursimran Singh (R3) 1.2% 7 March 2007 39. S. Parambir Singh Grewal (R4) 1.2% 40. Dr. Surjit Singh Grewal (R5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per the petition, the following employees have violated the provisions of section 314. 1. Sardar Gursimran Singh Grewal, R-3 and S/o Sardar Pritpal Singh Grewal. MD from 1995-96 and subsequently from 2002-03 onwards till the date of filing the petition. 2. Sardar Paramvir Singh Grewal, R-4 and S/o Sardar Pritpal Singh Grewal, MD from 1996-97 and subsequently from 2002-03 onwards till 2005-06. 3. Sardar Saminder Singh Grewal, R-6 and S/o S.S. Grewal from 1998-99 and 2004-05 onwards till 2005-06. 4. Sardar Mandeep Singh Grewal, R-10 and S/o P1 namely Gurlal Singh Grewaf from 2000-01 till 2003-04 up to 2005-06. 5. Mrs.Harsimran Dutta, sister of Smt.Jitender Kaur Grewal Punia (then working Director and later Joint Managing Director) who is daughter of founder MD Sardar Inder Mohan Singh Grewal from 1997-98 till 2001-02 and from 2002-03 till 2005-06. 6.1.2 It has been stated that in the extraordinary general body meeting dated 10.1.2007, the agenda for regularisation of violation u/s 314 contained names of only three persons namely, Sardar Paramvir Sinigh Grewal, Ms. Harsimran Dutta and Sardar Mandeep Singh Grewal while the other two alleged violators namely, Sarda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h plus perks. The petitioners have alleged that her appointment and payment of salary is to gain the support of her family that hold 11.3% shareholding in the company. 6.3 Appointment of R-8 Ms. Kushal Grewal as whole-time-Director. The petitioners have mentioned that Shri Guru Parshad Singh Grewal, R-7, was proposed to be elected as whole-time director in the AGM held in September, 2003, but. the same was contested on the ground that he was above 70 years of age. In December 2006, he tendered his resignation which was accepted, but his daughter Ms, Kushal Grewal R-3 was inducted as a whole-time director on monthly remuneration of ₹ 45.000/- along with perks, it is stated that R-8 was being paid remuneration even though she did not do any work for the R-1 Company, The petitioners have questioned her appointment and have stated that her appointment was to gain the support of her family that has 10.7% shareholding. 6.4 Appointment of R-2 Sardar Pritpal Singh Grewal as CMD and subsequent appointment of R-3 Gursimaran Singh Grewal as Vice-CMD. Sardar Pritpal Singh Grewal who has been the director of the company since 1970 to March, 2007 was appointed as Joint MD after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l exercise the substantial powers of the management which be and are conferred on the Managing Director. The terms and conditions would be as under 6.4.4 The petitioners have questioned this appointment and have alleged that the minutes of the meeting of Board of directors were neither circulated nor confirmed in the meeting of the Board of Directors held on January 24. 2007. 6.5 It is further stated that Sardar Ashok Singh Garcha, P-10, who had been appointed as director of the company mainly for the purpose of quorum or otherwise was not inducted as a whole-time director despite his rich experience. P-10's name was proposed by P-1 for being inducted as a whole-time director in the meeting held on 15.12.2006. It is stated that this proposal was ruled out allegedly on the ground that P-10 refused to support the majority group in all its activities. The Garcha group has a total shareholding of 14.1%. The petitioners have alleged that a special resolution had been moved by the minority shareholders to elect P-10 as a whole-time director in the EOGM held on 10.1.2007, but the special resolution was voted out. 6.6-6.6.1 It is alleged that in the Board of Directors meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve raised the issue of purchase of a second-hand rolling mill 22 inches / 18 inches which had run for about 20 years and required a lot of upgradation and change of parts at the time of installation. It is stated that the proposal in this regard was floated in the Board of Directors meeting held on 30.6.2005. wherein it was decided that the project may be discussed with consultants to assess its viability, but this issue was never discussed further nor any feasibility report obtained for purchasing the rolling mill. The purchase of this mill has been discussed in great detail in this petition to show that the second-hand mill was not required and does not serve any useful purpose. It is alleged that the majority has caused a loss of ₹ 10 crores approximately to the company by purchase of this second-hand rolling mill and such act shows mismanagement and is oppressive to the shareholders. 6.10 The Petitioners questioned the amount of ₹ 7.22 crores that had been written off as bad debt by the Board of Directors in the Balance Sheet for 2004-05, statedly only for saving the tax liability. 6.11 The Petitioners also questioned the withdrawal of cheque signing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, in regard to carrying on the business and affairs of the company be appointed as CMD. d. It is also prayed that Shri Pritpal Singh Grewal, who is illegally holding the office of Director-cum-Chairman be removed and in his place, a suitable person, rich with experience be appointed as director. e. Additionally, it is prayed that the appointment of Shri Saminder Singh Grewal as director being illegal and not sustainable under law, he be removed from the office of director and in his place, a suitable person rich with experience be appointed as a whole-time director. f. It is further prayed that the respondent company being a closely held company, the Board of Directors be re-constituted by granting indulgence to the shareholders for proportionate representation in the Board as well as amongst working directors, keeping in view the experience. g. It is further prayed that the delinquents on the Board as well as members of the company be required and be directed to furnish adequate securities to the satisfaction of this Hon'ble Bench, in regard to the monetary liabilities which have culminated into wrongful losses to the company, be furnished within the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 passed in CA 348/2011. P-31 (son of P-29 and P-30) has also filed CA No.27/2012 dated 16.3.2012 for withdrawal from the list of petitioners, but this is still pending. After withdrawal by the above named petitioners, the remaining petitioners hold 26.74% of the shareholding of the R1 company. 10.1-10.2 In their written submission, the Petitioners have alleged that the withdrawal of P-17, P-28, P-29, P-30 and P-31 is due to a quid pro quo deal of these petitioners with the majority group (respondents) which has accepted deposits at 13% return to the tune of ₹ 10 89 crores on 8.12.2011 and 15.12.2011. It is further alleged that a bank fixed deposit has been created by the respondents of ₹ 9 crores at only 8 to 9% interest. The answering Respondents in their written submission have denied such a quid pro quo deal and have stated that only 12% interest is being paid to P 30 and 31. 10.3 The Petitioners have filed CA 396/2012 for modifying CLB's order dated 24.8.2011 and for transposing P- 29, 30 and 31 as respondents. 11. From the detailed pleadings, rejoinders, several CAs, and written submissions filed by the Petitioners, it is evident that they are prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sardar Inder Mohan Singh Grewal. They have also emphasised that R-2 was on the Board of the Company as director in 1970 much before the appointment of P-1 as director in 1974. Thus, the Respondents have stated that R-2 was the senior most person in the company in September. 2001 and was rightly appointed as MD. The Respondents have also referred to Petitioners averments in the pleadings that it was a practice of the company to appoint the senior most person in terms of experience as the MD and have stated that even though they do not agree that there was such a practice, or such parameter also the appointment of R-2 as MD in September, 2001 is correct. 13. The Petitioners have stated that there were 11 directors of the company of whom five were working directors at the time of filing of the petition in April 2007. While R-2, Sardar Pritpal Singh Grewal was Chairman (which as per the petitioners is illegal as there is no such designation in the Articles of Association of the company) R-3 was allegedly illegally appointed as MD. P-1 continued as Joint MD Smt. Jitender Kaur Punia who was a whole-time director from 2001 and subsequently appointed as Joint MD in 2006 (she has pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o stated that P-1 was a signatory to the Balance Sheets of the company and cannot question the salary paid to R-9. The Petitioners in their rebuttal have stated that only P-1 out of the 36 petitioners has signed the Balance Sheets. It is also stated that on the reappointment of R-9 as JMD in 2006 in the Board Meeting of 27th May, 2006. the Petitioners present in that meeting had objected, but the matter was deferred to the next meeting and during the AGM of 25.9.2006, no voting took place and R9 was appointed as JMD. The Petitioners have averred that as R-9 did not work at all, the salary paid to her should be refunded to the company. They have also stated that there cannot be any waiver, estoppel or acquiescence towards any act forbidden by law . In this regard, they have referred to Section 269 of the Companies Act, 1956. Petitioners have stated that Respondents have nowhere pleaded that R-9 could be paid salary of a whole-time director without performing any work. They have also stated that there cannot be any waiver of a statutory requirement that is a distinction drawn by the Companies Act between an ordinary director and whole-time director. They have also cited several judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed in place of her father, and they were given to understand that she would shift to Ludhiana and would be working whole-time for the company. The Petitioners have stated that their TA /DA bills for the month of January, 2007 show that she was in New Delhi from 01.1.2007 till 23.1.2007 and subsequently, from 23.1.2007 till 26.1.2007. But, her attendance was marked for 17 days from 11.1.2007 (the date of her appointment) onwards. The Respondents have stated that as the Petitioners group had also voted for her appointment as a whole-time-director and payment of salary, they cannot question the same. 14.2.5 The respondents have stated that R-8 who is the daughter of R-7 was appointed as Whole-Time-Director after the resignation of R-7 as a Whole-Time-Director and Director w.e.f. 1.1.2007. Upon such resignation by R-7, his daughter R-8 who is stated to be well qualified and holds an MBA from USA was appointed as Whole-Time-Director and this was consented by everyone including the petitioners. The appointment of R-8 was also carried unanimously in the EOGM on 10.01.2007. 14.3. Appointment of R-2 (Pritpal Singh Grewal) as Chairman and Managing Director . 14.3.2 The Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was due to retire by rotation. P-1 was present in this meeting and did not raise any objection. (vii) P-1 and his wife P-2 trusted and relied on the experience of R-2 as in 2006 when a position of a trustee became vacant in Sardar Joginder Singh Charitable Trust (a public charitable trust), the remaining two trustees namely P-1 and P-2 chose to appoint R-2 as a trustee of the said trust. (viii) It is stated that at that time P-1 and P2 had no issue with R-2 and subsequently made baseless allegations of financial bungling and fuzzing of record while filing the instant petition. (ix) The respondents in their written statements have averred that there is no tradition of the senior most being appointed as CMD in the company or any understanding that proportionate representation is to be given to any particular group of shareholders. 14.4 Appointment of R-3 as Managing Director. The respondents have stated that the petitioners' challenge to the appointment of R-3 as Managing Director is liable to be rejected on the following grounds:- (i) R-3 has worked for more than 19 years in the company and has headed various functions and is credited with implementation of SA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appointment of R-3 Though the petitioners sent detailed objections to the proceedings in that meeting but they did not file any police complaint against the alleged misbehaviour of security grounds or coercion against them. (xii) Petitioners have also raised the grievance that the appointment of R-3 as M D. was clandestinely carried out under the miscellaneous head and was deliberately not included in the Agenda circulated for the Board meeting of 15.12.2006. The respondents have said that such a plea cannot be raised in a closely held company especially as the petitioners had attended the meeting and voted in favour of the resolution. (xiii) The respondents have questioned the stand of petitioner that the minutes of the meetings of the Board as well as general meetings were recorded incorrectly. It is also stated that the petitioner group would agree to the discussion in the Board meeting and later start sending letters of objections to the recording of minutes. It is further stated that the petitioners were asked to refrain from such activities vide letter dated 5.03.2007 and were advised to give their objections in the meeting itself. (xiv) The respondents have stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is to be appointed as MD. As per section 269 of the Companies Act, 1956, the MD is to be appointed by the majority of the shareholders. As the majority has appointed R-3 as MD in an EOGM and there is nothing on record to show that such EOGM was held illegally, his appointment cannot be challenged. 14.5.1 Appointment of relative of a director in violation of section 314 of the Companies Act, 1956: This allegation against five persons namely, Gursimran Singh Grewal (R-3), S/o Sardar Pritpal Singh Grewal, then MD, Saminder Singh Grewal (R-6), S/o Dr.S.Grewal who was then a director, Sh.Parambir Singh Grewal (R4), S/o Sardar Pritpal Singh Grewal, then MD, Ms. Harsimran Dutta (R-11). D/o Sardar Inder Mohan Singh Grewal, founder MD and sister of Mrs. Jitender Punia, then a working director and Sardar Mandeep Singh Grewal (R-10), S/oGurlal Singh Grewal, then JMD and P-1 have been discussed in detail earlier. These persons were drawing salary above 'the limits prescribed in section 314. In the Agenda for the EOGM held 12.1.2007. only 3 names out of 5 (namely, R-4, R-11 and R-10) were given for passing of special resolution with regard to violation u/s 314. The Petitioners have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of section 314. They have further stated that a complaint under section 314 can only be filed by a shareholder who was not a party to it. 14.5.6 The Petitioners in their rebuttal have stated that P-1 who was the signatory of the Balance Sheet is only one among the Petitioners and holds only 2,70% shareholding out of the total 26.74% shareholding of the petitioners. It is also stated that there cannot be any question of waiver / acquiescence of a statutory requirements u/s 314. 14.5.7 The Petitioners, in their written statement have also stated that though P-1 was signing the Balance Sheets, he was in-charge of the technical side while R-2 was jn-charge of the administration as per the letter dated 14.9.1999 of the then founder MD. A copy of the same has been attached. 14.6 Debt of ₹ 7.22 crores written off for the period 2004-05. This issue has not been raised by the petitioners either in their written statements or oral arguments before the Tribunal. These amounts were written off as bad debts and were accepted by the Income Tax Deptt. The Balance Sheet for 31.03 2003 was signed by both R-2 and P-1 and both P-1 and P-10 were present in the meeting that approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioners have acquiesced to the act of purchase of this mill as both P-1 and P-10 were present during the Board of Directors meeting held on 30.6.2005 and 28.3.2006 and these two meetings qualify for compliance to section 292. It is also stated that P-1's signature on the Balance Sheet for 31.3.2006 results in waiving of all objections regarding purchase of the second hand mill. The Petitioners have vociferously contended the statements of the Respondents and have reiterated that the mill was purchased contrary to the provisions of section 292 of the Companies Act, 1956 which states as follows: Section 292 certain powers to be exercised by board only at meeting. (1)...(d) the power to invest the funds of the company; and ... 14.7.3 In their written submission, the respondents have stated that the petitioners case is that the 22 rolling mill was not needed by the company is liable to be rejected for the following reasons:- (a) P-1 has not disclosed in the petition that he was a party to the decision of purchasing the 22 rolling mill and he had played an integral part in the purchase and the deal of purchase was negotiated by him. (b) P-1 and P-10 were prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the company had been reduced in the same year from 20% in the previous year to 10%. The Petitioners have stated that the cheque signing power of P-1 was diluted thereby leading to his virtual exclusion from the business. It is stated that as JMD the P-1 had power to individually sign all the cheques of the company, but as per the resolution passed under the miscellaneous head during the Board of Directors meeting on 24.1.2007, only the MD was authorised to sign individually or any two of the working directors had to sign individually. The Petitioners have stated that as all the other working directors apart from P-1 were from the majority group, his cheque signing power was virtually annulled. P-1 has denied that by giving his specimen signatures on 25.1.2007, he had consented to the above arrangement. 15.2.1 In the written submission, the Petitioners have stated that they were denied access by the majority group into the works area of the factory premises. This Act is stated to be oppressive as it affects proprietary interest of the minority shareholders and had led to their exclusion from the business. In this regard, they have filed CA 272/2008 seeking directions for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o misfeasance proceedings against a Director. In the instant company petition there is no such specfic contention except a broad reference in the written submission complaining about fraud and misfeasance. The respondents have cited several judgments in this regard but these relate to either misfeasance proceeding against a director or criminal breach of trust. The instant company petition is a complaint against oppression and mismanagement u/s 397 and 398. 16. COMPANY APPLICATIONS During pendency of the Company Petition for almost 10 years, both the Petitioners and the respondents have filed several CAs.Some of them have been adjudicated by the CLB High Court, few of them which were pending, are discussed herewith and are being disposed off along with the company petition. These are detailed below and are discussed in brief. CA 272/2008 - was filed by the petitioners on 7.5.08 praying that the respondents be directed to allow free access to the applicant petitioner as well as non-working directors of the minority group into the premises, work area of R-1 company and to disclose information pertaining to the functioning of the company as and when required by petitioners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA 648/2008 - was filed by the petitioner on 8.12.08 praying that right of the respondents to file reply to CA 562 of 2008 be foreclosed. This CA is pending. CA 309/2009 - was filed by the respondents on 23.6.09 seeking modification of the order dated 8.5.07 in relation to status quo of the fixed assets as the applicant company was seeking enhancement of the borrowing limits of the working capital loan. Order dated 25.6.09 was modified to the extent that R-1 company may avail a loan of ₹ 65.50 crores by mortgaging fixed assets of the company to Canara Bank. ' CA 434/2009 - was filed by the Petitioners under sec. 340 of Code of Criminal Procedures, 1973 read with section 10-E(4A) of the Companies Act, 1956 for initiating proceedings against the respondent Nos. 1,2,3,4,5,6,7,8,9 11 Applicant Petitioner alleged that it is evidently clear that the respondents have accepted valuation of land and building of the company at only ₹ 32 crores while offering fair price for the shares held by the petitioners. Petitioner submitted that value of the company is much higher than ₹ 138.57 crores which represents the value of only land building. The goodwill of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders having been issued by the CLB, the Respondents have committed further acts of oppression and mismanagement. The petitioners have stated that while invoking powers under ss 397 398 of the Companies Act, 1956, the CLB (Tribunal) has the requisite jurisdiction to look into subsequent events. These events are listed in brief here and are discussed in detail later. (i) Siphoning of funds while purchasing of scrap for the company and thereafter falsification of records to cover up the act of siphoning. (ii) Diversion of funds / siphoning of money while making investments in the fixed assets of the company without following due procedure. (iii) Siphoning of funds by inflating labour bills. Violation of section 209 of the Act i.e. managing the company with no transparency. (iv) Denial of access to the directors of the petitioners group to the works area and not permitting them to interact with any staff member. (v) Acts of perjury committed by the respondents to withhold information and provide incorrect information to CLB and the Board of Directors. (vi) Majority group has burdened the company with a huge loan liability and made the company debt ridden. (vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble High Court's order the Respondents sent a covering letter along with some record of the company. The Petitioners have alleged that the records pertaining to the purchase of scrap was fabricated. Later on, the Respondents stated that these quotations were re-generated quotations. On 26.9.2008, the High Court passed directions directing the CLB to conduct an enquiry into fabrication of records. It is stated that the fabricated documents in original have been handed over to CLB vide CA 139/2010. 17.1 The Petitioners have stated that several acts of oppression were committed by Respondents after filing of the petition. These subsequent events were brought on record by way of various applications and compiled by the Petitioners in CA 75/2014. In this CA, a prayer had been made to take cognizance of subsequent events along with prayer to exercise power under section 406 to direct the Respondents to refund the entire loss caused and to initiate the prosecution against the delinquent / respondents and to re-constitute the Board of Directors by excluding the delinquent / respondents. It is stated that the CLB has widest possible jurisdiction to take cognizance of subsequent act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd. [CA No. 755 of 2011, dated 6-2-2014] (discussed infra). 17.2.6 Birla Corpn. Ltd. v. Birla Education Trust and Harshvardhan Lodha 2013 SCC Online 17094. CP No.1 of 2010; In this case the Calcutta High Court held that it is permissible for the court to allow introduction of subsequent events in a pending proceeding if such subsequent events are consequential to the main lis, but an absolute inconsistent case or a new case all together cannot be permitted to be raised by way of amendment of the pleadings. in the case of Sangramsingh Gaekwad (supra) the ratio is that case for relief in petitions of similar nature must be made out in the petition itsetf and the defects in the petition coutd not be cured or lacuna filled up by other oral or documentary evidence --in the application out of which case appeal arises, the petitioners have alleged certain acts on the part of the present management which according to the petitioners were committed subsequent to institution of the petition Case of the petitioners is that such acts would lead to further prejudice to the interests of the company, in my opinion, though the acts complained against are not directly connected with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that even after filing of the petition the Respondents have continued to invest in fixed assets without seeking any approval of Board of Directors or even mentioning such investments in the meetings of Board of Directors in violation of Section 292. 17.3.2 It is stated that in violation of CLB status quo order dated 8.5.2007, the Respondents have allegedly invested a sum of ₹ 62.47 crores in fixed assets as per the schedules attached to Balance Sheets from 2006-07 till 2013-14. It is stated in the written submission that this investment of 62.47 crores has not brought any benefit to the company. The sale in terms of tonnage has dropped down trom 50602 MT on 31.3.2005 to 44094 MT in 2012. ft is further stated that the profits in 2005 was ₹ 14.20 crores and in 2013, the company suffered a loss of ₹ 17 crores and in 2014, the loss was ₹ 22 crores. The dividends paid in 2005 were ₹ 20.16 crores and reduced to ₹ 48 lacs in 2008. While no dividend was paid in 2009, in 2010-11, dividends of ₹ 48 lacs were declared, but after 2014, no dividends were paid. The contention of the Petitioners is that the alleged investment of ₹ 62.47 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the written statement that the auditor's report along with the Balance Sheet for the year ending 31.3.2013 states that the fixed assets have not been physically verified by the management. It is further stated that the Respondents have refused to share data with M/s CRISIL The Petitioners have alleged that the fact that the Respondents have maintained so much secrecy about these alleged fixed assets is indicative that these entries are bogus and these assets do not exist. The Petitioners have also referred to the report of Chartered Accountant Mr. Pankaj Jindal whose services were engaged by P-1, wherein it is mentioned that despite substantial additions to fixed assets, the expenditure on power and fuel calculated on net sale has remained the same. It is stated that the Chartered Accountant had pointed out that it is for the management to find out whether the machines installed were put to use or not particularly when sales have not increased. 19. The Petitioners have also referred to two applications filed by them before the CLB namely 208/2013 filed on 25.5.2013 for production of records and inspection of relevant documents pertaining to fixed assets and enhanced labo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to retain in employees. The Petitioners have not accepted these arguments stating that after incurring an expenditure of ₹ 62.47 crores the Respondents cannot take the stand that the machinery is old. They have also questioned the stand that the company is a labour welfare oriented company as it is stated that 20 old staff members have been removed. It is also stated that the company had not paid any increment to its employees since FY 2012-13. It is also stated that the company's PF return indicates that the employees' strength has come down from 1500 to 400. 21.4 The respondents have stated that the above allegations regarding inflated labour bills are baseless on the following grounds: (a) That the technology deployed in the company is nearly 30- 40 years old and requires a lot of human skill to operate it. (b) That the R-1 company is registered for both PF and ESI and is filing regular returns for the same. (c) The comparison of PF contributions and total employee cost is not justified as here can be no direct relationship between the same. Some senior persons who have been retained on superannuation do not fall under the PF regime. (d) Selective co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondents neither availed the term loan for ₹ 55 crores nor relocated the unit. But they started dismantling the machinery which was stated to be in good condition and selling the same by stating that it was not required. The decisions to sell the machinery was taken in various Board of Directors meetings despite the status quo order of CLB dated 8.5.2007. The Petitioners have stated that in Dec 2013, they noticed that the Respondents had started dismantling the shed covering the 12 inch rolling mill and the said mill was not seen in the factory premises. It is stated that the 12 inch mill was a running mill as per the production figures given in CA 75/2014. They were also informed that the motor of the 20-inch mill had been removed by the Respondents thereby destroying that mill as well. Petitioners have stated that they have filed a contempt petition in this regard before the Hon'ble High Court. 27. The Petitioners have stated that during the pendency of the petition, the Respondents have restructured the debt of the company in violation of CLB's status quo orders dated 8.5.2007. It is stated that the debt restructuring agreement with M/s Canara Bank for conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of land comes to ₹ 262 crores and the Plant and Machinery, Buildings and other properties, goodwill are extra. It is also stated that CA No. 309 filed for enhancement of working' capital limit from ₹ 50 crores to ₹ 65 crores, the valuation of land and building was given at ₹ 138.57 crores as per Canara Bank's letter dated 03.4.2009. It Is stated that the Respondents have been giving variable valuations in different forums / authorities. f. The Petitioners have questioned the conduct of R-3 and have stated that he has time and again filed fabricated / false documents before the CLB. It is also stated that R-3 is already facing an enquiry before the CLB for having filed fabricated documents before the Hon'ble High Court of Punjab and Haryana. g. The Petitioners have rebutted the argument raised by the Respondents that P-1 has his own business and is therefore acting as a spoke in the Respondent's livelihood. While admitting that the P-1 has his own businesses, it is stated that P-1 has opened two restaurants in his house with a total turnover of ₹ 3 crores and his floriculture business is closed and his third business i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land for setting up the factory. (vi) The Petitioners have averred that in case it is found by the Board/Tribunal that the petitioning shareholders cannot pull along with the majority group, they may direct demerger of assets between the shareholding group of the Petitioners and the majority. In this regard, they have placed reliance on the following judgment: 1. K.N. Bhargava v. Track Parts of India Ltd. [2000] 23 SCL 320 (CLB - New Delhi) paras 19 and 20 (infra) and 2. T. Ramesh V. Pai v. Canara Land Investments Ltd. [2004] 55 SCL 616 (CLB). The Petitioners in their written submission have stated that the respondents had themselves given a project report for relocating the factory from the existing premises so that a land bank could be created. It is also stated that the financial figures of the company namely reduction of turnover of ₹ 250 crores to ₹ 150 crores show that the company is on verge of closure. This and the fact that employee's strength has been reduced 1500 to 400 shows that the company is not a going concern and the Respondents are only interested in encashing the land bank. It is also stated that the company has 37 acres of land and ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be just and equitable to order winding up thereof and that the majority acting through the Board of directors by reason of abusing their dominant position had oppressed the minority shareholders. The conduct, thus, complained of must be such so as to oppress a minority of the members including the petitioners vis-a-vis the shareholders which a fortiori must be an act of the majority. Furthermore, the fact situation obtaining in the case must enable the court to invoke just and equitable rules even if a case has been made out for winding up for passing an order of winding of the company but such winding up order would be unfair to the minority members. 187. The interest of the company vis-a-vis the shareholders must be uppermost in the mind of the court while granting a relief under the aforementioned provisions of the Companies Act, 1956. 188. Mala fide, improper motive and similar other allegations, it is trite, must be pleaded and proved as envisaged in the Code of Civil Procedure. Acls of mala fide are required to be pleaded with full particulars so as to obtain an appropriate relief , 189. The remedy under Section 397 of the Companies Act is not an ordinar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, it is trite, the court should not ordinarily interfere- (SeeMaharashtra Power Develoment Corporation Ltd. v. Dabhol Power 'Company MANU/MH/0125/2004 2004(3)BomCR3l7). 212 The burden to prove oppression or mismanagement is upon the petitioner. The Court, however, will have to consider the entire materials on records and may not insist upon the petitioner to prove the acts of oppression. An action in contravention of law may not per se be oppressive. Bhagwati, (as His Lordship then was) in Mohanlal Garpatram v. Shri Sayall Jubilee Cotton and Jute Mills Company Ltd. MANU/GJ/0003/1964: (1964) glr 804 at 103 stated the law; thus: ........It may be that a resolution may be passed by the Directors which is perfectly legal in the sense that it does not contravene any provision of taw, and yet it may be oppressive to the minority shareholders or prejudicial to the interests of the Company, Such a resolution can certainly be struck down by the Court under section 397 or 398 Equally a converse case can happen. A resolution may be passed by the Board of directors which may in the passing contravene a provision of taw, but it may be very much in the interests of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner that the notice dated 11.8.2004 convening (he annual general meeting did not carry any agenda regarding the appointment of directors. Mere irregular acts by themselves, unless they are oppressive to any shareholder or prejudicial to the interest of the Company, as held in G.Gonvindaraj (supra) cannot support a petition under Section 397. The petitioner has not made out as to how the appointment of additional director has caused prejudice to the interest of the Company and its shareholders. b. P-1 and P-10 are directors of R-1 company from 1974 and 2001 respectively. They have attended various BM and GM and also voted in favour of resolutions being challenged now. c. No single contemporaneous complaint was raised regarding functioning of the BoD or R-1 company till the filing of the present petition. d. The Petitioners have challenged the appointment of R2 in 2001 as MD after having participated in such an appointment and acted upon it. e. P-1 as working director has signed all the Balance Sheets and annual accounts from 2001 till 2006. These annual accounts were signed by all working directors in 2001 but from 2002 to 2006, only R2 and P1 were signing them. f. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family being appointed as MD are not well founded and are contrary to the records. In 1964 and 2001 the eldest member of the family was not made the MD. k. Petitioners tried to set up a completely new case in the rejoinder and in subsequent pleadings, by filing miscellaneous applications (CA 75) The respondents have cited Supreme Court decision in Sangam Singh Gaekwad (supra) and S.P. Jain v. Kalinga Tubes [2008] 3 SCC 363 to state that only the allegations as set out in the petition can be looked into. The respondents have stated that Petitioners have chosen not to amend the petition but to agitate alleged subsequent action by way of filing CAs and that subsequent actions can only be challenged without amending the main petition where the same are in continuation of the act complained in the petition. They have cited Ashoka Betelnut Co. (P.) Ltd. v. M.K. Chandra Kauth [1997] 14 SCL 33 (Mad.) para 18/23 in this regard. (Discussed later at para 30.5 (D) infra.) 29.3.1 The specific response of the Respondents to the allegations are detailed below: 29.3.2 Remuneration violation of section 314 - There is no violation upto 1995-96 and thereafter P1 was party to all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder ss. 397 and 398 would be available only if there are continuous acts of oppression by the majority shareholders, (3) illegal acts committed by the directors, unless they are oppressive on the minority shareholders, cannot be challenged in a petition under S. 397 of the Act The instances of violation of the provisions of the Companies Act, cannot be complained of in the present proceedings under s. 397 or 398 of the Act. 29.3.3 The Respondents have also stated in their written submission that conduct involving illegality and contravention of the act will not by itself suffice to warrant the remedy of winding up especially where alternative remedies are available. 29.3.4 APPOINTMENT OF DIRECTORS. The petitioner has challenged the appointment of R-9, R-7, R-8 and R-6 as directors of the company alleging that this was to get the support of their group of shareholders. The respondents have averred that these appointments were made in accordance with law and in duly convened Board meetings and general meetings and cannot be challenged now for the following reasons: - (a) P-1 was aware of the appointment of R-9 and was a party to the decision. (b) In a family compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The respondents have stated that as per the judgement of Sangram Singh P Gaekwad and others (supra), only the allegations set out in the petition can be looked into. Thus the respondents argued that the allegations made in the subsequent application cannot be looked into. It is a settled principle of law that subsequent action can only be challenged without amending the underlying petition, where the same are in continuation of the acts complained of in the petition and additional facts and reliefs agitated by filing subsequent applications cannot be adjudicated. 29.3.6 SIPHONING OF FUNDS . P-1 signed all Balance Sheets as JMD of R-1. They have also referred to the statement made by P-1 in the Civil Suit titled Gurlal Singh Grewal v. Mata Gurmail Kaur Charitable Trust in a Ludhiana court during cross examination on 4.6.2012 stated on oath that Assignment as Director given to me earlier to 2007 had been performed by me with full responsibility. I used to look after production figures. As and when any customer of Upper India Company faced any dealing problem then I used to take care of marketing affairs also. Though the auditors of both R-1 company and P-Vs company'1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty has been charged on purchase of imported scrap. They have stated that no excise duty is charged on imported scrap, additional duties are imposed on all imports to protect the domestic manufacturers and to ensure that imported goods are not cheaper than the domestic goods. (5) The respondents have also countered the petitioners' allegations regarding the loading of a truck bearing 0.065 M.T in the godown of M/s. Raghav Industries and the same truck being off-loaded within 25 minutes of leaving R-1 company and the same truck came back and loaded 10.265 M.T. in R-1 company. It is stated that this allegation is baseless as two 'lots of goods having different assessable values cannot be billed together. Therefore, the usual practice is inat when dealing with two lots of different assessable values that need to be despatched together, then the first lot is loaded on to the truck and billed as the truck goes out and subsequently, the truck is loaded with the second lot and billed again. It is stated that P-1 is well aware of this trade practice. 29.3.8 WITHHOLDING INFORMATION - CA 135/2012 . The respondents have stated in their written submission that the allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quo on the shareholding of the company. (C) DECREASE IN DIVIDEND PAYMENT . The respondents have stated that non-payment of dividends is purely a management decision and cannot be an act of oppression and mismanagement. (D) INFLATED STOCK/INVESTMENT The respondents have contended that inventory holding is always a percentage of turnover in money terms and not in quantity terms. It is also stated that this being part of the management decision and regular working of the company, cannot be subjected to any allegations of oppression and mismanagement. 29.3.10 ALLEGED DESTRUCTION OF ASSETS OF R-1 COMPANY. The respondents have stated that in terms of the status quo order of CLB dated 8.5.2007 disposal of assets such as old vehicles or old equipment lying unused was duly approved by the CLB and money realized has come to the bank account of the R-1 company. Fortnightly statements of receipts and payments are also being given to the petitioners in accordance with the CLB's order and the petitioners have not challenged or objected to the same. It is stated that a number of assets have been disposed of by way of sale by the Board of Directors and the petitioner-d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land was reflected as ₹ 3,10,000/- i.e. ₹ 2.40,000/- + 70,000/-. The list of sale transaction of the company's land has been given in tabular form and the same is reproduced here for ready reference: Dale of sanction Name of Seller Name ot Buyer Conslderation Vaslka No. Date of Registration 11.7.59 Bhagwan Dass B Brothers - 1873 7.2.59 17.12.62 S. Indermohan Singh Sherpur Small Scale Iindustrial Bidg. Society Ltd. 30,000/- 1263 15.3.61 17.12.62 S Surjit Singh -do- 30,000/- 1548 30.3.61 17.12.62 S.Gurqbal Singh -do- 30,000/- 1267 15.3.61 17.12.62 S.Gurparshad Sinigh -do- 30,000/- 1271 15.3.61 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that these were regenerated. 29.3.15 ALLEGATION OF PERJURY AGAINST RESPONDENTS IN PROCEEDINGS OF CA 135/2012 . This issue has been dealt with by the CLB in their order dated 19.03.2013 which was confirmed by the Hon'ble High Court of Punjab and Haryana on 9.5.2013 wherein it was observed that CLB had adequately safeguarded the interest of the petitioner while disposing of the appeal. 29.3.16 RELIEFS. The respondents have stated that the present petition is liable to be dismissed as it is nothing but personal grievance and vendetta of P-1 against the respondents. It is alleged that the petitioners used delaying tactics and it is a fit case to be dismissed with exemplary costs to be paid by the petitioners to the respondents. (Hanuman Prasad Bagri v. Bagree Cereals (P.) Ltd. [2001] 33 SCL 78 (SC) (CAL Paras 22 and 25 confirmed by Supreme Court Hanuman Prasad Bagri. 29.4 The respondents while praying for dismissal of the petition with exemplary costs have stated that to bring an end to the dispute, they are praying for the following relief under Section 402 of the Act:- (A) Petitioners being minority shareholders should be directed to go out of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Insurance Co. (1924)LR 52 IA 126 128 where Lord Sumner said that No court can enforce as valid that which competent enactments have declared shall not be valid, nor is obedience to such an enactment a thing from which court, can be dispensed by the consent of the parties or by a failure to plead or to argue the point at the outset. The respondents have stated that this case is not relevant as no statutory right of petitioners has been taken away from them and therefore, estoppel against a statute will not arise. It is stated that this proposition is applicable only where the provision is in public interest and not to benefit a particular shareholder or director (B) M/s Motilal Padampat Sugar Mills Co. Ltd. v. The State of LLP. AIR 1979 SC 621. In this case the Supreme Court had observed that waiver means abandonment of a right and it may be expressed or implied from conduct but its basic requirement is that it must be an intentional act with knowledge - There can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it The respondents have stated that this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DB came into the management, notwithstanding the fact that he was the majority shareholder, irrespective of the fact whether the status was acquired rightly or wrongly, only in the year 1991. The Company Law Board, being a court of equity, has to keep these aspects in mind while moulding appropriate relief. It is on record that both the groups agreed for the division of assets and as a matter of fact, there has been a de facto division by which the petitioners are managing the forge division and the respondents other two divisions for nearly a year. It is at the last minute that the respondent resiled from this stand. According to us, the most appropriate direction that we could give, with a view to put an end to the disputes between the parties is that there should be division of assets of the company by which the petitioners will continue to control and manage the forge division and the respondents the other two divisions. This would be in line with our decision in Jaidka Motor's case (1997) 1 Comp LJ 268 (CLB) wherein also, even though the company was a public company, in view of the family nature of the company, we directed the division of the assets, Shri Sarkar pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that value. In giving these directions, we have taken note of the decision of the Supreme Court in Cosmosteels (P.) Ltd. v. Jairam Das Gupta [1978] 48 Comp. Cas. 312; AIR 1978 SC 375, according to which the Company Law Board need not follow the provisions of sections 100 to 104 of the Act in a proceeding under Section 397/398. The ICICI with nominate a suitable person as the chairman of the company latest by December 15, 1999, who will ensure that the final division of the assets is completed by June 30, 2000. The function of this board will be restricted to working out the modalities of carrying out the above directions. Expenses connected with these tasks will be borne by the company. During this period the company's bank accounts which stand frozen now, will be operated only as per the directions/authority of the chairman. However, the petitioners and the respondents are at liberty to open and operate new accounts in the names of the forge division and track components divisions respectively. If there are any outstanding from any customers on the supplies made prior to January 1, 1999, then realisation of the same will be credited to the accounts standing in the name of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any boarding facility. The respondent's contention that this was a real estate company is not correct. (C) Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd. AIR 1966 Cal. 512. In this case the Calcutta High Court held that the special auditor should be directed to find out the fair value of shares as was directed by Lord Denning in Scottish Cooperative Wholesale Society Ltd. case 1059 AC 324-we also order the respondents to the petition to buy the shares of the petitioners, in case respondents are unable or unwilling to buy the shares, the petitioners should have an option to buy the respondents' shares at the same price. The price is to be arrived at on the basis of the breakup value of the shares. The respondents should he given three months' time after the submission of the report of the special auditor and the ascertainment of the value of the shares to buy out by the petitioners in default the petitioners wilt have the right to buy up the respondents' shares within a further period of three months from that date. (D) Bharat Hari Singhania v. CWT AIR 1994 SC 1355. In this case the issue of valuation of shares under rule 1(D) of the We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt noted the decision in the case of Shoe Specialities (P.) Ltd. v. Standard Distillaries Breweries (P.) Ltd. [1997] 90 Comp. Cas. 1 (Mad.). It held that the Court considers not only the relief but also the nature of the complaint and how it is to be rectified. The Apex Court in paragraph 205 observed as under: 'The burden to prove oppression or mismanagement is upon the petitioner. The Court, however, will have to consider the entire materials on records and may not insist upon the petitioner to prove the acts of oppression. An action in contravention of law may not per se be oppressive. Bhagwati. J.(as His Lordship then was) in Mohanlal Ganapatram v. Shri Sayaji Jubilee Cotton and Jute Mills Company Ltd. MANU/GJ/0003/1964: (1964) GLR 804 at 103 stated the Jaw, thus -it may be that a resolution may be passed by the Directors which is perfectly legal in the sense that it does not contravene any provision of law, and yet it may be oppressive to the minority shareholders or prejudicial to the interests of the Company. Such a resolution can certainly be struck down by the Court under Section 397 or 398. Equally a converse case can happen. A resolution may-be passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any's affairs in future and under clause (g) the court's order may provide for any other matter for which in the opinion of the court it is just and equitable that provision should be made. An examination of the aforesaid sections brings out two aspects; first, the very wide nature of the power conferred on the court, and, secondly, the object that is sought to be achieved by the exercise of such power, with the result that the only limitation that could be impliedly read on the exercise of the power would be that nexus must exist between the order that may be passed thereunder and the object sought to be achieved by those sections and beyond this limitation which arises by necessary implication it is difficult to read any other restriction or limitation on the exercise of the court's power. Further, sections 397 and 398 are intended to avoid winding up of the company if possible and keep it going while at the same time relieving the minority shareholders from acts of oppression and mismanagement or presenting its affairs being conducted in a manner prejudicial to public interest and, if that be the objective, the court must have power to interfere with the normal corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. The contention that the reframing or insertion of a new article like article 95 as done in this case will be hit by section 9(b) could not be accepted The contention that the reconstituted board was violative of section 408 of the Act was also ill-conceived. The restrictions contemplated by that section are applicable when the Central Government exercised the power conferred on it thereunder, whereas in the instant case powers have been exercised by the court under section 398 read with section 402 of the Act. The decision to reconstitute the board with three directors being the representatives of the shareholders, three directors being the representatives of the Central Government and five directors being appointed by the court was taken by the learned judge himself and after taking this decision, he invited suggestions as to who should be the representatives of the respective parties and it was in this manner that the learned judge came to appoint the three members of the Central Government on the reconstituted board. Nothing had been pointed out which would indicate that discretion had been exercised by the learned judge on any wrong principle or on consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment the Supreme Court further observed, while referring to S.398 as follows (pp. 375, 376): This section only comes into play, as the marginal note shows, when there is actual mismanagement or apprehension of mismanagement of the affairs of the company, it may be contrasted with section 397 which deals with oppression to the minority shareholders, whether there is prejudice to the company or not. 13. From a reading of the aforesaid passages it is clear that s 397 would be applicable only in the case of oppression by the majority shareholders of the minority shareholders. Section 397 does not come into play in the case of wrongful acts being done by the management. That may be a ground for winding up. One of the pre-requisites of the applicability of s 397 is that the complaint of oppression has to be by the minority shareholders, in the present case, it is an admitted fact that the shareholding amongst the two groups is equal. The shareholding being equal, no group can be said to be ether belonging to the majority or the minority group of shareholder. The allegations referred to above, if true, may be a ground for the winding up of the company but are not relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid judgments it clearly follows that (1) past acts which have come to end cannot be challenged under s. 397 or 398 (2) the relief under ss.397 and 398 should available only if there are continuous acts of oppression by the majority shareholders, (3) illegal acts committed by the directors, unless they are oppressive on the minority shareholders, cannot be challenged in a petition under s.397 of the Act. The instances of violation of the provisions of the Companies act, which were referred to by the learned counsel for the petitioner, cannot be complained of in the present proceedings under s.397 or 398 of the Act. Whether the provisions of s.292 or s.314 have been violated or not is not a matter which is to be gone into in these proceedings (emphasis supplied). What has to be seen is whether there has been any action taken, legal or illegal, which has resulted in the oppression of the minority shareholders. It wilt be seen that respondent No. 2 has been the managing director of the company since its very inception. If there was any illegality or irregularity in the convening of the meeting in March, 1980, wherein respondent No.2 reappointed as a managing director, that canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uresh Kumar Sanghi (supra) VALIDITY OF MINUTES OF MEETING Karnataka Bank Ltd. v. A.B. Datar [1994] 79 Comp. Case. 417 (Kar.) held that ...According to the provisions of section 195 of the Companies Act, the minutes of the meeting of the board of directors shall be presumed valid end that the meeting was to be duly called and held and all decisions taken shall be deemed to be valid. ...Section 195 deals with the presumptions available in respect of the minutes duly drawn. Nowhere do these provisions require confirmation of the proceedings of the earlier meeting in subsequent meeting. On page 83 in Shackleton on the Law and Practice of Meeting, 7th Edition, by fan Shearman, it is noted as under. Decision once arrived at do not need confirmation - At a vestry meeting it was the usual procedure to read over at the next meeting the resolutions of the preceding one. At the second of two meetings there was considerable diversity of opinion as to the votes admitted at the first meeting, but judgment was to the effect that there was no necessity for the confirmation by the second vestry of what was legally done at the first. If the first was a legal vestry the election therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree months referred to in the second proviso of sec.314(1) and shall also be liable to refund to the company any remuneration received or the monetary equivalent of any perquisite enjoyed by him Clause (b) of sub section 2 provides that the company shall not waive the recovery of any sum refundable to it unless permitted to do so by the Central Government. Section 295 provides that any such emoluments paid in violation of section 314 and not refunded to the company shall be treated as a loan given to the director. U/s 314(2), the same is to be treated as a loan to a director within the meaning of section 295(1) of the Companies Act, 1956 Further, section 283(1)(h) provides that if any loan is given to a director in violation of section 295, the director shall be deemed to have vacated. It is clear that there have been violations u/s 314 by five persons Proposals/ resolutions for rectifying the same were raised in the board meeting in December 2006 in respect of three of the said violators. The petitioners voted against the said resolution as they were opposing the omission of two violators. Thus the violation is still continuing and has not been redressed by the respondent comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed unanimously. The petitioners have raised the issue that R-8 was appointed as working director on the understanding that she would shift to Ludhiana and work full time for the company. The petitioners have alleged that she did not shift from Chandigarh to Ludhiana but has been shown to be present for 17 days in January 2007. They have also stated that she is not qualified. The respondents have replied that R-8 holds an MBA degree from USA and has the requisite experience. As the petitioners have not pressed these allegations in the written submissions, the same are dismissed. c. S.Saminder Singh Grewal (R-6) The petitioners have objected to the appointment of R-6 as director on the ground that his appointment is in violation of sec. 314 of Companies Act, 1956. This has been discussed above in para 1 of this section. As we have directed that the excess remuneration paid to violators, of section 314 may be recovered, this allegation does not need any further adjudication. 1.4 Appointment of S.Pritpal Singh Grewal (R-2) and thereafter S.Gursimran Singh Grewal (R-3) as managing directors: This appears to be the chief grievance of the petitioners. The petitioners have ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise of a Director is solely within the domain of the shareholders of the company, we decline to interfere in this matter. 1.6 Retirement benefits for retiring directors: The petitioners have mentioned in the pleadings that retiring directors were given retirement benefits and have challenged the same. However, as petitioners have not argued the same either in the oral arguments or in the written submission, this allegation is dismissed. 1.7 Purchase of second hand 22-inch rolling mill: The petitioners have questioned the expenditure on purchase of second hand 22-inch rolling mill and its installation. The resolution to purchase mill for expansion of the manufacturing capacity of R-1 company was taken in 2005 when P-1 as working director and Joint MD was very much involved in the management of the company. The petitioners have questioned the purchase of this mill on the ground that no detailed feasibility report for the same was obtained from the experts. He has further questioned the purported feasibility report given by M/s Korus stating that the same was only of two-page report and appears to be ante- dated as the person who has signed it was on that date working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : This allegation namely that P-1 was earlier authorised to sign cheques individually but this power was diluted as per board resolution passed in the meeting on March, 2007 which required two of the working directors to sign each cheque. The working directors given such signing power included P-1 and three other working directors who as per p-1 belong to the minority group. We agree with the respondents that giving cheque signing powers is solely a business decision and does not require any interference from the CLB/Tribunal. The same is therefore dismissed. 1.9 Resignation of R-2 as MD: This allegation is connected to the allegation above at Sl.No.3. The same is dismissed. 1.10 Mismanagement on account of increase in rent paid for guest house: This allegation pertains to increase in monthly rent from ₹ 5000/- per month to ₹ 20,000/- per month regarding a guest house rented for the past 10 years. The same was not pressed by the petitioners either during the oral arguments and also written submissions. As such we find little merit in this allegation as the rent has been increased after more than 10 years. The allegation is accordingly dismissed. 1.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s between the parties, -in the vase of Promode Kumar Mittal v. Southern Steel Ltd. (1980) 50 Camp Cas. (Supra) the Calcutta High Court observed in a petition under sections 397 and 398 of the Companies Act that the court can take notice of the subsequent events to grant reliefs finally after trial in a company matter and the interim orders passed from time to time by the court in the applications, the meetings held under the chairman appointed by the Court, and the resolutions passed by majority shareholders and directors present therein are at) relevant. In the case of Inder Kumar Jain v. Osra Bottling Company (P) Ltd. [1977] 47 Comp. Cas. 194 the Delhi High Court has held that on an analogy of Order VI Rule 17 of the Code of Civil Procedure, the High Court has power to grant leave to amend a pleading in a petition under section 397 and 398 of the Companies Act, 1956 for relief against mismanagement or oppression in the affairs of a company. In the case of the Court has held that the provisions of the Code of civil Procedure, so far as applicable, would govern proceedings under the Companies Act also. There is thus no provision under the companies Act which prohibits a Court from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no provision under the Companies Act which prohibits a court from looking at subsequent events in a petition under Section 397 and 398 of the Companies Act . In the case of Vinod Kumar v. Singmalon Equipment (P.) Ltd. [Civil Appeal No. 5729 of 2008, dated 17-9-2008] the Supreme Court held while remanding the matter to the Board for reconsideration and fresh appropriate decision by taking note of all events which have taken place till now and the facts and circumstances as they exist today in accordance with law. In the case of Prasanta Kumar Mitra v. India Steam Laundry (P.) Ltd. Cal HC 06.02.2014, the Calcutta High Court observed that the subsequent events intrinsically connected with the original cause of action and have the material bearing on the principle issue involved therein, the Court should take note of the same to render complete, effective and appropriate remedies to the litigant. The Court should take note of the subsequent events to minimize the litigation and to render complete and effective adjudication of a dispute between the parties. It must be interconnected and intertwined with the original cause of action not capable of being divorced. The subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition has been filed u/s 397 and 398 of the Companies Act, 1956 seeking relief against oppression and mismanagement by the majority. Several allegations have been made and several interim applications, company applications have been filed before the CLB/Tribunal as well as civil and criminal complaints lifted before the Hon'ble/Punjab and Haryana High Court. It is seen that the petitioners have questioned virtually every decision or action taken by R-2 and R-3 since September, 2006 when R-3 was inducted as additional director and subsequently made Managing Director of the company. Most of the allegations made in the petition relate to the period when P-1 was a Joint Managing Director of the company and was actively involved in the management of the company and had voted in favour of the resolutions/decision of the meeting of the Board of Directors/AGM/EOGM. These decisions are now being questioned by him and other petitioners who together hold 26.74% shareholding of the company. It is true that P-1 who was actively participating in the management as JMD and was part of all the decisions now being alleged as being oppressive and indicative of mismanagement by the majority holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R-1 company upon payment of fair price by the shares as valued by an independent valuer. In CA 272/2008. the petitioners before the CLB had agreed to exit from the company on being paid a fair price for their shares by the respondents (order dated 13.5.2008) However, the petitioners did not agree to the price being offered by the respondents for their shares. Both the petitioners and the respondents have asked for an independent valuer to be appointed. They have given the names of the independent valuers (as below) to whom they are agreeable. 1. Ernst Young, Mahipalpur. New Delhi 2. Pricewaterhouse Coopers India LLP, Gurgaon, Haryana 3. Deloitte, Gurgaon, Haryana. Now the dispute between the petitioners and respondents is regarding the method of valuation adopted for calculation of the fair price of the shares. The petitioners in their written submission have stated that the relief of the petitioners being given a fair valuation of their shares and they being made to exit the company would not be sufficient as it is stated that the respondents have committed serious acts of fraud and siphoning of crores due to which a profit making company has been turned into a deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time has gone by between filing of the petition and final disposal. The petition was filed in April 2007 and the land prices were much lower. In 2012 (CA 135/2012} the respondents have given a project report for relocation of the unit and for creation of a land bank at the existing factory premises. This project report took the land to be valued at the rate of 15,600/- per sq.yd, thereby the land at Ludhiana only is worth about ₹ 262 crores as per respondent's project report. 3.6 The petitioners have stated that the respondents have burdened the company of ₹ 100 crores while in 2007 the liability was only about ₹ 14.2 crores but the inventories were ₹ 24.57 crores. The petitioners have stated in their written submission that all the shareholders including the petitioners have contributed their ancestral land for setting up the factory. This issue, has been discussed in detail at para (F) on page 81 to 83 above. 3.6.1 We have gone through the averments made by the both the petitioners and the respondents in this regard. The Petitioners have given details of sale transactions of land to M/s Sherpur Small Scale Industrial House Bldg. Society and subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osal for relocating the existing factory to another location and creating a land bank of the land at Ludhiana, shows that the land at Ludhiana can be partitioned by minor relocation of the factory and the petitioners be given their share of the land apart from the value of their shares in the remaining assets and liabilities of the respondent company. However, considering all the facts and circumstances especially that the respondent company is a single indivisible business and is a going concern, it would not be in the interest of the company to order division of assets However, it would be appropriate for the valuer to consider the immovable assets while determining the fair value of shares. 3.8 After considering and weighing all the facts, arguments made by the petitioners and respondents, and the judgments cited by them, we are convinced that the petitioners and respondents cannot get along and conduct business of the company. Both the parties have agreed to the parting of the ways by giving exit to the petitioners. We hold that it would be just and proper that the respondent group namely, R-2 to R-13 and particularly R-2 and R-3, who are admittedly in the control of the aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as desired/required by the said Valuer. E. The valuation report shall be prepared within 90 days from the date of receipt of copy of this order. F. Copy of the report shall be supplied to the parties who shall be entitled to file their respective objections, if any, to the valuation of the shares. After receipt of the objections the valuer shall dispose of the same within four weeks and shall prepare a comprehensive/speaking supplementary report dealing with each and every objection. Thereafter, the Valuer shall send final report to the parties. G. After determination of the value of the shares, the respondents 2 to 13 shall pay the amount to the petitioners, other than those who have withdrawn from the petition and whose application for withdrawal is pending (as per (he petitioners' shareholding proportions) within 30 days thereof and upon receipt of the amount, the petitioners shall execute all the documents/deeds necessary for the transfer of the shares held by the petitioners of the company in favour of the respondents and/or their nominees within two weeks. H. In case, the respondents decline to purchase the shares of the petitioners as aforesaid at the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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