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Shri Gurulal Singh Grewal And Others Versus M/s Upper India Steel Manufacturing & Engineering Company Limited & Others

Demerger - Held that:- 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 affairs of the company be directed to buy out the shares held by the petitioners in the company at a fair price to be de .....

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anced 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. - B. M/s Ernst & Young, 6th floor, Wing A & B, Worldmark-1, Aero city, IG1 airport Hospitality District, Opp. Holiday Inn, Mahipalpur, New Delhi 110037 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 .....

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nd applicable rules and regulations as applicable on the said date in this regard. - D. The parties are directed to extend every cooperation to the said Valuer. The company shall submit all the necessary documents and papers for the purpose of valuation 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 .....

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nd 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 determined share value, the petitioners .....

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luer after submission of the final report together with objections and the supplementary report. - CP NO. 49/2007, And RT. No. 17/2016 - Dated:- 1-3-2017 - MR. R. P. NAGRATH, AND MS. DEEPA KRISHAN, JJ. For The Petitioners : Mr. A. S. Narang and Mr. Ankush Anand, Advocates For The Respondents : Ms. Munisha Gandhi, Sr. Advocate with Mr. Saurabh kalia, Mr. Sameer Chaudhry, Mr. Virat Gandhi, Ms. Salina chalana and Ms. Sukhmani Kang, Advocates JUDGEMENT Deepa Krishan, Technical Member - Company Petit .....

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etitioner No.1 has been given Powers of Attorney and authorisation by each of the other petitioners namely, P-2 to P-36. Respondents R-2 to R-13 are also shareholders of R-1 company, while R-14 and R-15 are proforma respondents, namely the Regional Director of Companies, Noida and the Registrar of Companies, Punjab. R- 1 to R-3 are the only contesting respondents. 3. The National Company Law Tribunal was notified on 01.6.2016. As the Registered office of R1 company is situated at Ludhiana, Punja .....

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rtnership was taken over by the R-1 company. The shareholders of R-1 company are the Grewal family whose patriarch Shri Waryam Singh Grewal had three sons namely, Sardar Joginder Singh Grewal, Sardar Chetan Singh Grewal and Sardar Mohinder Singh Grewal. The Garcha family is the fourth branch of shareholders of R-1 company. It may be mentioned that the daughter of Sardar Joginder Singh Grewal was married in the Garcha family. All the shareholders are from these four branches and related to each o .....

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erence shares of ₹ 10 each. 4.3. 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) 0.05% 7. Mrs. Nagina Grewal (P7) 0.05% 8. Mr. Ra .....

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. Gurpreet Dhallwal (P22) 0.02% 23. Puleen Dhallwal (P23) 0.02% 24. Japman Dhallwal (P24) 0.02% 25. Madhu Dhallwal (P25) 0.02% 26. Sania (P26) 0.02% 27. Divya (P27) 0.02% 28. Mr. G.B. Singh Dhallwal (P28) 0.02% 29. Dr. Gurmohan Singh Grewal (P29) 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 (P3 .....

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deceased) 48. S. Sant Prasad Singh Grewal (R13) 2.9% 2002 5. Directors of the company; The petition includes year-wise list of directors of the company. It is seen that the R-1 company had Public directors from 1970 to 1972 and thereafter, from 1983 to 2001. The petitioners contended that till 2001 when the founder MD of the company Sardar Inder Mohan Singh Grewal died, there was proportionate representation from each branch of the family as directors. It is also stated that the public directors .....

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as salaries of certain officials related to the directors increased the limit provided in that section. Briefly section 314 provides that any relative of a director cannot be employed at a salary exceeding a certain limit without a special resolution of the company and sanction of the Central Government. Initially, this section applied to payment of salaries above ₹ 10,000/- per month and the limit was subsequently increased to ₹ 2,50,000/- per year. As per the petition, the followin .....

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, 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 pe .....

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, meaning thereby, he was earning more than ₹ 10,000/- per month. As no special resolution for this appointment was passed, and permission of Central Government as required was not taken and thus, R- 3's appointment was violating the provisions of section 314. Subsequently also, in 2001-02, when his salary was revised beyond ₹ 20,000/- per month and again, no special resolution was passed, nor the permission from Central Government was obtained. This violation was also not addres .....

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ardar Saminder Singh Grewal is the son of Dr. Surjit Singh Grewal who is also a part of the respondent group and has a family holding of 9.92%. It is stated that the appointment of Sardar Saminder Singh Grewal is also in violation of section 314 of Companies Act, 1956. 6.2 Appointment of Smt. Jitender Kaur Grewal Punia as whole time director for a period of five years vide resolution dated 29.9.2001 on account of her father Sardar Inder Mohan Singh Grewal having passed away. It is stated that he .....

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sed to ₹ 1,15,000/- per month 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 ag .....

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ar 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 he resigned as Principal of the Guru Nanak Dev Engineering College in 1986 His appointment was to expire in June, 2001, but his re-appointment was taken up as a miscellaneous item in the notice calling for Board Meeting on 06 09,2001. In this meeting, he was appointed as .....

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f Board of Directors held on 15.12 2006, it was resolved as per majority that R-3 be appointed as CMD. It is stated in the petition that the objection raised by P-1 that, he (P-1) was a fully qualified person and had looked after the company for the last 43 years, is the right person to be appointed as MD and was also one of the senior persons among the family members who constituted the closely held company, was not recorded. In this meeting, it was recorded that R-3 shall be the Vice-Chairman- .....

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ectors. It is stated that a letter of resignation was shown to have been received from R-2 allegedly dated 10.1.2007, but this letter was not produced in the EOGM and was not mentioned in the minutes that were recorded. The petitioners have produced an extract of minutes recorded in the EOGM on 10.1.2007 as follows. "Resolved that subject to sections 198, 309 and 310 of the Companies Act, 1956 and other applicable provisions thereof, Sardar Gursimran Singh Grewal, be and is hereby appointed .....

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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 activiti .....

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given a monthly pension of ₹ 45,000/- for life and / or lifetime of his or her spouse. It was further resolved that the said retirement policy shall come into effect from the date of retirement of R-2 Managing Director of the company and he was authorised to take due steps to give full effect of the policy. 6.6.2 The petitioners have alleged that this resolution was in violation of section 318 of the Companies Act, 1956 and there is no such provision under the Articles of Association of R- .....

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signed as MD allegedly with effect from 10/11.01.2007 is also In violation of section 318. 6.7 It is stated that many items were taken up under the head "miscellaneous" (with the permission of the Chair) in the Board of Directors meeting for the past five years. 6.8 It is stated that the practices followed earlier were changed. Earlier the presence of members of Board of Directors was recorded in the beginning and the minutes were not recorded in the meeting, but subsequently put toget .....

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e minutes of Board of Directors meeting dated 15.12.2006, EOGM dated 10.01.2007 and the Board of Directors Meeting dated 24.01.2007 as the confirmation of the same have been recorded despite oral objections. 6.9 Petitioners have 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 .....

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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 of P-1 and dilution of the same as he was authorised only to affix his signatur .....

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he company and shall act as a Chairman accordingly. Such act is stated to be oppressive. 6.13 The Petitioners have questioned the monetary gain to an individual by an increase of monthly rent of a guest house from ₹ 5000/- per month to ₹ 20,000/- per month as per Board of Directors meeting resolution dated 15.12.2006. It is stated that this rent is paid to one group of shareholders headed by Shri Gurdarshan Singh Tur ostensibly to retain their support as they hold one and a half per .....

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aries of employees, Board of Directors minutes, reading of minutes and pension may kindly be taken and the monetary loss caused to the company be reimbursed. b. The respondents who have managed the affairs of the company at the relevant time and during the tenure in the respective offices be directed to reimburse the monetary loss caused to the company regarding payment to Smt. Jitender Kaur, pension violative of section 318, write off of ₹ 7.22 crores and increase in rent from ₹ 500 .....

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irman 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 .....

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this Hon'ble Bench so that such securities remain effective till the final relief, in regard to reimbursement of the amount is ordered by this Hon'ble Bench. 8. This Company Petition has been pending for almost 10 years. During the pendency of the petition, several Company Applications (CAs) have been filed by both the petitioners and the respondents. Some of these CAs have been disposed of by the erstwhile Company Law Board (CLB) and final orders passed. Some of these orders of CLB have .....

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ORDER Company Petition 49 of 2007 in the matter of M/s Upper India Steel Manufacturing & Engineering Company Limited (the company) and CA 163 of 2007 thereof seeking interim reliefs were mentioned. Heard the arguments of the counsel. Considering facts and circumstances of the case, I grant the following interim reliefs: (1) The company/respondents shall maintain status quo as of date of the fixed assets, the composition of the board and shareholding in the company. (2) In case of sate of an .....

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written submission have stated that at the time of the filing of the petition, they constituted about 35 per cent of the shareholding. Subsequently, P-No.17 and P-28 were allowed to withdraw from the petition by the CLB. P-No.29 and P-30 namely Sardar Gurmohan Singh Grewal and his wife have also withdrawn from the petition vide order dated 24.8.2011 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 thi .....

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ixed 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 Petitio .....

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to resign in 2001 after the death of Sardar Inder Mohan Singh Grewal and prior to the AGM of 2001. 11.1-11.2 have gone through the detailed pleading in the regard of the above allegation. R-2 was elected MD in 2001 in the AGM and was voted so unanimously by the shareholders. Thus, his appointment as MD cannot be said to be illegal. 11.3 Removal of public directors: The Petitioners have not been able to bring anything on record to show the illegality in removing the public directors in 2001. R-1 .....

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ssion and mismanagement as per the meaning of sections 397 and 398 of Companies Act, 1956. 12. The Petitioners have alleged that R-2 was appointed as MD on 6th September, 2001 for a period of five years and thus, ceased to be a director on 5th September, 2006 after completion of a period of 5 years when such appointment lapsed. Thus, at the time of the AGM held on 29th September 2001 he was not a director of the company and could not have chaired the said meeting where he was appointed as MD. Th .....

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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 prac .....

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. Jitender Kaur Punia who was a whole-time director from 2001 and subsequently appointed as Joint MD in 2006 (she has passed away during the pendency of the petition), Saminder Singh Grewal and Smt. Kushal Grewal were both working directors. It is stated that at present, there are 9 directors, of whom four are working directors, as Smt. Jitender Kaur Punia and Sh. Guriqbal Singh Grewal have passed away during the pendency of the petition. 13.1-13.2 It may be mentioned that replies, statements et .....

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n. 14. The reply of the respondents R1, R2 & R3 to allegations made in the petition are discussed hereafter. 14.1-14.2 The specific allegation of oppression and mismanagement is that R2 gave undue benefits to muster up majority in his favour, by paying salary to Smt. Jitender Kaur Punia (R9) and Ms Kushal Grewal (R8) as working directors even though they did not perform any work for the company. The Petitioners have filed the TA and DA bills along with attendance register to show that both t .....

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sent in the meeting where R-8 and R- 9 were appointed as working directors and thus, have acquiesced in their appointment and payment of salary to them. The Petitioners while agreeing that they voted in their favour, have stated that they did not know that R8 and R9 will not be performing any duties for the company nor attending the office regularly. The Petitioners have stated that the majority group at the behest of R-2 continued to pay salary in order to keep the voting power of R-9, The Resp .....

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ook 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 a .....

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rusted with bill verification process and labour welfare activities and her appointment cannot be said to be unnecessary. It is stated that as R-9 had passed away on 26.05.2012, the allegation made against her, which is in personal capacity does not survive as on today. P-3, P-10 & P-15 and R-10 had attended the AGM on 29.09.2001 and had voted in favour of the resolution for appointment of R-9 as Whole-Time Director. Subsequently also, they voted for re-election of R-9 in 2004. Apart from th .....

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by both Respondents and Petitioners regarding payment of salary to R-9. It is seen that R-9 was a working director and being paid salary from September, 2001 till the filing of petition in 2007, but the petitioners have produced only the details of TA and DA bills and attendance sheets of only one month namely. January, 2007. The Respondents have also explained the alleged discrepancies by stating that the attendance of all the working directors was marked at Ludhiana factory irrespective of th .....

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ary of ₹ 45,000/- per month plus perks. The Petitioners have stated that they voted in her favour as she was being 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 1 .....

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lified 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. 14.3.1 Appointment of R-2 (Pritpal Singh Grewal) as Chairman and Managing Director. 14.3.2 The Petitioners have stated that the manner and method of appointment first of R-2 as the MD and subsequent appointment of his son R-3 as MD is oppressive. This allegation has been discussed in deta .....

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a violator of section 314 of the Companies Act, 1956, was appointed as MD but more experienced persons such as P-1 and P-10 were ignored. 14.3.4 The respondents in the written submission have stated that the appointment of R-2 as a Whole-Time-Director cannot be questioned for the following reasons: (i) R-2 is well qualified and has the requisite work experience being B.Sc. from University of Colorado, USA and MS. from MIT USA. He has also taught metallurgy at Engineering College, Ludhiana. (ii) .....

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years after the appointment of R-2 as JMD. (vi) Appointment of P-1 as JMD was also made under the miscellaneous category. (vii) It is stated that the reappointment of R-2 as JMD due in 2001 could not be done as the health of Sardar Inder Mohan Singh Grewal then M.D. started deteriorating in 2001 and he passed away in August 2001. It is stated that R-2 continued to be on the Board of Directors and chaired the Board meeting called on 6.9.2001 where he was appointed as Chairman and Managing Direct .....

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o 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 p .....

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ting on 2.09.2006 when the name of R-3 was proposed and approved for the first time to be inducted as Whole-Time-Director w.e.f. the date of the ensuing shareholders meeting i.e. 25.09.2006. (iii) R-3 is stated to have refused to accept the said appointment as Whole-Time-Director as his father R-2 was already on the Board and leading the company as CMD. Thus the resolution of appointment of R-3 was not required to be put to vote. (iv) In December, 2006, R-2 desired to step dawn as CMD and a Boar .....

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f office by the then CMD namely R-2. (vi) EOGM was fixed for 10.01 2007. (vii) P-1 and P-10 attended the Board meeting on 15.12.2006 and did not raise any objections to these resolutions which were passed unanimously. (viii) Petitioners have not raised the issue that the appointment of R-3 is prejudicial to the interests of the company even in the petition. (ix) The appointment of R-3 as Director and vice-CMD was approved by the shareholders in the EOGM on 10.01.2007. (x) R-2 resigned from the p .....

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at R-3 was unfit to be a MD or that his appointment would be prejudicial to the interest of the company. The respondents have also stated that security had not been called in order to pressurize the petitioner group on 10.01.2007 to support the 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 rai .....

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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 that P-1 is basically a disgruntled family member who is aggrieve .....

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tor of the Company and of course is one of the senior persons amongst the families who constituted closely held company. This objection was never recorded and the recommendation was made for appointing Shri Gursimran Singh Grewal as the Chairman-cum-Managing Director of the company." However, it is stated that in the criminal complaint filed by P-1 titled "Guriqbal Singh Grewal vs. Surjeet Singh Grewal and others" in a Ludhiana court, P-1 made the following statement on 13.07.2012 .....

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. (xv) The respondents have stated that the allegations challenging the appointment of R-3 as MD have been raised with a mala fide intention. (xvi) Respondents have stated in the written submission that not choosing P-1 as Managing Director in place of R-3 cannot be a ground of oppression as (a) P-1 has not been able to show that he had any right to be appointed as MD. (b) There is no agreement that P-1 would be the MD or any past practice or understanding that the senior most member in the Boar .....

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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, .....

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violation u/s 314. The Petitioners have stated that as the names of R-3 and R-6 were not included in the said resolution, their group voted against the same and the resolution was rejected. The Petitioners have stated that section 314(2) makes it mandatory that any salary received in violation of section 314 has to be refunded and such relative who has been employed shall be deemed to have vacated his office. It appears that the R-1 company has not taken any action even till date in this regard .....

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that till the remuneration received in default of section 314 is not refunded to the company 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. They have further referred to section 203(1)(h) which provides that if any loan is given to a director in violation of section 295, the director shall be deemed to have vacated his office. Accordingly, the Petitioners have made a prayer for removal of R-3 as MD and member of the .....

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t P-1 was present in the Board meeting on 02.09.2006 and did not object to R-6's appointment as a Whole-Time-Director. Subsequently in the AGM held on 25.09.2006, P-1, P-3, P-10 and P-15 also voted in favour of the appointment which was carried unanimously. 14.5.5 The Respondents in their reply of allegation have stated that P-1 has signed all the Balance sheets and as such, has accepted the payment of salary given in violation of section 314. They have further stated that a complaint under .....

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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 B .....

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overies and is duly making efforts to recover other amounts as well from the creditors by initiating appropriate legal proceedings. 14.7.1 The Petitioners have alleged that the act of purchase of a second-hand 22 inches rolling mill without the approval of Board of Directors as required under section 292 of the Companies Act, 1956 and without obtaining any detailed project report has caused a loss of ₹ 10 crores to the company. On going through the details submitted by the Petitioners in t .....

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is further stated that on 28.3.2006, the Board of Directors was informed that the mill had been purchased and the total cost would be ₹ 10 crores out of which ₹ 7 crores have already been spent. The Petitioners have alleged that the expenditure carried out for civil work/installation of the mill appears to be on the higher side and the majority appears to have siphoned off funds. The technical aspects of this mill and its capability and functioning along with the report of, M/s Korus .....

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ave argued that 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 reit .....

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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 present in the Board meeting on 30.06.2005 wherein expansion plans were discussed and did not raise any objection to the acquisition or the said Mill. (c) P-1 was present in the Board meeting on 28.03,2006 where the Board was informed of the commissioning of the Rolling Mills and the amount o .....

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djustments to the existing 20" rolling mills is not accepted by the respondents. It is stated that the 22" mill is capable of better quality production and lower wastage. The respondents have also averred that if this was so, P-1 who was actively involved in the management and was in charge of production affairs, would have done so before the purchase. (g) The respondents have also given technical details with regard to the petitioners' contention regarding the competitors. The res .....

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d in Maharashtra Power Development Corpn. Ltd. v. Dabhol Power Co. [2004] 52 SCL 224 (Bom.). Other grievances raised by the petitioners during arguments and by way of company applications and written submissions are detailed as follows: 15.1 The Petitioners have also stated that after being appointed as MD, R-3 immediately increased the salary of working director by 86% from ₹ 45,000/- to ₹ 1,15,000/- per month during the meeting of Board of Directors on 6.3.2007, allegedly to provid .....

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he 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 w .....

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area as he is alleged to have instigated the workmen and also taken trade secrets from them and given to their competitors. The Petitioners have denied this. The Respondents have stated that P-1 is permitted access to his office area. During the oral arguments, the Respondents have averred several times that P-1 continues to draw salary since filing the petition though he has not done any work for the company. However, this statement is not made in any pleading or written statement filed by the .....

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etailed chart of calculations has been given in CA 75/2014 to compute the above loss and also to show that M/s Raghav Industries was earning profit @ more than 30% which is unheard off The Petitioners subsequently stated that the photocopies of the documents regarding the above transactions supplied by the Respondents on CLS's directions were fabricated. Another CA 562/2008 was filed by the Petitioners for the purposes of inquiry. 15.3.2 The Respondents have questioned the allegations made b .....

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asdev Singh v. U.T.I. [2011] (ILR 4 Delhi 185) in which it was held that we have gone through the judgment and the contention of the respondent that this case is not relevant as it relates to 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 proce .....

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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, This CA is pending. CA 442/2008 - had been filed by Respondents under section 634A of Companies Act 1956 seeking e .....

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the petitioner is not agreeable to this amount and seeks time to indicate his price for the shares. For doing so he desires to have some information on the affairs of the company. He may write to the company as to what information he desires and the company will furnish the same within 10 days from the date of receiving the request to report on 21.7.2008 at.4.00 p.m." Following reliefs were sought a. Direct that the orders dated 13.5.08 & 21.5.08 shall be enforced in same manner as a de .....

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their purchasing the shares of respondent do not arise, (ii) the term order u/s 634A includes interim order, the Board rejected the contention that it is no capable of being enforced (iii) since petitioners have not quoted their own price, the fair price has to bedetermined by an independent valuer. CA 605/2008 - was filed by the petitioner on 17.11.08 to direct the respondent company to redeem the preference shares within a period of two weeks. This CA is pending. CA 606/2008 - was filed by the .....

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ication 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 .....

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tc. have not been included. The market value of plant and machinery is much higher. So it was prayed that R.No.1 to 9 and 11 be prosecuted u/s 340 of Code of Criminal Procedure, 1973. This CA is pending. CA 228/2011 - was filed by the Petitioners on 21.4.2011 for restraining the respondents for holding any meeting of the Board of directors for issuing fresh preference shares. CA 653/2011 - was filed by the petitioners on 8.12.11 for striking off annexure "N" from the record, alleging t .....

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iled by the petitioners on 27.3.12 for extension of time for filing the replies to the application filed by respondents dated 16.3.12. On 29.3,12. CA 159/2012 was heard. This CA is pending. CA 396/2012 - was filed by the petitioners under Regulation 44 for modifying the order dated 24.8.11 and for transposing petitioner Nos. 29, 30 and 31 as respondents on 6.8.12. It was stated that Gurmohan Singh Grewal and his wife P. Nos. 29 & 30 have been permitted to withdraw from the company petition v .....

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y the petitioners. Listed for hearing on 28.6.13, again listed on 9.7.13 allowing the petitioner to make submission on these two appiications, along with main petition. This CA is pending. CA 75/2014 - was filed by the Petitioners on 02.4.2014. This CA mainly deals with subsequent events. It is stated that after filing of the petition, despite interim orders having been issued by the CLB, the Respondents have committed further acts of oppression and mismanagement. The petitioners have stated tha .....

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edure. (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 an .....

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heir duty diligently and in the best interests of the company. (xiii) Removal of senior staff members as well as drastic reduction in labour strength. (xiv) Re-employment of employees removed under section 314. (xv) In this CA, the petitioners have prayed for the following reliefs: a. To take cognizance of the additional facts pleaded in this application and grant additional reliefs. b. Under section 406, direct the delinquent respondent / director / chairman to jointly and severally refund the .....

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ordered by the Hon'ble High Court regarding fabrication of documents and their application for the same in CA No.562/2008. It is stated that as per the CLB order dated 28.8.2007 the Petitioners were granted liberty to inspect the records of the company by indicating the documents to the company secretary and they were to be provided copies within two weeks if required. It is stated that on 10.10.2007, the Company Secretary declined their request for most of the documents by stating that it .....

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he 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 .....

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stated that the CLB has widest possible jurisdiction to take cognizance of subsequent acts under the regulations 24 and 44 of the CLB Regulations, 1991. 17.2.1 Several judgments have been quoted to support this contention by the petitioners. These are discussed hereinafter along with respondents' objections therein: 17.2.2 Promode Kumar Mittal v. Southern Steel Ltd. [1980] 50 Comp Case 555. (Calcutta High Court) In this case the High Court agreed with the contention of the respondents that t .....

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vasmaneck v. Gharda Chemicals Ltd. [2000] 23 SCL 71 (Bom.) The Bombay High Court in this case has held that in a petition for relief u/s 397 of the Companies Act 1956, it is permissible to bring on record by amendment not only the facts pertaining to the events up to the filing of the petition but also subsequent events. Once the court comes to the conclusion that the petition is maintainable then subsequent events can also be considered in order to do complete justice between the parties and to .....

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e parties." The said judgment does not hold that an amendment of the main petition is essential to consider subsequent events. The judgement states "there is thus 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." 17.2.4 Vinod Kumar v. Singmalon Equipment (P.) Ltd. [2005] 62 SCL 332 (Bom.) (discussed infra). 17.2.5 Prasanta Kumar Mitra v. India Steam Laundry (P.) Ltd. [CA No. .....

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dings. 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 .....

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tion and can be set to form part of a chain of events. I do not think in conflict pertaining to allegations of mismanagement and oppression in a company, for each instance of mismanagement and oppression filing of an independent petition u/s 397/398 of the Companies Act 1956 would be necessary if the subsequent acts can be said to be connected with the main allegations." The petitioners have referred to the following case regarding not mentioning of important items of agenda such as appoint .....

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ting on the said agenda item and it could not have been taken up under the miscellaneous head because the miscellaneous head is only meant for those items which are emergent in nature and are not known at the time of preparation of the agenda - the respondents have also violated the principle of natural justice as no opportunity of hearing much less show-cause notice was "given before its removal from the membership. The respondents have stated that this judgment is not applicable for the f .....

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ergent nature. Thus this judgment has no applicability. 17.3.1 The Petitioners have 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 as .....

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ere ₹ 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 crores has not benefitted the shareholders at all. 17.3.3 The respondents have contradicted the contentions of the petitioner regarding investment in fixed assets for the following reasons:- (a) P-1 has signed all the bal .....

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2013 = 36.27 crores. Thus the respondents have contended that there has been no major change in the quantum of capital investments made between the six years from 2001 to 2007 and six years from 2007 to 2013. It is also stated that during the period 2007 to 2013 the rolls used in the rolling mills have been capitalized as per the tax authorities, store stock items like spare parts used by the company to maintain old equipment have also been capitalized as per accounting practices and the new as .....

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rough the trying times as a result of the state of economy. 18. It is stated in the written statement that the Respondents have filed CA 135/2012 seeking permission to take a loan of ₹ 55 crores. 18.2 Under section 209 of the Companies Act, 1956, the Petitioners made a request on 01.9.2012 to provide details of investments made in fixed assets. It is averred in the written statement that the auditor's report along with the Balance Sheet for the year ending 31.3.2013 states that the fix .....

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d 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 .....

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used to the company from the delinquent directors. Judgment which has been cited in this regard is referred earlier in para 15.3.3 at page No. 41. 20.2 The Respondents in this regard have stated that the accounts of the company are audited by the auditors who are also auditors of the company run by the petitioners group and therefore the Petitioners cannot question the same. The Petitioners in their rebuttal have stated that the auditors themselves stated in their report that the fixed assets ha .....

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2005 to 12.06% in 2013 It is stated that similar expenditure on employees for competitors is much less at a higher turnover. 21.2 The Petitioners have also alleged that as per the EPF records, the number of employees was reduced from 1519 in 2012 to 1248 in 2013, but the employee's expenditure increased from 27.78 crores in 2011-12 to 28 85 crores in 2012-13 even though no increment was given in 2012-13. The Petitioners have also alleged that the documents regarding annual salary paid, PF p .....

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epted 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 .....

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ship between the same. Some senior persons who have been retained on superannuation do not fall under the PF regime. (d) Selective comparison of labour cost with that of competitors cannot be made as at least one of them has a fully automatic plant and thus reduced labour costs. (e) More than 90% of labour is paid through cheque. 22. The Petitioners have alleged that after filing of the petition, the Respondents have siphoned the funds of the company and turned a profit making and debt free comp .....

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ctions 198, 269 and 309 read with schedule XIII stand violated. 24. Vide CLB's order 25.6.2009, the Respondents were permitted to increase the working capital limits from ₹ 50 to ₹ 65.50 crores. At that time, Canara Bank imposed certain conditions one of them being that the company would close all other facilities. However, it is stated that the company has not closed the factoring limits with M/s SBI Factors and Commercial Services, as the CRISIL study carried out on 13.1.2014 i .....

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d that while accepting the above deposit, compliance of Section 292 has not been made as the same could have been borrowed only by way of resolution passed during a meeting of Board of Directors. 26. The Petitioners have alleged that despite status quo orders on Fixed Assets, the Respondents have destroyed certain Fixed Assets during the pendency of the petition. It is stated that CLB vide its order dated 6.2.2013, permitted the Respondents to avail a term loan of ₹ 55 crores for relocatin .....

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ring 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 t .....

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uo order was imposed the charge could not have been created. Also there is no consent of BoD for creating this charge. It is also stated that the working capital limit was earlier secured by the stock and inventories of trade receivable. While the term loan of ₹ 40 crores is only against the land measuring 5 acres. 28. The Petitioners have also sought to lead further arguments by way of written submissions: a. Preference Share redemption as per CA 605/2008 and CA 228/2011. It is stated tha .....

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ent that an area of 4 acres of land at Ludhiana has been released from the charge of Canara Bank, but that is falsified as Canara Bank has actually released approx. 20 acres on 5.12.2011. The Petitioners have stated that this information has been withheld from the CLB. d. The Petitioners have detailed that in response to their submission that they would be willing to go out of the company at a fair value of their shares, the Respondents had offered them ₹ 12 crores. Considering that at tha .....

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er sq.yd. As the R-1 company owns approx. 1.68 lakh sq.yds of land at Ludhiana, the total 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 hav .....

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e 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. Upper India Special Casting Unit has a turnover of ₹ 13 crores with a profit of ₹ 6 lakhs. P-1 has stated that his businesses are nothing compared to the turnover of the respondent company which was ₹ .....

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ad his Cold Storage at Parwanoo. The Petitioners have rebutted the argument raised by the Respondents that the Petitioners should be given a fair valuation of their shares and should be made to exit the company. (i) The Petitioners have stated in the written submissions that this relief in itself would not be sufficient as the Respondents have committed serious acts of fraud and siphoning of crores, thereby making a profitable company into loss making and debt ridden. (ii) The Petitioners have a .....

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s well as the 20-inch mill have been destroyed. (iv) The Petitioners have stated that granting share value would not be viable as the petition was filed in 2007 and the land prices were much lower then. It is also stated that in 2012 the value of only the land at Ludhiana was given at ₹ 260 crores by the Respondents. It is also stated that the Respondents have purposely burdened the company with the loan liability of ₹ 100 crores whereas in 2007, the liability was only about 14.2 cro .....

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nce 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 reductio .....

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ding of the Petitioners can be created for the purpose of demerger. 29. The Respondents in their written submissions have stated that the instant petition is a mala fide petition filed only to settle personal scores and grievances of P-1 against the Respondent group. It is also stated that the present petition merely raises directorial complaints and other irregularities and there is no cause of action to make out a case of oppression & mismanagement. • R1 company is the only source of .....

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, thus, must relate to the manner in which the affairs of the company are being conducted and the conduct complained of must be such as to oppress the minority members. By reason of such acts of oppression, it must be shown that the majority members obtained a predominant voting power in the conduct of the company's affairs. 185. The jurisdiction of the Court to grant appropriate relief under Section 397 of the Companies Act indisputably is of wide amplitude. It is also beyond any controvers .....

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he part of the Board of Directors. Reliefs must be granted having regard to the exigencies of the situation and the court must arrive at a conclusion upon analysing the materials brought on records that the affairs of the company were such that it 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 a .....

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ind 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 ordinary one. The acts of oppression must be harsh and wrongful. An isolated .....

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a proceeding under Section 397 of the Act would be maintainable only when an extraordinary situation is brought to the notice of the court keeping in view of the wide and far-reaching power of the court in relation to the affairs of the company. In this situation, it is necessary that the alleged illegality in the conduct of the majority shareholders is pleaded and proved with sufficient clarity and precision. If the pleadings and/or the evidence adduced in the proceedings remains unsatisfactory .....

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y which would normally be regarded as unfairly prejudicial to their interests or they might have shown no interest in pursuing their legitimate interest in being involved in the company. (See Re RA Nobie & Sons (Clothing) Ltd, (1983) BCLC 273) 206. In a given case the Court despite holding that no case of oppression has been made out may grant such relief so as to do substantial justice between the parties.' 207. It is now well-settled that a case for grant of relief under Sections 397 a .....

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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 .....

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any and of the shareholders " 213. The said decision has been referred to with approval in Needle Industries (supra), (Para 49). The conduct which is technically legal and correct, thus, may justify grant of relief on the application of the just and equitable jurisdiction and conversely that conduct involving illegality and contravention of the Act may not suffice to warrant grant of any remedy. Isolated act of oppression may not be sufficient to grant any relief but there should be a conti .....

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e High Court could only consider the pleadings filed in Company Petition No.51 of 1991. If no relief could be granted having regard to the pleadings contained therein, it is inconceivable in law that such relief would be granted on the basis of the pleadings made in other proceedings and totally ignoring the admissions made by the Respondent No.1 herein in the proceedings initiated by PLEADINGS -AND PROOF - LEGAL REQUIRMENTS." 29.2 The respondents have stated that the petition is liable to .....

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neral meeting held on 21.8.2004, admittedly attended by among others the petitioner, the additional directors mentioned here above, were appointed as directors of the Company. The petitioner, being a party to the resolutions passed at the aforesaid meetings is estopped from challenging any of the decisions taken at such meetings, notwithstanding the discrepancies now pointed out by the petitioner that the notice dated 11.8.2004 convening (he annual general meeting did not carry any agenda regard .....

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rious 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 w .....

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Respondents have also withdrawn their deposits. (ii) No personal guarantees from the Petitioners given since 2008 to secured creditors of R-1 company for repayment of dues. (iii) P-1 is admittedly a whole time director actively involved in the management of R-1 company from several years with access to all documents and records but has feigned ignorance. (iv) The grievances raised are merely directorial complaints. (v) P-1 was looking after R1 company unit in Tirupati while Ludhiana unit was run .....

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esses using the resources of R1 company and is not dependent on the R1 company and its business for his livelihood. h. Intention of petitioner group was to go out of R1 company. They have taken benefit of technicalities to prolong the litigation with a view to harass the Respondents so as to extract an unrealistic high value for their shareholding in the R1 company. i. Support of Petitioners group is dwindling withdrawal by P-29 and P- 30 vide order dated 24.8.2011 and withdrawal by P-17 and P-2 .....

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ed 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 Petit .....

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etailed below: 29.3.2 Remuneration violation of section 314 - There is no violation upto 1995-96 and thereafter P1 was party to all the decisions. P1's son R-10 has also drawn salary above the limits prescribed in section 314. It was not the case of the petitioners that neither such employees worked for the company or such positions were required in the company and that such employees were not qualified or eligible for employment by R-1 or the salary paid to such employees was in excess of w .....

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to the employees being directors including R-10. It is stated that there was no requirement for R3 and R6 as R-3 was being considered to be appointed as Additional Director and Petitioners group opposed the said resolution as an afterthought in the EOGM on 10.1.2007. Though substantial relief has been claimed against R-10 in the petition, he has not been represented through a counsel,or has neither filed any pleadings in the matter. Stand of the Petitioners itself is contradictory and self-defea .....

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tes and mere violation of section 314 is not a ground of O&M The Respondents have stated that on demurrer, a resolution passed by the directors may be perfectly legal and yet oppressive, and conversely a resolution which is in contravention of law may be in the interest of shareholders and the company. They have cited Needle Industries (supra) para 49 and Suresh Kumar Sanghi v. Supreme Motors Ltd. [1984] 54 Comp. Cas. 235 (Delhi) "(1) past acts which have come to end cannot be challenge .....

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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 accordan .....

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ainst the manner and method of appointment of remuneration made up to the filing of the instant company petition. (e) Allowing the petitioner to challenge these acts without the same being challenged ever earlier would settle dangerous precedent and no finality will ever be attained with respect to duly approved resolutions passed in a Board or general meeting. (f) The petitioners have not been able to given any documentary evidence to establish that these Directors did not work for the company .....

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that no grievance in this regard can be made out by the petitioners as P-10 who is the grandson of Jate Sardar Shamsher Singh Garcha {one of the initial investors in 1961 who was related to the Grewals by way of marriage of his son with one of the daughters of Sardar Joginder Singh Grewal) cannot be clubbed with the Sardar Joginder Singh Grewal family. It is also stated that neither Sardar Shamsher Singh Garcha nor any of his descendants have ever been working in the R-1 company and also P-10 ha .....

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in the EOGM dated 10.01.2007. CAVEAT AS PER RESPONDENTS' WRITTEN SUBMISSION. (CA 75/2014) 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 s .....

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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 namely Upper India Steel Castings Ltd. are the same. It is stated that the petitioners have referred to a qualification in the audit report that the fixed assets have not been verified. The resp .....

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ns which were mentioned in the oral hearing:- (1) Purchase of scrap - The respondents have stated that the contentions that funds were misappropriated in purchase of scrap as imported scrap was purchased from domestic dealers at a higher rate and that imported scrap is cheaper than domestic scrap are wrong and the petitioners have created a false hypothesis on the basis of two false assumptions namely that the term HMS (Heavy Melting Scrap) denotes imported scrap and that imported scrap is cheap .....

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s have countered the allegation that M/s. Raghav Industries had been verbally black-listed as no documentary evidence has been adduced to support the same. The respondents have countered the petitioners' arguments that if better quality scrap was being procured then why burning losses have not come down, by stating that the company has continued to procure good quality scrap all through. So there is no major change in burning losses. (3) The respondents have stated that the regenerated quota .....

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so 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 assess .....

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late to averments made in CA-135/2012 and have already been adjudicated by CLB's Order dated 19.03.2013 and have been confirmed by the Hon'ble High Court. The project modernization and expansion was conceived in 2011 and the process to get the land released undertaken. Thereafter 21 acres of land was released and an application to mortgage six acres of land of the total released land was filed before in CLB in March, 2012. CLB allowed this application in April, 2013 and the respondents b .....

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NING THE COMAPNY WITH LIABILITY. (A) INCREASE IN SECURED WORKING LOAN - The respondents have stated that there is no change in working loan limit as suggested by the petitioners but there is only a change in methodology. It is stated that letter of credit limits provided by the bank were also secured by creating a lien on the fixed assets of the respondents. In 2005 apart from loan limits of 10.91 crores, there were also 37 crores of secured LC limits. As the charge on these LC limits had alread .....

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f ₹ 10.89 crores though the same has not been mentioned. The respondents have stated that since the petitioners have withdrawn all their guarantees and deposits, the respondents group have invested by way of deposits to help out the company as there is a status 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 S .....

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es 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-directors were present in the meeting and did not object. 2 .....

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ash and the transfer of shares took place on 21.02.1962. The original shareholders namely Shri Dina Nath, Sohan Lal, Jagdish Chander, Mohan Lal, Tara Chand and Suresh Chand had offered to sell all their shares and the existing shareholders were asked to purchase them. Some shareholders purchased only 17 shares and Shri Joginder Singh Grewal purchased the balance 15 shares. The total no. of shares remained 117 shares. 'Subsequently 373 cumulative preferential shares of ₹ 1000 each were .....

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ed that the company having 11.7 shareholders had bought the land after raising ₹ 6,83,000/- vide cumulative preferential shares and no ancestral land was given to the company in lieu of equity shares as alleged by the petitioners. 29.3.11.2 The Petitioners have stated that all the shareholders including the Petitioners have contributed their ancestral land for setting up the factory. It is stated that the Grewal family had sold land to M/s Sherpur Small Scale Industrial Cooperative House B .....

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ame 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 S.Gurmohan Singh 30,000/- 1272 17.12 62 S.Pritpal Singh - .....

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land was also bought from M/s Sherpur small Scale Industrialists Co-op House Bldg. Society Ltd. on payment of full amount of ₹ 310000/- as per Board Minutes on 7.5.62. The respondents have stated that at the time of purchase of land, it was the company having 117 shareholders that bought the land after raising ₹ 683000/- vide cumulative preference shares and no ancestral land was given to the company in lieu of equity shares as alleged by the petitioners. 29.3.12 REMOVAL OF SENIOR S .....

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e Hon'ble High Court of Punjab and Haryana wherein they have sought to seek enquiry on alleged fabrication of documents by the respondents. The respondents have stated that the allegation that ten quotations from Dec. 06 to April, 2007 are fabricated as per expert opinion is baseless. It was stated 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 co .....

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d 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 company on fair valuation. (B .....

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to be a partner in a family company Pro-finance trust SA v. Glad Stone (2001) EWCA Civ 1031 at Page 264 Para 60-61. (E) Valuation by independent valuer cannot be on asset basis as R-1 company is a manufacturing company and such valuation is for the purpose of winding up. The same has to be valued as a going concern and the interest of the company is paramount (Sangram Singh P Gaekawad Supra Para 187) (F) A shareholder acquires a right to participate in the profits of the company, but not in the .....

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d. Entire land on which the factory is situated is being used for the purpose of manufacturing activity of the company. (J) The company is not a property or real estate company (K) CA 167 of 2013 filed by the respondents be allowed and respondents be allowed to appoint two Directors due to casual vacancy arisen due to demise of two directors of R group subsequent to the status quo order. (L) All interim orders are to be vacated. 30.1 The following case laws have been quoted by the petitioners in .....

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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 ( .....

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stated that this case is not applicable as in the present case all the matters are of fact and thus adjudication will have to be on the basis of facts as appearing on record. 30.3 DIVISION OF ASSETS: (A) K.N. Bhargava (supra) The Company Law Board stated "in proceedings u/s 397 398, even if the allegations are not established, more so in a family company, we have always taken the view that to protect the interest of the shareholders and the company, appropriate directions should be given es .....

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ps on various matters coming before the board. With such serious differences and disputes between the parties, the probability of stalemate in the proceedings of the board and the general body meetings in future is very high. Thus, parting of ways between the parties is the only solution which would ensure protection of the interest of the shareholders as well as the company including the financial institutions. As a matter of fact, this is what even counsel for the parties/and the parties thems .....

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uld be prejudicial to the interest of petitioners. It is an admitted position that KNB was one of the partners of the firm which was taken over by the company and also one of the original promoters of the company and has been the chairman-cum-managing director of the company for nearly a period of 20 years. Admittedly, 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 th .....

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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, S .....

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nt to enter in to a supply agreement on the terms and conditions applicable to other customers, in view of this, we are of the firm view that the division of the company is the only appropriate solution to bring to an end the disputes between the parties." Accordingly, in exercise of our powers under Section 402 of the Act, we direct as follows; Presently, the petitioners are managing the forge division and the respondents the other two divisions in Kanpur end this arrangement came into exi .....

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dient that they should be associated with the exercise of partitioning the company so that in the partition arrangement, their interests are also protected. Accordingly, we constitute a fresh board of directors for the company, which will consist of two directors from the petitioners group and two from the respondents group with an independent chairman to be nominated by the ICICI. The ICICI will appoint a valuer to value the shares as on December 31, 1998. Both the sides will be at liberty to m .....

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he 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 th .....

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made prior to January 1, 1999, then realisation of the same will be credited to the accounts standing in the name of the company. Till the partition is effected, no general body meetings of the company will be convened or held either by the company or by any shareholder.' The respondents have stated that this judgement has no application as nothing has been shown to the effect that the different units were being managed by different groups. Or that the running business of the company is divi .....

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iate to direct the petitioners to go out of the company on receipt of proper consideration. It was noted that the company was not having any business except running a hotel, but in possession of vast real estate. Hence the CLB held that instead of cash consideration being paid to the petitioners for their shares, the assets and properties of the company could be divided and properties to the extent of 44% given to the petitioners, it also held that determination of the value of the company as a .....

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at face value,' (Emphasis supplied) The respondents in the written submissions have stated that in this case division of assets has been ordered as the same is a case of a real estate company and also in view of the fact that petitioners were holding almost 50% of the shares. We have gone through the judgement in the above case of T. Ramesh Pai. The respondent company in that case was carrying on business of collecting rent and managing the hotel Green Y Park at Manipal with 30 or 40 rooms .....

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n 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 .....

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he CLB order division of assets by allotting different units to the petitioners and different respondents. It is noted that the respondent company has different units and thus such division of units/businesses was feasible. 30.4 CASE LAW ON SECTION 292: Ambala Bus Syndicate (P.) Ltd. v. Roopnagar Credit and Invest Co. Pvt. Ltd. [1997] 88 Comp. Cas. 821 (Punj.& Har.): In this case the Punjab and Haryana High Court held that the powers of a company are to be exercised by its Board of Directors .....

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regulations and resolutions of the company-in case of dispute the burden is on the company to prove delegation. The respondents have stated that this case is not applicable as the same relates to winding up. We are of the view that the cited case may relate to winding up but the portion cited above relates to the powers of Board of Directors, and is relevant in the present case. 30.5 RELIEF U/S 397 & 398 (A) Nafan B.V. v. SAF Yeast Co. (P.) Ltd. [2015] 64 taxmann.com 55 (Bom.); In this case .....

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e defects cannot be cured by evidence, oral or documentary." The Apex: Court 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 .....

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ny 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 the Board of Directors which may in the passing contravene a provision of law, but it may be very much in the interests of the Company and of the shareholders...". (Emphasis supplied). The Apex Court specifically sta .....

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e parties knew the case and all pleadings were on record, the petition ought to have been dismissed because the cause of action could not have been made out in the rejoinder.'(Emphasis supplied). Furthermore, there are more reasons why reliance cannot be placed on the decision of Sangram Singh Gaekwad (supra), in the present case, the cause of action has been sufficiently pleaded in the petition for the relief that is sought. The decision of the Apex Court in Sangram Singh (supra) after taki .....

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ions arising under different jurisdictions, as in the case of Sangram Singh Gaekwad (supra) itself, the Apex Court. has emphasized the jurisdiction of the Board under the very provision in question, in the cases of oppression and mismanagement and has indicated that totality of the evidence must be looked at by the Board. (B) Bennet Coleman & Co. v. Union of India [1977] 47 Comp. Cas. 92 (Bom.). 'The Bombay High Court analysed the powers of court u/s 397/398 read with section 402 Section .....

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t, 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, s .....

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-corporate management which may take the form of appointing an administrator or a special officer or a committee of advisers, etc., who would be in charge of the affairs of the company. The court could even have a truncated form of corporate management if the exigencies of the case required it, and any truncated form of corporate management can never conform to alt the provisions dealing with corporate management, it will all depend on the facts and circumstances of each case as to how, in what .....

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ere would no limitation or restriction on such power that the same should be exercised subject to other provisions of the Act dealing with normal corporate management or that such orders and directions should be in accordance with such provisions of the Act. Once it is held that on a true construction that the court has the widest possible jurisdiction and ample powers to bring about the desired result, there would be no question of the court not being able to reframe or insert a new article whi .....

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y exclusive and as such there will be no repugnancy between any article that may be reframed or inserted by the court while passing orders under section 393 read with section 402 and other provisions of the Act including section 255 which deal with normal corporate management of 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 violativ .....

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rs 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 considerations which were not warran .....

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Ltd. [1965] 35 Comp case 351 "no material or a new allegation can be added unless otherwise they relate to events taking place after the petition is filed", it is further stated that "there are a catena of judgments to the effect that judicial forum cannot sit in judgement on business/commercial decisions which are within the ambit of the powers of board of directors unless the power has been used for an ulterior motive or with an intent to defraud the company or to bestow an undu .....

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t or careless conduct of a director can give rise to a claim u/s 397 unless the conduct is one which lacks probity or a conduct which is unfair.' It is further stated in the same judgement that (where) the requirements of all that sections are procedural, violation of which cannot lead to a confusion that such violations are prejudicial to the interest of the company or public interest. Most of these sections provide for penalties for violation and are compoundable - the petitioner has relie .....

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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 do .....

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to above, if true, may be a ground for the winding up of the company but are not relevant for the purpose of invoking the provisions of s. 397 because the petitioner and members of his group are not minority shareholders. 14. Even if it be assumed that the aforesaid instances are correct, to my mind, they would not form acts of oppression or show tack of probity, which can entitle the grating of relief under s.397 of the Companies Act. It has been held in Hungerford Investment Trust Ltd. v. Tur .....

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is connection, was placed on the case of Sheth Mohanlal Ganpatram v. Shri Sayaji Bhagwati J. (as his Lordship then was), white dealing with the applicability of ss.397 and 398, observed at page 813 as follows ....the power of the court under both the sections is confined only to making an order for the purpose of putting an end to oppressive or prejudicial conduct and the court cannot make an order setting aside or interfering with past and concluded transactions which are no longer continuing w .....

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oppressive to the minority shareholders or prejudicial to the interests of the company. In Kalinga Tube's case 1965 (35) Comp. Cas. 351 also it was held by the Supreme Court that in order to constitute oppression within the meaning of s.397 there must be continuous acts on the part of the majority shareholder, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some apart of the members. From the aforesaid judgments i .....

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unsel 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 .....

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a cause of action of challenging the same in other appropriate proceedings, but such an allegedly illegal meeting did not, to my mind, result in any oppressive act being committed on the petitioner. The decisions which have been referred to by Mr. Ved Vyas, namely, Loch v. John Blackwood Ltd. (1924) AC 783, Ebrahimi v. Westbourne Galleries Ltd. (1972) 2 All ER 492, Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwals [1976] 46 Comp Cas 91 (SC), C.P. No. 39 of 1973 decided by this court on 30 .....

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ounds or circumstances may justify a winding-up order being passed, that is not enough to entitle the petitioner to obtain relief under s 397 of the Companies Act". (D) Asoka Betelnut Co. Ltd. (supra) In this judgment it is stated that allegations in the petition must be specific along with proof. It is also stated that the respondent had made oral protests against the irregularities but there was no evidence regarding the same. It is also stated that failure to declare dividends does not a .....

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dents have also cited the Delhi High Court judgement in the case of Suresh 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 th .....

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e 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 thereat was legal." 32. Apart from filing CAs, the petitioners and respondents have also filed several appeals contempt petitions before the Hon'ble High Court of Punjab and Haryana. These cases were adjudicated upon by .....

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ct, 1956 by appointing certain persons who are relatives of the directors of the company and paying them salaries above the amounts prescribed in sec 314: The defence of the respondents in this regard is that the petitioner No.1 was present in the meeting of the board of directors where such persons were appointed and P-1 had also signed the balance sheets of the company tiff FY 2005-06. It is also stated that P-1 himself was a beneficiary of such violation as his son S. Mandeep Singh Grewal (R- .....

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the doctrine of waiver and acquiescence. This is more so, as sec 314(2) provides that such employment is to be approved by way of special resolution passed at the general meeting of the company held for the first time after the holding of such office or place of profit. It is further provided that such consent may be obtained within three months from the date of appointment Sub section (2) of 314 provides that the director, partner, relative, firm, private company or the manager concerned shall .....

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tral 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 .....

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ng respondents are directed to recover' the emoluments paid in excess of amounts prescribed under sec.314 from the violators till the date their appointment is regularised u/s 314. Alternatively, the respondent company may apply for permission to Central Govt. to waive the same as per Law. 1.3 Improper appointment of Directors: a. Smt Jitender Kaur Punia (R-9). The petitioners have alleged that R-9 was appointed as working director from September, 2001 onwards and subsequently made Joint Man .....

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o 26.1.2007. In this regard, the respondents have stated that it was the practice of the company to mark the presence of working directors in the Ludhiana unit regardless of the fact as to where or in which branch/office they were actually working. The respondents have also said that P-1 was present in both the meetings of September 2001 and December 2006 when the resolution for her appointment was passed unanimously. It is also noted that she has passed away during the pendency of petition. In .....

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given by the petitioners, or in their oral arguments R-8 was appointed as working director in the meeting held In January, 2007 and the petitioner - directors were present in the said meeting. The resolution regarding the appointment was 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 .....

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nies 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 argued that the senior most person in terms of experience should have bee .....

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oard meeting held on 15.12.2006 under sec.260 of the Act. Subsequently, he was confirmed as working director and elected as Managing Director in 2007, The petitioners have challenged his appointment as MD on the ground that he was neither the senior most person and also not qualified The respondents have stated that there is no such practice in the company or stipulation regarding appointment of only the senior most person as managing director. Directors and managing directors are appointed by t .....

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rector, This allegation was raised in the pleadings. P-10 is stated to be representing the group of shareholders namely Garcha family who hold the maximum shares in the R-1 company. P-10 has been a director of the company since 2002 and his nomination for the appointment as whole time director was rejected in the meeting of Board of Directors held on 10.01.2007, The respondents have argued that S.Ashok Singh Garcha is having his own business of manufacturing of agricultural implements. We do not .....

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titioners 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 .....

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working for another company. The respondents, in their argument have stated that P-1 had - attended the board meeting where the decision for purchase of second hand 22-inch rolling mill was taken and he had himself inspected the said rolling mill and had also signed the balance sheet as Joint MD when the rolling mill was purchased and installed. The respondents have cited many judgements to say that the purchase of the rolling mill was a business decision taken by the management of the company a .....

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t the benefit from the Income-tax Department. The respondents have stated that P-1 was in the management of the company when these debts were written off and had signed the balance sheets as Joint Managing Director. It is also stated that P-1 had recommended writing off the same and was also negotiating for recovery of the same. Though the writing off of these debts was accepted by the Income-tax Department, some recovery has since been made. Again, the argument that this is a business decision .....

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ising the same. Writing off of debts is an accepted business practice to show the correct position of the company in the books of account. The fact that some of these debts were recovered later shows that the company had not given up on its efforts to collect the same. We are of the view that this allegation deserves to be dismissed. 1.8.1 Dilution of cheque signing power of P-1: This allegation namely that P-1 was earlier authorised to sign cheques individually but this power was diluted as per .....

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ected 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 .....

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e considered if they are related to the allegations made in the petition. The respondents have cited the judgment in the case of Shanti Parsad Jain v. Kalinga Tubes Ltd.1965 (35) Comp. Cas. 351 at page 366 it has been said "there must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members." Justice Sujata Manohar in the case of Khi .....

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continue till the date of the petition and the judgement does not deal with any subsequent conduct after (he date of filing of the petition. "The judgement does not deal with any subsequent conduct after the filing of the petition. It merely says that if there is no such conduct continuing fit the date of the petition, the petition would fail. From this a conclusion cannot be drawn if there is any subsequent of acts of oppression or mismanagement after the date of filing of the petition, th .....

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he 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 shareholde .....

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sions 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 looking at subsequent events in a petition under sections 397 and 398 Companies Act" (emphasis supplied) The Hon'ble High Court of Bombay in the case of Maharashtra Power Development Corpn. Ltd. v. Dabhol Power Co. [2003] 117 Comp. Case. 506 considered the question as to whether subsequent event .....

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on was filed on September 14, 1960. These matters were however cannot be taken into account for the application has to be decided on the basis of the facts as they were when, the application was made." The Hon'ble Bombay High Court did not agree with the submission of the respondent's counsel as the Division Bench of High Court had permitted the appellant to amend the petition before the CLB. "The appellant was thus allowed to include events subsequent to the filing of the peti .....

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eck v. Gharda Chemicals Ltd. (2001) CC25 held that in a petition for relief under Section 397 of the Companies Act, 1956, it is permissible to bring on record by amendment not only the facts pertaining to the events upto the fifing of the petition but also subsequent events. The said judgment stated that "there is no bar to an amendment which incorporates subsequent events if the amendment is otherwise necessary for proper determination of issues between the parties," The said judgment .....

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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, .....

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ake note of all events subsequently arisen unless it has a material bearing on the original cause of action. In a time consuming adversarial litigation, sometimes the main relief becomes inappropriate because of the subsequent events which the parties cannot foresee at the time of initiating the proceedings. In the context of the present case, it must bear in mind that the genesis of the initiation lies on an allegation of oppression and mismanagement by the majority members of the Company or th .....

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ment of petition. We have gone through the list of subsequent events filed with CA 75/2014 and find that most of the so called subsequent events are connected With the allegations made in the original petition. The caveat filed by the respondents in this regard has been discussed in detail for each of the subsequent events alleged in CA 75 above. This discussion is not being reproduced for the sake of brevity. It is seen that these instances are connected to the cause of action detailed in the m .....

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ed on pre pages 45 to 46 and have been discussed thereafter in detail. The same is not being repeated for brevity. We find that these subsequent events also relate to business decisions and hence we decline to interfere. 2. The petition 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 wel .....

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y 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 only 2.71% of the shareholding and hence the remaining petitioners ha .....

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ion of sec.314 does not come under the definition of oppression and mismanagement u/s 397 and 398. 3.-3.1 The instant case is that of a family company, where the shareholders who represent different branches of the same family have legitimate expectations of return by way of monetary benefit from the respondent company. This return may be by way of dividends and/or remuneration and perquisites paid to members of the company who may be employed as Directors and/or as salaried employees In the ins .....

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nagement The CLB Mumbai Bench, in the case of Tushar Clothing (P.) Ltd. v. Ramesh D Shah[2016] 59 taxmann.com 300/132 SCL 646 had held that even if in the opinion of the CLB, no case of oppression is made out under sections 397 and 398, the CLB in the exercise of its rights and powers u/s 402 of the Companies Act, 1956, is competent to direct the respondents to buy out the shares of the petitioners at a fair price to be determined by an independent valuer. 3.2 After considering all the pleadings .....

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ng 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, Ha .....

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turned into a debt ridden unit. They have also mentioned that the Board would be required to protect the interests of workmen as well, as several workmen have been removed. They have cited Supreme Court's decision in the case of National Textiles Workers case wherein it was held that workmen is an important factor of any manufacturing concern. We are of the opinion that once the petitioners take an exit on the fair valuation of their shares, the respondents should be free to run their busin .....

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he petitioners have also argued that the reliefs sought for pertaining to refund of money into the coffers of the company, and initiation of prosecution of the directors and reconstitution of the Board are granted to them. We have already held in para 1 above that emoluments paid in violation of sec.314 till the date of waiver obtained by the company should be recovered from the delinquent directors/employees, The other alleged acts of siphoning of funds have not been proved by the petitioners. .....

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d. Maharashtra Power Development Corporation Ltd.'s case (supra) 3.4 The petitioners have also raised the issue that no valuation can be carried out as substantial assets of the company have been destroyed i.e. the 12" mill and its shed as well as 20" mill. 3.5 Petitioners have also stated in their written submission that granting fair value of the shares to the petitioners would not be viable as much time has gone by between filing of the petition and final disposal. The petition .....

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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 ha .....

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ustrial House Bldg. Society Ltd. for ₹ 30000/- each. These 7 persons are members of the Grewal family. Subsequently, on 17.8.63, the Sherpur Small Scale Industrial House Bldg Society Ltd. sold the land to M/s Upper India Steel (R-1 company) for Rs,310000/-. The Sherpur Small Scale Industrial House Bldg. Society Ltd. belongs to the Garcha family and the daughter of S.Joginder Singh Grewal, father of P-1 and R-2 was married into the Garcha family. We are of the opinion that the ancestral lan .....

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the company is a going concern as they themselves had given a project report for relocating the factory from the existing premises so that a land bank could be created. They have stated that the company has 37 acres of land and certain areas are lying absolutely vacant. They have further stated that with minor relocation of the machinery within the premises, vacant land commensurate to the shareholding of the 'petitioners can be created for the purposes of demerger. The respondents have obj .....

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ven a proposal 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 go .....

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f 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 affairs of the company be directed to buy out the shares held by the petitioners in the company at a fair price to be determined by an independent valuer. The instant petition therefore stands disposed of with the following orders: A. As discussed in para 1.2 above of the judgement, the alleged .....

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ll be taken. B. M/s Ernst & Young, 6th floor, Wing A & B, Worldmark-1, Aero city, IG1 airport Hospitality District, Opp. Holiday Inn, Mahipalpur, New Delhi 110037 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. The cut- off date for determining the value of the shares will be 31.3.2007 i.e, the date nearest to the filing of the petition .....

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ce the filing of the petition and thus, they are alone responsible for any increase or decrease in both the profitability and liability of the company. As the date of valuation is almost 10 years ago, the fair price of the shares of the petitioners shall be enhanced by compound interest payable at the bank rate enhanced by 2% For this reason, the bank rate applicable as on the 31st March of each of the financial year shall be taken. D. The parties are directed to extend every cooperation to the .....

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