TMI Blog2017 (6) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... ition precedent. - Company Application No. 266 of 2013, And Company Petition No. 93/397/CLB/MB/MAH/2013 - - - Dated:- 3-5-2017 - Shri M. K. Shrawat, J. For The Respondent : Sharvan Jagtiani for the Petitioner. Mitesh Naik ORDER 1. The main Petition (CP No. 93 of 2013) was filed before the then CLB on 10thSeptember, 2013. On receiving the Petition the Respondent has challenged the maintainability of the Petition by filing an Application (CA-266 of 2013) dated 28th September, 2013. The said Application, challenging the maintainability , is at present under consideration. 2. FACTS OF THE CASE :- The main reason on the basis of which the Respondent/Applicant has challenged the main Petition was that on account of a Family Settlement the Petitioner (stated to be the only representative of the Kailashchand Kanodia Family) had transferred the entire shareholding of the Respondent No.1 Company as a result ceased to have any interest in the Respondent No. 1 Company. For ready reference only the relevant portions of the impugned Application are extracted below : (a) This Petition is filed by the Petitioner under Section 397 and 398 of the Act in respect of Kanodi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked Exhibit A is a copy of the said record of Family Settlement dated January 8, 1991. (e) The Petitioner has ceased to have any interest in the 1st Respondent since the year 1990. On the date of the Petition, the Petitioner is neither a shareholder nor a member of the 1st Respondent. The Petitioner has no locus to maintain this Petition and does not fulfil the qualification contemplated under Section 399 of the Act The Petition is not maintainable at the instance of the Petitioner. Without prejudice to the aforesaid, it is submitted that the Petition does not even aver that the facts would justify the making of a winding up order on the ground that it was just and equitable that the 1st Respondent should be would up, but to wind up the 1st Respondent would unfairly prejudice its members. This mandatory requirement of Section 397(2)(b) is not even averred in the Petition. On this ground also the Petition is not maintainable and must be dismissed. 3. On receiving the aforementioned preliminary objection, i.e. the impugned Application, now under consideration, the Petitioner (Respondent to the Application) has filed Reply on 10th February, 2014 wherein it was vehemently o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not longer a shareholder/ member of the 1st Respondent Company. Consequently, interim reliefs cannot be denied merely on the basis of unfounded allegations made in the present Application. In regard to Paragraph 1.2, the procedural allegation that the Petition does not comply with the mandatory requirement prescribed under Section 397(2) (b) of the Act for the Tribunal to exercise jurisdiction is denied. Section 397(2)(b) merely provides the criterion for the Company Law Board to satisfy itself in an application made under sub-section(l) of section 397. 5. The contents of Paragraph 2 that the Petition is filed on the basis of a false averment that the Petitioner holds 50% shares in the 1st Respondent, are denied. It is denied that the Petitioner has not given the particulars of his shareholding. The Petitioner is not in possession of the share certificates, which are admittedly in the custody of the Answering Respondent. The Petitioner's shareholding at the time of incorporation of the Respondent No.l Company is incontrovertibly established by the documents annexed to the Petition, including the Articles of Association and Memorandum of Association, and the Answering Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. The Petition does not even aver the mandatory requirement prescribed under S.397(2)(b) of the Act, which is a sine qua non before this Hon'ble Tribunal can exercise any jurisdiction. 4. On January 8, 1991 the Petitioners' branch, represented by his father Mr. Kailashchand Kanodia entered into a written Family Arrangement with the 2nd Respondents' branch represented by his father Mr. Mahabirprasad Kanodia and the third branch of his family members. The Family Arrangement inter alia provided for the followlng:- a. The Petitioners branch of the family will be entitled to the premises at 2nd floor, 47, Dadiseth Agiary Lane, Ashok Bhavan; 3 rooms in which the Petitioners were staying and the 2 rooms on the 3rd Floor. The Respondent No.2's branch 3rd branch of the Family will have no right title or interest in these properties. b. That the Petitioners branch of the family will not have any right, title or interest in (i) Family firm of M/s. Nanduka Dyeing and Printing Mills; (ii) Nandlal Sons; (iii) Shree Kanodia Fabrics; (iv) Kanodia Tex Industries Pvt. Ltd. (The Respondent No. 1 Company); and (v) Agarwal Textiles. c. The Petitioners branch of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his retirement from the partnership Firm of M/s. Nandlal Sons to both the remaining partners in furtherance of the Family Arrangement Copies of the said letters dated November 15,1990 along with registered A/D envelopment are hereto annexed and collectively marked Exhibit 'F'. g. On February 14, 1991 Mr Kailashchand Kanodia addressed a letter to the Central Bank of India and State Bank of India intimating his retirement from the said Firm of Nandlal Sons. A copy of the said letter dated February 14, 1991 to the Central Bank and State Bank is hereto annexed and marked Exhibit 'G-1' and G-2 respectively. h. Another letter dated April 15, 1991 was addressed by the Petitioner to Central Bank of India intimating his retirement from the said firm M/s. Nandlal and Sons. An acknowledged copy of the said letter dated April 15, 1991 is hereto annexed and marked Exhibit 'H'. i. On December 23, 1991 Kailashchand Kanodia addressed a letter surrendering his right in the rooms in 47, Dadi Seth Agiary Lane in favour of the Landlord in furtherance of the understanding in the family arrangement Copies of the letters dated December 23, 2016 are hereto annexed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant details thereof. 9. The Petitioner and his younger brother Mr. Sanjay Kumar Kanodia had also, by their letter dated November 16, 1990 resigned from the Directorship of the Respondent No.l Company. The said resignation letters along with registered A/D envelope of the Petitioner and Mr. Sanjay Kumar Kanodia are hereto annexed and marked Exhibit 'N' and 'O' respectively. 10. The Petitioner has, through his advocate submitted a list of five documents dated August 9, 2001 in the Court of Chief Judicial Magistrate, Thane in CC No. 288/94 which includes the said resignation letter dated November 16, 1990. Hereto annexed and collectively marked Exhibit 'P' a copy of the said list of documents dated August 9, 2001 along with the attachments thereto. He has in the very same proceedings filed an Application dated August 5, 2004 wherein he has himself relied on his resignation from the Respondent No.l Company. Hereto annexed and marked Exhibit 'Q' is a copy of the said Application dated August 5, 2004. The Petitioner has also, in the above proceedings, filed an application dated May 3, 2001, wherein he has stated that he has no connection with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly Settlement was going on since 1990 however, it was recorded in writing on 08.01.1991. The sequence of events and steps taken, as happened in the year 1990, have duly been recorded in an Affidavit filed by the Applicant to demonstrate that Mr. Kailashchand Kanodia, father of the Petitioner, had intimated his retirement from the Partnership Firms and also written Letter on 14th February, 1991 to the Banks intimating his retirement from the Firms. The Petitioner should therefore, be estopped from not honouring the said Family Settlement. Even the younger brother of the Petitioner Mr. Sanjay Kumar Kanodia had also written a Letter on 16th November, 1990 through which resigned from the Directorship of the R-1 Company. The Family Members of the Applicant/Respondents to the main Petition viz. Mahavir Prasad Kanodia, Shiv Kumar Kanodia (R-2) and Deepak Kanodia (R-4) have surrendered their rights in the Family Property to comply with one of the condition of the said Family Settlement that second floor of 47, Dadiseth Lane, Ashokvan having 3/5 Rooms in which the Petitioner along with his Family Members was staying shall remain with the Family Members of Kailashchand Kanodia and on those 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily Arrangement. (c) Murat Viniyog Ltd. v. Bijay Kumar Kajaria [2011] 110 SCL 53/14 taxmann.com 158 (Cal.) for the legal proposition that the contemporaneous rectification of the Register of Members by the Company is to be taken into consideration. (d) Balakrishan Gupta v. Swadeshi Polytex Ltd. AIR 1985 SC 520 for the legal proposition that a person seizes to be a member by transferring his shares to another person by transmission of his shares by operation of law, by forfeiture of shares, by death or by any other reason known to law. 7. ARGUMENTS OF THE RESPONDNENT: - From the side of the Respondent (Petitioner of the main Petition ) Learned Advocate Mr. Mitesh Naik appeared and at the outset objected the manner in which reliance was placed on the Family Settlement of the year 1991. According to him, the alleged transfer of shares took place in the year 1990, hence the alleged transfer of shares had nothing to do with the said Family Settlement. According to him, the alleged transfer is also in dispute but the fact remained as it was that the Petitioner was one of the Promoter/Director since inception of the incorporation of the Company. Placing reliance on the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificates etc. However, the Petitioner had never been given opportunity by the Respondents to examine those important documents. In support reliance was placed on the following decisions :- (a) Mahadei Kunwar v. Padarath Chaube AIR 1937 All 578 (FB) for the legal proposition that a Family Arrangement through which immovable property was transferred, not a valid document for want of Registration of the Document. (b) Vijayan Rajes v. MSP Plantations (P.) Ltd. [2010] 98 SCL 383 (Karn.) for the legal proposition that in a situation the Company is allotting shares to near relative and regulating the other affairs to benefit the family members then the company intends to be run as a family concern which is jot permissible. (c) J.P. Srivastava Sons (P.) Ltd. v. Gwalior Sugar Co. Ltd. [2005] 1 SCC 172 for the legal proposition that although restriction imposed in Sec. 397 to ensure that frivolous litigation be avoided but such matter also be decided on abroad common sense approach if involvement of the Company is lightly in nature . Substance must take precedence over form. (d) Scottish Co-operative Wholesale Society Ltd. v. Meyer 1959 House of Lords 324 for the legal propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extile. The said business was run by the Registered Firms and by the Company. There were losses in the business hence Kailashchand Kanodia (father of the Petitioner) had decided to segregate from the Joint Family Business. To act upon the process of segregation certain steps were taken and on completion of the legal formalities of separation, the Petitioner's father had executed a Family Settlement declaration/deed dated 08.01.1991, claimed to have been written by the Petitioner (Sri Pawan Kumar Kanodia) in his own handwriting. 8.3 The main contents of the Settlement Deed are two fold. As per clause 1 there was a description of immovable property (described as Second floor 47, Dadiseth Agiary Lane, Ashok Bhavan, the three rooms in which we are staying and two rooms on third floor are ours. In these five rooms you (Mahavir Prasadji) and Brishbhan will have no right. We can do anything with these rooms, whether rent out or sell.) It is clarified that since the said Deed was written by the Petitioner for the family of Shri Kailashchand Kanodia therefore, he has used the term we representing Kailashchand Kanodia, his wife Geetadevi and two sons Pawan Kanodia and Shri Sanjay Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Family Members including the Petitioner himself. One of the document annexed is 'Register of Members' to demonstrate that Pawan Kumar Kanodia had transferred his total share holding in favour of the family members of Shivkumar Kanodia. My attention was drawn on a letter dated 15.04.1999 written by Pawan Kanodia (Petitioner) addressed to the Chief Judicial Magistrate, Thane Court, Thane and copy to Member Secretary, Maharashtra Pollution Board to answer a Notice issued in connection with Water Pollution by Respondent No.1 Company. In the said letter the Petitioner has clearly stated that since more than 8 years after his resignation he had no connection whatsoever, w.e.f. 16.11.1990 with M/s. Kanodia Tex Industries . One of the document, i.e., Form No. 32, stated to be submitted before Learned ROC was in respect of the Intimation of the Resignation of Shri Pawan Kumar Kanodia from the Company viz. Kanodia Tex Industries Private Limited. 8.6 A fundamental question has been raised by the Respondents/Applicant that in a situation when rest of the terms and conditions of the said Family Settlement have been agreed upon, as well as acted upon by the concerned family membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears and concluded in the year 2012. Presently we are not on the question of legality of the provisions of Limitation Act , still worth to mention that the settlement executed in the year 1991 was as it was at it's place, however, the execution part was carried out in the subsequent years. If rest of the terms of the settlement have been honoured by the either side, then it is obligatory on the part of the Petitioner to honour Clause 5 of the said Family Settlement. 8.8 The Petitioner has challenged the authenticity of the said document. But that doubt had also been cleared by seeking report of handwriting expert namely Mr. Hiralal Mehta ( Forensic Document Examiner ) who had certified that the said settlement was written in the hand-writing of the Petitioner. Further, one of the witness of the said Deed viz. Shri Sawarmal Lohia had also been examined who had affirmed that the existence of the said Settlement Deed. Therefore, it is worth to make a remark that 'much water had flowed under the Bridge' since the said Deed was documented, hence it is improper and very late on the part of the Petitioner to raise issues which may thwart the basic intent of the Settlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent/Petitioner had placed reliance on the decision of Mannalal Khetan (supra) and Mahadei Kunwar (supra) that unless a proper instrument of Transfer duly stamped and executed by the transferor the same is prohibited by statute and to be treated as void. To answer this question, my attention is drawn on the fact that the immovable properties in question have not changed hands. The family of Kailashchand Kanodia were residing in the 5 Rooms, used as residential accommodation. Since there was no transfer or exchange or alienation and since there was no sale hence there was no question of payment of Stamp Duty. The respective parties already in physical possession have retained their right over that very property, as a result, there was no question of payment of Stamp Duty. 8.11 In the case of J.P. Shrivastav and Sons v. Gwalior Sugar Co. [2005] 1 SCC 172 an observation has been made that the object of prescribing a qualified percentage of shares under section 397 and 398 is clear to ensure that frivolous litigation to be avoided. Only real stake holder in the Company should be allowed to indulge in the affairs of the Company. Undoubtedly, this condition does help in curt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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