TMI Blog2014 (2) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... plicate shares is clearly impermissible unless it is proved that the original is lost or the duplicate shares and can only be issued to the registered member, this Court feels that the same being the subject matter in the original proceeding and, therefore, is required to be dealt with for the purpose of granting the final relief. - CA NO. 755 OF 2011, 485 OF 2011, 493 OF 2011, CP NO. 611 OF 1988 - - - Dated:- 6-2-2014 - The Hon ble Justice Harish Tandon Mr. Ranjit Kumar Mitra, Mr. Debdut Mukherjee, Mr. Sirsanya Bandopadhyay, Mr. Joydeep Kar, Mr. P.C. Sen, Mr. Raj Ratna Sen, Mr. Goutam Roy, Adv. for the petitioner Mr. D. Basu, Mr. S. N. Mukherjee, Mr. S. B. Mookherjee, Mr. D. N. Sharma for the respondent, JUDGEMENT- Harish Tandon, J. All these three applications are interconnected and, therefore, have been taken up for hearing together to avoid the prolixity of repetition. These applications are taken out in a Company Petition No. 611 of 1988 filed under Sections 397 and 398 of the Companies Act, 1956 alleging the oppression and mismanagement by the then majority shareholders. The facts leading to the present litigations are enumerated herein below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enating, mortgaging, letting out or otherwise transferring the assets of the Company and also from participating with the management and affairs of the company and/or dissipating the funds and assets thereof. On November 23, 2005, an order was passed in the said application in terms of prayer (k) to the judges summon which reads thus: (k) An order of injunction be passed restraining the respondent no.2 3 and the Board of Directors of the respondent company from letting out or creating any encumbrances relating to the movable and immovable properties of the company situated at 80, Jawpur Road, Kolkata 700 074 with a direction on the respondent No.2 to furnish a list of persons to whom the factory sheds have been let out and the rent received therefrom and also a list of the shop-rooms of the respondent company which have been surrendered by the respondent no. 2. By subsequent order dated December 6, 2005, the rents received from the tenants of the respondent company was directed to be kept in separate account which would be operated by the Special Officer appointed therein. Thereafter, several consequential orders were passed relating to the opening and operation of ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not pass any interim order on the basis of such submission. However, an order of status quo as on that date was directed to be maintained in respect of a directorship as well as the shares of the respondent company until further orders of the Court. It was further recorded therein that the Company is not engaged in any business at present for which it was incorporated. A further application being C.A. 755 of 2011 is filed on August 4, 2011 for recording the death of the petitioner no.2 and deletion of her name from the cause title of the petition and an order of injunction restraining the respondent nos.2 and 3 and the Board of Directors of the respondent company from letting out and/or creating and/or encumbering the movable and immovable assets of the Company. It is alleged in the said application that on May 16, 2011, the said Indrajit Roy aided and abetted by other persons removed the sign board and have ousted the security guard of the Company and posted their own security guard. It is further alleged that the books and relevant in documents of the company has been removed by ransacking the office room of the Company. All these three applications have been assigned to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the contention made in the said application filed by the petitioner no.3. Mr. Sudipto Sarkar, the learned Advocate appearing for the petitioner in all the three applications vehemently submits that the declaration dated September 5, 2006 which reflects the Directors Identification Number (DIN) allotted to the Director is a fabricated document, in as much as, the DIN was allotted on August 17, 2010. He strenuously submits the appointments of the Directors as on April 27, 2011 is afterthought for two simple reasons firstly on the same day, the Managing Director namely Tarun Kumar Das, the respondent no.2 died and secondly, the election was held on the said date in the State of West Bengal which means there was a holiday. He further submits that no general meeting could be held on a public holiday which could otherwise be not held unless at least 21 days prior notice is given. He vehemently submits that the original share scripts were pledged with the IIBI and, therefore, duplicate shares could not be issued. The Sub-division of shares could not be made without a valid board resolution which alleged to have been done in the year 2006. He placed the memorandum and articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany and placed reliance upon a judgment rendered in case of Tracstar Investments Limited another V Gordon Woodroffe Limited Others ; reported in 87 Company Cases 941 . Mr. Sarkar audaciously submits that Smt. Srila Mitra allegedly claim to have been appointed with effect from September 5, 2006 and Form 32 pertaining to such appointment was filed on 27.8.2010, along with the declaration which contains a Directors Identification Number (DIN) which admittedly was allotted on August 17, 2010. The purported declaration filed on September 5, 2006, therefore, could not contain the DIN at the footnote. He, therefore, submits that the aforesaid documents would suggest that the Srila Mitra was not appointed as a director as on September 5, 2006 so claimed by her. Mr. Sarkar further submits that the annual returns of the Company ending March 31, 2006 filed on August 31, 2010 showed the annual general meeting alleged to have been held on September 30, 2006 bearing the DIN of the said Srila Mitra. He further placed the annual returns of the Company from 2006 to 2009 to contend that the Srila Mitra does not possess the requisite shares required under Article 17 of the Article of Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is followed in case of J. L. Dutt Anr V Hooghly Ink Co . reported in 1982 (1) CLJ 422 . It is further submitted that even after the promulgation of the Companies ( Amendment Act ), 1988 which came into effect on 31st May, 1991, Section 68 thereof permits the continuance of the pending proceedings before the High Court. A further reliance is placed upon a judgment rendered in case of A.P. Jain vs Faridabad Metal Udyog Pvt. Ltd. Ors. , reported in (1999) 95 Company Cases 76 to contend that if at the time of the presentation, the petition is valid, it does not cease to be maintainable by reason of the subsequent events. Mr. Sarkar placed reliance upon a judgment of the Apex Court in case of Rajahmundry Electric Supply Corporation V A. Nageshwara Rao Ors., reported in AIR 1956 SC 213 and a judgment of the Madras High Court in case of L.RM.K Narayanan Anr. V Pudhuthotam Estates Ltd. Ors ., reported in (1992) 74 Company Cases 30 . Lastly it is submitted that the subsequent act of oppression and mismanagement at the instance of the members who are in control of the said Company, can be taken note of and be allowed to be taken in a proceedings as a recurring o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. Thus, according to him, the duplicate shares have been issued in clear contravention to the aforesaid provisions contained in the said rules, the same are invalid and illegal and placed reliance upon a judgment in case of John Tinson Co. Pvt. Ltd. Ors. V Mrs. Surjeet Malhan Anr ., reported in (1997) 88 Company Cases 750 . Mr. Joy Saha, the learned Advocate appearing for the Company vehemently submits that since the incorporation of the Company, there were outside directors and, therefore, cannot be contended that the Company was a closely held family Company. He placed various paragraphs of the Company Petition No. 611 of the 1988, in support of his contention that the alleged cause of action has eroded by passage of time and unless there is an amendment made therein, the new set of facts having brought by way of an interlocutory application should not be taken note of. According to him, the interim relief as sought in the aforesaid applications can only be granted in aid of the final relief and if the final relief is no longer surviving, these applications are liable to be dismissed and in support thereof placed reliance upon a judgment of the Apex Court in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed to have been condoned by placing reliance upon a judgment rendered in case of Reliance Industries Ltd. Others reported in 89 Company Cases 67 and in case of A.K.M.N. Cylinders Private Ltd. another reported in 95 Company Cases 555. He strenuously submits that on the basis of the terms of settlement dated 12 September, 1995, the petitioner agreed to divest their shares in favour of the Managing Director and, therefore, cannot contend contrary thereto. Lastly, he submits that there has been a gross delay in taking out an application relating to the appointment of Srila Mitra as Additional Director and, therefore, does not admit any interim relief to be granted on the basis of such belated applications. Mr. Joydeep Kar, the learned Advocate appearing for the added respondent nos. 13, 14 15 submits that the transmission of shares on the heirs upon the death of the share holder cannot be challenged by a third party who have no right of intestacy. He further submits that the transfer of shares being private in nature cannot be questioned in a proceeding under Sections 397 and 398 of the said Act and placed reliance upon a judgment of the Supreme Court in case of Chatter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of mismanagement and oppression is pleaded in the main petition, died in the meantime. It is satisfactorily demonstrated before this Court that the meeting could not have been conveyed by the said erstwhile director on the date of his death which was also a declared holiday because of the general election of the assembly. Those facts are brought in the aforesaid applications by laying foundation for an interim orders. The foremost opposition to such relief at the instance of the added respondents and the other respondents who gained benefit by such act of the erstwhile managing director is that it constitutes a fresh cause of action, if at all there be any, and in view of the Companies (Amendment) Act, 1988, the remedy lies before the Company Law Board. In other words, the High Court is denuded of its jurisdiction to entertain any disputes relating to oppression and mismanagement. The said Companies (Amendment) Act, 1988 came into effect on and from 31st May, 1991 conferring the jurisdiction on the Company Law Board to entertain the Company Petition apart from other provisions including Section 397 398 of the Companies Act, 1956. Section 68 of the said Amendment Act saves the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code of Civil Procedure was taken out by the respondents on the plea that he is the resident of Andhra Pradesh and therefore the Delhi High Court has no jurisdiction. The said contention was accepted as a consequence whereof the plaint was rejected by the Hon ble Single Bench. The order was carried in an intra court appeal which also stood dismissed. A plea was sought to be raised that a composite suit covering the cause of actions under the aforesaid acts is not maintainable. The Apex Court held that the composite suit is maintainable if the jurisdiction is vested in one Court but certainly does not lie when it constitutes two sets of cause of action where one cannot be entertained by the Court in view of the statutory interdiction in these words: 34. What then would be meant by a composite suit? A composite suit would not entitle a court to entertain a suit in respect whereof it has no jurisdiction, territorial or otherwise. Order 2 Rule 3 of the Code specifically states so and, thus, there is no reason as to why the same should be ignored. A composite suit within the provisions of the 1957 Act as considered in Dhodha House, therefore, would mean the suit which is founde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the grandfather when his father is alive and at the same time, the original plaintiff never pleaded requirement for the said legatee and as such, by virtue of testamentary succession he having acquired title to the property, his position is no better than that of a transferee landlord and he cannot continue with the suit on the original ground of reasonable requirement although the provisions of section 13 (3A) will have no application if he intends to me a fresh suit on the ground of reasonable requirement as the said provision is attracted only in case of transfer inter vivos. This Court, therefore, does not find any substance in the submission of the descending respondents that the said subsequent events amounts to a fresh cause of action and, therefore, cannot be taken note of in the instant proceeding because of the statutory embargo. The petitioners and supporting respondents have put much emphasis on the facts that the acquisition of shares by Srila Mitra as well as the added respondents are in gross violation of the provisions contained under Section 108 of the Companies Act as well as the memorandum and article of association of the Company. The ratio laid down b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Madras High Court in case of L. RM. K. Narayanan another V Pudhuthotam Estates Ltd. others. reported in 74 Company Cases 30 wherein it is held: Before adverting to the above judgments, it has to be considered whether a shareholder whose consent was obtained for filing petition under Section 397 of the Act, etc., can ask for substituting himself as a petitioning creditor even though his shareholding is less than 10 per cent as provided in Section 399 (1) (a). In this contention, the principal contention of Mr. G. Subramaniam is that such a person cannot ask for substitution and his only remedy is to file a separate petition. No direct authority has been brought to my notice on this aspect of the matter. In my considered opinion, when once a petition is validly presented, it is well open to a shareholder to ask for substitution and prosecute the proceedings even though such a shareholder by himself could not have presented a petition under Section 397 for want of required share qualification. The Court has to only consider whether the petition was a valid petition at the time of its presentation. If a valid petition has been presented, any shareholder can ask for substit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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