TMI Blog2014 (8) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents as the said division would result in stoppage of business operation of the company and even reasonable price may not be received out of the sale of unviable portions of the land/property. Under these facts and circumstances, it is considered appropriate in the interest of the company that the business operations be continued with the co-operation of the petitioners and the respondents and both the petitioners and the respondents to get the property valued again as per the current market conditions and to sell the property at reasonable price for distribution of proceeds in the ratio of their shareholding after paying off the liabilities. The business of the respondent-company should continue with better co-ordination and co-operation amongst the petitioners and the respondents and, hence, it is held that : (i ) The resolutions passed in the extraordinary general meetings held on November 15, 2010 and December 14, 2010, for removal of the petitioners as directors were bad in law and, hence, null and void ; (ii ) The petitioners are hereby restored as directors of respondent No. 1-company ; (iii ) The petitioners and the respondents to co-operate with eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest by the respondents who were carrying on competitive business of hiring the marriage hall at their personal premises at M-47-48, Green Avenue, Amritsar. Not only this, the petitioners highlighted that thereafter, the respondents are not holding any board meeting or general meeting and no notice of any meeting has been given to the petitioners who are directors and members of the company. Apart from this, the respondents have kept the petitioners in dark about the affairs of the company and are themselves filing the documents and have signed the annual accounts without notice or consent of the petitioners. 3. The petitioners' advocate has also specifically alleged that the respondents are not accounting for all the bookings at the resort in the books of the company. Consequently, the petitioners have deposited ₹ 10,00,000 towards share application money while the respondents kept on enhancing their share over the years. The petitioners have time and again requested the respondents to either allot shares against advance proportionately or refund the amount but no action has been taken in this regard by the respondents. Secondly, the respondents are dealing in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly this, in the meeting of the board of directors of respondent No. 1 company held on June 24, 2008, the petitioners came up with absolutely illegal demand of dividing the land of respondent No. 1 company between the two groups in total disregard to the fact that respondent No. 1-company is an independent legal entity and the assets owned by it are not so divisible. It has also been highlighted that around 2008, the land prices had astronomically gone high and, therefore, the petitioners were keen to sell respondent No. 1-company which could have fetched around ₹ 2.50 crore. However, the respondents strongly protested to this nefarious design of the petitioners to sell respondent No. 1-company as it would have spoiled the image, goodwill and reputation of Sakhi their trade name built over a long period of 30 years. Besides, the business of party lawn/resorts and banquet halls is a booming business because of the restrictions imposed by the Municipal authorities on the banquet halls operating in the city areas. The respondents' advocate has vehemently denied that the respondent-company is a glorified partnership of the family members at all relevant times. In fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. In fact, the potential business of party lawn/resort was about 5 lakh from the start of first year of operations of respondent No. 1-company which by the year 2011, could have easily grown to ₹ 20 lakh but because of lack of interest and neglect of business of respondent No. 1-company by the petitioners and their business incompetence, respondent No. 1-company could not achieve its potential. At the same time, the receipt of ₹ 10 lakh from the petitioners as share application money is not denied. As a matter of fact, the said amount along with the contributions made by the respondents was utilised for the purchase and development of immovable property admeasuring 11,000 sq. yards over which the party lawn/resort has come up and at the same time substantial amount was also contributed by the respondents. The respondents' advocate has also pointed out that it is absolutely frivolous allegation levelled by the petitioners that the respondents have been enhancing their shares in respondent No. 1-company. Initially, the respondent-company was incorporated with the paid-up share capital of 700 shares of ₹ 100 each amounting to ₹ 70,000. Thereafter, due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the petitioners. Rather, it has been clarified that respondent No. 3 sent a special notice dated October 25, 2010, to respondent No. 1-company for recommendation of removal of the petitioners from respondent No. 1-company and for convening an extraordinary general meeting of the shareholders of respondent No. 1-company for their approval. Therefore, after receipt of the aforesaid special notice, a notice of the board meeting to be held on November 15, 2010, at 11.00 a.m. at respondent No. 1-company's party lawn/resort for the purpose of convening the extraordinary general meeting for removing the petitioners from the directorship of respondent No. 1-company, was sent to the petitioners. The respondents' advocate, however, denied that the petitioners were present at the party lawn/resort on the aforesaid date and time but directors from the respondent group were not present and no board meeting was at all held. As a matter of fact, despite receipt of adequate notice, the petitioners did not turn up for the board meeting and the directors present in the meeting had deliberated and discussed the agenda of the board meeting and had taken certain decisions. 7. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners Nos. 1 and 3 and, hence, the petitioners were never allowed to deal with the clients and its day-to-day affairs and they were not allowed to operate bank account. As a matter of fact, all managerial functions and the day-to-day affairs of the company were looked after exclusively by respondents Nos. 2 and 4 as the managing director and the director, respectively. It has also been admitted that petitioner No. 3 started his own outdoor catering business to the clients as the petitioners were neither allowed to look after the business of the company nor they were getting any salary as directors or dividend, on their shares as shareholders. Apart from this, it has also been pointed out that no board meetings were called or held except on April 28, 2008 and June 24, 2008, when protest was made by the petitioners. Actually, petitioner No. 3 had suggested in the board meeting held on April 28, 2008, that the company may be sold as it was not possible to do business together. The petitioners' advocate has also highlighted that the land of the respondent-company is on the main road with attractive dimension of 356' frontage and the area under which the land of the company fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in law as requirements of section 284(2) of the Act have not been complied with. In fact, no special notice was given to the petitioners and their right of representation was denied. Moreover, in a closely held family company like respondent No. 1, removal of directors is a serious act of oppression even if the removal is perfectly legal. In this regard, the petitioners' advocate has relied upon the following judgments : (1) S. Varadarajan v. Udhayem Leasings Investments (P.) Ltd. [2005] 62 SCL 315 (CLB-Chennai), has held that (page 866) : Any omission to serve a special notice on the directors sought to be removed constitutes denial of their statutory right of reply and the absence of such notice to the directors, any resolution for their removal would be vitiated by such omission. I do not see any other material substantiating the fulfilment of the requirements of sections 284 and 190, before removing the petitioners from the post of directors. Moreover, the first petitioner is one of the promoter-directors of the company. The second petitioner having had acquired shares of Kasthuri Swamy, yet another promoter of the company, has been director of the company. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution amongst the petitioners and respondents in proportion of their existing shareholding of 40 per cent. and 60 per cent. respectively. For this purpose, the petitioners' advocate in C. A. No. 416 of 2011 has given four proposals by way of maps with first option to the respondents to choose any 60 per cent. portion of the maps. This contention of the petitioners' advocate has been supported by the judgment in the case of Vijay Kumar Chopra v. Smt. Sudershan Chopra (Hind Samachar Ltd.) [2010] 1 taxmann.com 157 (CLB - New Delhi) , wherein division of assets between two family groups was agreed to by the Company Law Board. 11. The respondents' advocate extended the argument that the petitioners are involved in competing outdoor catering business from 2005 by unlawfully using the resources of and at the expense of the business of Sakhi Resort . Apart from this, the petitioners are solely involved in operating and managing the business and entire affairs of Sakhi Resort without any interference from the respondents from the starting including taking booking of functions, collecting and depositing revenue/income and looking after entire hosting/managing the functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either the shareholding or directorship of any individual in respondent No. 1-company. Thus, mere lack of trust between the shareholders cannot also be made a ground for filing and maintaining petition under section 397/398 of the Companies Act, 1956. In support of his contention, the respondents' advocate cited the case of Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp Cas 351 (SC), wherein the hon'ble Supreme Court has held that : On the facts no case had been made out, of oppression within the meaning of section 397. For a petition under section 397 to succeed, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires, that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of the petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, 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 (PC), Ebrahimi v. Westbourne Galleries Ltd. [1972] 2 All ER 492 (HL), Hind Overseas P. Ltd. v. Raghunath Prasad Jhunjhunwala [1976] 46 Comp Cas 91 (SC), C. P. No. 39 of 1973 decided by this court on April 30, 1975 and C. P. No. 8 of 1975 decided on March 18, 1977, by this court, are relevant for deciding as to whether it is just and equitable to wind up the company or not. For the purposes of this petition, am assuming that the principles laid down in Ebrahimi v. Westbourne Galleries Ltd. [1972] 2 All ER 492 (HL) apply and that it may be just and equitable to wind up the company. It might here be stated that this contention is controverted by learned counsel for the respondents. Nevertheless, merely because grounds or circumstances may justify a winding up order being passed, that is not enough to entitle the petitioner to obtain relief under section 397 of the Companies Act. The petitioner has not proved or shown that there has been any continuous a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present petition having been filed in this respect only in 2010 is time, barred. As a matter of fact, the calling of and sending of the notice of convening the extraordinary general meeting of respondent No. 1-company by the respondents subsequent to the continuous non-cooperative, unprofessional and rather destructive attitude of the petitioners to bring about closure of Sakhi Resort is perfectly legal and was in the larger interest of the company. Furthermore, it has been contended that even special notice and the explanatory statement sent to all the petitioners in respect of the said extraordinary general meeting for discussing removal of the petitioners from the directorship of the respondent-company has been sent in complete compliance of sections 190 and 284(2) of the Companies Act, 1956, whereby the petitioners were given appropriate opportunity to explain their conduct and make written representation in this respect in the extraordinary general meeting but instead of coming out clean on their unlawful and unauthorised and sheer destructive conduct, the petitioners have preferred the present frivolous petition against the respondents. Lastly, it has been underlined that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation money and further stated that the amount along with the contributions made by the respondents was utilised for the purchase and development of immovable property admeasuring 11,000 sq. yards over which the party/lawn resort has come up. The respondents' advocate has also pointed out that it is absolutely frivolous allegation levelled by the petitioners that the respondents have been enhancing their shares in respondent No. 1-company. In fact, initially the respondent-company was incorporated with the paid-up share capital of 700 shares of ₹ 100 each amounting to ₹ 70,000 and subsequently 100 equity shares of ₹ 100 each were issued to each of the two shares along with 100 equity shares of ₹ 100 each issued to Shri Manveer Singh S/o. Shri Maninder Singh Sakhi on December 13, 2002, with the consent and approval of the directors of respondent No. 1-company in order to comply with a legal requirement of having paid-up share capital of ₹ 1,00,000 for a private limited company. 17. The respondents' advocate has submitted that respondent No. 3 sent a special notice dated October 25, 2010, to respondent No. 1-company for recommendation of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding extraordinary general meeting on December 14, 2010. However, despite receipt of the notice of extraordinary general meeting, the petitioners had neither sent any written representation to be read at the extraordinary general meeting nor had attended the extraordinary general meeting of the respondent-company and, hence, the agenda as contained in the special notice was transacted by the shareholders and the shareholders unanimously decided to remove the petitioners from the directorship of the respondent-company. In this regard, the petitioners' advocate has also alleged that the respondents hatched the conspiracy to remove the petitioners as directors and no special notice was given to the petitioners. 18. From the facts and circumstances stated above, it is learnt that there are allegations and counter-allegations as to whether the extraordinary general meetings were legally held on November 15, 2010 and December 14, 2010, for removal of the petitioners as the directors. The petitioners' advocate has also submitted that division of the resort is the only solution amongst the petitioners and respondents in proportion of their existing shareholding of 40 per cent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is not possible to continue the business with the respondents, does not appear convincing. Moreover, the valuation of the property of the company in the form of resort was done by the valuer appointed as per the direction of this hon'ble Board and sufficient efforts were made by appointing property dealer to sell the property at a price higher than the aforesaid valuation by the valuer so that the proceeds after payment of the liabilities of the company could be distributed amongst the petitioners and the respondents in the ratio of their shareholding. However, no buyer could offer the price higher than the aforesaid valuation done by the valuer. Not only this, neither the petitioners nor the respondents are also willing to buy out each other. Apart from this, the proposal of division of the property, i.e., resort in the ratio of the shareholding of the petitioners and the respondents by way of maps given through C. A. No. 416 of 2011 were also objected by the respondents as the said division would result in stoppage of business operation of the company and even reasonable price may not be received out of the sale of unviable portions of the land/property. Under these fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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