TMI Blog2007 (1) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... thorised share capital of the respondent No. 1 company, as on the date 9f arguments is ₹ 20,00,00,000/- (Rupees Twenty Crores only) divided into 20,00,000 (Twenty Lakhs) equity shares of ₹ 100/- (Rupees one hundred) each and the paid up capital of the company is ₹ 82 lakhs (Dhariwals ₹ 61.50 lakhs and Lodhas ₹ 20.50 lakhs). On 8.1.96 Lodhas and Dhariwals held 1250 shares of ₹ 100/- each. On 2.11.98 further 2500 shares were allotted to the Dhariwals. On 23.5.2005 further shares of 19049 shares were allotted to the Lodhas and the Dhariwals were allotted 57,147 shares. However, as per the inspection of the documents file maintained by the Registrar of Companies, Pune. The petitioner and the respondent No. 2 and 3 were appointed as directors of the respondent No. 1 company on 16.2.1997. However, as per the inspection of the documents file maintained by the Registrar of Companies, Pune, no Form No. 5 relating to increase of authorised capital from ₹ 5,00,000/- (Rupees Five lacks) to ₹ 20,00,000/- (Rupees Twenty crores) appears to have been filed by the company, viz. the respondent No. 1 with the Registrar of Companies. On 19.10.95 the memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case. The present petition is not based on directorial complaint only but has claimed the non-receipt of notice of board meetings in spite of sending cost for sending the notice by registered post. The petitioner has also claimed that the respondents have not sent the notice for general meeting (para 25,27 and 31 of the petition). The respondents has oppressed the petitioner by not sending the notices of general meetings and Board meetings. It was denied that there is no oppression by the respondents. It was pointed out that it is well settled that no inclusive definition of oppression has been provided in the Companies Act, 1956, and that the term oppression has wide meaning and Hon'ble Supreme Court has tried to define the term in Sangramsinh P. Gakwadand Ors. v. Shantadevi P. Gaekwad (D) through LRs and Ors. (2005) 3 Comp LJ 385 SC. The petitioner obtained the copy of Annual Accounts 2004 of the Respondent Company from ROC. The respondent never sent the copy of Annual Accounts to the petitioners. The respondents have not sent the Annual Accounts 2005 of the Respondents Company to the petitioners. It was argued that the respondents have failed to produce the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Corporation against the Respondent Company. The respondents have even misrepresented Hon'ble Company Law Board in this respect. It was pointed out that the respondents have alleged that since there is litigation pending on properties of the respondent company, division of the property is not possible. However, the respondents have failed to produce any detail of litigation pending. The respondents have also failed to submit counter valuation of the property in question. The respondents have relied on Article 23 of the Articles of Association for such disputes. The said article, it was pointed out, provides for disputes relating to transfer of share and not of the nature of the oppression referred to in Section 397 of the Act. The respondent has submitted that the petitioners should remain with the respondent company as the property rates re gong up. But the petitioners are not interested in continuing with the respondents due to continuous acts of oppressions committed by the respondents and has prayed for the Property/Assets (development rights) and investments in Kakade Constructions to be divided in proportion of shareholding of the petitioners and the respondents in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Indian Evidence Act and have also failed to provide copy of full order published in journals and further that the respondents have failed to give reply to para 41 to 48 of the petition, and. to para 30 of rejoinder. The counsel for the petitioners reiterated their prayer for purchase of the equity shares of the petitioners by the respondent No. 1 company and/or by the other respondents on fair value keeping in view tile present market value of the property rights of the respondent No. 1 company. Alternatively, it was prayed that Hon'ble Company Law Board may order the division of the property rights of the respondent No. 1 company between the petitioners and the respondent shareholders in the ratio of respective shareholding, 4. Shri Nesar Ahmad, Counsel for the respondents raised the preliminary objection about maintainability of the present petition and argued that Section 397 (2) does not permit such petition to be maintained and entertained by the Hon'ble Board. It was pointed out that the petitioner himself has categorically stated that the present petition, is only under Section 397and provisions of Section 398 are not attracted in the present Company Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles of Association of the company. Petition Under Section 397 is not a money recovery suit. Petitioner should not have accepted issue of shares at par if according to him the valuation of the property of the company and in turn the shares of the company is so high. While estimating value of the property, other aspects of litigation and claims are neglected by the petitioner. Even the exercise of valuation is too costly and cannot be undertaken for the whims fancies of the petitioner. Copies of annual accounts are filed by petitioner himself, therefore there is no question of him not getting copies of annual accounts. Petitioner himself has written letter to Pune Municipal corporation for withholding construction related permissions for building superstructure by the company. He has acted against the interest of the company and can not ask questions to the respondents as to why company has not started activities. Alleged grievances of the petitioner are in his capacity as director. This can not be a subject matter of petition under Section 397, The respondents relied upon the dicta Ruby Hospital case (2006 - 129- comp cases 0001-CAL). If intention was to reduce petitioner to/mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding over the possession of premises. The copies of the Balance sheet have been filed by the petitioner himself . Therefore, there is appropriate disclosure and this accounting practice is quite common and there is nothing unusual about it. 6. As regards the petitioners' contention that the respondents have not given adequate reply even though there is a express provision in the Article 45 (page 67) to give one day notice and despite the fact that a cheque for ₹ 250/- had been paid for notices to be sent by registered A.D, it was argued by the respondents that the petitioners demanded notices only of the Board meetings by Registered A.D in 2001 . It was contended as to why they did not come to CLB earlier but only in 2005. Another aspect is not getting Board notices can not be a complaint Under Section 397 as respondent No. 1 is not a quasi partnership. Further responding to the petitioners' contention that the word 'oppression' has not been defined in the Act but ratio has been drawn from the various Court pronouncements such as Needle Industries/Gaekward etc. Since there was no notice to meetings, non-receipt of Balance Sheet, non-involvement in the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. are the example of lack of probity, the respondents contended that no blank papers transfer deeds were obtained by respondents from the petitioners. This is a false allegation and they vehemently deny this. As regards the contention that the respondents have failed to make any reply to Para 37 (non-involving of the petitioners in Belbaug Property Complex Construction Programme) of the Petition and therefore, cannot claim that the Petitioner's action was against the interest of the Company. In fact, Petitioner has given a letter to PMC after newspaper advertisement for development of properties and has objected the approval for any building plan for construction of building complex on Belbaug property as the Petitioner has never been consulted prior to this action on the part of other Respondents, the respondents contended that the petitioners here have admitted that they themselves have objected for approval of building plan and also question why there is no income to the company. These two things cannot go hand in hand. Petitioner was always a member on the Board and was provided with all the information which he wanted to have. Even he was given access to books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of the company were such that it would be just and equitable to order winding up thereof and that the majority acted through the Board of Directors and by reason of abusing their dominant position had oppressed the minority shareholders. Conduct, thus, complained of must be such so as to oppress a minority of the members including the petitioners vis-a-vis the shareholders which a fortiori must be an act of the majority. Furthermore, the fact situation obtaining in the case must enable the court to invoke just and equitable rules even if a case has been made out for winding up for passing an order of winding up of the company; but such winding up order would be unfair to the minority members, acts of mala fides, improper motive and similar other allegations are required to be pleaded with full particulars, and proved, so as to obtain appropriate relief. As regards the ratio of the case - Caparo India Ltd. (UK) v. Caparo Maruti Ltd. 17.128 (2006) OCT -425 Page 448 para 36 relied upon by the petitioners, it was argued, - is also in favour of respondents. The petitioners have cited para 36 page 448 in support of their claims. The findings on the basis of that para as noted in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being absconder/fugitive against whom CBI enquiries are on, it is impracticable to continue with R-2 as a business partner and hence the petitioners are willing to part company with the respondent No. 1 at a fair valuation for their shares which may be purchased by the respondent company and/or by the respondents or alternatively the CLB may order division of the property rights of the respondent company between the petitioners and the respondents in the ratio of their respective shareholding. The respondents' case is that the petition is not maintainable under Section 397 of the Act as the petitioners' grievance is in the capacity of director of R-1 and not in their capacity as shareholders; the filing of petition is beyond limitation period; the petitioners' conduct has been detrimental to the interests of the R-1 besides no case of 'oppression' has been made out by the petitioners; no case of winding up has been made out by the petitioners; and what the petitioners require is fair market value of their shares to be sold to the respondent company and/or to the respondents by getting the value as calculated in the manner provided by the petitioners in paras 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly plead on five facts - (a) what is the alleged act of oppression; (b) who committed the act I of oppression; (c) how it is oppressive; (d) whether it is in the affairs of the company; (e) and, whether the company is a party to the commission of the act of oppression. On considering the present case on merits, I find that all the five aspects mentioned above have not been covered. It is true that the petitioner has not got notices of Board's Meetings for which even money has been deposited through a cheque of ₹ 250/- for receiving notices by Regd. A.D. But this single instance is not sufficient to prove act of oppression on the part of the respondent company/respondents. On the other hand the respondents have met with each and every allegation of the petitioners as detailed above in paras 6 to 8 which are not being repeated for the reason of prolixity. The petitioners' themselves, may be because of financial crunch or being dissuaded by the CBI enquiries against the respondents have been expressing directly and indirectly their unwillingness to continue to participate in the affairs of the company. The petitioners' willingness to dissociate themselves with the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r seeking equitable relief must come with clean hands and good conduct, failing which the petitioner would constitute a gross abuse of the process of Court, and the petitioner is not entitled for any relief under Sections 397 and 398. It also held that the conduct of the parties in other proceedings could also be taken into consideration. However, it was held that the conduct of the petitioner before filing of the petition may not be a relevant factor. Regarding the principle of equity in Shrimati Abnash Kaur v. Lord Krishna Sugar Mills Ltd. 44 CC 390 the Division Bench of Delhi High Court has held that while exercising equity jurisdiction, which clothes the Court with discretionary powers ...the discretion cannot be exercised arbitrarily or according to one's own will or whim. It has to be regulated by law, allay its rigour advance the remedy and to relieve against abuse. The court, therefore, exercising equity jurisdiction, cannot ignore the well known maxims of equity. Two such maxims are that he who seeks equity must do equity and he who comes into equity must come with clean hands.... There have been allegations and counter allegations. The Company Law Board is a court o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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