TMI Blog1996 (9) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1; respondents 2 and 3 are husband and wife respectively. The respondent 4 is the son of respondents 2 and 3. The respondent 5 is the wife of respondent 4 and respondent 6 is the daughter of respondents 2 and 3. 3. As regards the shareholding, petitioners 1, 2 and 4 together hold 42,001 ordinary shares in the total paid up capital of 1 lakh shares which is undisputed. In addition, the petitioner 3 claims title to 2001 shares standing in the name of his late grandfather Shri P.N. Jaidka (father of petitioner 1) which is not transmitted yet. In addition there is a claim regarding 1500 shares standing in the name of respondent No. 3. The petitioners claim to control in total, about 44 per cent of the shares. The respondents are shown to hold the balance substantially. 4. The brief facts as contained in the petition are as follows: The company was incorporated in 1946, comprising of the members and family friends of Jaidka family. The father of petitioner 1 was the managing director as per the articles of association. It is claimed, that it was understood and agreed that the managing directorship of the company would always be with the petitioners branch of the family. According t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and improved the financial position. However, after the advent of Maruti cars, the business of the company, namely, agency for ambas-sador cars suffered. Consequently, the company's profitability and finan-cial position were affected adversely which was conceded by the respon-dents also since they have approved the accounts of the company. Consequently, there was a working capital crisis but the other directors did not evolve a strategy for increasing the working capital. The feud actually broke out around 12-8-1993 when the petitioners 1 and 2 received from the company a letter dated 11-8-1993 at Patna, stating that they ceased to be directors of the company by virtue of section 283(1)(g) of the Act for not attending 3 consecutive board meetings without leave of absence. A registered letter was also received by them to this effect on 16-8-1993 which showed that the letter was posted in Patna on 12-8-1993. The 1st petitioner was also informed on 12-8-1993 by the Manager, Punjab National Bank, Exhibition Road Branch, Patna that certain persons claiming to be directors of the company approached him on that day and submitted an undated letter purporting to show induct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4-9-1993, the petitioners 1 and 2 met respondent 2 and sought for inspection of books of the company. How- ever, neither respondent 2 nor 3 evinced any interest to participate in any discussion to bring about any settlement. On 20-9-1993, the petitioners were able to get certain pages of the cash book of the company for 1993-94 initialled by the auditors and also obtained zerox copies of some of the pages. These pages show large-scale interpolations in respect of entries made on 20-6-1993, 1-7-1993, 17-7-1993, 21-7-1993 and 28-8-1993. Subsequently, on 21-9-1993 on ob- taining further copies of the cash book more interpolations were noticed. All the above go to show that the conduct of respondents is burdensome and oppressive to the petitioners and prejudicial to the interest of the company and public interest. There is justifiable lack of confidence in respondents 2 to 6. Another allegation against the respondents is that they were trying to alienate valuable properties of the company at Calcutta and Patna as early as in 1991 which came to light in September 93 during the visit of petitioners 1 and 2 to Calcutta. Certain documents purported to be agreements with third parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers as alleged. Soon after incorporation, the company was appointed as sole distributor of Hindustan Motors Ltd. for Patna for Ambassador Cars. In 1980, on discovery of some frauds committed at Patna office by some employees and since the 1st petitioner's father was not physically fit, on his sugges-tion, the 1st petitioner was appointed as managing director to look after the day-to-day business of Patna Office. In 1983, the petitioner wrongfully purported to issue 25,000 further shares, out of which only 6000 shares were allotted to respondent 2, and the rest going to petitioners group. After the allotment was disputed, it was settled that an additional 6,500 shares would be given to respondent 2 by transfer of 5,750 shares from petitioner 1 to respondent 4 and 750 shares to respondent 3. Despite this settlement, the 750 shares were not transferred and only on subsequent demand in 1988, these shares were transferred in the name of respondent 3. The respondent group holds 54.5 per cent, the petitioner group 45 per cent and 0.5 per cent by one Shri Y.P. Malhotra. According to the reply, the respondents' shareholding was always more than that of the petitioners' and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Patna office by the respon-dents. As regards the directorship, the reply traces back absence of petitioners in board meetings from 5-9-1992 onwards. At the meeting on 5-9-1992, though the first petitioner was present, the second petitioner was absent and there was no application for leave of absence. The next board meeting was held on 30-12-1992 for which due notice was sent to the first and the second petitioners but they were absent without even a leave of absence. At the next board meeting held on 31-3-1993 the same position remained. The petitioners did not show any interest in the affairs of the company. The second petitioner ceased to be a director under section 283(i)( g) since she did not attend three consecutive board meetings, namely, 5-9-1992, 30-12-1992 and 31-3-1993. For the next board meeting dated 7-7-1993 due notice was given to the first petitioner and though oversight notice was also sent to the second petitioner. At this meeting also, the 1st and 2nd petitioners were not present and the first petitioner also ceased to hold office under section 283(i)( g). After 7-7-1993, board meetings were held on 10-7-1993, 31-7-1993 and 5-8-1993. For these board meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be included in the accounts for the year ended 31-3-1993. This was objected to by respondent 2. The auditors, however, adopted partisan attitude towards the petitioners and consequently resigned from the company. With regard to the plea of the petitioners for inspection of the books, papers and documents of the company in September, 1993, it is asserted, that, since they were no longer directors legitimately, the inspection was denied. However, the auditors of the company wrongfully made over zerox copies of books of account to the petitioners. The allegation of interpolation was also denied by the respondents. As regards the allegation of disposal of properties of the company, according to the respondents, the company had surplus immovable properties which are not generating any income and it was felt that a portion of the property at Calcutta should be developed. The reply states that the petitioners had full notice and knowledge of the development agreement and never raised any objection with regard thereto. It is asserted that the respondents are entitled to deal with and/or dispose of the property in the best interest of the company. The annual general meeting of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members renounced the rights they were allotted to the first petitioner and his father. This may be evidenced from the directors minute book. The further transfer of 5750 shares to the respondents group was made as they agreed to buy those shares. However there was no agreement for transfer of 750 shares. The purported transfer deed in respect of 750 shares from the father of the first petitioner is alleged as forged and fabricated. The petitioners have chal-lenged that the respondents could produce the share certificate or the original transfer deed relating to these 750 shares, to establish their claim. In support of the allegation of the petitioners, that the books of account are being tampered with by the respondents, they have also annexed an affidavit from one of the employees of the family where in he has stated, that, as per instruction of respondents 2 and 4 on 30-8-1993, he was made to incorporate a few insertions in the cash book of the company showing expenditure towards postal charges on different dates from March, 1993 to July, 1993. In order to establish the unfair conduct of the respondents, it is stated that though respondent 4 was at Patna on 12-8-1993 as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No reply was filed on C.A. No. 50, whereas C.A. No. 125 was replied to. No counter affidavit from respondents on the affidavit filed on 24-5-1995 by petition-ers appear to have been filed. C.A. No. 125 was filed after our order of 12-4-1994 by which we allowed inspection of documents by the petition-ers. The petitioners had complained that full inspection was not given. It is stated that the shareholders' minute book was not offered for inspec- tion. In addition, no inspection of cash books, general ledgers and other accounts were given. Directors minute books was also given only for a limited period i.e. from September, 1992 to October, 1993. It is the contention of the petitioners that the respondents have not complied with the directions of CLB. The petitioners have also questioned the validity of annual general meeting for the year ended 31-3-1993 for which notice was received by the petitioners. They have also questioned the statement in the notes on accounts and in the directors report with regard to remuneration to petitioner No. 1 and regarding an amount of ₹ 1.45 lakhs stated to be outstanding against petitioner No. 1 without taking into account a bunch of vouche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing director expired by a efflux of time on 30-9-1991 and the petitioner is liable to refund all the sums received for the period from 1-10-1991. In C.A. No. 50 of 1994 filed by the petitioners, they have alleged, that, despite the order of the CLB dated 3-12-1993, the respondents are purporting to deal with the assets and properties of the company by letting out, the same for marriage ceremonies and other allied purposes, evidence in this regard in the form of an invitation was also produced. It is also alleged, that, the respondents have not taken any steps for effectively conducting the income-tax proceedings pending in respect of assessment years 1991-92 and 1992-93 despite notice from the income-tax authorities. It is also complained that no steps have been taken to finalise the accounts for the year ended 31-3-1993 and to get these audited. The draft accounts sent to the auditors contained wrong statements. It is further stated, that, during inspection in November, 1993, the petitioners found that the shareholders minute book had been tampered with and the pages relating to the EGM of 24-7-1991 approving the remuneration of petitioner 1 has been scored out. It is also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicially affected in such cases, he is oppressed as a member of the company; itself. (d)It is only necessary for the petitioner to show that the affairs are conducted in an oppressive manner which lacks probity and fair deal in order to claim relief under section 397. It is not necessary that there should be deadlock in management to consider relief. (e)The various acts of oppression and mismanagement cited by Shri Mukherjee were:- (i) of petitioners 1 and 2 as directors. (ii)Holding board meetings without notice to the petitioners. (iii)Denial of right to operate bank accounts by petitioners. (iv)Withholding the appointment of petitioner as managing direc- tor. (v)Shifting of Regd. Office without notice to the petitioners. (vi)Denial of inspection of books and records to the petitioners as directors. (vii)Non registration of shares in favour of petitioner 3 and false claim of respondent 3 in respect of shares belonging to petition-er No. 3. (viii)Interpolation of entries in the cash book of the company. (ix)Fabrication of shareholders minutes book. (x)False statement with regard to bank accounts of the company in Calcutta. (xi)Window dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a family company. The company was not a private company converted from a partnership. The company, on incorporation, was a public company and out of 5,702 shares 2700 shares were held by non-Jaidkas. The 7 promoters consisted of two members and 5 outsiders. Further, the articles of association do not contain any restrictions on transfer of shares. The respondent 2 acquired shares from outsiders and in 1950 his group holding became more than the petitioners. No evidence of any arrangement between the parties has been produced to show that there was any arrangement to the effect that the company was a family company. (b)the complaint of the petitioners relates to directorship and other directorial rights for which the petitioners cannot seek redressal through a petition under section 397. (c)the petition cannot be entertained as petitioner has already filed a suit in Patna which is pending and the prayers in the suit are the same as in the petition and as such parallel proceedings cannot go on and that the petitioner has not approached CLB with clean hands and equitable reliefs are not admissible in such cases. Shri Sarkar relied on the following decisions to support his con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further cited the Hind Overseas (P.) Ltd. 's case (supra) relied upon by respondents, to state that even family companies as against partnership could also be considered for applying the principles of partnership what the decision indicates is a caution in liberally applying the principle in companies when more than one family is involved. According to him. Ebrahimi's case (supra) has recognised that deadlock is not essential for invoking partnership principles. He further stated that the agreement regarding participation in management need not be in writing but can be oral as held by the Delhi High Court in Bhaskar Stoneware Pipes (P.) Ltd. 's case (supra) . The facts here clearly establish that the understand-ing was unwritten. Shri Sudipto Sarkar strongly refuted the above arguments and pleaded that the structure of the company should be looked into very carefully to determine the nature of the company. According to him this company, right from the inception, was public company and there were outside shareholders holding nearly 50 per cent of the shares in which event according to the Supreme Court in Hind Overseas (P.) Ltd.'s case (supra), partnership princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) and Yenidje Tobacco Co. Ltd. In re [1916] 2 Chd 426 cited by the Supreme Court in Hind Overseas (P.) Ltd. 's case (supra) were forerunners on this subject, Ebrahimi's case (supra) was a Landmark Judgment and also cited approvingly by the Supreme Court. Ebrahimi's case (supra) recognised the principle of piercing the corporate veil to take cognisance of equities as between parties, behind the corporate structure and given credence to the hopes and aspirations arising out of the understanding/relationship between parties behind. Though Ebrahimi 's case (supra) was actually a winding up case, where the 'Just and Equitable' clause was given a liberal interpretation as against the ejusdem generis principle, the facts in that case show that in reality the parties were in partnership with equal share in management before forming a company. There was no reference to any agreement in writing. The case was decided on the basis of the circumstances that the parties were in partnership which association continued. Since the Principles of dissolution of part-nership were invoked, the court only insisted on the petitioner coming with clean hands, the observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imi's case (supra) wherein after citing the judgment of Lord Cozens - RD MR in Yenidje Tobacco Co. Ltd.'s case (supra) , the court came to the conclusion that what is necessary to be observed is the lack of mutual confidence between parties which is the indicator of the presence of deadlock. In the present case this condition is absolutely satisfied and with only two groups in management with equal representation on the Board the deadlock situa- tion is clearly visible. Court however, have held that deadlock is not essential. As has been held by Lord Cozens - RD MR Yenidje Tobacco Co. Ltd.'s case (supra) 'whether there is deadlock or not... the circumstances are such that we ought to apply if necessary the analogy of the partnership and to say that this company is now in a state which could not have been contemplated by the parties when the company was formed'. In fact the Delhi High Court in Eastern Linkers (P.) Ltd. 's case (supra) has rejected the consideration of 'good prospects' of the company carrying on profitably (antithesis of dead-lock) when applying the principle of partnership. In the circumstances it is clear that 'what is deadloc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany at the time of incorporation nor is it necessary that it should be necessarily be a continuation of an existing partnership. The Supreme Court in Hind Overseas (P.) Ltd. 's case (supra) has cited their own Judgment in Mohanlal v. Grain Chamber Ltd. 1968 SC 253 to state that primarily the circumstances existing on the date of petition should be taken into account. If relationship at the time of incorporation alone is to be considered as relevant, then, we are afraid, that, all big corporations under leading business houses of the country today with lacs of public shareholders may easily qualify for consideration on this principle. Even on incorporation if certain basic understanding had been there but subsequent conduct of the parties could change the total structure resulting in equities to various parties like financial institutions and Public Shareholders, in such a case the original understanding/relationship takes the back seat. But, if originally a company had the involvement of a number of relatives and friends thereby giving the impression of a larger group of persons but subsequently if all others give up their claims and the entire share holding gets concentrated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore convinced that the company is a family company and as such equitable principles can be applied. (b) Whether there are parallel proceedings ? Another preliminary issue raised by Shri Sarkar is that the petitioners should not be allowed to have parallel proceedings on the same prayers. He stated that the petitioners have already filed a suit being suit No. 386 of 1993 in the Court of Sub-Judge, Patna. Prayers in the suit are identical to the prayers in the present petition. Shri S.N. Mukherjee submitted that the prayers in the suit are confined to the validity of the board meetings and the directorship of the petitioners 1 and 2. On the other hand the present petition is comprehensive and it is by four petitioners in their capacity as members of the company. He cited the decision of the Calcutta High Court in Piyush Kanti Guha's case (supra) and insisted that the provisions of section 397/398 are a code by themselves and it is not possible to circumvent this procedure by instituting proceedings in a Civil Court. In this case the Division Bench relied on the observations of the Supreme Court in Cosmosteels (P.) Ltd. v. Jairam Das Gupta AIR 1978 SC 375. The court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, there was no removal of the petitioners as directors but they have vacated the office by the operation of law since they have not attended three consecutive board meetings. He further stated that the managing directorship of the compa- ny was not vested with petitioner 1 as per the article of association and the same cannot be so in a public company. The petitioners have only been talking of an understanding that the petitioners group will hold the managing directorship which however, could not be established by them. Even if such an understanding exists, so long as the company is not a party to such understanding, the same cannot be enforced against the company. In this connection he cited Kalinga Tubes 'case where it was held that an agreement between a non-member and two members of the company, though such agreement was in fact carried out earlier, cannot be enforced against the company. He also referred to the decision of the Supreme Court in V.B. Renga Raj's case (supra) to state that any stipulation which is not specified in the articles of the company but is found in any agreement between the members is not binding on the company. He also cited Bengal Luxmi C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Calcutta High Court the onus is on the company as regards the issue of cessation of directorship but the company has not discharged its onus since there is no evidence on record as regards the service of the notice of the board meeting in the absence of which the contention relating to cessation of directorship cannot be accepted. Shri Mukherjee narrated series of events which were 'Stage Managed' by respondents to show as if petitioner 1 and petitioner 2 have vacated office as directors by their own absence from board meetings. We have to distinguish between cases where removal from directorship is an issue in a petition under section 397 and cases where the directorship question is agitated in a suit or other civil proceedings. In Joginder Singh Palta's case (supra) the petition was not under section 397. In Life Insurance Corpn. of India's case (supra) also, the petition was not under section 397. Even in cases under section 397 relief in interlocutory applications for restoration of directorship is not maintainable unless there is prima facie satisfaction that it is a case of a family company or partnership principles apply. This was the situation in Beng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (supra) (para 54). We have already dealt with the case of Notice and evidence of despatch in Shoe Specialities Case in which a number of decisions were cited with regard to satisfactory proof of service of notice. From the contents of the minutes of the board meetings it is evident that all these board meetings were held without any substantial agenda item excepting for the one held in September, 1992 when the accounts and the director's report for the year ended 31-3-1992 were considered. The holding of 3 consecutive board meetings in July - August, 1993 after the 7-7-1993 board meeting is strange. All along the company was just holding a quarterly meeting probably to comply with the requirements of law of one board meeting every three months. Noticeably in July - August, 1993 alone there had been 4 board meetings in a month in which further co- options were also made which is the subject matter of complaint in the petition. It is also relevant to note that in all these meetings till co-option. Shri S.N. Jaidka respondent 2 and his son Shri G.K. Jaidka respondent 4 were the only directors present. The fact that the company has not discharged its onus with regard to ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te evidence. It is further stated that respondents 2 and 3, while filing the annual returns of other family companies in August 1993 after the purported vacation of office were continuing to show petitioner 1 as managing director of the first respondent company. Thus the respondents are estopped from contending to the contrary. It is also stated in the rejoinder that on 31-3-1993 petitioner 1 and 2 were in Calcutta and were residing at 7 Brown Field Road. That being the case there was no reason for their not attending board meeting on that day in which respondents 4,5 and 6 were co-opted. The notice for the purported board meeting on 31-3-1993 is dated 17-3-1993. According to the petitioners, on that day petitioner 1 was in Calcutta and attended the board meetings of other family concerns in respect of which minutes were produced, when the notice for the purported 31-3- 1993 meeting could also have been served. As regards the purported service of notice even after the claimed vacation of office, it was stated by the respondents that it was due to oversight. However, according to the petitioners this is only an after thought. In respect of all the above averments in the rejoinder th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is remuneration and perquisites about which we shall deal with in more details in the final reliefs. In view of the above, we are convinced that the plea of vacation of office of directors in respect of petitioner 1 and petitioner 2 is unsubstantiated. In view of the nature of the company as already stated being a family company, keeping in mind the equitable considerations as has been already recognised by various English and Indian Courts, we are con- vinced that in such cases, directorial complaints cannot be ignored and we consider these acts as oppressive. Accordingly we hold that no effect can be given to the resolutions or minutes of the board meetings purported to have been held on 10-7-1993, 31-7-1993 and 5-8-1993. (d) Other Acts of oppression : We have not embarked on a quest for definition of oppression as there are ample precedents to identify what is and what is not oppression. So long as a course of conduct or a single act having enduring adverse effect against petitioner is such that it lacks in probity and is unfair, gets qualified to be branded as oppression. One such act we have already dealt with is with regard to the directorship of petitioner 1 and pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 993 and the same was allowed. In view of this these two grievances were settled during the proceedings. Hence no cause of action exists. As regards the grievances of non transfer and non transmission of the shares, the petitioners have put forward a claim in respect of 3501 shares i.e., 2001 stated to be held by the father of petitioner 1 who expired in 1989 and 1500 shares stated to be wrongly transferred to respondent 3. The petitioners' case is that, the entire 3501 shares belonging to the petitioners group for transmission/transfer of which the respondents are insisting upon a probate or a succession letter. It is further contended that 750 out of the 3501 shares have been wrongly transferred by the respondents in the name of respondent 3 in 1988 at a meeting of the board of directors. The contention of the respondents on this point is that the petitioner managed to issue 25,000 shares in 1983 out of which he took 19,000 shares to his group and allotted only 6000 shares to the respondents group. Thereafter by mutual settlement each group agreed to receive 12,500 shares. Accordingly the petitioners group should have transferred, as per the understanding, 6500 shares to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first petitioner as the sole executor of Late Pran Nath Jaidka, the father of the first petitioner. This probate appears to have been issued only in February 94 whereas the petition was filed in October 1993. Since the controversy is settled by the issue of probate in the name of petitioner 1 as a sole executor, the company has no alternative and has to register the 2751 shares in the name of petitioner 1. We order accordingly. As regards the claim of another 750 shares, keeping in view the fact that the annual return signed by both petitioner 1 and respondent 2 in respect of the year 1988 clearly shows that the transfer was already made and in view of the fact that the petitioners have not rebutted the assertions that the transfer was effected at a board meeting in which petitioner 1 was also supposed to be present, we do not propose to interfere in such transfer. Acts of mismanagement One of the acts of mismanagement relates to fabrication and falsification of accounts. The instances cited are: (i)Interpolation in the cash book on 20-6-1993, 1-7-1993, 17-7-1993, 27-9-1993 and 28-8-1993 by showing expenses on postage for issuing notices of board meetings and for payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not elaborated during the hearing and we do not have the benefit of the real intent of the petition in highlighting these entries. By merely looking at these entries we cannot come to any conclusion of siphoning of funds which perhaps is the allegation nor can we embark on a roving enquiry. Perhaps the petitioner wanted to establish that the funds were temporarily used by respondents. (iii)It is alleged that in the draft notes to the accounts for 1992-93, there was a wrong statement to the effect that no remuneration was provided to the managing director namely petitioner 1 whereas it should have been provided. Such a statement is also found in the final audited accounts for the year ended 31-3-1993. However, this state-ment did not find a place in the earlier accounts of the company. It is evident that such a stand has been taken by respondents subse- quent to the institution of these proceedings. In this connection we find that K.L. Chatrath and Company were the auditors of the company upto the year ended 31-3-1992. The respondents have now alleged that the said firm of auditors have now sided with the petitioners. Perhaps, since the auditors themselves had applied for Govt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese pleadings were put up by the petitioner in the subsequent application, the respondents have chosen only to make a general denial regarding falsification of accounts. This is an unprecedented case where the petitioner is attempting to establish discrepancies between draft accounts and final accounts. In draft account though approved by the board of directors is not final unless audited by the auditors of the company. If after auditing, the auditors point out any discrepancy, it may be worthwhile for us to enquire into the matter. If we attempt to probe into the discrepancy between draft and final audited accounts we will be only launching a fishing enquiry which is not appropriate for this forum (sic) . (vi)The petitioners have also pointed out discrepancies based on com-parison with the previous years figures on inter branch comparison between Calcutta and Patna. This kind of probing ought to have been done by the Board of Directors and the auditors to check the veracity of figures. It is also necessary for the 1st petitioner as managing director to have established that such discrepancies did not exist upto the previous years. These kind of variations can be apparently seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows that the Regd. office of the company as 7, Brown Field Row, i.e., a document filed after the purported shifting of Registered office. Further even the document filed in the Calcutta High Court with regard to an application under article 226 of the Constitution against the order of 4-12-1993 passed by the appellate authority under the Urban Land Ceiling Act the registered office of the company is shown as 7, Brown Field Row, Calcutta. These allegations of the petitioner have not been dealt with by the respondents in their reply or in the oral arguments. However on the basis of the accepted facts referred to by the petitioners, it is evident that the minute book of the board of directors appear to have been fabricated on a subsequent date which shows the mala fide actions of the respondents. We do uphold the contentions of the petitioners in this regard. Conduct of parties It is well established by precedents that relief could be considered in favour of the petitioners only if they have approached the court with clean hands. This was established in Bengal Luxmi Cotton Mills Ltd. 's case (supra) and was also subsequently affirmed by Karnataka High Court in Srikanta Datta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establish that though they were present in Calcutta, they were not informed about board meeting and thereby pointed but the undesirable conduct of the respondents. They have also drawn attention to affidavits given by Shri R. Roy and Shri Usha Ranjan Das, to show that a sum of ₹ 1.32 lakhs was actually drawn by Shri P.R. Dube and Shri R.D. Dube of Patna office against IOU slips for purchase of parts and workshop expenses and another to show that all the minute books of three companies of Jaidkas were in the custody of respondent 2 and that the minutes were not written after 1992 by deponent. These affidavits have been given by the employees after their services were terminated. Petitioners have also stated that due to the non cooperation of the respondents the company was starved of working capital resulting in the company's business being adversely affected. They also stated that with the introduction of Maruti Vehicles in the Market, the sale of the company was adversely affected and yet the company was performing satisfactorily. With regard to the conduct petitioners, excepting the 1983 episode of alleged issue of shares disproportionately to the petitioners, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company is a family company and as such equitable reliefs could be considered if oppression is established. We are also satisfied that there is just and equitable ground available for winding up the company but by doing so the petitioners would be prejudiced. Hence it is not advisable to wind up the company which would mean disposal of valuable assets and discontinuation of profitable business but better to frame a scheme by which the affairs of the company could be regulated in future and the matters complained of can be put an end to. We are also convinced that the acts of the respondents have been harsh, burdensome and wrongful with the result the petitioners have genuine grievance which needs to be redressed. Though some of the complaints go unsubstantiated the major complaint of oppression with regard to the directorship and non-furnishing of notice of meetings and falsification of records have been established. In the circumstances reliefs could be considered. After the transmission of 2751 shares in the name of the petitioners group the total holding of the two groups stands at 44.75 and 54.75 as reflected in annexure E on page 300 of Vol. I. Thus still the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utta's case (supra) and stated that 'the Court has ample power under sections 397 and 398 read with section 402 to divide the properties and business of the company into two equal groups, so that the shares will be surrendered to the company and thereby the capital of the company will be reduced to that extent and thereafter each group will be entitled to carry on the business of the company. But the name of the company for the respective groups should be suitably changed'. The suggestion therefore was for division of the properties and the business. Shri Sarkar on the other hand strongly refuted this suggestion and stated that his clients hold the majority and the decision in the case is not applicable as in that case the holding was 50:50. Moreover this is possible when both the parties agree for such division. In this case if at all, the petitioners may have to be paid off. We have considered the submissions of both the parties and have also gone through the facts and decision in Sishu Ranjan Dutta 's case (supra). We feel that we may drew substantially from the decision in this case with regard to the division of the business of the company. As regards divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners opportunity to refuse. Respon-dents may take over the property at market value. On valuation of business and property and after division based on shareholding ratio differences, if any should be settled by payment. We have also to keep in view that the accounts for the year 1993 has been finalised but the petitioners contend that it is finalised without taking into account certain vouchers of Patna Office which has been shown as outstanding from the 1st petitioners. Keeping in view all the above we order that: (i)The proceedings of board meetings of July 10th, July 31st and Aug. 5, 1993 are declared as null and void. (ii)The 1st and 2nd petitioner will continue to hold office as directors of the company with the 1st petitioner continuing as managing director and shall be entitled to remuneration as such till he vacates office as stipulated hereunder. Respondents 3,5 and 6 cease to hold office as directors with immediate effect. (iii)The accounts of the company for the year ended 31-3-1993 shall be recast after taking into account the details of vouchers submitted by the 1st petitioner as well as the observations of the Internal Auditors. If these details are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cancellation/transfer within 15 days of the valuation as notified by the valuer and informed to them. (x)After taking into account the assets and liabilities transferred to the petitioners as per valuation and after adjusting for the value of their shareholdings the balance if any, should be settled between the petitioners and respondents. The petitioners shares shall be can- celled, or if so desired, transferred to respondents or their nominees based on the valuation as referred to above. Before doing so, the 2751 shares shall be transmitted in the name of the 1st petitioner from his father's name. (xi)The respondents group will retain the present company after parting with the Patna business and assets as referred to above. However, the present name of the company shall not be used by either party in future as the name represents involvement of both the factions of the family. This conclusion is in line with the Calcutta High Court Judgment in Sishu Ranjan Dutta 's case (supra). In case the petition-ers' shares are cancelled correspondingly reduction in capital shall also be effected in the books of the company without any further proceedings in the matter. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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