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2007 (6) TMI 556

..... ammi against the respondents, M/s Pindi Roadlinks Pvt. Ltd. The CP has been filed under Sections 397 and 398 of the Companies Act, 1956 (hereinafter referred to as 'the Act'). alleging certain acts of oppression and mismanagement in the affairs of the Respondent company. 2. The undisputed facts of the case are: The respondent company, namely, M/s Pindi Road Links Ltd. was incorporated on 25.10.1983 with its registered office at B-116, Ashok Vihar, Phase-I, Delhi-52. The authorised share capital was ₹ 15,00,000 comprising of 15000 equity shares of ₹ 100/- each. The paid up capital of the company was ₹ 15,00,000/-. The main objects of the company are to carry on the business of transport of passengers, goods and animals by means of motor crafts, motor buses, lorries, motor cycles, motor rickshaws, tempos, trucks, tractors, scooters, ships, aeroplane, helicopters, trams, railways, carriers and other vehicles whether propelled or moved by electricity, petrol, vapour gas, diesel oil, oil or otherwise and to carry on the business of all other modes of transport. 3. Shri J.C. Mahindro, Counsel for the petitioners pointed out that the respondents have tried to mis .....

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..... unts realized from sale of trucks and a car of the company is also a distortion of the correct facts. It was pointed out that the sale proceeds from the trucks was deposited with the company. 4. The counsel for the petitioner pointed out that the petitioner No. 1 was not a signatory to the bank accounts and/or that all withdrawals as incorporated in Books of Accounts duly verified were not signed by the petitioner No. 1. All the alleged signatures of the P-1 in the books of accounts were forged by the respondent No. 2. R-2 became dishonest and started making unwarranted cash withdrawals from the bank. The respondent No. 2 had himself made cash withdrawal amounting to 95% of the R-1's money himself in last nine months before the disputes arose. Further, it was argued that the respondents' contention that the Division Bench has found diversification of funds of the Respondents company to H.K. Goods Transport Company Pvt. Ltd. be untrue is not correct. Admittedly an FIR has already been registered and the mischief of the R-2 is apparent from the fact that he himself wrote a letter to the SHO, Police Station Punjabi Bagh, wherein he had alleged that the record was lying with hi .....

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..... aced on the decision of the Hon'ble High Court of Delhi in Suresh Kumar Sanghi v. Supreme Motors Ltd. and Ors. Vol. 54 Companies Cases page 235 wherein it has been held as under: In that very case, it was also observed that the action of the directors, if it is illegal or invalid, may be challenged in a court of law by an appropriate action. The learned Judge held that challenge to such an action was not appropriate under S.397 or S.398 of the Companies Act. It was, of course, held that under S.397 or S. 398, action of the directors could be challenged if that action was oppressive to the minority shareholders or prejudicial to the interests of the company. In Kalinga Tube's case [1965] 35 Comp. Case 351 also it was held by the Supreme Court that in order to constitute oppression within the meaning of S.397, "there must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members". From the aforesaid judgments, it was argued that it clearly follows that (1) past acts which have come to an end cannot be challenged un .....

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..... putes. When the court finds that it does not seem to be suitable for resorting to those provisions, then it can be said that the choice before the petitioner is to move a winding up petition and no other alternative relief is available. It was pointed out that it is an admitted case of the petitioner that the respondent company is not doing any business since November, 1999. Therefore, it was argued that the present petition under the provisions of Section 397 and 398 of the Companies Act is not maintainable and deserves to be dismissed. Further, it was pointed out that respondent No. 3 has already filed a petition for winding up of the company which is an appropriate remedy. The said petition is pending consideration before the Hon'ble High Court of Delhi at New Delhi. 6. Further the counsel for the respondents pointed out that the petitioner is responsible for the present state of affairs in as much as if is the petitioner who wrote false, frivolous and defamatory letters to various clients of the respondent company and also to the banks to get the bank accounts of respondent No. 1 frozen. It was pointed out that in fact the business of respondent No. 1 company was running sm .....

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..... en action in accordance with law be taken. With these observations the petition disposed of. Dasti. Sd/- Usha Mehra, J. Sd/- M.A. Khan, J. 30.5.2001. 7. The counsel for the respondents further pointed out that the Respondent company was set up by respondent No. 3 and respondent No. 2 was a shareholder of the said company together with his wife holding about 36% shares in the said company. It was denied that that the appointment of the respondent No. 3 on the Board of the Respondent Company as of 8.7.99 is null and void or of no effect in law. It was pointed out that the same is in accordance with law. 8. Shri Vineet Malhotra, Counsel for the respondents argued that the petitioner had sought to make false and frivolous allegations against HK Goods, which was not a party in this petition, and against respondent Nos. 2 & The petitioner had been writing false and frivolous letters. In this regard the Hon'ble High Court of Delhi at New Delhi by its judgment and order dated 28.2.2006 passing a decree wherein the suit of the plaintiff was decreed and the Hon'ble High Court held as under: A decree is, thus, passed in favour of the plaintiffs and against the defendants restraini .....

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..... ibunal allowed the Bank's OA vide order dated 18.11.2004 directing the defendants to pay a sum of ₹ 37,54,500.69 as well as interest @ 10% p.a. w.e.f from 26.7.2000 within ten days, therefore, it is further argued that no useful purpose would be served if the R-1 company is allowed to exist and is not wound up. The petitioner has resorted to criminal activities, FIRs for which have been lodged. He has usurped the amounts realised from sale of trucks and a car belonging to the R-1 company. According to the respondents Petitioner's allegation that the R-1's assets and resources have been diverted to the present company namely H.K. Goods is not true as has been held by the Division Bench of the High Court mentioning that there is no document with the investigating officer to show that the amount was diverted from Pindi Roadlinks Pvt. Ltd. to H.K. Goods Transport Pvt. Ltd. Petitioner's case is that he has been ousted by the respondent, he has been removed as a director; R-3 has been appointed as a director; the respondents have made the R-1 a shell company by diverting funds and assets and other resources including the Goodwill of R-1 to H.K. Goods which is nothin .....

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..... cessary to examine the provisions of Section 397(2). It reads "If on any application under Sub-section (1), the Company Law Board is of the opinion - (a) that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members: and (b) that to wind up the company would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up". A careful analysis of the above would indicate that it is for this Board to form an opinion that the affairs of the company are being conducted in an oppressive manner and once it forms such an opinion, the just and equitable grounds for winding up of the company becomes established and this Board has to grant relief in terms of Section 402, if it again forms an opinion that such winding up would prejudicially affect the interest of the members/company. In other words, once this Board gives a finding that acts of oppression have been established, winding up of the company on just and equitable grounds becomes automatic. Shri Sarkar relevantly referred to the unreported judgment of Delhi Court in Prentice Hall case, .....

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..... ous to themselves but injurious to the company and even if the majority of the shareholders also support them, in such a case the directors are not acting as directors but are wronging the company as third persons and are liable for such actions. The directors have breached their fiduciary duties. On the role of Directors, the law is well settled. In some respects, Directors resemble trustees. Equity prohibits a trustee from making any profit by his management, directly or indirectly. It is objectionable to use such power simply or solely for the benefit of directors or merely for an extraneous purpose like maintenance or acquisition of control over the affairs of the company. Directors are required to act on behalf of a company in a fiduciary capacity and their acts and deeds have to be exercised for the benefit of the company. The fiduciary capacity within which Directors have to act enjoins upon them a duty to act on behalf of a company with utmost good faith, utmost care and skill and due diligence and in the interest of the company they represent. They have a duty to make full and honest disclosure to the shareholders regarding all important matters relating to the company. Th .....

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