TMI Blog2012 (7) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... ve given contradictory reasons for increase of the capital, one being for payment of liability towards tax and other dues, whereas in the letter dated 21st July, 2008 issued by the respondents another reason has been given that it is for reducing the interest burden. No member or director except Wagles were intimated or informed about the actual reason of the purpose of increasing the share capital. As on relevant date, the company had to recover a sum of ₹ 18,04,000 from its sister concern Metallurgical Analytical Laboratory, a Partnership Firm. No attempt was made to make recovery of the sum from the partnership firm. It was contended that the absolute contradiction in both version shows the dishonesty and malafides of the respondents. 3. Further, it was contended by the counsel for the petitioner that admittedly the resolution for issuance of the additional share was passed on 8th July, 2008. But there is no record produced by the respondents that any notice of the meeting of 8th July, 2008 was issued and sent to the director of the company, (Mrs. Suhasini Kurkure) and was received by her. The letter conveying the minutes of 8th July, 2008 for increase of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cability of section 81 of the Act in case of private limited companies casts a heavier burden on its director . It was contended that nothing is placed on record that what is the utilisation of the fund generated from issuance of additional shares. No meeting was, in fact, held to allot the said 694 shares to Wagle. No decision of any Board of directors has been placed on record. 5. Drawing my attention to article 7 of articles of association of the company which provides as follows: 7. Subject to any direction to the contrary that may be given by the resolution sanctioning the increase of share capital, all new shares shall before issue be offered to such person(s) as at the date of the offer are entitled to receive notice from company of general meeting in proportion as nearly as the circumstances admit, to the amount of the existing shares to which they are holding or for the time being entitled. The offer shall be made by notice specifying the number of shares offered and limiting a time within which the offer, if not accepted, will be deemed to have been declined and after the expiration of the specified time or on receipt of an intimation of non-acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout the knowledge of anybody. It was alleged that annual accounts of the company and directors' report for the year ending 31st March, 2009, 2010, 2011 and 2012 are not prepared and placed before the members as required under the Act. 8. Responding to the allegation that the petition is barred by limitation, it was pointed out that, the petitioner learnt about issuance of 694 shares to Wagle in August 2009 when the respondent Nos. 1, 2 and 3 filed suit in city civil court. Cause of action has, thus, accrued in favour of the petitioner in August 2009 when the petitioner learned all facts from the proceedings in city civil court. However, in view of the pendency of the suit being SC Suit No. 1781 of 2009 in the city civil court at Bombay, the petitioner did not take any action till February 2011, when the respondent Nos. 1, 2 and 3 withdrew the said petition. The respondents have never informed at any time prior thereto to the petitioner about the issuance of 694 shares to Wagle. It was contended that the Act of oppression and mismanagement by the respondents continues from the date of issuance till date, it is a continuous act of oppression and mismanagement and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be followed. The judgment cited relates to Arbitration proceedings and not an application under the Act. Another judgment in the matter of Gorakh v. Sub-Divisional Officer [2012] 2 Mh. LJ, arises out of the appeal under Bombay Tenancy and Agricultural Lands Act wherein the appeal was died beyond the prescribed period of limitation and no application for condonation of delay was filed. Hence, the hon'ble court refused to entertain the appeal. It is settled law that when an application is died beyond prescribed period of limitation either it is not maintainable or in a matter which falls under section 5 of Limitation Act, an application for condonation of delay is required to be filed. None of the authorities are with regard to a dispute under section 397 and/or 398 of the Act. Hence, the said judgments will not apply. Further, it was pointed out that in the judgment in the matter of Incable Net (Andhra) Ltd. v. A P Aksh Broadband Ltd. [2010] 97 CLA 158 (SC) : [2010] DGLS (Soft.) 296, the petitioner No. 2 had actively participated in all the proceedings including day to day activities and was attending the office and had signed cheques in the regular course of business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal A Jaisingh v. JJ Builders [2003] 3 Mh. LJ; Mohinder Singh v. Hoshiarpur Express Transport Co. Ltd. [2007] 80 CLA 292 (CLB) : [2008] 86 SCL 155 (CLB); L.S. Synthetics Ltd. v. Fairgrowth Financial Services Ltd. [2004] 62 CLA 153 (SC) : [2004] 11 SCC 456 and Smt. Kana Sen v. C K Sen Co. (P.) Ltd. [1997] 27 CLA 82 (CLB) : [1998] 91 Comp Cas 25 (CLB). 13. The respondents case is that the petitioner's allegations about allegedly illegal issue and allotment of 1,592 right equity shares are blatantly false, it is false to say that the petitioners had no knowledge of the said fact till service of plaint in city civil court and that such issues were allotted without offering it to the members of the company because (a) the letter dated 21st July, 2008 offering the shares was sent to the petitioner vide receipt No. 2955 dated 25th July, 2008 and its RPAD shows that the petitioner had duly received it; (b) the letter dated 21st July, 2008 offering the shares was sent to Mrs. Suhasini Kurkure as beneficiary shareholder vide receipt No. 6498 on 21st July, 2008 it was returned unclaimed ; (c) Mrs. Suhasini P Kurkure in her company petition has alleged that it was purposely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... false because at the relevant time the company had to discharge heavy burdens on account of taxes, salaries, etc. The company had, in usual course to pay service tax and the company had opted to challenge the tax imposed. After hearing the tax was finally fixed at ₹ 44,30,763 the same was paid by the company for which Mr. Wagle contributed his own funds to the extent of ₹ 20 lakh. However, there was still need of funds to run the company and hence the decision was taken to augment the funds. 15. Further, it was argued that the allegations of issuing the shares at par are ill-founded because: (a) there is no mandatory provision that the rights equity shares-must be issued, allotted above at par price; (b) the private company's shares are not a market commodity and it is not a listed company whose shares will fluctuate as per market; (c) the petitioner admittedly received the offer as per RPAD. She neither objected to at par offer nor did she offer to purchase these above at par price; (d) in the year 2001, the company had issued rights equity shares which were accepted at the price at par by all the shareholders including the petitioner herse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out that in both the petitions it is contended that Suhasini Kurkure and Neelam Divekar/Deepak Divekar be declared as director(s) of the company. It was pointed out that Mr. Deepak Divekar is the enemy of the company who made correspondence with Indian and foreign clients of the company for blacklisting of the company. Further, Mr. Deepak Divekar had filed criminal cases and civil suits against not only the company but also against its individual directors including the husband of petitioner Kurkure. It was further pointed out that Mr. Deepak Divekar was removed from the company-for his anti company activities in the year 2001 and both the petitioners are trying to bring him back into directorship despite his actions being detrimental to the company's interest. It is the respondents' case that both the petitioners had issued purported notice under section 169 jointly with Mr. Deepak Divekar who is not at all a 'member' of the company, the petitioners have joined hands with an outsider for interfering with the affairs of the company. It was argued that whenever the company issued letters to Mrs. Neelam Divekar as a shareholder, Mr. Deepak Divekar issued threate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice by Mrs. Divekar neither she purchased the shares at par nor she objected to the rate from 2008 till filing of the petition. The shares offered to Kurkure were not purchased at all. The petitioner (Mrs. Divekar) and the petitioner (Mrs. Kurkure) have been together in all the actions against the company at-least from the year 2009, therefore, it can not be contended that the fact of augmentation of share capital was known to petitioner Mrs. Divekar but was unknown to petitioner Kurkure. It was pointed out that in the past also the company had issued shares at par and none of the petitioners had objected to the same. 20. It 'is the respondents' case that the purported EGM notices dated 1st July, 2009 and 24th July, 2009 were and are patently illegal because: (a) non-members can not give any notice to the company for EGM; (b) members and non-members cannot join in section 169 notice of EGM; (c) notice was not given to other members, i.e., Aseem Wagle, Ashlesha Wagle, Medha Wagle and Mr. Gautan Dhume who are also the shareholders; (d) the agenda of EGM was hostile to the company, i.e., to appoint a person as director-who had been removed from the directorship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thirdly, much before the notice dated 1st July, 2009 the appointment of the respondent No. 3 was effected on 29th June, 2009, therefore, the agenda of EGM had became redundant. Further, the notice dated 24th June, 2009 was not signed by Deepak Divekar, when he understood the illegality of notice dated 1st June, 2009. 23. It was argued that the appointment of the R-3 was made in proper and legal manner. Mr. Rajan Wagle expired on 27th June, 2009 on which day he was working in the office in morning. It was a month end and the salaries of the workers, etc., were to be paid. 'The respondent No. 2 knew that it was required to pay salaries of the staff and discharge the outgoings. Therefore, he by passing resolution appointed the respondent No. 3 on 29th June, 2009. The express courier was sent to Noida on the very day and the DIN No. was applied for. The DIN No. was granted vide the letter dated 2nd July, 2009 which was received on 3rd July, 2009. The appointment of respondent No, 3 was reflected on even RoC site on 3rd July, 2009 itself. Therefore, the very agenda of purported EGM notice was rendered redundant and there was no shortfall in the number of directors unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions and the case law relied upon by the parties. There is no dispute with the case law cited but each case turns on its own facts. Considering the pleadings, the documents, arguments and the legal position as applied to the facts and circumstances of this case, I find that the petitioner has not been able to controvert the contentions of the respondents. It is noted that two company petitions (CP No. 54/11 and CP No. 15/2012) have been filed by two by two different petitioners alleging the same causes of oppression and mismanagement in the R-1-company and seeking similar reliefs without joining each other as a party in these petitions, the respondents' contention that the company petitions are not maintainable on account of non-joinder of parties is found to be correct. Further, it is noted that the respondents contentions regarding the conduct of Deepak Divekar being prejudicial to the interest of the R-1-company remain uncontroverted. There is no answer to the contradictory statements in the company petitions. Further, the respondents' contentions regarding appointment of R-2 and R-3 remain uncontroverted. 27. Admittedly, the petitioner has tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a single act, since it has continuous effect, allegation relating to the same can be entertained in a petition under section 397. In a 397 petition, if the alleged act of oppression has a continuous effect, then the issue of limitation is of no consequence. 29. It is noted that though the respondents have succeeded in making out a case, despite giving different reasons, for increasing the share capital by issuing and allotting 1,592 rights equity shares for proper purpose for meeting tax liabilities and other dues. Though there is no reply to the respondents' contention that in August 2009 itself the petitioner was aware of allotment of 1,592 shares and that her silence from August 2009 till the date of filing of the CP in 2012 is not explained, it is the petitioner who has succeeded in making out a case that due procedure has not been followed for increase and allotment of 1,952 shares to the respondents only and it is an act of oppression which as resulted in reduction of her shareholding and it is a continuous act of oppression. Irregularities per se may not be oppressive to the petitioner but lack of transparency in functioning of the R-1-company and redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections 397 and 398 of the Act, mere proof of those allegations would not entitle the petitioner to the reliefs sought for when these reliefs are discretionary reliefs and they will be granted only to persons who approach this court in good faith and the parties who approach this court for equitable reliefs must come with a clean record. So, such a person should not be entitled to the reliefs under sections 397 and 398 of the Act... In Gujarat Bottling Company v. Coca Cola Ltd. [1995] 18 CLA 322 (SC) : (1995) 5 SCC 545 @ para 47, the hon'ble Supreme Court has held that to invoke the equitable jurisdiction of the court, the conduct of a party is important: ....Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest... In Atmaram Modi v. ECL Agrotech [1999] 98 Comp Cas 463 @ p.479, the CLB has held that when a petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquiescence in the alleged acts of oppression and mismanagement and which acts she has failed to establish in the face of uncontroverted contentions of the respondents in reply to her allegations, on account of non-joinder of parties, on account of petitioner's conduct which is found to be prejudicial to the interest of the R-1-company, to do substantial justice between the parties, with a view to bringing to an end the matters complained of, and to regulate the conduct of the company's affairs in future. I hereby allow the petitioner to move out of the R-1 company on receipt of fair value of her shares (amounting to 28.43 per cent) to which she is entitled on a valuation report to be obtained by her as on 31st March, 2011 (being near to the date of filing of the CP). The respondents are hereby required to buy her shares at the price ascertained by a reputed valuer, within four weeks of receipt of such valuation report. In case of dispute regarding the fair valuation of shares, the parties are at liberty to mention the matter and submit sealed bids to buy/sell out their shares and part ways. Company Petition No. 54 of 2011 is disposed off in the above terms. All company a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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