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TMI Blog2018 (2) TMI 1988X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) On 4.7.2005 respondent no.1 company was incorporated. The authorized, issued and paid up equity share capital of respondent no.1Safe Heights Developers Pvt. Ltd. (the Company) at the time of incorporation was Rs. 2,00,000/ divided into 20,000 equity shares of Rs. 10/ each. Appellant no.1 and appellant no.2 and respondent no.2 and respondent no.3 were the first directors and shareholders of the company at the time of incorporation and account was opened in the name of the company on 7.7.2005 with Samata Sahakari Bank Ltd. in which appellant no.1 and respondent no.2 were the signatories. (ii) On 27.6.2006 an account was opened in the name of company with HDFC Bank, Goregaon branch in which appellant no.2 and respondent no.2 were joint signatories. Respondent no.2 resigned from office of director on 2.11.2006 which was accepted by Board and form 32 was filed accordingly with Registrar of Companies (ROC). (iii)On 6.11.2006 an Extraordinary General Meeting was called in which the authorized capital of the company was increased from Rs. 2,00,000/ to Rs. 5,00,000/. (iv)On 14.3.2007 in another Extraordinary General Meeting the authorized share c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007, the shareholding of the Petitioners had been diluted; allegedly no notices were given for the meetings pertaining to the rights issue; (b) The Respondents had caused the registered office of the Company to be shifted on two occasions; allegedly no notices were given for the meetings pertaining to the shifting of the registered office; and (c) disputes pertaining to appointment and removal of directors. 5 The CLB has analysed in detail the various submissions made by the Appellants, and after considering the factual matrix, the submissions made on both sides and the position in law, passed a detailed, comprehensive judgment dismissing the Petition, but directing the Respondents to buy out the Petitioners' shareholding. Limited Scope of Section 10F 1. It is well settled, as held, inter alia, by the Hon'ble Supreme Court in V.S. Krishnan & Ors .v. Westfort HiTech Hospital Limited & Ors. and followed in Purnima Manthena & Anr. v. Renuka Datla & Ors that an Appeal under Section 10F of the Companies Act, would lie only on a question of law. Section 10F expressly states that the Appeal will lie only on a question of law arising out of the order. It is furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 10F is not limited to adjudication of questions of law arising out of the order, but also extends to questions of facts in certain circumstances. This is a misreading of the judgments of the Hon'ble Supreme Court. It is clear that the scope of jurisdiction of this Court is restricted to a question of law and only if it can be held that a finding of fact is perverse and based on no evidence, then that perversity itself may be treated as a question of law. This is not to say that this Court would be required to minutely analyse the judgment of the CLB on all factual aspects and arrive at a conclusion that a particular fact ought to have been considered differently, or that some other conclusion ought to have been arrived at on the facts. This Court would truly be required to assess the judgment of the CLB holistically to ascertain whether the judgment is based on no evidence and is therefore perverse. In the present case, under no circumstances can it be said that the judgment of the CLB is either perverse or cursory or based on no evidence. The Appellants are attempting to treat the present proceedings as a First Appeal and are in effect seeking that this Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similarly discretionary order under Section 111 of the Companies Act, 1956, in Sulochana Neelkanth Kalyani v. Takle Investments Co. & Ors., has held that exercise of such discretion could certainly be affected by inordinate and unexplained delay and laches and that any such delay may render granting of the relief inequitable, as there could be equities arising in favour of other parties as a result of such delay and also such delay may give rise to a case of acquiescence, waiver or estoppel. These aspects would be for the CLB to assess and would depend upon the facts and circumstances of each case. 12. In the Petition filed by the Appellants before the CLB, the Appellants have set out the various acts, which according to them constituted oppression and mismanagement, including the rights issue and the shifting of the registered office. Thereafter it is the case of the Appellants that when they became aware of the purported conduct of Respondent Nos. 2 and 3 "then on 5th November 2007" they issued a show cause notice to Respondent Nos. 2 and 3. This show cause notice was followed by a letter on the same date addressed to Respondent Nos. 2 and 3. This letter was replied to by a let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narrow jurisdiction under Section 10F of the Companies Act, 1956. 15. Therefore, I find nothing wrong in the CLB concluding that on the ground of delay and laches alone, the Petition could have and ought to have been dismissed even without going into the allegations raised by the Appellants. Unclean Hands 16 The CLB has, after a detailed consideration of the Appellants' conduct, arrived at a finding of fact that the Appellants had suppressed material facts and had not come with clean hands, having indulged in various acts of misconduct as set out in the order, including running a parallel Board of Directors, holding meetings without any notice (as opposed to the Respondents having shown UPC records for service of notice for their meetings) and appointing / removing directors at their whim. The CLB has rightly noted that a party seeking relief in an equitable jurisdiction must itself act equitably (i.e., a person who wants equity must do equity), and has arrived at a conclusion that the Appellants have not acted equitably. 17 In their submissions, the Appellants have sought to deflect attention from their own defaults by alleging defaults on the part of the Respondents. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing both sides, but this aspect was not urged, as is apparent from the judgment of the CLB. 21 In this context, the CLB has rightly held on the basis of Section 53 of Companies Act, 1956, that there arises a rebuttable presumption that the documents were served on the Appellants under certificate of posting. As held by the Hon'ble Supreme Court in the case of V. S. Krishnan (supra) relying on the judgment of the Hon'ble Supreme Court in M. S. Madhusoodhanan v. Kerala Kaumudi Private Limited, the burden was on the addressee, i.e., the Appellants herein, to rebut the statutory presumption and show that the notice had not been received by them. Admittedly in the present case no such attempt has been made by the Appellants to show that the notice was in fact not received by them. In the circumstances, it cannot be said that the CLB judgment is perverse or unreasonable or arbitrary on this score. 22 The Appellants have sought to rely upon certain judgments on the aspect of service of notice for meetings. Broadly stated, the said judgments only lay down the accepted proposition that notice of a meeting ought to be given to the shareholder / director. The said judgments have no app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th March 2007 as set out later, in which the Appellants have participated in raising the share capital, and until the issuance of the show cause notice on 5th November 2007, (during which time the notices were sent by UPC) there is no record whatsoever to show that the relationships between the parties was in any manner embittered. During this period between March 2007 and November 2007 there was no embitterment whatsoever and it was during this period that the rights issue took place culminating on 22nd September 2007, as also the shifting of the registered office in April 2007 and JulyAugust 2007. Hence, the notices sent for these meetings under UPC during this period, cannot possibly be required to be viewed with any suspicion on the ground of purported embitterment, or otherwise. 23 Before the CLB, the case of the Appellants was that the UPC notices were infirm and should not be relied upon because relations between the parties were embittered. Before this Court, it was urged that the UPCs could not be relied upon in respect of Board Meetings and that the presumption under Section 53 applied to general meetings of the company. This contention is misleading. While Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company "wishes to enhance its current business greatly", and that the present authorised capital of the Company was "very small and would be a constraint to the growth of the Company". Admittedly, validity of these meetings which were referred to in paragraphs ii(a) and (b) of the Respondents' Reply , and the Appellant Nos. 1 and 2's presence have been accepted in paragraph 6 of the Appellants' Rejoinder . 26 The rights issue was thus obviously contemplated as being the avenue for increasing the funds of the Company and for the growth of the Company. The CLB has recorded a finding of fact (in paragraph 28) that the rights issue was necessary for the growth of the Company and therefore the action of issuing the shares could not be termed as oppressive to the Appellants and/or mismanagement of the affairs of the Company. 27 Pertinently, despite being party to the above meetings, at no point did the Appellants seek to subscribe to the rights issue, and did not even make such enquiries for several years prior to filing the present Petition. The reason for this was clearly because the rights issue which commenced from April 2007, was not of interest to the Appellants, as the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Respondents in the CLB . 33 As laid down by the Hon'ble Supreme Court in Hanuman Prasad Bagri v. Bagress Cereals Private Limited, shifting of the registered office by itself may not be a reason or a ground to be raised in a Petition under Sections 397 / 398 as long as the Company did not suffer much loss on account of the shifting and no case was made out to show that such exercise was undertaken to put oppressive pressure or pain upon the Petitioners. As in the case that was before the Hon'ble Supreme Court, there is nothing in the present case to show that any prejudice was/is caused to the Appellants or that any wasteful expenditure amounting to mismanagement was incurred on behalf of the Company by shifting of the registered office. 34 Pertinently, it is the admitted position that the UPC amount paid was Rs. 3/. It is more than sufficient for service on Appellant Nos.1 and 2; the other Directors and Shareholders being part of the Respondent Group, may well have been served by other means - they have raised no objection as to service or receipt of the notices. Once again this aspect is purely factual and is being dealt with only in light of the contentions raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Hon'ble Court, the judgments ought to be disregarded. Nevertheless, the said judgments are broadly dealt with hereinbelow: 40 As regards Dushyant D.Anjaria Vs. M/s.Wall Street Finance Ltd. ; 17Yogendra Kumar Maheshwari Vs. Registrar of Companies; and P.Natarajan V/s. Central Government, of the Compilation are in cases which were not under Section 397/398. 41 As regards Dushyant D.Anjaria (supra), Yogendra Kumar (supra); P.Natarajan (supra) ; Sishu Ranjan Dutta Vs. Bhola Nath Paper House Ltd.,; 20Harikumar Rajah V/s.Sovereign Dairy Ltd. (Mad) ; Hindusthan Cooperative Insurance Society Ltd. In re ; Sintex Industries Ltd., In re, pertain to appointment of (Additional) Directors and the tenure thereof. The appointment and duration of Directors is a matter beyond the scope of jurisdiction of the CLB, and in any case is not the grievance urged before this Court. 42 As regards Zora Singh V/s. Amrik Singh Hayer; Rajiv Kumar Singh V/s. Shree Narayan Developers P. Ltd. and Ors.; Ashok Kumar and Ors. V/s. Shree Janki Cold Storage P. Ltd. and Ors.; Swapan Dasgupta Vs. Navin Chand Suchanti, pertain to notices for meetings and the issue of UPC. This issue has been dealt with abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellants cannot be countenanced, as the events of which they complained, had to a material extent, culminated in 2007 itself, and there is no justification for the delay in approaching the CLB.
45 In the circumstances, the Appeal ought to be dismissed as it does not give rise to any question of law. The factual findings are strictly matters which were within the province of the CLB. The CLB having exercised its discretion after analysing the evidence before it, this Court cannot to replace the discretionary order passed by the CLB with any contrary order.
46 Even otherwise, on the findings of delay/laches and unclean hands, the present Appeal ought to be dismissed as the CLB has rightly declined to exercise its equitable jurisdiction in favour of the Appellants.
47 As noted earlier, even on the merits, the Appellants' case is untenable and contrary to the record.
48 No case of oppression or mismanagement has been made out, and the Appeal ought to be dismissed, with costs which is fixed in the sum of Rs. 2 lakhs. Appellants to pay this amount within 4 weeks by way of cheque drawn in favour of the advocate on record for Respondents. X X X X Extracts X X X X X X X X Extracts X X X X
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