TMI Blog2001 (11) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 lakhs which was increased to Rs. 3 lakhs divided into 3,000 equity shares of Rs. 100 each in the year 1964. The petitioners' group held 708 equity shares which was about 23% of the total share capital of the company. The respondent company was owning and running a cinema hall known as Sri Rupa Cinema in Contai Distt, Midnapur, West Bengal, which was the only property and business of the company. Deepak Kumar Mondal, elder brother of the petitioners 1 and 2, was the director in-charge from the period 20.5.1990 till his resignation; thereafter the first respondent was appointed director in charge with effect from 1.9.95. Ever since the first respondent took over as director in-charge, he indulged in acts of gross oppression of the Mondal Group and mismanaged the company. The accounts of the company were not prepared and no annual general meeting was held thereafter. The petitioner No. 1 who was one of the directors of the respondent company was disassociated from its affairs and was not even given any notice of any Board meetings. The respondent No. 1 purportedly acting on behalf of the company entered into an agreement of licence on 7.8.1995 with the respondent No. 3 for runn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they were themselves repeatedly requesting for a meeting of the shareholders and also offered to purchase the shares of the company in accordance with the procedure prescribed under article 10 of the article of association. The petitioners have alleged that the meeting dated 24.3.1999 was a bogus meeting held on papers only and the first respondent has apparently fabricated the records/documents in regard to the alleged transaction which never took place. Moreover, the consideration allegedly received against the allotment of shares to the third respondent had not been deposited in the bank account of the respondent company. It was further stated that, after 17.7.1998, only the first petitioner and the first respondent constituted the Board of directors and, therefore, in the absence of the first petitioner, no meeting of the Board could have taken place as the quorum would not be complete. The petitioners further learned that the respondents have made the third respondent who was a rank outsider as director in-charge and handed over the management of the company to him. On these allegations, the petitioners have prayed for canceling the allotment of the 2,000 equity shares mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the petitioners that no meeting of the shareholders was held on 24.3.1999 or that the minutes of the said meeting were fabricated as alleged. On the contrary, it was stated that the notices were issued to all the shareholders including the Mondal Group by certificate of posting which was the usual mode followed by the company. The respondents denied having received the alleged letter sent by the petitioners dated 3.10.96 purporting to buy the shares or the letters dated 1.10.1996, 10.10.1996 and 24.10.1996 and it was stated that the said letters were an afterthought and were manufactured for the purposes of the present case. It was further stated that the consideration amount of Rs. 2 lakhs against the allotment of shares was taken into account of the company and were utilised for payment to the employees. The allotments of the shares were made in accordance with the resolution passed by the majority of the shareholders and for the benefit of the company. 4. On behalf of the petitioners, a rejoinder has been filed denying the allegations made in the counter affidavit and reiterating the averments made in the petition. The alleged EOGM [extraordinary general meeting] itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aordinary general meeting was held, the decision taken was invalid. Thirdly, the allotment in favour of the third respondent and the subsequent of en bloc transfer of the shares by the Bera, Roy and Mukherji Groups in favour of third respondent was contrary to article 10 of the articles, hence, null and void. 7. In support of his submissions that a case of oppression of the petitioners group by the respondents group who are the majority shareholders have been made out in the facts of the present case, learned counsel relied on the decision of the apex court in the case of Shanti Prasad Jain v. Kalinga Tubes (1965) 1 Comp LJ 193 (SC): AIR 1965 SC 1535 and the Needle Industries case [Needle Industries (India) v. Needle Industries Newey (I) Holding Ltd.] (1982) 1 Comp LJ 1 (SC): AIR 1981 SC 1298 and certain other similar decisions given by the Company Law Board, where somewhat similar questions were involved. 8. Learned counsel for the respondents, on the other hand, contended that the company was lying closed since the year 1996 to April, 1999, due to labour unrest fomented by the petitioner No. 2. The company was in great financial difficulties; under the circumstances, majority of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners is that no such notice of any alleged general meeting of the shareholders were given to the Mandal Group, neither was any such meeting actually held and minutes of the said meeting has been fabricated. In paragraph 3(xii) and 3(xiii) of counter affidavit the respondents have taken a stand that with a view to reopen the cinema hall - the Board of directors decided to contact people for financial help and it was in pursuance of the said decision that the extraordinary general meeting was held on 24.3.1999 after due notice to the general body of shareholders which was attended by 76.4% of equity shareholders except the shareholders of the Mandal Group. In paragraph 17 of the said counter affidavit, the allegation that no general meeting of the shareholders took place on 24.3.1999 was denied and it was stated that the same was duly held after serving notice on all shareholdings including the Mandal Group under certificate of posting which was the prescribed mode under the articles of association. However, the Mandal Group boycotted the meeting due to an ulterior motive. 11. It is noteworthy that the respondents have not produced any evidence in support of their stand by pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... catena of cases by different High Courts as well as by us that in case of despatch under postal certificates a general presumption of posting could be drawn, however, such presumption was rebuttable (see Smt. Kanaklata Ghosh v. Amal Kumar Ghosh AIR 1970 Cal 328; Mrs. Achamma Thomas v. ER Fairman AIR 1970 Mys 77; Akbarali A Kalvert and another v. Konkan Chemicals (P) Ltd. and others (1994) 3 Comp LI 102 (CLB). Here, in the present case, the petitioners have denied receipt of the notice alleged to have been sent under postal certificate, thereby rebutting the presumption. The onus, therefore, was on the respondents who have failed to discharge the burden by not only failing to produce the postal by failing to produce any other proof like relevant extract from the despatch register or any other record. Similarly, the respondents have failed to produce the postal certificate or any other evidence in respect of the Board meeting by which the extraordinary general meeting was allegedly called to consider the increase in the authorised capital. The Supreme Court has held in the case of Parmeshwari Prasad Gupta v. Union of India AIR 1973 SC 2389 that, if notice was not given to even one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n regard to this meeting is the Form No. 23 which incidentally contains the explanatory statement. This statement relates only to the increase in authorised capital. However, from the minutes of the extraordinary general meeting on 24.3.1999, we find that besides the resolution relating to increasing the authorised capital, the general body had also resolved to allot all the 2,000 shares to the 3rd respondent and also to appoint him as an additional director. Thus, certain businesses which had not been proposed in the notice for the meeting appear to have been transacted in that meeting. Thus, we find that not only the company has not established that notices for this meeting had been sent to the petitioners, certain businesses other than notified had also been transacted. Therefore, there is full justification in the petitioners' complaint taken in the alternative that this meeting had not been properly held and the decisions taken thereat are invalid. 15. On behalf of the petitioners, it has been further contended that in fact, no general meeting took place on 24.3.1999 and the minutes of the alleged meeting are fabricated, as one of the shareholders Shrimati Jharna Bera who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtraordinary general meeting, we do not propose to nullify this allotment on the ground that it is an act of oppression. Even though the petitioners have relied on certain letters written by them to the 2nd respondent indicating therein their desire to take further shares in the company, yet, the factum of their sending the letters has not been conclusively established. 17. This takes us to the next question whether the transfer of shares amongst 3 groups of shareholders in favour of the 3rd respondent was in violation of article 10 of the articles of association of the company and its effect. It is to be noted that, in the petition, the main allegation was that of issue and allotment of 2,000 additional shares; and there was no allegation in regard to the transfer of shares. Even the respondents had not indicated in their reply any information relating to the transfer of shares. By an application dated 30.5.2000 (CA No. 128 of 2000), the petitioners brought on record, the matter relating to the transfer, on the basis of a letter from B. Roy Choudhary Associates, Chartered Accountants, stating that 1,787 shares held by the families of Shri Bera, Shri Roy and Shri Mukherjee had tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned notice. The directors shall with a view to find a purchasing member offer any share comprised in said notice to the existing members of the company (other than the retiring member) as nearly as he in proportion to their holding of shares in the company and shall limit a time within which such offer, if not accepted, will be deemed to be declined and the directors shall make such arrangements as regards the finding of a purchasing member for any shares not accepted by a member to whom they shall have so offered as aforesaid within the time so limited as they shall think just and reasonable . (d) If the directors do not, within the space of three months after the service of a sale notice, find a purchasing member for all or any of the shares comprised therein and give notice in the manner aforesaid or if through no default of the retiring member - the purchase of any share in respect of which such last mentioned notice, has been given shall not be completed within three months from the service of such notice the retiring member shall at any time within three (3) months thereafter, be at liberty to sell and transfer the shares comprised in the sale notice (or such of them as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the view to protect the interests of the company which is in financial difficulties, then, even if there is violation of the provisions of the articles, the same cannot be considered to be an act of oppression. In the case of Mrs. Pushpa Katoch v. Manu Maharani Hotels Ltd. (2001) 2 Comp LJ 510 (CLB) : (2001) 31 SCL 97 (CLB), three of the four sisters managing the company transferred their shares to an outsider in view of the dire financial position of the company. The fourth sister filed a petition under sections 397/398 challenging the transfer on the ground that there was a MoU among the sisters by which if any of the sister were to sell the shares, the same should be offered to the other sisters proportionately. Taking into consideration that the company was in real financial difficulties and that the transferee was financially sound to revive the company, the Bench held that in transferring the shares to an outsider, the three sisters had not acted in an oppressive manner and had done so in the interest of the company. The same decision is applicable in the present case also, as the facts reveal that till the 3rd respondent took over the company, the cinema hall was not fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of the Calcutta High Court in Ramashanker Prasad and others v. Sindri Foundry (P) Ltd. and others (1966) 1 Comp. LJ 310 (Cal), which were passed in similar circumstances, and also in line with the provisions of section 402 of the Act. 21. In view of what has been stated above, we direct that the petitioner's group will go out of the company on receipt of proper consideration for the shares held by them. The company will get the valuation of the shares done by the statutory auditors of the company on the basis of the balance sheet as on 31.3.2000 within 3 months from the date of this order. However, before submitting the final report on the valuation, the Auditors concerned will give a draft of the same to the parties who shall file their objection thereto, if any, within one month from the date when received. The Auditors shall after considering the objections, if any give final report. The Auditors' fees for valuation will be negotiated and paid by the company. On the basis of the valuation, the consideration worked out for the shares held by the petitioners' group shall be paid either by the respondents or by the company, who shall be bound to purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X
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