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TMI Blog2015 (3) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... e register of members by restoring the names of the Bharti Group as members. The CLB has further held that there is no nexus between the shareholding and the entitlement to space in the building and the entitlement to space did not arise out of the membership in the Company and was purely a contractual matter and as such could not be agitated in a petition under section 397 and 398 of the Act but had to be agitated in a civil court. The CLB has further held that it is for the Oriental Bank of Commerce (hereinafter referred to as the Bank), the tenant in LG 1 to LG 4, to decide as to whom the rent kept in deposit should be paid. The CLB has further held that since the Bharti Group holds 1/3rd shares, Shri Satish Kumar Bharti will continue as a Director and the Respondents (in the CP before the CLB) shall not take any action to remove him from the Directorship. The CLB further directed that all Bank operation should be joint by at least two Directors. The CLB has given an option to the Bharti Group, if they are so interested, to sell their 1/3rd shares on a fair valuation. 3. For the purposes of disposal of the appeal, it would be expedient to examine the brief facts leading to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anks of the Company for singly operation of the Bank accounts by him. He sought to cancel the allotment of the Bharti Group of the offices spaces LG 1 to LG 4. 10. On account of the above and other alleged acts, the Bharti Group approached the CLB by a petition under section 397 & 398 of the Act. Pending adjudication of the said petition, the Board of the Company is alleged to have removed the names of the Bharti Group as members of the Company. 11. The Company through Mr. R.K. Malhotra has filed the appeal (Co. A. (SB) 4 of 2007) impugning the judgment in so far as it restores the names of the Bharti Group as members of the Company and directs that the Bank operations be joint and further directs that Mr. S.K. Bharti continues to be a Director of the Company and shall not be removed as a Director. 12. The Bharti Group has filed the appeal (Co. A. (SB) 8 of 2007) impugning the judgment in so far as the CLB has upheld the appointment of Mr. R.K. Malhotra as the Managing Director and held that the cancellation of the agreements pertaining to LG 1 to LG 4, being a contractual matter, cannot be agitated in a petition under section 397 & 398 of the Act. CO. A. (SB) 4 OF 2007 (APPEAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the Company that the Company did not possess in its records the original of the instruments of transfer submitted to the Company by virtue of which the Bharti Group acquired their shares. It is admitted that the action of removal has been taken only based on the photocopy of the instruments of transfer filed alongwith the rejoinder. 16. The transfer of shares in favour of the Bharti Group was made by the Company in or around the year 1984. The action for removal has been taken after over 20 years. During this period of 20 years, the Bharti Group was duly recognized as member and they exercised all the rights of a member. It is the stand of the Company that it does not possess in its records the original instruments of transfer as on date. The action of removal has been taken by the Company only based on photocopy of the instruments of transfer. There is nothing on record to show that when the instruments of transfer were submitted to the Company and the shares were transferred in favour of the Bharti Group, the instruments were blank and unstamped. The transfer of shares in favour of the Bharti Group was complete and duly recorded. Neither the Company nor the Board of Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the board. 20. As there are serious disputes in respect of the functioning of the Company and there is distrust amongst the three groups, it would be in the interest of the Company and its shareholders that the Bank operation is carried out by at least two of the Directors. There is no thus infirmity in the CLB directing that the Bank operation shall be by two Directors jointly. 21. The appeal by the Company is thus liable to be dismissed. CO. A. (SB) 8 OF 2007 (APPEAL OF THE BHARTI GROUP) 22. The challenge raised by the Bharti Group to the CLB upholding the appointment of Mr. R.K. Malhotra as the Managing Director, in my view, is not sustainable. The CLB has returned a finding of fact, that effective from July 1997, Mr. S.K. Bharti ceased to be a functional Director and from March 1998, Mr. R.K. Malhotra had been a functional Director having complete control and management of the affairs of the Company. The CLB has noted that even without the designation of the Managing Director, Mr. R.K. Malhotra had been discharging the functions of a Managing Director and has in these circumstances held that his designation as a MD with or without the knowledge and consent of the Bha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ripartite Lease Deed on behalf of the Company. The said resolution is signed by all the three Directors. The resolution is not denied by the Company, however by an undated letter issued by the Company (Annexure V @ 218), the said authority has been terminated and it is stated that Mr. S.K. Bharti is not authorized to sign any document singularly. The letter thus amount to an admission of the genuineness of the resolution dated 02.02.1998. 29. Tripartite Lease Deeds were executed on 26.03.1998. The Lease Deeds record that apart from four spaces in the Basement, space on the Ground Floor owned by the Company was also let out to the Bank. Part of the rental to be received by the Bharti Group for the spaces in the Basement was to be shared with the Company. 30. The Lease Deeds in respect of LG 1 to LG 4 record that the ownership of the spaces is with the Lessor i.e. the Bharti Group. The Lease Deeds further record that the purpose of letting to the Bank is "for running the Banking business". Even the resolution dated 02.02.1998 records the Lease Deeds are for "Bank Branch Premises". 31. Letters were written to the Bharti Group by the Company in or around May 2003 contending that onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81 The jurisdiction of the court to grant appropriate relief under Section 397 of the Companies Act indisputably is of wide amplitude. It is also beyond any controversy that the court while exercising its discretion is not bound by the terms contained in Section 402 of the Companies Act if in a particular fact situation a further relief or reliefs, as the court may deem fit and proper, are warranted. (See Bennet Coleman & Co. v. Union of India [(1977) 47 Comp Cas 92 (Bom)] and Syed Mahomed Ali v. R. Sundaramoorthy [AIR 1958 Mad 587 : (1958) 2 MLJ 259 : (1958) 28 Comp Cas 554] .) But the same would not mean that Section 397 provides for a remedy for every act of omission or commission on the part of the Board of Directors. Reliefs must be granted having regard to the exigencies of the situation and the court must arrive at a conclusion upon analysing the materials brought on record that the affairs of the Company were such that it would be just and equitable to order winding up thereof and that the majority acting through the Board of Directors by reason of abusing their dominant position had oppressed the minority shareholders. The conduct, thus, complained of must be such so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. (c) The action is against probity and good conduct. (d) The oppressive act complained of may be fully permissible under law but may yet be oppressive and, therefore, the test as to whether an action is oppressive or not is not based on whether it is legally permissible or not since even if legally permissible, if the action is otherwise against probity, good conduct or is burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would amount to oppression under Sections 397 and 398. (e) Once conduct is found to be oppressive under Sections 397 and 398, the discretionary power given to the Company Law Board under Section 402 to set right, remedy or put an end to such oppression is very wide. (f) As to what are facts which would give rise to or constitute oppression is basically a question of fact and, therefore, whether an act is oppressive or not is fundamentally/basically a question of fact. 39. The Supreme Court in CHATTERJEE PETROCHEM V. HALDIA PETROCHEMICALS, (2011) 10 SCC 466 referred to the earlier decision in SHANTI PRASAD JAIN VERSUS KALINGA TUBES LIMITED [AIR 1965 SC 1535 : (1965) 2 SCR 720] to hold that the law had not defined as to wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,62,558/- has been adjusted from the building fund as license fee recovered during the said financial year. The said amount tallies with the detail schedule of license fee recovered during the financial year 1994-1995. The statement includes the payments made by the Bharti Group towards purchase of their flats/spaces. The Builder's Agreement in favour of Mr. Satish Kumar HUF has been signed by Mr. K.R. Gupta the third Director. The said agreement also records that entire sale consideration has been paid and „nil‟ amount is payable. The Company consented to participate in the Lease Deeds for "Bank Branch Premises" between the Oriental Bank of Commerce as a Lessee and the four allottees of basement floor as Lessor and the Company as Confirming Lessor. The Lease Deeds record the ownership of the Bharti Group of the spaces besides recording the purpose of letting to the Bank for running the Banking business. 45. In the cancellation letters, no reference has been made by the Company to the payments reflected in the "Detail Schedule of License Fee Received till 31.03.1995" and the Balance Sheets as on 31.03.1995, 31.03.1996 and 31.03.1997, which have been signed by the Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the minority and not against any other purchaser of flats/space. Even if the argument of the Learned Counsel for the Company, that some records were not handed over by Mr. S.K. Bharti (as was raised with regard to the share transfer documents), was to be extended to the records with regards to the payment in the year 1994 as reflected in the "Detail Schedule of License Fee Received till 31.03.1995" and the Balance Sheets as on 31.03.1995, 31.03.1996 and 31.03.1997, the action would still be wrongful and oppressive as the "Detail Schedule of License Fee Received till 31.03.1995" reflects payment received from several buyers. The Company and the other Directors have not shown that any action has been taken against the other buyers whose names are reflected in the said statement. If the record qua the Bharti Group is not available, then how is it possible that the records of the other buyers of the same period are available? The Bharti Group has been clearly singled out. The order of the CLB to this extent is clearly not sustainable. 50. In view of the above, the action of the Company and the other Directors in cancelling the four Builder's agreements dated 15th June 1994 in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeking to deposit the keys in court. 57. However, on 21.08.2008 the Bank filed a reply before this Court in Co.A. (SB) 8/2007 contending that it had vacated the premises long ago and had moved an application before the CLB in respect of which the CLB had passed an order on 30.08.2005. It further contended that the Bank was repeatedly writing to the Company and the Bharti Group to take over vacant and peaceful possession of the tenanted premises but the same was not taken over. The Bank prayed that the keys and the FDRs lying with the Bank be permitted to be deposited in court. 58. The Bank thereafter filed an application being CA 262 of 2010 in Co.A. (SB) 8/2007 praying that the Bank be permitted to deposit the keys and the FDRs with the court. By order dated 30.03.2011, the counsel for the Bank was directed by this court to deposit the keys of LG 1 to LG 4 and LG 18 (sic G 18) Premises with the Registrar General of the Court and the Registrar General was also directed to take possession of the FDRs in the sum of Rs. 12,58,164.54 from the Bank. The court further directed that the issue as to whether any further amount is due and payable by the Bank on account of rental/user charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrued interest thereon are directed to be released in favour of the respective persons as per the details mentioned in schedule I (@ page 593 of Co.A. (SB) 8/2007). There is nothing on record to show that anything is payable by the Bank towards any alleged damage caused to the property as was recorded in order dated 30.03.2011. 62. Since, I have held the termination of the spaces LG 1 to LG 4 to be unlawful, the Bharti Group is entitled to receive the keys of the premises LG 1 to LG 4. The Company, being the owner/landlord of the fifth premise i.e. G 18 (incorrectly mentioned in some places as LG 18), is entitled to receive the keys for the said premises. CA 1923 of 2014 in Co. A. (SB) 8 of 2007 63. This Application has been filed by the Bharti Group seeking a restrain against the Company from passing any resolution as proposed in the notice dated 08.08.2014. 64. By the notice dated 08.08.2014, a resolution by circulation was proposed to be passed whereby Mr. K.R. Gupta was proposing to retire as a Director and in his place, a Nominee Director Mr. Lalit Kumar Mishra was proposed to be appointed to represent his group on the Board. 65. The contention of the Bharti Group is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete details of the Banking operations alongwith all supporting documents and vouchers. (ii) The appeal filed by the Bharti Group (i.e. Co.A. (SB) 8/2007) to the extent that it challenges the appointment of Mr. R.K. Malhotra as a Managing Director is dismissed. (iii) The action of the Company and the other Directors in cancelling the four Builder's agreements dated 15th June 1994 in respect of LG 1 to LG 4 of the Bharti Group is held to be wrongful, burdensome, harsh and oppressive. The said action of the Company is set aside. The appeal of the Bharti Group to this extent is allowed. (iv) The Oriental Bank of Commerce is held liable to pay rent for the said premises comprising of LG 1 to LG 4 and G 18 till 21.01.2008. Since the Bank has already deposited the rental w.e.f. 01.01.2004 till 30.11.2005 in the form of FDRs (amounting to 12,58,164.54) with this court, the Bank shall pay the balance rent from 01.12.2005 till 21.08.2008 alongwith simple interest @ 8% per annum from the dates the amounts fell due till the actual date of payment. The amount be paid within 6 weeks from today, in the same proportion and in the same names as was being paid earlier. In case the Bank has ..... 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