9911796707
TMI Blog2024 (12) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... apital of the Respondent company. Petitioner Nos.2 and 3 are both shareholders of the Company and each one is holding 25 equity shares of Rs. 100/- each which is about 0.05% of issued and paid up share capital. Petitioner no 2 and 3 are sons of Petitioner no. 1. 1.1 The Petitioners submit that though they put together hold less than 10% of the issued capital, they constitute more than 1/10th of the total number of members (3 out of 7) of the company and hence the petitioners herein are eligible to file this Petition as they have right to apply for reliefs under Sections 397 and 398 of the Act, as provided by Section 399 of the Act. A copy of the form no. 20B along with the annual return made up to 27th September 2013 containing list of members of the respondent company is annexed as Annexure P2. 1.2 It is further submitted that V Bedekar & Sons Private Limited, Respondent No.1 Company was incorporated on February, 27 1943 under the companies Act 1913 as a private company limited by shares and has Corporate Identification No. U51900MH1943PTC003872 issued by the Registrar of Companies, Mumbai, Maharashtra. The Respondent No. 1 Company was formed to take over the existing business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for the year ended 31st March, 2007. Respondent no. 7 is also a necessary party to this petition. 1.10 Respondent no. 8 and 9 are companies, which are owned, managed and controlled by the Respondent no. 1 to 5 and are included as necessary parties to the petition. The petitioners alleged that the Respondent no,. 8 and 9 are subsidiaries of the Respondent no. 1. The Respondent no. 2 to 5 have been siphoning off funds of the Respondent no. 1 company through these companies. 1.11 The petitioners are three in number out of the total seven members of the respondent company and hence by virtue of their number being more than 1/10th of the total number of members of the company are eligible to file this petition under section 399 of the Act. 1.12 It is further alleged in the petition that V P Bedekar and Sons Private Limited, Respondent No. 1 Company was incorporated of February 27, 1943 as a private company limited by shares under the Companies Act 1913 and has Corporate Identification No. U51900MH1943PTC003872 i issued by the Registrar of Companies, Mumbai, Maharashtra. The company is being run by the members of Hindu Joint Family i.e Bedekar family and thus it is family business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship engaged in exactly the same earlier business activity of manufacturing Pickles and Spices. 1.17 On February 27,1943 a private limited company by the name 'V P Bedekar and Sons Private Limited' i.e. the respondent company was formed which took over the operations of the partnership firm 'V P Bedekar and Sons'. This company was incorporated to further the personal relationship involving mutual confidence and on understanding as to the extent to which each was to participate in the management of the company's business. At the time of incorporation, there were only two shareholders viz Late Shri Vishwanath Parsharam Bedekar (Grandfather and Great Grand Father of Petitioners and Respondents 2 to 5) Late Shri Mukund Vaman Chitale who was son in law of Late Shri Vishwanath Parsharam Bedekar. Though Late Shri Vasudeo V. Bedekar was a great entrepreneur, his father, brothers and he himself did not have formal educational qualifications. Looking at the growth of the business and its future potential, it was thought fit that someone close to the family capable of giving proper legal advice be made a director initially. Hence, Late Shri Mukund Vaman Chitale, who had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 1.21 The respondent company was first a HUF business of the Bedekar family. The HUF was converted/ taken over into/ by a partnership business with the co- parceners as the partners and subsequently, a private company, V P Bedekar and Sons Pvt. Ltd was incorporated wherein the current account balances of five partners of V P Bedekar and Sons' were converted to their share capital. Barring initial directorship of Shri Chitale, who was son in law of Late Shri Vishwanath Parsharam Bedekar, the directors and shareholders of the company have only been the male lineal descendants of the Bedekar family and the business run by Bedekar family members only. At no point of time, neither the shareholding nor the board control over the company has been with anybody other than Bedekar family members, except one instance where 5 shares of the company were transferred. There shares were transferred by Petitioner No. 1 for the purpose of acceptance of deposit from Esquire Press Private Limited, as being a private company, the respondent company could not accept deposits from persons other than shareholders and members. It is also pertinent to note that by virtue of Article 8(1) and Article 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply cartons and printed material to the company. These shares were transferred to Late Shri Trimbak V Bedekar sometime in 1989. Except for this, the shares of the company have always been held only by the male lineal descendants of the Bedekar family as stipulated in the Articles of Association of the company. 1.24 Late Shri Vasudeo V. Bedekar, who was the real entrepreneur, passed away in the year 1977. In May 1978, the family branches of Late Shri Govind V. Bedekar, Late Shri Vishnu V. Bedekar and Late Shri Gajanan V. Bedekar wrote a letter to the Chairman of the Board of directors to appoint their sons as directors on the board for participations control in the management of the company. The four sons and youngest brother of Shri Vasudeo. V Bedekar had sufficient majority and hence the other three family branches were not given participation in the management of the company. The differences in various branches of the family began to surface for control of the company. From 1977 to 1986, the respondent company was run by the four sons of Late Shri Vasudeo V. Bedekar, namely, Shri Shridhar Vasudeo Bedekar (Petitioner no. 1), Shri Vasant Vasudeo Bedekar (Respondent no .2) Late Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a director. Representatives of two branches of the family, Shri Chandrakant G. Bedekar and Shri Ashok V. Bedekar were appointed as directors to oversee equitable distribution of the assets of the company. These two persons were representatives of the majority shareholders of the respondent company at this time. During this period, shares held by Govind Bedekar and family, Vishnu Bedekar and family and Gajanan Bedekar and family were acquired by Respondent no. 2 and Late Shri Trimbak V. Bedekar illegally by giving tenancy rights of the company which were shops and factories of the company in various buildings and immovable properties in return for these shares to gain majority in the respondent company. The following are the particulars of the shares acquired by Respondent no. 2 and Late Shri Trimbak Bedekar illegally during the period 1988-1992: Serial No. Transferor Transferee 1. Govind Bedekar and family Tenancy rights in the shop at Dadar relinquished in their favour Trimbak Vasudeo Bedekar 2. Vishnu Bedekar and family Tenancy rights in the factory at Dadar, Mumbai and leasehold factory premises at Ghodap Deo, Mumbai relinquished in their favour Vasant Vasudeo Bedekar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. the Petitioners, Late Shri Gajanan V. Bedekar and Late Shri Suresh V. Bedekar were not given their due share commensurate with their shareholding. 1.30 After the Petitioner no. 1 resigned from the board of directors in 1986 and after garnering majority control of the respondent company in 1989, Respondent no. 2 and Late Shri Trimbak Bedekar became greedy and went back on their word regarding amicable and equitable distribution of company's properties and offered share value to the Petitioner no. 1 which was totally incommensurate with the value of his holding then. However, after the untimely demise of Late Shri Trimbak V. Bedekar in 1993, having acquired the absolute control of the company, Respondent no. 2 totally went back on the understanding and simply refused to purchase the shares of the Petitioners and this matter has been pending since 1992 till date. To corner and pressurize Petitioner no. 1 into submission to accept inequitable share, the Respondents did not give him gratuity and one month's salary. They also slapped a case on Shri Ram Foods Private Limited, a company in which the Petitioner and Late Shri Trimbak Bedekar were equal shareholders and the onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... future correspondences on the notified address. On 01 September 2009, Petitioner No. 2 visited the registered office of the company for the inspection of the statutory register (register of members) to verify whether his address had been updated as per his request of change in address as he had not received the annual report for the year ended 31 March, 2009. Respondent No. 3, who is the director in charge of the legal matters of the company, informed Petitioner No. 2 that the register was not available on that date. A copy of the letter requesting such inspection is annexed as Annexure P-7. 1.36 Petitioner no. 2 requested Respondent no. 3 by a letter dated September 01, 2009 to make the register available to him for inspection on September 05, 2009. The Respondent informed of his "inability to commit" confirmation of the timing of the inspection. The copy of the letter complaining about the denial of inspection of the register has been acknowledged by Respondent no. 3. A copy of the correspondence has been annexed as Annexure P-8. 1.37 By a letter dated 20th October, 2009, Petitioner No. 2 intimated the company in advance, though not required by the Companies Act, 1956, that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided to them. The entire correspondence in this regard is annexed as Annexure P-10A. 1.40 It is further submitted by the petitioners that by letter dated December 05, 2009, Petitioner no. 2 requested the company to provide extracts from the statutory registers i.e. extracts from the register of Members and Register of Contracts with Directors which are interested. On the 28th of December, 2009, the company provided the copies of the registers. After studying the register of Contracts of the Company, Petitioner no. 2 found several lapses and mistakes on the part of the concerned officers of the company in maintaining the register thereby contravening the provisions of the Companies Act. A complaint regarding this was made to the ROC, Mumbai on 04 January, 2010. 1.41 In response to the complaint of the Company dated 04 January, 2010, the ROC, Mumbai, issued a show cause notice no. 3872/09/3866 dated 08 January, 2010 to the Company and provided a time of 7 days to the company for a response. However, no response was received by Petitioner no. 2 for more than 50 days. By a letter dated March 02, 2010, Petitioner no. 2 brought this fact to the notice of the ROC, Mumbai. The response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorrect and in contravention of the provisions of the Companies Act 1956. In spite of such request, the company filed the relevant forms and the Registrar of Companies, Mumbai, has taken the forms on record. A copy of this letter is annexed as Annexure P-16. 1.46 The petitioners have further alleged that time and again the Petitioners have been raising queries about the accounts of the company in the Annual General meeting by sending the list of queries well in advance. However, the Respondents do not bother to reply to these queries or give evasive answers during the meeting or state that they would reply in writing and state that all queries have been answered. It is pertinent to note that the then Department of Company Affairs has issued a clarification that it is a healthy practice to answer queries of the shareholders related to accounts of the company. This act on the part of the Respondents has been oppressive in nature. 1.47 It is further alleged by the petitioners that the annual general meeting of the respondent no. 1 company for the year ended 31st March 2010 was proposed to be held on 26th October 2010. The Petitioner no. 1 and 3 lodged their proxies with the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies controlled by them without any gain for the company. Tenancy rights in one room on the 1st floor in the building at Bedekar Sadan no. 3 have been given to Mrs. Rohini Bedekar, wife of Respondent no. 2 and mother of Respondent no. 3 and 4. Tenancy rights in the room on 3rd floor, Bedekar Sadan no. 4 have been given to Respondent no. 9 which is controlled by Respondent no. 2 to 5. The Petitioners are in the know of this since the Petitioners reside there. The Petitioners apprehend that there could be other instances also. Three industrial galas of the company at C9, 10 and 11 at Royal Industrial Estate, Mumbai near Dadar have been given on rent to Respondent no. 9 at a rent of Rs. 5000 per month which is absolutely peanuts for the said property. Further, no proper entries of such transactions are made in the register of contracts of the respondent company. 1.50 The Petitioners submit that the annual accounts for the year ended 31st March 2009 were not in compliance with the provisions of the Companies Act. This was intimated to the chairman of the Board of Directors by way of a letter dated September 30, 2009 which is annexed as Annexure P-24. A copy of the financials for the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewale Private Limited at its own discretion and without depending upon any other person's consent or concurrence, to appoint a majority of directors of M/s Bedekar Pickles Private Limited. v. The Memorandum of Association of the respondent company does not provide for the formation of a subsidiary company. The Board of directors has acted with total disregard to the Memorandum of association and, thus, contravened the provision of the Companies Act. vi. The related party disclosures made by the Board of Directors of the respondent company are not in conformity with the Accounting standards and hence the disclosure is not only insufficient but totally misleading and gives far from true and fair view of the affairs of the Company. vii. All major transactions viz, purchase, sales, advertisement are routed through contracts signed with these companies and companies which are totally controlled by respondent 2 to 5. viii. These companies have been given premises of the Respondent no. 1 company on rent for which Respondent no. 8 pays rent of Rs. 7,200 per annum and Respondent no. 9 pays rent of Rs. 60,000 per annum. It is pertinent to note that it is not possible to get any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not allow cash transactions of the same. Without prejudice to whatever is stated earlier, even a small 10 X 10 room in the mentioned area in Mumbai costs not less than 10-12 lac rupees. Considering the amounts charged by the Company for 'transferring tenancy' of the premises, the petitioners humbly contend that, the figures so reported by the board of directors appear to be blatantly false and concocted. xiii. The management of the company has been planning production schedule of pickles without taking into account the quantity of opening stock and assessment of demand during the year. Thus, year after year, the company is burdened with unnecessary huge closing stocks of pickles in the range of 45% to 50% of total sales during the year in terms of quantity and 50% to 60% in terms of value. It is pertinent to note that the quality of pickles deteriorates if not sold during the year. This abnormal and fishy state of affairs regarding the production schedule has been pointed out to the management several times over the years. 1.51 The Petitioners have written number of letters to the company drawing the attention of the management towards the financial misstatements appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at taking into account the pattern of borrowings by the respondent company and their inability to properly manage the funds of the respondent company, there is no need to borrow further amounts. Further, the explanatory statement provided under section 102 of the Companies Act 2013 is incomplete and vague as no proper details regarding the amount borrowed till date, the need for further borrowing, the future plans of the company are given. A copy of the notice calling the EGM along with the explanatory statement is annexed as Annexure P-36. The Petitioners wrote a letter asking for the above details, a copy of which is annexed as Annexure P-37. The Respondents have not bothered to reply to this letter and neither was any explanation given in the EGM when the Petitioner raised this objection. 1.55 Shri V. A. Bhide, Chartered Accountants have audited and certified the accounts of the respondent company upto the year 2007-08 and V. D. Khadilkar & Co., Chartered Accountants have audited and certified the accounts of the company for the year ended 2008-09 and 2009-10. The petitioners discovered a number of misstatements in the financials by a close study of the annual financial stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided with the details of actions taken against the company for violation of the Order. Entire correspondence in this regard is annexed as Annexure P-46. 1.60 The Income Tax Department has also initiated investigation on the complaint of the Petitioner no. 2. The correspondence in this regard is annexed as Annexure P-47. 1.61 The Respondents have time and again humiliated the Petitioners. The Respondent company being a quasi-partnership, the Petitioners have legitimate expectation to participate in the management of the company or to get a fair exit from the company. 1.62 The Respondents have stooped down to the level of personal harassment of the Petitioners. The Respondents have filed a suit for eviction of the Petitioners from their dwelling house. The Petitioners have been staying that house for more than 50 years. The grounds that have been given by the Respondents for such eviction are absolutely frivolous, which are: (a) non-use by the Petitioners (b) baseless allegation of apprehension by the Respondents that the Petitioners would sell the premises since the Petitioners had undertaken a routine paint job and (c) the respondent company requiring it for its own use. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be in the interest of petitioners and the Respondent No.1 company. Section 397 warrants looking at business realities of a situation and does not confine to a narrow legalistic view. v. The Respondents had the majority power and they exercised their authority in a manner which can justly be described as "oppressive" to the minority shareholder; vi. That the interest of petitioners as members, who ventured their capital in the Respondent's business and worked for the company, does include a legitimate expectation. vii. That the Respondents have abused the majority power to the detriment of the Petitioners and to their personal advantage and not in the interests of the company. Actions and decisions, which are being taken by Respondents, are not bona fide and not actuated by the interests of the company but by personal aggrandizement of acquiring complete control over the company. viii. The facts would justify the making of a winding up order on the ground that it is just and equitable that the company should be wound up by applying the principles of dissolution of partnership. However, to wind up the company would unfairly prejudice the Petitioners. ix. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettling the said disputes. These disputes have arisen on account of the illegal acts committed by the Petitioners. Such acts include usurpation of the estate of Mr. Vasudev Bedekar (i.e. father of Petitioner No. 1 and Respondent No. 2), usurpation of funds belonging to Mrs. Rakhamabai Vasudeo Bedekar (i.e. mother of Petitioner No. 1 and Respondent No. 2), illegal retention of funds belonging to Mrs. Mangala Anant Bhide (i.e. sister of Petitioner No. 1 and Respondent No. 2), failure to repay the advance/ loan taken by Petitioner No. l's company M/s Shriram Foods Private Limited from Respondent No. 1 Company and other commercial disputes pertaining to M/s Shriram Foods Private Limited. In fact, a suit has been filed before the City Civil Court at Mumbai in 1989 for recovery of the sums payable by Shriram Foods Limited to Respondent No. 1 Company, which amount to about Rs. 1.2 crore. 6. All of the above wrong-doings had exposed the Petitioners to considerable liability. In an attempt to mitigate their liability, the Petitioners, who are admittedly facing severe financial problems, called upon Respondent No. 1 and offered to settle these matters. Although the Respondents owed no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egations proving to be false and vindictive, the Petitioners have continued with their abrasive stance and attempt to derail the management's attempts to grow the Company. 10. It is also submitted that the Petitioners have failed to explain, much less make a justifiable case for the winding-up of the Company. According to the respondents, a petition under Sections 397 or 398 of the Companies Act, 1956 is maintainable only if the petitioner is able to justify that the facts of the case warrant a winding-up of the company but that such winding up would be unfairly prejudicial to the members concerned. In the instant case, however, Respondent No. 1 Company is functioning smoothly in accordance with its Articles of Association. Board Meetings and General Meetings are being regularly held. There is no deadlock whatsoever in management. Moreover, the Company is making profits and enjoys excellent goodwill amongst its customers. Merely because the Petitioners are no longer involved in the management of the Company or are unsuccessful in their design of extorting benefits from the Respondents, this by itself does not warrant winding up of the Company. As the Petitioners have failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in Mr. Mukund Chitale as a member in the Company, even though he was not a member of the Bedekar family to ensure that the management of the Company includes a qualified and competent expert who could assist in the professional management of the Company. Moreover, in 1978, Petitioner No. 1 had himself transferred 5 (Five) of his shares to one M/s Esquire Press Private Limited. These shares held by M/s Esquire Press Private Limited were subsequently transferred to Mr. Triambak Bedekar in 1989. The said five shares were subsequently transferred to Mr. Mandar Bedekar on May 4, 1990. Mr. Mandar Bedekar obtained the remaining 3695 owned by him by transmission following the death of Mr. Triambak Bedekar. It is, therefore, clear that there is no commonality of membership between the erstwhile partnership firm and Respondent No. 1 Company. 14. It is further submitted that neither the erstwhile partnership nor Respondent No.1 Company can be considered an "HUF Business". In fact, the erstwhile partnership firm was formed on November 1, 1942 and not 1940 as is wrongly stated by the Petitioners. By the petitioners' own admission however, Mr. Vishwanath Bedekar had left Mumbai in the 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1986 vide his letter dated May 1, 1986, and has played no role whatsoever in the management of the Company since. As regards Petitioner Nos. 2 and 3, they have never been directors or managers of Respondent No. 1 Company. In the light of the aforesaid, Respondent No. 1 Company does not possess any of the hallmarks of a quasi-partnership and there is no basis whatsoever for applying the principles of dissolution of partnership to Respondent No. 1 Company. It is further submitted that as the Petitioners' entire case is predicated on Respondent No. 1 Company being treated as a quasi-partnership, the Company Petition automatically falls with the Petitioners' failure to establish the existence of a quasi-partnership. 16. Without prejudice to the aforesaid, it is further stated that the Petitioners are even otherwise not entitled to be appointed as directors of the Company or a management role/ responsibility. It is well settled that appointment and removal of directors of a company is the sole prerogative of the general meeting of the company and no person has an inherent right to be appointed as a director without the consent of the majority of the shareholders of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Petitioners' demand for allotment of Petitioners' shares clearly indicates that the Petitioners are only trying to enforce a purported private agreement among certain family members, to which Respondent No.1 Company is not a party, under the guise of a Company Petition under sections 397 and 398 of the Companies Act. As is evident from the Petition, the Petitioners claim that there was a "settlement between all Bedekar family members" and it is this "settlement" that the Petitioners are trying to enforce. However, the Petitioners have not produced even a shred of evidence to prove the existence of the supposed "settlement" or terms thereof. That apart, it is well settled that a private family agreement cannot be the subject matter of a petition under sections 397 and 398 of the Companies Act and this Tribunal cannot be burdened with the private disputes of family members. In these circumstances, the Petitioners' demand that they be allotted additional shares gratis, i.e. without any contribution to the capital of the Company, on the basis of an unproven family settlement, is fanciful at best and deserves to be dismissed. 20. It is further submitted that the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfined to an HUF and the Petitioners' contention that Respondent No. 1 Company is an HUF business has no basis either in law or in fact. 25. With reference to paragraphs 7.3 and 7.4 of the Company Petition, it is stated that the same are riddled with inaccuracies and inconsistencies. In any event, the history of the Bedekar family is wholly irrelevant to the subject matter of the instant Petition. With specific reference to "V.P. Bedekar and Sons", it is stated that the Petitioners have incorrectly described the partners of the said entity. 26. With reference to paragraph 7.5 of the Company Petition, it has been denied that any promise regarding allotment of shares was given by Mr. Vasudeo Bedekar to any person. With reference to the running of the business, it is noteworthy that the Petitioners have themselves admitted that from the 1920s onwards itself, there was no distribution of managerial powers among family members and the business was always centrally managed by the person who had the most experience and competence to handle the affairs of the Company. This is only further proof of the fact that the business was never run on the partnership principles and accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be considered a founding principle on which the Company was incorporated. That apart, the Petitioners themselves admit that persons other than Bedekar family members have been shareholders of the Company and that none of the Petitioners have been in management of the Company since 1986. 30. With reference to paragraph 7.12 of the Company Petition, it is denied that the current account balances of the partners of the erstwhile partnership firm were converted into share capital of the Company. In fact, the shareholders of Respondent No. 1 Company actually subscribed to the shares of the Company. As regards the transfer of shares that took place in 1951, it is stated that Mr. V.P. Bedekar expired on September 14, 1951, and his shares were transmitted to his heirs in equal numbers. Accordingly, each of his heirs received 75 (Seventy-Five) shares. It is also pertinent to note that in 1951, there was no requirement that shares only be transferred to male lineal descendants of the Bedekar family, and accordingly Mr. V.P. Bedekar's surviving wife, i.e. Mrs. Parvatibai Bedekar also received 75 (Seventy-Five) shares in her capacity as an heir of Mr. V.P. Bedekar. 31. With referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the years 1985 and 1986, the Company was facing severe labour problems and it was difficult to manage the affairs of the Company through small units located in different places. It was, therefore, decided that all business activities would be transferred to the Company's factory in Kurla and the properties that were no longer required would be surrendered to their respective landlords. As regards transfer of shares among family members, it is stated that the same is fully permissible under the Articles of Association of the Company and the price at which such shares are transferred does not in any way affect the interest of the Company or the non-transferring shareholders. 34. With reference to paragraph 7.17 of the Company Petition, it is denied that there was any illegal or oppressive acquisition of shares. In fact, all transfer of shares took place legally and in accordance with the Articles. Further, the Petitioners have failed to show as to what attempts they have made to either purchase shares from the other family members or during the allotment made by the Company. On the contrary, in 1978, Petitioner No.1 himself transferred part of his shareholding to M/s Esquire P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Company came out with the rights issue knowing well that Petitioners could not subscribe to the same. As a matter of fact, in 1997, the Company urgently needed an equity infusion, as the same was required by the Company's lenders as a precondition to grant of a further loan facility. That apart, all shareholders were given an equal opportunity to subscribe to the rights issue and purchase shares of the Company. The Petitioners, who were not interested in the Company or its affairs, chose not to subscribe to the rights issue and allowed their shareholding to be reduced. 39. With reference to paragraph 7.22 of the Company Petition, it is reiterated that the Company is not a quasi-partnership for the reasons given hereinabove. As regards the criminal complaint filed by Respondent No. 2 against the Petitioners, it is stated that the same became necessary on account of the actions of the Petitioners documented in the police complaint dated April 1, 1999. That apart, the grievances raised in the said paragraph do not relate to the affairs of the Company and cannot be the subject matter of a Petition under sections 397/398 of the Companies Act. 40. With reference to paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of law. As regards the queries raised by the Petitioners, they may inspect the records that they are entitled to under the law, which in fact they have already done. It is further submitted that the Company is not an information booth and is not required to provide any more information/ records than is necessary under applicable law. The Company is not bound to answer each and every whimsical question that may be asked by the Petitioners. It is obvious that the Petitioners were only issuing frivolous correspondence and attempting to build a record and a cause of action where there was none. 44. With reference to paragraph 7.38 of the Company Petition, it is denied if the Petitioners were denied their right to participate in the general meeting of the Company. Notice of the annual general meeting for 2010 was sent to the Petitioners on October 15, 2010 which granted the Petitioners sufficient time to lodge their proxy forms with Company. If the Petitioners wanted to attend meeting through proxies, it was their duty to ensure that they lodged their proxy forms well in time. By the Petitioners' own admission, the proxy forms were not lodged on time with the Company. The fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edekar Sadan, it is stated that the Petitioner No. 1 himself is a tenant in the same building and, therefore, the Petitioners have no basis for complaining about any other tenancies in the said building. That apart, the tenancies in Bedekar Sadan are protected under the Bombay Rent Control Act, 1940. With particular reference to the room given on rent to Respondent No. 9, it is stated that the said tenancy is actually beneficial to the Company as Respondent No. 9 permits the Company to stock its goods in the said room without payment of rent. As regards the three industrial galas at C9, 10 and 11, Royal industrial Estate in Mumbai, it is further stated that the same had been given on a rental basis to Respondent No. 9 as Respondent No. 9 used to manufacture and package the products of Respondent No. 1 Company. Given the regulated nature of the food industry, it was necessary for the Company to ensure that the manufacturing facilities are under their supervision. Also, the benefits received by the Company in the form of preferred rates from Respondent No. 9 were factored into the rent. That apart, all of these matters are now irrelevant as the Company has ceased to use the services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany has complied with all provisions of applicable law. 51. With reference to paragraph 7.41 (iv), it is denied that Respondent No. 1 Company has contravened the provisions of Section 227 of the Companies Act. Even otherwise, allegations against an auditor cannot be the subject matter of a petition under sections 397/398 of the Companies Act. 52. With reference to paragraph 7.41 (v), it is submitted that the contents thereof are nothing but a baseless and unsubstantiated allegation that has already been rejected by a competent authority. In fact, all transactions, including transfer of tenancies, have been executed in accordance with law and in the interests of the Company. As for the Petitioners' speculation regarding the relinquishment of tenancies, without prejudice to any other statement contained herein, it is submitted that the Company, as landlord, had every right to collect premium on tenancies. Annexed hereto and marked as Annexure 'R13' is a copy of the opinion of Khona & Kayser (Regd.) (Advocates and Solicitors). 53. With reference to paragraph 7.41 (vi), it is stated that the commercial decisions of the Company that have been taken in good faith in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, despite two years of rigorous and methodical following up by the Respondents, the NA Order is yet to be granted. Further, only a compound wall and pump room have been constructed on the said plot. 57. With reference to paragraph 7.49 of the Company Petition, it is stated that the applicable statutory provisions were complied with by Respondent No. 1 Company. I say that the said EGM was convened to comply with amendments to the Companies Act. Further, a proper explanatory statement was annexed to the notice for the said meeting. 58. With reference to paragraphs 7.51 to 7.56 of the Company Petition,it is submitted that these paragraphs raise allegations that can never be the subject matter of a Petition under sections 397/ 398 of the Companies Act and the allegations ought to be disregarded on this ground alone.it is further submitted that without prejudice to the aforesaid, this points to the fact that the Company Petition suffers from misjoinder of parties. the auditors of the Company have been impleaded only in order to exert pressure on the Respondents. As regards Respondent No. 6, the complaint against the said firm has been closed by the relevant authority. As regards R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Bedekar family. The HUF consisted of Late Shri Vishwanath Parsharam Bedekar and his four sons Mr. Vasudeo V Bedekar, Mr. Govind V Bedekar, Mr. Vishnu V Bedekar and Mr. Gajanan V Bedekar. Later on, the HUF was converted into/taken over by a partnership business with the co-parceners as the partners (Consisting of Late Shri Vishwanath Parsharam Bedekar, Late Shri Vasudeo V Bedekar, Late Shri Govind V Bedekar, Late Shri Vishnu V Bedekar and Late Shri Gajanan V Bedekar). Subsequently, a private company, V P Bedekar & Sons Pvt. Ltd was incorporated in 1943 wherein the current account balances of five partners of 'V P Bedekar and Sons' were converted to their share capital. Except initial directorship of Shri Chitale, who was the son- in- law of Late Shri Vishwanth Parsharam Bedekar, the directors and shareholders of the company have only been male lineal descendants of the Bedekar family and the business was also run by Bedekar family members only. At no point of time, neither the shareholding nor the board control over the company has been with anybody other than Bedekar family members, except one instance where five shares of the company were transferred to Esquire Press ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has further argued that the subscribers may be only two, however, as explained in the petition, the capital balances of the partners in the company were drawn as they were into the firm. The Respondents have not denied this. As regards a professional being made a subscriber, the even said professional was not a third party, but the son-in-law of Mr. Vasudeo Bedekar who was included in the process as an expert to help with the incorporation of the company. Even he did not retain shares of the company thereafter. 68. As regards Esquire, it has been argued by the Ld. Counsel for the Petitioner that, as explained in the petition and the rejoinder, a private company then was not allowed to borrow funds/accept deposit from anybody other than the shareholders of the company. Hence, five shares were transferred from the shares held by P1 to Esquire before accepting the deposit. This transfer was essentially for business purpose and in the interest of the R1 company and was not made with an intent to make Esquire a shareholder in the company. 69. Ld. Counsel for the Petitioners has further argued that there was equality in management. The management of the Company was in the hands of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts themselves have not treated the R1 as a company under the Companies Act. It is also pertinent to note that none of these assets were acquired by these respondents; these assets belonged to the company and were not to be disposed of in the manner chosen by the respondents. 72. Ld. Counsel for the Petitioners has further pointed out other acts of oppression committed by the respondents such as: refusal /delay in grant of inspection of records, improper circulation of annual accounts, non-reply to various queries on annual accounts, denial of opportunity to participate in the AGM by not accepting proxy and denial of opportunity to participate in management. According to the counsel for the petitioners, even the Respondents have not denied that they did not give inspection of the documents. Inspection was given only after the petition was filed and directions were issued by the CLB. 73. Ld. Counsel for the Petitioners has further argued that registers maintained by the respondents and the concerned officers of the company contain several lapses and mistakes which contravene the provisions of the Companies Act. This fact was intimated to the Company. There are a number of discrepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholding. Petitioner No. 1 resigned as director in 1986 and ever since none of the other Petitioners have been involved in the management of the Company. The Articles of the Company do not provide for any parity in shareholding or reserved seat on the board to any particular shareholder. The petitioners have not challenged the Articles of the Company and are, therefore, bound by them. The Petitioners have claimed that the Company is a quasi-partnership and sought the following final reliefs: (i) to appoint Petitioner No. 2 as a director; (ii) to treat Petitioners' shareholding in the Company as one third; (iii) direction to the Respondents to buy out the Petitioners shareholding. 79. Ld. Counsel for the Respondents has further submitted that the Petition deserves to be dismissed as the company is not a quasi-partnership and further that the Petition is barred by limitation. He has further contended that the Petitioners have miserably failed to prove the allegations of oppression or mismanagement and have also failed to make out a case for winding up of the Company and, therefore, the final reliefs sought in the petition cannot be granted. 80. On the point of limitation, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uditor about closing stock in balance sheet, etc. b. Letter dated April 6, 1996, Petitioner No. 1 seeks resolution of disputes relating to VPB Company (i.e. the present Company) c. Letter dated September 10, 2009, Petitioner No. 1 sought negotiations to resolve disputes regarding his shares in the Company. d. Letters dated April 3, 2009, May 6, 2009, April 3, 2009, May 6, 2009, April 13, 2009, November 7, 2009, December 28, 2009: Petitioners issued letters to Company complaining of the same matters that are now alleged in the Petition. e. Letters dated April 6, 2009, October 20, 2009 and October 22, 2009: Petitioner No. 2 made complaints to auditors regarding the same matters that are now alleged in the Petition and called himself an "oppressed minority shareholder" f. Letter dated May 18, 2010: In the 3rd para. of the letter, Petitioner No. 1 alleged mismanagement. 82. Thus, according to the Ld. Counsel for the Respondents, the petition is miserably barred by time. In support of his contentions, Ld. Counsel for the Respondents has relied upon several judgments of the superior courts which will be dealt with in the later part of this judgment. 83. We have weighed the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough it has been claimed by the petitioners that the company was formed in continuation of the erstwhile partnership firm and the respective captured structure of the former partners was kept intact when the company was incorporated in 1943. Even this claim does not seem to be correct. In this regard, a reference can be made to the petition itself wherein para no. 7.7, it has been candidly admitted by the petitioners that at the time of incorporation, there were only two shareholders viz. late Vishwanath Parsharam Bedekar and late Mukund Vaman Chitale (Son-in-Law of VP Bedekar). Therefore, equity shareholding of the company was not equally placed amongst the erstwhile partners of the family firm. The petitioners have further pleaded that the shares initially held by Mukund Vaman Chitale were transferred to Vasudeo Vishwanath Bedekar in 1951 which also shows that there was no equality maintained in respect of shareholding at any point of time otherwise the shares held by Mukund Vaman Chitale would have been transferred equally to all the family members/former partners of the Bedekar HUF. 87. The claim of the Petitioners that the shareholding was restricted to only male lineal desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st more than two decades prior to the filing of the petition. Counsel for the Respondents has further rightly pointed out that in 1978, Petitioner no. 1 himself diluted his shareholding by transferring his shares to Esquire Press, a third party and further that the petitioners chose not to subscribe to the rights issue in 1997 for reasons best known to them. Even the share-holding pattern of the Company, as is evident from the Memorandum of Association, is starkly different from the partnership structure of the erstwhile partnership firm. 89. The claim of the Petitioners that Articles of Association of the company, more particularly Articles 8(1) and 8(8), provide that shares of the company may only be transferred by a member only to a male lineal descendant of the Bedekar family also does not appear to be correct nor there is any evidence that this practice was followed throughout right from the beginning. Article (6) clearly provides that in case the company does not respond within three months of the notice given by a member intending to sell his shares nor finds a member to purchase such shares as per fair value got determined from the auditors of the company, the member shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being a quasi-partnership does not seem to have been established at all. Besides, the petitioners have also been able to make out a for winding up of the company which is sine qua non before a corporate body can be treated as quasi-partnership. 93. Secondly, the Petitioners have alleged and alluded to a family settlement of 1986. The Petitioners have alleged in the Petition itself that in the year 1986, an amicable settlement was arrived at in the Bedekar family that the property of the company would be divided not only between the existing management of five directors but also between all the branches of the Bedekar family in proportion to their shareholding which would be an equitable distribution of the assets of the company. It has further been pleaded that shareholding of the Petitioners, Respondent No. 2 and the family of Respondent No. 5 was almost equal and in accordance with the settlement, Petitioner No. 1 retired and did not seek reelection as a director while representative of other two branches of the family namely Shri Chandrakant G. Bedekar and Shri Ashok V. Bedekar were appointed as directors to oversee equitable distribution of the assets of the company. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholder by virtue of his shareholding cannot claim a share in the properties of the company, much less the partition of its assets. 95. So far as, the question of alleged acquisition of shares by Respondent No. 2 and Late Trimbak Bedekar with a view to reduce the petitioners to minority is concerned, it is pertinent to point out that the Petitioners never challenged the said acquisition or transfer of shares in favour of the Respondents by filing a Petition under Section 111(4) of 1956 Act or Section 59 of 2013 Act. On the contrary, the Petitioners have stated in the rejoinder that they are not questioning the transfer of shares in the name of Respondents or relinquishment of tenancy rights. That being so, the question of terming the alleged acquisition of shares by the Respondents being illegal or oppressive in nature does not arise. In addition to this, the Petitioners have again not led even an iota of evidence to prove that the Respondents transferred the property of the company to the acquired shares. In this regard, the bald allegations of the Petitioners cannot be said to be enough to prove the acquisition of shares by fraud. Therefore, it has to be held that the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppression and are of the considered view, the same do not qualify as acts of oppression or mismanagement. It has been repeatedly held by the Higher Courts the denial of the access of the books of the company or non-compliance of statutory formalities/compliances cannot be considered as acts of oppression and mismanagement of the affairs of the company. In this regard, reference can be made to Tata Consultancy Services v. Cyrus Investments Private Limited and others (supra) whereby it was held by the Hon'ble Supreme Court that if the Petitioners have not suffered any material harm or prejudice in their capacity as shareholders, it cannot be a case of prejudice cause to the Petitioner nor these acts termed as act of oppressions and mismanagement. In this context, Ld. Counsel for the Respondents have rightly relied upon Needle Industries (India) Limited & Ors. v. Needle Industries Newey (India) Holding Limited & Ors (supra). whereby it has been held that the person complaining of oppression must show that he has been constrained to submit to a conduct which lacks in probity, conduct which is unfair to him and which cause prejudice to him in the exercise of his legal and proprietar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Judgment dated 24.06.2013 which is annexed with the reply as Exhibit R- 6. Therefore, the Petitioner having already availed a remedy before the Civil Court cannot now be reagitate the same in the Petition under Sections 397-398 of the Companies Act 1956. Even otherwise, non-payment of gratuity cannot be an act which can be said to be an act of oppression and mismanagement. 101. As regards the entitlement of Petitioner No. 2 to be appointed as a director of the Respondent company, it would be suffice to say that Article of Association do not confer any such right upon Petitioner No. 2 to be appointed as a director of company. Even otherwise, under Section 152 of the Companies Act, a director can be appointed only by the shareholders at a general meeting. Since Petitioner No. 2 does not have the requisite number of votes, he has not been legally appointed as director. In this regard, a reference can also be made to the law laid in G. Vijayalakshmi Alias Brinda & Another v. Triupur Textiles Private Limited 2012 CC online Madras 5269 whereby it has been held that the principle of legitimate expectation cannot be extended in company law as it is mostly confined to the right of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh period of limitation accrues on every single default and further that every act of oppression and mismanagement will give rise to a fresh cause of action. 104. Having thoughtfully considered the rival contentions of the Ld. Counsel for the parties on the point of limitation, we are of the considered view that so far as the specific acts of breach of the alleged family settlement of 1986 or the acquisition of shares by the Respondents in 1988 and the alleged oppressive rights issue brought by the Respondents in the year 1997 are concerned, the same cannot be treated as a continuous cause of action, more so, when the Petitioners have not led any worthwhile or tangible evidence to prove the factum of execution of the alleged family settlement in the year 1986 and its non-implementation in 1989. Similarly, the factum of acquisition of shares by the Respondents in the year 1988 can also not be treated as a continuing cause of action. In this regard also, it is worthwhile to mention that the Petitioners have again not led any concrete evidence to prove that the shares were acquired by the Respondents illegally by disposing of or alienating the property of the company. The rights i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afore-cited cases and the fact that the alleged acts of oppression and mismanagement do not constitute a continuing cause of action, we are constrained to hold that the Petition is barred by time so far as the aforesaid alleged acts of oppression and mismanagement are concerned. 107. It has been vehemently argued on behalf of the Petitioners that they may be allowed to exit the company on fair valuation, which can be got conducted from an independent valuer and the Respondents be directed to purchase the shareholding of the Petitioners as this would address the grievances of the Petitioners, otherwise the Respondents would continue to perpetrate acts of oppression upon them and whatever little holding of shares is left with the Petitioners would be of no use of them as they have been excluded and ousted from the management of the Respondent company and are also kept out of all sorts of affairs and management of the company. 108. Counsel for the Respondents, on the other hand, has argued that since the alleged acts of oppression and mismanagement attributed to the Respondents have not been established on record by the Petitioners, as per settled law, the company or the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat initially the business was being run by the HUF as well as partnership concern consisting of members of one family before it was converted into a company and till date, it retains the character of a closely held family company. 110. We have thoughtfully considered the above contentions raised by the Counsel for the parties. In our considered view, to make out a case of exit from the company on fair valuation, even though, it is normally incumbent upon the Petitioners to have established a case of oppression and mismanagement. However, the question arises as to whether the Petitioners can be allowed to exit the company on fair valuation despite the fact that they have not been able to cogently prove the allegations of oppression and mismanagement on the part of the Respondents. No doubt, in this regard, the Counsel for the Respondents 1 to 5 has relied upon Jaladhar Chakraborty and Others. v. Power Tools and Appliances Co. Ltd. & Others (supra) as well as Vardhman Dye Stuff Industries Pvt. Ltd & others v. M.R Shah (supra) whereby it has been held that without proving the allegations of oppression and mismanagement, the Petitioners cannot be held entitled to the relief of exit f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family through an HUF and a partnership concerned consisting of a family members prior to its incorporation. Over the years, the shareholding of the Petitioners has been reduced to a minuscule less than 8%, which may not strictly be on account of something attributable to the Respondents. However, despite all this, in our considered view, it would be in the fitness of things, if the Petitioners are given the relief of exit from the company on fair valuation as it would put an end not only to the long drawn litigation which has been pending between the parties, who are members of one family, but would also end the animosity between them for all times to come. In this context, it is worthwhile to point out that in the written reply filed on behalf of the respondents, it has been stated that any meetings that may have been held between the parties have no relevance to the subject matter of the instant Petition. That apart, the Respondents have always engaged with the Petitioners with bona fide intentions of resolving the relevant issues between the parties. In this regard, the Petitioners have themselves failed to turn up at meetings that were initiated by the Petitioners themselves, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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