Umesh Chandra Banerjee, CJ .
1. Statutory protection against 'oppression' in corporate management as provided under Sections 397 and 398 of the Companies Act cannot but be ascribed to be discretionary in nature and the law Courts would be within its right to pass appropriate orders having due regard to the facts and circumstances of the matter under consideration and there is due statutory sanction in regard thereto. While it is true that there is no definition of 'oppression' as such in the Companies Act, but the fact remains that the events shall have to be shown in such a manner so as to depict a continuous state of affairs which would render the Court to come to the conclusion that the affairs of the company and the management thereof are being conducted in a manner oppressive to some members of the Company. Be it noted that isolated act of indiscipline or indifference or even deprivation by itself would not bring home the charge of oppression - there shall have to be a continuity of a burden-some, harsh and wrongful conduct. As a matter of fact, the conduct of the oppression towards oppressed shall have to be such so as to evince an existing element of absence of fair dealing or lack of probity. The observations of the Supreme Court in the case of Shanti Prasad Jain v. Kalinga Tubes, AIR 1965 SC 1535, lends support to the above. The discretion spoken of earlier and as is available within the meaning of the statute, however, knows no fetters by reason of specific language used, to wit, 'make such order as it thinks fit', by the law makers in Section 397 of the Companies Act.
2. Before proceeding further, it would, however, be convenient to advert briefly to the factual matrix of the matter under consideration.
3. The Deccan Enterprises Private Ltd., being the respondent-company, was incorporated under the provisions of the Companies Act on 15-4-1966 with the registered office at Secunderabad. The authorised capital of the Company was Rupees Ten lakhs of which issue-capital was Rupees Five lakhs divided into 50,000 shares of Rs.10/- each. As regards share-holding as of 30-9-1968, the records depict as follows:
'R. N. Jalan & FamilyR.N. Jalan-1100 S.D. Man- Hemant Jalan- Ritu Jalan- 22.00%Khemka & FamilyR. Khemka-170034.00%M. Khemka- K.D. Khemka- Savita Khemka- Sunita Khemka- Hemalata Khemka- R.D. Khemka- O. P. Jalan & FamilyO.P. Jalan-110022.00%Sudha Jalan- K. Jalan- V. Jalan- S.K. Jalan & FamilyS.K. Jalan-110022.00%A. D. Jalan- Miscellaneous-
4. Incidentally, be it recorded that the petitioner No.1 and respondent No.1, being closely associated with Hyderabad Industries Limited, said to have conceived the project of manufacturing rubber rings as ancillaryunit of Hyderabad Industries Limited and by reason of their active involvement in the day to day management in the Hyderabad Industries Limited, Respondent No.3, Sri O.P. Jalan, who was in jute business at Calcutta was asked to look after the day to day management of the project and it is in pursuance thereof that the Company Deccan Enterprises Private Limited, being respondent No.1, comes into existence. There is, however, some evidence on record which runs counter to the state of affaire as noted above and as contended by Mr. Sarkar appearing in support of the appeal. Mr. Mukherjee for the respondents contended that it is not true that the third respondent was brought on the Board for looking after day to day affairs of the Company and strong reliance was placed on the application for availability of the name to the Registrar of Companies and the draft Memorandum and Articles of Association. The application dated 6-1-1966, signed by Sri Om Prakash Jalan, being respondent No.3, and addressed to the Director of Research and Statistics, Government of India, through the Registrar of Companies, Hyderabad as regards the availability of name, depicts that the respondent No.3 did apply to the addressee as above for the purpose of obtaining necessary approval of the name of the Company in regard to the business of manufacture in rubber and rubber goods upon payment as is required for the purpose. Mr. Mukherjee contended that the third respondent being one of the five brothers, including the ninth and seventh respondents, has in fact taken all necessary steps to promote the Company, though, however, the signature of Sri O.P. Jalan is significantly absent in the Articles an Memorandum of Association. As an explanation thereto Mr. Mukherjee contended that during February, 1966, the marriage of Sri O.P. Jalan was fixed at Calcutta and as such he was required to go to Calcutta. But, since the printer could not deliver the printed copy of Memorandum and Articles of Association before Sri O.P. Jalan left for Calcutta an in order to avoid any delay in the incorporationof the Company, Sri UN. Jalan, being the elder brother of Sri O.P. Jalan, was requested to sign the Memorandum of Association along with Sri R. Khemka, who was working as a deputy to Sri UN. Jalan. Be it noted that while deposing Sri O.P. Jalan in no uncertain terms stated that even before the incorporation of the Company, he had applied to the Directorate of Industries for allotment of land in a private Industrial Estate at Balanagar in his personal name and got two plots allotted being B-58 and B-59 and subsequently also obtained the third plot being B-60. This evidence, however, stands corroborated in the relevant documentary evidence. The plots of land standing in the name of Sri O.P. Jalan, however, subsequently stand transferred to Deccan Enterprises Private Limited. The SSI registration was also obtained from the Director of Industries and it is the definite evidence of Sri O.P. Jalan that power connection for the factory and placement of order for plant and machinery together with application for approval of construction of factory building have all been effected by Sri O.P. Jalan. The Bank account was opened and over-draft credit limit from the State Bank of India was also obtained by Sri O.P. Jalan.
5. This longish narration could have been avoided, but the judicial ethics prompts this Court to have the same on record by reason of strenuous submissions made on behalf of the parties as regards the involvement of the petitioner No.1, respondent No.3 and respondent No.9. Tin's aspect of the matter, however, on the basis of the documentary evidence can be concluded with an observation that the petitioners' involvement as regards the promotion of the Company may not be such as is sought to have been projected before the Court. It is at this juncture, the pattern of share-holding upto the period ending on 31-12-1984 or as of 1-1-1985 ought to be noticed, since the same has a definite bearing in the matter in dispute.
R.N. Jalan & Family R.N. Jalan11001485351535157030S.D. Jalan 8001085234523454690Hemani Jalan--252550Ritu Jalan-
190025305910591011820 (25.33%)(25.30%)(23.64%)(23.64%)(23.64%)Khemka & family R. Khemka170022655660566011320M. Khemka5075185185370K.D. Khemka7831043248324834966Savita Khemka--252525Sunita Khemka--252525Hemlata Khemka--2525125R.B. Khemka-
253333838428842616881 (33.77%)(33.83%)(33.71%)(33.71%)33.76%)O.P. Jalan & Family O.P. Jalan11001465351535157080Sudha Jalan8671157257725775154K. Jalan--258251650V. Jalan-
196726225142694213934 (26.23%)(26.22%)(24.57%)(27.77%)27.87%)S.K. Jalan & Family S.K. Jalan11001465368528555730A.D. Jalan-
11001465402032206440 (14.67%)(14.65%)(16.08%)(12.88%)(12.88%)Miscellaneous--500500925 (2.00%)(2.00%)(1.85%)
6. It is to be noted that Shri R. Khemka and Sri R.N. Jalan were the directors since its inception and the appellants' principal contention is that the understanding of the Khemkas was to the effect that Sri O.P. Jalan, said to have been brought from Calcutta subsequently to look after the business, was to function under the definite guidance of Shri R. Kfiemka and Shri UN. Jalan. The whole tenor of submissions of Mr. Sarkar is that two groups, viz., Khemkas an Jalans wereto function as partners and reposed implicit faith on each other. As a matter of fact, since its inception right till 1985, the proportionate share-holding in the company was in the ratio of 1/3rd and 2/3rd between Khemka and Jalan groups and this was so in spite of increase in share capital from time to time prior to 1985-86.
7. On the factual score, two diametrically opposite versions are available; one pertaining to participation and active assistance of Shri H Khemka and Shri R.N. Jalan which has led to the company growing in leaps and bounds and bagging export orders and consequently building up of large reserves and on (he other count it is the definite ease of Shri O.P. Jalan that neither Khemka nor R.N. Jalan did ever bother about much of the business and it is due only to the hard work of Shri O.P. Jalan that the company had its expansion. Incidentally, petitioner No.1's son, Shri Mahesh Khemka, was inducted on to the company as an Executive Director immediately after his completion of Engineering,Degree.
8. Factual score depicts that ihe disputes, however, started since 1982-83 and it has been alleged that there are steady and defined methods adopted by Shri O.P. Jalan to oust and totally exclude the Khemka group and it all happened after return of Shri Mahesh Khemka from Saudi Arabia where he was inducted as a General Manager of Amiant Rubber Industries Limited with Shri R, Khemka and Shri O.P. Jalan as the Directors of the foreign company in Saudi Arabia and Shri Mahesh Khemka, it has been alleged, did shift completely his residence to Saudi Arabia till npto 1982. Obviously, after coming back to the country, there as an expectation that he would be absorbed in the Company at Hyderabad but as the records depict Mahesh Khemka was not inducted as a Director on the Board of the Company at Hyderabad - as a matter of fact, the first seed of discontentment was sown on account of the same and since then allegations andcounter-allegations are being levelled pointing to, however, one particular event, (hat is to say, management being retained in the hands of Shri O.P. Jalan culminating, however, in filing of the petition under Section 397 of the Companies Act.
9. The learned single Judge, in spite of the matter being rattier voluminous, has dealt with (he same and scrutinised every minor detail. In his order, the learned Judge did record the reliefs claimed in the Company Petition and we Set out the same in seriatum :
'(i) Declare the induction of the Respondent No.7 as additional Director onto the Board purported to have been made at the Board meeting held on 15-1-1987 as void and illegal and injunct the said respondent No.7 from exercising any power or authority as a Director of the Respondent No. 1 Company.
(ii) Declare that there were no Annual General Meetings held on 18-12-1985 or 18-10-1986 and the Board Meeting held on 9-11-1985, 1 l-l 1-1985 and 20-8-1986, 20-9-1986, if there were any such meeting or meetings and that each of the said meetings are illegal and the resolutions if any passed there at are void and inoperative.
(iii) Declare that the purported allotment of further/fresh shares in the years 1985 or 1986 if any, by the Board of the respondent No.1 is void, illegal and to injunct the respondent No.2 and 3 as Secretary and Managing Director from permitting any rights of such allottee share-holders under such further/fresh allotment including the voting right in respect of such further/fresh allotted shares.
(iv) Declare that the respondent No.3 is not the Managing Director of the Company and/or in the alternate to terminate his appointment as Managing Director on the ground that he has shownhimself to be unfit to be entrusted with the management of the company.
(v) Declare that the respondent No.2 is not the Secretary' of the Company and in alternate to terminate his appointment as the Secretary on the ground that he has shown himself to be unfit to be entrusted with such functions.
(vi) Restrain the respondent No.2 and 3 i.e., Secretary and Managing Director by an injunction From giving effect to any resolutions of the Board of the company at the meeting purportedly to have been held on 11-11-1985 and restrain respondent No.3 from acting pursuant to the power of Attorney said to have been executed in his favour based on the said illegal resolution dated 1 l-l 1-1985.
(vii) Give appropriate directions for the convening of the Annual General Meetings of the Company for the year ended March, 1985 and March, 1986 after due notice, and in accordance with the provisions of the Act so that the shareholders of the company may consider and transact such business as may be permitted by law to be transacted at that meeting including the appointment of reappointrnent or removal of the Directors.
(viii) Appoint a special officer or officers to take charge of the business and affairs of the company and to arrange for running the same till the Board is duly reconstituted.
(ix) A scheme be framed by this Court for administration of the company with proportionate representation of the petitioners on the Board in the alternate the Special Officer be directed to convene and hold and conduct an extraordinary general meeting of the company for the purpose of appointment of Directors.
(x) Give such other directions as this Hon'ble Court may deem necessary to put an end to the matters of mismanagement and oppression referredabove and to ensure the appropriate conduct of the affairs of the company in accordance with the understanding of the joint participation and management of the affairs of the respondent No. I and the foreign joint venture company and in accordance with the provisions of the Act and the Articles of Association of the respondent No. 1-Company.'
10. Before proceeding further, one redeeming feature transpired during the course of hearing before the Appellate Court that the issue is not between Khemkas and Jalans but the issue is between Khemkas together with Shri KN. Jalan, being the elder brother of Shri O.P. Jalan on one side, and the other Jalans on the other, including Shri Shubhkaran Jalan, being the father of Shri R.N. Jalan and O.P. Jalan.
11. At this juncture it would be convenient to note that during the course of hearing before the learned single Judge, voluminous documents and oral evidence were pressed into service in support of the respective contentions of the parties and the learned single Judge as noted above, did take very great pain in elaborating the same with great lucidity and since the matter has been dealt with in the manner as it has been, we refrain ourselves from dealing with the same once again in this judgment on the factual score excepting the essentiality, moreso by reason of the stage of the proceeding as at present.
12. Be it noted that the learned single Judge after considering the respective pleadings initially framed issued on 8-4-1998 in the manner following:
'1. Whether the petitioner No.1 and respondent No.9 and members of their family and associates have been excluded from the joint management and participation and enjoyment of the benefit of the 1st respondent Company and of the foreign joint venture Company from and by about 1983?
2. Whether the allegations of Oppression of the petitioner's and respondent No.9, their family members and associates, share-holders and of mis-management of 1st respondent Company, by respondent No.3 and his family members and assoeiates, prejudicial to ihc interests of the company, arc made out?
3. Whether the alleged issue of additional shares of Rs.5 lakhs in the year 1985 of the 1st respondent Company, is valid, legal and binding on and/or is in ihc interests of, the said company or were they issued solely for the benefit of respondent Nos.3, 6, 7 and 10?
4. Whether the Board and/or the Annual General Meeting of the 1st respondent Company in respect of the years 1984-85. 1985-86 and 1986-87 arc validly held and Annual Accounts and Balance Sheet of the said years are validly approved and passed by the Board and/or the General Body of the 1 st respondent Company?
5. Whether there has been any violation by respondent 3 or respondent 2 of any of the provisions of Companies Act in respect of the affairs of (he 1st respondent Company for the years 1984-85, 1985-86 and 1986-87 as alleged in the petition and reply affidavit?
6. Whether the alleged resolution of the Board of the 1st respondent company dated 21-8-1984 withdrawing the nomination of respondent No.l from the Board of Directors of joint venture foreign company is valid and binding on the 1st respondent company and Rl 1?
7. Whether the affairs of the 1st respondent Company are mismanaged and its assets and profits misappropriated and not duly accounted for by R3 and members of his family and associates on the Board of the 1 st respondent Company or otherwise, in the years 1983-84, 1984-85 and 1986-87 as alleged in the petition?
8. Whether all or any, if so, which of the reliefs sought for in the petition, are allowable? What is the effect of the proceedings pending in Calcutta High Court on these proceedings?
9. Whether there exists just and equitable ground for winding up of the 1st respondent company?
10. Whether any other or further relief of direction is just, equitable and necessary to be ordered by the Court in the circumstances of the case?'
13. It is on this score, however, that certain other factual details as has been recorded by the learned single Judge ought to be noted herein. The learned Judge recorded the following:
'..... However, the issues were reducedin subsequent proceedings when certain appeals were filed against Interlocutory orders. The Division Bench in OSA SR. No.24892 of 1994 on the basis of the submissions made by the learned Counsel for the petitioner observed as follows:
'Mr. K. Srinivasa Murthy, learned Counsel for the petitioners in Company Petition No.27 of 1987, has stated that the only issue, if at all the same can be called an issue, to be decided in the proceeding is - 'whether there are any acts of oppression of the minority shareholders of the company by any other group of share-holders or majority share-holders' - and relevant lo the above is the issue -'whether petitioner-R. Khemka and ninth respondent and/or any other person on their behalf, as alleged by the third respondent, consented to the allotment of additional shares to several other persons and if they have not consented to the above, whether allotment of shares, as alleged by the petitioners, is an act of oppression attracting action under Section 397 and/or 398 of the Companies Act. The main issue, as stated by usabove, it is obvious, is comprehensive enough to bring into its fold all questions as to maintainability of an action under Section 397 of the Companies Act on the suggestive of the presence of any act of oppression leading to the instant petition - Company Petition No.27 of 1987.'
Thus, it is not necessary for this Court to decide all the issues which arc framed earlier, but the relevant issues which are required now to be proceeded with are as follows:
(a) Whether there arc any acts of oppression of the minority share-holders of the company by any other group of share-holders or majority shareholders?
(b) Whether petitioner - R. Khsinka and 9th respondent - or any other person on their behalf, as alleged by the 3rd respondent, consented to the allotment of additional shares to the several other persons and if they have not consented to the above, whether allotment of shares as alleged by the petitioners, is an act of oppression attracting action under Section 397 and/or 398 of the Companies Act?'
14. While it is true that the issue at 'a' above was framed after consideration of the relevant pleadings and the submissions, as noted above, but the facts depict that the principal participants in the disputes are ShriA Khetnka and Shri R.N. Jalan on one side and Shri O.P. Jalan on the other, as such question of oppression of Jalans against the Khemkas, strictly speaking, may not arise since R.N. Jalan and R. Khemka have grouped themselves under one head and opposed O.P. Jalan.
15. It has been the definite case of the appellant that during the year 1984 no notice of the Board Meetings were sent to Shri li Khemka and as a matter of fact no Annual General Body Meeting was held, neither any notice of the Annual General Body Meetingwas sent. Mr. Sarkar, appearing in support of the appeal, strongly contended that the statutory requirement of having the Annual General Body Meeting has been given a quiet departure by Shri O.P. Jalan. Mr. Sarkar has been very emphatic as regards the service of notices and the evidence as is available on record, according to Mr. Sarkar, lacks probity and as a matter of fact on a total consideration of the entire evidence, it has been contended, there is no manner of doubt as regards the user and adaptation of unfair means and conduct of the business of the Company in a manner prejudicial to the interest of Khemka group. Two of the letters dated 25-3-1985 and 30-4-1985 were taken recourse to by Mr. Sarkar in support of his contention. It is on this count, however, that Shri R.N. Jalan also joins the appellant/ petitioner in the matter of lodgment of a complaint as regards receipt of notices of the Board Meetings for the years 1984-85. For convenience sake, the letter dated 25-3-1985 from R. Khemka to Shri O.P. Jalan, being the Managing Directorof Dcccan Enterprises IM. Ltd., and being Exhibit A21 is set out herein below:
'The Managing Director,
M/s. Deccan Enterprises Pvt. Ltd.,
I am surprised to learn that various Board Meetings and general meetings of the Company have been held for the last 18 months whereas during this period I have received no Notices, agenda or invitation for any of these meetings. I have also not received, as yet, the annual report and balance-sheet for the year ending 31-3-1984 for my signature and records. Since last year I have also not been receiving the monthly reports of the company as was our usual practice.
I would, therefore, request yon to please let me have copies of the minutes of various board and general meetings since June, 1983 (or my perusal and record and also a copy of the annual report andbalance-sheet of the company for the year ended 31-3-1984.
In future I would request you to please send me the notice for the board and general meetings by 'Reg. Post Ack. Due' at my above address so as to reach me a week before the date of the meeting. The monthly reports of the company may also be sent to me regularly as usual in future.
Sd/- R. Khemka.'
16. The reply letter from the Managing Director, Deccan Enterprises Pvt. Ltd., dated 30-4-1985, being Exhibit A22, is also set out herein below for convenience sake:
'Mr. R.K. Khemka,
This is wilh reference to your letter dated 25th March, 1985.
At the outset we express our great surprise at the contents of your letter under reference. The notices, agendas and other documents in connection with the meetings of the Board of Directors and the share-holders of the company held during the period mentioned in your letter were duly sent to each of the Directors of the Company including yourselves as was being done in the past. The Annual Report and Balance-Shee! of the Company for the year ending 31-3-1984 was placed before the meeting of the Board of Directors held on 3rd September, 1984 and was signed by all the Directors present at the said meeting. A copy of the said Annual Report and the balance-sheet of the company is enclosed.
As you are aware we had discontinued the practice of despatching monthly reports to each of the director individually.
Save and except as stated herein we deny each and every allegation made in your letter under reference.
Sd/- O.P. Jalanr
17. Before proceeding further in the matter, it is convenient to note, however, thatboth the complainants viz., Shri R.K. Khemka and Shri R.N. Jalan are residents of Hyderabad and are locally available. The letter dated 25-3-1985 (Exhibit A21) recorded non-receipt of the monthly reports as also non-receipt of notice of the Board Meetings 'for the last 18 months'. If any credence to the appellant-petitioner's case is to be effected, to wit, that Shri O.P. Jalan was inducted into the company for the purpose of day-to-day administration of the business under the guidance of both Shri UN. Jalan and Shri R.K. Khemka, then and in that event, the allegations in the letter cannot be said to be of any significance since, obviously, guidance was available for one and half years. If it is otherwise allegations are deemed to be correct, then and in that event the case of guidance and Shri O.P. Jalan being inducted as an administrator of the Company looses its efficacy. It shall have to be noted that the period involved is of 18 months i.e., to say this grievance of non-availability is existing since the middle of the year 1983 - then why this delay? If otherwise, one is active in management : and one participates in the management and/or one acts as a guide to the administration and management of the company - Is it in the normal course of events expected that the 18 months period would be allowed to be lapsed before a complaint is lodged to that effect - we arc afraid, the answer cannot but be in the negative.
18. The letterdated 30-4-1985 (Ex.A22) categorically records that all notices, agendas and other documents in connection wilh the meetings of the Board of Directors and the share-holders of the Company held during the period mentioned in the letter dated 25-3-1985 (Ex.A21) were duly sent to each of the Directors of the company including the complainant as was being done in the past. The letter further records the discontinuance of the practice of despatching of the monthly reports to each of the Directors individually -there was, therefore, a practice which has since been abandoned but, there was no whisper in regard thereto at any point oftime earlier than March, 1985. There is not even any immediate reaction from Shri R. Khemka either - if there was any deprivation or any oppression and the complaint had some justification in the normal course of events, there would have been some reaction from Shri Khemka's end. Be that as it may, there is thus a two pronged attack on to the management: one being from Shri R. Kheinka, the other being from Shri R. N. Jalan. The second line of grievance is that while it is true that some notices were received thereafter even in the year 1986, but, those were received much after the expiry of the meeting making it otherwise impossible to attend the same and it is in this context the involvement of Shri V.K. Chamaria, Company Secretary, did evoke some amount of criticism from Mr. Sctrkar.
19. The records, however, do tell a different story. The notice dated 13-6-1985 and June 18, 1985 informing Shri R. Kheinka as regards the meeting of the Board of Directors of the Company on 27-6-1985 did evoke a reply being Ex.A25, which reads as follows:
'Board of Directors
Deccan Enterprises Pvt. Ltd.
6-2-175/1, Rashtrapathi Rd.,
'This has reference to your notice dated June 13, 1985 and June 18, 1985 informing me that a meeting of Board of Directors of the Company will be held at the Registered Office of the Company on 27th June, 1985 at 11-00 a.m. I regret my inability to attend the above meeting since I will be away from Hyderabad on this date. I, therefore, request you to please grant me leave of absence from the same and oblige.
Sd/- (R. Khemka)'
Similar is the situation for the Board Meeting dated 8-7-1985 being Ex.A27, and which is also, for convenience sake, set out herein below:
6th July, 1985
Board of Directors,
Deccan Enterprises Pvt. Ltd.,
6-2-175/1, Rashtrapathi Rd.,
This has reference to your notice dated June, 28th 1985 informing me that a meeting of the Board of Directors of the Company will be held on 8th July, !985 at 11-00 a.m. Due to pre-occupation, I am unable to attend (he above meeting and, therefore, request you to please grant me leave of absence from the same.
Yours faith fully,
Sd/- (R. Khemka).'
20. On the factual score, Mr. Sarkar, further contended that induction of the respondent No.7, being Shri Srinarain Jalan as a Director was wholly unauthorised, illegal and unwarranted and this act of induction is stated to be an element of systematic oppression of Shri O.P. Jalan since long prior to induction unauthorised and wrongful allotment of shares were effected and which was objected to by Shri Khemka. Mr. Sarkar further contended that in the Balance-Sheet for 1983-84 it was shown as if the Company had incurred a loss of Rs.13 lakhs but the same does not reflect, as a matter of fact, the real financial position but it is the resultant effect of manipulated accounts and there lias been a systematic siphoning of the funds of the Company by way of money lending to related concerns and in fine Mr. Sarkar stated that there has been thus a deliberate oppression and systematic refusal to permit participation in the management on the part of Sri O.P, Jalan so far as Shri Khemka is concerned, which however, did not findfavour with the learned single Judge. The learned single Judge in paragraph 96 of the judgment recorded:
'96. With regard to the alleged oppression on the ground of (a) above, it is the case of R3 that there was total disinterestedness on the part of the PI and R9 in the management of Rl company. PI never attended tiie meetings and he continued to palronise the company APPL set up by P3. There is also evidence to the effect (hat APPL established by the P3 has been supplying the same products which were hitherto being supplied by Rl company and that the purchase of rubber rings by HIL from Rl company slowly decreased from 1983 onwards and by 1986 the supply of Rl company became nil. It is also in evidence that APPL company had been supplying the rubber rings to HIL I have already discussed the role played by PI in attending the meetings and I have held that PI has notice of meetings, but deliberately he failed to attend the meetings. Therefore, the contention that P] has an interest in the company and that lie was willing to purchase the shares had the offer for additional share issue had been made to him, cannot be accepted.....'
21. As a matter of fact, Shri R. Khemka after the return of Sri Mahesh Khemka from Saudi Arabia started two several separate competitive business concerns viz., Andhra Polymers Pvt. Ltd., and Ramak Enterprises Pvt. Ltd., and it is on this score that Mr. S.B. Mukherjee appearing for the respondents contended that by reason of the commencement of the business as above there has been an utter neglect on the part of Shri R. Khemka to get himself involved in administration in any way whatsoever. The two letters referred to above, dated 26-6-1985 and 6-7-1985, Exs.A25 and 27 respectively, lend credence to such a submission. Mr. Mukherjee contended that despite a definite bar and a restriclion in the Articles of Association of the respondent No.1Company to the effect that no share-holder directly or indirectly concerned or interested in or associated with the company shall carry on the business in the competition of the company, the appellant-petitioner started identical business and, as a matter of fact, diverted orders meant for the respondent No. 1 company to be supplied to the International Airport Authority to the detriment of the company, the Hyderabad Industries Limited, a customer of some magnitude by reason of the special efforts of Shri Khemka stopped placement of orders with the respondent No. 1 company, but commenced the same with Andhra Polymers Pvt. Ltd., and it is on (his score that Mr, Mukherjee heavily commented upon the conduct of the petitioner in the matter of ascribing oppression by Sri O.P. Jalan against the Khemkas.
22. Significantly, Hyderabad Industries Limited is the organisation wherein both Sliri R. Khemka and Sri R.N. Jalan were involved in high positions and by reasons of their association with the company (Hyderabad Industries Limited) there was, as a matter of fact, no difficulty in the matter of procurement of orders for Deccan Enterprises from Hyderabad Industries Limited. In fact, the main survival of the respondent No. 1 (Deccan Enterprises) were had from Hyderabad Industries Limited. The exclusion of Deccan Enterprises and inclusion of Andhra Polymers Pvt. Ltd., in the matter of placement of orders cannot be said to be an instance without any significance since the same was effected during the continuance of both Shri R. Khemka and Shri K.N. Jalan with Hyderabad Industries Limited. As a matter of fact there has been a definite attempt to avoid the meetings of the company after commencement of the business of a competitive industry viz., Andhra Polymers Pvt. Ltd., and Ramak Enterprises Pvt. Ltd. The records depict that after March, 1983 Shri R. Khemka never attended any of the meetings of the company. The records further depict that as early as 21-8-1984 the Board of the respondent No.1 company passed aresolution withdrawing the nomination of Shri Mahesh Khemka from Directorship of the Board of the joint venture company in Saudi Arabia. This meeting was held at Calcutta and notices were issued to all the Directors of the Board. Inspite of such a notice, Khemka's thought it prudent not to attend the meeting and subsequently the joint venture company in its Annual General Meeting on 7-5-1985 proposed to remove Shri Mahesh Khemka and at that juncture Sliri R. Khemka filed a civil suit in the Calcutta High Court on 3-5-1985 and sought for an order of injunction but the same was refused and by reason of the rejection of the prayer, the joint venture company in its Annual General Meeting held on 7-5-1985 removed Shri Mahesh Khemka from the Directorship of the joint venture company in Saudi Arabia.
23. Be it noted that inspire of the fact that the original petition filed in the Court under Section 397 of the Act includes Shri R.N, Jalan as an oppressor as well, but during the course.of hearing there is a definite shift of the stance as noted above, and Mr. S. Ravi, appearing for Mr. R.N. Jalan did lend concurrence to each of the submissions of Mr. Sarkar, appearing in support of the petitioner being the appellant herein.
24. At this juncture it would be convenient to note that the spark-off came from both Shri R.N. Jalan and Shri Khemka as regards the issue of further share capital of Rs.5 lakhs; whereas Mr. Mukherjee contended that in the Board meeting held on 26-11-1994, it was decided to issue further share capital of Rs.5 lakhs to meet its capilal requirement: Mr. Sarkar and Mr. Ruvi were very emphatic in disputing the same and as a mailer of fact were extremely vocal on this count and contended that by reason of the manipulation and adaptation of financial jugglary, a so-called capital requirement was made to appear but the intent of the same was to deprive Shri R.N. Jalan and Shri Khemka to be in the majority (sharesof both and their nominees taken together). Mr. Mukherjee, in support of his contention on capilal requirement, contended that the notice of the meeting was sent to all the Directors and there is ample evidence to that effect. The Board in its meeting held on 26-11-1984 did resolve to issue further share capital of Rs,5 lakhs and the notices for the said meeting were sent to all the shareholders asking them to send their applicalions along with the application money before 30-12-1984. Mr. Mukherjee relying upon the minutes of the Board meeting contended that the Board again met on 5-1-1985 and granted extension of time up to 15-2-1985. All notices, it has been contended, were sent to all the Directors and to all the share-holders fixing the last date of receipt of the applications up to 15-2-1985 and in the Board meeting held on 28-2-1985 it was resolved to allot further shares to the share-holders who made applications and the allotment of shares were effected in accordance with the provisions of law. As a matter of fact, Mr. Mukherjee contended that the shares were issued on 4-3-1985 and a report to that effect was filed before the Registrar of Companies on 21-3-1985 and there is no question of the issue being declared invalid or illegal or in any way tainted. In the Board meeting held on 15-1-1987 the respondent No.7 Shri Sr'marain Jalan was inducted as an Additional Director and even though the petitioner No.1 Shri R. Khemka indicated his dissent the majority, however, did lend concurrence and as such the resolution was adopted with a majority. It has been the definite case of Mr. Mukherjee that by reason of active connivance of the respondent No.9 and the appellant No.l there has been subslantial reduction in sales and this is, however, apart from the general recession in the total export market. The records depict that in 1984-85 and 1985-86 the company incurred losses on account of increased cost of production and substantial reduction in the business activities which cannot but be, it has been contended, attributed to the unfair competition encouraged by the respondentNo.9 and the appellant No.1. The records further depict that the lending by the company as on 31-3-1984 was about Rs.63 lakhs, within which a sum of Rs.50 lakhs were given to the concerns in which the appellant No.l was substantially interested. Mr. Mukherjee 's definite contention is that there has been an alround effort by Shri R. Kheinka to minimise the efficacy of the respondent No.l company. As a matter of fact Mr. Mukherjee contended lhat a number of employees, supposed to be experts were made to resign and join the competitive firm of Andhra Polymers Pvt. Ltd., - These are the acts which Mr. Mukherjee complained and started that it is a deliberate attempt to crush the respondent No.] company in order to sub-serve the individual gain and promote the growth of Andhra Polymers Pvt. Ltd.
25. Incidentally, another company in which the parties were interested was Nucon Enterprises Pvt. Ltd., but since Nucon Enterprises Pvt. Ltd., was making heavy losses Shri R.N. Jalan thought it prudent to devote his whole time an energy to revive Nucon Enterprises Pvt. Ltd., and by reason wherefor he did resign from Hyderabad Industries Limited sometime in March/ April, 1985, but unfortunately, however, this attempt has brought about a strained relationship between two brothers Shri R.N. Jalan and Shri O. P.Jalan. But, as noticed above, there was substantial investment of the respondent No.l company in Nucon Enterprises Pvt. Ltd., as well but the amounts were not returned by Nucon Enterprises. Similar is the situation with regard to the Secunderabad Commercial Corporation. The break up value of the shares was indicated at - 59% and it is at thisjuncture some amount of controversy arose which was eventually settled between the parties. The learned single Judge while dealing with the matter observed that the respondent No.9 being Shri R.N. Jalan did participate in the meetings and that he was aware of the increase in the share capital and intentionally did notcontribute. The learned Judge went on to observe:
'..... R9 also accepted that afterresignation from IIIL he started devoting his time for Nucon as it was in loses. It is also noticed that various powers were given to R9 in respect of Nucon Company and also the documents and records were handed over after he took over Nucon (Exs.13300, B243, B296). Even though his dis-interestedness is not directly established, the fact remains that the decision for additional share capital was taken in the meeting held on 26-11-1984 and other meetings, he failed to respond. Therefore, it is to be only presumed that he was not interested. Moreover, the way in which he initiated the litigative process from the alleged letter dated 16-8-1984 it was established that he was not coming with true facts. Hence, the contention lhat R9 would have purchased the additional shares had he been offered cannot be swallowed with confidence.'
26. Mr. Sarkar, on the issue of increased share capital, strenuously contended that there was, as a matter of fact, no necessity for increase of the share capital as the company was rather in a prosperous state and it has its reserves much more than the share capital. Similar was the submission made before the learned single Judge and before we refer to the observations of the learned single Judge it would only be proper in the fitness of things to record the submissions of Mr. Mukherjee as well. Mr. Mukherjee, relying upon the documentary evidence, contended that from 1981 itself the State Bank has been insisting for enhancement of share capital up to Rs.10 lakhs and, as a matter of fact, there was an assurance given to State Bank of India to enhance the share capital. The letter dated 16-6-1981 bears ample testimony of such a submission of Mr. Mukherjee. For convenience sake the letter dated 16-6-1981 being Exhibit B29, is set out herein below:
'State Bank of India,
SS & SB Bkg. Division.
Main Branch. P.B.No.
The Managing Director,
M/s. Deccan Enterprises (P) Ltd.,
SIB.No.845 Dated: 16th June, 1981. Dear Sir,
Small Scale Industries Credit Facilities
With reference to your application dated 1 1-6-1981, seeking renewal and enhancement of working capital facilities, we observe that a stipulation was made by us while sanctioning the existing limits to you during May 1980, that the Company would immediately initiate steps to increase the paid up capital from Rs.2.50 lakhs to Rs.10 lakhs within three months from the date of sanction of the enhanced working capital limits by converting part of the accumulated reserves and surplus or otherwise. But no steps seem to have been taken by you, to increase the capital of sanctioning the existing facilities. We shall, therefore, be glad if you will please take immediate sleps for increase of the paid up capital to Rs.10 lakhs without further delay. We note to proceed further in the matter of processing the proposal after receipt of your confirmation in this regard.
Sd/- P. Manager'
Subsequently a remainder was sent by the State Bank of India on 14-7-1981 (Ex.B30) recording, inter alia, the following:
'State Bank of India,
SS & SB Banking Division,
Hyderabad Main Branch.
M/s. Deccan Enterprises (P) Ltd.,
Raslitrapathi Road, Secunderabad.
SlB/SSR/No.1059 dated 14th July, 1981.
Small Scale Industries Credit Facilities'
In continuation of our letter No.SIB/SSR 900 dated the 25th June, 1981, we have to advise having received a letter dated 17-6-1981 from the Export Credit and Guarantee Corporation, indicating therein that your shipments Policy No.51430 has expired since 1980 and the same was not renewed due to non-payment of premium by you all the shipments made during the period of cover under the said policy. We shall, therefore, be glad if you will please settle the matter with ECGC and confirm to us having done so, to enable us to obtain fresh cover of ECGC for all the export limits presently enjoyed by you.
2. Incidentally, we invite your kind reference to our letter No.SIB 845 dated the 16th June, and shall be glad if you will please advice us whether the paid-up capital is increased to Rs.10 lakhs, to enable us to examine your proposal for enhancement of Working Capital requirements.
3. Please treat the matter as most urgent.
Subsequent thereto, (he records depict that on 16-7-1981 the respondent No.1 sent a reply, being Ex.B31, inter alia recording the following:
1. We are agreeable to increase our paid-up capital from Rs.2.5 lakhs to Rs. 10 lakhs by capitalisation of our reserves and surplus and are doing the needful in the matter shortly.'
Therefore, there is, thus, a presenting need for the purposes of increase of share capital. Mr. Sarkar contended that while somedocumentary evidence remained on record to show the need for increase, but the statement as recorded in the letter dated 16-7-1981, to wit, by capitalisation of our reserves and surplus runs counter to the case of increase of share capital since, as noted above, the company has had at the relevant time sufficient reserves for doing the needful in the matter.
27. It is on this score the learned single Judge was pleased to observe:
'97.....Therefore, the only question that arises for consideration is whether there was genuine need for enhancing the capital. It is to be seen tliat enhancement of capital is a purely an internal administration of the Company and Courts do not interfere in the normal course. When the resolution was held to be valid, it would not be in the fitness of things to construe that there was no genuine requirement. It cannot also be said that Rl company could have taken a decision to go'for loan from the financial institutions or sold some of its assets rather than increasing the capital because, the decision. vested with the Board of Directors which cannot be scrutinised, when it is found that valid resolution was passed in accordance with the provisions of the Companies Act and also the Articles of Association. It was found by me that proper notices were given for Board meetings and minutes were properly drafted. When there was no response for the offer for additional shares from PI to R9, the shares were allotted to R3 and his family members. Therefore it cannot be said that subscription of additional capital is mala fide'
28. In the contextual facts, we do not find any reason to record a centra-note since documentary evidence galore are available to that effect and we also feel it expedient to render concurrence to the observations of the learned single Judge and thus reject thecontentions raised by the appellant and respondent No.9 in regard thereto. The matter is going on since the year 1981. It was within the knowledge thai (here is an unconditional assurance to the Bank that the share capital shall have to be raised to Rs.10 lakhs and in terms of the finding of the learned single Judge that the notice was given to both the appellant No.l and respondent No.9, we do record our concurrence as well on perusal of the documentary evidence in regard thereto that there was in fact participation in the proceedings and question of coming to a different conclusion does not and cannot arise. The subscription for increased share capital is a genuine requirement of the company in order to fulfil its obligation. It is for the company to decide what and which method to be applied for the purposes of increased share capital and not for the Court to suggest what would have been better for the company. The jurisdiction of the Court to interfere in the ordinary administration is restrictive in nature and unless it is shown that there is an utter mala fide involved, question of there being any interference would not arise. We also do feel it expedient to record our concurrence with the observations of the learned single Judge that in the contextual facts there cannot be any mala fides in the matter of increase of share capital and it is only to fulfil the obligations, as has been recorded in the letters noted herein before in this judgment, such an increase was effected.
29. The factum of the assurance being given relates back to 1981 and at that juncture there was no complaint whatsoever and the parties were proceeding with amity, cohesion and cooperation amongst themselves, but the relationship was strained subsequently and in July, 1985 the respondent No.l received an intimation dated 13-7-1985, being Exhibit B339, from its Banker recording the following:
'With reference to your request for renewal of your working capital limits please advise us the reasons forShri R. Khemka withdrawing liis personal guarantee which was available till now. Please treat the matter as extremely urgent.''
The Company in its turn by a letter dated 20-7-1985 (Exhibit IJ340) intimated the Banker in the manner following:
'We refer to your letter No.IBD/ADV/ 867 dated 13th July, 1985 and wish to inform you that Mr. R. Khemka has started a separate competitive business and as such he is not actively participating in otir Company. Since he is still holding shares in this Company, he continues to remain as a Director. Under the circumstances, Mr. R. Khemka will not be extending a personal guarantee against our working capital limits which please note.'
Subsequent correspondence from the Bank itself suggest, however, that on his own showing Shri R. Khemka has not been participating in the business of the Company and as such he wanted to withdraw the guarantee. This runs counter to the case made out that there has always been an endeavour on the part of the appellant No.l so as to be involved in the affairs of the company at all times, but by reason of the machination engineered by Shri O.P. Jalan there has been total deprivation of the exercise of right as a member of the company and as such the appellant No.1 was oppressed. There is, however, no factual justifiability of such a case being made out. On the contrary the factual score depicts otherwise.
30. There is yet another aspect of the matter, which, of course, the learned single Judge did not feel expedient to deal in detail, excepting recording that the same is not of much relevance for deciding Ihe issue. But we do feel it inclined to refer to the same, moreso by reason of Ihe presence of the father of Shri R.N. Jalan and Shri O.P. Jalan before the appellate Court by way of aseparate representation and detailed submissions made on that score.
31. Mr. P. Chatterjee, appearing for Respondent No.8, Shri S.K. Jalan, brought forth certain documentary evidence in support of the contention pertaining to a family settlement and special reference in that context has been made to a hand-written document. Admittedly, the same is in the hand-writing of Shri R.N. Jalan, excepting, however, some corrections incorporated at page 3 of the document. Though rather longish in nature, the same is however set out herein below for proper appreciation of the same:
'Whereas Mrs. SKJ/RNJ/SGJ/SNJ/OPJ has been carrying on the business in name of companies firms, trusts, etc., as per Annexure I enclosed.
Whereas this business was a joint family business for all practical purposes and the constitution, share-holding, partnership in various companies, firms were for sake of meeting the various statutory requirement of various enactments only.
That whereas the percentage of shareholding, percentage of partnership has no relevance for practical purposes and that each member is entitled to l/5th share of the total assets of the family.
Whereas dispute has arisen between members and with a view to avoid litigation and to arrive at an amicable settlement the parties discussed the issues in various meetings with Mr. B.L. Jalan and Mr. Rajaram Musaddi.
As a result of these discussions agreement has been arrived on most of the issues as listed in Annexure II, III & IV.
That whereas certain issues have remain unresolved as per Annexure IV it was agreed and decided that these may be referred for Arbitration by Mr. Rajaram Musaddi who decided as per principles agreed between the parties and mentionedtherein. His decision in such matters will be final and binding on the parties.
That the parties hereby agree to appoint Mr. Rajaram Musaddi to have Hie various transactions completed to cause the separation.
The assets will be divided into three groups. Group I consisting of Mrs. SKJ, SNJ, OPJ and Group II consisting of Sri SGJ and Group III of RNJ. These groups can again separate 011 such-terms as they mutually agree.
It is further agreed that M/s. Deccan Ent. ARIL, M/s. Golconda, M/s. Kohinoor Jalan, Com & Industrial Corp. Sanjay Comm., Anand Trading, Pramod Com. will go to Group I and M/s. Nucon, Sec Com Co., Hyd. House to Group III and D/Polymer, JCC, Prakash Trading to Group II. The difference in the assets will be made good by payment by each group to the other group.
It is further agreed that Mr. R. Khemka 's share in D/E, D/P, ARIL, Secunderabad Com., will be determined and settled with hint by Mr. SKJ and RNJ and any sum so determined to be payable to him will be contributed equally by each member.
It is further agreed that no issues shall be raised by any member during the proceedings and it shall not be taken into account.
It is further agreed that the status quo in respect of any companies, firms, etc., changed during the course of such arbitration and transfer of assets proceedings, will be valid, legal. Hach member shall be entitled to go to the Court and take help of this agreement along with anncxure.
It is further agreed that all liabilities incurred by any member after 31-7-1984 will be that of such member.
The arbitration and completion of transactions will be completed by 15th April 1985.'
32. It would be pertinent, however, to narrate sonic portion of the evidence, moreso by reason of the fact that this aspect of the matter has not been delved into by the learned single Judge on ihe ground of not being relevant. But we do feel it inclined for the reasons noted above, since judicial ethics prompt us to discuss the subject in slightly more greater detail. The evidence of Shri O.P. Jalan records:
'Thereafter, all the members of Jalan group sat together for valuing the shares and net worth of the holdings allotted to each member so that the difference in the assets will be made good by payment by each group to the other group. At that particular time, Mr. R.N. Jalan was holding by way of loans and advances more than Rs.1.00 crore in Nucon and in the personal accounts of himself and his family belonging (o the company firms and individuals of the other groups' families. In order that he is not required to return his amount, Mr. R.N. Jalan siarted undervaluing the value of the shares/assets, etc., allotted to other group. In spite of repeated meetings no solution could be arrived at mainly because of the unreasonable and uncomprising stand taken by Mr. R.N. Jahiu. Even my father Mr. S.K. Jalan's repeated efforts failed. The matter was therefore brought to the attention of Mr. Rajaram Musaddi a prominent industrialist/businessman at Calcutta and a close relative of the Jalan Family to arbitrate on this issue. Accordingly, all the Jalan family members sat down at Calcutta and a draft was prepared by Mr. R.N. Jalan as per Exs.B157, 157A and 157B in his own handwriting to refer the disputes to Mr. Rajaram Musaddi for settlement of the values of shares, assets, etc., and to complete transactions between the family members to finally settle all the matters. The last date for completion of the arbitration was mutually agreed as on 15-4-1985. Thereafter an arbitrationagreement was typed and signed by four members, viz., Mr. S.K. Jalan, Mr. S.G, Jalan, Mr. S.N. Jalan and Mr. O.P. Jalan, but Mr. R.N. Jakin who was then staying in a hotel in Calcutta, took the typed agreement with him saying that he will return it duly signed next morning. Later on, all the family members were shocked to learn that Mr. UN. Jalan had left for Hyderabad by the evening flight without returning the signed agreement taken away by him. It is not true that Ex.B157B is not in the hand writing of Mr. R.N. Jalan. I am of the brother of Mr. R.N. Jalan and I can identify Mr. R.N. Jalan's handwriting. I confirm that lixb.B157B is in the hand-writing of Mr. UN. Jalan. Ex.B157 was presented by my father before (he Division Bench in OSA No.3 of 1990. Since Mr. S.K. Jalan could not find the third page at that time and the OSA No.3 of 1990 was already ordered, the additional paper later on found could not be produced at that time. Later on when my father found Ex.B157A and 157B, he had given it to me to file the same in the Court. Mr. S.K. Jalan has become very old and is aged about 85 years and my mother aged about 79 years is seriously sick with a stroke of paralysis and my father is solely looking after her. My father therefore, could not come to Hyderabad to file Rx.B157A and 157B and therefore had given me this paper to file in this Ilon'ble Court.
Although the arbitration by Sri Rajaram Musaddy could not fructify due to Mr. R.N. Jalan not signing the arbitration agreement, repeated efforts were made by my father, other relatives and friends to settle the dispute regarding valuation of shares, but Mr. UN. Jalan did not agree to any independent and reasonable valuation. In August, 1986, Mr. R.N. Jalan, his wife Mrs. Sutyabhama Jalan and his son Mr. Hemanl Jalan had sent me three separate letters along with bills for selling DIZPL's shares at an exorbitantprice of Rs.445/- per share Exb.B240 to 242 are the three letters along with bills written to me as above. I could not agree to the exorbitant price of DEPL's share as mentioned by Mr. R.N. Jalan and his family members, In the bills enclosed along with exhibits B240 to B242, it was also mentioned that 1 have agreed to the said price. This is also untrue and demonstrate the extent of untruth which Mr. R.N. Jalan can speak to extract money from me. In August, 1990, my eldest brother B.L. Jalan tried to mediate and arrived at Hyderabad on 29th August, 1990. During mediation by Mr. B.L. Jalan in August, 1990, Mr. R.N. Jalan once again changed the date of valuation of shares of companies from 31-7-1984 to 31-3-1984. This fact is duly recorded in Exb.B269. The additions and corrections in the said typed document are in the hand writing of Mr. B.L, Jalan. It was also stated by Mr. R.N. Jalan that Khemka's shares has been settled by him for Rs.25.00 lakhs which is as per Private Agreement Exb.No.B70 and B7` and should be paid by both parties equally. Accordingly, Mr. B.L. Jalan has mentioned that both Mr. R.N. Jalan and Mr. O.P. Jalan will pay Khemkas Rs.25.00 lakhs in the ratio 50:50.'
33. In this context, it is significant to note the evidence of Sri R.N. Jalan as well Sri R.N. Jalan in his deposition on 5-11-1996 stated that Exb.8157 is in his handwriting and it is not true to suggest that it represents the family settlement entered into by Jalans' family in August/September, 1984. Shrj R.N. Jalan continued to say in his evidence that there are some more pages to the document which have not been submitted by the father Shri S.K. Jalan. There was, however, a categorical statement that the document was prepared in August, 1984 and some corrections on the third page of the document marked separately being Exhibit B157A and B157B are not in the handwriting of Shri R.N. Jalan as noted above. But thefact remains that this particular episode of there being a family settlement cannot be doubted in anyway whatsoever.
34. Let us at this juncture, however note the affidavit filed in August, 1996 during the pendency of the appeal by Shri S.K. Jalan, the father of the two brothers being Shri R.N. Jalan and O.P. Jalan and the relevant extract is set out herein below. Shri S.K. Jalan stated:
'In accordance with the Family Settlement in 1984-85, my second son R.N. Jalan took charge of all business falling to his share, issued additional capital in these companies and appointed his nominees as Directors and removed me and my youngest son O.P. Jaian from the Board of these companies. I would not have objected for the same if the matter ended here. However, later on my second son R.N. Jalan started demanding higher valuation of the shares of companies falling to the shares of other brothers and very low valuation of the shares of companies falling to his share. I iried to mediate regarding the valuation of the shares and assets but, unfortunately, my second son did not agree to my mediation on this matter. Number of other persons also tried to mediate in respect of Hyderabad Group, but unfortunately, my second son did not agree. In fact, if the disputes relating to business at Hyderabad consisting of myself and my two sons R.N. Jalan and O.P. Jalan are settled, the same settlement can be binding on the other two brothers and settlement at Calcutta between myself and my other two sons S.G. Jalan and S.N. Jalan can be binding on the Hyderabad Group. As a father and at this old age it is my only ambition to see that during my life time my sons live in harmony. 1 shall be grateful to this Hon'blc Court, if my desire comes true by appointment of Court appointed arbitrator to settle the disputes between myself and my two sons R.N. Jalan and O.P. Jalan at Hyderabad.'
35. Two other documents do also refer rather emphatically to the family settlement as also the issue of new shares. The first of the two letters is dated 21-1-1985 being Exb.B201, the signature whereof stands admilled. It is a type-written document in the manner following:
'R.N. Jalan Shubham,Gulmohar Avenue,Rajbhavan Road,Hyderabad.21st January 1985. Respected Father,
I have to inform you that I am not interested to invest in DEPL's new share issue which is to Omprakash's share. In fact Nucon requires substantial funds and I am unable to spare an finance at present. Khemkas have also refused to contribute and I enclose Mahesh's letter dated 16-1-1985 in this regard.
Ram Niranjan Jalan (R.N. Jalan)'
The words 'which is to Omprakash 's share' run counter to the case made out by Mr. Sarkar to the effect that there was never any settlement. As noted above, the signature stands admitted, though, however, it has been stated thai certain blank documents were kept both with the father and O.P. Jalan, which have been utilised by father at the instances Shri O.P. Jalan. We are not, however, very much impressed with the submission. Though, however, we are not expressing any opinion, but suffice it to record that it is extremely unlikely that a hard-core businessman would leave number of blank documents, duly signed by him. The second is the letter from Shri Mahesh Khemka dated 16-1-1985 being Exhibit B64, and for convenience sake, the same is also set out herein below:
6-3-1089/A/3/6. Gulmohar Avenue, Rajbhavan Road, Somajiguda, Hyderabad-500 482. Date: 16-1-1985.
Sri R.N. Jalan,
I have discussed with Bapuji your proposal of our contributing to DEPL new capital issue and stopping of APPL Rubber business. In your family separation, DEPL has gone to Om Prakashji's share, and it will not be personally possible for me to work with him. Further in view of present strained relationship between yourself and Babuji, it is not possible for us to retrace our steps and also to contribute to the new capital.
I however, suggest that our share in DEPL, Nucon, DPL and SCC may be settled immediately.
With best regards,
This document again reflects on two counts: First of all the disinclination to contribute from Khemka's side and on the second count (he family settlement, since it records 'DEPL has gone to Om Prakashji 's share'. The first aspect has already been dealt with by us herein-before and as such we need not go into the same issue afresh, excepting recording that this piece of evidence ought not to be ignored as regards the increased share capital resolution and the total ignorance thus feigned by Khemka cannot be said to be a justifiable stand. The second aspect asnoted above pertains to the family settlement as well. The defence as pointed out by Mr.Sarkar again is the same, viz., blank document signed by Mr. Mahesh Khemka kept with Shri O.P. Jalati and for the serf-same reason as noticed above, we are not inclined to accept the same, though, however, record our concurrence that, strictly speaking, nothing turns on this issue pertaining to the matter, excepting, of course the credibility of the witnesses. The learned single Judge while dealing with the matter recorded:
'But one thing is clear that PI had reconciled to settle his accounts and PI and Jalan family submitted to the mediation and arbitration of Mr. Khaitan.'
36. In this context, reference ought to be made to a letter dated 3rd July, 1986 being Exhibit 'A52', which reads as follows:
'Pradip Kumar KhaitanAdvocate 9 Old Post OfficeTele: 23-3197,234388 Street, Calcutta-1Telegram: Khaitanco Cal 3-7-1986Telex: KCL CA 2187 My dear OP,
Please refer to your letter on 25th June, 1986 and the conversation i had with you as well as with Shree Narayan. It was agreed that the payment for the shares would be made within June, 1986 although you would attempt to do so in April, 1986. Before 1 left for abroad in the last week of May, I had informed everybody that I would definitely be back on 22nd June, 1986. I would therefore have been happy if the payment could have been completed within June, 1986.
As discussed with your and Shree Narayan, kindly arrange for the payment within next week on Shree Narayan's return from Hyderabad on Monday. The exact date convenient to you should be communicated to the Khemkas so thatthey may also be present to receive the money from you.
Cc noo : Mr. Mahesh Khemka
Raj Bhavan Road
37. On this document, however, the learned single Judge recorded:
'It is also evident from (he leltcr of Khaitan, Ex.A52, that a settlement was arrived at and payment schedule was to be finalised. At this point of lime, entire exercise was blown off. Therefore, it has to be seen that there was some steps towards the settlement f 'he accounts between Khemka and Jalan families.'
38. On the basis of the factual details as above, the learned single Judge came to a conclusion as detailed herein below:
'Therefore, in view of the findings recorded above, it cannot be said that R3 acted in a manner oppressive to other share-holders. Normally oppression is alleged against majority share-holders by the minority share-holders. But, in the instant case, it is turned to be otherwise. The oppression is now being alleged by majority share-holders (prior to additional share capital) namely PI and R9. As already stated the genesis appears to be not that the meetings were not being conducted, notices were not being issued, but P3 was not properly accommodated after his return in 1982 from Saudi Arabia. Even this was confirmed by R9 in his counter as extracted earlier.
99. The Company has been running right from 1987 after the company petition has been filed and the issue of lack of probity has not been established by any proper evidence. It is also not established that the company has been not functioning in accordance with the provisions of the Companies Act and that the situation warranted the winding up of the company on just and equitable ground. As already noticed by me that it is not open for this Court to interfere with the management and administration of the Rl company in each and every issue, but it can only interfere when the Company has been acting to the detriment of the interest of the share-holders in general. Further, it has to be seen whether R3 has acted in a manner detriment to the interest of the other share-holders or he changed the setup of administration after he became the majority share-holder. Admittedly, PI and R9 continued to be the Directors even after the majority share-holders and they are being invited to participate in all the meetings and affairs of the Company. It is not as if they are completely excluded from the management of the company. On the other hand, PI never attended meetings after 31-3-1983 for the reasons already set out above. Therefore, even after the additional allotment of shares in favour of R3, it cannot be said that the position of PI and R3 changed in a manner prejudicial to their interest or their members. As already found by me, the genesis took place when P3 was not properly accommodated in 1982 when he returned back from Saudi Arabia and the crisis which was brewing from 1982 took its deep route in 1985 when P3 was withdrawn from the Board of ARIL Saudi Arabia. This lead to the filing of the suit by PI and exchange of letters between PI and R3 and simultaneously the correspondence was started by R9 with R3. Even though the additional issue was never focal issue, yet it was made the basic issue in this Company Petition, forsustaining the aliegcd acts of oppression. Even otherwise what is sought to be established was that PI and R9 in their capacities as Directors and not as shareholders were subjected to oppression. That is not the requirement of law.'
39. We do feel it expedient to record our concurrence to the observations of the learned single Judge in the contextual facts.
40. As noted above, there ought to be some burden-some, harsh and wrongful conduct of one party against another in order to bring the conduct within the ambit of the word 'oppression'.
41. On a short analysis of the matter, where is the scope of 'oppression'? The facts depict that all notices were sent, though, however, some disputes were raised as to why the notices were to be posted from a post-office which is about four kilometers away from the registered office, whereas it is possible to post the letter from the post-office next door, but does that by itself show an element of 'oppression' or an element of falsity as regards the evidence adduced for posting? The document in support of posting negates (hat same, since the same was issued by the postal authorities themselves. The facts further depict that Shri R. Khemka without any hesitation prays for leave of absence from attending the meetings. The facts further depict Mahesh Khemka's letter recording therein strained relationship and his disinclination to contribute to the increase in share capital - It further records R.N. Jalan 's inability to contribute to further share increase by reason of (he financial stringency being expressed by Nucon and as evidenced in the letter to the father: can any justifiable reason be put-forth for recording oppression on these counts? Our answer cannot but be in the negative. There must be cogent evidence depicting burden-some, harsh and wrongful conduct. We, in the present context, however, do not find such an evidence, whichcan justly be described as oppressive, however, extended meaning one would like to attribute to tlic word. Situation is rather peculiar in the facts of the matter under consideration, since prior to the increased share capital, O.P. Jalan was not in majority rested with R.N. Jalan and R. Khemka jointly. ft is true, however, that by reason of this increased share capital, the majority position shifts and clothes O.P. Jalan as majority rendering R.N. Jalan and R. Kheinka as the minority and it is on this context that the judgment of the Calcutta High Court in Appeal No. 186 of 1971 (Tea Brokers Private Ltd. v Hemandra Prasad Barooah) was relied upon and Mr. Sarkar has been very emphatic to the effect that the Calcutta High Court in the appeal has observed that a single act of 'oppression' is sufficient for the purpose of granting relief under Section 397 and issuance and allotment of new shares by the company to a particular person may be treated as an act of'oppression'. The Calcutta High Court decision is, however, clearly distinguishable on facts, morcso by reason of the discussions as above pertaining to the issuance of notices and the documentary evidence in support of the disinclination of both Shri Kheinka and Shri R.N. Jalan to participate in the new issue of shares.
42. In the oft-cited decision of the House of Lords in Scottish Co-operative, Ltd., v. Meyer, (1958) 3 All ER 66, Viscount Simmonds stated in no uncertain terms that the oppressor must exercise the power and authority in a manner burden-some, harsh and wrongful. In the facts of the matter under consideration, question of there being any burden-some or wrongful conduct does not and cannot arise as detailed more fully herein-before.
43. The learned single Judge, while dealing with the matter observed that oppression and mis-management being the basic and foundational concepts in the Section are left by the Parliament without defining them and when once it is left withoutdefinition, the task of the Court is difficult and more responsible. The learned single Judge recorded that the word 'oppression' is a 'Chamelionic word' and it changes its colour, content and form from time to time, place to place, event to event, depending on the circumstances of the case and question of confining its limits does not and cannot arise. Oppression has to be made-out on the facts and circumstances of each case. The learned Judge went on to. record that 'oppression' is the core element to be proved and the nature of 'oppression' ought to be decided in the context of the statutory provision as envisaged under Section 397(2)(b) to the effect that (o wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should lie wound up.
44. The expression 'just and equitable' has come up for consideration before the English Courts far too frequently, though, however, the Scottish case' in Elder v. Elder & Watson Ltd, 1952 SC 49, is one of the most oft-cited decision in that regard Lord Cooper in the Elder's case (supra) observed:
'Where the 'just and equitable' jurisdiction has been applied in cases of this type, the circumstances have always, I think, been such as to warrant the interference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy. The phrase 'oppressive to some part of the members' acquires a certain colour from its collocation in Section 165 with such stronger expressions as Intent' to defraud', 'fraud' 'misfeasance' or 'other misconduct', and the essence of the matter seems to be that the conduct complained of should at thelowest involve a visible departure from the standards of fair dealing, and a violation of the conditions of fair play on which every share-holder who entrusts his money to a company is entitled to rely. This, broadly speaking, was the class of case which the draftsman of Section 210 evidently had in mind, and the question is whether the petitioners have brought themselves within the scope of the Section.'
Lord Keith in his judgment observed:
'But, apart from this, the question of absence of mutual confidence per se between partners, or between two sets of share-holders, however relevant to a winding up, seems to me to have no direct relevance to the remedy granted by Section 210. It is oppression of some part of the share-holders by the manner in which the affairs of the company are being conducted that must be averred and proved. Mere loss of confidence or pure deadlock does not, I think, come within Section 210.
It is not lack of confidence between shareholders per se that brings Section 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company's affairs, and oppression involves, I think at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a share-holder.'
45. As noted earlier, that there is a statutory sanction for user of discretion in the body of the Section itself, and it has been seriously contended by Mr. Mukherjee that since the relief is discretionary, the question of interference would not arise, unless the same tantamounts to a total perversity. There is no manner of doubt as regards the discretion as sanctioned by the statute in the Section itself and the discretion vested in the Court ought to be properly and judicially exercised and it is not ordinarilyopen to the Appellate Court to substitute its verdict, without coming to a conclusion that there lias been total failure of justice by reason of exercise of discretion in a manner which cannot but be termed to be unreasonable, perverse or capricious in nature. In this context, the observations of the Supreme Court in the case of Printers (Mys.) Private Ltd. v. P. Joseph, : 3SCR713 , lend support to the contextual facts staled above. Gajendragadkar, J., while dealing with matter in paragraph 9 of the report observed:
'Where the discretion vested in the Court under Section 34 has been exercised by the trial Court the appellate Court should be slow to interfere with the exercise of the said discretion. In dealing with the matter raised before it at the appellate stage the appellate Court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the trial Court reasonably and in a judicial manner the fact that the appellate Court would have taken different view may not justify interference with the trial Court's exercise of discretion. As is often said, it is ordinarily not open to the appellate Court to substitute its own exercise of discretion for that of the trial Judge; but if it appears to the appellate Court that in exercising its discretion the trial Court has acted unreasonably or capriciously or has ignored relevant facts and has adopted an unjudicial approach then it would certainly be open to the appellate Court - and in many cases it may be its duty - to interfere with the trial Court's exercise of discretion. In cases falling under this class the exercise of discretion by the trial Court is in law wrongiul and improper and that would certainly justify and call for interference from the appellate Court. These principles are well established; but, as has been observed by Viscount SimonL.C. in Charles Osenlon & Co. v. Jolmston, (1942) AC 130 at p. 138, 'the law as to the reversal by a Court of appeal of an order made by a judge, below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case.'
While it is true that the matter under consideration before the Supreme Court pertains to Section 34 of the Arbitration Act of 1940, but the principle of law enunciated by the Supreme Court has its full force and applicability by reason of the discretionary remedy as is available in terms of (he provisions of Section 397 of the Companies Act.
46. Same is the view expressed by P.D. Desai, C.J., speaking for the Bench in Sharawan Kumar Agarwal v. Shrinenp Investment Ltd., 1994 CWN 482, wherein in paragraph 29 of the report, Desai, C.J., observed:
'It is not disputed that the order under appeal dated February 6. 1990, accepting the offer and confirming the sale in favour of the first respondent is discretionary in nature. The Appellate Court would not be normally justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage, it would have come to a different conclusion. If, however, the exercise of discretion by the trial Court is in law wrongful and improper, that is, in exercising the discretion the Trial Court has acted unreasonably or capricious or has ignored relevant facts and has adopted an unjudicial approach or proceeded on wrong principle, then it would be open to the Appellate Court - and in many cases it may be its duty to interfere with such exercise of discretion (See Printers (Mysore) Pvt. Ltd v. P. Joseph, : 3SCR713 ). The same considerations mustweigh also in judging the order under appeal dated February 7, 1990. The said order is also a similar nature since the Court in the exercise of its discretion rejected the prayer for de-confirming the sale made in favour of the first respondent and for ordering a fresh sale.'
47. Having due regard to the law as laid down, we do not find the exercise of discretion by the learned single Judge to be so capricious or unwarranted so as to warrant intervention. We do not repeat ourselves to avoid prolixity and we do feel it expedient to record our concurrence with the observation and findings of the learned single Judge.
48. Before coming fo the area of grant of relief, two short issues may be dealt with -the first being the objections pertaining to reliance on the documents. Mr. Sarkar contended that these documents have not been properly proved and as such question of placing any reliance thereon does not arise. Admittedly, all the documents contain signatures without there being any dispute. It is in regard to contents, however, that Mr. Sarkar submitted that the Court would not be pleased to look into the same. We arc, however, unable to record our concurrence with the same, morcso by reason of the fact that a detailed trial did take place before the learned single Judge with witnesses being examined-in-chicf by way of affidavit-evidence and thereafter making the witness available for cross-examination and re-examination. Not a whisper of any objection has been raised at any point of time pertaining to the documents being tendered and marked as exhibits and as such the submission cannot, thus, be accepted. In this context, reference may be made to the decision of the Privy Council in the case of Padman v. Hanwanta, AIR 1915 PC 111, wherein the Privy Council at page 112 of the Report observed:
'The defendants have now appealed to his Majesty in Council, and the case has been argued on iheir behalf in great detail.
It was urged in the course of the argument that a registered copy of the Will of 1898 was admitted in evidence without sufficient foundation being laid for its admission. No objection, however, appears to have been taken in the first Court against the copy obtained from the Registrar's office being put in evidence. Had such objection been made at the time, the District Judge, who tried the case in the first instance, would probably have seen that the deficiency was supplied. Their Lordships think that there is no substance in the Present contention.'
49. On the second count, Mr. Scirkar contended that further issue of shares was only to gain control of the company and to reduce the majority to a minority. We, however, cannot lend any concurrence to the same. As noticed above, there was a definite assurance and commitment to the Bank and there was, in fact, a pressing need for such an increased share capital. The methodology to comply with such a requisition ought to be at the discretion of the company and it is no part of the Court's duly to intervene or direct the company to act in a manner other than what it desires. Mr. Sarkar contended that the Directors being in fiduciary capacity have misused their power in the matter of increased share capita] and as such the question of further evidence of oppression is not required. Mr. Mukherjec, appearing for the respondent while disputing the same, placed strong reliance on to the decision of the Supreme Court in Needle Industries case, NII Ltd. v. NINIII Ltd., : 3SCR698 . In paragraph 111 of the judgment, the Supreme Court observed:
'Whether one looks at the matter from the point of view expressed by this Court in Nanalal Zaver or from the point of view expressed by the Privy Council in Howard Smith, the test is the same, namely, whether the issue of shares is simply or solely for the benefit of the Directors. If the shares are issued in the larger interest of the company, the decision to issue shares cannot be struck down on the ground that it has incidental ly benefited the Directors in their capacity as share-holders. We must, therefore, reject Shri Seervai's argument that in the instant case, the Board of Directors abused its fiduciary power in deciding upon the issue of rights shares.'
50. In that view of the matter and having come to a conclusion as above, question of mal-user of fiduciary position does not and cannol arise. The submission of Mr. Sarkar cannot, thus, be sustained and therefore fails.
51. As to the relief, the learned single Judge in paragraphs 108 and 109 observed:
'Section 402 has been engrafted with wide discretionary powers to ensure smooth functioning of the Companies. The Court is entitled to grant the relief as it thinks fit in the interest of the share-holders and Company. That is the reason for both ailments under Sections 397 and 398, the treatment is common under Section 402. The Court is empowered to pass order both as a curative and preventive measures if it finds that the affairs of the Company are being conducted detrimental to the interest of the Company, for bringing an end or for preventing the matter complained of or apprehended.
This Court is interested in the affairs of the Company as a whole and the personal quarrels are wholly irrelevant. The interest of the Company cannot be at the altars of bickerings among the Directors for their personal ends. Moreover the ad infenitum wordy dual undertaken by the parties endless and unwarranted prolongation of trivial and insignificant issues coupled with serious personal differences have created formidable symptoms, where P1 and R9 cannot go hand in glove with R3. It is also understood that in latter years,R9 resigned the Dircclorship of the company. The company has already faced litigation for over a decade for the reasons as set out earlier. Therefore, this Court is of the firm opinion that the affairs of the company have not been conducted nor will be conducted in future in the interest of the company. Apprehension of stalemate is writ at large. Consequently, the situation has arisen that company cannot function in the hands of P3, R9 and R3 jointly. Three powerful horses yielding strength in different directions cannot bring the charriot safely to the destination. Therefore, I find that the company should be run either by R3 or by PI and R9 jointly It can be safely concluded that a quictous cannot be brought in the company unless the matters complained of or apprehended are resolved once for all and (his Court is fully empowered to meet such a situation in the interest of the company. In subsection 2 of Section 398 it is clearly stated that if the Court finds that (he affairs of the Company are being conducted as contemplated under clause (a) and (b) of sub-section (1), or likely that the affairs of the company will be conducted in a manner prejudicial to the interest of the Company, the Court may pass orders curative, preventive and prohibitive in respect of existing and apprehended acts prejudicial to the interest of the Company. There need not be any oppression under Section 398. The Directors are expected to function in the best interest of the company and lack of probity inter se Directors is cancerous element for the phased destruction of the company. Though, in the instant case, the oppression by one group of share-holders, to the other group of share-holders, is not established and the lack of probity was not established among the share-holders, but, yet, it is a case where the conduct of parlies cannot put the company on safe rolls. Therefore, when the affairs are not being conducted by the parties in the interest of thecompany, it is also open for the Court to pass appropriate orders. The Company has been running throughout by R3 and after Company Petition has been filed, for some time by the Interim Administrator and now it is again being run by K3 as Managing Director. Though the PI did not ask for direction for selling of shares of R3 to him. it is only after filing of affidavit by R3 reply to (he counter affidavit of R9, a further affidavit was filed by PI in which lie had stated that PI was ready and willing to purchase the shares so as to save RI company from tlie clutches of R3. R9 also in his counter did not say that he was willing to purchase the shares, but only in his rejoinder to the counter of R3, he stated that direction may be issued to R3 and his family members to share their share-holding at a price as may be determined by the Court. Thus, PI and R3 never expressed their readiness to purchase the shares. R3 has been managing the Company for several years and also presently he is managing the Company, it is desirable to offer the management of the Company to R3 by passing appropriate directions.'
52. It is on these observations, that Mr. Sarkar very strongly commented that a Chief Executive has been given an element of permanency which by no stretch can be claimed by Sliri O.P. Jalun. We, however, do not lend any concurrence to such a submission.
53. In the matter of grant of the final relief, the learned Judge recorded:
'110. Keeping in view the above factors, the situation prevailing as on the date of the filing of the Company Petition and by exercising the powers under Section 398(2) read with Section 402 of the Companies Act, I pass the following orders:
(i) The value of the shares held by P1, P2 and R9 and the members of his group viz., his wife and son and R3 and membersof his group viz., R4, R5 and R6 shall be assessed by competent Chartered Accountant.
(ii) The value of the shares possessed by P1 and P2 shall be assessed as on 30-6-1986 and the value of the shares possessed by R9 and his members of family shall be valued as on 31-7-1986. The value of shares held by R3 and members of his family viz., R4, R5 and R6 shall be assessed as on 1-1-1985 i.e., prior to the allotment of additional shares. Though the value of shares are to be normally reckoned on the date of presentation of Petition as per principle laid down in Scottish Wholesale Society's case (30th cited supra), since PI and R9 were agreeable for settlement during respective periods, the dates were fixed accordingly.
(iii) The shares held by P1, P2, R9 and his wife Smt. Satyabhama Jalan and his son Hemanth Jalan after so valued as directed above shall be offered to R3, who will give consent for purchase of the same within two weeks from the date of such offer. He will pay the amount to the respective share-holders within mree weeks of consent and necessary transfer formalities will take place as per law.
(iv) In case R3 fails to purchase the shares as offered above, the value of shares of R3 and his family members namely R4. R5 and R6 shall be as assessed by the competent Chartered Accountant as on 1-1-1985, shall be purchased by PI, and R9 either jointly or individually. The amounts shall be paid to R3, R4, R5 and R6 within three weeks and other formalities shall be completed as per law.
(v) The value of the shares of the parties referred to above shall be assessed on the basis of paid-up share capital of Rs.5 lakhs divided into 50,000 of Rs.10/- each.
(vi) The shares held by P3 shall not be disturbed as the matter relating towithdrawal of his nomination is sub-judice before the Calcutta High Court.
111. For the purpose of carrying out the directions as passed by this Court, this Court appoints Special Officers.
112. Accordingly, I appoint Sri P.S. Raju, Advocate and Suit. E. Urmila, Advocate to carry out the directions. R3 shall make available necessary files/documents and information as may be required by the Special Officers for the purpose.
113. The Special Officer shall first refer the matter regarding the assessment of value of the shares of PI, R9 and R3 and their respective groups as indicated above to the competent Chartered Accountant before offering lo the parties. It is also open for the Special Officers to move this Court for further directions.
114. P1, R9 and R3 shall deposit a sum of Rs.15,000/- each in Rl company for meeting the expenses and also the remuneration of Special Officers. Out of the said sum a sum of Rs. 10,000/- each shall be paid to the Special Officers towards their remuneration tentatively. The fee of Chartered Accountants and other expenses including the ministerial assistance shall be paid by R3 from the amount so deposited on intimation by the Special Officers.'
54. We do record or concurrence to the above, moreso having regard to the Bench Judgment of the Calcutta High Court in Sindri Iron Foundry's case, Rawashankar v. S.I. Foundry, : AIR1966Cal512 , wherein paragraph 66 of the report, Mitter, J., speaking for the Bench observed:
'A complaint was justly made that the learned Judge failed to evolve a formula for remedying the permanent evil of the company, namely, the conflict between two groups of share-holders. In my opinion, the company cannot function properly if these two warring groups continue to hold the shares. As a matterof fact, at the early stage of the hearing of the appeal, a suggestion was made that one of the two groups should buy up the other's holding but nothing tangible came out of attempts made by Counsel on that behalf. In my opinion, the special auditor should be directed to find out the fair value of the shares at the date of the petition as was directed by Lord Denning in Scottish Co-operative Wholesale Society Ltd. 's case, 1959 AC 324. We also order the oppressor i.e., the respondents to the petition to buy the shares of the petitioners. In case the respondents are unable or unwilling to buy the shares, the petitioners should have an option to buy the respondent's shares at the same price. The price is to be arrived at on the basis of the break-up value of the shares. The respondents should be given three months time after the submission of the report of the special auditor and the ascertainment of the value of the shares to buy out the petitioners'. In default the petitioners will have the right to buy up the respondents' shares within a further period of three months from that date. Except for this modification the order made by the learned trial Judge will stand.'
55. The learned single Judge while recording the principles in Scottish Wholesale Society's case (supra) came lo the conclusion that since the parties were agreeable for settlement during the respective periods, the dates were fixed accordingly. We also do feel in the same way that since there is definite evidence as regards the settlement of the disputes between the parties, though not very material for the purpose of coming to a finding of oppression within the meaning of Section 397 of the Companies Act, but the same ought to be taken note of in the matter of valuation of assets and in that perspective we do lend concurrence that while it is true that the value of the shares normally ought to be reckoned on the date of presentation of the petition, but in the facts of the matterunder consideration, the respective dates, viz., 30-6-1986 and 31-7-1986 ought to be taken in for assessment of the value of the shares.
56. Before we conclude, ihe observations of A.N. Sen, J., in Tea Brokers Private Ltd v. Hemendra Prasad Barooah, seem to be rather apposite in the matter of grant of relief as well. A.N. Sen, J., observed:
'Except in unusual circumstances the majority group of share-holders, in my opinion, should never be ordered or directed to sell their shares to the minority group of share-holders. An order directing the majority group of share-holders to sell his shares to the minority group of shareholders will not redress the wrong done to the majority group of share-holders and will not give him sufficient compensation or relief against the acts of oppression complained of by him, and, on the other hand, may add to his suffering and grievance and cause him, greater hardship. Such an order, to my mind, will not further the ends of justice an indeed the cause of justice may be defeated. The decision of the House of Lords in the case of Scottish Co-operative Wholesale Society v. Meyer and another, (1958) 3 All ER 66, relied on by Mr. Dull, is, in my opinion, no authority for the proposition that whichever party conies to Court with an application complaining of acts of oppression to the said party, must necessarily be directed and ordered to sell his shares to the party who commits the acts of oppression. The said decision lays down no such proposition and indeed, to my mind, no such broad proposition can be laid down. Orders are passed by the Court to meet the requirement of justice in the facts of a particular case. As I have already noted in a case where the minority share-holder complains of acts of oppression by the majority, and that is what generally happens in most of thecases, the ends of justice may require that the minority share-holder should be directed to leave the company on payment of proper compensation to him. To ask a majority share-holder who is normally entitled to run the affairs of the company to go out of the company, will not, generally speaking, meet the ends of justice, as it will indeed be unfair and unjust to deprive the majority share-holder of his valuable right for all time to come.'
57. Having regard to the observations as above, we do find the user of discretion by the learned single Judge to be in accordance with the known concept of justice and cannot, by any stretch, said to be perverse warranting interference by the Appellate Court and as such both the appeals fail and are dismissed. No order as to costs.