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Shri Subash Hastimal Lodha and Vs. Manikchand Promoters and - Court Judgment

LegalCrystal Citation
CourtCompany Law Board CLB
Decided On
Judge
Reported in(2007)1CompLJ420
AppellantShri Subash Hastimal Lodha and
RespondentManikchand Promoters and
Excerpt:
1. in this order i am considering company petition no. 28/2005 filed under section 397 of the companies act, 1956 (hereinafter referred to as 'the act') wherein the petitioners (the lodhas) have prayed that their shares in the respondent company namely, manikchand promoters and developers pvt. ltd. be purchased by the respondent nos. 2 to 6 (the dhariwals) or any of them on the fair value worked out as per paras 20 (at page 13) and para 42 (at page 21) of their petition) or alternatively the clb may order the division of the property rights of the respondent no. 1 company between the petitioners and the respondent shareholders in the ratio of their respective shareholding.2. the undisputed facts of the case are: the respondent no. 1 company namely manikchand promoters and developers pvt......
Judgment:
1. In this order I am considering Company Petition No. 28/2005 filed under Section 397 of the Companies Act, 1956 (hereinafter referred to as 'the Act') wherein the petitioners (the Lodhas) have prayed that their shares in the respondent company namely, Manikchand Promoters and Developers Pvt. Ltd. be purchased by the respondent Nos. 2 to 6 (the Dhariwals) or any of them on the fair value worked out as per paras 20 (at page 13) and para 42 (at page 21) of their petition) or alternatively the CLB may order the division of the property rights of the respondent No. 1 company between the petitioners and the respondent shareholders in the ratio of their respective shareholding.

2. The undisputed facts of the case are: The respondent No. 1 company namely Manikchand Promoters and Developers Pvt. Ltd. was incorporated as Vishnu Developers Pvt. Ltd. with total five shareholders on 3.3.1994. The authorised share capital of the respondent No. 1 company, as on the date 9f arguments is Rs. 20,00,00,000/- (Rupees Twenty Crores only) divided into 20,00,000 (Twenty Lakhs) equity shares of Rs. 100/- (Rupees one hundred) each and the paid up capital of the company is Rs. 82 lakhs (Dhariwals Rs. 61.50 lakhs and Lodhas Rs. 20.50 lakhs). On 8.1.96 Lodhas and Dhariwals held 1250 shares of Rs. 100/- each. On 2.11.98 further 2500 shares were allotted to the Dhariwals. On 23.5.2005 further shares of 19049 shares were allotted to the Lodhas and the Dhariwals were allotted 57,147 shares. However, as per the inspection of the documents file maintained by the Registrar of Companies, Pune. The petitioner and the respondent No. 2 and 3 were appointed as directors of the respondent No. 1 company on 16.2.1997.

However, as per the inspection of the documents file maintained by the Registrar of Companies, Pune, no Form No. 5 relating to increase of authorised capital from Rs. 5,00,000/- (Rupees Five lacks) to Rs. 20,00,000/- (Rupees Twenty crores) appears to have been filed by the company, viz. the respondent No. 1 with the Registrar of Companies. On 19.10.95 the members were allotted 2400 equity shares. On 8.1.96 further 2500 equity shares were allotted. The respondent No. 3 and family members purchased 2500 equity shares from original subscribers on 8.1.1996 The shareholding pattern of the respondent No. 1 company was consolidated to four shareholders - 25% with the petitioners jointly and 75% with the three members of Dhariwal family. The petitioner and the respondent No. 2 and 3 were appointed as directors of the respondent No. 1 company on 16.2.1997. The business of the respondent No. 1 company was to run on the partnership basis between the petitioners and the Dhariwal family members. The main object of the company is to carry on the business as developers and builders and to purchase, sell, resell, give or take on lease or rent, lay out, develop, construct, building, erect, demolish, re-erect, alter, repair, remodel roads, highway, bridges, sewers, canals, docks, wells, springs, dams, power plaints, parts, reservoirs, etc.

3. Shri Sanjay K. Maria, Counsel for the petitioners argued: that the respondents have not sent the notices of the Board meetings and General Meetings of the respondent No. 1 company and the same are not being sent to the petitioners in spite of the fact that the petitioner has deposited the amount towards postal expenses with the respondent No. 1 company for sending the notices of the Board meetings and General Meetings to the petitioners by Registered Post. The respondents have not produced any proof for dispatch of notices. The respondent No. 1 company and the respondent No. 2 to 6 have not sent any information as to the progress of the business, if any, and the statement of affairs of the respondent No. 1 company to the petitioners from 1997 till date.

The respondent No. 1 company and the respondent No. 2 to 6 have sent no information about the joint venture agreement entered into with Siddhivinayak Kohinoor Developers for development of Bhosari Property, which is continuing, and its financial implications to the petitioners.

The respondent No. 1 company offered equity shares on rights basis without offering the same to the petitioners. However, the petitioners could procure the rights offer after filing the present petition. It was argued that it is well settled law that the Directorial complaints can be raised before CLB in Section 397 petition in a closely held company depending upon the facts of the case. The present petition is not based on directorial complaint only but has claimed the non-receipt of notice of board meetings in spite of sending cost for sending the notice by registered post. The petitioner has also claimed that the respondents have not sent the notice for general meeting (para 25,27 and 31 of the petition). The respondents has oppressed the petitioner by not sending the notices of general meetings and Board meetings. It was denied that there is no oppression by the respondents. It was pointed out that it is well settled that no inclusive definition of oppression has been provided in the Companies Act, 1956, and that the term oppression has wide meaning and Hon'ble Supreme Court has tried to define the term in Sangramsinh P. Gakwadand Ors. v. Shantadevi P.Gaekwad (D) through LRs and Ors. (2005) 3 Comp LJ 385 SC. The petitioner obtained the copy of Annual Accounts 2004 of the Respondent Company from ROC. The respondent never sent the copy of Annual Accounts to the petitioners. The respondents have not sent the Annual Accounts 2005 of the Respondents Company to the petitioners. It was argued that the respondents have failed to produce the proof of service of Annual Accounts before CLB. Further, it was pointed out that the respondents have not given any particulars in Annual Accounts about the progress and income earned/accrued by the respondent company and that the respondents made false and evasive statement that the accounting standards fenable the developers and construction companies not to report the progress of the business for number of years. The respondents has failed to refer to particular Accounting Standards and make accurate statement. It was argued that the petitioner is justified in praying for division of assets as there has been no profit/return from the investment made by the petitioners in the share capital of the respondent company. The facts clearly show that the principle of quasi partnership and legitimate expectation applies in the present case. It was argued that the facts clearly show that both the petitioners and the respondents made the investment in equity share capital at the same time and both continue to be in the same ratio. It is not necessary that there should be written agreement for considering the respondent company as Quasi Partnership. Hon'ble Company Law Board has to consider and apply the principle of Quasi Partnership and legitimate expectation. The respondents have admitted that the petitioner is a partner with the respondents and has expertise to contribute in progress of the respondent company.

It was contended that the respondents lack in of probity which is evident from the facts that: the respondents took signature of the petitioners on plain papers on 9.8.2000; the respondent sent blank transfer form in August 2000; The petitioner had written letter on 14.8.2000 to the respondents; the legal notice dated 23.8.2004; the respondents have not consulted the petitioners in entering into agreement with Kohinoor; the respondents have not sent notices of Board Meeting and General Meeting since 1997 till present. It was argued by the respondents that the petitioners wrote letter to Pune Municipal Corporation against the interest of the respondent company. It was clarified that the petitioner has written letter to Pune Municipal Corporation on 26.6.2001 to protect his interest after the respondents gave advertisement in the Times of India on 23.6.2001 without consulting the petitioners. The respondents have not disclosed any action by Pune Municipal Corporation against the Respondent Company.

The respondents have even misrepresented Hon'ble Company Law Board in this respect. It was pointed out that the respondents have alleged that since there is litigation pending on properties of the respondent company, division of the property is not possible. However, the respondents have failed to produce any detail of litigation pending.

The respondents have also failed to submit counter valuation of the property in question. The respondents have relied on Article 23 of the Articles of Association for such disputes. The said article, it was pointed out, provides for disputes relating to transfer of share and not of the nature of the oppression referred to in Section 397 of the Act. The respondent has submitted that the petitioners should remain with the respondent company as the property rates re gong up. But the petitioners are not interested in continuing with the respondents due to continuous acts of oppressions committed by the respondents and has prayed for the Property/Assets (development rights) and investments in Kakade Constructions to be divided in proportion of shareholding of the petitioners and the respondents in the respondent company. The respondents have alleged that the petitioners have not paid any application money. On the other hand, the respondents have not disclosed to the petitioners about the names of the applicants from whom share application money was received by the respondent company and have also not disclosed the same before the Hon'ble Company Law Board also. The respondents have alleged that rights shares have been allotted to the petitioners as par in the month of March 2005 and no premium was asked for. In fact, the respondents had no intention to offer the rights shares to the petitioners but the respondents were compelled to offer the same after the petitioners had filed the present petition. Moreover, the respondents issued rights shares at par mainly to provide the benefit to themselves as the respondents hold 75% shareholding of the respondent company. It was alleged that the respondents had tried to push the petitioner into minority by not offering the rights shares to the petitioners. However, the same were offered after filing of the petition. The petitioners had participated in the share capital in the respondent company in the year 1997 and it is obvious from the fact that the manifold increase in property rates would increase further and the respondent No. 1 company would progress well and give handsome profits to the petitioners and due to continuous oppression by the respondents, the non subscription would result in reduction in shareholding of the petitioners and ultimately loss to the petitioners. Further it was pointed out that the respondents have alleged that the petitioner have invested Rs. 1,25,000/- in January 1996 and are asking for Rs. 20 Cr. It is to be noted that the petitioners had invested Rs. 1,25,000/- in January 1996, which has now increased to Rs. 20,29,900 in 2006. Similarly, it was argued that the respondents had invested 3,75,000 in 1996, which has now increased to Rs. 60,89,799, and similar profit would accrue to them. Even if there was no written agreement between the petitioners and the respondents but implied agreement was in existence as the dates of investment by both the petitioners and the respondents are same and both hold the same for a number of years. It was pointed out that the respondents have produced the case law from software and head notes only which is not admissible under the Indian Evidence Act and have also failed to provide copy of full order published in journals and further that the respondents have failed to give reply to para 41 to 48 of the petition, and. to para 30 of rejoinder.

The counsel for the petitioners reiterated their prayer for purchase of the equity shares of the petitioners by the respondent No. 1 company and/or by the other respondents on fair value keeping in view tile present market value of the property rights of the respondent No. 1 company. Alternatively, it was prayed that Hon'ble Company Law Board may order the division of the property rights of the respondent No. 1 company between the petitioners and the respondent shareholders in the ratio of respective shareholding, 4. Shri Nesar Ahmad, Counsel for the respondents raised the preliminary objection about maintainability of the present petition and argued that Section 397 (2) does not permit such petition to be maintained and entertained by the Hon'ble Board. It was pointed out that the petitioner himself has categorically stated that the present petition, is only under Section 397 and provisions of Section 398 are not attracted in the present Company Petition, therefore, there can not be any allegations about mis-management and there is no scope for arguing any thing about the management of the Company and its affairs. It was argued that the petitioner has failed to prove a single act of oppression . There is not any single evidence that has been laid by the Petitioner either in the Petition or in his rejoinder or in oral pleadings except one letter which he has sent to the Company in the year 2001 with DD of Rs. 250. The petitioner has even never tried to raise any issue of non-receipt of notice of the general meeting, It was emphasised that the petitioners have failed to prove that Respondent No. 1 is quasi partnership (pages 3, 4 & 5 of sur-rejoinder refer) Directorial complaints cannot be entertained Under Section 397.

Further, issue of quasi partnership was never raised in the original petition. Petitioners have failed to prove that the company deserves to be wound up. This is an essential requirement of maintainability of petition Under Section 397 of the Companies Act 1956. Petitioners have failed to prove that there is a deadlock in the Management. There is no deadlock, rest of Directors other than petitioner are attending the business as usual. Petitioner cannot expect fantastic appreciation in their investments. He wants 20 crores against his investing Rs. 1.25 lacs in 1996 & Rs. 19.25 lacs in 2005. Petitioners have failed to make other partners of Sharada Developers etc parties to petition - This is a case of mis-joinder. As shareholder, petitioner is not entitled to get documents which he is calling for. As shareholder he cannot claim access to books of accounts or other business contracts. This is not permitted under the Act. Further, it was argued that the Letter for Regd. A.D. was sent on 11.10.2001 (pg 3 of petition). After 4.5 years petitioner has come for relief. (para 31 of petition). The letter only talked about notices of the Board meeting by Registered post. This cannot be a grievance Under Section 397. If at all there is any grievance it is in his capacity as a Director and not as a shareholder.

It was pointed out that the only prayer of the petitioner is that he wants to sell off his shares & quit. How can that be entertained? Case under 397 is not proved at all. And if at all he wants to sell his shares, he should follow the procedure as prescribed by Clause 21 to 23 of Articles of Association of the company. Petition Under Section 397 is not a money recovery suit. Petitioner should not have accepted issue of shares at par if according to him the valuation of the property of the company and in turn the shares of the company is so high. While estimating value of the property, other aspects of litigation and claims are neglected by the petitioner. Even the exercise of valuation is too costly and cannot be undertaken for the whims & fancies of the petitioner. Copies of annual accounts are filed by petitioner himself, therefore there is no question of him not getting copies of annual accounts. Petitioner himself has written letter to Pune Municipal corporation for withholding construction related permissions for building superstructure by the company. He has acted against the interest of the company and can not ask questions to the respondents as to why company has not started activities. Alleged grievances of the petitioner are in his capacity as director. This can not be a subject matter of petition under Section 397, The respondents relied upon the dicta Ruby Hospital case (2006 - 129- comp cases 0001-CAL). If intention was to reduce petitioner to/minority as alleged in para 39 of the petition, additional shares would not have been allotted to him at par by the respondents in March 05. Petitioner "has never given in writing his request for inspection, therefore, he can not allege oppression on this ground.

5. It was pointed out that in spite of creating problems Respondents No. 2 to 6 have not removed petitioner from directorship. He was not pushed to minority. Annual accounts etc are being sent to the petitioner regularly. Thus there is no question of oppression. As regards the petitioners' contention that the property rates have gone up in and around Pune, respondents stated that let petitioner stay with the company and share the prosperity. As regards the petitioners' prayer that the valuation of the property as done by the petitioner should be accepted by Respondents, it was argued by the respondents that the valuation done by petitioners is not acceptable. If at all petitioner wants to transfer the shares let him follow provisions of Article 21 to 23 of Articles of association Auditors of the company will value the shares. As regards the petitioners' allegation that no dividend has been declared by Respondent No. 1, Company does not have any income in last nine years, the respondents argued that the two of properties of the company are without any activity. In fact, petitioner himself has created hurdles in the activities by writing letters to authorities including PMC. It is not easy to immediately commence construction activities, as there are number of legal permissions to be sought and the land is subject to a number of reservations, which requires relief/permission from various authorities including the PMC.On the third property development is going on through a partnership firm. As & when Company will earn income , dividend could be declared.

Non declaration of the Dividend can not be a matter for application Under Section 397. Company is a partner in construction firm and does not have any independent activity and income. Further, due to the peculiar nature of the business( Construction of tenements), company cannot book income till contract is complete. In the statement of significant accounting policies attached to every Balance sheet it has been specifically mentioned that Income from construction of residential complex shall be recognized on completed contract method on handing over the possession of premises. The copies of the Balance sheet have been filed by the petitioner himself . Therefore, there is appropriate disclosure and this accounting practice is quite common and there is nothing unusual about it.

6. As regards the petitioners' contention that the respondents have not given adequate reply even though there is a express provision in the Article 45 (page 67) to give one day notice and despite the fact that a cheque for Rs. 250/- had been paid for notices to be sent by registered A.D, it was argued by the respondents that the petitioners demanded notices only of the Board meetings by Registered A.D in 2001 . It was contended as to why they did not come to CLB earlier but only in 2005.

Another aspect is not getting Board notices can not be a complaint Under Section 397 as respondent No. 1 is not a quasi partnership.

Further responding to the petitioners' contention that the word 'oppression' has not been defined in the Act but ratio has been drawn from the various Court pronouncements such as Needle Industries/Gaekward etc. Since there was no notice to meetings, non-receipt of Balance Sheet, non-involvement in the business plan, not allowing participation in the management etc. these amount at the 'oppression'; the respondents' argued that the petitioners had a, meager stake in the company i.e. of Rs. 1.25 lacs invested in 1996 as Equity Capital. As late as in March 2005 he invested another Rs. 19.25 lacs. While stake of the respondents is Rs. 950 Lacs (Forty seven times more than petitioner ) not getting Board notices, non-involvement in the business plan, not allowing participation in the management etc.

can not be a complaint Under Section 397. It was contended that the respondent No. 1 is not a quasi partnership. In any case the petitioner was continues to be a member on the Board of Directors, Replying to the petitioners contention that the Company application is pending with the Bench but the Respondents have not submitted the copy of development agreement with regard to two properties without which the Petitioner is unable to provide the proper business valuation, the respondents argued that petitioners have no right to ask for these development agreements.

If at all he wants copies he could have as well made the partnerships viz. Sharada Developers etc., parties to petition . Further, regarding the petitioners' re-iteration that the present arrangement is in the nature of quasi-partnership to the extent that both the Petitioner and Respondent No -2 were initially having equal share in the Company and later agreed to be 75:25 and the same ratio is being maintained but the Petitioner has been totally sidelined and was never involved in the business, the respondents argued that there is no case of Quasi Partnership proved by the petitioner, all the cases in which Private Limited company has been treated as a Quasi Partnership lists out the essentials of the same being equal shareholding/stake by two groups; existence of family arrangement; formation of a company by conversion of Existing Partnership into Private Limited; agreement for Participation in Management; and in the present case none of these elements is present and hence it can not be called as Quasi Partnership. Further, to the petitioners' contention that the respondent has shown lack of probity in as much as that R-2 with coercion got the sign on few blank papers and blank transfer deeds in the year 2000, further, agreement with Kohinoor, no participation in the management etc. are the example of lack of probity, the respondents contended that no blank papers & transfer deeds were obtained by respondents from the petitioners. This is a false allegation and they vehemently deny this. As regards the contention that the respondents have failed to make any reply to Para 37 (non-involving of the petitioners in Belbaug Property Complex Construction Programme) of the Petition and therefore, cannot claim that the Petitioner's action was against the interest of the Company. In fact, Petitioner has given a letter to PMC after newspaper advertisement for development of properties and has objected the approval for any building plan for construction of building complex on Belbaug property as the Petitioner has never been consulted prior to this action on the part of other Respondents, the respondents contended that the petitioners here have admitted that they themselves have objected for approval of building plan and also question why there is no income to the company. These two things cannot go hand in hand. Petitioner was always a member on the Board and was provided with all the information which he wanted to have. Even he was given access to books of accounts.

7. Further, the counsel or the respondents' argued that petitioners are looking for division in the property owned by the Company or to sell their shares at a fair consideration. Division in the property is possible only in winding up of the company. Petitioners have failed to prove any case for winding up. If at all they want to sell shares , they will have to follow the procedure prescribed by Articles. As regards the petitioners' argument that the share application money was lying with the intention to push the Petitioner to hopeless minority but because of the present Company Petition, R-2 had no option but to ask the Petitioner to participate in the right issue. Since Respondents have allotted the shares at par so the Petitioner receive the shares at par, the respondents argued that the share application money put in by Respondents was and is lying with the company since last several years.

If respondents had designs to push the petitioner to minority they could have done that earlier. This they never did. In fact without there being any obligation legal or otherwise respondents have offered shares to petitioners as a fair gesture for which petitioner should be thankful. To the petitioners' re-iteration that the petitioner was denied the inspection of books and other papers and other statutory records which itself would be an act of 'oppression'; the respondents contended that the petitioners have never given either in writing or orally their request for inspection, therefore they cannot allege oppression on this ground . Whenever they wanted to inspect any books of accounts etc. they were always given access to as a Director of the company. It was argued by the respondents that the ratio of this case - Sangramsinh P. Gaekwad and Ors. v. Shantadevi P. Gaekwad 2005 (3) CLJ 385 SC page 441 para 153, 154, page 445, page 450 relied upon by the petitioners, is in fact in favour of respondents . In the said case, it has been held that "jurisdiction to grant appropriate relief against Oppression under Section 397 is of wide amplitude. However, that would not mean that Section 397 provides for a remedy for every act of omission or commission on the part of Board of Directors. Reliefs must be granted having regard to exigencies of the situation. Court must arrive at a conclusion upon analyzing material brought on records that the affairs of the company were such that it would be just and equitable to order winding up thereof and that the majority acted through the Board of Directors and by reason of abusing their dominant position had oppressed the minority shareholders. Conduct, thus, complained of must be such so as to oppress a minority of the members including the petitioners vis-a-vis the shareholders which a fortiori must be an act of the majority. Furthermore, the fact situation obtaining in the case must enable the court to invoke just and equitable rules even if a case has been made out for winding up for passing an order of winding up of the company; but such winding up order would be unfair to the minority members, acts of mala fides, improper motive and similar other allegations are required to be pleaded with full particulars, and proved, so as to obtain appropriate relief. As regards the ratio of the case - Caparo India Ltd. (UK) v.Caparo Maruti Ltd. 17.128 (2006) OCT -425 Page 448 para 36 relied upon by the petitioners, it was argued, - is also in favour of respondents.

The petitioners have cited para 36 page 448 in support of their claims.

The findings on the basis of that para as noted in para 39 on page 449 have been reproduced below, which are in favor of the respondents: ...over a period of time differences arose between the two groups and Mr. Jindal was removed as the Managing Director. The relationship has worsened over a period of time. There are even criminal cases filed against each other. In these circumstances, petition was filed before the CLB challenging removal of Mr. Jindal as Chairman and also alleging certain other acts of oppression as pell as mismanagement. No doubt the CLB did not find any substance in these allegations and those findings are affirmed by me in the discussion recorded above. Allegations also relate to mismanagement.... In these circumstances and particularly going by the relationship between the two parties, exercise of equitable jurisdiction by the CLB appears to be justified. It is not possible for the two groups to remain together because of worsening acrimony.

Subsequent events ...also justify this course of action. Therefore, keeping in view the principles laid down in Needle Industries and the manner in which they were followed by this Court in Chander Krishan Gupta, I am of the view that direction of the CLB to the effect that shares of Jindal group be purchased by the Caparo Group should not be interfered with....

once it is found that the CLB, in the given circumstances, was within its power to exercise equitable jurisdiction and it is exercised, it would not be proper to interfere with the said equitable equity jurisdiction in an appeal under Section 10F of the Act. Therefore, without going into the maintainability of the appeal..., the same is dismissed on merits.

8. I have considered the pleadings and the documents filed therewith as well as the arguments of the counsels for the petitioners and the respondents. The petitioners' case is that of 'oppression', that they being 25% shareholders in the company, and being director in the company are not getting notices of the Board Meetings despite the fact that they have paid a cheque for Rs. 250/- requiring the respondent company to send them notices by Regd. A.D.; the petitioners have no intimation regarding the construction programmes/plans of the respondent company; that there is no mutual faith and trust left in the respondent company which is nothing but a quasi-partnership; and that in view of the bad reputation of R-2 being absconder/fugitive against whom CBI enquiries are on, it is impracticable to continue with R-2 as a business partner and hence the petitioners are willing to part company with the respondent No. 1 at a fair valuation for their shares which may be purchased by the respondent company and/or by the respondents or alternatively the CLB may order division of the property rights of the respondent company between the petitioners and the respondents in the ratio of their respective shareholding. The respondents' case is that the petition is not maintainable under Section 397 of the Act as the petitioners' grievance is in the capacity of director of R-1 and not in their capacity as shareholders; the filing of petition is beyond limitation period; the petitioners' conduct has been detrimental to the interests of the R-1 besides no case of 'oppression' has been made out by the petitioners; no case of winding up has been made out by the petitioners; and what the petitioners require is fair market value of their shares to be sold to the respondent company and/or to the respondents by getting the value as calculated in the manner provided by the petitioners in paras 14,20 and 42 of the petition which is not permissible; the petitioners have alternatively prayed for division of the property between the petitioners and the respondents in the ratio of their respective shareholding which again is not permissible as the respondent company is a separate entity entirely different from that of its shareholders and the company's properties are is not the assets of its shareholders; hence the petition is not maintainable and deserves to be dismissed.

9. On consideration of the facts and circumstances of the case, Is find that the petitioners have not been able to make out a case under Section 397 of the Act. The petitioners have not been able to meet the preliminary objections raised by the respondents. However, the respondents preliminary objections that the petition is barred by limitation is not tenable. Respondents' case is that matter of 2001 (when letter dated 11.10.2001 was sent vide Regd. A.D. enclosing a cheque for Rs. 250/- demanding notices of Board's meetings by registered A.D) is agitated in 2005 after inordinate delay. CLB is a court of equity. Equity does not fix a specific time limit but considers the circumstances of each case in determining whether there has been such delay as to amount to laches. The doctrine of laches is based on equitable consideration and depends upon general principles of justice and fair play. To be laches delay should be such that it could be said that the petitioner is not entitled to relief on account of gross negligence or inaction or for want of bonafide imputable to him or that he has given up (waived) his right by acquiescence or by his conduct or neglect. In the present case I find that there has been no negligence, nor inaction nor want of bonafide which could be imputed to the petitioner. There is no presumption that delay in approaching CLB is deliberate. In any case, there is no delay in the present case. No case has been made out for winding up of the respondent company. This is an essential requirement of maintainability of petition under Section 397 of the Act. Petitioners have failed to prove that there is a deadlock in the management. It is noticed that the petition has been filed for putting pressure on the respondents to make them agree to buy the shares of the petitioners.

10. It is settled law that in a case of oppression, a member has to specifically plead on five facts - (a) what is the alleged act of oppression; (b) who committed the act I of oppression; (c) how it is oppressive; (d) whether it is in the affairs of the company; (e) and, whether the company is a party to the commission of the act of oppression. On considering the present case on merits, I find that all the five aspects mentioned above have not been covered. It is true that the petitioner has not got notices of Board's Meetings for which even money has been deposited through a cheque of Rs. 250/- for receiving notices by Regd. A.D. But this single instance is not sufficient to prove act of oppression on the part of the respondent company/respondents. On the other hand the respondents have met with each and every allegation of the petitioners as detailed above in paras 6 to 8 which are not being repeated for the reason of prolixity. The petitioners' themselves, may be because of financial crunch or being dissuaded by the CBI enquiries against the respondents have been expressing directly and indirectly their unwillingness to continue to participate in the affairs of the company. The petitioners' willingness to dissociate themselves with the respondent company has been expressly made in their prayer in the petition as well. They have been all through willing to get out of the company by selling their shares at the rates which according to them must be calculated as per the valuation of the properties got done by the petitioners' as provided in paras 14,20 and 42 of the Company Petition or alternatively they have been asking for division of the properties of the company which is the stock-in-trade of the R-1. The respondents have rightly pointed out that such demands of calculation of the value of the petitioners' shares in the manner provided by them and division of the assets of the company which is a separate entity and no case of winding up has been made out is impracticable, impossible and impermissible to be acceded to. Furthermore, the respondents' contention that the grievances in this petition are in the capacity of director of the company and not in the capacity of shareholders is also found to be true. Directorial complaints cannot be entertained in a petition under Section 397 of the Act unless it is composite complaint and is in the case of a company in the nature of quasi partnership. In the present case though the petitioners have been reiterating that the respondent company is in the nature of quasi-partnership and the mutual faith and trust between the parties is lost, the respondents have all through denied quasi partnership nature of the present R-1 as essentials elements of quasi partnership -equal shareholding/stake by two groups; existence of family arrangement; formation of a company by conversion of existing partnership into private limited; and agreement for participation in management etc. are missing. Further, the lack of confidence and mutual trust of which the petitioners are complaining is arising from mere dissatisfaction generated by the petitioners' own non-participation in the business affairs of the company. It is not arising from the lack of probity in the conduct of the company affairs.

11. Further, I agree that it is a settled proposition of law that the conduct of the parties is a very relevant factor to be considered in the equitable proceedings under Sections 397/398. In Sri Kanta Datta Narasimharaja Wadiyar v. Venkateshwar Real Estates Private Ltd. (1991) 3 Comp. LJ 336 (Kara) : (1991)72 Comp Cas 211 (Karn), it was held that the petitioner seeking equitable relief must come with clean hands and good conduct, failing which the petitioner would constitute a gross abuse of the process of Court, and the petitioner is not entitled for any relief under Sections 397 and 398. It also held that the conduct of the parties in other proceedings could also be taken into consideration. However, it was held that the conduct of the petitioner before filing of the petition may not be a relevant factor. Regarding the principle of equity in Shrimati Abnash Kaur v. Lord Krishna Sugar Mills Ltd. 44 CC 390 the Division Bench of Delhi High Court has held that while exercising equity jurisdiction, which clothes the Court with discretionary powers "...the discretion cannot be exercised arbitrarily or according to one's own will or whim. It has to be regulated by law, allay its rigour advance the remedy and to relieve against abuse. The court, therefore, exercising equity jurisdiction, cannot ignore the well known maxims of equity. Two such maxims are that he who seeks equity must do equity and he who comes into equity must come with clean hands...." There have been allegations and counter allegations. The Company Law Board is a court of equity and considering the equities between the parties, I find that the equity is in favour of the respondents. Rather it is the conduct of the petitioners as detailed above which has been prejudicial to the interests of the functioning of the company. Therefore, it would be highly unjust to grant the prayers sought by the petitioners . Such a relief, if granted could be highly oppressive to the respondents. Thus, the petitioners have not established any act of oppression. Rather admittedly the respondents have been treating the petitioners very fairly and in a considerate manner that despite his making complaint to the Pune Municipal Corporation (PMC), despite his conduct being detrimental to the functioning of the respondent company, have still retained him as a director and provided him with every opportunity to participate in the shareholding of the company as well as in its management. It is the petitioners themselves who have adopted a recalcitrant attitude and have made up their mind to move out of the company or get their share as per their own calculations. In these circumstances, though no case of oppression has been made out, I find that the petitioners will not be able to contribute anything to the functioning of the company and would rather be impeding the company's progress, I hold that the petitioners' hereby move out of the company on receiving fair valuation of their shares to be done by the independent valuer to be appointed by the consensus of the parties in the next Board Meeting to be held within a month of receipt of this order. The valuer so appointed by the Board shall be directed to make a valuation of the shares of the petitioners within a month of giving such assignment to him/them.

12. With the above directions, I dispose of this petition. No order as to cost. All interim orders stand vacated. All Company Applications made in this Company Petition stand disposed of.


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