1. All these eight appeals arise out of the orders passed by the Company Law Board, Principal Bench, New Delhi in two company petitions, namely, C.P.No. 45 of 1993 and C.P.No. 16 of 1994, dated 12.5.1998.
2. C.M.A.Nos. 1071, 1207, 1208 and 1210 of 1998 are preferred against the order in C.P.No.16 of 1994, while C.M.A.Nos.1072, 1073, 1149 and 1209 are preferred against the order in C.P.No.45 of 1993. The main dispute relates to the affairs of M/s. Gordon Woodroffe & Company Limited (GWL), a sick company now before the Board for Industrial and Financial Reconstruction (BIFR) In C.M.A.No.1071 of 1998, M/s. Gordon Woodroffe & Company Limited, U.K. the petitioner in C.P.No.16 of 1994 is the appellant. In C.M.A.No.1207 of 1998, Kishore Rajaram Chhabria, Madan Dwarakdas Chhabria and Rajaram Dwarakdas Chhabria, the respondents 4 to 6 in C.P.No.16 of 1994 are the appellants. In C.M.A.No.1208 of 1998, Tracstar Investments (P) Ltd., the second respondent in C.P.No.16 of 1994 is the appellant. In C.M.A.No.1210 of 1998, Shoe Specialities (P) Ltd., the third respondent in C.P.No.16 of 1994 is the appellant. In C.M.A.No.1072 of 1998, M/s. Shaw Wallace & Co. Limited., the second respondent in C.P.No.45 of 1993 is the appellant. In C.M.A.No.1073 of 1998, M/s. Gordon Woodroffe Ltd., the first respondent in C.P.No.45 of 1993 is the appellant. In C.M.A.No.1149 of 1998, Tracstar Investments (p) Ltd., the petitioner in C.P.No.45 of 1993 is the appellant. In C.M.A.No.1209 of 1998, Shoe Specialities (P) Ltd., the ninth respondent in C.P.No.45 of 1993 is the appellant.
3. The peculiar feature of these appeals is that the appeals have been preferred both by the petitioners as well as the respondents in both C.P.No.45 of 1993 and C.P.No.16 of 1994. Two groups of companies and individuals are the parties in these appeals and they are both appellants as well as respondents. The seven petitioners in C.P.No.45 of 1993, headed by Tracstar Investments Private Limited and its Managing Director, Kishore Rajaram Chhabria, are forming one group; Kishore Rajaram Chhabria is heading that group; while his brother Manohar Rajaram Chhabria is heading the other group. M/s. Tracstar Investments Private Limited; headed by K.R. Chhabria, two individuals and four Companies are petitioners in C.P.No.45 of 1993. They filed the said petition under Sections 397 and 398 of the Companies Act, 1956.
4. The petitioners in C.P.No.45 of 1993 alleged that the affairs of the Gordon Woodroffe Limited (GWL)/first respondent company were mis-managed by the respondents 2 to 11 and their subordinates. Theirmulti-dimensional oppressive acts by themselves and through their agents have seriously affected the interest of the public as well as the company itself. While the Shoe Specialities Private Limited in which the Tracstar Investment Private Limited holds substantial shares, i.e, 12.73% of shares held in Gordon Woodroffe Limited. The respondents deliberately manipulated the minutes of the Board of Directors on 26.5.1992 and 25.6.1992 refused to transfer 6.84% shares in the name of the Trident Investments and Portfolio Services Private Limited, the seventh petitioner herein, in which also, the first petitioner holds controlling interest. On account of the manipulation perpetrated by the respondents, the petitioners were not in a position to exercise their right in respect of 19.57% shares in the first respondent company. Shaw Wallace and Company (SWC); the first respondent and Mr.M.R. Chhabria (Mr. Manohar Rajaram Chhabria) have consistently defrauded the Board for Industrial and Finance Reconstruction (BIFR) Scheme and have been acting against the interest of the company. SWC and MR. Chhabria have been attempting to grab all the valuable properties of GWL. In the Annual General Meeting on 14.8.1992 none of the nominees of the petitioners were elected on account of the manipulation of the minutes of the meeting of Board of Directors. By reducing the voting rights of the petitioners by 19.57% and adding to the respondents' voting rights by 12.73% the respondents were able to show 44.48%. An artificial majority of 37.63% to 24.91% was made out. On account of this manipulation Mr. Kishore Rajaram Chhabria was defeated in the last Annual General Meeting held on 14.8.1992. Manohar Rajaram Chhabria Consistently defied BIFR Scheme for rehabilitation. In the hearing before the BIFR on 31.3.1993 Hongkong Bank explicitly stated that it has lost confidence in the present management of GWL There was an attempt in a meeting held on 30.6.1993 by the Board to alienate the First Line Beach property to SWC. This resulted in the resignation of Mr.M.S.Ram from the Board of Directors. On account of the various acts of mis-management, the BIFR chose to lay an embargo on the alienation of assets by the present management. Despite the fact that Tracstar Investment Private Limited and Shoe Specialities Private Limited (SSPL) have ceased to be controlled by SWC or M.R. Chhabria group, M.R. Chhabria and SWC continued to claim that these two companies are in their control. Mr.M.R. Chhabria fell out with his father, uncle and brother namely, Rajaram Dwarakdas Chhabria, Madan Dwarakdas Chhabria and Kishore Rajaram Chhabria. When the family consisting of brothers, father and the uncle held 62.54% of shares in Tracstar Investment Private Limited and SSPL, after split, K.R. Chhabria got control of 37.67%, while M.R. Chhabria group had only 24.9% of shares. This took place during the year 1992. 44.48% of shares in GWL came to be owned in the following manner:
Tracstar Investments Pvt. Ltd. 24.9%
M/s Trident Investments & Portfolio Service Pvt. Ltd. 6.84%.
As on 5.5.1992 when C.P.No.19 of 1992 was filed, the entire proprietory right in SSPL, which held 12.73% shares in GWL came to be owned by K.R. Chhabria group, because Tracstar Investment Pvt. Ltd., and SSPL owning 24.9% and 12.73% of shares in GWL, came to be owned by the said group. Hence, the other M.R. Chhabria group began to initiate multi-dimensional move to grab, confiscate, hijack and strangulate the proprietory and voting rights in Tracstar, SSPL Stridewell and Bhankerpur. After filing C.P.No.19 of 1992 under Sections 247 and 250 of the Companies Act, the respondents group attempted to obtain an order for freezing the voting rights on the 44.48% shares held by K.R. Chhabria group in GWL. But the Company Law Board declined to pass any order and the petition under Section 250(3) of the Act was dismissed. The next attempt was to file civil suit O.S.No.3277 of 1992 before the Civil Judge, Bangalore by SWC, to take over the management of Tracstar. On 20.5.1992, the Civil Judge at Bangalore refused to grant the interim order.
5. The malicious attempt of M.R. Chhabria group to take away the proprietory and voting rights of 12.73% shares held by R.D. Chhabbria and M.D. Chhabria (through SSPL and GWL) was frustated when the petitioners' group filed C.P.No.29 of 1992 before the Company Law Board, and when the Company Law Board cancelled the illegal allotment of 20,000 further shares issued by the Managing Board to Bhankerpur and pledged with Malleswara Investments Private Ltd., on 28.5.1993. The said order was challenged in the Delhi High Court; but that was dismissed at the admission stage itself. Thereafter, W.P.No.26461 of 1993 was filed in the Karnataka High Court. When their attempt was not successful in Karnataka also a Civil Miscellaneous Appeal was filed in this Court. Similarly another attempt was made to control SSPL and M/s. Stridewell, which owned 40% of the paid up capital of SSPL by fraudulent issue of shares in M/s. Stridewell. Then the petitioners group filed C.P.No. 30 of 1993, challenging the transfers and the same is pending before the Company Law Board. In the mean time, the employees of M.R.Chhabria group filed an Application No.92 of 1992 in C.P.No.29 of 1992 to remove the name Stridewell, who is the complainant in C.P.No.29 of 1992. This was dismissed by the Company Law Board. In the said petition, the Company Law Board held that M.R. Chhabria group employees pretending to be the directors of Stridewell, have no right to represent the Stridewell, which was properly represented by the nominees of K.R. Chhabria group. After failing in their attempt to get the control of 12.73% shares held by SSPL in GWL, the next attempt was to hold the control of 6.84% of shares held by Trident and GWL. This attempt was made because of refusal to register 6.84% of shares in the name of Trident. When the application was made by Trident to register the aforesaid 6.84% shares in their name, disclosing that the beneficial owner was Tracstar, it was refused on 28.5.1992 by GWL. The reasons given for refusal are mala fide and fictitious. The continuous and persistent efforts of the respondents to prevent the petitioners from exercising their voting rights in 12.73% shares in SSPL and6.34% shares pending in registration in the name of Trident are with the sole object of perpetuated control of GWL by the respondents and these acts clearly constitute hostile attitude.
6. Then the petitioners set out the mis-management by SWC, M.R. Chhabria in GWL. Thereafter, they set out the acts prejudicial to the public interest. With the aforesaid allegations they have included seven prayers in C.P.No.45 of 1993. The first prayer is to permanently injunct the respondents 3 to 8 from functioning as directors in GWL and to declare that the other Chhabria group owning 44.48% shares in Tracstar, SSPL and Trident are the majority group shareholders of the company, after directing the registration of 6.84% of shares in the name of Tracstar or substitute the name of Tracstar for Trident.
7. The respondents 1,2,3,7 and 8 have filed reply, which reads as follows: Petitioner No.2 and 3 have no locus standi to file the petition inasmuch as they are not members of the company. The company is presently under the rehabilitation scheme of BIFR and SWC of which respondent No.3 is the Chairman has made a substantial investment. The acquisition of shares by Tracstar is liable to be rejected as they have been acquired by illegal and improper means and as such no cognizance of the shareholding by petitioner No.1 should be taken. The reply goes on to narrate the proceedings before BIFR to state that SWC controlled by Shri Mr. Chhabria is actually involved in rehabilitating the company. The proposal of the company to issue shares to SWC for the purpose of rehabilitating the company has also been thwarted by the petitioners. Further, the reply also narrates the association of Shri K.R. Chhabria with SWC and how Shri K.R. Chhabria had taken away or attempted to take away profitable business etc. from the control of Shaw Wallace when he was functioning as the Managing Director of SWC and how the petitioner No.1 came to hold the alleged shares held by it. In regard to the Annual General Meeting held on 14.8.1992, none of the nominees of the petitioners group could get elected as they were in minority and not because of any unlawful decision taken in the meeting. In regard to the refusal of 6.84% shares in the name of 7th petitioner, the company has already filed a reference under Section 22A of SCR Act before the Company Law Board. As far as the rehabilitation programme is concerned, the matter is under consideration of BIFR and SWC has not acted in any way against the scheme proposed by BIFR. In regard to the having properties of the company, respondents have denied the same.
8. After hearing the parties on 13.8.1993, the Company Law Board recorded an agreement between the parties, agreeing to postpone the meeting of the company scheduled to be held on 24.8.1993 till further orders. On 22.9.1993 the existing directors of the Board were allowed to continue to hold the office till the Annual General Meeting.
9. When the petition was pending before the Company Law Board, one of the companies in the respondents group, namely GWL, U.K. filedC.P.No.16 of 1994 under Section 398(1)(b) read with Sections 402 and 403 of the Companies Act, 1956. In the said petition Tracstar Investments Private Limited, Shoe Specialities Private Limited, Kishore Rajaram Chhabria, Madan Dwarakdas Chhabria Rajaram Dwarakdas Chhabria are respondents 2 to 6, while Gordon Woodroffe Limited, India and Shaw Wallace and Company Limited, are respondents 1 and 7.
10. After setting out the history of the GWL, India, it is stated that in 1973 the majority share holding of GWL, UK, in Gordon Woodroffe, India, was reduced to just below 40% consequent upon the coming into force of the Foreign Exchange Regulations Act, 1973. It is stated that GWL, UK, had no other business except the investment in GWL, India and the only assets of which GWL , UK, is holding is the assets of GWL, India. Till 1982 GWL, India was a successful business establishment owning number of properties in Madras, Bombay, Delhi etc. From 1982-83 GWL, India incurred losses. On 4.1.1985 M.R. Chhabria became the director of GWL, India and thereafter he became the Chairman of the said company. This was because Messra Jumbo International Holdings Limited continued to hold the entire shares in GWL, UK. M.R. Chhabria. acquired through overseas companies the control of 38.96% shares in Shaw Wallace, the seventh respondent. As Mr.M.R. Chhabria became a director of Shaw Wallace with effect from 27.3.1987 and subsequently Chairman of Shaw Wallace with effect from 6.4.1987, the day-to-day affairs of GWL, India and its management were done by the employees of Shaw Wallace group. M.R. Chhabria acquired the controlling interest in various ventures apart form GWL, such as Dunlop India Limited. Chhabria Investment Private Limited, Jaguar Investment Private Limited and Orson Investment Private Limited. The younger brother of M.R. Chhabria became a director of Shaw Wallace on 27.3.1987. Later he was appointed as the Managing Director of Shaw Wallace Company and continued in the said position till 25.4.1992. As the Managing Director of Shaw Wallace Company K.R. Chhabria acted as the Chairman of the group executive committee constituted by Shaw Wallace Company to attend the affairs of various companies in the Shaw Wallace group. The group executive committee used to take decision and advise the affairs of GWL, India. On 20.9.1991 Kishore Chhabria was appointed as Director of GWL, India and he continued to be the director of the said company till 15.9.1993. Thus Kishore Chhabria was in the position of fiduciary and trustee, both in law and in fact of Shaw Wallace as well as the other companies in the group companies. He was required scrupulously to avoid getting into a situation where there will be a conflict of the company's interest and his personal interest. The duties and obligation in regard to the above being absolute, the same were required to be followed strictly. He owed similar duties and obligations to GWL, UK and other Companies. While so, Kishore Chhabria, in a fraudulent manner has taken away or attempted to take away the profitable businesses, monies, interests, companies, assets and properties and business opportunities of GWL, UK., and Shaw Wallace for his personal gain and for the benefit of his family andrelatives. These amount to breach of trust and fiduciary obligations as well as fraud perpetuated by him on Gordon Woodroffe (UK) and Shaw Wallace. Only in April, 1992, this was brought to light when M.R. Chhabria, sent a circular dated 5.3.1992. After the letter was issued by M.R. Chhabria, Kishore Chhabria attempted to take away the assets of the various companies. He began to take several steps with groups and acted adverse to the interest of the companies and in a prejudicial manner to the public interest. This includes, his attempt to take away the control of GWL, India. This he did by taking away Tracstar which held 24.91% equity shares in GWL, India, and claiming hostile title to Shoe Specialities Private Limited, which held 12.73% of equity snares in GWL, India. and by acquiring 6.84 % in GWL, India, in the name of Trident Portfolio and Investment Services Private Limited for the benefit of Tracstar. Thus, he eventually made a claim for voting rights in GWL, India to the extent of 44.48% and thereby arranged to oust the existing management of the company. By acquiring the shares in GWL, India to the extent of 24.91 % in the name of Tracstar and 12.73% of SSPL. Kishore Chhabria and others acted against the interest of GWL, U.K. By mis-using his fiduciary and dominant position, he attempted to secure personal gain and advantage for himself and his family members. The acquisition of shares in GWL, India in the names of Tracstar and SSPL, were in violation of various requirements of law and hence it is illegal. When the sick Industrial Companies (Special Provisions) Act, 1985, came into force, the Board for Industrial and Financial Reconstructioin (BIFR) declared the GWL, India, as a sick industrial company.
11. The Industrial Reconstruction Bank of India was appointed as the operating agency for the purpose of preparing a scheme for revival/rehabilitation. When BIFR issued guidelines for framing of schemes for revival of the company pursuant to the guidelines of Industrial Reconstruction Bank of India, formulated draft scheme for reconstruction of GWL, India. Pursuant to the scheme, Shaw Wallace and its group contributed Rs.1,40,00,000 and Rs.90 lakhs, which would be 24.9% of the expanded equity shares; Rs.50 lakhs as the interest free unsecured loan. While the revival scheme was under consideration, on 10/11.6.1989, an extraordinary general meeting of GWL, India was held, to consider further issue of equiry shares on rights basis to the existing shareholders. It was resolved to increase the issued capital of the company by issue and allotment of fresh 13,09,363 equity shares of Rs.10 each to raise Rs. 1,30,93,630. On 20.5.1991 letter of offer was issued to the shareholders of GWL, India, including GWL, UK., whose names were in the register of members as on 16.5.1991, which was the Record date for the rights issue. In the meanwhile, a decision was taken that three private limited companies namely, Chhabria Investment, Jaguar Investment and Orson Investment, would transfer their share holdings in GWL, India, to the investment companies under the control of Shaw Wallace group. On 23.5.1991, Chhabria Investment and Jaguar Investment transferred their 1,69,160 equity shares held by them in GWL, India, to Tracstar. Tracstar was allowed to acquire the said shares as it was treated as an investment ofShaw Wallace. The transfer was registered on 25.5.1991. Tracstar came to own 6.78% of shares in GWL, India. On 31.5.1991 Orson Investment also transferred 2700 shares held by it in GWL, India, to Tracstar. On 11.7.1991, the group investment committee of Shaw Wallace decided to allot the right issue held by GWL, UK in GWL, India to Tracstar. Kishore Chhabria attended the meeting. Similarly, Chhabria investment and Jaguar Investment sold the shares to Tracstar for the same rate. Again when Tracstar requested for additional 13,45,420 shares and it was accepted for the same reason required by Tracstar as the above investment were arranged by Shaw Wallace group. This aspect is dealt with in C.P.No.19 of 1992 on 25.2.1993. Out of 14,30,000 shares allotted to Tracstar, as it would hold in excess of 25% of shares of GWL, India, 5 lakhs equity shares were allotted to SSPL and the balance 8,30,000 were allotted to Tracstar. When the rights issue of GWL, India was finalised in September, 1991, GWL, UK, did not subscribe for the issue of shares in view of the allotment to Tracstar and SSPL as mentioned above. On account of the arrangement under which the rights issue shares which the GWL, UK would have secured but allowed to be secured to the Tracstar and SSPL, the holding of GWL, UK, in GWL, India, came to be limited to 24.90% of shares, on the other hand, Tracstar came to hold 24.91% of shares, while SSPL came to hold 12.73% of shares. Even after the aforesaid allotment Tracstar and SSPL continued to be managed and controlled by Shaw Wallace group till 25.4.1992. On account of certain acts of omission and commission from 25.4.1992, Kishore Chhabria ceased to be the Managing Director of Shaw Wallace as per the resolution of the Board of Directors dated 11.4.1992 and 25.4.1992.
12. After the aforesaid statement of facts, the petitioner sets out the circumstances,and instances to show that Tracstar and SSPL were also considered belonging to Shaw Wallace group. Some of the salient facts would show that the parties concerned intended that the equity shares in GWL, India were intended to go to Shaw Wallace group and not to any third party are also set out. Thereafter, reference is made to the number of suits and petitions filed in Courts and before the Company Law Board. Apart from the proceedings pending before the Civil Courts and the Company Law Board, Case No.205 of 1987 is pending before the BIFR is also referred to. Then the petitioner states as follows:
'The petitioner says and submits that without prejudice to the rights and contentions of the parties in the above mentioned suit and independent of any orders that may be passed in the said other proceedings, in the facts and circumstances of the case, the petitioner is entitled to seek relief of this Hon'ble Board under Section 398(l)(b) read with other applicable provisions of the Companies Act, 1956 to protect the interest of Gordon Woodroffe (Indian) and the public interest.'
The prayer in the petition is to direct that notwithstanding anything contained in the Memorandum and Articles of Association of Gordon Woodroffe (India) and notwithstanding any resolution which may be proposed to be passed at inthe Annual General Meeting or in the Extra Ordinary General Meeting of Gordon Woodroffe (India), there shall be no change in the present management of Gordon Woodroffe (India) at the instance of Tracstar and/or Shoe Specialities and that the Board of Directors of Gordon Woodroffe (India) will be continued to be by nominees as may from time to time be designated by Shaw Wallace and Company Ltd. and Gordon Woodroffe (UK) or its nominees; to restrain Tracstar Investments (P) Ltd., and Shoe Specialities (P) Ltd., to transfer their respective holding to Gordon Woodroffe (UK) or its nominees; to restrain Tracstar Investments (P) Ltd., and Shoe Specialities (P) Ltd., from exercising any voting rights in respect of shares held by them in Gordon Woodroffe (India) or interfering with the affairs of Gordon Woodroffe (India).
13. Not satisfied with the elaborate statement of facts contained in the petition, the petitioner has also filed a petition requesting the Board that some more facts to be taken into account in the said petition.
14. A detailed reply has been filed on behalf of the 2nd, 5th and 6th respondents. In the said reply, number of defences are taken. The first one is that though the reliefs claimed relate to Chhabria Investment Private Limited, Jaguar Investment Private Limited and Orson Investment Private Limited, these three companies are not parties 10 the proceedings. They have not made any complaint. Hence, no relief can be granted in their absence. Further, the petitioner seeks re-transfer of shares held by Tracstar and SSPL in GWL, India. In the absence of the aforesaid companies such a relief cannot also be granted. These companies have never filed any declaration under Section 187(c) of the Companies Act to the effect that they were the benami holders of the respective shares for the benefit of the petitioner.
15. In substance, the relief claimed requires re-transfer of shares involving the rectification of register. Section 111(4) of the Companies Act is the proper Section to be invoked. Hence, the petition under Section 398(1)(b) of the Act is incompetent. Another defence raised by these respondents is that the deponent to the affidavit accompanying the petition is one E. Subramaniam, is none other than the Manager of the seventh respondent. He is personally not aware of the facts relating to M.R. Chhabria and his business relationship or Orson Investment Private Limited or with members of Chhabria family.
16. The second respondent filed C.P.No.45 of 1993 in August 1993 pleading apprehension of the second respondent right to exercise the voting with reference to 44.48% of shares by the management. When the said petition almost came to a conclusion, the present petition has been filed. In C.P.No. 19 of 1992, the acquisition of shares by the second respondent to the extent of 24.91% in first respondent company has already been approved by the Company Law Board. It has also been decided by the Company Law Board that the second respondent is owned by 5th and 6th respondents. The petitioner filed C.S.No.1503 of 1993 for identical reliefs as contained in thepetition. Further O.A.Nos.443 and 454 of 1994 have also been filed by the petitioner for injunction restraining the second respondent from exercising its rights in the first respondent company. In the said suit, the title of the second respondent company in respect of 24.91% of the shares held in the first respondent company is in dispute. When a suit is pending in a Civil Court, which has exhaustive powers of investigation and trial, the petition for identical relief is not maintainable. The said suit C.S.No.1503 of 1993 has been transferred to the City Civil Court and it is pending as O.S.No.10803 of 1996 on the file of the XII Asst. Judge, City Civil Court, Madras. The respondents have also denied the allegation that the second respondent and third respondent acquired their shares in the first respondent company with the help of funds provided by Shaw Wallace/seventh respondent. The petitioner itself has filed C.P.No.19 of 1992 before the Company Law Board under Section 247/250 of the Act. After elaborate enquiry, the Company Law Board negatived the claim of the petitioner. On this ground as well the petition is not maintainable. Delay and laches are also set out in the said defence. Then the respondents explained how M.R. Chhabria was helped by the family of Chhabria by providing funds for building up his business in Dubai and London. It is also stated that K.R. Chhabria was in Dubai for some time and then in London. In 1986, he was sent by M.R. Chhabria to India to look after the Shaw Wallace and GWL, India, These respondents deny that Shaw Wallace has any connection with Tracstar and SSPL. They have been under the control of M.D. Chhabria and R.D. Chhabria, the 5th and 6th respondents. They rely upon the findings of the Company Law Board in C.P.No.19 of 1992. Wherein, it has been held that from the facts available the true identity of persons in control of Tracstar and SSPL and they are under the control of M.D. Chhabria and R.D. Chhabria. They refer to the findings rendered in C.P.No. 19 of 1992 with reference to Tracstar and C.P.No.29 of 1992 and C.P.No.44 of 1993 with reference to SSPL.
17. It is also stated that after the aforesaid orders passed by the Company Law Board, Shaw Wallace transferred the shares of SSPL to third parties. These transfers were challenged in C.P.No.29 of 1992 and it is pending. The Company Law Board found that a fraud was committed on the members of SSPL and set aside the enhanced equity capital. Though C.M.A.No. 743 of 1993 was filed in the High Court, no stay has been granted. One of the transferees M/s. Malleswara Finance & Investments Company Pvt. Ltd., challenged the order of the Company Law Board in W.P.No.19256 of 1993. The said writ petition was dismissed on 10.5.1994, confirming the order of the Company Law Board in C.P.No.29 of 1992. Though the Company Law Board rejected the transfer of shares in favour of Trident Investments & Portfolio Services Pvt. Ltd., in C.M.A.No.232 of 1994 the High Court has passed orders prohibiting any person other than Tracstar and Trident Investments & Portfolio Services Pvt. Ltd., from exercising the voting rights in respect of the shares. The respondent denied the allegation that the entiremanagement, control of GWL. India would be jeopardised. Therefore, they pray for the dismissal of the petition.
18. The seventh respondent -- Shaw Wallace & Company Limited filed a supporting reply in favour of the petitioner. In the supporting affidavit, it is stated that K.R. Chhabria is duty bound to ensure the protection of interest of Shaw Wallace. He committed breach of fiduciary duty. He set up a scheme in GWL through Tracstar, which is adverse to the interest of Shaw Wallace. Shaw Wallace has contributed over Rs.3.77 crores as interest free loan to GWL. It is also stated that Shaw Wallace has from time to time advanced various funds to companies such as Dobur Lager Breweries Limited and Vinedale Distillery Limited. The funds advanced to these companies have been diverted by K.R. Chhabria. The amount so advanced aggregate to over Rs.8 crores. Further, Tracstar owes amounts over Rs.600 lakhs. Tracstar is not a company involved in any manner in the revival of Gordon Woodroffe Limited. As on 31.3.1991, the issued capital of Tracstar was Rs.200, which was increased to Rs.5 lakhs. The Karnataka Government has issued garnishee order with reference to sales lax due against Tracstar amounting to Rs.78.39.012.. A notice has been issued by A.G. Glass Limited to Tracstar for recovery of Rs.2,10,229.
19. The 2nd 5th and 6th respondents have filed a reply to the allegations of the 7th respondent. They have denied the various allegations of the seventh respondent. K.R. Chhabria-- fourth respondent himself has filed a reply. In the said reply he has stated how he has helped for the growth of Chhabria group and how he assisted M.R. Chhabria in the business at Dubai and London. According to him, he was the Managing Director of Shaw Wallace & Company from 23.6.1987 to 25.4.1992. Only on account of some immoral act of M.R. Chhabria, the family of Chhabrias got divided into two groups. This respondent is supporting the fathers and the uncle group, hence, he had to vacate the office of the Managing Director and Director of Shaw Wallace. It is also stated that he was able to hold the said office by virtue of the Chhabrias family holding the shares. He has stated that the management was always conducted by group committee. He has denied the allegation that he was able to command the affairs of the number of other companies in which M.R. Chhabria had interest. On the other hand, it is M.R. Chhabria, who was actually in control. It is also stated that group management committee was always conducted by the approval of M.R. Chhabria. He has denied that he committed breach of fiduciary duty either to Shaw Wallace or other group companies. He has also found fault with M.R. Chhabria and his associates for indulging in fraud, forgery etc. He has also relied upon the decisions with reference to the conduct of M.R. Chhabria and his group.
20. In the rejoinder filed by the petitioner, it is stated that the petition is maintainable under Section 398(1)(b) of the Companies Act and there are sufficient ingredients for maintaining this petition. It is also stated that the proceedings in the Civil Suit C.S.No.1503 of 1993 are independentproceedings. The reliefs claimed in both are different. Both the proceeding are maintainable in law. The petitioner has not acquired the transfer of shares to Tracstar or SSPL in the understanding that these are companies independent of Shaw Wallace group. There is also a denial that the interest of GWL was acquired with the joint family funds. The order passed by BIFR shows that Shaw Wallace is a promotor or forms part of promotor company in the rehabilitation of GWL, India. Tracstar and SSPL were not independent companies. They are connected with Shaw Wallace. There was no illegal management on the part of GWL or on the part of Shaw Wallace. No member of the family of Chhabria other than M.R. Chhabria ever had any interest in GWL, UK. GWL, UK, never formed part of family's assets of Chhabria family.
21. With these pleadings, the Company Law Board, Principal Bench, New Delhi, passed order on 12.5.1998 in both petitions, namely, C.P.No.45 of 1993 and C.P.No.16 of 1994. A detailed order has been passed by the Company Law Board in C.P.No.16 of 1994 and following the order in the said petition C.P.No.45 of 1993 has been disposed of.
22. The Company Law Board has over-ruled the preliminary objection on the maintainability of the petition C.P.No.16 of 1994 under Section 398(l)(b) of the Indian Companies Act, 1956. It has also rejected the other preliminary objections such as that the petition having been signed by one P. Subramaniam, not associated with any of the decision taken by Shaw Wallace and had no personal knowledge about the various averments in the petition is not competent to verify the application. Another objection is on the question of res judicata based on the decision of the Company Law Board in the earlier proceedings relating to the transfer of shares in respect of Tracstar and SSPL, have also been rejected. The Company Law Board found as regards the second limb of Section 398(l)(b) of the Act, requiring satisfaction that the management and control of the company was likely to be conducted in a manner prejudicial to the interest of the company public. The Company Law Board has held that the decision under Section 398(1)(b) of the Act and apprehended mis- management would depend on the extraneous matter. Hence, they refrained from expressing their opinion.
23. The Company Law Board also considered the arguments of Mr.P.Nagesh that M.R. Chhabria, Shaw Wallace should continue to have the management of GWL. According to him, Tracstar had only paid up capital of Rs.5 lakhs and there was a stricture passed by the Karnataka High Court against Tracstar. They have also considered the allegation against K.R. Chhabria that he misused his position as director of Shaw Wallace relating to the acquisition of shares by SSPL and Tracstar. The Company Law Board found that K.R. Chhabria had no fiduciary duty to Shaw Wallace. The breach of fiduciary duty in one company cannot be the basis for claiming the relief in another group company. Hence they refrained from taking cognisance of the alleged breach of fiduciary duty. They have given another reason forrefraining to consider the said issue. According to them, the petitioner along with M.R. Chhabria companies who have transferred their shares to Tracstar have already filed a suit C.S.No.1503 of 1993 in the High Court (now transferred to the City Civil Court, Chennai and numbered as O.S.No. 10803 of 1996 on the file of the XII City Civil Court, Chennai, The suit was filed prior to the filing of the petition. The reliefs claimed in the suit were that the transfer of shares by the three companies to Tracstar and SSPL was null and void. The breach of fiduciary duty has also been taken up in the said suit. Further, there is a plea of violation of provision of Section 372 of the Companies Act, at the time of transfer of shares after the book closure date.
24. There is also a reference to the request of the Company Law Board to Sri.S. Ganesh, counsel for the petitioners to withdraw the suit and a categorical assurance from the Company Law Board demanded by him for considering these issues before he withdraw the suit and the refusal of the Company Law Board to do so. The Company Law Board expressed its opinion that it was the petitioners prerogative to choose the forum and as the petitioner has not chosen to withdraw the suit which is a comprehensive one and filed earlier in point of time, the Company Law Board refused to consider the relief relating to setting aside the transfer/allotment of right of additional shares or the direction that the shares to be transferred to the petitioner.
25. The Company Law Board refused to consider the arguments of the counsel for the petitioner that GWL was likely to be mis managed by Tracstar's low capital and unsatisfactory functioning etc., as the allegations remained unestablished in other forums where the allegations are levelled and challenged.
26. After having given the findings as aforesaid, the Company Law Board has finally concluded that as the revival scheme proposed by Shaw Wallace & Company and K.R. Chhabria group are pending consideration before the BIFR, both of them having remitted Rs.1 core each, the Annual General Meeting should not be convened, before 31.12.1998, even though they indicate that corporate democracy and the will of the shareholders should prevail. Finally, they have restrained the GWL from holding its Annual General Meeting for 1992-93 upto 31.12.1998, by which time the Company Law Board hoped the BIFR proceedings would come to an end. But however, they have directed the holding of the Annual General Meeting by the Company within three months from 31.12.1998.
27. Based on the judgment in C.P.No.16 of 1994, the Company Law Board passed orders in C.P.No.45 of 1993 also. Referring to the grievances of the petitioner in C.P.No. 45 of 1993 and noting that K.R. Chhabria was group holding 37.64% shares and M.R. Chhabria group holding 24.9% shares ordered that within three months from 31.12.1998, the Company could hold the Annual General Meeting. They have also added that the direction was without prejudice to the proceedings before the BIFR which has already appointed a committee of management to manage the day-to-day affairs of thecompany and the order that without the approval of the BIFR the Board could dispose of any of the assets of the Company.
28. As against the orders passed by the Company Law Board in both the C.P.Nos. 45 of 1993 and 16 of 1994, we find that the first petitioner in C.P.No.45 of 1993 has filed C.M.A.No.1149 of 1998 against the order in C.P.No.45 of 1993 and C.M.A.No.1208 of 1998 against the order in C.P.No.16 of 1994. The second and third petitioners in C.P.No.45 of 1993 Mr. M.D. Chhabria and R.D. Chhabria along with K.R. Chhabria. who are respondents 5,6 and 4 in C.P.No.16 of 1994 have filed C.M.A.No.1207 of 1998. SSPL, the 9th respondent in C.P.No.45 of 1993, the third respondent in C.P.No.16 of 1994 has filed C.M.A.No.1209 and 1210 of 1998 against the order in C.P.No.45 of 1993 and C.P.No.16 of 1994. GWL, UK, is the appellant in C.M.A.No.1071 of 1998, challenging the order in C.P.No.16 of 1994. SWC, which is the second respondent in C.P.No.45 of 1993 and 7th respondent in C.P.No.16 of 1994 has preferred C.M.A.No.1072 of 1998 against the order in C.P.No.45 of 1993. GWL, India, which is the first respondent in both the C.P.No. 45 of 1993 and C.P.No.16 of 1994 has preferred C.M.A.No.1073 of 1998 against the order in C.P.No.45 of 1993.
29. Thus it is seen that though Tracstar, SSPL and K.R. Chhabria group have factually succeeded in both the Company petitions, they have filed five appeals, while the other group headed by GWL, UK which has almost failed in both the Company Petitions has filed three appeals.
30. All the appeals relate to the management, control, and administration of a company, known as M/s. Gordon Woodroffe Limited, India (GWL,India). It is shown as the first respondent in C.P.No.45 of 1993. It is stated to be a public limited company incorporated under the Indian Companies Act. 1913, having its registered office at No.36, Rajaji Salai, Madras-600 002. The said company may be called as GWL for brevity, was incorporated in December 23rd 1924. The authorised share capital of the company is Rs.5 crores made up of 49,97,390 equity shares of Rs.10 each and 2610 cumulative preference shares of Rs.10 each, the issued and paid up capital of the company is Rs.3,93,08,850. The object of the company incorporated was to acquire and take over business carried on by William Arthur Wigram, Eustace Harold Robinson, Robert Galloway, Sir Huge Stein Frasor, and other Britishers under the name and style of 'Gordon Woodroffe & Co.'. Originally, the ownership and control of GWL was with GWL, UK Limited, holding 39.23% shares upto 31.8.1998. The Chhabria group outside India acquired controlling power in GWL in the year 1985. Subsequently, the three investment companies i.e., Chhabria Investment Private Limited, Jaguar Investment Private Limited and Orson Investment Private Limited acquired 6.89% shares in GWL. Thus by 31.3.1991 Chhabria group family was holding 46.12% shares, including 39.23% held by GWL, UK in GWL India. As a result of some developments in Chhabria family, Chhabria Investment private Ltd. Jagnar Investment private and Orson Investment Private Ltd., transferred6.78% shares in GWL to Tracstar, another Chhabria group company, in May, 1991.
31. Mr. M.R. Chhabria was holding the single largest share in SWC and GWL. M.R. Chhabria became a Director of Shaw Wallace on 27.3.1997. Thereafter Kishore Chhabria was appointed as the Managing Director of Shaw Wallace for a period of five years from 23.6.1987 to 22.6.1992. He continued in the said position when he ceased to be the managing director and Directorship of Shaw Wallace. On 25.8.1987 GWL India made a reference to the Board for Industrial and Financial Reconstruction under Section 15 of the Sick Industrial Companies (Special Provisions) Act. 1985. as it became a sick company by that time. On 17.3.1988 BIFR declared GWL as a sick industrial company. BIFR appointed Industrial Reconstruction Bank of India as the operating agency for preparing a scheme for revival of the company. The Industrial Reconstruction Bank of India drafted scheme for rehabilitation of GWL and submitted the same to BIFR. It was considered by the BIFR on 21.9.1988. On 12.12.1988 the Board of Directors of Shaw Wallace made a proposal to the BIFR, agreeing to invest Rs.250 lakhs by way of subscription or purchase equity shares of the company. But it was felt that direct participation of Shaw Wallace group in the equity shares of GWL, India above 25% would result in GWL losing the concessional rates of interest on the term loans. Therefore, the promotors contribution was envisaged in the scheme at Rs.140 lakhs. A sum of Rs.90 lakhs to be contributed on the expanded equity and the remaining Rs.50 lakhs by way of interest free unsecured loan. The proposal was accepted by the BIFR on 19.1.1989.
32. In the circumstances, on 10/11.6.1989 extraordinary general meeting of GWL. India was held to consider the further equity shares in the company on rights basis on the existing shareholders. It was further resolved to increase the issued capita) of the company by issuing and allotting fresh 13,9,363 equity shares of Rs.10 each to raise Rs.1,30,93,630. Out of it 12,47,013 equity shares of Rs.10 each was to be offered to the members of GWL, India, whose name was on the register of members as on the record date with a right of renunciation, and 62,350 equity shares at Rs.10/- each to the permanent employees of GWL. India for preferential allotment. After getting the permission from the controller of Capital Issues on 11.8.1989 and on 20.5.1991, rights issue was issued to the shareholders of GWL, India, including GWL, UK., whose names were in the register of members as on 16.5.1991, which was the record date for the rights issue. At that stage, it was decided by the Shaw Wallace, as a promotor in the revival scheme of GWL with the three Private Limited companies namely, Chhabria Investment, Jaguar Investment and Orson, Investment would transfer their share holdings in GWL, India to the investment companies belonging to Shaw Wallace group. On 23.5.1991 Chhabria Investment and Jagur Investment transferred their respective equity shares held by them in GWL, India to Tracstar. Thus on 23.5.1991, Tracstar acquired 6.52% and 0.26% of equity shares of Chhabria Investment and Jagur Investment held by them in GWL. India. OrsonInvestment Private Limited continued to hold its 0.11 % shares in GWL, India. However, on 31.5.1991 Orson Investment also transferred its 0.11% shares to Tracstar. Thus on 31.5.1991, Tracstar came to hold 6.89% shares in GWL, India. However, as on 16.5.1991, the shares held by Tracstar in GWL, India was not registered because only on 25.5.1991 and 31.5.1991 Chhabria Investment, Jaguvar Investments and Orson Investment transferred their shares.
33. While the position was thus, on 11.7.1991 the group management committee of Shaw Wallace decided that the shares pertaining to the rights issue of GWL. India to GWL, UK would be allotted to Tracstar. Further, on 29.8.1991, in view of the investment of the rights issue in the Tracstar, Kishore Chhabria was appointed as Director. By allowing the rights issue pertaining to the GWL, UK to be allotted to Tracstar, GWL, UK shares in GWL, India are reduced to 24.91% from 39.23% . On 30.7.1991 Tracstar applied for allotment of equity shares on rights basis to the extent of 84580 shares. Again Tracstar applied for additional 13,45,420 shares i.e., more than 15 times of its rights. However, Tracstar by a letter dated 24.8.1991 requested that out of 14,30,000 shares applied by Tracstar, 5,00,000 equity shares shall be allotted to SSPL and the balance 8,30,000 be allotted to Tracstar. In September, 1991, the allotments of rights issue of GWL completed as requested by Tracstar and SSPL. Hence as on 20.2.1992 Tracstar and SSPL came to hold 24.91% and 12.73%, make a total of 37.64%, while GWL, UK 24.90% shares. On 11.4.1992 and 25.4.1992 Kishore Chhabria ceased to be the managing Director of Shaw Wallace. The term of Kishore Chhabria as Additional Director of GWL, India came to an end on 14.8.1992 as he was not elected as a Director at the 67th Annual General Meeting. Thus, from 25.4.1992 Kishore Chhabria ceased to be the Director and Additional Director of SWC, India and SWC, UK.
34. After April, 1992 misunderstanding developed between Kishore Chhabria, M.D. Chhabria and R.D. Chhabria on the one hand and M.R. Chhabria on the other. This resulted in several proceedings before the Courts and Company Law Board. C.S.No.1503 of 1993 was filed by GWL, UK, Shaw Wallace, Chhabria Investment, Jaguar Investments and Orson Investments against Kishore Chhabria, Tracstar, SSPL and others in the High Court, Madras, or declaration that the transfer of shares by the three private limited companies were illegal and void. Subsequently, the said suit was transferred to the City Civil Court, Madras and has been numbered as O.S.No.10803 of 1996 on the file of the XII Assistant Judge, City Civil Court, Madras. C.P.No. 19 of 1992 was filed by M.R. Chhabria group for investigation regarding the shares involved in SWL, India and held by Tracstar, under Sections 247 and 250 of the Companies Act. This petition was disposed of on 28.2.1993 by the Company Law Board. C.P.No.45 of 1993 was filed by Tracstar under Sections 397 and 398 of the Companies Act, 1956 in respect of SWL, India. O.S.No.1471 of 1991 was filed by Tracstar in the City Civil Court, Madras, for injunction restraining the GWL, India issuing furthercapital and O.S.No.1472 of 1992 was also filed by Tracstar in the City Civil Court, Madras to restrain GWL, India, from disposing of any of the immovable properties. C.P.No.18 of 1993 was filed by GWL, India under Section 22-A of the Securities Contract Regulation Act in regard to rejection of the registration of shares lodged in the name of Trident Portfolio and Investments Private Limited.
35. Apart from the above, C.P.No.45 of 1993 and C.P.No.16 of 1994 were also filed for the reliefs already mentioned above and the Civil Miscellaneous Appeals, now we are concerned have arisen, out of the orders passed in the aforesaid two petitions.
(Wherever the words 'appellant' or 'appellants' used in this judgment it will refer to Gordon Woodroffe Limited, Shaw Wallace & Company Limited, Manohar Rajaram Chhabria (3rd respondent) and group. Similarly wherever the words 'respondent' or 'respondents' used in this judgment it will refer to Tracstar Investments Private Limited, Kishore Chhabria (K.R. Chhabria) /4th respondent and M.D. Chhabria/5th respondent.)
36. Mr. Anil B. Divan, senior counsel appearing for the appellants in C.M.A.No.1071 of 1998 has raised the following contentions. The failure of the Company Law Board to go into the validity of the transfer of shares in favour of Tracstar and SSPL is failure to exercise the jurisdiction vested in the Company Law Board. Elaborating this point, he also contended that acquiring of shares by Tracstar was in violation of section 372 of the Companies Act. Further Kishore Chhabria has committed breach of his fiduciary duty. Secondly be contended that after having found in favour of the petitioner in C.P.No.16 of 1994 about the change of administration when the revival schemes are pending before the BIFR., and when SWL has taken active part in submitting a scheme and contributing about Rs.240 lakhs, the Company Law Board ought not to have permitted the convening and conducting of the Annual General Meeting of the company after 31.12.1998 and within three months thereafter.
37. Mr.R. Krishnamoorthy, senior counsel appearing for the appellants in C.M.A. Nos. 1072 and 1073 of 1998 etc. contended that the Company Law Board ought to have decided the validity of the transfers in C.P.No.16 of 1994. It has wider powers than the Civil Court with reference to the matters contemplated by the provisions of the Companies Act, 1956 and the refusal to go into the same on the ground that the petitioner refused to withdraw the suit O.S.No.10803 of 1996 inspite of an option given to him is improper and unjustified. The learned senior counsel further contended that C.P.NO.16 of 1994 filed under Section 398(l)(b) of the Companies Act, is maintainable and there are sufficient ingredients available for the same. There was also a contention that if the management is allowed to continue and taken over by Kishore Chhabria group, interest of the Company as well as the public will suffer. It was also contended that Tracstar Investment Private Limited is not afinancially sound company and such a company should not be allowed to have control over GWL.
38. Mr.A.L. Somayaji, senior counsel for the appellants in C.M.P. NOs.1149 and 1208 of 1998 contended that C.P.No.16 of 1994 is not maintainable under Section 398(1)(b) of the Companies Act, as the requirements under the said Section are not present in the case. According to him, after holding that corporate democracy should prevail, the Company Law Board erred in postponing the convening and conducting of the Annual General Meeting. He also in turn contended that Shaw Wallace is also in doldrum and such a company cannot be allowed to have control over GWL, India. The learned senior counsel further contended that the idea of Shaw Wallace is to some how absorb the GWL and alienate the valuable properties owned by GWL, India. The learned senior counsel was also at pains to point out how M.R. Chhabria group was preventing the majority shareholders to take charge by resorting to all sorts of improper and unjustifiable methods by initiating one proceeding or the other in different forums including the Apex Court.
39. Mr.C. Harikrishnan, learned senior counsel appearing for the appellants in C.M.A.Nos. 1209 and 1210 of 1998, for Shoe Specialities Private Limited, contended that the jurisdiction of the Company Law Board is not wider than the Civil Court. According to the learned counsel, Section 398 of the Companies Act is available for preventive relief while the suit is a Comprehensive one and declaratory relief and consequential reliefs can be obtained. Further, the learned counsel contended that there is no violation of Section 372 of the Companies Act in the purchase of Tracstar and SSPL rights issue from GWL, India. He also denied that there was any breach of fiduciary duty by Kishore Chhabria.
40. Mr. Vedantham Srinivasan, another senior counsel appearing for the appellants in C.M.A.No.1207 of 1998 contended that Section 398(l)(b) of the Act will be attracted only when the persons are holding the shares in a company legally and legitimately. Since M.R. Chhabria group is not owning any share in GWL, India, is not entitled to file a petition under Section 398(l)(b) of the Act. He also contended that the reliefs claimed in C.P.No.16 of 1994 are hit by the principle of estoppel by election. The allotment of shares to Tracstar and SSPL was made by persons incharge of the Company i.e., M.R. Chhabria group, hence they cannot complain of transfer of shares. The learned counsel also contended that there was no breach of fiduciary duty involved in this case. The learned counsel argued the question of maintainability of C.P.No.16 of 1994 under Section 398(l)(b) of the Companies Act, 1956.
41. The contention of Mr.A.L. Somayaji, learned senior counsel on the question of maintainability is that the requirements of Section 398(1)(b) of the Act are not satisfied in this case. Therefore, the petition C.P.No.16 of 1994 is not maintainable. Section 398(l)(b) of the Companies Act, reads as follows:
'398 (l)(b) that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of Directors (or, of its managing agent or secretaries and treasurers) (or manager) (or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers) or in the ownership of the Company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and by that reason of such change, it is likely that the affairs of the company (will be conducted in a manner prejudicial to public interest or) in a manner prejudicial to the interests of the company; may apply to the (Company Law Board) for an order under this section provided such members have a right so to apply in virtue of Section 399.'
42. According to the learned Senior counsel Mr.A.L. Somayaji, a material change has not taken place in the management of GWL, even though Tracstar and SSPL have come to acquire the largest individual shares, the management continues to be in the hands of M.R. Chhabria group. Therefore, when there is no material change in the management and control of the company, the first limb of Section 398(1)(b) of the Companies Act, is not satisfied.
43. In this case in the statement of facts, we have seen that as on 20.2.1992 Tracstar and SSPL acquired 37.64% shares in the company while GWL, UK, held only 24.90% of shares. On 31.3.1991 GWL, UK held 39.23% of shares. It was the single largest shareholder. Chhabria Investment held 6.52% ; Jaguvar Investment held 0.26%; Orson Investment held 0.11%. As on 25.5.1991 Tracstar acquired 6.52% shares and 0.26% from Jaguar Investment making a total of 6.78% shares. By 30.5.1991 Tracstar acquired another 0.11 % shares from Orson Investment. Hence, the Tracstar's share pattern increased to 6.98% shares. As on 31.8.1991 after the addition of shares, Tracstar percentage of shares increased to 24.91% and the SSPL share increased to 12.73%. In addition to that Trident also acquired 6.84% shares. Therefore, Tracstar and SSPL acquired 37.64% shares; in addition to Trident's 6.84% shares. Trident, another company belonging to Kishore Chhabria acquired the aforesaid 6.84% shares in the open market. As on 31.8.1991 Tracstar was under the control of K.R. Chhabria group; B.D.A. Ltd., holding 40% and BIO FOODS (P) Ltd. and Standard Distilleries adding 30%; and 30% respectively. As regards 40% held by B.D.A. it was controlled by M.D. Chhabria. In C.P.No.19 of 1992 Shaw Wallace Company and another filed on 5.5.1992 before the Company Law Board for investigation into the acquisition of 44.48% shares by Tracstar, SSPL and Trident Investments & Portfolio Service Pvt. Ltd., no interim order was granted by the Company Law Board. On 25.2.1993 C.P.No.19 of 1992 was dismissed. Even though attempts were made to increase the shares in SSPL and transfer it to M/s. Bhankepur Simbholi Beverages Pvt. Ltd., with a pledge to M/s. Malleswara Finance & Investments Company Private Ltd., the Company Law Board did not approve the same. Against the order in C.P.No.29 of 1992 dated 28.5.1993, C.M.A.No.473 of 1995 was filed on 25.5.1995, but no interim order was granted. Thereafter M/s. Malleswara Finance & Investments Company Private Ltd., also filed awrit petition. Another attempt was made by M/s. Malleswara Finance & Investments by way of filing a writ petition in Karnataka High Court against the order dated 28.5.1993 in C.P.No.29 of 1992. As against the order dated 27.2.1993 in C.P.No.18 of 1993 C.M.A.No.232 of 1994 was filed in the High Court. An interim order has been passed granting injunction restraining any other person, than Tracstar and Trident investments from exercising voting rights of 6.08% of GWL.
44. Prom these facts, it is clear that Tracstar group is able to command 44.48% of shares in GWL. The Company Law Board in its order dated 12.5.1998 said that Kishore Chhabria, Tracstar and SSPL together with Trident held 44% of Shares in GWL. Out of this, the shares held by Tracstar and SSPL have been registered, while it was not so in the case of 6.67% of shares of Trident. Inspite of it, the Annual General Meetings were not conducted and Kishore Chhabria group is not in a position to be in management of the company. Therefore, Mr.A.L. Somayaji's contention is that the allegation that there is material change in the management, cannot be accepted.
45. Even though there is no change in the management, can it be said that there is a material change in the control of the company by an alteration in the Board of Directors or in the ownership of the company shares? Here again, it cannot be straight away said that material change is there and the control of the company by an alteration in ownership of shares of the company. Two things are relevant, one is material change in control of the company; the second is an alteration in the ownership of the company's shares. No doubt, as we have seen above, the ownership of shares have undergone changes; but the ownership is under challenge by the petitioners in C.P.No.16 of 1994 itself. According to them, the transfer of shares in favour of Tracstar and SSPL are illegal and void. The main challenge is to the transfer of shares and the purchase of shares by Tracstar.
46. In paragraph 104 of the C.P.No.l6 of 1994, it is averred as follows:-
'The petitioner states that the entire transaction relating to transfer of shares by Chhabria Investment, Jaguar Investment and Orson Investment to Tracstar and the allotment of shares by Gordon Woodroffe (India) to Tracstar and Shoe Specialities are liable to be declared as illegal and void. The said shares in Cordon Woodroffe (India) are liable to be vested in favour of Shaw Wallace and/or its nominees or in the alternative restored back to the said three private limited companies...'
As regards the shares allotted to M/s. Trident Investments & Port folio Services Pvt. Ltd., the Board of Directors refused to register the same. On 26.5.1992 when there was a challenge in C.P.No.19 of 1992 before the Company Law Board the decision of the Board of Directors was confirmed on 28.2.1993. Further in the petition itself, the prayer in paragraph 126 is as follows:
'(a) Direct that notwithstanding anything contained in the Memorandum and Articles of Association of Gordon Woodroffe (India) and notwithstand-ing any resolution which may be proposed to be passed at in the Annual General Meeting or in the Extra Ordinary General Meeting of Gordon Woodroffe (India), there shall be no change in the present management of gordon Woodroffe (India) at the instance of Tracstar and/or Shoe Specialities and that the Board of Directors of Gordon Woodroffe (India) shall continue to be by such nominees as may from time to time be designated by Shaw Wallace & Company Ltd. and Gordon Woodroffe (UK).
(b) direct Tracstar Investments and Shoe Specialities to transfer their respective holding to Gordon Woodroffe (UK) and or its nominees without prejudice to the rights and contentions of the petitioners and others supporting the petitioner in the other proceedings pending.
(c) Restrain permanently Tracstar Investments (P) Ltd. and Shoe Specialities (P) Ltd., (respondents 2 and 3) from exercising any voting or other rights in respect of shares held in their names in Gordon woodroffe (India) or otherwise interfering with the affairs of Gordon Woodroffe (India),
47. That apart as we have seen above, the High Court has granted injunction with reference to the shares held by Trident Investments & Portfolio Services Pvt. Ltd. Hence, no one other than Tracstar or Trident can exercise the voting rights of 6.84%. In paragraph 120 of the petition there is an averment to the following effect;
'Even the amount paid by Tracstar and Shoe Specialities for acquisition of the shares in Gordon Woodroffe (India) were funded by Shaw Wallace.'
Therefore, when the ownership of shares is seriously disputed with reference to 44.48% of shares, how the petitioner can claim that there is a material change in the control of the company by an alternation in the ownership of the company's shares? Even if we assume that there is change in the ownership of shares, there is no change in control of the company on account of such change in ownership'. The control of the company is undoubtedly with appellants, i.e., M.R. Chhabria's group.
48. The transfer of shares in favour of Tracstar and SSPL are challenged under Section 372 of the Indian Companies Act and also lengthy arguments were advanced on this point by the learned counsel for the appellants in C.M.A.Nos.1071 to 1073 of 1998. According to them, purchase of shares by Tracstar on 31.3.1991 of 11.41% tantamounts to investment of more than 30% of subscribed equity share capital. There is no resolution by the Board of Directors of Tracstar and there is no prior approval from the Government of India. Further, it was also contended that as Tracstar was not a member of GWL, India, before the record date namely, 16.5.1991, the acquisition was not valid. While elaborating the argument on this point Mr.Anil B.Divan, senior counsel cited the decision reported in Mannalal Khetan v. Kedar Nath Khetan and others, 1977 (47) C.C. 185 and contended that if any thing is done in violation of the condition in an enactment, the thing done is void. The provisions of the enactment must be construed to be mandatory. The transfers were also challenged on the ground of breach of fiduciary duty owed byKishore Chhabria to GWL, India. Here again, the learned senior counsel cited a number of decisions.
49. The another contention by the learned senior counsel is that K.R. Chhabria committed breach of fiduciary duty by purchase of the shares for Tracstar from the three companies. Therefore, if the company is allowed to be in his control, it will not be in the interest of the company or the public. The decisions cited in support of the above contention are:
(1) Scottish cooperative Wholesale Society Ltd., v. Meyer and another, 1958 (3) WLR 404; (2) Granleigh Engineering v. Bryant 1964 All E.R. 289; (3) Industrial Development Consultants v. Cooley. (1972) 2 All E.R. 162); and (4) Delhi Development Authority v. Skipper Construction Co. P) Ltd., : AIR1996SC2005 .
I will consider this argument at a later stage. But, however, I may add that the decision reported in Scottish Co-operative Wholesale society Ltd. v. Meyer, 1958 (3) WLR, 404, is not directly on the point. In this case, the minority shareholders in a subsidiary company on account of the conduct of the nominee directors of the company acted in an appressive manner resulting in the reduction of the value of shares. The minority shareholders applied for purchase of the shares at a price based on the previous value. The petition was allowed. On the face of it, the minority shareholders suffered some detriment or loss by the conduct of the nominees of the company. But however, I may add that 'mere interest' of the company one cannot invoke Section 398(l)(b) of the Act, unless there is material change in the management or control of the company.
50. The learned senior counsel Mr.R. Krishnamoorthy, appearing for the appellants in C.M.A.Nos.1072 and 1073 of 1998 also advanced his arguments on this point. However, it should be noted that there is no specific prayer in the petition itself to the effect that the transfer of shares in favour of Tracstar and SSPL is null and void. Even though, there is a prayer for directing the Tracstar and SSPL, to transfer their respective shares to GWL or its nominee, in the absence of a specific prayer for a declaration to declare the transfer of shares as null and void or to set aside or cancel it, the prayer contained in the petition in paragraph 126 cannot be granted. However, the petitioners have admitted that they have filed the suit in the High Court viz., C.S.No.1503 of 1993 (Now numbered as O.S.No10803 of 1996 on the files of the XII Assistant Judge, City, Civil Court, Madras) for declaration that the transfer of shares by the three private companies is void and is liable to be set aside, for the reasons and on the grounds stated in the suit. It is specifically stated by the petitioner in paragraph 87(b) of the petition C.P.No.16 of 1994 as follows:
'The petitioner says and submits that without prejudice to the rights and contentions of the parties in the above mentioned suit and independent of any orders that may be passed in the said other proceedings, in the facts and circumstances of the case, the petitioner is entitled to seek relief of this Hon'ble Board under Section 398(l)(b) read with other applicable provisions of the Companies Act, 1956 to protect the interest of Gordon Woodroffe (India) and the public interest.'
Therefore after having carefully avoided the relief of declaration that the transfer is void or to set aside the same in the company petition and after having specifically prayed for such reliefs in the suit, probably, the idea of the petitioners is that the issue of transfer of shares can be properly and fully adjudicated only in the suit and not in the Company Petition. That is why they have moved the Company Law Board half-heartedly with a prayer as contained in the petition.
51. The prayer claimed in the petition C.P.No.16 of 1994 can be granted only when the main issue relating to transfer is decided. Without a specific prayer for avoiding or challenging the transfer of shares in the petition, they have chosen to advance their arguments on the validity of transfer.
52. Their contention that even though there is no specific prayer in the petition under Section 111 of the Act and it is also not quoted in the petition, the Court can take note of facts and grant the relief with reference to the transfer of shares treating the petition as a composite one. Ofcourse, Section 111(1) and 111(4) of the Act enables the aggrieved person or any member of the company or the company to apply to the Company Law Board for rectification of the register. As stated above, there is no relief claimed by the petitioner under Section 111 of the Act. Further, they have carefully reserved such relief in the suit stated in paragraph 87(b) as referred to above. This is a clear indication that the petitioners do not want the Company Law Board to decide the issue relating to transfer. They have reserved their rights to agitate the same in the suit. That is why when the Company Law Board insisted the counsel to withdraw the suit, he avoided it by seeking a counter assurance from the Company Law Board. The reference is to the following effect:
'Shri Sarkar, time and again, raised the issue of the petitioner's pursuing parallel proceedings and had also prayed that unless otherwise the said suit is withdrawn, the petitioners should not agitate the same matter before us. Shri Ganesh wanted a categorical decision from us that these issues would be considered by us, as a precondition for withdrawing the suit. We decline to give a decision on this inasmuch as the petitioner's prerogative to choose a forum, i.e., either before us or before the High Court. Since, the petitioner has not chosen to withdraw the suit and since the suit, which is a comprehensive one, was filed prior in time, we are of the view that the matter relating to transfer and allotment of shares will have to be pursued in the High Court and we shall not consider the relief relating to setting aside the transfer/allotment of right and additional shares or direction that the shares be transferred to the petitioner.'
53. In the reply filed by the respondents 2,5 and 6 in C.S.No. 1503 of 1993, they have pointed out that the petitioner was seeking more or less the same relief as claimed in the petition. A rejoinder has been filed to the reply filed on behalf of the appellants. In paragraph 14, it is stated as follows:
'...the relief claimed in the said suit are independent of the relief prayed for in the present petition. Both the proceedings are maintainable in law. The two proceedings are for different purposes. There is nothing inconsistent in maintaining the two proceedings. It is wrong and denied that the petitioner is in any way estopped from filing the present petition,'
Even after making such a statement in the rejoinder, the learned counsel, who appeared before the Company Law Board advanced arguments on the validity of transfer of shares. Even though the Company Law Board was ready to decide the issue, the advocate maintained that he would not withdraw the suit and wanted assurance by the Company Law Board categorically stating that the issue should be decided. I am not in a position to appreciate the request of the counsel for the petitioner. What prevented the petitioner from agreeing to withdraw the suit and inform the Board to decide the same. Some excuses are given in this Court, relying upon the preliminary objection on the maintainability of the petition under Section 398(l)(b) of the Act. But however, the Board advised the counsel for the parties to argue both on the preliminary objection as well as the merits to pass a composite order on merits and only for that purpose they wanted to withdraw the suit. But the counsel wanted a categorical decision and an assurance that the issue could be decided by the Board. When the Board was ready to decide the issue and advised the counsel on both sides, it is beyond even an ordinary man's comprehension as to why the Advocate demanded an assurance from the Company Law Board. As I have already indicated, the petitioner has not chosen to move the Board with a definite case. It has moved the Board without prejudice to its rights to have a decision in the suit before the Civil Court. That is why, the learned counsel appeared before the Company Law Board was evasive. Therefore, as rightly pointed out by the Company Law Board, I am also not in a position to go into the question of validity of transfer of shares.
54. The jurisdiction of this Court under Section 10(f) of the Act is limited. It can go into the question of law arising out of such an order. When the Board has not discussed the issue in detail and given a decision on the transfer, this Court acting as an appellate authority under Section 10(f) of the Act, having limited jurisdiction with reference to law, cannot as a Court of law embark upon the consideration of evidence with reference to the transfer of shares.
55. The examination of parties may be necessary because several allegations contained in the petition with reference to transfer of shares require the parties to be examined in the witness box. Further, the documents also have not been marked in this case before the Company Law Board. How many documents were actually produced and whether they are original or copies; whether they are admissible or not under the Evidence Act, are all matters to be taken note of. Before this Court, not even a single scrap of original document is produced, even though number of volumes of papers are produced purporting to be the pleadings, documents etc.
56. One more vital aspect that prevents this Court from going into the validity of transfer is the absence of the transferor parties, namely, Chhabria Investment Private Limited, Jaguvar Investment and Orson Investment. They are the parties, who actually transferred the shares to Tracstar. When they are not before this Court, this Court cannot go into the validity of their transfer at the request of a third party, which would be in effect a futile exercise of the jurisdiction vested in this Court. I am told that the aforesaid three companies are parties in the suit filed by the appellant in C.M.A.No. 1071 of 1998. In suchcircumstances, this Court cannot go into the facts and evidence as a trial Court and decide the validity of question of transfer of shares.
57. At this stage the learned senior counsel Mr. Anil B.Divan, addressedhis arguments at length that the Company Law Board and this Court as anappellate Court, have wider powers than the Civil Court. The learned seniorcounsel for the respondents Mr.A.L. Somayaji, Mr.C.Harikrishnan andMr.Vedantham Srinivasan, on the other hand cited the decisions takingcontrary view.
58. The constitution of the Company Law Board is governed by section 10E of the Companies Act, 1956. The Act by itself has not provided legal qualifications or judicial experience for the members to be appointed. But however under the Company Law Board (Qualifications, Experience and Other Conditions of Service of Members) Rules, 1993, legal qualifications or judicial experience are prescribed for judicial members. Nine members can be appointed to the Company Law Board, but the Board is empowered to constitute Benches from out of the nine members to discharge the functions of the Board. When such constitution takes place, whether it is mandatory to have a judicial member in the Bench or not, is not stated either in the Provisions of the Act or in the Rules mentioned above. It is possible that technical members themselves can constitute a Bench. The Bench constituted shall have powers of a Court under the Civil Procedure Code, 1908, in respect of discretionary and in respect of documents, enforcing attendance of witnesses, compelling production of documents, examining the witnesses on oath, granting adjournments and receiving evidence on affidavits. The Board while discharging its powers, shall be guided by principles of natural justice and shall also act at its discretion. As per Section 10E(4) of the Act, no act done by the Company Law Board shall be called in question on the ground only of any defect in the constitution of the Board. This Section gives wide powers to the Government to ignore the qualification of the members of the Board when they are selected. Therefore, it cannot be said that the Company Law Board or a Bench constituted by the Board can be said to be a Civil Court. Further, no finality is given to the orders passed by the Company Law Board. High Courts as well as District Courts, in some case, are also having jurisdiction in respect of certain matters relating to the affairs of the company.
59. The learned senior counsel cited the following decisions:
(1) IN re Sindhri Iron Foundry (P) Ltd., l964 (34) C.C.510; (2) Hungerford Divestment Trust Ltd., Re v. Turner Morrison & Co. Ltd., 1972 (I) Cal, 286; (3) Thiruvalluvar Velanmai Kazhagam (P) Ltd. v. M.K. Seethai Achi, 1988 (64) C.C. 304; (4) V. Balachandran v. Union of India and another, 1993 (76) C.C.67; (5) Strdiewell Leathers (P) Ltd. v. Bhank-erpur Simbhaoli Beverages (P) Ltd., 1994 (79) C.C. 139; (6) Vankamamidi Venkata Subba Rao v. Chatlapalli Seetharamaratna Ranganayakamma, : 3SCR530 ; and (7) K. Radhakrishnan v. Thirumani Asphalts and Felts (P) Ltd., : 1998(1)CTC682 .
60. In the first cited decision, a Single Judge of the Calcutta High Court has held that Sections 397 and 398 should be liberally interpreted to remedy the mischief. At the same time, the learned Judge has also indicated that only when the facts justify interference by the Court in the exercise of its powers under the two sections and if the conditions prescribed by the sections are fulfilled, the Court ought not to relegate the parties to protracted costly litigation. Hence, only when the fact justify the interference and the conditions contained in the provisions are satisfied, the Company Law Board must decide the question brought before it. This decision is not helpful because there is no justification for the interference as the appellants have specifically reserved their right to have an adjudication before the Civil Court. Further, the said decision does not state anywhere the powers of the Company Law Board is wider.
61. In the Second cited decision, a learned Single Judge of the Calcutta High Court has observed in paragraph 55 as follows:
'Serious and disputed questions of title and controversies, already the subject of pending legal proceedings, should not generally in my view be adjudicated in this summary proceeding under S. 397 of the Companies Act. Section 397 is in the nature of a summary proceeding by way of an application. Serious questions have been raised in the controversies between the parties, for instance, (i) question, whether certain shares are forged or not, (ii) different judgments in pending suits from which appeals are going on and (iii) the 707 shares whether rightly or wrongly withheld which is the subject of criminal proceeding as well as lien suit proceedings.'
62. In the third cited decision, Justice S.A. Kader, has taken the view that the Civil Court will have no jurisdiction, only in respect of matters falling exclusively within the jurisdiction of the Court (Company Court) having jurisdiction under the Companies Act. Further, the learned Judge has also held at page 307 as follows:
'It is well-settled that every presumption should be made in favour of the jurisdiction of the Civil Court. In other words, the exclusion of jurisdiction of the Civil Court is not to be readily inferred. Such exclusion must be either explicitly expressed or clearly implied. A provision of law ousting the jurisdiction of the Civil Court must be strictly construed and the onus lies on the party, seeking to oust the jurisdiction, to establish his right to do so.'
I have already referred to the jurisdiction of the Company Law Board and found that the decision with reference to title as regards the shares is only incidental, while considering the application for rectification of the register. Hence, it cannot be said that the decision with reference to title is exclusively within the jurisdiction of the Company Law Board.
63. The fourth cited decision is a Division Bench decision of this court. The Division Bench has upheld the validity of the constitution of the Company Law Board in lieu of the courts on the ground that judicial review is provided. The Division Bench has also taken note of Section 10F of the Companies Act, 1956, providing for the appeal to the High Court on questionof law. From this, l am not in a position to hold that Company Law Board has wider powers than the Courts. In this Judgment, the Bench has indicated that unless judicially trained independent persons of proven integrity are appointed to adjudicate such questions, one may get a feeling that there is an attempt to create not a parallel and independent mechanism for the purposes that were noticed by the Experts, namely, the Joint Parliamentary Committee and the Sachar Committee, but for, unknown reasons to trammel the adjudicatory mechanism, and the litigants, who hitherto were entitled to move the Courts, thus may get a feeling that the decision making process might be affected by reason of dependence upon the executive. The Bench has also considered the Company Law Board members qualifications, Experience and other conditions of Service Rules, 1993 and also observed as follows:
'We, however, feel constrained to observe that the respondents shall be duty-bound to reframe the rules as observed above and such refraining must be completed within a framework of a time schedule. For the exercise in this behalf, a period of nine months from the date of receipt of a copy of this order will be reasonable and proper.'
Pursuant to this only, we find that the new rules of the year 1993 have been framed. Even after the framing of the Rules in 1993, as indicated above, there is no mandatory provision to include the judicial member in the bench to be constituted by the Company Law Board.
64. In the decision fifth cited above, it is stated that the original jurisdiction of the High Court in respect of such matters has been transferred to the Company Law Board formed under the newly inserted Section 10E of the Companies Act. From this, it cannot be inferred that the powers of the High Court is vested with the Company Law Board.
65. In the decision sixth cited above, the Apex Court has held that it was equally settled that when jurisdiction was conferred on a Tribunal, the Courts examine whether the essential principles of jurisdiction had been followed and decided by the Tribunals leaving the decision on merits to the Tribunal. It was also equally settled legal position that where a statute gives finality to the orders on the special tribunal, the Civil Court's jurisdiction must be held to be excluded, if there was adequate remedy to do what the Civil Court would normally do in a suit. Such a provision, however does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory Tribunal had not acted in conformity with the fundamental principles of judicial procedure. Where there was an express bar of jurisdiction of the Court, and examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but was not decisive to sustain the jurisdiction of the Civil Court. Where there was no express exclusion, the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case, it was necessary that the statute creates a special right or liability and provides procedure for the determination of the right or liability and further lays down that all questions about the said right or liability shall be determined by the Tribunal so constituted andwhether remedies was normally associated with the action in Civil Courts or prescribed by the statutes or not. Therefore, each case requires examination whether the statute provides right and remedies and whether the scheme of the Act was that the procedure provided would be conclusive and thereby excludes the jurisdiction of the Civil Court in respect thereof.
66. The aforesaid statement of the Apex Court has left open the question of finality to be decided depending upon the scheme of the Act As regards the position relating to the title of shares, sub-section, (7) of Section 111 of the Act, reads as follows:
'On any application under this section, the Company Law Board--
(a) may decide any question relating to the title of any person who is a party to the application to have his name entered in, or omitted from, the register;
(b) generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification.'
The expression used in the above sub-section is 'may'. That itself is an indication that the Parliament decided the decision of title relating to the shares should be incidental. Further, as regards title, it is well known that the decision by the Civil Court is always preferable. As indicated by the Supreme Court, there is no implication in Section 10C or in any other sections of the Companies Act to exclude the jurisdiction of the Civil Court.
67. In the decision seventh cited, a learned Single Judge of this Court has held that Companies Act does not bar jurisdiction of the Civil Courts in respect of matters which are expressly made subject to the jurisdiction of the Company Court. The learned Judge has considered a number of decisions and has held in paragraph 11 as follows:
'The enactment of a special statute like the Companies Act does not have the effect of barring the jurisdiction of the Civil Court unless the statute expressly prohibits the jurisdiction of the Civil Court in relation all matters arising under the statute or the scheme of the statute is such that such prohibition is necessarily to be implied. There is no provision in the Act expressly barring the jurisdiction of the Civil Court with respect to all matters arising under the Act. The bar of jurisdiction is implied and is in respect of some matters only.'
In this case, the learned Judge was concerned with the scope of Section 283 of the Companies Act. The question involved was whether the director of the Company was validly removed or not? The applicant in that case moved the Company Court for declaration that he has not vacated the office. The question was whether the petitioner ought to have moved the Company Law Board or the Company Court? After considering the provisions, the learned Judge took the view that the Company Court had jurisdiction to maintain the company petition. The question in the said case was not whether a civil suit can be maintained with reference to a matter which has to be adjudicated by the Company Law Board.
68. We have already seen that in paragraph 55 in Hungerford Divestment Trust Ltd., Re. v. Turner Morrison & Co. Ltd., 1972 (I) Cal, 286 there is a statement that Section 397 is in the nature of a summary proceeding by way of an application. On a consideration of the aforesaid decisions. I am not in a position to agree with the counsel for the appellants that jurisdiction of the Company Law Board is very wide and serious dispute with reference to title has to be decided only by the Company Law Board and the Civil Court cannot adjudicate upon such questions.
69. The senior counsel Mr. Anil B.Divan, further contended that if a decision is rendered by the Company Law Board on the question of validity of transfer of shares, it will operate as res judicata and the parties will be bound by the same. Therefore, there will be no necessity for the Civil Court to go into this aspect. He cited the decision reported in Sulochana Amma v. Narayanan Nair, : 1994ECR195(SC) and Ashok Kumar Srivastav v. National Insurance Co. Ltd., : 2SCR1199 . No doubt the Apex Court has held that a decision rendered by a Court or Tribunal will operate as res judicata. In paragraph 5, the Apex Court has clearly stated that the principle of res judicata will apply to all proceedings either Civil or Criminal. It equally applies to Boards and Tribunals other than Civil Courts. In the latter decision cited above also the Apex Court has reinstated the abovesaid principle. But in the absence of transferors before the Company Law Board, how the decision of the Company Law Board will be binding upon them is beyond one's comprehension.
70. Another contention raised by the learned senior counsel is that even if the Company Law Board finds that the petitioner failed to establish a case under Sections 397 and 398(1)(b) of the Act substantially, justice can be done by it. The learned counsel cited the decision reported in Needle Industries (India) Ltd. and others v. Needle Industries Newey (India) Holdings Ltd. and others, : 3SCR698 . According to the learned counsel, the purchase of shares of the three companies by Tracstar can be scrutinised in view of the violation of Section 372 of the Act. All these contentions, I am not able to appreciate at all, as I have already indicated as above. The three companies, from which the shares were purchased were not before the Company Law Board or before this Court. In their absence if a finding is given by the Company Law Board or this Court, can it be said that it will be binding on those companies. Is it not open to those companies to contend that inasmuch as they are parties in the suit O.S.No.10803 of 1996 pending on the file of the XII Assistant Judge, City Civil Court, Madras, orders in C.P.No.16 of 1994 are not binding on them. Chhabria Investments Ltd.. Jaguar Investments and Orson Investment Private Ltd., are parties in the above suit as plaintiffs 2 to 5. They have produced 47 documents along with the plaint. The prayer in the plaint is that the transfer of 1,62,710 equity shares of Rs.10/-. each bearing distinctive Nos.2331316 to 2494025 held by Chhabria Investment Private Ltd., in Gordon Woodroffe Ltd., India, on 25.5.1991 to Tracstar Investment Private Ltd., is illegal and void and the benefit of the said shares shall continue to vest in Chhabria Investment Private Ltd.. Similarly, with reference to the Shares transferred by Jaguar Investment Private Ltd., with reference to 6450equity shares of Rs.10 each, they are sought to be declared as illegal and void.Similar relief is claimed with reference to the 2700 equity shares of Rs.10each transferred to Tracstar Investment Pvt. Ltd., by Orson Investment Pvt.Ltd., is null and void. Apart from the prayer it is further prayed that the sharesmentioned above continued to be vested with those three companies.Injunction is also prayed for in the suit against the Tracstar from exercising therights with reference to those shares.
71. Not only the transferor companies are not before this Court and were not before the Company Law Board, but the petitioner in C.P.No.16 of 1994 who is the first plaintiff in the said suit has specifically reserved its rights to have an adjudication in the suit in paragraph 87(b) of the petition.
72. The learned senior counsel for the appellants Mr. A.L. Somayaji, Mr.C. Harikrishnan and Mr. Vedantham Srinivasan, contended that after having filed a suit specifically claiming the relief with reference to transfers made in favour of Tracstar by three companies, it is not open to the appellant in C.M.A.No.1071 of 1998 to request the Company Law Board to go into the very same question in C.P.No.16 of 1994. They further contended that the record date was extended to 31.8.1991. They also contended that there is an exemption granted under Section 81 by virtue of the proviso contained in sub-section (4) of Section 372 read with sub-section l(a) of Section 81 of the Companies Act. It was also contended that the fiduciary duty in fact tantamounts to breach of trust and such a question can be decided finally and fully by the Civil Court. Mr.Vedantham Srinivasan, raised the plea of estoppel by election of remedies. According to the learned counsel, the relief claimed in the civil suit C.S.No.1503 of 1993 and in C.P.No.16 of 1994 are identical. Therefore, after having chosen a forum for a relief and initiated proceedings, one cannot choose another forum for the very same relief. Such forum shopping is prevented by the principle of estoppel by election of the remedies. He cited Section 115 of the Indian Evidence Act and also page 1151 of the Sarkar on Evidence, in support of his contention. As I have already held that the Company Law Board was right in not trying the issue of the transfer of shares, I need not discuss the aforesaid contentions of the learned counsel.
73. The learned Senior Counsel Mr. Anil B.Divan, contended that BIFR has to decide which of the group of management is to be entrusted and therefore the Company Law Board felt that they should not decide such issue at that stage and allowed the respondent to disturb the present management especially when M.R. Chhabria/SWC have funded the company with substantial amount of nearly Rs.4 crores. After having found so at the end the Company Law Board has permitted to convene the Annual General Meeting after 31.12.1998. Therefore, according to the learned counsel, the Company Law Board has committed serious error of law. He also cited Tracstar Investments Pvt. Ltd, v. Dy. Commissioner. Commercial Taxes, ILR, 1994 Kar 1181 to show mat in the said decision the Tracstar was commented upon about its financial position by the Karnataka High Court. As regards this aspect I have to only say that from the records placed before me, I do not think that BIFR proceedings will reach a finality in near future.
74. Already the BIFR has passed an order directing the Board not to dispose of the assets of the Company. Further with reference to the schemes proposed by SWC and Kishore Chhabria group have been considered and passed orders by BIFR. Before the BIFR, Tracstar group proposed stand alone basis scheme, while SWC group proposed merger scheme for rehabilitation. On 10.6.1994 BIFR passed an older accepting the scheme known as Stand Alone Scheme proposed by Tracstar Group. But on appeal AAFIR has set aside that order on 10.10.1995, and remanded the master to BIFR. It also directed to give opportunity to Tracstar Investment pit. Ltd., to formulate their scheme also. Again on 1.1.1996 BIFR passed an order to finalise rehabilitation report on the proposal received from SWC. On appeal, the appellate authority for Industrial and Financial Reconstruction, New Delhi, the appellate authority, directed the BIFR to take a decision on the rehabilitation scheme based on amalgamation of GWL with SWC. The matter was taken to this Court by way of W.P.Nos.5278/96 and 5279 of 1996. On 29.4.1997 a learned Single Judge of this Court has set aside the order dated 19.3.1996 passed by AAIFR on 6.5.1997 and directed the BIFR to consider the proposal for Tracstar also. Thereupon W.A. Nos.631 to 634 of 1997 have preferred. In C.M.P. Nos.7228 to 7231 of 1997 a Division Bench of this Court directed the BIFR to go without prejudice to the rights and contentions of the parties, but there shall not be any final order pending further order in the Writ Appeals. Subsequent to the order of the Bench, BIFR, directed the operating agency to consider the proposal of SWC and GWL and submit a report in four weeks. And again an appeal was preferred against the said order in AAFIR. The appeals were dismissed. Then W.P.No. 10881 of 1988 and another writ petition were filed in the High Court. Interim stay has been granted and it has been extended on 28.8.1998. Therefore, in my view, the Company Law Board was right in giving a direction to convene the holding of the Annual General Meeting.
75. The relief claimed in C.P.No.16 of 1994 is to direct the Tracstar Investments and Shoe Specialities to transfer their respective holding to GWL, UK or its nominees without prejudice to the rights and contentions of the petitioners and others supporting the petitioner in the other proceedings pending. This is prayer (b) in Paragraph 126 of the petition. Even here, the petitioners are very particular to get their rights adjudicated by the Civil Court. Their intention is clear that final adjudication has to come from the Civil Court and the relief claimed in the petition C.P.No.16 of 1994 is temporary.
76. If the Civil Court finally decides the issue with reference to the shares and the petitioner succeeds in the suit, it will be automatically entitled to have the relief granted. Even if Annual general Meeting is convened and there is a change of management of the Company as result of the decision taken in the Annual General Meeting, that will be subject to the result of the suit. Therefore, there is nothing wrong in the convening of the Annual General Meeting, for which a direction has been issued by the Company Law Board. Further, the proceedings before the BIFR has not reached the stage of Section 18 of The Sick Industrial Companies (Special Provisions) Act, 1985. Noscheme has been approved. Only when the BIFR sanctioned scheme it shall be binding on the company and the shareholders etc. Further, the BIFR can fix a date for the enforcement of the scheme. As per Section 17(2) of the Sick Industrial Companies (Special Provisions) Act, 1985, an opportunity should be given to the Board of Directors to make its networth of the company exceed the accumulated losses. All along the Company has been under the control of the present management. It cannot be ruled out that if by virtue of convening of the Annual General Meeting a new set of Board of Directors is elected. It is possible that new Board is likely to make a request to the BIFR to give them an opportunity to make networth of the company exceed the accumulated losses. It is worthwhile to mention here that as per Section 18(3)(a), the scheme was prepared by the operating agency and the Board has to consider the objections of the company before the scheme is sanctioned.
77. The learned Senior counsel contended that the refusal of the Company Law Board to decide the question of the validity of transfer of shares on the grounds that violation of the provisions contained in Section 372 of the Act, breach of fiduciary duty and failure to exercise jurisdiction is unfair and therefore this Court can interfere with the order passed by the Company Law Board and decide the question of validity of transfer of shares in favour of Tracstar. After making such a submission in the beginning, later on the learned counsel contended that mis Court as court of appeal has to correct only the error of law and not facts. Therefore, this Court has to accept the Finding of the Company Law Board and then grant the relief which the appellant is entitled to. B. Divan relied on the following findings of the Company Law Board, 1)' that the position has changed and Tracstar and SSPL are under the control of Kishore Chhabria, which means the control of 39% of shares in GWL. That this change in control, it is also apparently clear that the controlling interest in GWL has come to Kishore Chhabria, in other words, the control is by both Kishore Chhabria and SWC.' 'We should not direct the Board at this stage and allow the respondents to disturb the present management especially when MRC/SWC have funded the company with the substantial amount of nearly Rs.4 crores. We consider inappropriate at this point of time to allow a change in the management which may in all probability alienate MRC/SWC from the revival process which would be in the interest of the company'. The learned senior counsel repeatedly contended that Kishore Chhabria has committed breach of his fiduciary duty and therefore the Company Law Board ought to have gone into that question, and granted the reliefs prayed for in the petition. As regards the finding with reference to control and ownership of shares by Kishore Chhabriam group, the finding is based on the fact that Tracstar and SSPL are under the control of 39% of shares in GWL. One group as per the figures after the transfer as on 31.5.1995 the position is that GWL, UK is holding 39.23% of shares. As on 31.8.11998, the share holding pattern of the company is as follows: GWL, UK 24.90%, Tracstar 24.91%, SSPL 12.73%, Trident 6.84%, others 6.84%. So Tracstar and SSPL are holding only 37.64% of shares. They are not holding 51%. Only when such is the position, it can be asserted that Tracstar and SSPL are in a position to control the company. No authority was cited before me to show that simply because one minority group is having larger shares than theother minority group, it can be assumed that the minority group having larger shares to be in control. Such a presumption is possible if the group is owning somewhere near 50% or so. Similarly no authority was also cited before me to show in all cases invariably the minority group having more shares than the other minority group will be able to succeed in getting its members alone elected to the Board of Directors. It all depends upon how the minority groups are able to canvass and gain support of other large number of shareholders. In this case, itself there is an example that when Kishore Chhabria contested for the post of Director, he could not succeed. This is admitted in the petition itself. In Paragraph 83 of the petition C.P.No.16 of 1994, the following statement is found:
'The term of Kishore Chhabria as Additional Director of Gordon Woodroffe (India) came to an end on 14.8.1992 i.e., on which date the 67th Annual General Meeting of Gordon Woodroffe (India) was held, Kishore Chhabria was not elected as a director at the said Annual General Meeting.'
This has taken place after the purchase of shares by Tracstar and SSPL in GWL, India. In my view, the Company Law Board has made only an observation and it has not given a finding on consideration of all the relevant facts and circumstances. As regards the investment of about Rs.4 crores by MRC/SWC for the purpose of revival scheme, there is also a Finding by the Company Law Board in paragraph 25 of the Order, which reads thus:
'While as per the orders of BIFR, Tracstar has deposited a sum of Rs.l crore, a group company of MRC has remitted a similar amount on behalf of SWC.
That apart, no details have been given as to how the amount of Rs.4 crores were invested by MRC/SWC. The statement of MRC/SWC have funded sufficient amount of nearly Rs.4 crores in also not a finding arrived at after discussion of evidence. It also appears to be only an observation. So, the contention of the learned counsel for the appellant that the Company Law Board has given a specific finding on the aforesaid facts is not correct.
78. Based on. the question of breach of fiduciary, it is lastly contended that K.R. Chhabria's continuing in Tracstar, which in turn will control GWL, is not in the interest of the company. In the petition in paragraph 36, it is stated that Kishore Chhabria was in the position of a fiduciary and trustee both in law and in fact of, SWC as well as the other companies in the group and concents wherein Shaw Wallace group had interest and/or involvement including Gordon Woodroffe (India). Kishore Chhabria being a trustee and in the dominant position was required to perform his fiduciary duties and obligations scrupulously, and protect, preserve, maintain and develop the business, interest, assets and properties of Shaw Wallace and the Companies in the group and the opportunities available to the said companies in their best interests.
79. Similarly, paragraphs 37 and 38 of the petition contain statements about fiduciary duty. But the specific instances are not mentioned i.e., how he committed the breach of trust of the fiduciary duty reposed in him by the othergroup of companies of GWL. That apart, the breach of fiduciary duty is a question of fact that has to be established both by documentary and oral evidence. Breach of trust of fiduciary duty cannot be established without examination of the parties alleging and denying such allegations. What is mainly stated is that when the shares of GWL were transferred to Tracstar and SSPL, Kishore Chhabria acquired control over these two companies and they were removed from the control of SWL. SWL inturn was in control of GWL. It is no doubt true that Kishore Chhabria was the managing director of SWL till 25.4.1992. It is also stated in the petition that from 25.4.1992, he ceased to be the Managing Director of SWL, by virtue of the application of Section 299 of the Act read with Section 293 of the Act i.e., on account of failure to disclose his conflicting interest.
80. This allegation of breach of fiduciary duty is made only after M.R. Chhabria went out of the family of Chhabrias, on account of a dispute in April, 1992. At that time M.R. Chhabria parted company with his father, uncle and brother viz., M.D. Chhabria R.D. Chhabria and K.R. Chhabria. He went to the Press regarding the family dispute. Thereafter, notice came to be issued on 25.4.1992 by the father and uncle against M.R. Chhabria. If M.R. Chhabria had continued to be with the father, uncle and brother, the question of breach of trust of fiduciary duty would not have arisen.
81. Mere breach of fiduciary duty resulting in the suffering of the interest of the company or public interest is not a ground for calling for interference by the Company Law Board or this Court, under Section 398(l)(b) of the Companies Act, 1956. As already indicated, there must be material change in the management or control of the company. However, as the appellant's counsel repeatedly urged this point, I chose to go into that question also.
82. The learned senior counsel Mr. Anil B.Divan, relied upon the following decisions:
(1)Cranleigh Engineering v. Bryant, 1964 (3) All E.R. 289; (2)Industrial Development Consultants v. Cooley, 1972 (2) All E.R. 162; and (3) Delhi Development Authority v. Skipper Construction Co. P) Ltd., : AIR1996SC2005 ;
Apart from the passages in pages 118, 125, 126 and 129 of Gower's Principles of Modern Company Law Fifth Edition, The passages cited show that a group of companies managed by a group of persons or individuals must be treated as a single economic unit. At page 118, it is stated as follows:-
'Nevertheless, it has long been recognised that in relation to financial disclosure, the phenomenon cannot be ignored if a 'true and fair' view of the overall position of the group is to be presented and that accordingly when one company (the parent or holding company) controls others (the subsidiary and sub sub-sidiary companies) the parent company must present group financial statements as well as its own individual statements.'
At page 126, the statement is to the following effect:
'Admittedly there is no general principle that all companies in a group of companies are to be regarded as one; on the contrary the fundamental principle is unquestionably that 'each company in a group of companies... is a separate legal entity possessed of separate rights and liabilities. Nevertheless, it was argued, the court will, in appropriate circumstances, ignore the distinction between them, treating them as one. For this proposition a number of authorities were cited.
After considering a number of judgments, at page 129, it is stated as follows:
'It seems therefore that in aid of interpretation the court may (and indeed should) have regard to the economic realities in relation to the companies concerned.'
To find out whether the group is a single economic unit or not it is stated at page 125 as follows:
'Nevertheless, there have been exceptional cases in which the Courts have felt able to life the veil and until recently there were perhaps signs of a greater willingness to do so.'
Again at Page 126 it is stated as follows:
'The House of Lords had no hesitation in rejecting this argument since 'every step taken by (the subsidiary) was determined by the policy of (the parent) and the section warrants the Courts in looking at the business realities of the situation and does not confine them to a narrow legalistic view.'
No doubt, the aforesaid statements indicate that a group of companies controlled by a controlling company can be treated as a single economic unit for the purpose of business of the company and every action taken by the controlling company must be in the interest of all the shareholders of the group of companies.
83. In Cranleigh Engineering v. Bryant, 1964 (3) All. E.R, 289 is a case where one Bryant, an engineer and an inventor of above- ground swimming pool, with the knowledge of the right type of the clamping strip to use, how to define to a plastic manufacturer what was required and which manufacturer would readily supply the strip; the method, purpose and particular size and shape etc., was the managing director of the plaintiff company. When the plaintiff company applied for a patent for invention of above ground swimming pool, the plaintiff's company's patent agents communicated the information of a prior grant of British letters patent for a foreign invention of a similar swimming pool. This information was concealed by Bryant and failed to disclose the same to the Company's Board. Specification of plaintiff's application was not published. Bryant left the plaintiff's company and started the defendant company. In the suit filed by the plaintiff company for among other relief, an injunction to restrain the defendant company from making use of confidential information obtained by Bryant whilst employed by or acting as an officer of the plaintiffs concerning the design, manufacture and distribution of their swimming pools and frommaking use of the Bisehoff patent. Roskill,J of the Queen Bench Division held at page 302 as follows:
'I have no doubt that Bryant acted in grave dereliction of his duty to the plaintiffs in concealing from the plaintiff's board the information which he received from the plaintiffs' patent agents, and in taking no steps whatsoever 10 protect the plaintiffs against the possible consequences of the existence and publication of the Bisehoff patent. I also have no doubt that Bryunt acted in breach of confidence in making use. as he did as soon as he left the plaintiffs, of the information regarding the Bisehoff patent which he had acquired in confidence and about its various effects on the plaintiffs' position, for his own advantage and for that of the defendant company.'
84. Industrial Development Consultants v. Cooley, 1972 (2) All. E.R 162 is a case where the defendant appointed as Managing Director in order to use contracts in gas industry and to secure contracts from public undertakings was offered contracts by Gas Board in respect of depots to defendant in private capacity as architect. The defendant failed to inform the company about the offer. The defendant secured release from the company's service by misrepresenting state of health. Then he secured the contract from the Board for himself. In this case also the very same learned Judge Roskill, J., at page 173 held as follows:
'The defendant had one capacity and one capacity only in which he was carrying on business at that time. That capacity was as managing director of the plaintiffs. Information which came to him while he was managing director and which was of concern to the plaintiffs and was relevant for the plaintiff to know, was information which it was his duty to pass on to the plaintiffs because between himself and the plaintiffs a fiduciary relationship existed as defined in the passage I have quoted from Buckley and, indeed, in the speech of Lord Cranworth in Aberdeen Railway Co. v. Blaikie Bros. 1854 2 Eq. Rep. 1286.'
85. In Delhi Development Authority v. Skipper Construction Co. (P) Ltd., : AIR1996SC2005 , the Apex Court has ruled, as follows:
'The concept of corporate entity was involved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned.'
86. The English cases cited above show that a person who was in control of a company must not gain an advantage for himself by securing a benefit for himself without making the benefit available to the Company, which he is controlling. The emphasis is that an advantage or benefit must have been gained and the person has secured the benefit or the advantage by concealment of certain facts or knowledge which he acquired not in his individual capacity but as acting on behalf of the company. In the last citeddecision the Apex Court has held that such acquiring benefit for himself by such a person tantamounts to committing fraud.
87. In the present case what is the position. The allegation is that before Tracstar acquired shares in GWL, Kishore Chhabria who was acting as Managing Director of Shaw Wallace group company failed to disclose that Tracstar came to be under his control. But he thereto it remained under the control of SWL group. If he had disclosed the fact that Tracstar came to be under his exclusive control and was no longer in the group, the shares would not have been transferred to Tracstar.
88. GWL was already a sick company. It was a sinking company. There are lot of difficulties in reviving it as is evidenced from the record. The revival process has been prolonging and nobody was certain that the revival could be achieved in the near future. In such circumstances if a person acquires shares even assuming it to be so for the sake of argument, can it be said that he has gained the benefit or advantage. Such a person has really taken a risk.
89. That apart, the mere failure to disclose certain facts cannot tantamount to breach of trust. Some amount of mental state of affair has to be spelt out from the conduct of the person i.e., such a failure to disclose must be a mala fide act on the part of the person who owed a duty to disclose. This is made clear from the statement of the Supreme Court which used the word 'defraud'. There must be an intentional violation on the part of the person to gain advantage for himself and to deprive that advantage to other shareholders or members of other group of companies. To my knowledge there is no allegation that the failure on the part of Kishore Chhabria to disclose that Tracstar and SSPL came to be under his control was deliberate or wilfully done.
90. Unless the act by itself conveys the element of mala fide on the part of the person who acted in a particular circumstances mala fide cannot inferred, some time mala fide will be reflected from the conduct or from the records available relating to the conduct of the person in a particular case.
91. In this case, one V.Subramanian has sworn to the affidavit of verification. He has been authorised to do so as it is mentioned in the affidavit. He had no direct knowledge as to why or how M.D. Chhabria and others gained the impression that Kishore Chhabria failed to disclose that he got control of Tracstar and SSPL before the two companies acquire shares in GWL. Further, the statements in C.P.No.16 of 1994 are argumentative; and do not appear to be a pleading as contemplated under the Civil Procedure Code. No person has been examined in this case to show that Kishore Chhabria failed to disclose the position of Tracstar and SSPL deliberately, wilfully and with any mala fide intention. Therefore, it is very difficult to infer that Kishore Chhabria acted with any intention of defrauding the other members of the Board of Directors of SWL or the shareholders of that company. Therefore, I am not in a position to hold that Kishore Chhabria committed any breach of fiduciary duty in this case and on that account, his continuing in control and management of GWL through Tracstar is not in the interest of the Company.
92. On a consideration of the relevant facts and circumstances of the case, I am of the view that in C.P.Nos 16 of 1994 is not maintainable and the prayer in it cannot be granted. However, it is made clear that it is open to the appellants to have a decision with reference to the transfer of shares in the Civil Court in O.S.No.10803 of 1996, which they have already instituted, and thereafter move the Company Law Board for appropriate relief. Since, in my view, the validity of transfer of shares can be fully and finally adjudicated in the suit. Hence, the appeals preferred by the appellants are dismissed.
93. The Company Law Board has held that the Board of management of GWL should not be disturbed pending proceedings before the BIFR. But at the same time it has also held that corporate democracy should prevail. As I have already indicated, the proceedings before the BIFR has not reached the stage of Section 18 of the Act. The Scheme proposed have not been accepted. Only when the schemes are accepted and declared, it will be binding on the Board as well as the shareholders of the company. In the circumstances, there is nothing wrong in allowing the corporate democracy to prevail. Hence, the direction that Annual General Meeting should be held only after 31.12.1998 is set aside. The appeals preferred by the respondents are allowed to the extent of the prayer for setting aside the direction of the Company Law Board that the shareholders should be allowed to exercise their rights in electing the Board of Directors of the Company in the Annual General Meeting to be held within three months after 31.12.1998. The shareholders of the company are entitled to exercise their right in electing the Board of Director and it is for the Company to hold the Annual General Meeting at any time, in accordance with the procedure contemplated by the Provisions of the Companies Act, 1956. However, excepting to this extent the other prayers contained in C.P.No.45 of 1993 cannot be granted. If the Annual General Meeting is conducted and the Board of Directors are elected, it is for them to seek appropriate relief in appropriate forums. Since, the petitioners in C.P.No.45 of 1993 apprehend that the Annual General Meeting cannot be conducted in a fair and proper manner, they are given the liberty to obtain suitable direction from the Company Law Board for appointment of some official to convence and conduct the Annual General Meeting. The petition is allowed to this extent. The relief No.3 cannot be granted because the matter is pending adjudication in Civil Court. As regards the relief No.2, when the Board of Directors is constituted in the Annual General Meeting to be conducted, it would be open to them to take appropriate steps for recovery of properties by initiating appropriate proceedings. The other reliefs claimed are not granted. In the result, C.P.No.45 of 1993 is allowed partly.
94. In the result, C.M.A.Nos.1207 to 1210, 1149 of 1998 are allowed in part as indicated above. C.M.A.Nos.1071 to 1073 of 1998 are dismissed. However, there will be no order as to costs in all the appeals.