KRISHAN LAL AHUJA Vs. SURESH KUMAR AHUJA

JUDGEMENT

(1.) THIS judgment would dispose of C.P. No. 17 of 1979, C. A. Nos. 164, 322 of 1979 and Criminal (Original) No. 3 of 1979 in C.P. No. 17 of 1979 and Transferred Civil Suit No. 157 of 1979.

(2.) THE proceedings are a sequel to the scramble for the control of a family company between four brothers on the one hand, and the heirs of the fifth on the other.

(3.) ASA Nand Ahuja, the eldest of the five brothers, for short, the deceased, started the business of retreading and vulcanising of tyres in 1972. In course of time, the four brothers, for short, the brothers, joined him in the business and the resultant family partnership entitled Ahuja Tyres was eventually incorporated in 1974 as Ahuja Tyres (P.) Ltd. Almost the entire issued capital was held by different members of the family. The company maintained steady progress and all went well until the deceased died on March 6, 1976. He was survived by a widow and two sons, for short, the heirs. The total holding of the heirs on the date of death was less than 40%. The brothers and the wives of two of them between them held more than 60%. On the date of death, Suresh Kumar Ahuja, eldest son of the deceased, was a young man of about 24 years pursuing his Post Graduate studies but nevertheless, either on account of their sentiment for the elder brother, or in recognition of the fact that the deceased was the originator of the business and the heirs admittedly held shares constituting the largest single block, a question on which there was some controversy, Suresh Kumar Ahuja was unanimously appointed managing director of the company. Three of the brothers were the other directors of the company. It may be pointed out that one of the four brothers, Shiv Prakash Ahuja, and the deceased had married real sisters. The new set up did not appear to have a smooth sailing because problems were thrown up in November, 1977, and two of the brothers came to this court on a petition under Sections 397/398, being C.P. No. 104 of 1977, complaining of acts of oppression and of attempts by Suresh Kumar Ahuja and his mother to exclude Krishan Lal Ahuja, one of the brothers. The petition was disposed of by an order of December 7, 1977, which was in the nature of a consent order, and by which the position was sought to be stabilized. The differences between the four brothers, on the one hand and the heirs of the fifth on the other, however, appeared to have survived the attempt at stabilisation leading to a virtual scramble for the control of the company between the four brothers and the heirs. The appointment of one of the brothers, Bhim Sen Ahuja, as technical director of the company was apparently taken as an act of affront by the managing director and gave the signal for further trouble. The adverse reaction of the managing director led to a retort by the brothers, when they carried out in the next meeting of the board, said to have been held on October 16, 1978, the election of the wives of the two brothers as additional directors raising the strength of the board from 4 to 6. This is said to have caused a violent reaction and led, inter alia, to an ugly incident, which was allegedly reported to the local police. The matters having thus come to a head, what had happened thereafter followed the normal pattern of happenings in private or even closely held public companies, a pattern which is made popular by the events of a decade or more in the Indian polity. The pattern is very simple. The dissatisfied faction goes out but claims to be the real party or the company, as the case may be, and goes about taking unilaterally all such steps as may be necessary to get rid of or to neutralise the strength of the other. In the course of time, two parallel bodies are functioning in the same name creating a deadlock and confusion. If one faction is in a minority in the board it seeks to expand the board by the addition of its own nominees to neutralise the strength of the other. The faction which is in minority in the company seeks to improve its position by the issue of further capital, if necessary. Both the factions invariably claim to have sent notice of meetings to the members of the other faction through certificate of posting. Such notices are shown as duly sent with the case with which their receipt is invariably denied. That such certificates can be easily obtained is now common knowledge. That the law still recognises such a mode of service only shows that in the race for supremacy between the law and its breakers, the breakers are far ahead of the law. It is necessary to apportion blame in this case, because what has happened has more or less followed the set pattern. Both factions held meetings. The meeting on the side of the four brothers, excluded the representatives of the other group from the board and the meeting sponsored by the heirs doing one up by not only eliminating the other side from the board but also neutralising their majority hold on the company by the issue of further shares to themselves for consideration other than cash on account of advances said to have been made by them to the company in the past, a matter about the existence of which there was no dispute but the parties were at variance with regard to the quantum of it. Parties have attributed to each other a number of illegal and improper actions but without going into the details, it is sufficient to say that when the matters came to this court, the heirs claimed that while their nominee continued to be the managing director, their group holding the majority shares, Krishan Lal Ahuja, one of the four brothers ceased to be the director of the company. On behalf of the four brothers, it was claimed that they held between them more than 60% of the holding and that the son of their deceased brother had been removed as a managing director of the company. It was in this setting that the four brothers and the wives of two of them sought the intervention of this court under Sections 397/398 of the Act by C.P. No. 17 of 1979 to declare that Suresh Kumar Ahuja had ceased to be a director of the company, his mother and their other nominee had also ceased to be the directors, the additional allotment of shares issued on October l6, 1978, was null and void and for certain other reliefs. By C.A. No. 164/79, interim protection of this court was sought. Meanwhile, the heirs caused a suit to be filed, being suit No. 157 of 1979, in the name of the company and one of them for a permanent injunction in the District Court and obtained an ex parte interim order on December 26, 1978, from the Additional District Judge, Delhi, restraining two of the brothers and son of one of the brothers from interfering in the management of the company. The suit was eventually transferred to this court for trial. Among the controversies between the parties, one is, whether one of the brothers, S.P. Ahuja, who is also related to the heirs through the widow of the deceased, attended certain meetings and signed the attendance register and certain other documents. It appears that at one stage, S.P. Ahuja was inclined to side with the heirs in preference to the brothers but had second thoughts. The explanation of S.P. Ahuja with regard to his purported signatures on certain documents by the heirs provoked an application for proceedings for perjury against him, being Criminal (Original) No. 3 of 1979. Aggrieved by the injunction issued by the District Court, the brothers sought its vacation by C. A. No. 322 of 1979.