VISHNU DAYAL JHUNJHUNWALLA Vs. UNION OF INDIA UOI

JUDGEMENT

(1.) By means of a petition under Article 226 of the Constitution (Civil Miscellaneous Writ Petition No. 9210 of 1978), the petitioners have prayed for a writ of certiorari quashing the order dated May 5, 1978, passed by the Regional Director, Company Affairs, Kanpur, in exercise of his power under Section 108(1D) of the Companies Act, 1956, granting extension of time for registration of shares of K. M. Sugar Mills Ltd. (hereinafter referred to as "the company") in the names of respondents Nos. 4 and 5. A prayer has also been made for quashing the order of respondent No. 1 passed on the review application made by the petitioners. It has further been prayed that the respondent-company be directed to restore the names of the petitioners in the records of the respondent company as shareholders of 4,000 shares and to restrain respondents Nos. 4 and 5 from acting in any manner or exercising any right as owners and holders of the aforesaid 4,000 shares. The connected Special Appeal No. 30 of 1979 is directed against the order of the learned company judge dated August 13, 1979, dismissing the application of the petitioners under Section 155 of the Companies Act for rectification of the register of members of K. M. Sugar Mills Ltd.

(2.) The case set up by the petitioners was that K. M. Sugar Mills Ltd. was incorporated on December 17, 1971, as a private limited company under the Companies Act, 1956. On September 13, 1974, it was converted into a public limited company with its registered office at 11, Moti Bhawan, Collectorganj, Kanpur. The authorised capital of the company is Rs. 25,00,000 consisting of eighteen thousand equity shares of Rs. 100 each and seven thousand 10 per cent cumulative redeemable preference shares of Rs. 100 each. The paid up capital of the company is Rs. 23,00,000 comprising eighteen thousands equity shares of Rs. 100 each and five thousand 10 per cent cumulative redeemable preference shares of Rs. 100 each. The petitioners held four thousand equity shares registered in their names. There were several other companies, partnerships, agricultural farms and charitable trusts as shareholders which were controlled by the petitioners and respondents Nos. 4 and 5 who were members of the same family. Serious disputes and differences arose between the petitioners and respondents Nos. 4 and 5 which were referred to one Sri M. L. Bajoria, a common relation of the parties (for arbitration). Sri M. L. Bajoria chalked out a scheme for settlement of the family disputes. However, differences again arose among the parties which were referred to Sri R. P. Nevatia and Sri S. K. Rajgharia. It has been alleged that in connection with the implementation of the family settlement, the petitioners delivered a number of blank transfer deeds to respondents Nos. 4 and 5. It has, however, been asserted that the petitioners never specifically executed any transfer deed for transfer of the petitioners' shareholding in K. M. Sugar Mills Ltd., in the names of respondents Nos. 4 and 5 and that the petitioners have reason to believe that the blank transfer deeds and the gift deeds executed by them in respect of other companies have been wrongfully utilised by the respondents for the purpose of transfer of the disputed shares in the respondent company. According to the petitioners, respondents Nos. 4 and 5 committed fraud and wrongfully and illegally sought to deprive the petitioners of their shares in the respondent company. It has further been averred that it was agreed between the petitioners and the said respondents that until a sum of Rs. 30,00,000 together with agreed damages was paid to the petitioners, the petitioners would continue to be members of the respondent company and their shareholding would not be transferred in favour of respondents Nos. 4 and 5. The petitioners, however, in June, 1978, learnt that respondents Nos. 4 and 5 had procured orders from the Regional Director, Company Law Board, Kanpur, extending the time for registration of 4,000 equity shares of the company in their names on the basis of certain transfer deeds alleged to have been executed by the petitioners in their favour between June, 1976, and October, 1976. Thereupon, the petitioners made an application to the Company Law Board on June 6, 1978, for reviewing the order of the Regional Director, dated May 5, 1978. The Company Law Board dismissed the review application by an order dated August 5, 1978. On the basis of the order of the Regional Director, the names of the petitioners in relation to the four thousand equity shares in dispute have been deleted and the shares have been fraudulently registered in the names of respondents Nos. 4 and 5.

(3.) The legality of the order of the Regional Director has been challenged on the the ground that he passed the impugned orders without any notice to the petitioners and in violation of the principles of natural justice and without applying his mind to the allegations contained in the applications under Section 108(1D) of the Companies Act. The order of the Company Law Board has been assailed on the ground that the Board has illegally refused to entertain the review application and gave no reasons for refusing to interfere in the matter.