RAVINDRA SINGH AHUWALIA Vs. SANDEEP KAUR AHUWALIA

JUDGEMENT

(1.) Admit. Counsel for the Respondents waive service. With the consent of Counsel and at their request taken up for final hearing. 1A. The Appeal under Section 10F of the Companies Act, 1956 arises out of an order passed by the Company Law Board ('CLB') on 7th August, 2009. By that order the CLB in a petition under Section 397 of the Companies Act, 1956 declined to stay the holding of an Extra Ordinary General Meeting of the Second Respondent, but nonetheless directed that the resolutions passed at the meeting shall not be implemented "till the completion of the suit proceedings in the High Court of Bombay and also the arbitration proceedings". The dispute between the parties relates to a company by the name of Mukat Pipes Limited, a public limited company which has been listed, the Court is informed, on the Stock Exchanges at Delhi, Mumbai and Ludhiana. About 40% of the shareholding is held by the members of the public, consisting of nearly 12,000 shareholders. The bone of contention relates to about 43.38% of the shareholding which stood in the name of Rajinder Singh. The Appellant and the Third Respondent are brothers of Rajinder Singh who died on 11th May, 2005. The First Respondent is the widow of the deceased. Rajinder Singh and the mother of the Appellant and the Third Respondent formed a partnership firm by the name of Muktanandan Corporation on 17th September, 1975. According to the Appellant the partnership was reconstituted by a supplemental deed dated 2nd April, 2003 with the earlier two partners, the Appellant and the First and Third Respondents. About 33,24,400 shares of the Second Respondent were held in the name of Rajinder Singh. The case of the Appellant is that though these shares stood in the name of Rajinder Singh, the shares were purchased out of the funds of the partnership and the ownership of the shares has been reflected in the books and records of the partnership firm signed and acknowledged by Rajinder Singh during his lifetime. Upon the death of Rajinder Singh on 11th May, 2005 the shares were transmitted to the name of the First Respondent.

(2.) On 13th December, 2005 the First Respondent filed a company petition under Section 397 before the Principal Bench of the CLB at New Delhi. The Appellant and the Third Respondent filed an application under Section 111A challenging the transmission of shares to the name of the First Respondent. Both the petitions were disposed of by a judgment dated 14th February, 2007 of the CLB. By its judgment the CLB held that the resolution of the Board of Directors dated 5th December, 2005 for the retransmission of shares to the individual partners of the partnership firm viz. the Appellant and the First and Third Respondents would have to be set aside. The order of the CLB holds that the First Respondent validly held shares representing 43.38% of the capital and consequently, the First Respondent would be entitled to atleast two directors out of a total of five directors on the Board of the company who would be appointed at the next Annual General Meeting which was directed to be convened within a period of one month. The order stipulated that the First Respondent would continue to have "the same proportion of representation on the Board in the event of increase in the number of directors in future". The petition under Section 111A of the Companies Act, 1956 was dismissed. The CLB held that the question as to the genuineness or otherwise of the supplementary partnership deed could not be enquired into for which the Respondents to the proceedings viz. the Appellant and the Third Respondent hereto would have to approach a Court of law for relief.

(3.) The order of the CLB was carried in appeal before this Court under Section 10F. During the course of the proceedings on 4th May, 2007 Consent Terms were filed before this Court in terms whereof the Company Appeal was disposed of. The Consent Terms record as follows: