RAMDAS MOTOR TRANSPORT LTD Vs. DEVARAPALLI SURYA RAO

JUDGEMENT

(1.) Common Judgment: (Per Honble Mr. Justice Bilal Nazki) By this judgment we propose to dispose of all the three letters patent appeals. These appeals have been filed against the common judgment of a learned single Judge of this Court in C.A.Nos.4 and 5 of 1999, which were filed against the order, dated 15.6.1999 passed by the Company Law Board in C.P.No.15 of 1994. The parties shall be referred to as the petitioners and the respondents as they appeared in C.P.No.15 of 1994. LPA Nos.442 and 443 of 2001 have been filed by the respondents and LPA No.134 of 2002 by petitioners 6 to 9. We have heard Mr.Parasaran, learned senior counsel appearing for the respondents and Mr. M.S. Prasad, learned counsel appearing for the petitioners and gone through the record.

(2.) Shorn of the unnecessary details, the facts which gave rise to the litigation can be summarized as below, Basically this is a dispute between father-in-law and son-in-law. Father-in-law had died and his legal representatives have been brought on record. The petitioners 1 to 8 filed an application before the Company Law Board under Sections 397 and 398 of the Companies Act seeking certain reliefs. According to them, they were holding 10.65% in total issued share capital of M/s.Ramadas Motor Transport Ltd.-1st respondent. The main allegation, according to the order of the Company Law Board, was with respect to oppression and mismanagement in the affairs of the company which related to closure of parcel offices, sale of lorries and vehicles, fabrication of minutes books and documents, removal of petitioner No.9 as Director of the Company, increase in share capital by way of right issue, diversion of funds to companies managed by former employees, fabrication of Board minutes and diversion of funds for personal gains by the respondents. On the basis of these allegations, the petitioners sought various reliefs. They prayed for supercession of the Board by declaring that the respondents 2 and 3 were not fit to hold the post of Director of the company. They also prayed for appointment of two representative directors from the petitioners group. They further prayed that the respondents 2 and 3 be ordered to compensate the company of the money misappropriated by them. They also sought a declaration that the removal of the petitioner No.9 as Director of the company as null and void. They also sought cancellation of right issue made in 1994.

(3.) The petitioners had earlier filed a petition on 24.2.1994 being CP No.7 of 1994. The petitioners in this petition had sought the relief relating to the right issue and the Board had given certain directions. The respondents raised an objection on maintainability of the petition in view of Section 399 of the Companies Act. Therefore the petitioners were allowed to amend the petition and accordingly CP No.15 of 1994 was filed on 11.4.1994. The petitioners thereafter filed an application being CA No.83 of 1995 seeking permission to file evidence by way of affidavits and also for summoning of certain witnesses. The matter came up before the Company Law Board on 21.7.1995. The Board, on 27.7.1995, declined permission to file affidavits, but permitted them to lead evidence by producing witnesses, if they so desired. On 16.10.1995 the petitioner No.9 gave oral evidence and was cross-examined on 17.10.1995 and 18.10.1995 which was not conclusive. Since the parties belong to Andhra Pradesh, the Board was of the view that further cross-examination should take place at Madras or at Hyderabad on a date which had to be notified later. In the meantime on 15.2.1996 the petitioners filed CA No.65 of 1996 seeking certain reliefs including the relief of appointment of an administrator. In a hearing held on 30.7.1996 the petitioners sought liberty to amend the application which was granted. The petitioners further submitted that they wanted to lead evidence of other persons. Therefore the Board gave permission for filing of a list of such witnesses by 16.8.1996. On 23.5.1997 the Board gave directions to the petitioners to file a list of witnesses which was filed on 3.9.1997. According to the order of the Board, by that time the petitioners had filed another petition in respect of a connected company viz., Gopal Automotive Limited. Therefore the Board suggested the parties to settle the disputes not only in respect of two companies, but also in respect of four other group of companies in which the petitioners had some interest. The suggestion made by the Board was that the shares held by the petitioners in all these companies should be purchased by the respondents at a value to be determined by an independent chartered accountant. This suggestion was reiterated by the Board in a hearing held on 29.9.1997. However no progress was made as the respondents were not ready for compromise. An application for appointment of an administrator was heard on 28.11.1997 and an order was passed on 18.12.1997 rejecting the application. After the list of witnesses was filed, the Board decided to record the evidence at Chennai on 9.6.1998. At the request of the counsel for the petitioners summons to the witnesses were handed to him for service, but on the date fixed at Chennai no witness was produced and accordingly recording of evidence was closed. In a hearing held on 8.9.1998 the counsel for the petitioners informed that one of the petitioners has expired and as such legal heirs had to be substituted in his place. On this ground the hearing was adjourned till December, 1998 and finally the petition was heard and concluded on 22.3.1999. During the hearing the parties before the Board gave written submissions. There were allegations of mismanagement and oppression which were denied and after hearing the parties, the Board passed an order directing that the shares held by the petitioners should be purchased either by the respondents themselves or by the company. The Board also found that in order to give effect to the directions it was necessary that the shares of the company be valued by an independent chartered accountant. The Board also fixed a date and directed that the valuation be based on the balance sheet on 31.3.1998.