O P JALAN Vs. DECCAN ENTERPRISES PVT LIMITED

JUDGEMENT

(1.) This company application is filed under section 151 of the Civil Procedure Code, 1908, read with rule 9 of the Companies (Court) Rules, 1959, and under section 403 of the Companies Act, 1956, to discharge the interim administrator and assistant administrators and to restore the board of directors of Deccan Enterprises Pvt. Ltd., hereinafter called "DEPL" as it existed on 23/11/1989, and for other reliefs.

(2.) This case has a chequered career and an unending story. To appreciate the rival contentions, a brief history of the case is necessary.

(3.) Company Petition No. 27 of 1987 was filed by Mr. R. Khemka, his wife and son-referred to as the Khemka group. The main contestants of the said petition are O. P. Jalan - the third respondent who is the managing director of the company and respondents Nos. 4 to 6 who are his wife and sons. The ninth respondent - R. N. Jalan, the brother of the third respondent is sailing with the applicants. The parties will be referred to as they are arrayed in Company Petition No. 27 of 1987 for convenience. Pending Company Petition No. 27 of 1987, the first petitioner, Mr. R. N. Jalan, filed Company Applications Nos. 184 to 188 of 1988 seeking reconstitution of the board of directors with representatives of R. Khemka and R. N. Jalan proportionate to the shareholding as on 31/12/1984, or in the alternative, to suspend the board of directors constituted on 5/07/1988; and that the joint managing director be appointed representing R. Khemka and R. N. Jalan and a direction be issued to the managing director to carry on the management along with the joint managing director jointly; a fresh audit of books of account of the company be ordered for the period ending with 31/03/1988, and M 31/03/1987, and to declare the resolution passed in the annual general meeting held on 5/04/1988, as void. When these applications came up before a learned single judge, the learned single judge holding that the reason for increasing the share capital of the company is to gain the overall control of the company by the third respondent and that continuance of the third respondent and his supporters on the board of directors may result in preventing the profits reaching all the shareholders; that the respondents have abused the fiduciary powers as directors by increasing the shareholding in a manner oppressive to the other shareholders like respondent No. 9, etc., appointed Sri Justice P. Ramachandra Raju, retired judge, as interim administrator for a period of two years in the first instance, assisted by two assistant administrators, representing the petitioners and respondent No. 9 as one block and the third respondent as another block. Questioning the said order, the company represented by its secretary and also O. P. Jalan (the third respondent) filed O.S.A. No. 28 of 1989, while the 8th respondent-Subahkaran Jalan filed O.S.A. No. 3 of 1990 and both the appeals were disposed of by a common judgment dated 26/04/1990. The Bench observed that there was no advantage to the company by the issue of capital and the contentions of the ninth respondent that it was only done to alter the shareholding in favour of the third respondent is prima facie justified. Here, it may be stated that respondents Nos. 3 and 4 held board meetings on 26/11/1984 and January 5, 1985, wherein they took a decision to increase the share capital of the company by Rs. 5 lakhs and by their resolution dated 28/02/1985, allotted those shares to respondents Nos. 3 to 6, i.e., the first applicant and his wife and son.