WILLIAM ASKEW SOMERVILLE Vs. EASTERN SCALES (P.) LTD.

JUDGEMENT

(1.) THIS is a petition filed under Sections 397 and 398 of the Companies Act, 1956 ('the Act'), filed by the Petitioners stating that the acts of Respondent Nos. 2 to 10 are prejudicial to the interest of the first Respondent -company and the Petitioners as well, thereby sought for appointment of a special officer, cancellation of 37,170 equity shares issued to the nominees being Indian nationals in the year 1980, as such issuance is illegal, null and void in the eye of law and also sought alternative reliefs for rectification of share register lying in the name of Respondent No. 9, Respondent No. 2, Respondent No. 5, Respondent No. 6, Respondent No. 7 and also other reliefs questioning the acts of the company since the year 1980. In furtherance of the same, these Petitioners also sought interim reliefs seeking appointment of special officer ; cancellation of the 37,170 shares issued in the year 1980 and subsequent transfer thereto which are more or less the same as prayed in the main reliefs. As the Petitioners' counsel sought for interim reliefs, this Bench heard the arguments of the Petitioners' counsel and the Respondents' counsel, accordingly, passed orders as follows.

(2.) THE brief facts of the case : One John Hutchison Somerville formed the first Respondent -company., i.e., Eastern Scales (P.) Ltd., in 1939, and also, in due course, formed two other companies, namely. Automatic Machine Co. (I) (P.) Ltd., and Bell Punch (I) (P.) Ltd., with registered office at 12, Gurusaday Road, Kolkata -700 019. Since the founder passed away in the year 1972, this company came into the hands of his sons, viz., William Askew Somerville, Jack Dunhill Somerville ('JDS') and James Collingwood Somerville ('JCS'). William Askew Somerville is the eldest son presently residing at Bangkok, Thailand. JCS died on 18th April, 1994, leaving behind his wife Margaret Ellen Somerville and three sons, i.e., Petitioner Nos. 2 to 4. As Margaret died in the year 2004, the shares held by JCS in the company ultimately devolved upon Petitioner Nos. 2 to 4. JDS died on 7th August, 2004, leaving behind his first wife children John Clive Somerville, Marilyn Rosemary Ash, Peter Robert Somerville and also his second wife (Respondent No. 2) and her two daughters (Respondent Nos. 3 and 4). Since his first wife's children are not presently holding any shares, their names are not shown in the shareholders' register, whereas his second wife is Respondent No. 2, her daughters are Respondents Nos. 3 and 4 in this case. This company is primarily carrying on the business of manufacture and sale of weighing scales and operating the same. This is basically a closely held family company of the Somerville family. The sum and substance of this petition is that the shareholding of the company is not evenly distributed among the sons and their heirs after the demise of the founder John Hutchison Somerville due to the acts of Respondent Nos. 2 to 10 which is prejudicial to the interest of the Petitioners herein. For these reasons, these Petitioners assailed the transfer of shares in this company from the year 1980 onwards. Since some of the family members of this company are foreigners, according to Indian law, foreigners are not entitled to hold above 50 per cent shareholding of the company, in view of the same, the shareholding of the company has been shown in the names of various Indian persons working as employees and closely connected to this family. The first Petitioner, as said above, is the eldest son of the founder, the other Petitioner Nos. 2 to 4 are children of another son of the founder, whereas Respondent Nos. 2 to 4 are the second wife of JDS and her daughters. Petitioner No. 1, Respondents Nos. 2 to 5 and 8 are the directors of this company, Respondent No. 9 is the chartered accountant of the company, Respondent No. 10 is the auditor of the company. The shares said to been shown in the names of Indians are indeed the shares of Somerville family, which are shown in the names of Indians to bring their shareholding within limitations. The disputed shares in the company were transferred in the name of Respondent No. 2 on 5th May, 2004. Thereafter, some of the shares, out of the disputed shares were transferred in the name of Respondent No. 9. The entire allegations in this petition are relating to the transfer of shares purportedly lying in the name of Indian nationals on behalf of the family members of Somerville, primarily in the name of Respondent No. 2.

(3.) THE Petitioners filed a citation Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd. : AIR 1966 Cal. 512 to state that an application under Sections 397 and 398 by the majority of shareholders is maintainable. Since the Petitioners' shareholding is shown as more than 10 per cent, it is needless to take the support of this citation for the Respondents' counsel not having said it as not maintainable.