MANEKCHAND KOJMAL JAIN Vs. MOHANLAL KOJMAL JAIN

JUDGEMENT

(1.) THE present petition is filed by invoking the provisions of Section 397/398 of the Companies Act, 1956 ("the Act") alleging certain acts of oppression and mismanagement in the affairs of the company by the respondents and sought reliefs as prayed in paragraphs 7.1 to 7.3 of the petition. Shri Dhiren Dave, practising company secretary appearing for the petitioners submitted that the petitioners are the directors and shareholders of the company. He submitted that the company was incorporated in the year 1991 as a family concern and since then there were four directors, i.e., petitioners Nos. 1 and 2 and respondents Nos. 1 and 2. Since it was a family concern, the management of the company was assigned to respondents Nos. 1 and 2. In the year 1999 the family business was separated and the company came to the share of petitioners Nos. 1 and 2 with unanimous consent of all the family members. Respondents Nos. 1 and 2 consented to the separation and stopped attending the affairs of the company and voluntarily resigned as directors and also signed valid transfer deeds. The petitioners took charge of the company and made payment through cheques to the respondents' group in September, 2000 at an agreed price and the cheques were cleared from the bank on September 29, 2000. Respondent No. 1 did not deposit the cheque given to him for his and his family member shareholders and started creating nuisance in the affairs of the company. Petitioners Nos. 1 and 2 being the elder brothers tried to convince him with peace and harmony but it was futile. While the matter stood thus, the petitioners' applied for loan to the bank and to their utter surprise it was found that respondent No. 1 has filed Form No. 32 on June 27, 2000, for resignation of petitioner No. 1 and petitioner No. 2 with effect from March 16, 2000. Though the petitioners did not resign as directors, the said form was filed without any base and support. In fact the respondents resigned as directors as per the family separation. Further, respondent No. 1 has filed one more form appointing respondents Nos. 2 and 3 as directors. The petitioners who were in the affairs of the management and were legally empowered to fulfil all compliance of the law, filed three valid Form No. 32 with the Registrar of Companies appointing petitioners Nos. 3 and 4 as directors and showing the resignation of respondent No. 1 and respondent No. 2 as directors on the basis of the resignation letters signed by them. In spite of all this, respondent No. 1 remained vindictive since the beginning and kept on harassing the petitioners by making complaints to the Registrar of Companies, etc. To set right the things regarding issue of directorship, the petitioners called an extraordinary general meeting on July 28, 2003, to decide the directorship of the company and once again regularised the petitioners as directors. The respondents in April, 2008 made a false complaint to the police against the petitioners and got them arrested. In the interregnum period the respondents tried to take away the records from the factory premises with force. Even the bankers sought clarification on the complaint made by the respondents to the Registrar of Companies. The Registrar of Companies clarified that the company has four directors on the Board and no one else. The respondents have crossed all their limits and caused nuisance and committed notorious acts which are becoming unbearable and against the interest of the company. Respondents Nos. 2, 3 and 4 transferred their shares and resigned from the board except respondent No. 1. In spite of the resignations and ceasing to be members, the respondents created nuisance thereby the petitioners were not able to run the company in cordial atmosphere. As stated in the particulars of the respondents, respondent No. 1 is holding 47,000 equity shares of Rs. 10 each which constitutes 2.76 per cent of the issued and subscribed capital. Even though respondent No. 1 holds 2.76 per cent, of the issued and subscribed capital, not allowing respondent No. 1 to function and it is a classic case of oppression and mismanagement by the minority against the majority. Therefore, it is prayed to direct respondent No. 1 to transfer the shares to the company and sign all the necessary papers. In support of his case, he relied upon the various judgments/orders.

(2.) THE respondents filed a detailed counter to the petition and submitted that the allegations, averments made in the petitions are not correct and there are no grounds made out in the petition for invoking the provisions of Section 397/398 of the Act. It is averred that the petitioners failed to establish the conduct of the minority shareholders which is oppressive to the majority shareholders. On the other hand the respondents' group was oppressed by the petitioners and there is mismanagement in the affairs of the company by the petitioners who are in the management and they themselves filed this petition which lacks the basic characteristics of the provisions of law and the petition is liable to be dismissed. The respondents further submitted that respondents Nos. 1 and 2 managed the company till they were illegally removed in the year 2000. After taking over the management by the petitioners the company started making losses due to mismanagement by the petitioners. The petitioners increased the paid -up capital to increase their stake in the company without making any offer to the respondents' group. In the result, the shareholding of the respondents' group was reduced. It is a clear example that the respondents' group was oppressed by the petitioners. The petitioners being elder brothers offered to acquire the shareholding of respondents Nos. 2, 3 and 5 at a fair price of Rs. 25 per share. However, they paid Rs. 10 per share and the balance was never paid to the respondents. The petitioners who were having dishonest intentions forcefully took possession of the factory and the management in the month of October, 2000. It is pertinent to mention that the petitioners filed four Form No. 32 before the Registrar of Companies on October 17, 2000, which shows the dishonest intention. Further, the petitioners passed resolutions in the extraordinary general meeting dated July 28, 2003, for obtaining the approval and confirmation of the shareholders about the constitution of the board of directors, which is neither customary nor required by law. The entire exercise done by the petitioners was to support their fraudulent and dishonest act. The respondents having been left with no other remedy, filed a complaint in the court of JMFC Surat, under various provisions of the IPC. The court directed the police authorities to investigate the matter complained by the respondents. On investigation, the police arrested the petitioners. Aggrieved by the same, the petitioners filed a petition before the High Court of Gujarat for quashing the proceedings before the JMFC. However, the High Court did not grant any relief and the petition was withdrawn by the petitioners. It is submitted that the present company petition is filed with a view to frustrate the criminal proceedings before the JMFC. The petitioners have not approached this Bench with clean hands. In view of the above the petitioners have not made out any case either on oppression or on mismanagement and the company petition is liable to be dismissed. In support of this he relied upon various decisions.

(3.) WITH the above the company petition is disposed of. No orders as to costs.