BABU KHANDELWAL Vs. ANDHRA FERRO ALLOYS LTD.

JUDGEMENT

(1.) THE present petition is filed by invoking various provisions of the Companies Act, 1956 ('the Act') alleging certain acts of oppression and mismanagement in the affairs of the R1 -company and sought various reliefs. The counsel appeared for the petitioners narrated the brief facts of the case. He submitted that petitioner No. 1 and respondent No. 2 are real brothers (petitioner No. 1 is the younger brother of respondent No. 2) and they had purchased shares from the original promoters and took over the control and management of the respondent -company during the year 1993 -94. Before the taking over of respondent -company, the petitioner No. 1 was in the business of form alloys from inception of his career. The petitioner No. 2 is the wife of petitioner No. 1 and petitioner No. 3 is the daughter of petitioner Nos. 1 and 2. The petitioners' group (which consists of petitioner No. 1 and his family) continued to hold 58 per cent of shareholding with effect from 28th May, 1998 to 31st March, 2005. However, due to three successive illegal allotments of shares from November 2005 to March 2010 by the respondents the petitioners as on 10th March, 2010 was reduced to insignificantly to 17 per cent shareholding. The respondents (which consists of respondent No. 1 and his family) who continued to hold 42 per cent of shareholding with effect from 28th May, 1998 to 31st March, 2005, however, due to the said three successive illegal allotments of shares by them, the respondents as on 10th March, 2010 brought them to overwhelming majority of 83 per cent shareholding. That Andhra Ferro Alloys Ltd. though a public limited company, however, is a closely held company and most of the shares are held by Khandelwal family (belonging to the group of petitioner and respondent) and presently Khandelwal family holds approx. 99 per cent of total paid -up capital of the respondent -company. The respondent -company is like a family concern and seldom a member of joint family, that too younger member of the family, used to question doubt the action and decisions of the elder member of the family and the basis on which the family concern runs is the faith and trust because it is emotion and not the rationality which binds the family concern together. It is submitted that the respondent -company, was incorporated on 20th day of March, 1986, as private limited company. The petitioner No. 1 and respondent No. 2 took over the management of the respondent -company on 1st April, 1997 and petitioner No. 1 and respondent No. 2 became whole -time director ('WTD') and chairman and managing director ('CMD'), respectively while the third director, viz., Mr. K.K.T. Raju from original group continued in the Board. The authorised capital of the company as on 31st March, 2005 (remained the same with effect from 31st March, 1998) was Rs. 2,00,00,000 comprising of 20,00,000 equity shares of Rs. 10 each.

(2.) The issued subscribed and paid -up capital of the company remained Rs. 85,36,900 comprising of 8,53,690 equity shares of Rs. 10 each full paid -up. The petitioners are holding 2,03,000 equity shares of Rs. 10 each which constitute 58 per cent of total shareholding of Khandelwal family as per the annual return dated 30th September, 1998 to 30th September, 2005. However, on account of illegal and unlawful allotment of 10 lakh equity shares of Rs. 10 each on 7th November, 2005 and further illegal allotment of 2,89,800 equity shares of Rs. 10 each on 31st May, 2008 and further illegal allotment of 9,15,000 equity shares of Rs. 10 each on 10th March, 2010, the shareholding of petitioners was reduced to 16.81 per cent illegally and unlawfully and the same is under challenge in the present petition. It is to state that through three illegal allotments of shares, the respondents group have illegally increased their shareholding from 42 per cent to 83 per cent and reduced the shareholding of petitioners' group from 58 per cent to 17 per cent. The entire shareholding pattern of the respondent -company (past and present) is mentioned below:

(3.) IT is submitted that during April 2009, the petitioner came to know through outside sources that the respondents have changed the shareholding pattern and by two successive allotments of shares, the respondents group have increased their shareholding from 42 per cent to 76 per cent and the shareholdings of petitioners' group has been reduced from 58 per cent to mere 24 per cent. The petitioner did not believe the same and when enquired, it was found that the news was correct which completely shocked him and his family. The first petitioner was paid the salary till March 2009, however, the salary of April 2009 was not paid. Immediately, the petitioner approached the elder brother, i.e., respondent No. 2 herein and lodged his serious protest and expressed to him his serious concern over the mischievous developments and asked for immediate corrections. Due to mediation of senior family members and relatives of Khandelwal family, the respondents agreed to set things right and promised to make the shareholding and Board structure as it was on 6th November, 2005, i.e., in the ratio of 58 per cent and 42 per cent respectively and to bring parity in Board structure. It is to state that in the last week of March 2010 when the petitioner No. 1 was trying to deal with one of the bankers of respondent -company, they intimated that he was no more authorised signatory to the Bank and he is also no more director of the respondent -company. Initially, the petitioner No. 1 did not believe his word, however, when he enquired the facts from the office of RoC, Hyderabad many other glaring acts of oppression came to the knowledge of the petitioner No. 1 and his family and they were under tremendous shock and trauma. Instead of setting the things right as promised by the respondent No. 2 in April 2009, the respondents group gave the petitioners gravest kind of shock, firstly by removal of petitioner Nos. 2 and 3 from the directorship with effect from 30th September, 2008 (ante dated as Form 32 has been prepared and filed on 5th December, 2009 after undue delay of 15 months) thereby breached the parity in the Board structure, secondly by showing removal of petitioner No. 1 from whole -time directorship on 14th December, 2009, i.e., completely eliminating the petitioners' group from the Board and thirdly by increasing authorised capital from Rs. 2.5 crore to Rs. 5 crore on 4th January, 2010 fourthly by making further allotment of 9,15,000 shares on 10th March, 2010 exclusively in their favour and fifthly, by acts of mismanagement and oppression by misusing funds of respondent -company including the siphoning of funds of respondent -company.