COLABA LAND AND MILLS COMPANY LIMITED Vs. VASANT INVESTMENT CORP LIMITED
HIGH COURT OF GUJARAT
COLABA LAND AND MILLS COMPANY LTD., BOMBAY
VASANT INVESTMENT CORPORATION LIMITED,AHMEDABAD
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(1.) This is a petition under sections 397 and 398 of the Indian Companies Act 1956 (No. 1 of 1956) (hereafter called the Act) by the Colaba Land and Mills Company Ltd. a company incorporated under the Indian Companies Act 1866 and having its registered office at Bombay (hereafter called the petitioner Company) against the Vasant Investment Corporation Limited a company incorporated under the Indian Companies Act 1866 and having its registered office at Ahmedabad (hereafter called the respondent Company) and ten other respondents. Respondents Nos. 2 to 9 were at the time of the presentation of the petition Directors of the respondent Company. Respondents Nos. 10 and 11 are the shareholders of that Company. They have been joined in the petition for themselves and also for and on behalf of the shareholders of the respondent Company other than respondents Nos. 2 to 9. The petitioner Company admittedly is a shareholder of the respondent Company holding therein 22 0 ordinary shares of their Company and it is not disputed that the petitioner Company has a right under sec. 399 of the Act to file the present petition under secs. 397 and 398 of the Act. The petitioner Company prays:-
(a) for the removal of respondents Nos. 2 to 7 from their office as Directors of the respondent Company; (b) for obtaining suitable directions for appointment of new Directors for regulation of the future conduct and the affairs of the respondent Company; and (c) for appointment of a fit or proper person or a committee to conduct and manage the future affairs of the respondent Company. These are the main prayers in the petition. But for the reasons to be presently stated these prayers no longer survive. In addition to the aforesaid prayers the petitioner Company also prays:- (d) that respondents Nos. 2 to 4 or any one or more of them be ordered to pay or contribute such sums or sums of money to the assets of the respondent Company as and by way of compensation in respect of mal-practices mis-management mis-appropriation and breach of trust committed by them or any of them such as are set out in the petition; and (e) for obtaining such necessary directions for making such enquiries or passing such orders or taking such accounts as may be deemed proper by this Court.
(2.) The relief which survives for consideration is the relief (d) aforesaid and such part of the relief as is connected with the relief (d). In connection with these two reliefs a preliminary point is raised by Mr. Bhatt the learned Counsel for respondents Nos. 3 and 4 and it is that point which requires consideration and determination at the present stage. For the purpose of disposal of this preliminary point it is not necessary for me to state all the allegations on the basis of which the present petition is founded. It is sufficient to mention that originally the name of the respondent Company was The International Bank of India Limited and that it was later on changed into its present name The Vasant Investment Corporation Limited. The authorised capital of the respondent Company originally was 1 1 0 ordinary shares of Rs. 100/each. The subscribed capital originally was 96 961 shares of Rs. 100/each of which Rs. 50/was paid up and 1500 shares of Rs. 100/was fully paid up. But at present the subscribed capital is of 96 961 fully paid up shares of Rs 50/each and 1500 fully paid up shares of Rs. 100/each. Originally one J. C. Thakker was the Managing Director of the respondent company. He held a controlling block of 27 0 shares in that Company. One Jwaladatt R. Pilani is the father of the second respondent Vasudev Pilani. This Jwaladatt and Vasudev purchased on or about 13 of August 1946 the aforesaid controlling block of 27 0 shares from J. C. Thakker and thereafter entered into management of the respondent Company. Later on Jwaladatt Pilani and second respondent acquired a further block of 13 0 shares in the respondent Company. Having regard to the fact that a large number of shareholders of the respondent Company is residing in East Africa the Pilani family was able to secure control over the management of the respondent Company inspite of the fact that it held only 40% of the shares of the Company. The affairs of the respondent Company are being managed by a Board of Directors. Jwaladatt Pilani became Chairman of the Board of Directors on or about 13 of August 1946 and continued to be so till 21st of November 1950. The respondent No. 2 became an ordinary Director of the respondent Company on 13th August 1946 and continued to be so till 1st September 1951 when he was elected Chairman of the Board of Directors. The respondent No. 2 continued to be the Chairman of the respondent Company thereafter and was its Chairman when the present petition was filed on 26th of November 1956. However he ceased to be the Chairman during the pendency of this petition as and from 31st of December 1958. The respondent No. 3 was coopted as a Director of the respondent Company on 27th of August 1953 and the respondent No. 4 was coopted as such a Director on 14th December 1954. Both these persons continued to be the Directors of the Company at the date when the present petition was presented but they ceased to be such Directors from 30th of June 1959 during the pendency of the petition.
(3.) The Central Government made an order No. 33 (105)-CL/56 dated 17 October 1956 under sec. 235 clause (c) of the Act appointing witness V. H. Deshpande a Chartered Accountant as an Inspector to investigate into the affairs of the respondent Company and to make a report thereon to the Central Government. The witness made his report on 29th June 1957 The present petition is mainly based upon the report of the witness Deshpande and that report constitutes the main evidence for the prayers made in the petition including the prayer for compensation on the ground that respondents Nos. 2 to 4 were guilty of acts of malfeasance and misapplication of funds. The act of malfeasance alleged against respondent No. 2 are eight in number and they have been tabulated by the petitioner Company in paragraph 11 of the petition. Some of these acts of malfeasance are also attributed to respondents Nos. 3 and 4. For the purpose of deciding the preliminary point it is not necessary to state the details of the alleged malfeasance and mis-application of funds.;
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