Kanthi Narahari, Member (J) - (1.) THE present company petition has been filed under section 397, 398, 402, 403 and 409 of the Companies Act, 1956 ('the Act') in the year 2003 praying this Bench, inter cilia, to declare that the purported resolutions of the Board of directors of the 1st respondent -company passed on 30th August, 2002 removing the 1st petitioner from the post of managing director and the resolution dated 23rd October, 2002, removing the 1st petitioner from the post of whole time director of the respondent -company as null and void and not binding on the petitioners and that the petitioners, through the 1st petitioner, are entitled to participate in the management and business and affairs of the 1st respondent -company as managing director/whole time director of the 1st respondent -company and to restrain the respondents from issuing any shares for altering the capital structure of the 1st respondent -company and also to restrain the respondents from in any manner inducting any other persons into the Board of directors of the 1st respondent -company without the consent of the petitioners and direct investigation into the management, affairs and working of the 1st respondent -company. The undisputed facts of the case are that the 1 St respondent -company was incorporated on 1st April, 1998 and Kartikey Aggarwal (P1), Renu Aggarwal (P2), Ravinder Kumar Agarwal (R2), Anurag Agarwal (R3) are the subscribers to the memorandum of association with P1 holding 4,10,000 shares, P2 holding 1 000 shares, R2 holding 5,50,000 shares, R3 holding 5,20,000 shares and R4 holding 1000 shares. Thus, the petitioners, put together, hold 33.34 percent of paid -up capital and the respondents put together hold 66.66 percent of paid -up capital in the R1 -company.
(2.) THE brief narration of the facts are that the company petition was mentioned before the Company Law Board ('CLB'), Additional Principal Bench at Chennai on 5th February, 2003 and this Bench vide its interim dated 5th February, 2003 directed that "The petitioner will continue to make use of the 2 cars now being used by them. The respondent would reimburse expenses to both the cars up to a ceiling of Rs. 15,000 per month against the production of receipts by the petitioners. The petitioners will be provided I driver by the respondent". The above direction is still in force. The petitioners filed an Application being CA No. 26/2003 and this Bench by an order dated 27th March, 2003 directed the company to maintain status quo in respect of remuneration, perquisites enjoyed by the petitioner till the disposal of the said Application. As per the said directions director's remuneration and perquisites to the 1st petitioner continue to be paid. When the matter was listed on 7th May, 2003 this Bench recorded that the pleadings are completed in the matter and the petition will be taken up for hearing. Further it was observed by the Bench in its order that "In the meantime the parties' are at liberty to negotiate for settlement upon which they are at liberty to move before the Bench". In its attendance -cum -order sheet dated 23rd January, 2004, this Bench observed that "All the Applications and the company petition will be heard on 26th February, 2004 at 10.30 AM". When the matter was listed on 26th February, 2004, after hearing the counsels, the Bench "observed that the parties have agreed that an independent valuer, preferably a chartered accountant will be appointed by this Bench to ascertain the value of the shares of the company and directed the parties to exchange the list of chartered accountants amongst themselves through their counsel and file names before the Bench by 5th March, 2004 upon which the Bench will appoint a valuer for the purposes of valuation of the shares of the company". It was also directed that the valuer will file a report before this Bench by 31st March, 2004. Further it was directed that the valuer in his report would indicate valuation of the Units of company separately and any feasibility of division of such units. Further it was ordered that after giving opportunity to both parties, it would be decided whether the company would be divided unit -wise between the parties or whether the respondents would purchase the share of the petitioners at the value indicated by the valuer in his report. It was further ordered that in the meanwhile all the interim orders passed by the Bench would continue and the Parties would implement the same. The statement made by the 1st petitioner that he will not interfere with the day to day affairs of the company is taken on record. The petitioner's personal financial liabilities as a director of the company will not be in any way enlarged or increased till disposal of the company petition or settlement of disputes, whichever is earlier. The company will repay an amount of Rs. 1,00,000 out of the unsecured loan extended by the petitioner, in 3 monthly instalments commencing from 21st March, 2004. The matter was adjourned to 15th April, 2004 at 02:30 PM. Pursuant to the order of this Bench Brahmayya & Co., a chartered accountant firm, was appointed with the consent of both the parties. The CLB in the attendance -cum -order sheet dated 12th May, 2004 recorded that the valuer has commenced the valuation work and on 14th June, 2004 it was observed that the valuer will complete the valuation process and submit the report by 7th July, 2004. The CLB on 21st July, 2004 recorded that the valuer has filed their report on 7th July, 2004 and they have given value per share and also stated that it is not feasible to divide the units. While matters stood, thus, the petitioner preferred an appeal under section 10F before the High Court of Karnataka at Bangalore being MFA No. 2288/2004 challenging the orders of this Bench dated 26th February, 2004 whereby this Bench appointed the valuer with the consent of both the parties to value the shares of the company. The hon'ble High Court of Karnataka disposed of the said appeal by its order dated 11th January, 2005 with the direction to the CLB to decide whether or not the petitioners have the right to purchase the shares of the respondents but without being influenced by any of the observations made during the course of the impugned order. In compliance of the directions of the hon'ble High Court, the CLB by order dated 16th May, 2005 in the above company petition disposed of the company petition and passed the following order. "I, therefore, in exercise of powers under section 402 of the Act, direct accordingly division of units with a view to put an end to the stage of stalemate and to ensure smooth parting of ways by the parties. In view of the unit wise division of the company, I do not deem it fit to go into the issue whether the petitioners or the respondents group would go out of the company by selling their shares to the other group at the value determined by the valuer or merits the valuation report". The CLB directed the parties to be present on 20th July, 2005 at 02:30 PM to suggest on the issue of further consequential directions in regard to separation of common machinery, etc. In sum and substance, the CLB was of the view that the company can be divided unit -wise amongst the parties. Notwithstanding the disposal of the company petition and the applications, the interim orders granted already remain in force till the respective units are taken over by the parties.
(3.) AS per the directions of the CLB, both the parties have to be present on 20th July, 2005. However, the CLB observed in its attendance -cum -order sheet dated 20th July, 2005 that "None appeared for the petitioners. The respondents have filed an appeal against the order dated 16th May, 2005". The appeal preferred by the respondents is registered as CA No. 231 of 2005 before the High Court of Karnataka, Bangalore and the appeal preferred by the petitioner is registered as CA No. 233 of 2005. The hon'ble High Court has stayed the order of the CLB dated 16th May, 2005. Therefore, for passing of further orders by this Bench the matter could not proceed further and was adjourned from time -to -time. The hon'ble High Court passed a common order in both the appeals on 12th April, 2007. During pendency of the above appeals before the hon'ble High Court, several suggestions were made for the purpose of settlement but for reasons best known to the parties, the matter could not be settled. While setting aside the order of this Bench dated 16th May, 2005 the hon'ble High Court made the following order. "In these circumstances, these appeals are accepted, The impugned order is set aside. Matter is remitted back to the CLB. Board is directed to appoint a valuer after hearing the parties. Liberty is reserved to the parties to place their views before the valuer to be appointed by the CLB. A further opportunity is also reserved to the parties to be present before the valuer at the time of considering their case. The valuer is directed to submit his report within 4 weeks to the Board. The valuer is also to consider the financial position of the parties as on today in terms of Bank accounts or any other financial institutions accounts while submitting his report. Thereafter the CLB is directed to hear the parties with regard to various contentions and proceed to pass orders in accordance with law with regard to the feasibility or otherwise of the division in the light of the report to be submitted by the valuer. If the division is not possible or feasible, the company law Board is directed to pass such orders as it deems fit in "accordance with law, without in any way being influenced by the earlier order or by this order. Liberty is reserved to the parties to appeal before the CLB on 30th April, 2007. The CLB is directed to complete the proceedings on or before 31st December, 2007. Till the CLB decides the matter in terms of this order, the parties are directed to maintain status quo as on today, in their own interests".;