K.K.Balu, - (1.) THIS is a petition under Sections 397 and 398 read with Sections 235, 237 and Schedule XI of the Companies Act, 1956 ("the Act") filed by the petitioner with the consent of other shareholders collectively claiming 680 shares out of 5,000 shares in the issued and paid-up capital of M/s Richfield Agencies Private Limited ("the Company") and claiming the following reliefs: (a) to declare that the petitioner and her children continue to be shareholders of the Company and that the annual return filed for the year 2003 by the second respondent is fraudulent and fabricated; (b) to appoint an independent hoard of directors to manage the affairs of the Company and also the appointment of an independent chairman of the Company; (c) to appoint an independent chartered accountant to audit the books and accounts of the Company and submit a report thereof; (d) to surcharge the second respondent with siphoning the funds of the Company and to direct an investigation into affairs of the Company under Section 235/237 of the Act; (e) to restrain the respondents from alienating or encumbering the properties belonging to the Company; (f) to direct the second respondent to make good the loss suffered by the Company in using the funds of the Company for the purchase of various items of immovable properties and for the development of these properties; and (g) to direct the second respondent to restore all benefits to the petitioner and her children as shareholders of the Company.
(2.) The main acts of oppression and mismanagement alleged in the company petition are in relation to (a) acquisition of a number of immovable properties in the names of the second respondent, his first wife being the third respondent and their children from and out of the funds of the Company; (b) manipulation of the records of the Company, thereby illegally transferring the impugned shares standing in the names of the petitioner and her children to the second respondent and others. However, the reliefs claimed in regard to (i) audit of the books of account; (ii) investigation into affairs of the Company; (iii) surcharge of the second respondent and (iv) immovable properties of the Company (Para K(c), (d) and (f) in page 8/9 of company petition) have not been pressed by learned Counsel representing the petitioners at the time of conclusion of his oral submissions. Accordingly, the claim and counter-claim of the contesting parties on the acquisition of the immovable properties under dispute are not dealt with by me. Shri R. Venkatavaradan, learned Counsel, appearing for the petitioner submitted: The Company was incorporated in March, 1971 with the main objects (i) to act as agents for shipping companies, luxury lines, boats or other steam or cargo vessels; (ii) to carry on the business of travel agents; (iii) to act as agents for manufacturers of any product etc. The petitioner joined the Company in the year 1973 as an office assistant to the second respondent and later became his wife. The petitioner is responsible to a great extent for developing the business of the Company. In the year 2002, the second respondent forced the petitioner and her children to sign a deed of arrangement and declaration regarding the personal affairs of the petitioner and the second respondent, whereby the petitioner and her children were offered an amount of Rs. 15 lakhs, certain immovable properties and LIC policies. It was clearly understood that the petitioner and her children holding 680 shares in the Company would continue as shareholders and that the business of the Company be carried on in the same manner as it was pursued prior to the execution of deed of arrangement and declaration. However, the second respondent conspired to ensure that the petitioner and her children would cease to be the shareholders in the Company by transferring 680 shares to the second respondent and others as evident from the annual return filed for the year 2003. The annual return filed by the second respondent for the year 2003 is a fraudulent and fabricated one. The petitioner and her children never transferred the impugned shares as claimed by the second respondent. The Company did not issue the share certificates to any of the shareholders and letters of acknowledgment reportedly given by the petitioner, showing the receipt of the share certificates do not contain her signature in some of such letters and in certain cases her signature differs. Furthermore, the petitioner and her children neither executed any instrument of transfer nor the purported transfer of shares does satisfy the mandatory requirements of Section 108 of the Act. No consideration has been received from the second respondent under the deed of arrangement and declaration by the petitioner towards the impugned shares. The petitioner and her children while challenging in November, 2004 before the High Court of Madras in C.S. No. 951/2004, the deed of arrangement and declaration, prayed for a judgment and decree against the second respondent for a mandatory injunction, inter-alia, to make necessary arrangements to perform the marriage of the petitioner's children. The proceedings are now before a Division Bench of the Madras High Court. In view of this, the validity of the deed of arrangement and declaration need not be adjudicated in the present proceedings. The second respondent while opposing the civil suit before the High Court, has sought to rely upon the deed of arrangement and declaration, but not whispered any thing about the impugned transfer of shares by the petitioner and her children. The petitioner and her children have not relinquished their rights over the shares impugned in the company petition and, therefore, they are entitled for those shares with the benefits accrued thereon. Shri Venkatavardan, learned Counsel, while concluding his submissions expressed that the second respondent may be directed to purchase the impugned shares from the petitioner at a fair price which may be determined by an independent auditor appointed by the Bench and accordingly sought for appropriate directions.
(3.) SHRI R. Murari, learned Counsel, while opposing the prayer made in the company petition submitted: The company petition is a speculative one made with malafide intention of obtaining unlawful gains at the cost of the second respondent. The deed of arrangement and declaration is neither challenged in the present proceedings or before the High Court, nor could be assailed by the petitioner. In terms of the deed of arrangement and declaration, the petitioner was given (i) title deeds in respect of the properties described in the schedules thereto; (ii) an amount of Rs. 15 lakhs during the period between 24.06.2002 and 03.10.2002 and (iii) LIC policies in settlement of her claim in toto. The petitioner and her children further agreed that they have no right, title, interest or claim against the second respondent or in the Company. Thus, the deed of arrangement and declaration is a complete severance among the petitioner, her children and the second respondent regarding their personal as well business affairs. The petitioner and her children having acted upon the deed of arrangement and declaration and surrendered to the second respondent the original share certificates held by her and her children, they are estopped from raising the plea of violation of the provisions of Section 108, of which the Bench is not concerned in the present proceedings, but it shall only be seen whether it would constitute an act of oppression. The belated plea of the petitioner that the Company never issued share certificates is falsified by her letters of acknowledgement, which are not disputed by her in the rejoinder. The claim and the relief sought by the petitioner and her children before the High Court are entirely different from those claimed in the company petition. The petitioner has not chosen to challenge the deed of arrangement and declaration either before the High Court or any other forum at any point of time, in which case, the petitioner is bound by the terms of the deed of arrangement and declaration. While the income tax return filed by the petitioner for the year 2002-2003 shows an amount of Rs. 38,000/- towards her share capital in the Company, the income tax return filed by her for the year 2003-2004 does not furnish her contribution towards the share capital in the Company. The plea of the petitioner that her auditor committed a mistake, while filing the income tax return by not furnishing the particulars of her contribution towards the share capital in the Company is unacceptable. Therefore, the annual return for the year 2003 reflects the true position that the petitioner and her children are no longer the shareholders of the Company. In these circumstances, the petitioner having ceased to be a shareholder of the Company and having failed to make out a case of oppression and mismanagement as envisaged in Sections 397 and 398, is not entitled to any relief as claimed by her.;