Vimla Yadav, - (1.) IN this order I am considering Company Petition No. 28/2005 filed under Section 397 of the Companies Act, 1956 (hereinafter referred to as 'the Act') wherein the petitioners (the Lodhas) have prayed that their shares in the respondent company namely, Manikchand Promoters and Developers Pvt. Ltd. be purchased by the respondent Nos. 2 to 6 (the Dhariwals) or any of them on the fair value worked out as per paras 20 (at page 13) and para 42 (at page 21) of their petition) or alternatively the CLB may order the division of the property rights of the respondent No. 1 company between the petitioners and the respondent shareholders in the ratio of their respective shareholding.
(2.) The undisputed facts of the case are: The respondent No. 1 company namely Manikchand Promoters and Developers Pvt. Ltd. was incorporated as Vishnu Developers Pvt. Ltd. with total five shareholders on 3.3.1994. The authorised share capital of the respondent No. 1 company, as on the date 9f arguments is Rs. 20,00,00,000/- (Rupees Twenty Crores only) divided into 20,00,000 (Twenty Lakhs) equity shares of Rs. 100/- (Rupees one hundred) each and the paid up capital of the company is Rs. 82 lakhs (Dhariwals Rs. 61.50 lakhs and Lodhas Rs. 20.50 lakhs). On 8.1.96 Lodhas and Dhariwals held 1250 shares of Rs. 100/- each. On 2.11.98 further 2500 shares were allotted to the Dhariwals. On 23.5.2005 further shares of 19049 shares were allotted to the Lodhas and the Dhariwals were allotted 57,147 shares. However, as per the inspection of the documents file maintained by the Registrar of Companies, Pune. The petitioner and the respondent No. 2 and 3 were appointed as directors of the respondent No. 1 company on 16.2.1997. However, as per the inspection of the documents file maintained by the Registrar of Companies, Pune, no Form No. 5 relating to increase of authorised capital from Rs. 5,00,000/- (Rupees Five lacks) to Rs. 20,00,000/- (Rupees Twenty crores) appears to have been filed by the company, viz. the respondent No. 1 with the Registrar of Companies. On 19.10.95 the members were allotted 2400 equity shares. On 8.1.96 further 2500 equity shares were allotted. The respondent No. 3 and family members purchased 2500 equity shares from original subscribers on 8.1.1996 The shareholding pattern of the respondent No. 1 company was consolidated to four shareholders - 25% with the petitioners jointly and 75% with the three members of Dhariwal family. The petitioner and the respondent No. 2 and 3 were appointed as directors of the respondent No. 1 company on 16.2.1997. The business of the respondent No. 1 company was to run on the partnership basis between the petitioners and the Dhariwal family members. The main object of the company is to carry on the business as developers and builders and to purchase, sell, resell, give or take on lease or rent, lay out, develop, construct, building, erect, demolish, re-erect, alter, repair, remodel roads, highway, bridges, sewers, canals, docks, wells, springs, dams, power plaints, parts, reservoirs, etc. Shri Sanjay K. Maria, Counsel for the petitioners argued: that the respondents have not sent the notices of the Board meetings and General Meetings of the respondent No. 1 company and the same are not being sent to the petitioners in spite of the fact that the petitioner has deposited the amount towards postal expenses with the respondent No. 1 company for sending the notices of the Board meetings and General Meetings to the petitioners by Registered Post. The respondents have not produced any proof for dispatch of notices. The respondent No. 1 company and the respondent No. 2 to 6 have not sent any information as to the progress of the business, if any, and the statement of affairs of the respondent No. 1 company to the petitioners from 1997 till date. The respondent No. 1 company and the respondent No. 2 to 6 have sent no information about the joint venture agreement entered into with Siddhivinayak Kohinoor Developers for development of Bhosari Property, which is continuing, and its financial implications to the petitioners. The respondent No. 1 company offered equity shares on rights basis without offering the same to the petitioners. However, the petitioners could procure the rights offer after filing the present petition. It was argued that it is well settled law that the Directorial complaints can be raised before CLB in Section 397 petition in a closely held company depending upon the facts of the case. The present petition is not based on directorial complaint only but has claimed the non-receipt of notice of board meetings in spite of sending cost for sending the notice by registered post. The petitioner has also claimed that the respondents have not sent the notice for general meeting (para 25,27 and 31 of the petition). The respondents has oppressed the petitioner by not sending the notices of general meetings and Board meetings. It was denied that there is no oppression by the respondents. It was pointed out that it is well settled that no inclusive definition of oppression has been provided in the Companies Act, 1956, and that the term oppression has wide meaning and Hon'ble Supreme Court has tried to define the term in Sangramsinh P. Gakwadand Ors. v. Shantadevi P. Gaekwad (D) through LRs and Ors. (2005) 3 Comp LJ 385 SC. The petitioner obtained the copy of Annual Accounts 2004 of the Respondent Company from ROC. The respondent never sent the copy of Annual Accounts to the petitioners. The respondents have not sent the Annual Accounts 2005 of the Respondents Company to the petitioners. It was argued that the respondents have failed to produce the proof of service of Annual Accounts before CLB. Further, it was pointed out that the respondents have not given any particulars in Annual Accounts about the progress and income earned/accrued by the respondent company and that the respondents made false and evasive statement that the accounting standards fenable the developers and construction companies not to report the progress of the business for number of years. The respondents has failed to refer to particular Accounting Standards and make accurate statement. It was argued that the petitioner is justified in praying for division of assets as there has been no profit/return from the investment made by the petitioners in the share capital of the respondent company. The facts clearly show that the principle of quasi partnership and legitimate expectation applies in the present case. It was argued that the facts clearly show that both the petitioners and the respondents made the investment in equity share capital at the same time and both continue to be in the same ratio. It is not necessary that there should be written agreement for considering the respondent company as Quasi Partnership. Hon'ble Company Law Board has to consider and apply the principle of Quasi Partnership and legitimate expectation. The respondents have admitted that the petitioner is a partner with the respondents and has expertise to contribute in progress of the respondent company. It was contended that the respondents lack in of probity which is evident from the facts that: the respondents took signature of the petitioners on plain papers on 9.8.2000; the respondent sent blank transfer form in August 2000; The petitioner had written letter on 14.8.2000 to the respondents; the legal notice dated 23.8.2004; the respondents have not consulted the petitioners in entering into agreement with Kohinoor; the respondents have not sent notices of Board Meeting and General Meeting since 1997 till present. It was argued by the respondents that the petitioners wrote letter to Pune Municipal Corporation against the interest of the respondent company. It was clarified that the petitioner has written letter to Pune Municipal Corporation on 26.6.2001 to protect his interest after the respondents gave advertisement in the Times of India on 23.6.2001 without consulting the petitioners. The respondents have not disclosed any action by Pune Municipal Corporation against the Respondent Company. The respondents have even misrepresented Hon'ble Company Law Board in this respect. It was pointed out that the respondents have alleged that since there is litigation pending on properties of the respondent company, division of the property is not possible. However, the respondents have failed to produce any detail of litigation pending. The respondents have also failed to submit counter valuation of the property in question. The respondents have relied on Article 23 of the Articles of Association for such disputes. The said article, it was pointed out, provides for disputes relating to transfer of share and not of the nature of the oppression referred to in Section 397 of the Act. The respondent has submitted that the petitioners should remain with the respondent company as the property rates re gong up. But the petitioners are not interested in continuing with the respondents due to continuous acts of oppressions committed by the respondents and has prayed for the Property/Assets (development rights) and investments in Kakade Constructions to be divided in proportion of shareholding of the petitioners and the respondents in the respondent company. The respondents have alleged that the petitioners have not paid any application money. On the other hand, the respondents have not disclosed to the petitioners about the names of the applicants from whom share application money was received by the respondent company and have also not disclosed the same before the Hon'ble Company Law Board also. The respondents have alleged that rights shares have been allotted to the petitioners as par in the month of March 2005 and no premium was asked for. In fact, the respondents had no intention to offer the rights shares to the petitioners but the respondents were compelled to offer the same after the petitioners had filed the present petition. Moreover, the respondents issued rights shares at par mainly to provide the benefit to themselves as the respondents hold 75% shareholding of the respondent company. It was alleged that the respondents had tried to push the petitioner into minority by not offering the rights shares to the petitioners. However, the same were offered after filing of the petition. The petitioners had participated in the share capital in the respondent company in the year 1997 and it is obvious from the fact that the manifold increase in property rates would increase further and the respondent No. 1 company would progress well and give handsome profits to the petitioners and due to continuous oppression by the respondents, the non subscription would result in reduction in shareholding of the petitioners and ultimately loss to the petitioners. Further it was pointed out that the respondents have alleged that the petitioner have invested Rs. 1,25,000/- in January 1996 and are asking for Rs. 20 Cr. It is to be noted that the petitioners had invested Rs. 1,25,000/- in January 1996, which has now increased to Rs. 20,29,900 in 2006. Similarly, it was argued that the respondents had invested 3,75,000 in 1996, which has now increased to Rs. 60,89,799, and similar profit would accrue to them. Even if there was no written agreement between the petitioners and the respondents but implied agreement was in existence as the dates of investment by both the petitioners and the respondents are same and both hold the same for a number of years. It was pointed out that the respondents have produced the case law from software and head notes only which is not admissible under the Indian Evidence Act and have also failed to provide copy of full order published in journals and further that the respondents have failed to give reply to para 41 to 48 of the petition, and. to para 30 of rejoinder. The counsel for the petitioners reiterated their prayer for purchase of the equity shares of the petitioners by the respondent No. 1 company and/or by the other respondents on fair value keeping in view tile present market value of the property rights of the respondent No. 1 company. Alternatively, it was prayed that Hon'ble Company Law Board may order the division of the property rights of the respondent No. 1 company between the petitioners and the respondent shareholders in the ratio of respective shareholding,
(3.) SHRI Nesar Ahmad, Counsel for the respondents raised the preliminary objection about maintainability of the present petition and argued that Section 397 (2) does not permit such petition to be maintained and entertained by the Hon'ble Board. It was pointed out that the petitioner himself has categorically stated that the present petition, is only under Section 397 and provisions of Section 398 are not attracted in the present Company Petition, therefore, there can not be any allegations about mis-management and there is no scope for arguing any thing about the management of the Company and its affairs. It was argued that the petitioner has failed to prove a single act of oppression . There is not any single evidence that has been laid by the Petitioner either in the Petition or in his rejoinder or in oral pleadings except one letter which he has sent to the Company in the year 2001 with DD of Rs. 250. The petitioner has even never tried to raise any issue of non-receipt of notice of the general meeting, It was emphasised that the petitioners have failed to prove that Respondent No. 1 is quasi partnership (pages 3, 4 & 5 of sur-rejoinder refer) Directorial complaints cannot be entertained Under Section 397. Further, issue of quasi partnership was never raised in the original petition. Petitioners have failed to prove that the company deserves to be wound up. This is an essential requirement of maintainability of petition Under Section 397 of the Companies Act 1956. Petitioners have failed to prove that there is a deadlock in the Management. There is no deadlock, rest of Directors other than petitioner are attending the business as usual. Petitioner cannot expect fantastic appreciation in their investments. He wants 20 crores against his investing Rs. 1.25 lacs in 1996 & Rs. 19.25 lacs in 2005. Petitioners have failed to make other partners of Sharada Developers etc parties to petition - This is a case of mis-joinder. As shareholder, petitioner is not entitled to get documents which he is calling for. As shareholder he cannot claim access to books of accounts or other business contracts. This is not permitted under the Act. Further, it was argued that the Letter for Regd. A.D. was sent on 11.10.2001 (pg 3 of petition). After 4.5 years petitioner has come for relief. (para 31 of petition). The letter only talked about notices of the Board meeting by Registered post. This cannot be a grievance Under Section 397. If at all there is any grievance it is in his capacity as a Director and not as a shareholder. It was pointed out that the only prayer of the petitioner is that he wants to sell off his shares & quit. How can that be entertained? Case under 397 is not proved at all. And if at all he wants to sell his shares, he should follow the procedure as prescribed by Clause 21 to 23 of Articles of Association of the company. Petition Under Section 397 is not a money recovery suit. Petitioner should not have accepted issue of shares at par if according to him the valuation of the property of the company and in turn the shares of the company is so high. While estimating value of the property, other aspects of litigation and claims are neglected by the petitioner. Even the exercise of valuation is too costly and cannot be undertaken for the whims & fancies of the petitioner. Copies of annual accounts are filed by petitioner himself, therefore there is no question of him not getting copies of annual accounts. Petitioner himself has written letter to Pune Municipal corporation for withholding construction related permissions for building superstructure by the company. He has acted against the interest of the company and can not ask questions to the respondents as to why company has not started activities. Alleged grievances of the petitioner are in his capacity as director. This can not be a subject matter of petition under Section 397, The respondents relied upon the dicta Ruby Hospital case (2006 - 129- comp cases 0001-CAL). If intention was to reduce petitioner to/minority as alleged in para 39 of the petition, additional shares would not have been allotted to him at par by the respondents in March 05. Petitioner "has never given in writing his request for inspection, therefore, he can not allege oppression on this ground.;