Arun Kumar, J. - (1.) P.K. Ramanujam, appellant 2 and P.K. Prathapan and his wife Pushpa Prathapan, respondents 1 and 2 are the contesting parties in this litigation. Appellant 1 is the Company in which they are all shareholders and the litigation is about its control and management. Both parties are making claims to the right to control and manage the Company. Briefly the facts are: Ramanujam had returned to Kerala, his native place, after resigning his job as an accountant in England in the year 1983. He was looking for an opportunity to work. Prathapan, also a native of Kerala, had been working in Muscat since long and was staying there along with his family. The mother of Prathapan, named Kalyani Kochuraman, was living in Kerala. Prathapan had two sons. According to Prathapan his sons were desirous of returning to India and settling down in their native place. Therefore, Prathapan wanted to set up some business in India in order to settle his sons. Since the parties are relations they were in touch with each other. Towards the middle of 1987 Ramanujam informed Prathapan that a Hotel called Hotel Siddharth in a town called Chalakudy, was available for sale. The Hotel building had ten rooms, besides a restaurant with a bar attached to it. The partners who were running the Hotel were interested in selling it immediately. Ramanujam further informed Prathapan that the Hotel was available for down payment of Rs. 6 lakhs (Rupees Six Lakhs). The purchaser, in addition, had to take upon a liability of about Rs. 18 lakhs (Rupees Eighteen Lakhs) which was standing on the Hotel. Ramanujam offered to look after the business of the Hotel till Prathapan decided to return to India. The parties decided to go ahead with the purchase of the Hotel for which Prathapan agreed to send Rs. Five Lakhs. Ramanujam was to get a salary for the services to be rendered by him in looking after the business of the Hotel. A Company by the name of Dale and Carrington Investments Private Limited was incorporated on 4th November, 1986 for the Hotel business. Ramanujam and his wife Draupathy were shown as the promoters of the Company. On the request of Ramanujam, Prathapan sent a Bank Draft in the sum of Rs. 5 lakhs (Rupees Five Lakhs) favouring his mother Kalyani Kochuraman on 3rd March, 1987. The draft was sent in the name of the mother because Prathapan was an NRI and the Company could not receive money directly from him. The device of money being first sent in the name of Prathapans mother and thereafter the mother transferring it to the company, was suggested by Ramanujam in his letter dated 25th February, 1987 to Prathapan. The Hotel was accordingly acquired by the Company in March, 1987. A sum of Rs. 6 lakhs (Rupees Six Lakhs) was required to be paid in cash to the vendors out of which Rs. 5 lakhs (Rupees Five Lakhs) were received from Prathapan and a sum of Rs. 50,000/- (Rupees Fifty Thousand) was invested by Muralidharan, brother of Prathapan. The rest of the amount came from other respondents. There was no financial contribution by Ramanujam. Initially Ramanujam and his wife Draupathy were the Directors of the Company. However, in December, 1988 Draupathy was dropped as Director and in her place Muralidharan, brother of Prathapan and Suresh Babu, brother of Prathapans wife, were taken as Directors of the Company. 5000 (five thousand) equity shares worth Rupees five lakhs were allotted in the name of Smt. Kalyani Kochuraman, mother of Prathapan against the investment of Rupees Five Lakhs. These 5000 equity shares were subsequently transferred in the name of Prathapan and his wife, 2500 (two thousand five hundred) each, subject to the transferees obtaining requisite permission of the Reserve Bank of India under the Foreign Exchange Regulation Act (FERA). The transfer of shares in the name of Prathapan and his wife Pushpa was duly recorded in the Register of Members maintained by the Company. Thus Prathapan and his wife Pushpa became shareholders of the Company to the extent of 2500 equity shares each.
(2.) Initially the Company was making losses. However, by about the year 1991-92, the Company turned the corner. Copies of balance sheets of the Company for a few years of its working have been placed on record by the appellant which show that till 31st March, 1992 there were no profits in the Company. For the first time some profit was shown as on 31st March, 1993. Till 31st March, 1993, under the head Advance towards share capital pending allotment only a sum of Rs. 3000/- (Rupees Three Thousand) was shown whereas as on 31st March, 1994 under the said head, a balance of Rs. 6,86,500/- (Rupees six lakhs eighty six thousand five hundred only) was shown. We have mentioned this figure here because it will be relevant for the main controversy in this case.
(3.) It is the case of Prathapan that he continued to provide finance to the Company by sending money to Ramanujam from time to time. The details of some of such disbursements are as under : (a) A sum of Rs. 1,00,000 in March, 1989; (b) US$ 6300 in favour of Maruti Udyog Ltd. for allotment of a vehicle for the use of second appellant in November, 1991; (c) A sum of Rs. one lakh in February, 1994; (d) A deposit of Rs. one lakh with State Bank of India in the year 1996 to provide bank guarantee in favour of the sales tax authorities at Kerala; (e) A sum of Rs. Nine lakhs in January, 1996 for making remittance in favour of the Sales Tax Authorities. ;