S. S. SUBRAMANI J. - (1.) ALL these appeals arise against the order in Company petition No. 3/111 (4) SRB/94. Except C. M. A. No. 132 of 1996, all the other appeals are preferred by the various respondents in the company petition. C. M. A. No. 132 of 1996 is filed by the petitioner in respect of that portion of the finding which went against them. For the sake of convenience, the reference to the parties hereafter will be according to their rank before the Company Law board. In its first meeting after the board of directors was reconstituted on June 2, 1994, the following subjects came for discussion and resolutions were passed by the second respondent as under : It was reported to and noted by the board that the share certificate No. 47768 for 5, 00, 000 equity shares of Rs. 10 each fully paid-up of Gordon Woodroffe Ltd. , registered in the name of the company, bearing distinctive Nos. 02617978 to 03117977, both inclusive, has been lost, as the share certificate has been illegally removed from the custody of the company and taken away by a person claiming to have control over Tracstar Investments pvt. Ltd. Accordingly, it was necessary to submit an application to the said gordon Woodroffe Ltd. for issue of duplicate share certificates, together with a deed of indemnity ; a draft whereof, was tabled for the board's consideration and approval. It was also reported to and noted by the board that it was necessary to have the above holding of the company sub-divided in the lots of rs. 1, 75, 000 shares, 1, 75, 000 shares and 1, 50, 000. In this connection the following resolutions were passed by the board : "resolved that Mr. M. S. A. Kumar, Mr. K. K. Banerjee and Mr. A. Syed Ahamed, directors, be and are hereby severally authorised to make an application to Gordon Woodroffe Ltd. , 36, Rajaji Salai, Madras 600 001, for the issue of duplicate share certificate in lieu of share certificate No. 47768 lots, in respect of 5, 00, 000 equity shares, bearing distinctive Nos. 2617978 to 3117977, both inclusive, and also to apply for sub-division of the said 5, 00, 000 equity shares, in the lots of 1, 75, 000 shares, 1, 75, 000 shares and 1, 50, 000 shares. Further resolved that the deed of indemnity proposed to be executed by the company in favour of Gordon woodroffe Ltd. in connection with the issue of duplicate certificates as hereinbefore mentioned ; a draft whereof tabled at this meeting, be and is hereby approved, and that Mr. M. S. A. Kumar, director, be and is hereby authorised to execute the same for and on behalf of the company. " * It is seen that on the same date, namely, June 2, 1994, the second respondent wrote a letter to the first respondent, to issue a duplicate certificate. An indemnity bond was also sent to the first respondent. On June 3, 1994, the second respondent again held a board meeting, and it was resolved that : "resolved unanimously that 5, 00, 000 equity shares of Rs. 10 each, fully paid-up Gordon Woodroffe Ltd. , 36, Rajaji Salai, Madras 600 001, bearing distinctive Nos. 02617978 to 03117977, both inclusive and registered in the name of the company, be sold and disposed of, at the best available market price, but at a price not below Rs. 12. 75 per share, net of brokerage, if any, and that Mr. M. S. A. Kumar, director, who failing Mr. M. M. Gupta, director, be and is hereby severally authorised to sign the requisite transfer deeds, for and on behalf of the company. " * On June 4, 1994, the first respondent again held a board meeting, and it was resolved thus : "resolved to issue a new certificate bearing No. 48177 (for 1, 50, 000 shares), No. 48178 (for 1, 75, 000 shares) and No. 48179 (for 1, 75, 000 shares) under its common seal, in the name of Shoe Specialities pvt. Ltd. in lieu of original certificate No. 47768 as recorded in the register of loss of certificate, tabled at the meeting. " * Respondents Nos. 17 to 19 seem to have purchased the shares and their names were entered in the registers. The company petition was filed challenging the above actions of respondents Nos. 1 and 2 by the petitioners under section 111 of the Companies Act whereby they prayed for the following reliefs after issuing notices to the sixteenth respondent on June 11, 1994, and June 14, 1994, asking for particulars : " (a) To declare that the transfer of shares said to have been effected by respondent Nos. 10 to 15 for and on behalf of SSPL in respect of 5, 00, 000 shares held by SSPL in Gordon Woodroffe Ltd. bearing distinctive Nos. 02617978 to 03117977, covered by folio No. GLS 05348, certificate No. 57768 as non est in law, illegal, fraudulent and invalid in law, as being violative of section 108 (1) of the Companies Act, section 4 (3) of the Companies (Issue of Share Certificates) Rules, 1970, and section 22a (4) of the SCRA and not binding on the company and/or the petitioners. . . . " * The material averments in the petition are as follows : The late Dwarakadoss Chhabria had two sons, R. D. Chhabria (R. D. C.) and M. D. Chhabria (M. D. C. ). R. D. C. had two sons, namely, m. R. Chhabria (M. R. C.) and K. R. Chhabria (K. R. C. ). In this case, we are concerned with the dispute between M. R. C. on the one hand and R. D. C. and M. D. C. on the other. The Chhabria family was controlling various companies. M. R. C. is having control over the Shaw Wallace group of companies, and R. D. C. and M. D. C. are having control over the second respondent. One of the members of the family, namely, K. R. C. (named above), was a non-resident Indian. He contributed substantially to the growth of the companies while he was abroad till 1984. The family gained control over the shareholdings of R. G. Shaw and Co. Ltd. in Shaw Wallace Co. and, in the year 1984, K. R. C. was required to go over to India by his brother M. R. C. to secure and completely take over control of Shaw Wallace and Co. It is seen that k. R. C. gave up his non-resident Indian status under the Foreign Exchange regulation Act and income-tax laws. In view of this, M. R. C. was the only member of the M. R. C. family who was having control over Shaw Wallace Co. but also the other Shaw Wallace group of companies abroad, as, under the provisions of FERA, a non-resident Indian cannot acquire or hold assets abroad, without the permission of the Reserve Bank of India. It is seen that there was some oral understanding between the members of the Chhabria family whereby it was agreed that M. R. C. would own and control most of the companies of the chhabria group, which includes Shaw Wallace Co. and its subsidiaries. Others were given control of distillery companies which included Tracstar Investments Pvt. Ltd. and Gordon Woodroffe Ltd. (GWL ). In these companies, the majority shares were held and owned by M. D. C. and R. D. C. As a consequence of this arrangement, K. R. C. was relieved of his obligations given under bank guarantee in favour of Hongkong Bank. It is seen that M. D. C. , and R. D. C. , had good business in beverages, and this was not liked by M. R. C. It is alleged that due to the development of the companies owned by M. D. C. and R. D. C. , M. R. C. was perturbed. He decided to do everything within his reach to go back on the family arrangement and with that intention, some time in April, 1993, M. R. C. decided to undo all that had been done from April, 1990 to september, 1991, in pursuance of the family arrangement. He began to claim that all the companies including GWL, Tracstar, etc. , belonged to him and to SWC, and not to any other Chhabrias. It began as a family dispute, and became a news item, and finally the same was converted into a corporate battle. It is seen that from April, 1992, onwards, the dispute which began as a family dispute, ended in dispute over the ownership and control of the companies. On April 22, 1992, a notice was issued on behalf of M. D. C. and R. D. C. regarding their rights in the second respondent/company, and their apprehension regarding the interference by M. R. C. and his people. The reason for the apprehension was that the second respondent-company was controlled by a board of directors who were employees of SWC owned by M. R. C. The notice requested the board of directors to desist from exercising their powers in a manner which prejudices or undermines the interest of the shareholders of the company. SWC owned by M. R. C. filed an application before the Company Law Board as C. P. No. 19 of 1992 under sections 247 and 250 of the Companies Act. One of the main reliefs sought in that case was, to investigate into the persons who held the shares in the second respondent-company. That application is dated May 5, 1992. It was alleged in that petition that M. R. C. wanted to interfere with the rights of standard and Stridewell in the second respondent-company. The second respondent was manufacturing shoeuppers and had been manufacturing the same through GWL. GWL was being managed by the board of directors which controlled the employees of SWC. The second respondent was also being managed by a board of directors which essentially consisted of employees of SWC or its consultants or its constituents. Thus, the persons who managed the second respondent were obliged to M. R. C. by virtue of their jural relationship, and the employees were dependent on M. R. C. It is further averred that M. R. C. , emboldened by the jural and fiduciary relationship between him and the directors of respondents nos. 1 and 2, was inspired by the fact that the directors will dance to his tune and, therefore, abused his position. They wanted to wrest control over the second respondent-company. With that intention, M. R. C. ignited the series of fraud, first by unauthorisedly increasing the share capital of the second respondent from 5, 000 to 25, 000 shares and again illegally allotted an enhanced capital of 20, 000 shares to Bhankerpur Shimbhaoli Beverages Pvt. Ltd. , which in turn created a pledge in favour of Malleswara Finance and investments Pvt. Ltd. The enhancement of the capital, issue of allotment of the same and the subsequent pledge were questioned and a company petition was filed as C. P. No. 29 of 1992 by M. D. C. and R. D. C. , before the Company Law Board. That was on July 15, 1992. In Company Petition No. 29 of 1992, an interim application was also filed, to restrain the second respondent herein from alienating its shares in the first respondent-company. On August 20, 1992, counsel for the second respondent undertook not to alienate its shares in the first respondent's company. On May 20, 1993, the Company Law Board passed an order whereby the issue of allotment of 20, 000 shares was set aside and a direction was also issued to rectify the registers. In spite of the order, the board of directors did not comply with the direction and, therefore, on August 2, 1993, another application, namely, C. P. No. 44 of 1993 was filed by M. D. C. and R. D. C. complaining of continued oppression by the directors of the second respondent, who were employees of SWC. Against the order of the Company law Board in C. P. No. 29 of 1992, Malleswara Finance and Investment Co. Pvt. Ltd. filed a writ petition before this court as W. P. No. 19256 of 1993. It came before a learned single judge for admission, and the order of the Company law Board dated May 28, 1994, was stayed. In the meanwhile, C. P. No. 44 of 1993 filed by M. D. C. and R. D. C. for giving relief against the continued oppression, came for consideration, and, in view of the stay order passed by this court in the writ petition, the Company Law Board also reserved its orders after the disposal of the stay petition. On May 10, 1994, the writ petition filed by Malleswara Finance and Investment Co. Pvt. Ltd. was dismissed. In the meanwhile, some of the respondents in C. P. No. 29 of 1992 filed C. M. A. before this court as A. A. O. Nos. 743 of 1993 and 875 of 1994. Against the dismissal of the writ petition, Malleswara Finance and Investment Co. Pvt. Ltd. filed Writ Appeal No. 806 of 1994. The writ appeal as well as the appeals against the order in C. P. No. 29 of 1992 were heard and disposed of. The judgment dated September 27, 1994, is reported in Malleswara Finance and investments Co. P. Ltd. v. Company Law Board 1995 (82) CC 836, 1995 (1) CLJ 1, 1995 (1) Complj 1 When the attempt of M. R. C. to increase the share capital in the second respondent-company failed, another attempt was made by him to sell its shares in the first respondent-company in which the first petitioner claimed some right. For the said purpose, M. R. C. issued direct instructions to the board of directors to dispose of the shares held by the second respondent in the first respondent, to third parties. Since there was already a judgment against the board of directors, in C. P. No. 29 of 1992 which was subsequently confirmed by this court, these directors expressed their dissent and, therefore, it is alleged that M. R. C. wanted those directors to resign their post, and, immediately, after the resignation, his own employees were appointed as additional directors and later inducted as directors by M. R. C. It is said that the same was done June 1, 1994, and June 2, 1994, and in the first meeting itself, in its board meeting, it was decided to obtain duplicate certificates and, thereafter, sell the same to third parties. It is averred that the resolution to get duplicate certificates and to sell the same to third parties and subsequent purchase by respondents Nos. 17 to 19 is invalid. The main reasons mentioned in the petition are (1) that it is against the undertaking filed by counsel in C. P. No. 29 of 1992 ; (2) that the appointment of the board of directors is against law and they have not formed any opinion in good faith either to issue duplicate certificates or for selling the same ; and (3) before issuing duplicate certificates, the relevant provision of law had not been applied, and no attempt was made to get the original. It is also contended that the above acts are the result of collusion between the directors of respondents Nos. 1 and 2 companies and respondents Nos. 17 to 19. It is not only against the interest of the first petitioner-company but also the other petitioners. The issuance of duplicate certificate is mala fide and is only with an intention to take away the right of the first petitioner in the second respondent-company. It is also said that the board of directors have not applied their mind, nor were they aware of the real state of affairs, and they have acted negligently and they have danced according to the tune of M. R. C. since they were none other than his own employees.
(2.) IN the counter-statement filed by the respondents, it is contended that the petition is not maintainable. It is said that the transfer of shares effected by the second respondent, a member of the first respondent, is in accordance with law, and when the transferor and the transferee had no complaint, the petitioners herein can have no locus standi to challenge the same. It is further stated that the action challenged relates to the affairs of the second respondent and the same cannot be the subject-matter of a petition under section 111 of the Companies Act. It is further said that the first petitioner cannot claim any right, title or interest in the five lakhs shares held in the second respondent which shares were transferred by the second respondent to three persons who are respondents nos. 17 to 19 in the petitions. It is further said that there is no restriction on the sale or disposal of shares held by the second respondent and, therefore, the second respondent disposed of those shares without any restriction. It is said that such a claim will be invalid and opposed to clauses 40 (a) and 40 (b)of the listing agreement form and also in violation of section 372 of the companies Act. It is further said that the first respondent-company had issued duplicate certificates and the same were registered in accordance with law. There is no violation either under section 23a (iv) of the Securities Contracts regulation Act, 1956, and rule 4 (3) of the Companies (Issue of Share certificates) Rules, 1960. According to them, the challenge is without any merit, and the directors have done only their duties in accordance with law. It is further said that the board of directors duly elected in pursuance of the resolution passed by the board of directors were competent to effect the transfer. It is said that the duplicate certificate was issued pursuant to the request made by the second respondent stating that the certificate held by it was lost from its custody, the same having been taken away by persons claiming to have control over the first petitioner-company. The request was made on June 2, 1994, and the second respondent also made a request for three split certificates. It is said that share transfer committee of the first respondent, constituted by the board of directors of the company to deal with such matters considered the matter on June 4, 1994, and the documents presented by the second respondent were perused, and they were satisfied that the conditions provided for the issue of duplicate certificate had been complied with. It is said that the first respondent received an application for registration of the transfer of the shares from third persons, who were subsequently impleaded as respondents Nos. 17 to 19. The allegation regarding fraud and collusion between respondents Nos. 1 and 2 and respondents Nos. 17 to 19 was denied. They also dispute the right of the first petitioner in its claim over the said shares. They also dispute the claim of the first petitioner as pledgee of the said shares, which were registered in the name of the second respondent. It is said that the said claim is contrary to law. They also dispute the locus standi of the other petitioners in filing the petition under section 111 of the Companies act. They also said that there was no necessity to investigate the loss of the original certificate, the reason being that the first petitioner was in possession of the same without any authority and, therefore, when the second respondent applied to the first petitioner for the issue of a duplicate certificate, so far as the second respondent was concerned, it was denied its right to be in custody and, therefore, deemed to have been lost. The contentions of the other respondents are also similar, except those of respondents Nos. 17 to 19 wherein they further allege that they have purchased the shares bona fide for consideration without notice about the inter se dispute between the members of the Chhabria family. It is their case that they have purchased the shares as an investment. They also contend that as against them no separate relief has been claimed in the petition and they have not been issued any notice before they were impleaded. They also say that the provisions under section 111 of the companies Act cannot be invoked in this case, since disputed questions of fact and law are in issue. It is their case that there is no violation of either section 84 or section 108 of the Companies Act, and the remedy of the petitioners, if any, is only to file a suit and get appropriate relief. On the above contentions, the Company Law Board raised the following issues (at p. 952 of 87 Comp Cas) : " (1) Whether the petitioners have locus standi to present the petition " (2) Whether the matter is to be relegated to a suit " (3) Whether SSPL has violated the undertaking given to the Company Law Board in C. P. No. 29 of 1992 " (4) Whether sale of shares of SSPL is deemed to be the sale of the undertaking " (5) Whether GWL has violated the provisions of section 84 (2) of the Act and the Companies (Issue of Share Certificates) Rules, 1960 " (6) Whether removal of the name of SSPL and consequent entry of the names of respondents Nos. 17, 18 and 19 in the register of members of GWL was'without sufficient cause'" (7) Whether the prayer for rectification of the register of members is to be granted "" * On issue No. 1, the Board held in favour of the petitioners. On issues Nos. 2, 3 and 4, the finding was against the petitioners. On issue No. 5, the finding was in favour of the petitioners. On issues Nos. 6 and 7 also, the finding was in favour of the petitioners. Finally, the Board held that the transferees were not able to establish that they were bona fide purchasers for value without notice, and the name of the second respondent was omitted from the register of members without sufficient cause and, therefore, it was directed to be entered therein, after removing the names of the transferees. It also directed the second respondent to pay respondents Nos. 17 to 19 the consideration for the sale of the shares and that will be sufficient to protect their interest. It also held that the issuance of a duplicate certificate was against law, and respondents Nos. 17 to 19 will not get any right therein. It is against the said judgment, these appeals have been preferred. The main argument advanced on behalf of the respondents in these various appeals is that the finding by the Company Law Board that there is collusion between respondents Nos. 1 and 2 to gain control over the first respondent is not correct. All of them attack the finding that the directors of the second respondent deviated from their fiduciary position and decided to act against the interest of the majority of the second respondent with the active co-operation of the first respondent, is without any basis. The further finding of the company Law Board that without the active co-operation and pre-arrangement between the directors of respondents Nos. 1 and 2, the alleged transaction could neither have been conceived, planned or implemented with such fine tuning is also based on no evidence and, therefore, liable to be set aside. It is their case that since that finding is without any evidence, the order of the company Law Board has only to be set aside. The said argument is elaborated by them by stating that in the petition, there is no substantial pleading regarding fraud or collusion and the particulars are also not given. It is their further case that if it is a case of fraud and collusion, minute details will have to be pleaded, for which the summary procedure under section 111 of the Companies Act is not the proper forum. The Company Law Board should have directed the parties for a regular civil suit. I will first consider the question whether there is a pleading in this case, and whether the alleged vagueness or its absence has in any way prejudiced the case of the respondents, and whether they have been misled by absence of pleadings. Learned counsel for the respondents (appellants herein)relied on the decision reported in Bishundeo Narain v. Seogeni Rai, 1951 air (SC) 280, 1951 SCJ 413, 1951 (2) SCR 548, 1951 ALJ (SC) 127, 30 ILR (Pat) 947, 1951 ALJ 127 and also on the decision reported in Ladli Parshad Jaiswal v. Karnal Distillery and Co. Ltd. , 1963 AIR (SC) 1279, 1964 (1) SCR 270, 1963 (33)CC 593, 1964 (2) SCJ 12 for the said purpose. Learned counsel also relied on the provisions of Order 6, rule 4 of the Civil Procedure Code for the said purpose. I will deal with these decisions and the provisions of the Code of civil Procedure seriatim. The object of pleadings is to present a full picture of the cause of action with such information and detail as to make the opposite party understand the case. The object of giving such particulars is to enable the opposite party to know as to what case he has to meet and thus to prevent a surprise trial and to limit the generality of the pleadings to definite and limited issues to be tried and thus save unnecessary expenses. "fraud" is defined in section 17 of the contract Act. But the "fraud" dealt with therein is concerning the fraud between two contracting parties. In fact, the provisions under section 17 of the said Act may not be specifically applicable to the facts of this case. According to the petitioners'case, the acts of directors of respondents Nos. 1 and 2 have affected their rights, and their act was a secret arrangement. The petitioners herein are not the contracting parties, but the affected persons. They are not parties to the alleged secret arrangement. If so, what they can plead are only the circumstances from which an inference has to be drawn, whether the secret arrangement is in any way fraudulent or collusive. In G. Subashini v. P. Lakshmi Bai [1987] II MLJ 107, one of us (Srinivasan J.) had occasion to consider a similar question. In paragraph 18 of the judgment, at page 113, the learned judge discussed the law and held as to what is sufficient compliance with Order 6, rule 4 of the Civil Procedure code. The relevant portion of paragraph 18 reads thus : "the provisions of Order 6 of the Code of Civil procedure would only mean that where a party is in a position to give all the particulars regarding the grounds set out in the rule, he shall set out the same in the pleading itself. The object of the rule is to enable the opposite party to know what case he has to meet and thus to prevent a surprise at the trial. But, it must always depend upon the facts of each case as to what decree of particularity is required. (vide Philips v. Philips [1879] 4 QB 127 ). The general rule that full particulars must be given in the pleading cannot be made applicable to a case where the concerned party is not in a position to know the full particulars. " *(emphasis supplied) On going through the petition, and also the reply affidavit filed by the petitioners, it is clear that they have averred the necessary circumstances from which, if they are proved, an inference of collusion can be inferred. Before going to the facts, we have also to consider what is meant by "fraud" independent of contract, and what is the effect of the power exercised by persons who stand in a fiduciary relationship. It cannot be disputed that the directors of the company stand in a fiduciary position in discharging their duties which they owe to the company and they are to be treated as trustees of the properties of the company under their control. In Shackleton on the Law and Practice of Meetings, 7th edition (1983), at page 229, the learned author says thus : ". . . the management of a company is vested in its directors who are, in effect, agents for the company in relation to the transactions into which they enter on behalf of the company, and trustees for the company so far as concerns the company's funds and property. " At page 230, the learned author further says thus : " Directors are in a fiduciary position. They must exercise their powers for the company's benefit and, if abuse of these powers is threatened, the court will intervene. There have been cases, for example, of directors having been restrained by the court from abusing powers in the articles relating to the registration of transfers and the issue of shares under their control. Alternatively, the court may order a general meeting : Under a scheme designed to avoid a takeover bid, the board altered the voting rights attaching to shares so that the board and its associates obtained a majority of votes at general meetings by means of an issue of new preference shares. The court regarded this action as unconstitutional but made no order until a general meeting had an opportunity of approving the scheme. " *
(3.) PALMER's Company Law, volume 1, 23rd edition (1982), chapter 64 deals with "directors" and "fiduciary Duties". At page 850 (Chapter 64-04), the learned author says that directors are under a duty to act bona fide in the best interest of the company. While dealing with the said subject, the learned author further says thus : "although directors'duties are owed primarily to, and are enforceable by, the company and not to individual shareholders, the company is defined in equity usually by reference to the shareholders as a whole and not by reference to the company as an entity distinct from its members. In a celebrated instance, counsel advised that'the expression "the company" did not mean the sectional interest of some (it may be a majority) of the present members, but of present and future members of the company'and that, on the basis that the company has to continue as a going concern, the directors'should balance a long-term view against short-term interests of present members'. A similar view was taken by Megarry J. in Gaiman v. National Association for Mental Health 1970 (2) Aller 362, 1971 (41) CC 929, 1971 Ch 317 when he said : 'the interests of some particular section or sections of the company cannot be equated with those of the company, and I would accept the interests of both present and future members of the company as a whole, as being a helpful expression of a human equivalent.' It may be that when the company is no longer solvent the interests of the company include the interests of its creditors. " * (emphasis supplied) The power to manage the company is vested in them. We may have also to consider what is meant by "collusion". In P. Ramanatha Aiyar's The Law Lexicon, reprint edition 1987, at page 216-i, "collusion" is defined as "a secret agreement for a fraudulent purpose ; a secret or dishonest arrangement in fraud of the rights of another ; a secret agreement by two or more persons to obtain an unlawful object, an agreement between persons to obtain an object forbidden by law, or to obtain a lawful object by illegal means" * . The petitioner's case is that there is a secret and dishonest arrangement between the directors of respondents Nos. 1 and 2, in fraud, which has affected their right. In Wharton's Law Lexicon, 14th edition (1993), at page 212, "collusion" is defined as "to unite in the same play or game, and thus to unite for the purposes of fraud of deception ; an agreement or compact between two or more persons to do some act in order to prejudice a third person, or for some improper purpose. " * In Shrisht Dhawan v. Shaw Bros. 1992 AIR (SC) 1555, 1991 (5) JT 378, 1992 (1) RCJ 339, 1992 (1) RCR 442, 1992 (1) Rentlr 584, 1991 (2)Scale 1386, 1992 (1) SCC 534, 1991 (S3) SCR 446, 1992 (1) UJ 346, 1992 AIR (SCW)1649 their Lordships considered a similar question as to how far fraud and collusion invalidate any decision or action. In paragraph 20 of the judgment, their Lordships said thus : "fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It is a concept descriptive of human conduct. Michael Levi likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to,'wing me into the easy-hearted man and trap him into snares'. It has been defined as an act of trickery or deceit. . . " * After extracting the various definitions in the dictionaries, their Lordships further held thus : ". . . fraud in public law is not the same as fraud in private law. Nor can the ingredients which establish fraud in commercial transactions be of assistance in determining fraud in administrative law. It has been aptly observed by Lord Bridge in Khawaja that it is dangerous to introduce maxims of common law as to the effect of fraud while determining fraud in relation to statutory law. . . The present day concept of fraud on statute has veered round abuse of power or mala fide exercise of power. It may arise due to overstepping the limits of power or defeating the provisions of the statute by adopting subterfuge or the power may be exercised for extraneous or irrelevant considerations. The colour of fraud in public law or administrative law, as it is developing, is assuming different shades. It arises from a deception committed by disclosure of incorrect facts knowingly and deliberately to invoke exercise of power and procure an order from an authority or tribunal. It must result in exercise of jurisdiction which otherwise would not have been exercised. That is, misrepresentation must be in relation to the conditions provided in a section on existence or non-existence of which power can be exercised. But non-disclosure of a fact not required by a statute to be disclosed may not amount to fraud. Even in commercial transactions non-disclosure of every fact does not vitiate the agreement.'in a contract every person must look for himself and ensure that he acquires the information necessary to avoid bad bargain'. In public law the duty is not to deceive. . . . " * In De Smith's Judicial Review of Administrative Law action, fourth edition (1980), at pages 335 and 336, the learned author says thus : "a power is exercised fraudulently if its repository intends to achieve an object other than that for which he believes the power to have been conferred. For example, a local authority committee would exercise in bad faith its power to exclude interested members of the public if it deliberately chose to hold the meeting in a small room. The intention may be to promote another public interest or private interests. A power is exercised maliciously if its repository is motivated by personal animosity towards those who are directly affected by its exercise". In" Administrative Law" * by justice C. K. Thakker, (1992) edition, at page 328, the learned author has stated thus : "sometimes, an authority entrusted with a power does not exercise that power but acts under the dictation of a superior authority. Here, an authority invested with the power purports to act on its own but'in substance'the power is exercised by another. The authority concerned does not apply its mind and take action on its own judgment, even though it was so intended by the statute. In law, this amounts to non-exercise of power by the authority and the action is bad. " * In Equity and the Law of Trusts by Philip H. Pettit, fifth edition (1985), at page 148, the learned author says that there is no distinction between the words "fraud" and "dishonest". Both of these mean the same thing and the use of the two together does not add to the extent of dishonesty required. The learned author also says at page 149 what a trustee should know before he is made liable or charged with dishonesty or fraudulent act. The learned author says thus : " (i) actual knowledge ; (ii) wilfully shutting one's eyes to the obvious ---'nelsonian knowledge'; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make ; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man ; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry. " * A director of a company must know that he is a trustee for the company ; though he need not know all the details of it. He must know of the dishonest and fraudulent design, though not necessarily of the whole design ; and he must know that his act assisted in the implementation of such design --- if these acts are proved, fraudulent act on the part of the directors can be imputed. In this connection, it is better to refer to Kerr on the law of Fraud and Mistake, 7th edition (1952), at pages 672 and 673, the learned author has said thus : "it is not, however, necessary, in order to establish fraud, that direct affirmative or positive proof of fraud is given. Circumstantial evidence is not only sufficient, but in many cases it is the only proof that can be adduced. In matters that regard the conduct of men the certainty of mathematical demonstration cannot be expected or required. Like much of human knowledge on all subjects, fraud may be inferred from facts that are established. Care must be taken not to draw the conclusion hastily from premises that will not warrant it, but a rational belief should not be discarded because it is not conclusively made out. If the facts established afford a sufficient and reasonable ground for drawing the inference of fraud, the conclusion to which the proof tends must, in the absence of explanation, or contradiction, be adopted. It is enough if from the conduct of a party the court is satisfied that it can draw a reasonable inference of fraud, or if facts be established, from which it would be impossible upon a fair and reasonable conclusion, to conclude but that there must have been fraud. . . " * (emphasis supplied)Now, let us consider whether the above ingredients are proved in this case. ;