Deepa Krishan, Member - (1.) This order will dispose of C.P. No. 40(ND) of 2015 (RT No. 29/2016) filed by the petitioners under sections 397. 398, 402 and 403 of the Companies Act, 1956. The Respondent No. 1 is M/s. Rai Bahadur Kishore Chand and Sons (Properties) Pvt. ltd. (hereinafter referred to as R company). Respondents 2,3 and 4 are Shri Ajay Maheshwari. Shri Sanjay Maheshwari and Ms. Namita Maheshwari who are Directors of R1 Company and are real brothers and sister. Respondents 5 and 6 namely Registrar of Companies, Punjab, Haryana and Himachal Pradesh and Regional Director (North Region) are Proforma Respondents.
(2.) The Petitioners have filed the petition against Respondents No. 1, 2, 3 and 4 stating that there have been acts of oppression and mismanagement by the Respondents. The petition was filed on 21.5.2015 before the Company Law Board, New Delhi Bench. Subsequent to the creation of National Company Law Tribunal, Chandigarh Bench, the Company Petition was received on transfer to NCLT, Chandigarh Bench as the Registered Office of the Company is located at Amritsar. Punjab. 2.2 R1 Company RBKC is a private family owned company and was founded/incorporated by two brothers namely, Shri Pratap Chand Maheshwari (father of the Respondents 2, 3 and 4) and Shri Kailash Chand Maheshwari (father of the Petitioners 1 and 2) on 2.6.1980. The Petitioners were appointed on the Board of R1 Company as Directors in 2009 when they had 1500 and 3582 shares in R1 company and subsequently in 2012 acquired their parents shareholding and jointly hold 45.81% of R1 Company shareholding R2 and R3 have 19.32% and 18.26% of the total shareholding respectively, and other members of the respondent group have the remaining shares. 2.3 The Petitioners have stated that R1 Company is in the nature of quasi partnership and is family owned, thereby creating equal rights amongst the members in sharing profits of the Company The Respondents have questioned the stand of the Petitioners. 2.4 Apart from being Directors of the R1 Company since 2009, the Petitioners were also managing other business and were residing in Indore since 1999. The Petitioners have stated in their petition that both the Petitioners and R2. R3 and R4 are also Directors of Respondent No. 1 Company. The Petitioners and Respondents R2, R3 and R4 are children of two real brothers. The main business of the Company was to invest in properties and to generate funds through rentals and other use of the property. 2.5 The issued, subscribed and paid-up capital of R1 Company at the time of incorporation was Rs. 29,87,400/- divided into 29874 equity shares of Rs. 100/- each. At the time of filing of the petition in May, 2015, the authorised share capital of the R1 Company was Rs. 50 lakhs divided into 30000 equity shares of Rs. 100/- each and 20000 preferential shares of Rs. 100/- each. The Paid-up capital is Rs. 29,87,400/- divided in 29874 equity shares. 2.6 Petitioner 1 is a Director and shareholder of R1 Company holding 6820 equity shares amounting to 22.83% of the total shareholding of R1 Company. 2.6.2 Petitioner 2 is also a Director and shareholder of R1 Company, holding 6864 equity shares, amounting to 22.98% of the total shareholding of R1 Company. 2.6.3 The Petitioners thus hold 45.81% of the share capital R2 holds 5454 equity shares i.e. 18.26% of the share capital and R3 holds 5770 equity shares i.e. 19.32% of the share capital. Respondent No. 4 is a Director of the R1 Company but does not hold any equity share in the R1 Company. Other significant shareholders of R1 company are 8.37% (2050 shares) in the name of M/s. Amritsar Rayon and Silk Mills Pvt. Ltd. and Rai Bahadur Kishore Chand (HUF). 2.7 In the pleadings and during arguments it is stated that when the Respondents' father died in 2007, R2 was appointed as Director on 16.2.2007 P1, P2. R3 and R4 were appointed as Directors on 22.7.2009. It is also stated that though R4 was not holding a single share but was made Director in 2009, the Petitioners did not object as they were busy in their own business at Indore and also as R4 was their sister. 2.7.2 The Petitioners have alleged in the petition that R2 was entrusted inter-alia with operating all bank accounts of the Company, negotiating with all parties and was in effective control of the business and finances of the Company, but always consulted the Petitioners on most matters The Petitioners had shifted to Indore to manage their other business and thereafter, the answering Respondents did not inform the Petitioners about day-to-day affairs of the Company. The Petitioners were not issued any notices for the Board Meetings from 2009 onwards. The Petitioners have alleged that the answering Respondents restrained the Petitioners from inspection of Board Minutes and Annual Reports of the Company. Thereafter, the Petitioners got a search conducted on MCA portal and found that the Respondents had been indulging in activities detrimental to the business of the Company and its shareholders and the income of the Company was brought to losses. The Petitioners also alleged that - "a. R1 Company never issued any notices to the petitioners for any AGMs/EGMs post 2009. b. The Respondents did not file the statutory records of the R1 Company with the ROC, allegedly to ensure that their acts of oppression and mismanagement in R1 Company do not come to light. c. The analysis of Balance Sheets obtained from ROC indicate large transfer of R1 Company's funds to the private business of R2 and R4. It is stated that these loans were being taken without the knowledge, consent or permission of the Petitioners and against the specific bar of the Memorandum and Articles of Association of R1 Company. d. The answering Respondents have created charges on the properties/assets of R1 Company. They have specifically mentioned loan of Rs. 5 crores taken on 30.9.2012 from HDB Financial Services Ltd. against the property bearing No. 3-A. Abadi. the Mall, Opp. Company Bagh, Amritsar. This loan came to light of the Petitioners when they got a search conducted on MCA portal on 11.3.2015. The Petitioners subsequently sent a legal notice dated 01.4.2015 addressed to the Respondents requesting them to allow inspection of records of the Company and provide copies of certain documents. e. On coming to know that the Respondents were transferring certain assets, the Petitioners carried out a public notice on 04.5.2015 in Dainik Tribune and Times of India, cautioning the public at large that the Respondents may try to sell, alienate the assets of the Company and the public shall deal with them at their own risk. f. In 2013-14, Respondents also took loan of Rs. 1.34 crores for buses which are running for schools of R group. g. Respondents also gave unsecured loans without any charge of interest. h. They have made efforts to amicably resolve all matters, but to no avail. It is also stated that though properties have been put up on rent for good amount (for e.g. Maclead Road Property has been put up on rent for about Rs. 4 lakhs per month) but no dividend was ever declared nor any amount disbursed in favour of the Petitioners. It is further stated that the same property had been leased oat for 99 years to a third party along with tenants at the meagre lump sum amount of Rs. 15 lakhs. i. The Petitioners have stated that in the facts and circumstances, it will be just and equitable to wind up the Company However, as the winding up of the company may not be in the interests of the shareholders of the Company and the Company itself, the Petitioners are praying for an equitable relief which are reliefs, other than winding up under sections 397 and 398 read with sections 402, 403 and 406 of the Companies Act." 2.8 The following reliefs have been sought by the Petitioners:- "• Declare that the respondent Nos. 2 and 4 have rendered themselves liable to be removed from the board of respondent No. 1 company; • To pass appropriate orders under section 397 of the Companies Act, 1956 to regulate the affairs of the company and to end oppressive acts complained thereof and also to pass appropriate directions under Section 398 of the Act thereby ending conduct of affairs of company which are being conducted in a manner prejudicial to public interest, the company and various stakeholders. • Direct the Respondent No. 2 - 4, to restore to the Company all the losses suffered by the Company pursuant to or as consequence of various acts/omissions, complained in the Petition and/or otherwise including but not limited to the various acts of oppression and mis-management; • Declare that the Respondents No. 2 - 4 have no power or authority to encumber, deal with the assets and properties of the First Respondent Company or in any manner intermeddle with the affairs of the First Respondent Company; • Restrain the respondent Nos. 2 to 4, their agents, employees, representatives, nominees, assignees administrators or any other person acting for and on behalf of respondent No. 1 from in any manner selling and/or alienating or creating any third party interest upon any of the assets of the company in favour of anyone; • Pass an order thereby framing a scheme under Section 402 of the Companies Act, 1956 in the respondent No. 1 Company thereby dividing the assets in proportion to the shareholding of the Petitioners and of the Respondents. • Pass such further order or orders as this Hon'ble Board may deem fit and proper in the facts and circumstances of the case." The Petitioners have also prayed for interim orders. However, the same were not granted.
(3.) The Respondents, primarily answering Respondents i.e. R2, R3 and R4, have vehemently opposed the Company Petition They have stated that the Petitioners who are two Directors of R1 company have never taken any interest or played an active role in the management of the R1 company. 3.2 The answering respondents in their reply have given the details of a purported family arrangement of 1986-87. There are four branches of the Maheshwari family, each headed by one of the sons of Late Shri Rai Bahadur Kishore Chand Maheshwari. Two of these are the fathers of Petitioners and answering Respondents Each of these four sons have been given different businesses at different cities which are situated at Ballabhgarh near Delhi, Jaipur Rajasthan, Amritsar Punjab and Pithampur at Indore, Madhya Pradesh respectively, as part of family arrangement in 1986-87. The businesses at Indore were in the control of the Petitioner group and the businesses at Amritsar was run by the Respondent group who also diversified into healthcare and education and revived the business of transportation. The copies of detailed family chart and shareholdings in each of the four businesses have also been filed by the Respondents in their reply. It is seen that there is no significant cross holding by other members of the family in the businesses run by each group, apart from R1 company where the petitioners have 45.81% shareholding and only 54.19% belong to the R group. The respondents do not have any shareholding in the business being run at Indore by the Petitioners The Respondents have several other businesses in Amritsar where the petitioners do not have any significant shareholding. 3.3 The respondents in their reply have stated that they have been successful in restoring the R1 company as the rent given by various tenants have shown significant increase as per table given below: 3.3.2 We have gone through this table showing increase in monthly rent from 2007-08 to 2014-15 i.e. a period of seven years. Extraordinary increase has been shown in the case of Sales Tax dept of 722% over a period of seven years. In another two cases namely PNB and DD International, the increase is more than 300% but in both the cases, additional area was developed. Of the remaining cases, only in the case of IOB, the increase is 115.9% while in the other three cases the increase is much below the cumulative bank rate or inflation rate for 7 years. 3.4 The respondents have stated that out of mutual respect and family tradition, interlocking shareholding and Directorships remained in the R1 company at the specific request of the petitioners as positions on Boards of other companies make it easier for them to obtain loans from Banks and other financial institutions. 3.4.2 It is observed that the respondent company was formed in 1980 with the fathers of petitioners and respondents being the original subscribers and directors After the purported family arrangement in 1986-87, there was no corresponding change in the shareholding of the respondent 1 company and the petitioner group still holds the same 45.81% share since the inception of the company Thus even if there was a family arrangement, R-1 company apparently was not a part of the same because there was no change in the shareholding of the two groups. 3.5 Petitioners have also stated that though the shares of petitioners' father were transferred to them in 2012 they were inducted as Directors in 2009 when P1 and P2 held 1500 & 3414 shares respectively. The answering respondents have admitted that presently petitioner No. 1 and petitioner No. 2 hold 22.84 and 22.98% of the shares of R1 company. It is noted that each of the petitioners are the largest single shareholders of R1 company though together they own less than 46%, making them minority shareholders. 3.6 The answering respondents have stated that the petitioners have played no active pan in the R1 company since 2009 and there is an undue delay on the part of the petitioners to file the CP. It is stated that the CP suffers from delays and laches and is barred by limitations and also that the petitioners while praying for equitable relief have approached the Board with unclean hands by not disclosing the particulars of the family arrangement and the Mclead Road property. 3.7 The respondents have stated that the petitioners have concealed material facts relating to R1 company's Mclead Road property. The location of the property, expansion of the existing building and establishing good relations with as many of the existing tenants as possible, left the R1 company with few option to develop the said property. The respondents decided to leverage this property to provide a more stable stream of rental income and thus struck a deal to develop the property to its fullest and share the rentals on a 60-40 basis with R1 company. The salient feature of this deal was for the R1 company to retain the present building and (for the buyers) to develop the vacant area. The revenue from the newly constructed area was to be shared in the ratio of 60% by the tenant/buyer and 40% to the R1 company for the next 99 years even though all building costs and construction related costs were to be borne by the buyer/tenant. 3.7.2 The respondents have stated that the petitioners interfered with these arrangements by telephoning various associates of R1 company and threatening them not to proceed with the contract by mentioning that there is a litigation pending This resulted in the proposed contract being cancelled. 3.8 The respondents have stated that the petitioners have also written to the lender namely HDB Financial Services against the R group who were trying to pay off their high interest bank loans and to consolidate their borrowings from one lender. 3.8.2 The respondents have given details of some of the loans taken by R1 company. 3.8.3 The respondents have stated that as these loans were accruing at an interest rate of 15%, the R1 company took a loan of Rs. 5 crores on 30.9.2012 from HDB Financial Services Ltd. at a rate of 12.5% against the property bearing No. 3-A. Abadi The Mall, Opp. Company Bagh, Amritsar (this property is co-owned by R1, R2, R3 and the petitioners). 3.9 The petitioners have stated that by carrying out a public notice in Dainik Tribune and Times of India on 4.5.2015 cautioning the public from dealing with the answering respondents is hampering the business of R1 company and is a breach of fiduciary duties they owe to R1 company as Directors. 3.10 The respondents have stated that Sh. Kailash Chand Maheshwari (father of the petitioners) had handed over the records that were with him to the answering respondents in 1998 However, it is noted that the answering respondents are Directors only from 2007 and 2009. 3.11 The answering respondents have stated that the request of the petitioners to inspect the documents of the R1 company was granted by CLB on 5.6.2015. A detailed chronology of events has been given in the reply and it is stated that the inspection was carried out on June 25, 2015 at the registered office of Petitioner No. 2. It is further stated that 6 weeks after this date on 6.8.2015, the petitioners again issued a notice for inspection and such notice contained allegations with a view to harass the answering respondents and delay the adjudication of company petition CLB again issued an order on 25.8.2015 for inspection sometime in the week of Sept 21, 2015. It is stated that apprehending interference in their quiet and peaceful possession by the petitioners of the house situated at 3-A Abadi The Mall, Amritsar the respondents moved a suit for injunction and the Court ordered dated 5.8.2015 directed the parties to maintain status quo regarding possession till the next date of hearing. 3.12 The respondents have also attached a copy of email received by them from the petitioners on 20.8.2015, wherein they have stated that this discloses the true purpose of filing the CP i.e. to demand an extortionate price for the petitioners exit from the R1 company. This email is a proposal for settlement of 3-A The Mall/RBKC (Property) company and is reproduced below (The status of the persons named therein in the CP have been inserted in brackets for ready reference). "PROPOSAL FOR SETTLEMENT OF 3-A PROPERTY COMPANY "1. Sarad (P2) & Sunil (P1) would gift their share in Property Company to Sunjay (R3) & Ajay (R2) or their nominee as such the company would exclusively belong to them. 2. Delhi has gifted a part of the property to Sunjay, Ajay, Sarad & Sunil. From that property Sunjay & Ajay would gift their share to Sarad & Sunil. 3. The old house at Town Hall. Amritsar would be sold and the proceeds to be given to Sarad & Sunil. In case not saleable early meanwhile rent received to be given to them. 4. Cash amount of 3 Cr. be given within 2 to 3 months. 5. If the above proposal is implemented 3-A the Mall would belong to Sunjay & Ajay. Property Company (solely owned by them) one part & II part would belong to Kailash Chand (Father of P1 & P2). Sarad & Sunil. 6. Legal cases at Delhi & Amritsar would stand withdrawn" 3.13 The Regd. office of R1 company is at RBKC Towers, Mclead Road, Amritsar (while the respondents had filed a suit for injunction fearing interference in their quiet and peaceful possession of the house situated at 3-A Abadi, The Mall, Amritsar. As per CLB order Dt. 5.6.2015, the inspection was to be carried out at the Regd. Office. The CLB order stated that "Counsel of R2. Mr. Rahul P Dave hereby undertakes to this Bench that R1 company will provide inspection to the petitioners, provided they come to Registered Office by giving two days' notice before visiting the Registered Office". 3.14 In their para-wise reply to the petition, the answering respondents denied that the R1 company was established/incorporated for the benefit of the entire family with more or less equal shareholdings amongst family groups, giving representation to all family members on the Board and was being managed in the nature of quasi partnerships. 3.15 The respondents have also denied that the petitioners are entitled to file a petition under Section 399 of the Companies Act as no cause of action has arisen. They have also denied that the petitioners were involved in the R1 company since 1990 and were responsible for identifying properties to be purchased by R1 company or carrying out its day-to-day business. All the allegations made in the CP have been denied by the answering respondents except the admitted facts. 3.16 The answering respondents have denied that R1 company has not issued any notices for AGMs/EGMs post 2009 and have not published any minutes of these AGMs/EGMs. Copies of the Minutes of the AGMs/EGMs of the R1 company from 30.9.2009 to 30.9.2014 and the notices stated to have been issued to the petitioners have been annexed with the reply. It is further stated that the petitioners were in fact present at the AGMs/EGMs from the year 2010 to 2013. It is also stated that all statutory records have been filed with the ROC. 3.17 The answering respondents have stated that the loans being taken by R1 company are pursuant to the objects of the R1 company and Clause 13 of the Memorandum specifically allows the R1 company to take loans pursuant to the objects of the company. 3.18 The respondents have denied that the company was receiving Rs. 4 lakhs per month as rent from one of the properties and there were no overheads. It is stated that the answering respondents have been utilising the revenue of the R1 company to expand its business. However, in Para 8.19 of their reply, the respondents have stated that the rent received from Mclead Road property is Rs. 3,74,721/- per month. 3.19 The answering respondents have denied that they are siphoning off or diverting funds of the company for their personal gains and against the interests of the petitioners and other shareholders.;