SHIV NATH RAI BAJAJ Vs. NAFABS INDIA P LIMITED

JUDGEMENT

(1.) SHIV Nath Rai Bajaj, the petitioner herein, has filed this petition under Section 397/398 of the Companies Act, 1956, (the Act) alleging acts of oppression and mismanagement against the respondents and seeking appropriate reliefs.

(2.) Briefly stated, the petitioner's case is that the petitioner and Heeralal Arora (second respondent) along with one Mr. Jaggi were the subscribers to the memorandum of association of the company, NAFADS India (P) Ltd. (first respondent) which was incorporated as a private limited company on 25.6.1982. The authorised capital of the said company was Rs. 25 lakhs and the paid up capital was Rs. 14,56,640. The petitioner held 98,824 shares and Shri Amarnath Jaggi, who was a nominee of the petitioner, held 22,501 shares, while the second respondent held 4,339 shares. Thus, the petitioner along with his nominee held 83.29% of the share-holding of the first respondent, whereas the second respondent namely, Heeralal Arora, held 16.71% of the equity share capital. The petitioner and second respondent were directors of the respondent company. Taking advantage of the absence of the petitioner who was a NRI settled at Bangkok, the second respondent, contrary to the provisions of the articles of association of the company and without notice, behind the back of the petitioner, allotted 20,000 shares of the face value of Rs. 10 each in favour of himself and his wife, Smt. Darshan Arora, and his son Sanjeev Kumar arora. Neither the wife nor the son was earlier a member of the company. Nor had their names been approved by the Board of directors. By the further issue of these shares, the majority share-holding of the petitioner has come down to 67.84%. Besides, the petitioner has been totally ousted from the management and control of the respondent company, and has been denied access to the company premises, account books and statutory records despite the fact that he was the Chairman of the Board of directors of the company. Mismanagement was evident from the fact that though the turnover of the company had increased, its losses have multiplied. Inspection of the accounts [and] of the records of the company and inspection taken in the office of RoC reveal that relevant returns have not been filed for several years. To resolve the difference, subsequently, an agreement/memorandum of understanding dated 2.4.1991 was arrived at between the petitioner and second respondent whereby the latter had agreed to pay a total consideration of Rs. 51,50,000 for purchasing the entire shareholding of the petitioner and his nominee, in five yearly instalments alongwith interest on the outstanding amount and till the completion of all payments, the petitioner was to continue as a shareholder director of the company and also entitled to appoint an alternate to act as director. The second respondent was entitled to appoint additional directors only as necessary for providing guarantees. The parties had also agreed not to increase the paid up capital. According to the petitioner, an amount of Rs. 25,000 was paid at the time of signing of the agreement, and in total, an amount of Rs. 23,43,750 only was paid in instalments, the balance amount of Rs. 30,31,250 has not been paid by the second respondent till date. Consequently, the petitioner continues to be a shareholder and a director of the respondent company. However, not only has he been ousted from the participation in the management of the respondent company, but was being denied even the basic rights of a shareholder. It is stated that after 2.4.1991, the petitioner has never received any notice of any general body meeting or the meeting of Board of directors, and the petitioner apprehends that all sorts of resolutions may have been passed without notice to him. On 3.12.1998 and 6.12.1998, the petitioner tried to take inspection of the account books and records, etc., though his power of attorney holder however, the same was denied Consequently, a case of oppression/mismanagement has bene made out and in the facts and circumstances, it would be just and equitable to wind up the respondent company unless the acts of oppression and mismanagement as complained of in the petition are not brought to an end. On these allegations, the petitioner has sought appropriate reliefs as set out in their prayer to the petition.

(3.) PETITIONER has filed a rejoinder reiterating the averments made in the petition and denying the allegation made in the reply filed by the respondents. It was denied that the full consideration for the shares was paid as per the MoU, and reiterated that the petitioner continues to remain a shareholder and a director. It was denied that the petitioner himself withdrew from the respondent company as alleged, and it was reiterated that he was ousted from the management by the respondents.