JAGJIT SINGH CHAWLA Vs. TIRATH RAM AHUJA LTD

JUDGEMENT

(1.) THE substantive allegation in this petition filed under Section 397/398 of the Companies Act, 1956 ("the Act"), in relation to the affairs of Tirath Ram Ahuja Ltd., is that the petitioners group collectively holding 12 per cent. shares in the company have been completely excluded from the management of the company in spite of its having been a part of the management for over 45 years.

(2.) According to the petitioners, the company which was incorporated in the year 1950 was all along being jointly managed by members of three families headed by Sri R.S. Tirath Ram Ahuja, Sri J.S. Chawla and Sri S.K. Bagai. None of the three is alive today. Even though the original subscribers to the memorandum were the late Tirath Ram Ahuja and the late S.K. Bagai, yet, immediately after incorporation, the late Chawla was also inducted as a director and he continued to be so till his demise in 1996. The late Tirath Ram Ahuja was a permanent director and chairman of the company as per the articles of association of the company. All the three were electors right from incorporation of the company on February 28, 1950, and the affairs of the company were being managed in line with partnership principles among the heads of the three families. When Tirath Ram expired in 1985, the late J.S. Chawla became the chairman of the company and he continued to function as such till he expired in 1996. In 1985, the second respondent who is the son of the late Tirath Ram Ahuja became the managing director and Sri P.S. Chawla, a son of late J.S. Chawla became the joint managing director, a post created for the first time. When Sri Bagai expired, his son Sri R.R. Bagai joined the company as an employee and he continues to be so even now. In 1997, Sri P.S. Chawla died in an accident. Since the petitioners belonged to Chawla's family, in spite of repeated requests made to the respondents for a representation on the board, the same has been denied notwithstanding the fact that the business of the company is in the nature of a partnership between the three families. In addition to this grievance, the petitioners have also made allegations of financial mismanagement.

(3.) HE further argued ; After the company was taken over by the respondents, the performance of the company has deteriorated in view of siphoning off of funds of the company as is evident from the fact that the profitability has gone down. Further, notwithstanding the fact the petitioners constitute a single block of shareholders, the company is not allowing inspection of the accounts of the company. The petitioners are not given notices for the board or general body meetings. The petitioners have been completely sidelined and are kept in the dark about the affairs of the company. Therefore, an investigation into the affairs of the company is necessary.