MOHAN M THITE Vs. RELIABLE ROPES MFG. (P.) LTD.

JUDGEMENT

(1.) THE present petition is filed under sections 397 and 398 of the Companies Act, 1956 ('the Act') alleging certain acts of oppression and mismanagement in the affairs of the company and sought various reliefs as prayed in para 8 of the petition. Shri Pradip Jain, learned Counsel for the petitioners submitted that the first petitioner and the second respondent and one Mr. Nitish Kumar Chakravorty were the subscribers to the memorandum and holding each 1/3rd in the share capital of the company. They were also the first directors of the company. The shareholding pattern was maintained proportionately. The shares belonging to Shri Nitish Kumar Chakravorty were transferred to Mrs. Mrudula Parekh, i.e., the 3rd respondent herein. The said transfer of shares to the 3rd respondent who is wife of 2nd respondent was done purposefully to capture the management and control over the company by the 2nd and 3rd respondents. The signature of the petitioner No. 1 was taken on blank form by misrepresenting the facts who is basically a technocrat and unaware of the commercial and legal aspects of the business. The respondent No. 3 was inducted as director on 21st December, 1993 and Form 32 was filed which was misrepresented. The learned counsel for the petitioners further submitted that the assets of the company have been sold to Shri Swastik Ropes & Traders (P.) Ltd. for a sum of Rs. 1.26 crore even though the liabilities of the company are yet to be cleared. After sale of the assets the company wants to be wound up and should have been logically paid 1/3rd to petitioner No. 1 which was promised by the respondents while taking his signatures on the relevant papers and documents for transfer of assets. The conduct of respondent Nos. 2 and 3 constitutes acts of mismanagement and oppression on the ground that the second respondent has changed the shareholding of his family so as to acquire two third share holding in the entire share capital of the company. The petitioner has no say in the management even though he has built up the entire goodwill of the company. Further the respondents have utterly mismanaged the operations of the company and the petitioners were not getting notices to attend any general meetings or Board meetings in spite of being the shareholders as well as the directors. In the circumstances, he prayed the Bench to grant the reliefs as prayed in the petition. In support of the same the learned counsel for the petitioner relied upon the following decisions:

(2.) HEARD the learned counsel appeared for the parties and perused the pleadings, documents and citations relied upon by them. After analysing the pleadings, it is to be decided whether the petitioners have made out any case to grant reliefs as prayed for. From the reliefs it is seen that the petitioners have sought indulgence of this Bench to take over the charge of the company and wind up the same and prayed that the interest of the petitioners and the creditors are taken care of and also sought direction to respondent No. 2 and 3 to deposit any funds collected by them on behalf of the R1 -company and also sought direction to furnish the account of the same. It is an admitted fact that the first petitioner is the subscriber to the memorandum and also by virtue of article 14, he became the 1st director of the company. One of the grievances of the petitioners is that the asset of the company was assigned by way of deed of assignment on 7th January, 2009, in spite of the same, the liabilities of the company are yet to be cleared. Moreover the petitioners states that the company is to be wound up after the sale of its assets and they should be paid 1/3rd of its shares as was promised by the respondent No. 2. From the perusal of the deed of assignment dated 7th January, 2009 it is evident that the 1st petitioner has signed the deed and he is having full knowledge of the sale of assets and receipt of consideration. So far as winding up of the company is concerned, it is for the company to take decision if the company is not doing any business and they feel that the company should be wound up. The payment of amounts to the petitioners on the proportionate of their shareholding out of the sale consideration is also to be decided by the company and its directors but not by this Bench. In view of the reason that the property or the asset of the company whether movable or immovable cannot be distributed among the shareholders, since it belongs to the company. In the event of making profits by the company, the company can declare dividend to its shareholders as decided by the directors. Therefore, the contention of the petitioners that they should have logically paid l/3rd of the sale consideration is not correct. Moreover the petitioners have not made out any case for winding up of the company. So far as the other grounds of the petitioners that the 3rd respondent was appointed by misrepresenting the petitioner is concerned the 3rd respondent was appointed on 21st December, 1993 and the annual returns filed for the years 1996 and 1997, the name of the third respondent along with the petitioner and the 2nd respondent were shown as directors and the petitioners signed on the annual returns. Moreover the appointment was done way back in the year 1993 and the petitioner signed the annual returns and there is no document to show that the petitioner expressed his concern with regard to misrepresentation by the respondents. Raising of such issue that too, after lapse of 16 years is completely unwarranted and afterthought. So far as the removal of first petitioner as director is concerned the petitioner has not made out any ground to challenge the same. On the other hand from the documents it appears that the company issued notice dated 17th March, 2009 to his members calling extraordinary general meeting ('EGM') to propose a resolution to remove the 1st petitioner as director of the company. The explanatory statement attached to the notice wherein it is stated that the Board of directors in their meeting held on 14th March, 2009 have considered the requisition dated 3rd March, 2009 and decided to convene the EGM. It is also stated that the first petitioner acted against the interest of the company and attempted to stop the banking accounts. The petitioner though mentioned about the notice of removal, however, he had not made any grounds to challenge the said removal nor prayed any relief to that effect. It appears that after removal of petitioner the company addressed a letter dated 8th April, 2009 to the Union Bank of India intimating them that the first petitioner was removed as director. From the documents it is established that the Union Bank of India has frozen the account of the company at the behest of the first petitioner. The company filed writ petition before the High Court of Bombay seeking directions to the bank to allow the company to operate the banking account. There are numerous correspondences exchanged between the respondents and the bank in that regard. Thereafter, the matter has been settled between the respondents and bank and the hon'ble High Court recorded the same in their order dated 15th December 2009. The citations relied upon by the petitioners are not applicable to the facts of the present case. On the other hand the CLB was of the view that even in a quasi -partnership a partner/director can be removed if his acts are prejudicial to the interest of the company. In the present case the reason given in the explanatory statement that the 1st petitioner has acted against the interest of the company. Therefore, the decision of the Sumit Jain (supra) squarely applicable to the facts of the case which goes in favour of the respondents. On overall the petitioners have not made out any case either on oppression or mismanagement and not entitled to any reliefs as prayed in the petition. The petition is miserably failed and liable to be dismissed. Hence, the same is dismissed. No orders as to cost. Irrespective of the above, the petitioners being the shareholders of the company are entitled to the notices for the general meetings of the company as per law and also entitled to the inspection of the records and registers of the company in the capacity as members/shareholders as per law.