A. VENKATARAMANA Vs. A.K.R. MINERALS (P.) LTD.

JUDGEMENT

(1.) AKR Minerals (P.) Ltd. ('the first respondent -company'), incorporated on 20th November, 1991 with its registered office in Andhra Pradesh, having an authorised share capital of Rs. 10 lakh (10,000 equity shares of Rs. 100 each) on the date of incorporation, is engaged in the business of mining activities. Petitioners and respondents 2 to 4 are brothers and 5th respondent is their mother. 5th respondent died during the pendency of this petition. Petitioners and respondents 2 to 4 are the signatories to the memorandum of association and also first directors of the company. The issued share capital was Rs. 5,000, with each of the original subscribers holding ten shares each. The understanding was that the affairs of the company should be carried out in the nature of a partnership with equal participation and sharing the benefits equally. The family of the parties has been in the mining business for over eighty -five years under the name and style AKR Minerals. The first petitioner along with a few relatives and second respondent were carrying on mining activities since 1982 under the name AKR Minerals, a partnership firm. In 1993, the firm was re -constituted by inducting the son of a deceased partner. Respondents 2 to 5 created another partnership firm under the existing name without the knowledge of the petitioners. The first petitioner being the eldest brother was appointed as the managing director of the company, with power to operate the bank account, to obtain advances by way of loans, overdrafts, discount bills and cheques on behalf of the company. The first petitioner also purchased three plots measuring a total extent of 11.92 acre by way of three sale deeds, for the purpose of carrying the mining activity of the company and by paying the entire consideration out of his personal funds. The second respondent was holding lease -hold right over an extent of 389.17 acres and 69.13 acres of land in different survey numbers. As per the agreement dated 1st July, 1992, the second respondent entered into an agreement with the company for the transfer of the lease -hold right to the company and for that purpose an application was made to the Government of Andhra Pradesh on 4th July, 1992. The understanding was that the mining operations in the said lands should be carried for the benefit of the company. When a need arose for further capital, the issued and paid -up capital was enhanced to Rs. 2,15,000 on 17th August, 1990 and the petitioners and respondents 2 to 5 were allotted 350 shares each. Towards the end of 1992 the first petitioner resigned as a director and the fifth respondent was inducted into the Board and made the managing director. In the beginning of 1994, dispute arose between the first petitioner and second respondent in relation to the partnership firm and the same was reflected over the company as well, following which there was a split in the family, i.e., petitioners on one side and respondents 2 to 5 on the other side. Respondents 2 to 5 who were in over -all control of the company started to act in a manner prejudicial to the interest of the company as well as the other shareholders. Decisions which required the consent of the general body were taken unilaterally by the second respondent and his group. They started manipulating the records to suit their convenience. A loan of Rs. 7 lakh was availed from the State Bank of India by providing the immovable properties of the 5th respondent as collateral. The fifth respondent is eighty -five years old and acting as a tool in the hands of the other respondents. The bank has filed a suit against the company for recovery of Rs. 9,96,818 and the respondents 2 to 4 have already sold company's land without the knowledge of the petitioners and are attempting to sell the remaining land also. The said immovable properties were bought out of the personal income of the first petitioner and there was no authority for the respondents to alienate the same and this clearly violates section 293(1)(a) of the Act, and the aim is to enrich personally respondents 2 to 5. In view of the several illegalities committed by the respondents, the petitioner filed a CP No. 87/1997 before the Company Law Board ('CLB'). In the above petition, the respondents claimed that the property does not belong to the company. By order dated 3rd June, 1999, the CP was dismissed. The appeal filed against the above order was also dismissed. Meanwhile, second petitioner filed a suit OS No. 455/2001 before civil court, Cuddappah against third parties seeking injunction. The fifth respondent herein got impleaded in the suit by contending that second petitioner had resigned from directorship in 1994. Later, the suit was dismissed and is pending in appeal. Thereafter, the company represented by its managing director filed a suit OS No. 105/2006 seeking a declaration that the first petitioner herein is not the owner of the property and that it belonged to the company. The suit is pending. This averment in the suit is contrary to the stand taken in the earlier company petition. They have also conflicting stand regarding the directorship of the second petitioner. The resignation letter allegedly signed by the second petitioner had been fabricated by the respondents. The arbitrary removal of second petitioner as director attracts principles of oppression of minority shareholders. Hence, the petition.

(2.) DENYING the allegations as false and misconceived, respondents 1 to 4 submitted that they have been taking necessary steps to protect the interest of the company whereas the petitioner has been consistently acting against the interest of the company. Paragraphs 7(i) to 7(xiii) are the verbatim reproduction of the allegations contained in the earlier company petition filed by the petitioner. The only difference is that they are relying on some mistakes in the reply affidavit filed by these respondents. All the allegations in this petition were already considered by this Board earlier. Even though the family business of AKR Minerals is there for several decades, the R1 -company came into existence in 1991. It is a different legal entity. The allegations relating to a partnership firm have no relevance in this petition. With regard to the properties, there was no clarity and, therefore, resolutions were passed treating them as properties of the company. While disposing of the earlier petition, this Board suggested that appropriate remedy for the petitioners is to approach the civil court. Currently, the landed properties admeasuring an extent of 9 acres is belonging to the company and the title has been legalised by the issue of patta by the Tehsildar, Pendalimarri (Annexure R11 -proceedings dated 5th July, 2007). The company further obtained leasing rights thereon from the government (Annexure R12 -proceedings of the Assistant Director of Mines and Geology, Cuddappah dated 6th June, 2008). Mr. Ashok Kumar (second petitioner) resigned as a director and the same was accepted by the Board on 30th April, 1994 followed by the filing of Form 32 on 16th May, 1994 (Annexure R6). This factual position cannot be changed by a mistake in the reply statement. The petitioners have denied this statement in their rejoinder filed in CP No. 87/97 (Annexure R4). No decision was taken by this Board on the basis of the so -called statement. The respondents have clarified this mistake in their written statement filed in the suit OS 455/2001 filed by the second petitioner before the civil court in Cuddappah.

(3.) I have heard the arguments on both sides and perused the pleadings and documents filed by both sides.