DIPANKAR BANERJEE Vs. HTC ENGINEERING (1958) PVT. LTD.

JUDGEMENT

(1.) IN this order I am considering C.P. No. 74 of 2005 filed under Sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956 (hereinafter referred to as the "Act") against HTC Engineering (1958) Pvt. Ltd. and Ors. alleging that the R -2 with malafide intent excluded the petitioners from the business; the two allotments of shares in 1999 and in 2005 were made by the R -2 in favour of his son and himself respectively, by this issue and allotment, the R -2 purported to create a new majority in the Company and in effect converted the majority into a minority; the R -2 with an intention to reduce the P -1 to a minority on the Board of the company, illegally inducted R -3 as Director of the company allegedly on 26.3.1999; the R -2 has purported to show that the P -1 has ceased to be a Director of the Company by relying on the provisions contained in Section 283(1)(g) of the Act and that the petitioners' entitlement of 488 equity shares out of 610 equity shares of their deceased father was not transmitted to deny majority shareholding in the company.

(2.) SH . S.N. Mookherjee counsel for the petitioners pointed out that the case of the Petitioners is that HTC Engineering (1958) Pvt. Ltd. is a Family Company which was incorporated on 6^th June, 1989, a private Company limited by shares. The subscribers to the Memorandum and Articles of Association were the P -1, R -2 and their father wherein equal shareholding was held by the P -1, R -2 and their father and the wives of the P -1 and the R -2 held equal number of shares. The father of the P -1 and R -2 admittedly died intestate on 18^th May, 1999. By reason of the aforesaid, 610 shares held by the father of the P -1 and R -2 Late Sukumar Banerji is yet to be divided equally between his five heirs i.e. P -1, R -2 and P -3 to P -5. Petitioner Nos. 1, 3, 4 and 5 are entitled to 488 equity shares out of said 610 equity shares and thus in the absence of any further increase in the shareholding of the Company the petitioners constituted the majority shareholding of the Company on the death of Late Sukumar Banerji and, therefore, the petitioners are entitled to be in control of the majority shareholding of the Company. The respondents have also admitted such position as a partition Suit was filed by R -2 being Title Suit No. 22 of 2005. The business of the Company was primarily that of material handling and transportation. One of the principal businesses of the Company was the contract of material handling and transportation from SAIL. It is, however, an admitted position that since 2002, the business of the Company has come to a standstill. At all material time, the Company had three Directors, viz. P -1, R -2 and their father. It is the grievance of the petitioners that the R -2 has wrongfully taken control of both the shareholding and directorship of the company and completely ousted the petitioners from the Company and thereby taken control of the assets of the company which comprising inter -alia valuable immovable properties.

(3.) AS regards issue and allotment of 2950 shares alleged to have been made on 19^th February, 2005, the counsel for the petitioners argued that no effect can be given to the said issue and allotment of shares because no notice of any Board meeting relating to said issue and allotment was given to the P -1, who admittedly on the said date was a Director of the Company; no Board resolution was ever validly passed relating to making of the said further issue and allotment of shares. It was pointed out that the R -2 has contended that resolution was passed by the Board of Directors relating to the said issue and allotment on 19^th February, 2005, which P -1 is alleged to have attended. Apart from the said Minutes of Board Meeting, the R -2 has relied on an extract of Minutes of Board Meeting of 7^th December, 2004, letter dated 14^th December, 2004 addressed by the Company to the Bank, reply dated 31^st January, 2005 from the Bank, letter dated 20^th February, 2005 from the Company to the Bank and the Return of Allotment relating to the said issue and allotment of shares. No reliance can be placed on any of the said documents disclosed by the R -2 because (i) It is unbelievable that P -1 would not subscribe to any further shares in the Company and permit the R -2 to acquire majority by himself when admittedly on the said date disputes were existing between the parties; (ii) The day when the Form No. 2 was filed was the same day when the P -1 had moved an application under Section 9 of the Arbitration & Conciliation Act, 1996 against the R -2 in regard to the affairs of the partnership firm of Howrah Trading Corporation; (iii) The Company was not carrying on any business and the purported issue and allotment was not in terms of the letter of the Bank dated 31^st January, 2005 as the issued capital was not raised to Rs. 10.00 lakhs and the said issue and allotment was only enhanced allegedly to Rs. 5.00 lakhs. In fact, no additional funds came into the company and the increase in allotment was made against the alleged loans advanced to the Company is evident from the Return of Allotment which shows that no payment against the said shares; (iv) There is also nothing to indicate that at any future point of time, an offer was made to the other shareholders of the Company to increase their shareholding. It is thus evident that the sole and whole purpose of the increase was to create a new majority and to convert a minority into a majority; (v) In fact no steps have been taken in accordance with the letters exchanged with the Bank as no business has been commenced. The sole purpose of the issue was to create a new majority which is per se an act of oppression. During the course of hearing, it was suggested on behalf of the petitioners that the petitioners were willing to subscribe for the balance of Rs. 5 lakhs, but this was objected to by the respondents. It was argued that this clearly shows that the sole and whole object of the said issue and allotment was to create a new majority and not to permit the petitioners to exercise their rights as majority shareholders in the Company.