Oppression/Mismanagement Matter following within the purview of MOU

Any issue relating to a matter which falls under the purview of the memorandum of understanding (˜MoU™) between the parties is not within the purview of the Company Law Board and cannot be entertained in a proceeding under section 397/398.

Companies Act, 1956 Section 397/398 Oppression/Mismanagement Petition for relief against Issue relating to a matter falling under the purview of MoU between the parties to the petition Is it within in the purview of the Company Law Board Whether any issue relating to a matter which falls under the purview of MoU between the parties is not within the purview of the Company Law Board and cannot be entertained in a proceeding under section 397/398 Held, yes [Para 29].

It is an admitted fact that the petitioner has himself withdrawn from property asset group and he has himself chosen the division of work as per his choice. Hence, no merit is found in the allegation of the petitioner that he has been ousted from the day to day management of the business of respondent company. So far as allegation of ousting the son of the petitioner is concerned, he is not a shareholder of the company, and as such his allegation does not have any bearing in a petition under section 397/398.

Companies Act, 1956 Section 397/398 Oppression/Mismanagement Petition for relief against Allegation of petitioner that he was ousted from day to day management of the company having himself chosen to withdraw from the concerned asset group dealing with the respondent, how far justified on facts Justification of allegation regarding ouster of son of petitioner when he is not shareholder of company Whether both the allegations of the petitioner have no merit on facts of the matter relating to a family company Held, yes [Para 30].

When though no relief is sought but an averment is made by the petitioners in the rejoinder bringing out the fact about the respondent  not paying any warehousing charges to it, it is the duty of the respondents to answer the same, and they cannot escape/evade that issue without replying to the said averment, since the matter concerns finance/monetary aspects of the respondent-company and the directors owe a fiduciary duty towards the affairs of the company. The respondents are accordingly directed to clarify/reply to the same in respect of averment to the petitioner.

Companies Act, 1956 Section 397/ 398 Oppression/Mismanagement Petition for relief against Averment made in the rejoinder only regarding non-payment of certain warehousing charges by the respondent Can the respondent escape/evade the issue without replying since no-relief has been sought in the matter Whether it is the duty of the respondents to answer the allegation since the matter concerns finance/monetary aspects of the respondent-company and the directors owe a fiduciary duty towards the affairs of the company Held, yes, so they are directed to clarify/reply in respect of the said averment [Para 31].

Synopsis

The Company Law Board (˜CLB™) has dismissed a company petition being CP No. 114 of 2008, holding that the petitioner has failed to make out any case on all issues and other allegations, averments and contentions. Referring to most of the issues, the CLB observed that the same were identical to the issues already dealt with in CP Nos. 112 of 2008 [2010] 97 CLA 185, 113 of 2008 [2010] 97 CLA 452 and 120 of 2008 [2010] 98 CLA 10  except issue No. 4 in respect of non handing over of keys of flats to petitioner No.1 about which it pointed out that the matter fell under the purview of MoU between the parties, which is not within the purview of the Bench and cannot be dealt with by it.

Case referred to : Deepak Lohia v. Kamrup Developers (P.) Ltd. [2002] 47 CLA 226 (CLB).

Appearances : Navroz Seervai, senior counsel (Rahul Chitnis, Pankaj Kode, I J Nankani & H S Khokawala with him) for the Petitioners. Praveen Samdhani, senior counsel (Snehal Shah, Bindi Dave & Kunal Vajani with him) for the Respondents.

ORDER

1. The instant company petition is filed alleging certain acts of oppression and mismanagement in the affairs of the R-1-company by the respondents and seeking various main and interim reliefs as prayed in paras VIII and IX of the petition to put an end to the same.

2. Shri Seervai, learned senior counsel for the petitioners, narrated the brief facts which lead to file the present petition. He submitted that the respondent No. 1 Grentex Wools (P.) Ltd. was incorporated on 9th August, 1985 as a company limited by shares under the provisions of the Companies Act, 1956 (˜the Act™). At present the authorised share capital of the company is Rs. 5 lakh divided into 50 thousand equity shares of Rs. 10 each. The issued, subscribed and paid-up share capital of the company is Rs. 1,00,200 divided into 10,020 equity shares of Rs. 10 each. The company is carrying on business as merchants, traders, exporters, importers, consignors, consignees, commission agents, retailers, wholesalers, dealers and manufacturers in wool and woollen products, cotton and cotton products, natural silk and natural silk products, etc.

3. He submitted that Shri Shyamsunder Kapur, the husband of petitioner No. 3 and the father of petitioner No. 1 and respondent Nos. 2 to 4, during his lifetime was head of the family and various businesses of combers, worsted/semi-worsted and woollen spinners of yarns were commenced and managed by his sons petitioner No. 1 and respondent No. 2. These businesses were carried on, inter alia, in the name of the company, respondent No. 6, Grentex & Co. (P.) Ltd., Grentex Yarns (P.) Ltd. and Grentex Spinners (P.) Ltd. (˜the said companies of the Kapur family™). The said Shyamsunder Kapur passed away on 24th December, 2002. After his death, a memorandum of understanding (˜MoU™) was entered into by petitioner Nos. 1 and 3 and respondent Nos. 2 to 4 giving respondent No. 4 the share of Shri Shyamsunder Kapur in the assets of Shyamsunder Kapur (HUF). During the lifetime of Shri Shyamsunder Kapur, petitioner No. 1 was handling the production, quality control, sales/marketing, product development and customer service up to December 2007 of Grentex & Co. (P.) Ltd. and production units of respondent No. 6 of the Kapur family. Whereas respondent No. 2 was handling the accounts, finance, administration, raw material purchases, logistics, legal matters, legal proceedings and liaison with various government bodies of the company up to December 2007.

4, He submitted that the company is the owner of land at Ghatkopar together with buildings and structures standing thereon. The company had entered into an agreement dated 30th December, 1997 with Godrej Properties Ltd. who was appointed as the ˜project manager™ (contractor) for carrying out construction on behalf of the company. Under the said agreement Godrej Properties Ltd. was to construct a commercial building consisting of basement, ground plus first floor having built up area of approx. 10,000 sq. ft. called Wing ˜A™ coming to the share of the company and also construct residential building with 3 separate wings Nos. B, C and D of saleable area of approx, 50,000 sq. ft. upon the portion of the said property to be jointly shared by the company and Godrej Properties Ltd. in the manner as stated in the said agreement. An area of approx. 1,600 sq. metres of land of the company consisting of structures being utilised by the production units of respondent No. 6 at Ghatkopar, Mumbai for industrial use and storage activity. While matter stood, thus, several disputes arose between the company and the project managers and the matters were referred to arbitration in 2000/2001 which is still pending before hon™ble Justice B N Srikishna, sole arbitrator in the matter. Out of the total of 56 residential flats constructed by Godrej Properties Ltd. in 3 Wings B, C and D 34 residential flats have been sold by Godrej Properties Ltd. and out of balance 22 flats – 15 flat keys have been handed over to the company in the month of August 2007 as per interim order passed by the arbitrator and balance flats are subject-matter of pending arbitration. Out of the balanced 7 flats, 1 flat is to be shared jointly by Godrej Properties Ltd. and the company. Stilt packing has been allotted proportionately and some stilt and all open car parking are still pending. Upto December 2007 the respondent No. 2 was responsible for day-to-day affairs of the said project resulting out of the agreement with Godrej Properties Ltd. and all litigations/arbitration and legal matters.

5. During the last five years, several disputes arose between petitioner No. 1 and respondent No. 2 with regard to the running of the said companies of the Kapur family, in spite of attempts made by family members, close relatives, to sort out the matters and to divide the assets, no finality was arrived at. The petitioner No. 1 observed that respondent No. 2 conducted the affairs of the company unilaterally and without consulting petitioner No. 1 but the petitioner No. 1 did not object to every action taken by respondent No. 2 as he was his elder brother and also when petitioner No. 1 spoke to respondent No. 2, he assured him that things would be set right. The Board of directors of one of the Kapur family companies, viz., Grentex & Co. (P.) Ltd. Conducted its affairs unilaterally by passing a purported resolution dated 26th March, 2004. The petitioner No. 1 objected to this resolution being acted upon and also on it being part of the records of Grentex & Co. (P.) Ltd. and the respondent No. 2 assured him that the same would be deleted from the records of Grentex & Co. (P.) Ltd. The petitioner No. 1 was also not sent minutes of meetings of the Board of directors of the said companies of the Kapur family, immediately after a particular meeting, but was sent minutes of meetings of the Board of directors of the respondent-Grentex & Co. (P.) Ltd. and the company on different dates between 27th November, 2004 and 30th November, 2004 after several reminders from the petitioner No. 1 as the division talks were initiated. By an e-mail dated 5th January, 2005 addressed by the petitioner No. 1 to the company secretary of the Kapur family group companies he recorded that he had received copies of various minutes of the meetings purported to be held of the Board of directors of the said companies of the Kapur family. He also stated that henceforth the resolutions should bear the signature of the petitioner No. 1 so that the resolutions are to his knowledge. Though the company received the said e-mail, they failed and neglected to forward all the resolutions for his signature.

6. After several months of further negotiations, on 24th December, 2007 a new proposal was discussed and agreed upon in the presence of the family mediator, Mr. Pawan Mahendro. The said proposal was written down and signed by petitioner Nos. 1 and 3 and respondent Nos. 2 to 4 and two witnesses. As per the said agreement the said companies of the Kapur family were divided info two parts, one called the ˜business assets group™ and the other called the ˜property assets group™. It was further agreed that the business assets group was to be controlled by respondent No. 2 whereas the property assets group was to be controlled by petitioner No. 1. The business assets group was to consist of the company and assets and liabilities of Grentex & Co. (P.) Ltd. and production units of respondent No. 6 including industrial land in Ghatkopar, Mumbai (except the corporate entity of respondent No. 6) and godown land belonging to the company. The property assets group was to consist of all balance assets/properties including residential properties at Amritsar, Punjab, Delhi, Haridwar, UP and Ghatkopar, Mumbai and assets of or leased to Grentex Yarns (P.) Ltd., residential, flats and commercial properties owned by the company (excluding the godown land) and some properties belonging to Shri Rattanchand Kapur HUF at Amritsar, Punjab, Delhi, Haridwar, UP and Ghatkopar, Mumbai which had been leased to respondent No. 6.

7. The solicitors of the Kapur family were instructed to draw up a detailed document. The respondent No. 2 asked the petitioner No. 1 to permit him to conduct the day-to-day business of the Grentex & Co. (P.) Ltd. and production units of respondent No. 6 immediately after the agreement and asked the petitioner No. 1 not to interfere in the same. On 2nd January, 2008, respondent No. 2 circulated a note informing all concerned that as per the internal arrangement, the business assets group would be under his purview/control and that respondent No. 4 would assist him. Respondent No. 2 also confirmed that all functions and management related to some properties of the property assets group would be carried out by petitioner No. 1 with the assistance of his son an employee of Grentex & Co. (P.) Ltd. He also stated that any matter relating to the business and affairs of the Grentex & Co. (P.) Ltd. and production units of respondent No. 6 should be referred directly to him for any decision to be taken in the matter. The said note was signed by petitioner No. 1 and respondent No. 2.

8. Since 24th December, 2007 the petitioner No. 1 commenced withdrawing himself from the day-to-day affairs of the business assets group as was asked to do so by respondent No. 2 at the time of the agreement though he continued to be a director of all the said companies of the Kapur family as well as shareholder and guarantor of the loans taken from the banks and financial institutions for Grentex & Co. (P.) Ltd. and respondent No. 6. On 8th January, 2008 the petitioner No. 1 addressed a note to respondent No. 3 requesting him to hand over the keys of the flats belonging to the company and also to handover the books of account of the company along with all statutory records. The respondent No. 2 also took over the production, sales, marketing and customer service of Grentex & Co. (P.) Ltd. and respondent No. 6 which was being earlier handled by petitioner No. 1 and visited annual exhibition in Germany and UK for meeting customers and raw material suppliers of the company from 12th January, 2008 to 20th January, 2008. The respondent No. 2 also addressed e-mails to various agents/customers of Grentex & Co. (P.) Ltd. with a view to gather information and take control.

9. The petitioner No. 1 addressed a letter dated 25th February, 2008 to accounts manager of all the companies of the Kapur family informing him that there was no balance in the account of company for making pending payments. He also recorded that for the last two months he had been asked for cheque books and other account particulars. The accounts department of the company endorsed a note stating that there was no balance in the account of the company, but did not mention anything about the cheque books at the behest of respondent No. 2. The petitioner No. 1 addressed a letter dated 3rd April, 2008 to the company secretary of the company requesting to furnish him minutes of the meetings held during the year 2006-07 for his records (including AGM) of all the companies of the Kapur family. Though the said letter was received by the administration department there was no reply. The petitioner No. 1 addressed a letter dated 26th April, 2008 to the company secretary of the company, inter alia, asking for share certificate numbers and their distinctive numbers of all shareholders in companies where returns were being filed. Though the said letter was received by the administration department there was no reply. On 6th May, 2008 petitioner No. 1 addressed a letter to respondent No. 2 requesting for an updated (as on 31st March, 2008) statement of the personal account of petitioner No. 1 with all the said companies of the Kapur family. Petitioner No. 1 also stated that he had not been receiving the accounts and bank statements since long and wanted that the same be provided to him on a regular basis till implementation of the MoU. Though the said letter was received by respondent No. 2 there was no reply.

10. The telephone bills of petitioner No. 1 were being paid by Grentex & Co. (P.) Ltd. but since about July 2008 the bills were not being paid in time. The petitioner No. 1, vide his letter dated 26th August, 2008 addressed to respondent No. 2 recorded that he had requested for various payments several times but the same was not done. Petitioner No. 1 also stated that he needed cheque books of the company to facilitate various statutory and other relevant payments ; petitioner No. 1 also stated that arrears had not been paid to the staff that was working for him whereas all other staff had been paid arrears ; Thus, the staff working for petitioner No. 1 was being discriminated again by respondent No. 2 and clear efforts were made by respondent No. 2 to harass the staff working under petitioner No. 1. The petitioner No. 1, vide his letter dated 9th September, 2008 requested the accounts department of the companies to furnish him a copy of the balance sheet of the company as on 31st March, 2008 along with the trial balance and day book from 1st April, 2008 till date. Though the latter was received, neither were the documents forwarded to petitioner No. 1 nor was any reply given. The staff working for petitioner No. 1 was not paid their salaries for the month of August 2008, The petitioner No. 1 addressed a letter dated 10th September, 2008 to the accounts department of the company and requested that the salary be released to them at the earliest. The respondent No. 2 has till date not ensured that all the payments requested have been made.

11. The petitioner No. 1 addressed a letter dated 22nd September, 2008 to the accounts department of the company and stated that he had a talk with the auditors regarding the audit of the company and Grentex Yarns (P.) Ltd. and that no papers had been given to them for audit purposes. Audit queries raised by auditors with regard to the company and Grentex Yarns (P.) Ltd. are also pending. The petitioner No. 1 requested the accounts department of the company to provide the details including provisional balance sheet, profit and loss account, trial balance, etc., for audit purposes and for scrutiny by petitioner No. 1 which has not been done till date. The trial balance sheets of the company and Grentex Yarns (P.) Ltd. were forwarded to the petitioner No. 1 by respondent No. 2 and on perusing the same. Petitioner No. 1 required certain clarifications. The petitioner No. 1 addressed a letter dated 25th September, 2008 to the accounts department of the company and requested for certain clarifications, as mentioned therein. But, the accounts department failed and neglected to reply to the said letter.

12. Again, the staff working for petitioner No. 1 was not paid their salaries for the month of October 2008. Some of the staff was not paid salaries since August 2008 as well as no bonus was paid to them for the financial year ended 31st March, 2008. Further, various bills raised by petitioner No. 1 were also not paid. The petitioner No. 1 addressed an e-mail dated 8th November, 2008 to respondent No. 2 and requested that the payments be released to them at the earliest, some of which have not been released till date. Some of the instances which clearly show how the respondent No. 2 has been taking unilateral decisions in respect of assets/affairs of the company without consulting and/or taking consent of the petitioner are :

(1) In or about July 2008 the boundary wall of the lease hold land of respondent No. 6 collapsed and needed urgent repairs. Petitioner No. 1 attempted to carry out the repairs. Petitioner No. 1 had by a letter dated 3rd November, 2008 requested respondent No. 2 and his staff members to lend him support and necessary facilities for repairing the wall. However, respondent No. 2 and his staff members did not lend their support by providing the necessary facilities and the work was stalled. Thereafter through repeated efforts of petitioner No. 1 the repair work was completed.

(2) Respondent No. 2 has unilaterally over the last couple of months constructed several temporary structures on the company premises. The petitioner No. 1 has never been consulted nor any resolution to that effect been passed by, the company.

(3) Respondent No. 3 has deliberately instructed his staff to shift furniture around petitioner No. 1™s office so as to restrict and block petitioner No. 1™s movements. This also led to an unfortunate instance (which ultimately reached the police) and personal belongings on the other side were attempted to be blocked by respondent No. 2™s actions.

(4) Petitioner No. 1 has received copies of Andar Tax invoices which are in the name of the company which indicate that the expenditure incurred is no way connected with the business of the company. Respondent No. 2 has been fraudulently using company™s money for his personal expenditure in spite of several protests by petitioner No. 1.

(5) Sometime in November 2008 respondent No. 2 started digging on the side passage of the company premises. Petitioner No. 1 had by an e-mail dated 3rd November, 2008 to respondent Nos. 2 and 4 sought clarifications as to why petitioner No. 1 had started the digging. Respondent No. 2 then informed petitioner No. 1 that he was installing a gate. Petitioner No. 1 requested him to maintain status quo till such time the family arrangement was implemented and matters resolved by e-mail dated 8th November, 2008.

(6) The municipal taxes and water charges pertaining to the company have been pending and over due since a long time. Petitioner No. 1 has by a letter dated 24th September, 2008 addressed to respondent No. 2 informed him that the Final Notice from Bombay Municipal Corporation (˜BMC™) was received regarding payment of property taxes, water charges, etc., within 48 hours. Petitioner No. 1 requested respondent No. 2 to take necessary action and to make the payment immediately to avoid penalty.

13. It is submitted that some of the instances which clearly show how the respondent No. 2 has been causing hindrances in the affairs of the company pertaining to the pending litigation being handled by petitioner No. 1 are that as follows :

(1) By an interim order passed by hon™ble Justice B N Srikrishna 15 flat keys were received by the company in August 2007. Respondent No. 2 unilaterally took charge of the 15 keys on 23rd August, 2007. On petitioner No. 1 questioning respondent No. 2 about the same, respondent No. 2 informed him that he was keeping keys in his custody for maintenance works and repairs of the 15 flats. Under the family agreement petitioner Nos. 1 and 3 were allocated 10 out of 15 flats and the keys were to be handed over to them by the company. Respondent No. 2 assured and made false promise to petitioner Nos. 1 and 3 that he would handover the keys and requested petitioner No. 1 to sign an interim arrangement letter. Petitioner No. 1 on 2nd January, 2008 in good faith signed an interim arrangement with an assurance from respondent No. 2 that he would hand over the keys the following day. The following day the respondent No. 2 refused to handover the keys on the pretext that as there were residual pending issues between the petitioner No. 1 and respondent No. 4 he would handover the keys only on the issues being sorted out. Thereafter, respondent No. 2 started causing problems between petitioner Nos. 1 and 3 on one hand and respondent Nos. 3 and 4 on the other hand so as not to handover the assets under the property asset group to the petitioners. The respondent No. 2 has not carried out any repair work in either of the 15 flats upto date.

(2) Respondent No. 2 has ousted petitioner No. 1 and his son from managing the assets of the company and/or managing the day-to-day business of the company. Petitioner No. 1 and his son have been left to battle the pending litigation and arbitration matters of the company.

(3) Respondent No. 2 had not paid any legal fees and consultation charges of advocates and solicitors of the pending litigation. The petitioner No. 1 had time and again sent reminders to respondent No. 2 requesting him to pay the legal fees of the advocates. Ultimately, the same was paid belatedly except for payment of family solicitors is pending.

14. Thus, clearly petitioner No. 1 has been systematically excluded from the day-to-day business of the company (except legal matters) information and access to the company™s accounts, Registrar of Companies (˜RoC™) records, statutory compliances, filing of returns, bank statements and cheque books is being denied to him despite repeated requests. Even, the staff working for petitioner No. 1 has been harassed by respondent No. 2 by not paying them their dues/salaries on time including the arrears and yearly bonus as had been paid to all other employees of all group companies.

15. Further, the company does not have a proper functioning Board of directors because there are only two directors on the Board of the company, namely, petitioner No. 1 and R2. Both the petitioner No. 1 and R2 are permanent directors of the company and not liable to retire by rotation. In anticipation of the fact that a detailed MoU would be drawn up whereby petitioner No. 1 would get control of the property assets group, petitioner No. 1 withdrew from the day-to-day affairs of the business assets group. However, respondent No. 2 did not withdraw himself from the property assets group and petitioner No. 1 was left merely to attend to the legal proceedings of company along with his son who was assisting petitioner No. 1. Respondent No. 2 also unilaterally withdrew/diverted money from the said companies of the Kapur family for capital expenditure and other unknown objectionable expenses.

16. On 13th November, 2008 the petitioner No. 1 was surprised to receive an e-mail from R2 admitting that the companies of the Kapur family were without a fully functioning Board. Respondent No. 2 offered two choices to petitioner No. 1 to save the companies to let them run with full support by either of them, i.e., (a) that either petitioner No. 1 takes over the running of the business and properties, etc., and respondent No. 2 goes out of directorship, or (b) respondent No. 2 takes over the running of the business and properties, etc., and petitioner No. 1 goes out of directorship. The respondent No. 2 also falsely alleged that petitioner No. 1 had a deadlock with respondent Nos. 3 and 4 for about a year which was allegedly compounded by a serious conflict of interest by petitioner No. 1 setting up a competing wool spinning business along with his wife and son. The respondent No. 2 also forwarded his resignation in advance, addressed to the Board of directors. By another e-mail dated 13th November, 2008 addressed by respondent No. 2 to the son of petitioner No. 1, the respondent No. 2 as a director of Grentex & Co. (P.) Ltd., purported to terminate the services of the son of petitioner No. 1 allegedly owing to his misusing information, Goodwill, etc., by setting up and working for a competing factory as a co-promoter with his father the petitioner No. 1 and also allegedly poaching the key employees of Grentex & Co. (P.) Ltd.

17. Since the respondent No. 2 took over the exclusive control of the day-to-day affairs of the company including the functions being handled by the petitioner No. 1 the capacity utilisation of the company is down substantially. A majority of skilled employees have left or been removed by respondent No. 2 and there is a drop/reduction of over 50 per cent in the income of the business asset companies. The said companies are also facing several complaints from customers. In fact the business asset group companies have not even declared dividend for the last two accounting years as against the desire of the petitioners, at the instance of the respondent No. 2 so as to accumulate reserves in the company till the division took place within the family. In view of resignation of respondent No. 2 as a director of the company, the petitioner No. 1 addressed an e-mail to respondent Nos. 2 to 4 and petitioner No. 3 and convened an urgent meeting of the Board of directors of the company on 15th November, 2008. On 15th November, 2008 the respondent No. 2 did not attend the urgent meeting of the Board of directors of the company, but addressed an e-mail to petitioner No. 1 alleging that his e-mail dated 13th November, 2008 was misinterpreted. The respondent No. 2 alleged that petitioner No. 1 was picking and choosing what suited petitioner No. 1 without addressing the major issues and holding the companies to ransom. Respondent No. 2 also alleged that the advance offer of resignation was taken by petitioner No. 1 in isolation and the resignation was infructuous at this stage. By an e-mail dated 22nd November, 2008 addressed by respondent No. 2 to the petitioner No. 1 the respondent No. 2 made false and frivolous allegations and on the basis of the same called upon the petitioner No. 1 to resign from the Board of the companies. The petitioner No. 1 has by his communication dated 2nd December, 2008 addressed, to respondent No. 2 denied all the allegations contained in respondent No. 2™s e-mail™s dated 13th November, 2008, 15th November, 2008 and 22nd November, 2008 and put the correct facts on record.

18. It was always understood by and between petitioner Nos. 1 and 3 and R2 to 4 that after having withdrawn himself from the day-to-day affairs of the business assets group, the petitioner No. 1, along with his son, would start a new business of wool textiles. This was because petitioner No. 1 had been in the business of wool textiles for the past many years and it was agreed that petitioner No. 1 would it was agreed that petitioner No. 1 would be free to avail of the corporate opportunities that presented themselves in the market. Petitioner No. 1 along with his son incorporated a company named Kaposta Carpets (P.) Ltd. The said company was kept dormant and did not carry on any business. In or about 29th May, 2008 the petitioner No. 1 alongwith his wife and son, incorporated another company named Kapotex Industries (P.) Ltd. Petitioner No. 1 has purchased land, machinery, etc., in GIDC, Sarigam, Distt. Valsad, Gujarat for setting up a factory for the manufacture of wool textiles. However, till date neither has Kapotex Industries (P.) Ltd. nor Kaposta Carpets (P.) Ltd. commenced commercial production nor sold any products in the market. The petitioners submit that petitioner No. 1 having totally withdrawn from the day-to-day management of the business asset group companies, the question of competing with the same companies did no and does not arise. The petitioners became aware that as far back as January 2006 (even before a settlement was proposed in September 2006) respondent No. 2 had formed a proprietary firm named Gorashyam Enterprises for offering products of scoured wool, wool-tops and yarns, carpets, etc. Further, the petitioners have also recently become aware that respondent No. 2 unilaterally imported a scouring plant from New Zealand despite objections from petitioner No. 1 during September/October 2005 and paid for all the costs/expenses through Grentex & Co. (P.) Ltd. Respondent No. 2 also declared Gorashyam Enterprises as supporting manufacturers of Grentex & Co. (P.) Ltd. for the said plant to various government authorities. Petitioners have also learnt that during the period 2006 to 2008, large amounts were withdrawn from Grentex & Co. (P.) Ltd. towards expenses for building a factory for Gorashyam Enterprises on farm land belonging to respondent No. 2 at Khopoli, Maharashtra. Petitioner No. 1 vehemently opposed the import and installation of the scouring plant as it was not required by Grentex & Co. (P.) Ltd. since sufficient existing capacity was available and the report of the technical engineer-cum-plant manager sent (without informing petitioner No. 1) to inspect the machinery concluded that the machinery purchase was not recommended. In or about May/June 2008, the plant was shifted to Grentex & Co. (P.) Ltd. factory in Sarigam, Gujarat. The business of Gorashyam Enterprises, thus, directly competes with the business of the business asset group companies. The respondent No. 2 has been in a competing business since past couple of years in a clandestine and surreptitious manner in spite of being a director of Grentex & Co. (P.) Ltd. and respondent No. 6 and being in control of the day-to-day management of the same. In fact, respondent No. 2 placed advertisements in the name of Gorashyam Enterprises, in the official publications of the Wool Industry Export Promotion Council. This clearly shows that for the past two years. Respondent No. 2 in breach of the trust and confidence reposed by the petitioners on respondent No. 2 in relation to the management and affairs of the Grentex & Co. (P.) Ltd. and respondent No. 6 and in breach of his duties and obligations which are of a fiduciary character owned to Grentex & Co. (P.) Ltd. and respondent No. 6 and such conduct is prejudicial to the interests of the Grentex & Co. (P.) Ltd. and respondent No. 6 and is also prejudicial to the shareholders of the Grentex & Co. (P.) Ltd. and respondent No. 6.

19. The respondent No. 2 has systematically, but in a fraudulent manner, taken the support of respondent Nos. 3 and 4 to gain full control of and/or hijacked the company and its Board of directors. The respondent Nos. 2 to 4 (i.e., respondent No. 2 with the support of respondent Nos. 3 and 4) are together acting contrary to the provisions of the Act and are also acting against the interests of the company. The conduct of respondents in the management of the affairs of the company has been extremely harsh and oppressive to the petitioners. Thus, respondents have sidelined the petitioner No. 1 from the management and affairs of the company. The respondent No. 2 with the support and assistance of respondent Nos. 3 and 4 is maneuvering the affairs of the company in a manner, so as to ensure, inter alia, that the petitioners are ousted from the company without adequate compensation. By the aforesaid acts of oppression and mismanagement the respondent No. 2 has brought about a situation where the company™s operation and business is carried on as per his whims and fancies. From the facts on record, it is clear that there is a mutual lack of confidence between the petitioners on the one hand and respondent Nos. 2 to 4 on the other hand leading to sidelining of the petitioners from the company.

20. The circumstances set out in the foregoing render mandatory an order in favour of the petitioners for full, free and complete access being provided to the petitioners of all records requisitioned together with access to the books of account of the company. The company is the subject of gross mismanagement by respondent No. 2. The petitioner No. 1 and respondent No. 2 are the only directors on the Board of directors. No meetings of the Board of directors are held since January 2008. The entire arrangement arrived at between the petitioners and respondent No. 2 was based on mutual confidence and trust, and it was in keeping with this goodfaith approach that the petitioners reposed total and complete faith in respondent No. 2 in the matter of supervising and looking after the affairs of the company. Thereafter, by seeking to oust the petitioners, the respondent No. 2 has breached the confidence and trust reposed in him by the petitioners and has acted contrary to and in breach of the basic understanding between the parties. The relationship of the parties is that of partners and/or quasi-partners and the company has throughout been nothing but a glorified partnership in a corporate garb, since there is no outsider shareholder in the company. The respondent No. 2 having maneuvered the affairs of the company in such a manner as to take decisions relating to the company™s affairs at his whims and fancies without consulting the petitioners and without their knowledge.

21. The learned senior counsel for petitioners submitted that on overall pleadings the following acts of oppression emerges :

(1) The respondents not abiding the agreement.

(2) The respondents are not paying the rents on godowns which is being utilised by the production units of R-6-company at Ghatkopar.

(3) Non-handing over the documents, cheque book.

(4) Non-handing over the keys of flats.

The all aforesaid acts constitute oppression and are continuing till date. The respondent did not reply nor deny by filling sur-rejoinder, hence, it is admitted. The petitioners have made out a case for just and equitable winding up of the company, but to wind up the company would prejudicially affect the interests of the petitioners as shareholders. The reliefs prayed for, if granted, would do complete justice between the parties and would bring to an end the matters complained of. The petitioners have become entitled to reliefs prayed for herein which ought to be granted to him in the interest of justice to ensure that the petitioners are dealt with fairly and equally by respondent No. 2. The petitioners have a very strong prima facie case and that the interests of justice and equity, as also the balance of convenience is clearly in favour of the grant of reliefs as prayed for. The learned senior counsel for petitioners at the end of arguments suggested three options that :

(i)   the petitioners willing to sell or buy out the respondent on the basis of fair valuation upon its value by an valuer ;

(ii)   appoint an independent chairman from any retired Judges of the High Court ; and

(iii)   out of four companies two companies to each group.

22. A detailed counter/reply is filed by the respondents and traversed the allegations made in the petition and also narrated the facts to appraise the Bench. Shri Samdhani learned senior counsel leading the arguments on behalf of respondent took the preliminary objection on its very maintainability of the petition. He submitted that the company petition may have been filed under the provisions of the sections 397 and 398 of the Act and may have the look and feel of a regular company petition filed under the said sections, but the fact remains that no act whatsoever, of either oppression or mismanagement concerning respondent No. 1-company, has been set out in the company petition. The petitioners have in the company petition resorted to pacing on record several alleged events which are irrelevant, totally extraneous, frivolous and false and thereby have sought to confuse the issues. He submitted that respondent No. 1-company carries on the business of property development. Respondent No. 1-company was managed by respondent No. 2, petitioner No. 1 and by their father late Mr. Shyamsunder Kapur until his demise in December 2002 after which the respondent No. 1-company has been managed by respondent No. 2, petitioner No. 1 and respondent No. 4 (who discharges several duties, inter alia, including operating all bank accounts, which were earlier carried out by their father, Late Mr. Shyamsunder Kapur. Admittedly, upto December 2007 respondent No. 2 was handling/carrying out the administrative matters, legal matters and liaisoning with various government bodies on behalf of respondent No. 1-company. The accounts and finance were jointly managed by respondent No. 2 and petitioner No. 1. Sometime in April 2004 due to the unscrupulous, self-centered, obstructive and non-cooperative attitude of petitioner No. 1, petitioner No. 1 raised disputes with regard to the running of respondent No. 1-company. Despite attempts made by family members, close relatives, to sort out the matters and to separate the family interests/assets, no finality was arrived at. Several proposals (including, but not limited to, the proposal dated 20th July, 2007) were discussed and discarded as petitioner No. 1 was not interested in a final settlement which was fair to not only respondent No. 2 and petitioner No. 1, but also to the other members of the family including petitioner No. 3, respondent Nos. 3 and 4. Thereafter, one Mr. Pawan Mahendro (cousin of petitioner No. 1 and respondent Nos. 2 to 4) acted as mediator and attempted to mediate over a period of few days in the years 2005 and 2006 and for a period of about 11 days in the year 2007 (i.e., from around 13th December, 2007 to 22nd December, 2007). The said mediation, however, failed at effecting any compromise between parties. Ultimately the father-in-law of petitioner No. 1, i.e., Mr. Vishwanath Khanna intervened and a meeting was called by petitioner No. 1 and held on Sunday, 23rd December, 2007, in the presence of the said Mr. Pawan Mahendro, when a broad without prejudice proposal came to be agreed and executed between the respondent No. 2. Petitioner Nos. 1 and 3 and respondent Nos. 3 and 4. The family assets were to be divided into two lots on a melting pot basis, viz., the ˜property assets group™ [which included properties of the Rattanchand Kapur (HUF) and other charitable trust leased properties] and the ˜business assets group™, respondent No. 2 was allotted the entire business assets group and petitioner No. 1 elected to partake in the property assets group alongwith petitioner No. 3 and respondent Nos. 3 and 4. The without prejudice proposal dated 24th December, 2007 executed between the petitioner Nos. 1 and 3 and respondent Nos. 2, 3 and 4 is described by the petitioners as an agreement.

23. These respondents state that the aforesaid division of assets was agreed upon and the without prejudice proposal, was executed on the basis of a clear understanding that having elected to take the property asset group, it would not be upon the petitioners to commence the same business or compete with the business assets group in any manner whatsoever. Needless to clarify that if petitioners would have been allowed to compete, then the whole purpose of separating the property asset group from the business asset group would have been rendered futile/nugatory. In fact, the business asset group was evaluated on that very basis, though without any formal valuation. Admittedly, petitioner No. 1 himself withdrew from the management of the business asset group, leaving respondent No. 2 to manage the same. In fact, respondent No. 2 and petitioner No. 1 also jointly signed a.-working arrangement, in the form of the note dated 2nd January, 2008 recording therein that petitioner No. 1 would, henceforth, inter alia, manage the some of the property assets of respondent Nos. 1 and 6-companies and that respondent No. 2 would henceforth manage Grentex & Co. (P.) Ltd., respondent No. 6-company and the godown of respondent No. 1-company. Subsequent thereto and as mandated under the note dated 2nd January, 2008, petitioner No. 1 was to manage and look after a limited number of problems as more particularly set out in the said note. However, contrary to the said note and understanding between petitioner No. 1 and respondent No. 2, petitioner No. 1 did not carry out his obligations and instead primarily devoted his time, inter alia, in setting up of Kapotex Industries (P.) Ltd. (incorporated on 29th May, 2008) which is in direct competition with the business carried on by business asset group. In addition to the said competing business, petitioner No. 1 alongwith his son, have also incorporated Kaposta Carpets (P.) Ltd. on 23rd June, 2007.

24. Petitioner No. 1 has for the said competing business also poached several employees who were originally working for the business asset group, including but not limited to Mr. Sasidhran S Thachappilly and Mr. V S Rao. These respondents crave leave of this Board to refer to and rely upon the replies filed by these respondents in the Company Petition Nos. 112 and 113 of 2008. Further, petitioner No. 1 has also indulged in utilising the assets of the business asset group and the funds of respondent No. 1-company for the purposes of setting up and furthering the said competing business. In fact petitioner No. 1 has even indulged in making salary payments from the funds of respondent No. 1-company to the employees poached from the business asset group. For example Mr. V S Rao (now appointed as director of the said competing business) and Mr. Sasidhran S Thachappilly. Initially, employees with the business asset group are now employed by the said competing business but are being remunerated from the funds of respondent No. 1-company. Petitioner No. 1 then adopted the following obstructive acts with the intention to ruin the operations/functioning of respondent No. 1-company the following are the disputes within the property assets group :

(1) Disputes arose within the property assets group, i.e., between petitioner Nos. 1 and 3 and respondent Nos. 3 and 4, so much so that respondent No. 2 was even constrained to address his letter dated 23rd January, 2008 to petitioner No. 1 requesting him to resolve the disputes between the property assets group and cautioned petitioner No. 1 that in the event the said disputes between the property asset group are not resolved, the same may result in litigation.

(2) Thereafter, despite the fact that disputes remained unresolved between petitioner Nos. 1 and 3 and respondent Nos. 3 and 4 with regard to the property asset group, petitioner No. 1 suo motu and prematurely started giving instructions to the advocates to prepare a draft MoU on the basis of the without prejudice proposal. Respondent No. 4 has in her letter of 10th April, 2008 addressed to petitioner No. 1 (a copy whereof was marked to petitioner No. 3, respondent Nos. 2 and 3 and Mr. Pawan Mahendro), clearly set out some of the issues remaining unresolved between the property asset group.

(3) Subsequently meetings were held between respondent No. 2, petitioner Nos. 1 and 3 and respondent Nos. 3 and 4 but no settlement could be arrived at between the property assets group.

(4) Due to the disputes that arose within the property asset group, more particularly between petitioner No. 1 and respondent Nos. 3 and 4, petitioner No. 1 refused to implement the without prejudice proposal with ulterior motives. These respondents state that property asset group was to consist of 4 persons, namely, petitioner No. 1, petitioner No. 3 and respondent Nos. 3 and 4.

These respondents further state that it is due to the disputes within the property assets group that the property asset group has till date not intimated respondent No. 2 as to the manner in which respondent No. 2 should transfer his share in the property assets group and/or to whom should respondent No. 2 handover charge in respect of™ the various records/documents pertaining to the property assets group. The property asset group has not given/transferred full ownership to respondent No. 2 of business assets ; and the petitioners are holding these respondents to ransom. All the circumstances led to the exchange of numerous correspondences between the petitioners and the respondents. These respondents crave leave of this Board to refer to and rely upon the said correspondences. It is apparent that having failed to settle their disputes with respondent Nos. 3 and 4 the petitioners have in fact renege on the without prejudice proposal in their pursuit of harassing respondent No. 2 and respondent Nos. 3 and 4. It is, therefore, obvious that the petitioners have filed the captioned company petition, along with three more equally frivolous company petitions being company petition No. 112 of 2008, Company Petition No. 113 of 2008 and Company Petition No. 120 of 2008 concerning three other companies also jointly held by the petitioners and respondents with a view to harass these respondents. Each of the said three company petitions run into 150 odd pages and contain the same parrot like narration of the family history and the family settlement to have been arrived at between the petitioners and the respondents. None of these petitions fulfil the requirements of section 397/398 of the Act and are, therefore, in fact all liable to be dismissed by this Board. The learned senior counsel submitted that the petitioners have of their own free will handed over the control and management of business asset group to respondent No. 2 and the petitioner No. 1 has thereafter attempted to ruin business asset group, inter alia, by starting the said competing business (Kapotex) and even poaching employees from the business asset group. Petitioner No. 1 has and is misusing the assets and funds of respondent No. 1-company towards furthering the said competing business. Petitioner No. 1, thus, completely breached his fiduciary duties towards the business asset group and property asset group ; and under no circumstances whatsoever can the petitioners be said to be either oppressed or can respondent No. 1-company be said to have been mismanaged.

25. In reply to the points on the acts of oppression as contended by the petitioners, the learned senior counsel for respondents submitted that the MoU is without prejudice and the said MoU cannot be acted upon on the following points. The MoU is lying in Escrow and no finality has attained. The petitioners cannot enforce private agreement before this Bench. When there is no agreement in eye of law the same cannot be called an act of oppression. In this context the learned counsel relied upon the decision reported in the matter of Deepak Lohia v. Kamrup Developers (P.) Ltd. [2002] 47 CLA 226/[2003] 116 Comp Cas 188 (CLB) to show :

[E]ven though learned counsel for petitioner, at the outside submitted that he was not seeking enforcement of alleged MoU dated 2nd May, 2000, other than to prove that the company was to come to the petitioner, yet elaborate arguments were advanced on the same. Since it is an issue behind the scope of section 397/398, be do not propose to examine this issue, notwithstanding the claim of petitioner, on the basis of, the letter by the company dated 2nd May, 2000, the authenticity of which has also been questioned by the respondent, that the company had agreed to avoid by the terms of the MoU.

In answering to the second point on oppression he submitted that there is an averment made in the petition in para 9 but there is no ground made out that respondent No. 6 has not paid rent to R-1-company. However, in rejoinder at para 51 the petitioner stated that the warehouse charges to the tune rate of Rs. 13.5 lakh at the rate of Rs. 50,000 per month are due and payable as on date by R-6-company. Since there is no ground in the petition the petitioners cannot raise in rejoinder. The petitioners have not sought any relief of non-payment of warehousing charges. In this context the learned counsel relied upon the judgment of Chancery Division (Roxburgh, J), 13th November, 1950 reported in All England Law Reports :

From the prayer of the petition as presented it is impossible to know what the petitioner wants. A petitioner seeking relief under section 210 ought to state in the prayer of the seeking relief under section 210 ought to state in the prayer of the petition in clear terms the general nature of the relief sought, whether it be by the appointment of a director or of some other kind. The prayer need not contain as much detail as the court would require on the drawing up of the order, or as much as is requisite in a draft minute. It must, however, contain enough to leave no doubt what the petitioner desires the court to do. The petitioner must take the responsibility of stating specifically what he wants.

In reply to third point non-handing over keys of flats to the petitioners. The learned counsel submitted that the respondent No. 2 is a director of R-1-company holding keys in the capacity as director of the company. The petitioner is entitled to keys on implementation of MoU but not as a shareholder. Non-handing over keys to petitioner cannot be ground an act of oppression. In reply to the contention that the records were not handed over to petitioner is concerned the petitioner as shareholder not entitled to record if he seeks the records under the MoU the remedy is else with but not before this Bench. Irrespective of facts that R-2 handed over documents to P-1™s secretary. The following are the copies annexed to the reply at page 65, 66, 67, 68, 69, 70, 83 are the correspondence which is the evidence to show that the records have been given to the petitioner No. 1. Almost all the information handed over to petitioner No. 1. The further the respondents given the cheques to petitioner No. 1 which is evidence from p. 61, 62,63 of volume A. The petitioner paying the salary to employees of his own company from companies funds to one Mr. Subbarao who is employee of Kapotex belonging to P-1. Further it is evident from record at page 31, 32, 33, 34 of volume A wherein the P-1 instructed to bankers to pay money to Mr. Subbarao. Thus, the petitioner No. 1 diverted the money for his personal business. Mr. Subbarao resigned in April 2008 from the group of companies and joined in Kapotex in June 2008 and bank statements which clearly shows that the payments have been made to Mr. Subbarao in December 2008, January 2009 is an evident that the companies money™s have been misutilised by the petitioner No. 1. In reply to buy out or sell is concerned the principle is inapplicable for these reasons :

(i)   no dead-lock situation and shareholding is also not equal,

(ii)   principles of quasi-partnership will be applied in winding up only on just and equitable ground is made out but cannot be applied in this case, and

(iii)   no prayer in respect of buy out or sell out. So far appointment of independent chairman is concerned, the learned counsel submitted that the petitioners have not made out any case either on oppression or mismanagement and no ground made out for winding up of the company. The shareholders will decide the Board and there is no necessity for appointment of an independent chairman.

26. The petitioners filed their rejoinder to the reply in affidavit of respondent Nos. 2 and 5. Shri Seervai learned senior counsel submitted that the purported reply dated 23rd June, 2009 which was filed, respondent Nos. 2 and 5 deserves to be rejected and not to be taken on record as the said respondents have failed and neglected to file their reply within the time stipulated by this Board. The said respondents have breached deadline set out for filing their reply to the company petition on three occasions, i.e., 15th January, 2009, 27th February, 2009 and 8th June, 2009 with a view to delay the hearing of the company petition. Without prejudice to what is stated aforesaid and at the further outset, the petitioners submitted that the said respondents have in the said reply expressly admitted that the facts as stated herein (a) that the family agreement dated 24th December, 2007 was signed by all the family members, (b) that respondent No. 2 has taken control of all, cheque books, statutory and other records, etc., and has stopped all information of accounts from period prior to family agreement and all the information after the family agreement, (c) that respondent No. 2 has unilaterally delayed or stopped various payments of petitioners and the employees assisting them, (d) that respondent No. 2 did neither send any notice for Board of directors meeting nor take any signatures on resolutions as called upon by petitioner No. 1, vide his letter dated 5th January 2005. The learned counsel further submitted that the respondent have mislead this Bench. On the other hand the true facts are : (a) a firm family agreement executed between the petitioners and the respondent Nos. 2 to 5, which has been duly acted upon to an extent by the parties, is sought to be described as ˜without prejudice proposal™ by the said respondents ; (b) the said respondents have annexed and are wanting to rely upon certain unsigned purported communication marked ˜without prejudice™, the receipt and/or the contents whereof are not admitted by the petitioners ; (c) the said respondents are trying to create an impression as if the respondent Nos. 3 and 4 were at any point of time within the control of the petitioners, by alleging failure to resolve the issues within the property assets group, despite the fact that the said respondents and the respondent Nos. 3 and 4 are in collusion and have been conniving and acting in tandem.

27. The petitioners have denied each and every allegations, contention, submission made by the said respondents in the reply dated 23rd June, 2009 which are contrary to and/or inconsistent with what is stated in the above company petition as also what is stated hereinafter. None of the allegations, contentions and submissions shall be deemed to have been admitted by the petitioners unless they are specifically dealt with and admitted hereinafter. All such allegations, contentions and submissions which are not specifically admitted hereinafter shall be deemed to have been denied. Each and every preliminary objection/ground mentioned in the said reply are liable to be rejected outright as the same are baseless, ill-founded and without any material, and the same are denied herein. The petitioners have denied that the petition is not maintainable or that no case is made out either of oppression or mismanagement. I deny that no act of either oppression or mismanagement, as alleged or at all, has been set out in the captioned company petition. The petitioners have denied the insinuation that they have filed any frivolous company petitions for the reasons alleged or at all. They have denied that none of the company petitions make out any case of either oppression or mismanagement, as alleged or that they are liable to be dismissed for the reasons alleged or at all. In April 2004 due to the following reasons it became extremely difficult to work with respondent No. 2 : (i) respondent No. 2™s lack of interest in the running of the family group companies due to his problems with his personal life ; (ii) the functions that were directly under respondent No. 2 were mismanaged ; (iii) the respondent No. 2, who was in-charge of joint agreement with Godrej Properties had disputes with the ˜project managers™ and the Godrej Properties are still in litigation with several cases pending, including a criminal case in Vikhroli court ; (iv) all matters relating to the properties (which were admittedly being handled by respondent No. 2) were kept in complete secrecy, no documents were shared at the relevant time and respondent No. 2 managed the affairs unilaterally and in a surreptitious and discreet manner ; (v) no money was generated from the properties, apart from a distress sale and monies received out of the agreement with Godrej Properties for 35 years, (vi) respondent No. 2 always backed out from sale of properties which the whole family has/had agreed to including respondent No. 2, at the last minute by giving one excuse or another ; (vii) respondent No. 2 had adopted a rigid, selfish and uncompromising attitude towards each and every matter related to petitioners and more often than not discussions would lead into arguments and no finality was being reached ; (viii) respondent No. 2 did not allow sale of 15 out of 22 vacant flats belonging to respondent No. 1-company, viz., Grentex Wools (P.) Ltd. (keys of which were in the possession of respondent No. 2 since 23rd August, 2007) only because the sale consideration for the same was to eventually come to the petitioners as per the family agreement dated 24th December, 2007 ; (ix) respondent No. 2 did not pay dividend to the shareholders of the company for the last two years (now three years), (x) respondent No. 2 retained possession of all statutory and other records of the company and denied petitioners any access to the same ; and (xi) respondent No. 2, after the family agreement dated 24th December, 2007 refused to make payments to the petitioners and to the employees assisting them. The learned counsel for the petitioner submitted that in view of the acts there is complete breakdown in a faith and trust between the parties. The CLB has power under section 402 of the Act to direct either buy out or the sell out the shares even there is no relief in the prayer. In this context he relied upon a decision reported in the matter of Deepak Lohia (supra).

28. Heard the learned counsel appearing for the parties and perused the documents, pleadings and authorities cited by them. After hearing the learned counsel for the parties elaborately and continuously for some days and after analyzing the pleadings of the parties, the following issues are fell for consideration and need to be addressed :

(1) Whether the affairs of the company conducted unilaterally ?

(2) Whether the MoU dated 24th December, 2007 between the parties would be subject-matter of jurisdiction of this Bench ?

(3) Whether the company is functioning with proper Board of directors ?

(4) Whether non-handover of keys of flats in spite of petitioner™s request, vide his letter dated 8th January, 2008, amounts to acts of oppression ?

(5) Whether non-payment of telephone bills/dues of petitioner No. 1′ and discriminating the staff, non-payment of salaries, non-payment of bonus to the staff working for P1 amounts to oppression ?

(6) Whether Gorashyam Enterprises belonging to R2 is in competing business™ with R-1-company and whether Kapotex Industries belonging to P1 is in competing business with that of R1 ?

(7) Whether the company is in deadlock situation ?

(8) Whether principles of quasi-partnership apply to the present case ?

(9) Whether any case is made out by the petitioners to grant reliefs as prayed for ?

(10) To what relief ?

29. The aforesaid issues are identical to the issues which are already dealt with in CPs 112, 113 and 120 of 2008. However, the issue No. 4 in respect of non-handing over keys of flats to the petitioner No. 1 is concerned, since the issue of flats belonging to the R1-company herein it is necessary to deal the same elaborately in this petition. The petitioner vide his letter dated 8th January, 2008 (p. 107 A.8 to the petition) requested the respondent No. 2 to hand over the keys of the flats belonging to the R1-company and also to hand over the books of account of the company along with all statutory records. The respondents in their reply stated that the disputes between the property asset group remained unresolved and, therefore, the handover of keys of flats belonging to R1-company and also the books of account and other statutory records of R1-company to any member of the property asset group would be premature. The respondents further stated that the other members of the property asset group objected to the requests made by the petitioner for handover of keys of the flats belonging to R1-company and the said objection has been recorded in the letter dated 23rd January, 2008 addressed to the petitioner No. 1 (p. 41 Exhibit ˜B™ of reply). I have perused the letter wherein at para 10 the relevant averment is made. The respondents also stated that the petitioner has at all times had free access to bank account of respondent No. 1-company and has been operating the said bank account and withdrawing the monies from the same even in the absence of the cheque book of R1-company. The account department of R1-company also forwarded a requisite form to petitioner for obtaining a cheque book, the respondents also stated that the petitioner acknowledged the receipt of the cheque book requisition slip. So far as the aforesaid issue of non-handing over of flats is concerned, again the matter falls under the purview of MoU between the parties. As I already hold that the MoU is not within the purview of this Bench and this Bench cannot deal the same.

30. The issues/averments which are not dealt with in this petition are being dealt herein. The averment of the petitioner that respondent No. 2 ousted the petitioner No. 1 and his son from managing the day-to-day business of the company is concerned, the respondents stated that the petitioner No. 1 has himself opted to manage the litigation matters of R1-company and there is no question of ousting the petitione©2r. It is an admitted fact that the petitioner himself withdrew from property asset group and he has himself chosen the division of work as per his choice. Hence, I do not find any merit in the allegation of the petitioner that he has been ousted from the managing the day-to-day business of the R1-company. Since the son of the petitioner is not a shareholder of the company, hence, the allegation in respecting of ousting him from the management does not have any bearing in section 397/398 petition.

31. The averment of the petitioner that the R1 has not paid warehousing charges to the tune of approximately 13.5 lakh by the R6-company herein, to the R1-company, in spite of his letter dated 25th September, 2008. The respondents stated that there is no averment in the petition in respect of the said averment, however, in the rejoinder at para 51 the petitioner raised this issue. The learned counsel for the respondents submitted that since there is no ground made in the petition nor any relief sought to that effect in the petition, the petitioners cannot raise the same in rejoinder. In this context the learned counsel for the respondents relied upon the judgment of Chancery Division (Reported in All England Law Reports) supra. I find even though there is no relief sought but an averment is made by the petitioners, in the rejoinder bringing out the fact. It is the duty of the respondents to answer the same but cannot escape/evade without replying to the said averment. Moreover, a matter concerning finance/monetary aspects of the R1-company, the directors who are in the managerial affairs owe a fiduciary duty towards the affairs of the company. The respondents are hereby directed to clarify/reply the same in respect of this averment to the petitioner.

32. Except the aforesaid averment, the petitioner has not brought put any other new issues or facts which need to be addressed. The petitioners failed to make out any case on all issues and other allegations, averments and contentions, the petition is failed and liable to the dismissed. Hence, the company petition is dismissed. No orders as to costs. All the applications pending as on this date, are disposed of. All the interim orders stand vacated.

Citation:

[2010] 98 CLA 35 (CLB)

BEFORE THE COMPANY LAW BOARD, MUMBAI BENCH

CP No. 114 of 2008

Rajeev Kapur and others

v.

Grentex Wools (P.) Ltd. and others (No.2)

Kanthi Narahari, Member

30th January 2010