Company Law Board
Akbarali A. Kalvert And Anr. vs Konkan Chemicals Pvt. Ltd. And Ors. on 2 May, 1994
Equivalent citations: [1997]88COMPCAS245(CLB)
ORDER
1. This is a petition under Sections 397, 398 and 402 of the Companies Act, 1956, filed on August 18, 1992, alleging oppression and mismanagement against respondents Nos. 2 and 3 in the affairs of respondent No. 1-company, namely, Konkan Chemicals Pvt. Ltd. There are two petitioners, namely, Akbarali A. Kalvert and Unis A. Kalvert, both the petitioners together holding 11,900 fully paid-up equity shares in the issued capital of the company. In addition, the petitioners have also filed a letter of consent from yet another set of shareholders holding in all 5,700 fully paid-up equity shares. The issued and subscribed capital of the company without taking into account the additional capital issued, which is the subject matter of dispute in the present petition amounts to 80,000 equity shares of Rs. 10 each. The petitioners along with the consenting parties were thus holding more than 10 per cent. of this subscribed capital. Also the number of shareholders as on the date of the petition has been ascertained as 11 and as such the minimum number of shareholders was available to maintain the petition. Though the respondents have contested in reply the maintainability on the basis of the enhanced capital, it was not pursued by them. The respondents in this case apart from the company include Dr. S.L. Hendre and Mrs. Manek Hendre who are the chairman and managing director respectively of the company. Though two more respondents were sought to be added, there was no proper application from the petitioners in this regard.
2. According to the petitioners from the inception of the company, i.e., February, 1970, the affairs were conducted as if it was a partnership with three groups, namely, Wazirs, Gogtes and Kalverts, i.e., the petitioners. In or about April, 1991, the Wazir group and the Gogte group purportedly entered into an agreement with Hendres for selling their entire shareholding in the respondent company amounting to 78 per cent. without the knowledge of the petitioners. On this agreement there now exist several legal proceedings between the parties. Consequent to the above agreement the petitioners were left alone with the Hendre group and being strangers, the petitioners were unwilling to be partners with the Hendres. Therefore, the petitioners also thought of selling their shares. Subsequently, on August 3, 1991, a written agreement was entered into with regard to the sale and purchase of 17,600 equity shares belonging to the petitioners and their group at the rate of Rs. 200 per share. As per this agreement, the consideration was to be paid on or before August 13, 1991, by way of deposit of cheque for the said amount and the share certificates and transfer deeds with Mulla and Mulla, Craige, Blunt and Caroe, solicitors, on the understanding that the sale shall be completed only upon the payments being made to the vendors and the shares being transferred to the purchasers. Both the petitioners were directors of the company, the first petitioner being joint managing director. They both handed over to the said attorneys their respective letters of resignation dated April 25, 1991, to be held in escrow with the arrangement that the solicitors shall pass on the same to the Hendres only upon the sale being completed. In the event of the sale not being completed, the said letters of resignation were to be returned. The first petitioner has executed guarantees in favour of the Bank of Maharashtra in connection with the credit facilities availed of by the company which the Hendres have agreed to release as expeditiously as possible and have also executed an indemnity bond in favour of the petitioners in this connection. After having failed to pay the consideration, respondents Nos. 2 and 3 also took complete charge of the company and purported to carry on the business in the manner that suited them and with great prejudice to the company and its shareholders. The respondents wrongfully by two letters dated February 5, 1992, informed the petitioners that both of them have vacated their office as directors on the plea that they absented themselves from three consecutive alleged board meetings held on April 29, 1991, June 17, 1991, and July 9, 1991, and also subsequent meetings up to January 31, 1992, and that petitioner No. 1 had also ceased to be the joint managing director. Thereafter, a series of correspondence between the petitioners and the respondent ensued. The respondent company had availed of diverse credit facilities from the Bank of Maharashtra and on assumption of control by the Hendres defaults were committed. The bank thereafter instituted a suit in the Bombay High Court against the respondents and the petitioners in February, 1992, for recovery of a sum of Rs. 71.64 lakhs along with further interest at 25 per cent. per annum with quarterly rest. The bank had also applied for an order of attachment of the premises of the company. An ad interim order was passed by the Bombay High Court on March 18, 1992, appointing the court receiver for the mortgaged securities and hypothecated goods. An undertaking was also given on behalf of the company that the office premises would not be disposed of or encumbered. According to the petitioners, on June 18, 1992, the company at the instance of the Hendres have obtained a decree in the suit and the company has filed an undertaking to maintain the hypothecated goods and at least Rs. 10 lakhs.
3. The respondents also intimated to the petitioners about the shifting of the registered office of the company to Panvel, District Raigarh outside the limit of Bombay city to which the petitioners protested. The petitioners have also come to know that several suits have been filed against the company after the Hendres have taken over. One of the suits related to specific performance in respect of a purported agreement dated April 9, 1992, by Good Value Marketing Co. Ltd. in connection with the sale of the premises of the registered office of the company. It appears that respondent No. 2 received an amount of Rs. 25 lakhs promising to pay back to the said company which he has defaulted. Another suit was by Kasturi Leasing Co. for recovery of an amount of Rs. 34.7 lakhs together with further interest in which an order of attachment has also been passed. According to the petitioners despite the two court orders respondent No. 2 was attempting to enter into consent terms in the suit by Good Value Marketing Co. Ltd. thereby committing contempt of court. The petitioners also learnt that Kasturi Leasing Co. has also instituted a suit in the city civil court at Bangalore and has obtained attachment orders. Besides the above, the Wazir group has filed a further suit against the respondents in the High Court on July 22, 1992, and a restraint order has been passed against the respondents particularly with regard to the sale of office premises. It is also understood that a winding-up petition has been instituted by Chemox Industrial Corporation Ltd. against the company which has been admitted in the Bombay High Court. The original registered office of the company was situated at Court Chambers Building, New Marine Lines with an accommodation of about 3,000 square feet. These office premises were well-equipped and carried a substantial value. These premises are admittedly being destroyed and reduced to a shell. In addition to the premises of the registered office, the company has huge immovable properties at Badlapur where the factory is located. The total area is about six acres with a built up area of 1 lakh square feet. Besides, the company has valuable plant, equipment and machinery at the factory. It is apprehended that respondent No. 2 would dispose of all the valuable assets against the interests of the company and its shareholders for the purpose of meeting the demands of its creditors. It is, therefore, necessary to restrain respondents Nos. 2 and 3 with regard to sale, alienation, etc., of the properties of the company. It is also learnt that the services of several loyal employees who have grown with the company have been terminated or forced to leave due to the acts of mismanagement and the company is left with practically no employees. It is further alleged that the statutory meetings of the company are not being held and the annual accounts not being made up. The meetings of the board are being got up and the minutes fabricated. The entire business of the company has come to a standstill and the substratum of the company has gone. Respondents Nos. 2 and 3 have also purportedly increased the authorised capital of the company without following any of the procedures prescribed. The petitioners have, therefore, contended that it is just and equitable and necessary to wind up the company but doing so would unfairly prejudice them.
4. The petitioners have prayed for orders for changing the management of the company by appointment of an administrator and/or independent committee ; removal of respondents Nos. 2 and 3 ; restraining respondents Nos. 2 and 3 from operating bank accounts or borrowing ; directing the respondents to render complete accounts ; relocating the registered office to its original location and restoring the office premises to its original shape.
5. At the hearing held on October 20, 1992, an undertaking was given on behalf of the respondents that they would not dispose of property at Court Chambers, New Marine Lines. The respondents also agreed to give weekly statement of receipts and payments to the petitioners. The respondents also agreed to give inspection to the petitioners, of all the statutory records which a member is entitled to inspect. These undertakings were to continue till the disposal of the petition.
6. The reply filed on behalf of all the three respondents has refuted the allegations contained in the petition. The respondents have contended that negotiations for the purchase of the shares from the three groups, namely, Wazirs, Gogtes and Kalverts had commenced in February, 1990, and the deal was consummated on April 25, 1991, and April 29, 1991, as regards the Wazirs and Gogtes were concerned. The price agreed to was Rs. 200 per share. The first two groups transferred their entire shareholding amounting to 47,200 and 15,200 shares respectively to respondents Nos. 2 and 3 as a consequence of which the representatives of the Wazirs and the Gogtes resigned from the board of directors from the aforesaid respective dates. This fact is known to the petitioners as they were personally present at the meeting held on April 25, 1991, when the board passed necessary resolution in this regard. On the same day, it was also noted that the board minutes about the shares of the Kalvert group would be acquired at the same price and terms and conditions as with the Wazir and Gogte groups. Though the petitioners also assured that they would soon transfer their holdings, an agreement for transfer was entered into only on August 3, 1991, between the petitioners and the respondents. The date of the agreement reflects the actual date of recording but the agreement was actually arrived at much earlier. Subsequently, it turned out that the petitioners and their associates did not present the true picture of the working of the company for the year ended March 31, 1991, while negotiating the sale of the shares. The respondents accepted their representations in good faith and completed the deal without any idea about the plan to dupe them. After the audit of the accounts it was found that the company had incurred a loss of over Rs. 1 crore for the year 1990-91. At the board meeting held on April 25, 1991, the petitioners and their associates did not disclose to the respondents a vital fact that the company's factory had been closed by them in February, 1991. After the true picture of assets and liabilities as on March 31, 1991, became known, the respondents could not be expected to pay such a high price of Rs. 200 per share for a share of the nominal value of Rs. 10. The respondents made it known to all the three parties that they would be willing to pay a price equivalent to the true net worth of the share.
7. According to the reply, there was a board meeting on April 25, 1991, in which the petitioners were present and the transfer of shares from the Wazir group to the Hendres were approved and respondents Nos. 2 and 3 co-opted as directors and appointed as chairman and managing director respectively. At the meeting held on April 29, 1991, the transfer of shares from the Gogtes was also approved at which meeting the petitioners walked out and the first petitioner deleted from the minute book their names and the sentence that they had walked out and the same was initialed by respondent No. 2 as chairman.
8. The contention that the registered office was wrongfully and illegally shifted first to Peddar Road (the residence of the Hendres) and later to Panvel in District Raigarh is refuted. It is stated that all the necessary legal provisions had been complied with before transferring the registered office. It is also justified on the ground that there were only 15 employees in the registered office with a total space of 3,600 square feet which was a luxury and it was considered in the best interest of the company to sell the office premises and utilise the proceeds productively for the business of the company as the company needed funds to pay off the creditors and also to meet its working capital requirements. Even the removal of furniture and fixtures was justified as the prospective buyers wanted to use the space as a show room and as such these items were removed to the factory premises.
9. As regards the allegation of removal of the petitioners as directors, it is stated that with the understanding dated April 25, 1991, they were to resign from the board. Though the Wazir group and the Gogte group resigned on April 25 and 29, 1991, respectively, the petitioners voluntarily decided not to take any interest in the management and refrained from attending board and general body meetings. On April 29, 1991, also they withdrew themselves from the meeting. Even if the claim is admitted that they continued there was no communication for leave of absence nor did petitioner No. 1 claim any salary or benefits which he used to do prior to May, 1991. It is also asserted that notices for the board meetings and various general body meetings were sent to all the shareholders but the petitioners did not choose to attend any of the meetings. Having thus abandoned the office of the joint managing director from May, 1991, they did not attend the subsequent board meetings and, accordingly, under Section 283( 1 j(g), the office of the two directors became vacant. The meetings were regularly held and the petitioners deliberately chose to ignore the notices. Thus, the allegations are all an afterthought and attempts to legitimise the petitioner's grievances and averments.
10. As regards the legal proceedings initiated against the company, an amount of Rs. 50.42 lakhs was outstanding as on March 31, 1991, to the Bank of Maharashtra and in March, 1992, the bank filed a suit claiming Rs. 71.64 lakhs. This situation was due to accumulated losses of over Rs. 1 crore. Though the respondents tried to avoid the appointment of a receiver temporarily, subsequently, the court appointed a receiver for the property charged to the bank, i.e., the factory premises and other assets located therein and, accordingly, the receiver has taken possession. The respondents in good faith attempted to avoid the appointment of the receiver for the factory by trying to sell the Bombay property and hence shifted the registered office to Panvel. The liabilities have devolved on the company due to the commitments made by the previous management consisting of the petitioners and the other two groups. The petitioners have instigated the creditors after the new management took over whereas no such proceedings were started before the take over by the new management. The petitioners have suppressed the full facts with regard to the suit decreed in favour of the Bank of Maharashtra by the High Court. In fact, in the suit filed by the Bank of Maharashtra the petitioner had given notice of motion which was dismissed by the High Court stating that they have no locus standi in the matter and the petitioners went in appeal and the appellate court reverted the case to the learned single judge to decide on the merits. With regard to the suit filed by Kasturi Leasing Co., it was stated that the petitioners sold the plant and machinery in 1987-88 to the leasing company and leased it back and in the process booked a profit on the sale. Even after this credit, the net profit was only Rs. 3.20 lakhs in that year. Similarly, the petitioners and their associates had been indulging in acts and deeds of dubious nature, while in charge of the management which is reflected in the accounts. There were transactions with other group companies of the earlier management which are difficult to be unravelled in the absence of details. Another Civil Petition No. 354 of 1992 was also filed by Chemox Chemicals Industries Ltd. at the behest of the petitioners and/or their cohorts but an amicable settlement has been reached.
11. As regards the appointment of Mrs. Hendre as managing director, the same was approved by the general body at an extraordinary general meeting on July 9, 1991. Respondent No. 2 was elected as chairman at the board meeting held on April 25, 1991, when the petitioners were present. The respondents have also set out in detail the deteriorating position of the company operationally as well as financially since 1987-88. The respondents have subsequently brought in funds and assets to the tune of Rs. 90 lakhs and, therefore, have a greater stake in the company than the petitioners. It is also alleged that the petitioners in fact have joined hands with the Wazirs and have been instigating company employees to destabilise the company by putting forward uncalled for and unwarranted demands. Presently, the employees are on strike and the factory premises have been taken over by the receiver appointed by the Bombay High Court. The respondents will pay off the dues of the bank in full out of the sale proceeds of the Bombay office as and when concluded. In conclusion, the respondents have stated that due to a series of acts of mismanagement by the previous management including the petitioners, the company has landed itself in the current unenviable situation and the respondents are putting in sincere efforts to revive the company. According to the respondents the real intention of the petitioners and their only motive is to put pressure on them to succumb to the payment of Rs. 200 per share as against a price based on the net worth which is now accepted by the Wazir group in terms of the consent decree,
12. As per our directions, the petitioners were given inspection of the statutory records and, thereafter, a rejoinder was filed. It was brought out in the rejoinder that between June, 1991, and May, 1992, the respondents have purportedly convened and held six extraordinary general meetings. These meetings are illegal and records have been got up and/or fabricated to show the holding of meetings. The notices and explanatory statements indicate not only violations of company law and also self-contradictory. An examination of the register of contracts showed various omissions and commissions. The entire entries in the register relate to renting out the company's premises at cheaper rates to the respondents' own parties and charging exorbitant rent and deposit from the company for use of the premises of the respondents. All these acts are in violation of Sections 299 to 303 of the Companies Act. It is also found that the paid-up capital was increased by Rs. 90 lakhs by fresh issue of shares on three dates July 9, 1991, September 13, 1991, and March 27, 1992. Out of the total issue of Rs. 90 lakhs, Rs. 73.5 lakhs was for consideration other than cash. The balance-sheet of March 31, 1992, as submitted, however, does not reflect any details of issue for consideration other than cash. The entire issue is totally illegal and contradictory to the provisions of the articles of association. The respondents have also filed conflicting forms relating to directorships of the petitioners. One set of forms was filed in May, 1991, indicating resignation in April, 1991, and another set of forms was filed in February, 1992, showing vacation of office under Section 285(1)(g) of the Companies Act in January, 1992. In between the annual return for the year 1990-91 shows as if the petitioners have already vacated office. The register of directors also indicate resignation of the petitioners without a valid resignation on record. The allegation that no board meetings were held was substantiated as a meagre figure of sitting fees in the accounts for 1991-92 as compared to the number of board meetings purportedly held. The petitioners were also not satisfied with the details of receipts and payments submitted by the respondents as per our interim orders on a weekly basis. The petitioners have also alleged mala fides against the respondents in delaying compliance with orders for inspection, refusing to hand over possession to the court receiver, non-payment of various dues to the employees, the electricity board and the municipal council. In addition, the petitioners have also contradicted the replies of the respondents on the merits.
13. The main issue which arises from the petition is whether the acts complained of are factually correct and if so, do they constitute oppression and/or mismanagement. Also whether the petitioners are entitled to any relief. Shri F.G. Devitre, advocate, appearing on behalf of the petitioners listed out the following main charges :
(a) fabrication of notices of minutes of the meetings (board and general body) and other documents and creating records to show fictitious meetings ;
(b) removal of the petitioners as directors and fabrication of records to show as if the petitioners have ceased to be directors ;
(c) deliberate shifting of the registered office against the interests of the company and for the personal benefit of the respondents ;
(d) allotment of additional shares of about Rs. 90 lakhs mostly for consideration other than cash, exclusively to the respondents and transfer of shares in violation of the articles of association ;
(e) utilising the company's properties for personal benefits and embroiling the company into various litigations thereby mismanaging the affairs of the company.
14. Elaborating on the above, the learned advocate, pointed out various discrepancies noticed from the inspection. He stated that the respondents have already admitted that there exists a correction in the minute book with regard to the meeting of April 29 which was also admittedly initialled by respondent No. 2. However, during the hearing the original minutes book produced was found to be totally different and there was no correction of minutes and no initialling was evident. With regard to the assertion of the respondents that notices were sent under postal certificate, during inspection the certificates of posting produced did not bear any postal stamp or cancellation thereof. Subsequently, after about two months, the respondents produced the stamped certificates, all from one post office at Bandup, Bombay, which is located far away from the registered office, whereas a post office is available very close to the registered office. In connection with the extent of reliability of certificate of posting as evidence he cited Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd. [1966] Comp LJ 310 ; AIR 1966 Cal 512. Yet another discrepancy was in the notice dated June 7, 1991, with regard to an alleged extraordinary general meeting of July 2, 1991. The explanatory statement refers to the resignation of the petitioners having been already submitted whereas the petitioners had handed over to the solicitors on escrow their resignation only in August, 1991, pursuant to the agreement of August 3, 1991. He further stated that in the notice dated June 17, 1991, with regard to the extraordinary general meeting of July 9, 1991, the explanatory statement is dated July 9, 1991. Further this notice dated June 17, 1991, is on the letterhead of the company with the address of the registered office at Peddar Road, Bombay, which according to the respondents themselves, is the new address to which they had shifted only on August 14, 1991. Another instance of fabrication illustrated relates to an amendment of the articles of association purportedly at the extraordinary general meeting called on July 9, 1991, but the relevant resolution appears to have been filed only after 7 months that is in February, 1992. Moreover, in the certified copy of the articles of association dated October 15, 1992, the amendment is not at all reflected. Self-contradictions relating to the resolutions of extraordinary general meeting of August 5, 1991, were also pointed out, as to the total number of resolutions passed as on that day. Further, contradiction with regard to resolution for allotment of shares against gloves and laminates was pointed out, viz., resolution for allotment is stated to be passed on September 13, 1991, and refers to an extraordinary general meeting held on September 21, 1991, for approving and authorising the board to allot the shares. The minutes of this meeting however are dated March 20, 1992, i.e., much after (7 months) of the meeting.
15. With regard to the allegation of removal from the directorship he stated that the petitioners were informed by two notices dated February 5, 1992, that they had remained absent without obtaining any leave of absence in the last three consecutive meetings, namely, April 29, June 17, and July 9, 1991, and also at subsequent meetings up to January 31, 1992, and, accordingly, they have ceased to be the directors as per Section 283(1)(g) of the Companies Act, 1956, and Article 94(i) of the articles of association. He pointed out that respondent No. 2 himself in his letter dated March 30, 1992, has admitted the presence of the petitioners in the board meeting held on April 29, and June 17, 1991, though for a while. The request of the petitioners for inspection with regard to the notices of board meetings was also not granted. He further stated that petitioner No. 1, had given standing instructions in writing as early as in 1973 to send registered acknowledgment due notices. He further stated that the respondents had fabricated documents with regard to the cessation of the petitioners as . directors. They have filed conflicting returns with the Registrar of Companies first in May, 1991, stating that they had resigned on April 25, 1991, and again on July 30, 1991, with regard to joint managing directorship on the same grounds though admitting that petitioner No. 1 is continuing as non-executive director. However, by another return dated February 7, 1992, the Registrar of Companies has been informed that both the petitioners have vacated office on February 5, 1992, due to non-attendance at three consecutive board meetings. In this connection, the learned advocate cited Parmeshwari Prasad Gupta v. Union of India [1974] 44 Comp Cas 1 (SC) ; AIR 1973 SC 2389, to state that notice to all the directors is essential for the validity of any resolution passed at the board meeting.
16. The registered office located at Court Chambers, New Marine Lines does not involve any expenditure on account of rent. The respondents shifted the registered office on August 14, 1991, to their own residence at Peddar Road, Bombay, and, thereafter, in July, 1992, further shifted to Panvel, Distt. Raigarh (outside Bombay), which is not even the factory premises of the company. Thus it was shifted to a third location belonging to the respondents involving a rental of Rs. 10,000 per month to the company payable to the respondents. By this process the registered office was also made inaccessible to the minority shareholders which constitutes oppression. The petitioners did not receive any notice of meeting for shifting the register office. The respondents have removed the furniture and fixtures and reduced the registered office to a shell.
17. As regards further issue of capital, between July, 1991, and March, 1992, not only the authorised capital was increased from Rs. 25 lakhs to Rs. 1 crore but further allotments were also made exclusively to the two respondents for consideration other than cash. The allotments made were as follows :
July 10, 1991 Rs. 8.5 lakhs Allotted to respondents Nos. 2 and 3 for consideration other than cash, namely, building material, machinery, spares and tools without any details.
September 13, 1991 Rs. 65 lakhs Allotted to respondents Nos. 2 and 3 for consideration other than cash, namely, surgical gloves and industrial laminates.
March 27, 1992 Rs. 8 lakhs Allotted to respondents Nos. 2 and 3 against unsecured loans outstanding.
18. Apart from absence of details of building materials and machinery, the company has never dealt in any surgical gloves or industrial laminates. The inventory taken by the court receiver in the factory premises also does not show any laminates and shows a few items of gloves. There had been no unsecured loans outstanding for which the issue of Rs. 8 lakhs of capital was made. Further, the balance-sheet as filed by the respondents for 1991-92 though reflects increase in the capital does not give any details of issue for consideration other than cash. Further these shares were exclusively allotted to the respondents, without any offer to the other shareholders which is in violation of Article 8 of the articles of association.
19. As regards misuse of the company's properties Shri G. Devitre cited after inspection, instances of the properties of the company being let out to the respondents' own companies at nominal rent with nominal deposits. In addition they are charging Rs. 10,000 per month for locating the registered office of the company in their own premises. Further substantial sums have been siphoned off on account of the purported remuneration to themselves as directors and the purported interest to alleged creditors. Besides this the respondents have also embroiled the company into various litigations with regard to the sale of the registered office of the company and non-payment of creditors' dues.
20. Shri M.R. Lal, advocate, appearing on behalf of the respondents, emphasised that the petitioners have not come with clean hands. The petitioners have mismanaged the company earlier and have joined the Wazir group in instigating the workmen to strike work. They had sold and leased back plant and machinery during 1987-90 and thereby showed profits in the three years and have also declared dividends. By such sale and leasing back, the company has ceased to be the owner of the plant and machinery and yet the plant and machinery have been charged to the bank against borrowings. This act has been condemned by the Bombay High Court in one of the suits connected with this property as "a fraud committed by the former directors of the company", which includes the petitioners. The grievance of the petitioners is a private grievance, i.e., inability to recover an exorbitant price from the respondents as per the agreement dated August 3, 1991. Shri Lal cited in this connection Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises (Pvt) Ltd. [1991] 72 Comp Cas 211 (Kar) to state that relief will be refused if the real purpose of the petitioner is to obtain payment owed by the company or to force the directors to accept their views.
21. With regard to the meetings, learned counsel stated that the company had convened and held 10 board meetings, 2 annual general meetings and 5 extraordinary general meetings under the management of the Hendres. Notices were sent in accordance with the Article 106(2) of the articles of association up to January 31, 1992, for board meetings and for general meetings notices were duly served on the members of the company and the proof of posting has been submitted. As per the articles "notice shall be considered to have been served or posted as stated above and proof of posting, of letter duly addressed shall be sufficient evidence of notice having been given". He questioned the veracity of the petitioners' statement that they did not receive notices of meetings.
22. With regard to the removal of the petitioners as directors, he stated that they did not take care either to attend the meetings or take any interest in the affairs of the company. Petitioner No. 1 had voluntarily abandoned his office as joint managing director and did not visit the office except once in May, 1991, to collect his salary. The petitioners should have sought leave of absence from attending each meeting if they had any interest in the company. The provisions of Section 283(1)(g) are mandatory and take effect immediately after the happening of the event and the petitioners cannot invoke Section 397 to remedy the situation. There was no removal or restraint placed by the respondents but a pure and simple vacation of office.
23. As regards the failure to present the original list of addressees without the postal stamps it was a mere lapse on the part of the employees. As regards posting of the letters at the Bhandup post office, since there was no check on the staff while going out, one of the staff members residing in Bhandup area was instructed to do the posting with an allowance of leaving the office an hour earlier. There is no law which prevents posting letters from any post office and the respondents enjoying 78 per cent. voting power had no cause or reason to be afraid of the presence of the minority at the meetings. On the legal issues of posting of letters, the presumption is that if a letter properly addressed is proved to have been posted, it reached its destination and was received by the person to whom it was addressed.
24. With regard to the shifting of the registered office and allegation of destruction of fixtures in the office premises, he stated that it was in the best interest of the company to relieve itself of the huge debt burden and get some working capital. The furniture and fixtures were removed only to the factory. Since there were 15 employees at the registered office and with debts exceeding Rs. 200 lakhs and with the Bombay premises not being a productive asset, it was considered advisable to dispose of this property to pay off the dues without unduly affecting the production apparatus, namely, the factory premises and also generate some money for the working capital. There was no other choice in the circumstances except to shift the registered office.
25. With regard to the allotment of additional shares, the same was made on three different dates, namely, July 9, 1991, September 21, 1991, and March 27, 1992, in pursuance of special resolution as per Article 56(6} of the articles of association. Due notices were given to all the members. The company is not governed by Section 81(1A) of the Companies Act being a private company. The petitioners themselves have admitted that they had agreed to the increase of the capital in July, 1991. Since the petitioners also did not want to have any truck with the respondents (total strangers) the subsequent allotments made as per the provisions of the articles are also justified as the petitioners have already made their views clear. Necessary returns were filed with the Registrar of Companies in this connection. With regard to the court proceedings, the working capital facilities were obtained from the Bank of Maharashtra several years ago, when the petitioners were in management and they failed to repay the bank loans, left the company dry with no liquidity on account of their own acts. Consequently, the bank initiated recovery proceedings. Other creditors of the company had also filed recovery or winding up proceedings on account of outstandings contracted by the petitioners and other former directors. He also submitted that where the petitioners themselves are responsible for bringing about the alleged state of affairs, their petition cannot be entertained because that would amount to taking advantage of their own fault. It is further stated that the court receiver has already auctioned the company's factory, plant and machinery and other assets on the basis of "sealed bids" invited by him.
26. As regards sale of the Court Chamber premises, the consideration agreed to was Rs. 225 lakhs whereas the outstanding debts of the company stood at more than Rs. 200 lakhs at that time. In addition, other dues of workers and the State Electricity Board were also to be settled. Hence there was no personal advantage for the respondents.
27. It was also stated on behalf of the respondents that the general principle of law laid down in Foss v. Harbottle [1843] 2 Hare 461 that the courts will not interfere in matters of internal administration should prevail. It is for the majority to decide the manner in which the affairs of the company are to be conducted. The court only intervenes in very exceptional cases, that is where there is fraud or oppression.
28. It was also argued that the case is not one of deadlock in the company and as such there is no ground for winding up. Thus where the shareholding of the two groups is substantially disproportionate the principle of partnership or removal of deadlock will not apply. Shri Lal, therefore, concluded that the petitioners do not deserve any relief of any kind whatsoever.
29. We have carefully considered the petition, the reply, counter reply and the arguments advanced from both the sides. We have also considered the written arguments from both the sides submitted after the final hearing on November 30, 1993. From the various averments, certain admitted facts emerge, namely :-
(i) There were three groups of shareholders, namely, the Wazirs, the Gogtes and the Kalverts (i.e., the petitioners). They have been together in the company for more than 20 years with respective shareholding as follows :
1.
Wazirs 47,200 shares 59 per cent.
2. Gogtes 15,200 shares 19 per cent.
3. Kalverts 17,600 shares 22 per cent.
(ii) An understanding for purchase and sale of shares between the Wazirs on the one hand and the Hendres (i.e., the respondents) was arrived at for a consideration at Rs. 200 per share and, accordingly, the shares of the Wazirs were transferred at the board meeting on April 25, 1991, when both the petitioners were also present. The shares of the Gogtes were also transferred at the board meeting on April 29, 1991.
(iii) The last meeting fully attended by the petitioner was on April 25, 1991.
(iv) An agreement to purchase the shares belonging to the petitioners was entered into with the Hendres on August 3, 1991, at the rate of Rs. 200 which, however, has not been carried out.
30. The submission of the respondents that the petitioners cannot agitate their private rights against respondents Nos. 2 and 3 under Section 397/ 398 is a valid objection. This contention is also supported by a number of decisions of various courts including the one cited by the respondents, namely, Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises (Pvt.) Ltd. [1991] 72 Comp Cas 211 (Kar). We are in complete agreement with the respondents on this issue and we, therefore, do not propose to take cognizance of the private agreement for the purchase and sale of shares between the petitioners and the Hendres in which the company is not a party. We shall only deal with matters relating to oppression and mismanagement as complained of by the petitioners. Apart from this, the contention that the petitioner has not come with clean hands is not established. The instance of sale of fixed assets by the erstwhile management cited by the respondents and mala fides therein have not been conclusively established against the petitioners. Hence we cannot dismiss the petition on this ground.
31. From the facts submitted, it is evident that from April, 1991, to February, 1992, there was a period of suspense since an understanding was reached between the two parties for the sale and purchase of shares. It is also evident from the petitioner's own submission that even in February, 1992, they had been following up with the respondents for payment for the shares, obviously, when the petitioners were following up the payment, they could not also have insisted on exercising their rights arising out of the shareholding, namely, membership rights and rights as directors. It is, therefore, understandable that petitioner No. 1 did not enforce his authority as joint managing director or insist on attending the board or general meetings. The resignation of the petitioners as directors is also not on record and hence their vacating office due to resignation also did not arise. The fact remains that as per the records of the company, the petitioners were directors as well as shareholders. Since the deal regarding shares was already clinched it is also understandable that the respondents could have ignored the formality of sending notices to the petitioners, as members/directors. That by itself, however, does not absolve the respondents of giving notices of board/general meetings to directors/members so long as they continue to remain so. The entire shares purchased from the Wazirs and Gogtes were registered exclusively in the names of respondents Nos. 2 and 3. As per the records of the company, besides respondents Nos. 2 and 3, there are 9 shareholders, all belonging to the petitioners' group. Thus, it is not possible to crosscheck whether notices were really sent to members. It has also been noted that the respondents were in fact filing necessary documents required to be filed under the Companies Act as per dates claimed in the submissions.
32. This is evident from the receipts issued by the Registrar of Companies which are superimposed on the relevant documents. Faced with this situation, the respondents are called upon to justify the various documents whether relating to appointments, issue of shares, approval of contracts, etc., through minutes books and notices and their records. If notices and minutes had not been there earlier, the respondents have to necessarily justify their acts, as certain documents are already on the records of the Registrar of Companies. The petitioners have after inspection allowed by us shown ample evidence of the fabrication of notices and minutes of meetings. Commencing from the minutes of April 29, 1991 (i.e., the minutes of the first board meeting after April 25, 1991) discrepancies are very evident. In the April 29 minutes admittedly the petitioners' names were shown as present then deleted and initialled by respondent No. 2. This is also reflected in the photocopy of the minutes submitted by the respondents, before us. However, during inspection the petitioners were shown a typed copy where also a deletion was evident but with no initial. Later during the hearing a new minutes book was produced where there was no deletion or initialling at all. Discrepancies were also evident in the notices for the general body meetings. For instance, the notice dated June 7, 1991, for an extraordinary general meeting to be held on July 2, 19.91, refers to the resignation of the petitioner whereas the resignation letters were to be handed over by the petitioners only in August, 1991, as per the agreement. The petitioners could not be presumed to have handed over the resignation earlier. Discrepancies were also noticed in the notice dated June 17, 1991, which had along with it an explanatory statement dated July 9, 1991, which actually is the date of the alleged meeting. The most glaring evidence of fabrication is the indication of the address of the registered office in the notice dated June 17, 1991, namely, 63, Peddar Road, Bombay, whereas, admittedly, the registered office was shifted to this address only in August, 1991. There is no convincing reply to all these allegations excepting an excuse of lapse on the part of the staff. The petitioners also drew our attention to the posting of the notices from a particular post office in Bhandup which is far away from the registered office though a post office was available nearby. They also drew our attention to the fact that originally in inspection the list of addresses was shown without the postal stamps duly cancelled. After two months, however, the respondents produced a stamped certificate of posting. According to the respondents, there is no law which prevents the company from posting its letters from any post office if it suited its convenience or that of its employees. They have also justified the non-production of the stamped and cancelled postal certificates as a mere failure of the concerned staff. According to the respondents, the petitioners have blown these lapses out of proportion. The petitioners, on the other hand, have drawn our attention to the decision in Ramashankar Prosad v. Sindri Iron Foundry Pvt. Ltd. [1966] 1 Comp LJ 310 ; AIR 1966 Cal 512 wherein the question of admitting certificates of posting as sufficient proof of notice was dealt with. It has been observed there that "it is only too well-known that certificates of postings can be got hold of without actually putting the letters in the post and the respondents must have adopted that course". We have come to the same conclusion keeping in view the various discrepancies with regard to the notices and minutes, some of which could not be refuted by the respondents. Particularly, with regard to the notice containing the details of a future address and also in view of the fact that subsequent communications in February, 1992, and, thereafter, having reached the petitioners. While coming to this conclusion we have also relied on our decision on this issue in Stridewell Leathers Pvt. Ltd. v. Shoe Specialities Pvt. Ltd. (C. P. No. 29 of 1992)--since reported in [1996] 1 Comp LJ 426 (CLB). In that case, we had occasion to consider the decisions in Smt. Kanak Lata Ghose v. Amal Kumar Ghose, AIR 1970 Cal 328 and Mrs. Achamma Thomas v. E.R. Fairman, AIR 1970 Mys 77. In both these cases, it was held that in the case of despatch under postal certificates a general presumption of posting could be drawn. However, in both the cases, scope has been left to take the circumstances into account while drawing the presumption. Therefore, one will have to take into consideration the circumstances in determining the service of the letters sent under postal certificates. Even if it is presumed that the petitioners have suppressed the receipt of the notices in January, 1992, since they were anticipating the payments it could not be said of notice dated March 27, 1992, of the extraordinary general meeting for additional share issue at which time the dispute has assumed serious proportions. We have also noted that though the respondents have produced certificates of posting in respect of extraordinary general meetings, no such certificates were produced in respect of board meetings. In fact the respondents have admitted that at the board meetings of April and June, the petitioners were present though for a while. Thus, the grounds for vacation of office of directors have not also been conclusively established. The petitioners have also drawn our attention to the decision of the Supreme Court in Parmeshwari Prasad Gupta v. Union of India, AIR 1973 SC 2389 ; [1974] 44 Comp Cas 1, to state that "even if notice was not given to one of the directors, the resolution passed at such a board meeting is not valid". In view of the above we are convinced that the board and the general body meetings of the company held during the period from April 29, 1991, were not duly convened and all those meetings are invalid.
33. With regard to the grievance of the petitioners of removal from directorship and fabrication of records to show their exit, as already referred to, the respondents themselves had admitted that the petitioners were present at the meetings on April 29, and June 17, 1991. The vacation of office under Section 283(1)(g) of the Companies Act for non-attendance of three consecutive board meetings has not been substantiated since details of further board meetings after July, 1991, were not submitted before us. It is also established that conflicting returns were filed with regard to the cessation of the petitioners as directors.
34. One return dated May 9, 1991, and the two returns dated July 30, 1991, have been filed. The first with regard to petitioner No. 2, the second with regard to petitioner No. 1 and the third again with regard to petitioner No. 1, stating that he has resigned as joint managing director but is continuing as non-executive director. Ultimately, another return on February 7, 1992, states that both petitioners Nos. 1 and 2 have vacated office as per Section 283(1)(g) of the Companies Act and Article 94 of the articles of association. One of the returns dated July 30, 1991, at least admits that petitioner No. 1 is continuing as a non-executive director. Yet the respondents have not served notices of meetings even in respect of petitioner No. 1 up to February 5, 1992. Counsel for the respondents did admit during the hearing that the filing of forms in May and July, were not proper and should not have been filed. In view of the non-production of evidence of notice of meeting of the board of directors, the contention of vacation of office by the petitioners as directors of the company cannot be upheld. All the same, the petitioners themselves had expressed a desire not to continue any association with strangers and the two respondents together have held admittedly 78 per cent. of the shares, the petitioners could have been removed otherwise also after amending the relevant articles which provide for directorship for life time. Since a grievance of loss of office cannot be made by a director under Section 397/398, we refrain from passing any orders with regard to the cessation of office of the petitioners as directors. It is also necessary to note in this context that no relief in this regard was sought by the petitioners.
35. The vital issue which affects any shareholder of a company is the allotment of additional shares without making a pro rata offer to the other shareholders. This issue is the crux of any oppression as has been held in a number of cases by various courts. In the present case also, the petitioners have complained of further increase in the capital from Rs. 8 lakhs to Rs. 98 lakhs. The allegation is that at different extraordinary general meetings, the authorised capital was increased and further issues were made exclusively to the directors without making any offer to the existing members. The complaint, therefore, is two-fold, namely, failure to issue notice of relevant extraordinary general meeting and failure to make a pro rata offer to the existing equity shareholders. The question of failure to issue notice has been already dealt with by us. As regards the other question the petitioners drew our attention to Article 8 of the articles of association which is reproduced below :
"8(i). Where at any time after the expiry of two years from the formation of the company or at any time after the expiry of one year from the allotment of shares by the company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares then :
(a) such further shares shall be offered to the persons or corporate bodies, who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid up on those shares at that date ;
(b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted will be deemed to have declined ;
(c) the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person ; and the notice referred to in Clause (b) shall contain a statement of this right ;
(d) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the board of directors may dispose of them in such manner as they think most beneficial to the company.
(ii) Notwithstanding anything contained in the foregoing clause, subject to the provision of Section 81 of the Act, the further shares aforesaid may be offered to any persons (whether or not those persons include the persons referred to in Clause (a) in any manner whatsoever) :
(a) If a special resolution to that effect is passed by the company in general meeting or subject to Section 81 of the Act."
36. The respondents had argued that the pre-emptive clause under Section 81(1A) of the Companies Act is not applicable being a private company. They have further stated that the issue of further capital to any persons whether or not to present shareholders, should be done by the board. However, we find that this is again possible only by way of a special resolution at the general body meeting as per Article 8 of the articles of association. It is important to note that the entire allotment of shares of Rs. 90 lakhs has been made to the two directors and to the exclusion of other shareholders of the company. The directors have a fiduciary responsibility inasmuch as the allotments result in making their holdings in the company up to 98 per cent. and reducing the other shareholders to a mere 2 per cent. from 22 per cent. Such an act is sought to be justified by way of resolution passed by the two directors who were the only members present in the general meeting.
37. The directors' fiduciary responsibilities in this connection vis a vis other shareholders is relevant. This has been spelt out by the Supreme Court in Nanalal Zaver v. Bombay Life Assurance Co. Ltd. [1950] 20 Comp Cas 179. The observations of Justice S. R. Das in the case are relevant (at page 203) :
"It is well-established that directors of company are in a fiduciary position vis a vis the company and must exercise their power for the benefit of the company. If the power to issue further shares is exercised by the directors not for the benefit of the company but simply and solely for their personal aggrandisement and to the detriment of the company, the court will interfere and prevent the directors from doing so. The very basis of the court's interference in such a case is the existence of the relationship of a trustee and of cestui que trust as between the directors and the company."
38. In Gluco Series Pvt. Ltd., In re [1987] 61 Comp Cas 227, the Calcutta High Court has also observed that the court will scrutinise with particular circumspection any issue and allotment of shares by which existing balance of power in a company is disturbed. In Sindhri Iron Foundry Pvt. Ltd.'s case [1964] 34 Comp Cas 510, the Calcutta High Court has categorically stated that a single wrongful act alone could constitute oppression, as in the present case by increasing the 78 per cent. majority to 98 per cent. It is also noted that out of the total issue of 90 lakhs, Rs. 81.5 lakhs (including conversion of a purported loan into capital) was for considera-
tion other than cash. As such, these issues could not be considered as in the interest of the company. The major issue of Rs. 65 lakhs has taken place on September 13, 1991, against purported supplies of industrial laminates and surgical gloves. The special resolution waiving the preemptive right is stated to have been passed on September 21, 1991, though the allotment is stated to have been made on September 13, 1991, as per return of allotment filed by the company. Also, the consideration appears to have been totally non-existing as observed from the inventory list of the court receiver who took possession of the factory along with materials lying therein. The inventory list does not contain any item of industrial laminates and very few negligible items of gloves. Since the date of issue, the company has not done any business as the factory was closed and as such, these could not have been disposed of nor do they reflect consumption of these items in the profit and loss account for the year 1991-92 and 1992-93. It was also pointed out to the respondents that the balance-sheets for 1992 or 1993 do not make a reference to issue of shares for consideration other than cash. There was no response from them on this issue excepting that they sought to amend the balance-sheet of 1992 already approved to reflect these transactions. The respondents also could not explain as to where the laminates and gloves have gone. Keeping these circumstances in view, we have to come to the inevitable conclusion that all the additional issues of shares beyond Rs. 8 lakhs is unauthorised and invalid.
39. We have also considered the subsequent allegation of the petitioners through their application No. 256 of 1993 with regard to the transfer of 100 shares each to two persons stated to be employees in violation of the provisions of Articles 33, 33A, 33B and 33D of the articles of association of the company. The respondents have attempted to justify these transfers on the ground that the board has wide discretion and authority to authorise the transfer of shares. The respondents also stated that as per Article 33E the general body can vary the rules and since the respondents hold 98 per cent. of the capital they can vary the terms. They have also justified the transfer on the ground that the petitioners did not raise this objection when the Wazir group and the Gogte group transferred their shares to the respondents. We are not, however, convinced of these justifications of the respondents inasmuch as on the date of transfer the relevant provisions of the articles being as they are, any transfer in violation of the articles amounts to denying a privilege available to the petitioner shareholders. The potential of the respondents to amend the articles, cannot by itself be taken as a justification for violating the articles. Even if such a potential is actually used to amend the articles it can by itself be a ground of oppression. Though we have not admitted the two transferees as additional respondents, we hold that the approval of the transfer by the board of directors of 200 shares is not valid.
40. The petitioners' complaint of deliberate shifting of the registered office against the interests of the company and for the personal benefit of the respondents has been considered. It is evident that the respondents have complied with the legal requirements of filing the necessary returns with the Registrar of Companies in this connection. As already discussed, the notices for the relevant meetings appeared to be fabricated. Apart from this, the justification for shifting from New Marine Lines are convincing. The respondents had kept in view the poor financial position and in order to reactivise the factory operations took a decision to dispose of the New Marine Lines office so that the proceeds could be used to pay off the liabilities and partly to meet the working capital needs. Accordingly, the shifting of the registered office to Peddar Road (residence of respondents) is understandable. However, there is no valid justification for further shifting to a place belonging to the respondents and thereby burdening the company with a monthly rental of Rs. 10,000. Though the respondents state that this rental is considerably lower than the rates prevailing in the respective localities, it is unfair to maintain idle space in the factory premises or let out the space in the factory premises and keep the registered office in a hired building, particularly, belonging to the respondents thereby additionally burdening the company with a monthly rental of Rs. 10,000. The reference to the decision of the Allahabad High Court in Chaturgun Ram Maurya v. U.P. Buildwares P. Ltd., [1985] Tax LR 2030 (All) U. P. Buildwares P. Ltd.'s case (Ramaiya 1992 Edition, page 1667) that the majority decision cannot be a ground for a petition under Section 397/398 does not help the respondents. If an alternative option is open to the directors by which the company can be monetarily benefited, by taking a decision which directly benefits the directors, the respondents cannot escape the charge of mismanagement by the company.
41. The petitioners have also drawn our attention to instances of misuse of the properties of the company for the benefit of the respondents, particularly, with regard to renting out the canteen stores, engineering section and guest house on comparatively cheaper terms to the respondents. In addition the respondents have also drawn huge amounts in the guise of salary and other expenses. It is further alleged that the respondents have embroiled the company in various litigations. The respondents state that there is no material on record anywhere which shows that they have taken any undue advantage of use of the company's assets. This argument is convincing as idle space has been put to use but there is no concrete proof to establish that the terms were unfavourable to the company nor have the auditors reported so in their report when they are required to so indicate. As regards siphoning off the funds the respondents state that they have not taken any funds other than their legitimate dues as remuneration. They have also justified the payment of salary to themselves as they are required to attend courts, conferences with solicitors/ advocates, attend the court receiver's office, etc. However, their justification on the counter-allegation that petitioner No. 1 was receiving remuneration as joint managing director for more than 20 years cannot by itself constitute a justification against siphoning off funds. Though the fact of withdrawal of funds on account of remuneration or expenses has been stated by the respondents, the petitioners have not established as to how the withdrawal of legitimate dues would constitute mismanagement. Accordingly, we do not express any view in this matter. As regards the allegation of the respondents embroiling the company in innumerable litigations we are not convinced about this allegation since the various litigations are a consequence of transactions entered into by the company before the respondents have come on the scene. This itself is sufficient to show that the respondents themselves have not initiated litigations. However, we are not to examine the counter-allegations against the petitioners in the management of the company and as such we are not examining these counter-charges by the respondents.
42. We are conscious of the fact that by declaring the further issue of shares and by holding various board meetings and general meetings as invalid many decisions taken are upset. However, it is possible to ratify the decisions and as such no harm would be done to the functioning of the company.
43. We are conscious of the fact that respondents Nos. 2 and 3 hold a 78 per cent. majority in the company and the petitioners constitute 22 per cent. As a matter of rule and, as argued by the respondents, the principle laid down in Foss v. Harbottle [1843] 2 Hare 461 will prevail, that is, the decisions of the majority will hold sway in the affairs of the company. However, if the individual rights of a shareholder are directly imperilled then it warrants interference by the court. Every shareholder is entitled to attend meetings, offer himself for appointment as director, hold directorships as per articles of association, subscribe to the additional issue of capital to maintain his percentage holding and a pre-emptive right to any shares offered for transfer. If some of the above are not applicable to a private company, the same will still apply if the articles of the company permit. In the present case, there is a clear oppression inasmuch as additional shares were issued without being offered to the other shareholders in violation of the articles of association, no notice was given for attending meetings, and shares were transferred without being offered to the other members of the company, in violation of the articles. It is also established that issue of shares to the extent of Rs. 81.5 lakhs has been made for consideration other than cash, which are not represented by corresponding assets. This by itself also constitutes mismanagement of the affairs of the company. In addition burdening the company with additional rental by shifting the registered office and thereby committing avoidable expenditure to the company also constitutes an act of mismanagement. The petitioners, therefore, are entitled to reliefs :
44. The reliefs sought by the petitioners mainly are-
(1) dislodging the respondents from the management of the company ;
(2) appointment of administrator and/or independent committee of management ;
(3) independent audit of the accounts ;
(4) re-locating the registered office to its original location.
45. While considering all the above reliefs the undisputable fact that the respondents hold 78 per cent. of the share capital cannot be ignored. The petition itself states that the petitioners did not want to associate themselves with strangers and hence wanted to get rid of their shares. During the final hearing, the petitioners also expressed their readiness to sell their holdings provided the payment is assured. As such to put an end to the complaint of oppression the appropriate solution is for the respondents to buy out the petitioners. This is in line with the decision in Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] 29 Comp Cas 1 (HL) ; [1958] 3 All ER 66 and of the Division Bench of the Calcutta High Court in Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd., AIR 1966 Cal 512, in similar circumstances. This is also in line with the provisions of Section 402 of the Companies Act, 1956.
46. As regards the value at which the petitioners' shares are to be bought we have been appraised by both the parties about some proceedings in Suit No. 2278 of 1992 with regard to the shares of the Wazir group, before the Bombay High Court. We observe that in that suit the present respondents were directed to pay, based on their own admission, a consideration of Rs. 80 per share with interest initially. The parties have also consented in that case for a fair valuation based on which the balance is to be paid. We understand that though the valuation has been completed and the valuer has determined a value of Rs. 104 per share, it appears that the same has been disputed by the respondents. The final value has not been determined. Consistent with the decision in the above suit, we order that the petitioners shares shall be purchased by respondents Nos. 2 and 3 at a value which will be finally determined as per the abovesaid consent terms dated November 6, 1992. The respondents shall, however, pay by demand drafts to the petitioners and their consenters at the rate of Rs. 80 per share with respect to their shareholding, within one month from the date of receipt of this order. The demand drafts shall be deposited with the attorneys for the petitioners. The petitioners and the consenters shall hand over their share certificates along with blank transfer deeds to their attorneys within one week from the date of receipt of the demand drafts as above which will be passed on to the respondents. The demand drafts shall also include interest at the rate of 15 per cent. per annum from the date of filing of the petition that is, August 18, 1992, till the actual date of the payment. This is in line with the consent terms in the suit referred to. The respondents shall make further payment if any after the value of the shares is finally determined, as per consent terms in Suit No. 2278 of 1992 before the Bombay High Court. The difference if any shall be paid within four weeks from the date of final settlement in Suit No. 2278 of 1992 along with interest at the rate of 15 per cent. per annum from August 18, 1992, till the actual date of payment, which shall also be paid by demand drafts in the name of the petitioners and the consenters. The shares shall not be transferred from the name of the petitioners and their consenters till the fair value is ultimately settled and final payment made. In case the respondents fail to send the demand drafts as referred to above at the rate of Rs. 30 per share, the petitioners are entitled to press for further reliefs through an application to the Company Law Board.