Kerala High Court
Dr. Babu Oommen vs M/S.Malabar Produce And Rubber on 11 February, 2020
Bench: K.Vinod Chandran, V.G.Arun
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
&
THE HONOURABLE MR.JUSTICE V.G.ARUN
TUESDAY, THE 11TH DAY OF FEBRUARY 2020 / 22ND MAGHA, 1941
MFA.No.1188 OF 2002
APPELLANT/S:
DR. BABU OOMMEN
AGED 55 YEARS
NOW RESIDING AT CIRCUIT HOUSE, THANA, KANNUR.
(RECORDED AS LEGAL REPRESENTATIVE OF DECEASED R6)
BY ADV. SMT.K.LAKSHMI
RESPONDENT/S:
1 M/S.MALABAR PRODUCE AND RUBBER
COMPANY LIMITED, THAMARACHERI, CALICUT - 673 573.
2 MR.P.K.ABDULLAKUTTY CHAIRMAN
MALABAR PRODUCE AND RUBBER COMPANY, LIMITED, A/10, GANDHI
NAGAR COLONY,, WEST HILL, CALICUT-5.(DIED)
IT IS RECORDED THAT R2 IS DIED AND IS NOT NECESSARY TO
IMPLEAD THE LEGAL HEIRS OF THE DECEASED R2 OR ANY OTHER
PERSON AS THE LEGAL REPRESENTATIVE OF THE DECEASED R2.VIDE
ORDER DTD.27.10.09 ON MEMO DTD 16.10.09
3 M.C.MATHAI MANAMPURATHU PEEDIKAYIL
KARIMPUZHA, MAVELIKKARA.(DELETED)
(RESPONDENT NO.3 IS DELETED FROM THE ARRAY OF PARTIES, AT
THE RISK OF THE APPELLANT, VIDE ORDER DATED 31/1/03 IN CMP
538/03.
4 K.M.VARGHESE NIVIL FARM
SREEKANDAPURAM P.O., (VIA), TALIPARAMBA.(DELETED)
RESPONDENT NO.4 IS DELETED FROM THE ARRAY OF PARTIES, AT
THE RISK OF THE APPELLANT VIDE ORDER DATED 31/1/03 IN CMP
538/03.
5 MR.VIJAY KUMAR TREHAN B-2 DEFENCE
COLONY, NEW DELHI - 24.
6 MRS.JOLLY THOMAS, MANAGER
MALABAR PRODUCE AND RUBBER COMPANY LIMITED,, A/2, GANDHI
NAGAR COLONY, WEST HILL,, CALICUT - 5.(DIED)(LR'S
IMPLEADED)
7 MRS.RITA TREHAN, W/O.VIJAYAKUMAR
MFA.No.1188 OF 2002 ..2..
TREHAN, B-2 DEFENCE COLONY, NEW DELHI - 24.
8 P.C.MAMMU HAJI, PUZHANKARA
KODUVALLY, CALICUT.
9 MS.MUJAHID EDUCATION TRUST, 7/647
S.M.STREET, NAGARAM AMSOM, KOZHIKODE.
10 ADDL.R10.THOMAS B.ABRAHAM
AGED 64 YEARS
S/O.THOMAS, CDM PLANTATIONS, THAMARACHERI, KOZHIKODE.
11 ADDL.R11. MRS.JACINTH ABOOBACKER,
AGED 66 YEARS, D/O.M.O.THOMAS, NO.50/3 GT ROAD,
MADIKKARI, KODAGU, KARNATAKA - 571 201.
ADDITIONAL R10 AND R11 ARE IMPLEADED AND THE APPELLANT
IN MFA IS RECORDED AS THE LEGAL REPRESENTATIVE OF
DECEASED RESPONDENT NO.6 AS PER THE ORDER DATED
07/12/2017 IN IA 1981/2017.
12 ADDL. R12. SULTAN THOMAS OOMMEN,
AGED 37 YEARS, S/O.DR.BABU OOMMEN THOMAS, RESIDING AT
12B SKYLINE, BAYWATERS, BEACH ROAD, KOZHIKODE -673 032.
ADDITIONAL R12 IS IMPLEADED AS PER THE ORDER DATED
23.9.2019 IN IA 2/2019.
R5 & R7 BY ADV. SRI.SHYAM PADMAN
ADV. ANDREWS C.M
ADV. P.T.MOHAN KUMAR
ADV. SMT.BOBY M.SEKHAR
ADV. SMT.ANITYA ANNIE MATHEW
R9 BY ADV.THOMAS ANOTONY
BY ADV.SRI.SABI JOSEPH
R12 BY ADV. SRI.VAKKOM N.VIJAYAN
BY ADV.V.RENJI
BY ADV.ANIYAN P
BY ADV.SMT.PRIYA NAIR
BY ADV. SRI.K.JAGADEESH
OTHER PRESENT:
SR. GP SRI.T.RAJASEKHARAN NAIR
THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 11.02.2020,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
MFA.No.1188 OF 2002 ..3..
JUDGMENT
VINOD CHANDRAN,J.
The appellant is before this Court challenging the judgment of the Company Court, which dismissed the Company Petition (C.P) on the ground of the prayers having become infructuous and there being no just and equitable ground for consideration of certain prayers incorporated later, on the basis of an order of a Division Bench in MFA No.193/1991.
2. Obviously, the cause of action is the appellant's estrangement from his family, who had the controlling shares in the 1st respondent Company. The 6th respondent who was the then Manager of the Company, is the mother of the appellant and it was his claim that there was rampant mismanagement of the affairs of the Company, which led to irreparable losses being occasioned. The C.P originally was filed with 11 prayers, all relating to the day to day affairs of the Company as also the convening of meetings, appointment of Manager and so on and so forth.
3. The learned Company Judge had extracted each of the MFA.No.1188 OF 2002 ..4..
prayers in the judgment and also specified as to how the said prayers have become infructuous. We have also gone through each of the prayers originally sought for in the Company Petition.
4. The 1st prayer, in the C.P, is to restrain the Company from proceeding with the resolution to sell or lease a further extent of 50 acres, as passed in the 45th Annual General Meeting (AGM) of the Company and the 2nd prayer is to restrain the 8th respondent from cutting and removing the standing rubber trees within 30 acres of land by means of slaughter tapping. We notice that an application for the above reliefs was filed in C.P.No.25 of 1985 as Company Application Nos.230/85 and 18/87. The learned Company Judge by order dated 13.01.1987 found that there was an injunction order passed insofar as the transfer of 50 acres of estate and directed maintenance of status quo. But however refused to restrain the slaughter tapping for which agreement was entered into by the company with the 8th respondent, subject to the condition that if it is found at the time of disposal of the main petition that loss was MFA.No.1188 OF 2002 ..5..
occasioned through the mismanagement of the persons in management of the Company, they will be personally liable for the same. The learned Company Judge also observed that with respect to the sale, the applicant would have to prove that the price obtained by the Company is too low and was occasioned due to the negligence or mismanagement of the persons in the management of the company.
5. Admittedly, the appellant was examined in part on 15.10.1991. Though it is claimed that 106 documents were produced and the appellant had also filed petitions for production of other documents, there was no attempt to pursue the matter diligently after examination in part on 15.10.1991. We see from the order of the Company Court impugned in this MFA, that the same was passed on 21.10.2002; after about 11 years. The appellant cannot, at this point, take a contention that the Company Court did not permit further evidence to be adduced. The appellant also has not pointed out any evidence adduced or produced to substantiate MFA.No.1188 OF 2002 ..6..
the contention of loss having been caused to the Company by this transaction. The 1st and 2nd prayers as rightly held by the Company Judge are rendered infructuous.
6. The 3rd and 4th prayers are to comply with the agreement of purchase dated 11.10.1984 entered into with one K.T.Thomas and to restrain the 6th respondent from letting out the building taken on lease by the Company, to strangers, that too in the personal capacity of the 6th respondent. The background facts are that; the Company entered into a lease agreement with one K.T.Thomas and later it was decided to purchase the leased out building. The Company also paid an amount of Rs.3 lakhs as advance. Later, the Company realised that there was a mortgage in favour of Chartered Bank executed by the vendor, and the mortgagor had obtained a decree as against the property. The decree was purchased by the 6th respondent in her personal capacity for an amount of Rs.4,40,000/-. From the subsequent events it is clear that the said purchase was on behalf of the Company and it was agreed that the rights would be transferred MFA.No.1188 OF 2002 ..7..
to the Company on the 6th respondent being paid the amounts spent, with interest. However subsequently, the property was put up for sale for reason of income tax dues of K.T.Thomas by the Income Tax Department, in which auction, the Indian Express purchased the property. The property itself having been sold in pursuance to a statutory charge, the reliefs sought for do not survive, as the decree purchased from the Chartered Bank by R6 cannot be enforced as against Indian Express who is said to have purchased the same in a public auction conducted by the Income Tax Department. The 3 rd and 4th prayers also do not survive as of now.
7. The 5th and 6th prayers are for removing the 6th respondent from the post of Manager and to restrain her from functioning as the Manager of the estate of the company; both of which are infructuous for reason of the demise of the 6 th respondent. Prayer No.7 is to direct the convening of a general body meeting to elect a new Manager, which prayer also does not survive as 6th respondent is no more the Manager. There is also a new MFA.No.1188 OF 2002 ..8..
dispensation in the management of the Company as of now.
8. Prayer No.8 is to direct the Company to hold the 47 th AGM which it is asserted, has not been held on 29.6.1985. In fact, if no meeting was held, the applicant should have challenged the decisions, projected as taken on the said day, on the ground of there being no such meeting. There can be no direction to reconvene the 47th AGM, which was held on 29.6.1985 and the prayers cannot be allowed at this stage after about 35 years. Prayer No.9 is with respect to setting aside of, the resolution passed at the 43 rd AGM of the Company, especially the declaration made that the appellant does not intend to get re-elected, as null and void. The appellant had been removed from the Board of Directors of the Company on the ground of not having attended three consecutive Board meetings of the Company and it is in the 43 rd AGM that he was ousted from the post of Director. The appellant having not challenged the ouster, cannot claim for declaring the resolution to be null and void, especially, since he admits that he was not present MFA.No.1188 OF 2002 ..9..
in the meeting.
9. The 10th prayer is with respect to a direction to the Board of Directors to submit full and detailed information to the queries of the shareholders especially the applicant, which is an omnibus prayer without specifically pointing out what are the queries; which remain unanswered. The 11th prayer is only a residuary relief for safeguarding the interest of the company which, as of now, we do not think can be dealt with as there are no grounds to find mismanagement of the affairs of the Company. We perfectly agree with the order of the learned Company Judge in the C.P.
10. What remain are the prayers, incorporated on the basis of the directions in MFA No.193/1991. This was with respect to setting aside of a sale deed conveying 15 acres of cashew plantations and a direction for prosecution for offence under section 628 of the Companies Act, 1956 (herein after referred to as 'the Act') as also winding up of the Company. The learned Company Judge had found that there were no just and equitable grounds stated as to how the MFA.No.1188 OF 2002 ..10..
Company was liable to be wound up. As far as the sale of 15 acres of cashew plantation, the appellant was left to pursue alternate remedies. There was also no ground for initiating any prosecution or directing the same to be initiated by the Registrar of Companies. The learned Company Judge however, made it clear that it shall be open for the appellant to approach the Company Law Board.
11. The grievance of the appellant that there was no opportunity given by the learned Company Judge to adduce evidence, as we noticed, is belied by the fact that the learned Company Judge had recorded that only a part examination of the appellant was done before the Company Court. The default of the appellant cannot be turned into an allegation against the Court. The learned Counsel appearing for the appellant also brings to our notice the decision in M.F.A.No.193/1991, which specifically found that this Court, while proceeding under Sections 397 and 398 of the Act has jurisdiction to consider the setting aside of a sale deed, as also the prosecution sought for by the appellant and there is no MFA.No.1188 OF 2002 ..11..
reason for relegating a party to a petition under Section 402 of the Act. In such circumstance, these prayers should have been considered, is the specific assertion of the appellant.
12. We have to reiterate that what has been recorded in the judgment of the learned Company Judge is that the appellant has partly examined himself and there is nothing seen as to a further examination having been sought for by the appellant or an allegation raised that the adducing of evidence was specifically prohibited by the Company Court. It is also to be noticed that after the dismissal of the C.P, there has been substantial change in the constitution of the company and the share holding has increased considerably, which has not been challenged by the appellant. The appeal of the year 2002 was never seriously pursued by the appellant in the past 17 years. The instant M.F.A was dismissed for default on 18.12.2009 and though an application for setting aside the order of dismissal was filed in 2010, no action was taken to pursue it. In the meanwhile the 6th respondent died on 16.12.2016 MFA.No.1188 OF 2002 ..12..
and on 10.06.2017 an application was filed to implead two respondents as the legal heirs of the deceased, in addition to the appellant himself. The appeal then was restored on O7.10.2017.
13. Be that as it may, there were three additional prayers allowed in M.F.A. No.193 of 1991 to be included in the C.P., which are as follows:
"(i) Setting aside the sale deed in regard to 15 acres of cashew plantation belonged to the Company.
(ii) To ensure that the Company be prosecuted for an offence under Section 628 of the Companies Act.
(iii) Winding up of the Company."
14. The 1st prayer is for setting aside the sale deed in regard to 15 acres of cashew plantation. The specific contention raised by the appellant in the C.P. was that there was no resolution taken by the Board to sell the property. The respondents 1 & 6 in their Counter Affidavit, specifically stated that the Board of Directors ratified the sale of 15 Acres, which property is not a cashew plantation and is a vacant land. The subsequent resolution passed MFA.No.1188 OF 2002 ..13..
ratifying the decision to sell 15 Acres of property to the 9 th respondent has not been challenged.
15. The further prayers incorporated by the Division Bench in the M.F.A. are with respect to prosecution for an offence under Section 628 and for winding up of the Company. The learned Company Judge found that the prayers made by the applicant on the ground of oppression and mismanagement were not possible of consideration; all of them having become infructuous. We have also dealt with each of the prayers herein above and we have found that there is no cause to find oppression or mismanagement and in such circumstances there could be no prosecution initiated against the Company, nor could there be a winding up. There are no just and equitable grounds for winding up of the Company, as we see from the records.
16. The appellant, subsequent to the increasing of the share holding has been reduced to a minority of 3% and is hence dis- entitled to maintain an application under Section 397 & 398 as per MFA.No.1188 OF 2002 ..14..
Section 399. The appellant had filed interlocutory applications before this Court in the M.F.A, seeking injunction against transacting in or transferring the 44,000 shares in Folio 314 by the deceased 6 th respondent, which is admittedly bequeathed to various persons. Without challenging the enhancement of the share holding there can be no challenge against the transfer of shares; which it is asserted goes as per the will of the 6 th respondent. In this context we have to pertinently notice the admitted position that there are put forth four wills, the veracity and validity of which are pending adjudication in various civil courts.
17. We also see that two I.As have been filed numbered as I.A 87 of 2018 and I.A 1449 of 2018 for the identical prayer of injunction, by a Counsel, both of which were not pursued. Again an I.A numbered as 1 of 2019 was filed for the very same relief through another Advocate. We notice that on 21.02.2018 another Division Bench had closed I.A. 87 of 2018 recording the submission of the 10th respondent that the transaction of transfer of shares of the 6 th MFA.No.1188 OF 2002 ..15..
respondent has already been stayed by the District Court, Kozhikkode. The issue of enhancement of share capital, which was occasioned in the ensuing years, has not been challenged.
18. We would also deal with the contention with respect to the enhancement of share capital, which was carried out on 07.11.2002, when the above M.F.A. was filed on 06.11.2002. The authorised capital has been increased to Rupees Five lakhs by allotting 44,000 shares to the 6th respondent, is the specific contention. This is in return for the purchase made of the decree obtained by the Chartered Bank against the property owned by K.T. Thomas. The mortgage being not capable of enforcement for reason of the property having been sold in a public auction to realise a statutory charge, there could have been no further allotment of the shares, is the contention raised. However, we have to look at it in another perspective. As has been argued by the learned Counsel for the appellant itself, respondents 1 & 6 in their Counter Affidavit dated 15.03.1986 specifically spoke of the transaction with MFA.No.1188 OF 2002 ..16..
K.T.Thomas. We see from the Counter Affidavit that the sale itself was fixed for Rs. 14 lakhs and Rupees Three lakhs was paid by the Company as advance. After which it was realised that the property is mortgaged. Without further realising that there was a statutory charge on the property, there was a purchase effected by the 6 th respondent of the decree obtained by Chartered Bank.
19. The counter affidavit of respondents 1 to 6 specifically indicate that the 6th respondent, the Manager of the Estate and also the major shareholder, had stepped in to protect the interest of the Company insofar as the agreement of sale having been entered into, on which property there was a prior mortgage, which was not in the knowledge of the Company or its Management. Later, despite the purchase of the decree, it could not be enforced, since the property was sold to Indian Express in a public auction by the Income Tax Department. However, the 6th respondent having purchased the decree for and on behalf of the Company; the Company had an obligation to reimburse the amounts spent. The 6 th respondent, MFA.No.1188 OF 2002 ..17..
keeping in mind the best interest of the Company, did not seek for reimbursement of the entire money paid, but was satisfied with allotment of additional shares of the Company. This was despite the fact that the Company had retained Rs.4,40,000/- in Sundry Account for the purpose of paying up the amounts to the 6 th respondent. The 6th respondent hence had acted in the best interest of the Company and the eventual frustration of the agreement as also the purchase of decree was only due to the Company being not aware of the income tax dues of K.T. Thomas, who was the original owner of the property. We do not think this raises any ground of mismanagement by itself.
20. More importantly the 5th respondent, who is the Executor of the Will of the 6th respondent and additional respondent No.12, who is the appellants son, sail together on the question of allotment of further shares. The 12th respondent, son of the appellant, filed I.A. No.1 of 2020 along with certain documents showing the allotment of shares. As is indicated in Annexure R12(a), in the meeting held MFA.No.1188 OF 2002 ..18..
on 02.10.2002, the 6th respondent had requested the Company to repay the amount due to her and also expressed her consent to accept equity shares in lieu of the amounts due to her. The matter was again placed in the Board Meeting on 07.10.2002, wherein the Chairman of the Company brought it to the notice of the Board that in 1984 the 6th respondent was authorised to purchase the East-hill Bungalow; the one which belonged to K.T. Thomas, on behalf of the Company. She had obtained assignment of the decree in respect of the above property by paying consideration of Rs.4,40,177/-. The Company had to reimburse the amount to the 6th respondent with 10% interest. The Board had after assessing the present situation found that the payment of amount in cash would not be possible. It was hence, the Board decided to accept the offer of the 6 th respondent to allot her with equity shares in the Company in consideration of the aforesaid transaction.
21. The authorised capital of the Company was Rs. 5,00,000/- and the paid up capital Rs. 60,000/- and it was MFA.No.1188 OF 2002 ..19..
noticed in the Board Meeting that the amendment to the Companies Act (Act 53 of 2000) required every Public Company to have paid up capital of Rs. Five lakhs, minimum. The Board decided to increase the share capital and allot 44,000 equity shares having face-value of Rs. 10/- each in reimbursement of the amounts spent by the 6 th respondent. Section 81 of the Companies Act required that on additional allotment of shares for the first time, it be offered to persons, who at the date of allotment are holders of equity shares of the Company, in proportion to the shares held, unless a special resolution under 81(1A) is passed. Hence, on 07.11.2002 it was decided to convene an Extraordinary General Meeting, for which the 6th respondent was authorised to issue notice. This is evident from Annexure R12(b) produced along with I.A. No.1 of 2020.
22. On 07.11.2002 as evidenced from Annexure R12(c) a special resolution was passed under Section 81(1A) of the Companies Act and the shares were allotted on 11.11.2002, as is evident from Annexure R12(d). It can also be seen from Annexure MFA.No.1188 OF 2002 ..20..
R12(h) that the decree as against the property of K.T Thomas having been rendered impossible of execution, the Board requested the 6th respondent to pay the amounts in lieu of issuance of additional shares which was also complied by her. We do not think there is any surviving ground of oppression or mismanagement, even if the appellant is found entitled to maintain the action against the Company under the Companies Act, dehors reduction of his proportionate holding.
23. We are also told that there are many suits pending between the parties and that there are claims raised on four Wills said to have been executed by the 6 th respondent. There is also a partition suit pending before the Civil Court. It is stated by the parties that the suits are filed in the State of Kerala and the State of Karnataka. We make it clear that we have not expressed any opinion on the merits of the matters pending before the Civil Courts. We have only looked at the prayers made by the appellant in the Company Petition and rejected them as being not sufficient to find MFA.No.1188 OF 2002 ..21..
oppression or mismanagement and also there being no just and equitable grounds for the winding up of the Company.
On the above reasoning, we find that there is absolutely nothing surviving in the appeal and we dismiss the same, however, with the reservation that the adjudication of the various issues pending in the Civil Court shall not be governed by this judgment or our findings. Parties to suffer their respective costs.
Sd/-
K.VINOD CHANDRAN JUDGE Sd/-
V.G.ARUN JUDGE scl/Sp/11.02