Calcutta High Court
Narendra Kumar Berlia & Ors vs Om Prakash Berlia & Ors on 30 September, 2024
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Civil Appellate Jurisdiction
Original Side
Present :- Hon'ble Mr. Justice I. P. Mukerji
Hon'ble Mr. Justice Biswaroop Chowdhury
IA No. GA 1 of 2022
APO No. 102 of 2022
with
CS No. 12 of 2009
Narendra Kumar Berlia & Ors.
Versus
Om Prakash Berlia & Ors.
And
APO No. 52 of 2022
Vijay Kumar Berlia
Versus
OM Prakash Berlia & Ors.
And
APO No. 113 of 2022
with
CS No. 12 of 2009
Vijay Kumar Berlia for Self and
as Karta of Gurdayal P Berlia HUF
Versus
OM Prakash Berlia for Self and
as Karta of Om Prakash Berlia HUF
For the appellants :- Mr. Abhrajit Mitra, Sr. Adv.
(APO 102 of 2022) Mr. Arif Ali, Adv.
Mr. Arnab Sardar, Adv.
Mr. Ratul Das, Advs.
For the Appellant :- Mr. Ahin Choudhury, Sr. Adv.
(APO 52 of 2022, APO 113 Mr. R. Bhattacharya, Adv.
of 2022) & Mr. Lalit Baid, Adv.
For the respondent Mr. Tamoghna Saha, Advs.
(APO 102 of 2022) For the Dhruva Woolen Mills :- Mr. Jishnu Saha, Sr. Adv.
Mr. Pranit Bag, Adv.
Mr. Vikram Wadehra, Adv.
Ms. Aisia Hasan, Adv.
Mr. Prathik Choudhury, Adv.
Mr. Mayank Shah, Adv.
Mr. Arghya Chakraborty, Adv.
Mr. Devdutt Saha, Adv Mr. Riddhiman Mukherjee, Advs.
For the respondent :- Mr. S. N. Mookherji, Sr. Adv.
(APO 102 of 2022 & Mr. Varun Kedia, Adv.
APO 52 of 2022 Mr. Yash Singhi, Adv.
Mr. Avee Jaiswal, Adv.
Mr. Himadri Roy, Advs.
For the respondent Nos.1&2 :- Mr. Sakya Sen, Sr. Adv.
Mr. S. R. Kakrania, Adv
Ms. Shreya Goenka, Advs.
For the respondent nos.4,5,6:- Mr. Aditya Kanodia, Adv.
APO 102 of 2022 & respondent Ms. Suparna Sardar, Advs.
Nos. 30, 31 & 32 APO 52/2022
For the respondent No.9 :- Ms. Reshmi Ghosh, Adv.
APO 102 of 2022 Ms. Parna Mukherjee, Advs.
For the Dhruva Woolen Mills :- Mr. Pranit Bag, Adv.
Ms. Jayashree Ramacharan, Adv.
Mr. S. S. Banerjee, Adv.
Mr. Vikram Wadehra, Adv.
Mr. Mayukh Roy, Adv.
Mr. Indradeep Basu, Adv.
Swagata Roy, Advs.
Judgment On :- 30.09.2024
Biswaroop Chowdhury, J.:-
The above appeals are taken up together for their interconnectiveness. These appeals arise out of the order dated 17th May 2022, passed by the Hon'ble Justice Krishna Rao in IA GA. 12 of 2022 in C.S. 12 of 2009 and order dated 4th October 2021 passed by the Hon'ble Justice Moushumi Bhattacharya as her ladyship then was in IA. GA 9 of 2021 in C.S. 12 of 2009. As the Appeal APO No-102 of 2022 was preferred against the Order dated 4th October 2021 passed by the Hon'ble Justice Moushumi Bhattacharya in IA. GA. 12 of 2022 in C.S. 12 of 2009 refusing to pass an order of injunction restraining sale of land at Thane and during pendency of the Appeal Land at Thane had already been sold, the Appeal APO No. 102 of 2022, has become infructuous and is treated as disposed of without further discussion. The instant appeal APO-113 of 2022 arises out of the interlocutory Order dated 17th May 2022 passed by a Learned Single Judge of this Court wherein the Learned Judge was pleased to dismiss the application being IA GA 12 of 2022 in C.S. 12 of 2009 where the plaintiffs prayed for the following reliefs.
a) Direction upon the respondents to immediately circulate the valuation report of the CBRE South Asia Pvt Ltd in terms of the order dated 27th January 2022 passed in G.A. No. 10 of 2022 and GA No-11 of 2022 in 2 C.S. No. 12 of 2009 [Narendra Kumar Berlia and ors. VS Om Prakash Berlia and Ors.]
b) A fit and proper person be appointed as Special Officer/receiver who may be directed to do the following:
i) Obtain a copy of the valuation report from the appointed valuer, namely CBRE South Asia Pvt Ltd, and thereafter circulate the same to all the parties;
ii) Conduct sale of the said property by public auction or in such other transparent manner as this Hon'ble Court may so direct in order to ensure maximization of the sale value.
iii) Retain and hold the sale proceeds in a separate bank account subject to such further order or orders that may be passed by this Hon'ble Court.
C) Injunction restraining the respondent Nos. 1,2 and 15, their agents, servants and assigns from dealing with disposing of or transferring the said property fully described in the schedule hereunder pending disposal of the present application.
d) Ad interim orders in terms of prayer above;
e) Such further and/or other order or orders be passed direction as directions be given as Your Lordships may deem fit and proper.
During pendency of the above application GA 12/2022, the subject land with regard to which relief was sought by the Plaintiffs/Appellants, was disposed by the defendant/respondent no-15 by executing 3 deeds of conveyance on 31.03.2022.
The Learned Judge while dismissing the application filed by the Plaintiffs/Appellants was pleased to observe as follows:
"Heard the Ld counsel appearing for the parties, documents available on record and the judgement referred by the counsel for the defendant no 15. 3 Admittedly the plaintiffs have filed an application before this court being G.A. No 9 of 2021 earlier and in the said application also the plaintiffs have prayed for an injunction against the defendant no 15 by restraining the defendant no 15 for dealing with, disposing of and encumbering the property in question. In the said application this court vide order dt 04.10.2021 had categorically held that defendants cannot be restrained from giving any effect to the resolutions or restrained from disposing of or dealing with the said property. The plaintiffs have accepted the said order and have not carried the said order in appeal and thus the order dt 04.10.2021 reached its finality. It further transpires from record that during the pendency of the instant application the defendant no 15 had executed deed of conveyance with respect of the suit property on 31.03.2022 and thus third party interest has been accrued and the plaintiffs have not made the purchaser as party to the instant application. The plaintiffs have also not challenged the report of valuer and the deed of conveyance though the plaintiff had the knowledge of both documents.
As regards the prayed (b) (iii) of the instant application as prayed for by the plaintiff it is settled law that the shareholder of the company acquires right to participate in the profits of the company but not in the assets of the company as reported in AIR 1955 SC 74 (supra) wherein the Hon'ble Supreme Court held inter alia:
"7.It was argued by Mr. Kolah on the strength of an observation made by Lord Anderson in Commissioners of Inland Revenue v. Forrest(1), that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word 'assets' in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-a-vis the company was explained in the Sholapur Mills 4 Case. That judgment negatives the position taken up on behalf of the appellant that a shareholder has got a right in the property of the company. It is true that the shareholders of the company have the, sole determining voice in administering the affairs of the company and are entitled, as provided by the Articles of Association to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. The dividend is a share of the profits declared by the company as liable to be distributed among the shareholders. Reliance is placed on behalf of the appellant on a passage in Buckley's Companies Act, 12th Ed., page 894, where the etymological meaning of dividend is given as dividendum, the total divisible sum but in its ordinary sense it means the sum paid and received as the quotient forming the share of the divisible sum payable to the recipient. This statement does not justify the contention that shareholders are owners of a divisible sum or that they are owners of the property of the company. The proper approach to the solution of the question is to concentrate on the plain words of the definition of agricultural income which connects in no uncertain language revenue with the land from which it directly springs and a stray observation in a case which has no bearing upon the present question does not advance the solution of the question. There is nothing in the Indian law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the Articles of Association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up, but not in the assets as a whole as Lord Anderson puts it."
In view of the circumstances mentioned above this court is of the view that the application filed by the plaintiffs is misconceived and the plaintiffs are not entitled to get any injunction as prayed for. However, this court has not gone into the point raised by Mr Thaker with regard to Res judicata. The appellants being aggrieved by the order of Learned Single Judge has come up with the instant appeal.
It is the contention of the appellants that C.S. 12 of 2009 was originally a suit combining a derivative action with a partition suit but pursuant to the order dated 6th April 2011 the suit has been bifurcated. After amendment the present suit (CS 12 of 2009) has become a pure derivative action while a separate partition suit (C.S. No. 79 of 2011) was also filed by the plaintiff No.1. It is further contended that the present suit ie. C.S. No. 12 of 2009 is a 5 derivative suit which has been held by a Learned Division Bench of this Court by Order dated 16th June 2011. Although the matter went upto the Hon'ble Supreme Court but the Hon'ble Court by Order dated 12th August 2014 refused to interfere in the Order passed by the Learned Division Bench of this Court.
Learned Advocate also submits that Gurdayal Berlia had five sons. The eldest Satyanaryan Berlia died issueless in the year 2003 ie. before family disputes arose. Another son Shiv Kumar Berlia had special needs, he died in the year 2022. He was unmarried and issueless. The three remaining sons who are all at loggerheads are Vijay Kumar Berlia (defendant no-3) Om Prokash Berlia (defendant no-1) and Narendra Kumar Berlia (Plaintiff no-1). Learned Advocate submits that each of the remaining three brothers also have only 500 shares each in the defendant no-15 (pesticides and Brewers Limited now PB Global Limited) being the Company against which the present derivative suit has been filed, and the rest of the controlling shares (ie. 42. 69%) are held through a network of family companies. It is submitted that the last admitted shareholding of the family in the defendant No. 15 is 42.69% shares held primarily through different family companies till 2004 before Om Prakash Birla at an alleged Extra Ordinary General Meeting without notice to the other brothers caused 500,000/- preferential shares to be allotted to his associates where defendant no-1 purported to gain control. The present suit was filed immediately after this fact was discovered by the plaintiff no-1. Learned Advocate submits that the Learned Trial Judge completely overlooked the fact that the suit has been filed not by the plaintiff as a shareholder but it is a derivative suit where the plaintiff qua shareholder espouses the cause of action of the company. Thus the concept of a shareholder not having any interest in the company's property does not apply. Learned Advocate has also relied upon the Order dated 16th June 2011 passed by the Learned Division Bench in Appeal APO-167 of 2011 and Order dated 12th August 2014, passed by the Hon'ble Supreme Court. 6 Learned Advocate submits that the sale of Thane Property on 31st March 2022 is against the interest of the Company and in violation of the order dated 4th October 2021 passed by a Learned Single Bench of this Court. Learned Advocate further submits that there is faulty valuation, under value sale, and sale consideration payable 5 years after absolute transfer. Learned Advocate also submits that by absolute transfer the buyer gets the property and is free to deal with it in any manner it so chooses without paying the consideration amount. In case of default the seller will have to sue the buyer who by that time may have already transferred/mortgaged the property. Learned Advocate submits that setting aside of the sale of the Thane Property, which is in the defendant No153 only asset is in the interest of the company, whether it is a derivative suit or in an oppression mismanagement petition the interest of the company is paramount since the company is the eo-nominee plaintiff Learned Advocate submits that if at all the sale of Thane Property is not set aside or stayed for the time being appropriate orders are required for protection of the consideration yet to come. (Rs 185.91 crores). Learned Advocate relies upon the following Judicial decision. Syed Mahomed Ali Vs M.R.Sundaramurthy and ors. (Reported in AIR 1958. Madras 587) MSDC. Radharamanan Vs MSD. Chandrasekara Raja and Anr (Reported at (2008) 6 SCC P 750) Learned Counsel for the respondent/defendant no-15 submits that the appellants have not come with clean hands as they are pursuing the said land for self interest in the garb of a suit for derivative action praying for an injunction restraining the respondents from dealing with the land in any manner. Learned Counsel further submits that the Appellants namely Narendra Kumar Berlia and Vijay Kumar Berlia merely hold 500 shares that is 0.05% shareholding of the company. Learned Counsel submits that it is well settled proposition that shareholders have no right over assets of the 7 company. Learned Counsel relies upon the order of the Hon'ble Supreme Court of India dated 12th August 2014, in SLP(c) No. 16759-16760 arising out of Order dated 16th June 2011 vacating the interim order and directing that the sale of subject land to abide by the outcome of the suit. Learned Counsel that the said land was sold at the best possible price in accordance with the valuation report prepared by independent Court appointed valuers and the funds from the said sale was utilized for paying back the creditors and enhancing the working capital of the company. It is submitted that the Company sold the land in haste to the reasons above at the best possible price.
Mr. P. Chidambaram Learned Counsel for the purchaser submits that his client is a bona-fide purchaser and its interest must be protected Learned Counsel for the purchaser submits that in view of the provisions contained in Section 241 and Section 430 of the Companies Act 1956 the instant suits are not maintainable. Learned Counsel further submits that the reliefs prayed for in the suit do not fall under the purview of the jurisdiction of a civil Court.
Learned Counsel relies upon the following decisions.
1. ICP Investment (Mauritius) Ltd. Vs UPPAL Housing Pvt Ltd and Ors.
(CS (COMM) 1079/2018. And IA No. 17779/2018 Dated 30th August 2019)
2. Valluvur Kurkuman Private Limited Vs APC Drilling and Construction Private Limited and ors.
(CRP (NPD) No. 2044 of 2022 and CMP Nos. 10516 and 10518 of 2022. dated 30.11.2022.)
3. Foss Vs Harbottle.
8 (67 ER 189.)
4. The Asansol Electric Supply Co. and ors. Vs Chunilal Daw and ors. (75 CWN-704.)
5. Nurcombe Vs Nurcombe and Anr. [(1985) 1 WLR-370.] The decisions relied upon by Learned Counsel for the purchaser are the authorities with regard to non-maintainability of derivative suit where sufficient remedial measures is provided under Section 241 of the Companies Act.
The Hon'ble Delhi High Court in ICP Investments (Supra) was pleased to observe as follows:
"37. I must however hasten to add that while an application under Section 397 of the Companies Act, 1956 for relief in cases of oppression was available to a member of the company, only when the affairs of the company were being conducted in a manner oppressive to such member or other members, but under section 398 thereof an application for relief in cases of mismanagement could lie even on complaint that affairs of the company were being conducted in a manner prejudicial to the interests of the company itself, just like section 241 of the companies Act, 2013 is that the separate remedies of oppression and mismanagement under sections under 397 and 398 of the erstwhile Act of 1956 have been combined, though under the 1956 Act also, a petition was mostly filed, both under sections 397 and 398. However notwithstanding which, derivatives actions for the benefit of a company were held to be maintainable in India. However, my research does not reveal the said aspect to have been considered in any of the judgments holding a derivative action to be maintainable in India. I therefore take the liberty of a holding derivative action to be per se not maintainable, specially claiming a relief of declaration, which under Section 34 of the Specific Relief Act, 1963 is a 9 discretionary relief, and which discretion will not be exercised in favour of the plaintiff when a statutory remedy for a relief is available."
With regard to the submission of Learned Counsel for the purchaser regarding maintainability of the suit this Court is of the view that as the suit is pending for about fifteen years and this appeal is from an interlocutory order it would not be proper to make any observation with regard to maintainability as the parties have liberty to take this plea before the Trial Court.
Moreover issue of maintainability may be framed as a preliminary issue and necessary orders may be passed. In this regard it is necessary to consider the provisions contained in order XIV Rule 20 of the Code of Civil Procedure. Order XIV Rule 2 provides as follows:
2) Court to pronounce judgment on all issues-1) Notwithstanding that a case may be disposed of an a preliminary issue, the Court shall subject to the provisions of sub-rule (2) pronounce judgment on all issues.
2) Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to-
a) the jurisdiction of the Court or
b) a bar to the suit created by any law for the time being in force, and for that purpose may if it thinks fit, postpone the settlement of the other issue until after that issue has been determined and may deal with the suit in accordance with the decision on that issue.
Thus considering the provisions contained in Order XIV Rule-2 it would not be proper to make any observation while disposing appeal from an interlocutory order and the issue of maintainability is left open for the trial Court to decide.
10 In the written notes of argument the purchaser/intervener has repeated the stand taken by the Learned Counsel Mr. Chidambaram in the Course of hearing. In the written notes the purchaser has taken the stand that it was not made party to suit and jurisdiction lies with NCLT. The decision for sale was approved by 100% of the majority of the general body of the company through a validly held voting. The Plaintiff has not come to the Court with clean hands and this Court does not have jurisdiction, and the valuation was correctly made.
As the point of jurisdiction of this Court is an issue with regard maintainability as observed above the point of maintainability will be decided by the trial Court. The stand taken that the decision of the director for sale of the land was not wrong as it was approved by 100% of the majority of the general body of the shareholders is not so important at this stage as the bone of contention is under valuation of the land, and arbitrary sale process in undue haste by defendant no-15. Now, with regard to the issue whether plaintiff has come with clean hands and whether valuation is properly made is to be considered from materials on record and upon considering the arguments of the other parties. However impleading of the purchaser is necessary, thus we have heard the purchaser and intervener in this appeal. Now with regard to the locus standi of the appellant in praying for injunction restraining transfer of immoveable property it appears that the Hon'ble Division Bench of this Court in APO 167 of 2011 considered the decision of the Hon'ble Supreme Court in the case of Mrs. Becha F Gurdar reported in AIR-1955 S.C. 74 regarding position of a shareholder in a company with regard to the assets of the company. It modified the order passed by the Learned Single Judge of this Court regarding restraining respondent no-6 in dealing with the entire share composition by directing defendant no 1 to 5 to maintain status quo in respect of shares held by them in respect of defendant no-6 and modified the order of injunction imposed upon defendant no. 1 to 5 by Learned Single Judge by directing respondent no. 1 11 to 5 to maintain status quo in respect of properties standing in their names and by not modifying restrain order of alienation of assets in respect of respondents no 7 to 18 as no appeal was preferred by the said respondents from the order of Single Judge but nowhere in the said Order the Learned Division Bench observed about the locus standi of the appellants, to maintain the suit.
The Learned Bench made the following observations with regard to maintainability of the suit.
"At this stage, we propose to deal with two technical points raised by Mr. Mukherjee as regards the maintainability of the present suit on account of being barred by order 2 rule 2 of the Code and that his client should not be vexed with the same case twice over the same subject- matter. We do not for a moment dispute that in the matter of grant of discretionary relief in the nature of injunction, a court, if finds that in the past on the basis of similar facts the plaintiff failed to obtain the same relief and thereafter, has come up with a second litigation on the basis of same allegation, will refuse to grant the relief. But the position will be different if on the earlier occasion, the relief was refused not on merit but on a technical ground. In such a case, if the plaintiff by removing the defect comes up with a properly constituted suit, the failure on the earlier occasion on technical reason cannot be a ground for refusing the relief. In the case before us, the plaintiff along with others filed a suit where interim relief was granted but the same was vacated not on merit but on a technical ground that the earlier suit was a derivative and representative action where the claim for partition could not have been made. The merits of the case were not dealt with while passing such order. It appears that the plaintiff has abandoned and is not pressing prayers (a) to (e) and (o) in the earlier suit and a separate application has also been filed in the said earlier suit recording this fact. It was the appellant before us, who raised such objection and such objection 12 was upheld and thereafter, the present suit has been filed removing the defect."
We, thus, find that the principles laid down in the case of Amir Din Shahab Din vs. Shiv Deb Singh (supra), relied upon by Mr. Mukherjee has no application to the facts of the present case.
The other points regarding maintainability of the second suit being barred by Order 2 rule 2 are equally devoid of any substance. In order to appreciate the scope Order 2 Rule 2 of the Code, it will be appropriate to quote the same:
"2. Suit to include the whole claim.-(1) Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any Court.
(2) Relinquishment of part of claim.-Where a plaintiff omits to sue in respect of, or intentionally relinquishes, any portion of his claim, he shall not afterwards sue in respect of the portion so omitted or relinquished. (3) Omission to sue for one of several reliefs.-A person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs; but if he omits, except with the leave of the Court, to sue for all such reliefs, he shall not afterwards sue for any relief so omitted.
Explanation.- For the purposes of this rule an obligation and a collateral security for its performance and successive claims arising under the same obligation shall be deemed respectively to constitute but one cause of action. Illustration A lets a house to B at a yearly rent of Rs. 1,200. The rent for the whole of the years 1905, 1906 and 1907 is due and unpaid. A sues B in 1908 only for the 13 rent due for 1906. A shall not afterwards sue B for the rent due for 1905 or 1907."
In the case before us, the earlier suit was filed by the plaintiff with other two persons, and the earlier suit was a derivative and representative action and thus, the prayer of partition was foreign to such a proceeding. Therefore, in that suit there was no scope of claiming partition and consequently, the provision of Order 2 Rule 2 of the Code does not stand in the way of the plaintiff in filing an appropriate suit claiming the relief which was not available in the earlier suit. We, thus, find no substance in the aforesaid contention of Mr. Mukherjee.
The other contention of Mr. Mukherjee that the order impugned was violative of the provisions of the Companies Act by placing reliance upon Section 111A thereof, since we propose to modify the order of injunction by restricting the transfer of shares only to the extent held by the parties and not in respect of other shares of the defendant no. 6, Mr. Mukherjee cannot have any grievance.' The matter went up before the Hon'ble Supreme Court but there was no observation with regard to the locus standi of the appellants. In the case of Syed Mohamed Ali V.R. Sundarmorthy and others reported in AIR-1958 Madras P 587 the Hon'ble Madras High Court observed as follows 'We are not hampered by such rigid technicalities of procedure and if the minority in a company complains of an oppression and disclosed certain grounds of complaint in the petition which are made the basis for the relief, we would hold that the Court should ordinarily investigate the charges. Such investigations may in certain cases be necessary even to regulate the future conduct of the company for providing against recurrence of such abuses of power by the majority.
14 We are, therefore, of opinion that notwithstanding the omission in the petition to pray for relief against the delinquent directors, an inquiry into the charges against them was properly within the scope of the petition. Sections 402 and 406 of the Indian Companies Act give ample jurisdiction to the Court to dispose of the matter in the larger interests of the company. The question then is whether it would be in the interest of the company and even of the disappointed minority to set aside the compromise and start an inquiry on the petition.' In the case of Radhasamanan MSDCV Chandrasekara Raja MSD reported in (2008)6 SCC P-750 the Hon'ble Supreme Court observed as follows:
'42. A similar question came up for consideration in Sangramsinh P. Gaekwad V. Shantadevi P. Gaekwad wherein this Court upon noticing a large number of decisions including Needle Industries (India) Ltd. Observed: (SCC P. 375 para 191) "191. In Shanti Prasad Jain referring to Elder case it was categorically held that the conduct complained of must relate to the manner of management of the affairs of the company and must be such so as to oppress a minority of the members including the petitioners qua shareholders. The Court, however, pointed out that law, however, has not defined what oppression is for the purpose of the said section and it is left to the court to decide on the facts of each case whether there is such oppression."
It was furthermore held: (SCCpp. 377-78.paras 196-99 & 201) "196. The court in an application under Section 397 and 398 may also look to the conduct of the parties. While enunciating the doctrine of prejudice and unfairness borne in Section 459 of the English Companies Act, the court stressed the existence of prejudice to the minority which is unfair and not just prejudice per se.
15
197. The court may also refuse to grant relief where the petitioner does not come to court with clean hands which may lead to a conclusion that the harm inflicted upon him was not unfair and that the relief granted should be restricted. (See London School of Electronics Ltd., In re 11.
198. Furthermore, when the petitioners have consented to and even benefited from the company being run in a way which would normally be regarded as unfairly prejudicial to their interests or they might have shown no interest in pursuing their legitimate interest in being involved in the company. [See RA Noble & Sons (Clothing) Ltd., In re 12.]
199. In a given case the court despite holding that no case of oppression has been made out may grant such relief so as to do substantial justice between parties.
201. In Shanti Prasad Jain V. Union of India13 it was held that the power of the Company Court is very wide and not restricted by any limitation contained in Section 402 thereof or otherwise."
Although the decisions relied upon by Learned Advocate for the Appellants are with regard to oppression and mismanagement in Company Court but the principles laid down with regard to beneficial interest of the Company may be followed by Civil Courts having jurisdiction to hear derivative suit with regard to mismanagement in the Company.
It is true that in the absence of Order of injunction restraining defendant no- 15 from selling the Land at Thane the said defendant committed no illegality but it is to be remembered that although sale cannot be restrained but the effects of sale can be regulated. It is within the power of the Court to monitor utilization of the proceeds of the sale of assets of company for the interest of the Company and its share holders.
Although the valuer appointed by the order 22nd January 2022 completed the valuation but copy of the report was not served upon the plaintiffs after 16 completion for which the plaintiffs filed an application being GA 12 of 2022 praying for a direction upon defendants to immediately circulate the valuation report and for appointment of Receiver to conduct sale of the property concerned by public auction or in any other transparent manner and to retain and hold the sale proceeds in a separate bank account subject to further orders from the court. Pursuant to filing of the application the Defendant No-15 through its Learned Advocate by email forwarded the valuation report. Although the valuation report was prepared by the valuer on 10th March 2022, but the copy of the same was provided by the defendant no-15 to the plaintiffs on 29th March, 2022 after application G.A. 12 of 2022 was filed on 18/03/2022. Pursuant to service of valuation report on 29/03/2022 the defendant no-15 executed 3 registered deeds in favour of one Dhruva Woolen Mills Private Limited on 31/03/2022 which the plaintiffs came to know on 20/04/2022 at the time of hearing of the application GA 12 of 2022. The defendant no-15 thus gave no reasonable time to the plaintiffs to consider the valuation report and give views or move the Court for necessary orders. The Learned Single Judge also had no opportunity to consider as to whether the direction of sale by public Auction should be given upon considering valuation report. This act of undue haste shows some elements of mala-fide of the defendant no-15. Moreover opportunity is given to the purchaser by the said defendant to pay the full consideration money within 5 years. The Learned Judge had no occasion to consider the reliefs prayed for except the prayer to keep the sale consideration amount in a separate Bank Account which the Learned Judge refused. Learned Advocate for the Appellant submits that even though transfer of the land is with immediate effect on 31st March 2022 out of the net consideration of Rs. 342.55 crores Rs. 185.91 crores is to be paid in future between 2025 and 2027 which is unusual in real estate transactions. In other words, the buyer gets the property and is free to deal with it in any manner it so chooses without paying the consideration amount. In case of default the seller will have to sue the buyer who by that time may have already 17 transferred/mortgaged the property. Learned Advocate submits that in the event sale is not set aside a special officer should be appointed to whom purchaser will pay the balance consideration money which is for the benefit of the company.
We order as follows:
The purchaser Dhruva Wollen Mills Private Limited shall disclose in all Agreements for sale or Deed of Conveyance or Deed of Lease or any transfer entered into by them with a third party in respect of the subject Land at Thane the subject matter of dispute in C.S. 12 of 2009. This compliance should continue till the entire consideration amount is paid. Upon the entire consideration amount being paid the purchaser may pray for waiving the condition before Trial Court.
We appoint Smt. Manimala De Advocate Bar Association Room No-1 Mobile- 8240965507 and Smt. Jyotsna Mukherjee Advocate Bar Association (m) 9433146289 as Joint Special Officers to conduct inspection at the site of subject land and to submit a report as to the construction which has taken place with necessary photographs and the persons if any in possession thereof. Such inspection should be conducted within a period of thirty days from the date of communication of the order upon notice to all parties and their Learned Advocates. The report of such inspection should be submitted before the Trial Court within ten days from the date of completion of inspection. In the event any agreement for sale is made or conveyance executed or any transfer of portion of the subject property is made such intimation shall be given to the Learned Special Officers by the purchaser. Special Officers upon receiving the information shall file a supplementary report in Court regarding the development. The special Officers are entitled to an initial remuneration of 6000 gms to be paid by the plaintiffs. The expenses of conducting inspection of the Thane property shall be paid by the plaintiffs.
18 Urgent certified photo copy of this judgment and order if applied for be furnished to the appearing parties on priority basis upon compliance of necessary formalities.
I Agree:-
(I. P. Mukerji, J.) (Biswaroop Chowdhury, J.)
19