Calcutta High Court
Bijay Kumar Kajaria & Anr vs Ajay Kumar Kajaria & Ors on 28 October, 2009
Author: Pinaki Chandra Ghose
Bench: Pinaki Chandra Ghose
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
PRESENT :
The Hon'ble Mr. Justice PINAKI CHANDRA GHOSE
And
The Hon'ble Mr. Justice SANKAR PRASAD MITRA
GA No. 1176 of 2009
APOT No. 154 of 2009
GA No. 1079 of 2009
CS No. 92 of 2009
Bijay Kumar Kajaria & Anr.
Vs.
Ajay Kumar Kajaria & Ors.
For the Appellant : Mr. S.K. Kapoor, Sr. Adv.,
Mr. Jishnu Saha, Adv.,
Mr. Ranjan Bachawat, Adv.,
Mr. D. Basak, Adv.,
Mr. Ravi Kapoor, Adv.,
Mr. S. Agarwal, Adv.,
Mr. Ashis Mukherjee, Adv.,
Ms. Surabhi Banerjee, Adv.,
For the Respondent No.1: Mr. Anindya Kumar Mitra, Sr. Adv.,
Mr. R.Banerjee, Adv.
Mr. A Roy, Adv.,
Mr. S. Basu, Adv.,
For the Respondent No.6: Mr. Amitash Banerjee, Adv.,
Mr. Debdutta Sen, Adv.,
Heard on : 04.05.2009, 11.05.2009, 12.05.2009, 15.05.2009 and 19.05.2009
Judgment on : 28.10.2009
PINAKI CHANDRA GHOSE, J. : This appeal is directed against three orders dated 7th April, 2009, 17th April, 2009 and 23rd April, 2009. It appears that the order dated 7th April, 2009 was an ex parte ad-interim order which was extended on 17th April, 2009 and subsequent thereto, another application was filed by the appellants praying for vacating the order dated 7th April, 2009. On 23rd April, 2009 an order was passed on the said application.
It is submitted that this composite appeal is maintainable against the said three appeals as has been submitted on behalf of the appellant relying upon a decision in the case of Cityscape Developers Pvt. Ltd. Vs. Alka Builders Pvt. Ltd., reported in (2000) 1 Calcutta L. T. 346. It is further submitted that this composite appeal is maintainable. It is also submitted that each of the said orders would be independently appellable.
However, it is further submitted that the said orders dated 7th April, 2009 and 17th April, 2009 in any event have merged with the order dated 23rd April, 2009. Therefore, there is no question arises that the appeal is not maintainable.
The facts of the case briefly are as follows :
The respondent Nos. 1 to 4 filed a suit against the appellant and the respondent Nos. 5 and 6 with the following prayers :
a) Declaration as to the composition of share holders of the company as given in schedule being annexure 'F' hereto;
b) Perpetual injunction restraining the defendant Nos. 1 and 2 from intermeddling with the affairs of the company and/or transacting any business or transaction on behalf of the company and/or creating any liability of whatsoever nature in the name of the company;
c) Perpetual injunction restraining the defendant No. 4 from in any manner intermeddling with the affairs of the company and/or discharging any function as commercial manager and/or employee of the company;
d) As enquiry into the dealings and transactions of the defendant Nos. 1, 2 and 4 in respect of the company and decree for such sum as may be found due and payable upon such enquiry;
e) Mandatory injunction direction the defendant Nos. 1 and 2, their men agents and assigns to forthwith return all the books and record of the company including those mentioned in paragraph 15 (j) to the registered office of the company at 15B Hemanta Basu Sarani, Kolkata - 700 001;
f) Perpetual injunction restraining the defendant Nos. 1 and 2 from in any manner interfering with the functioning of the plaintiff Nos. 1 to 4 as Directors of the company;
g) Perpetual injunction restraining the defendant Nos. 1 and 2 from interfering with and/or obstructing the convening of extra ordinary general meeting of the company to be held on 27th April, 2009 pursuant to the members' requisition dated 25th March, 2009;
h) A Chairman be appointed to conduct and hold the extra ordinary general meeting of the company in terms of the requisition dated 25th March, 2009 of the shareholders of the company being annexure 'W' hereto;
i) Perpetual injunction restraining defendant Nos. 1, 2 and 4 from entering the factory premises of the company situated at 106, Kiran Chandrda Singha Shibpur, Howrah
- 711 102 as also the registered office of the company at 15B, Hemanta Basu Sarani, Kolkata - 700 001;
j) Receiver;
k) Injunction;
l) Costs;
m) Further or other reliefs.
On 7th April, 2009 in the said suit the respondent Nos. 1 to 4 filed an Interlocutory Application inter alia praying for the following prayers :
a) A Chairman be appointed to conduct and hold the extra ordinary general meeting of the company in terms of the requisition dated 25th March, 2009 of the shareholders of the company being annexure 'W' hereto;
b) Injunction restraining the respondent Nos. 1 and 2 from filing any return/form on behalf of the respondent No. 3 company and/or otherwise holding themselves out as Directors of the respondent No. 3 company;
c) Injunction restraining the respondent Nos. 1 and 2 from intermeddling with the affairs of the company and/or transacting any business or transaction on behalf of the company and/or creating any liability of whatsoever nature in the name of the company;
d) Injunction restraining the respondent No. 4 from in any manner intermeddling with the affairs of the company and/or discharging any function as commercial manager and/or employee of the company;
e) Injunction directing the respondent Nos. 1 and 2, their men agents and assigns to forthwith return all the books and records of the company including those mentioned in paragraph 15(j) to the registered office of the company at 15B, Hemanta Basu Sarani, Kolkata - 700 001;
f) Injunction restraining the respondent Nos. 1 and 2 from in any manner interfering with the functioning of the petitioner Nos. 1 to 4 as Directors of the company;
g) Injunction restraining the respondent Nos. 1 and 2 from interfering with and/or obstructing the convening of extraordinary general meeting of the company to be held on pursuant to the members requisition dated 25th March, 2009;
h) Injunction restraining the respondent Nos. 1, 2 and 4 from entering the factory premises of the company situate at 106, Kiran Chandra Singha Road, Shibpur, Howrah 711 102 as also the registered office of the company at 15B, Hemanta Basu Sarani, Kolkata - 700 001;
i) Ad interim orders in terms of prayers above;
j) Such further and/or other order or orders be passed, direction or directions be
given as your Lordships may deem fit and proper.
An order was passed on 7th April, 2009 in terms of prayer (c) and (d) which was extended by an order dated 17th April, 2009.
It is the case of the appellants that since the appellants moved an application before the Company Law Board under Sections 397 and 398 of the Companies Act, 1956, the plaintiffs/respondent Nos. 1 to 4 herein, filed this application and got an order from this Court. It is further submitted that the respondent did not even intimate the appellants in respect of the said ex parte ad-interim order till 9th April, 2009. As a result whereof, on 9th April, 2009, the Company Law Board was pleased to pass an order directing that no Board Meeting/General Meeting of the company should be held without the leave of the Board and further directed to maintain status quo as on date with regard to the shares/shareholding in the company and other orders were also passed in respect thereto. The appellants could not place all those facts on 17th April, 2009 and as a result whereof on 17th April, 2009 the Court was pleased to extend the ad- interim order for a period of 10 (ten) weeks. The appellants thereafter filed an application for vacating the interim order and the Court was pleased to give direction for filing affidavits in the application so filed by the appellants before the Trial Court. However, on 23rd April, 2009 the Court clarified with the expression "intermeddling" with the affairs of the company should not be construed to deprive of their rights as Directors of the company or prevent the appellants from exercising the same. A contempt application was filed on 23rd April, 2009 against the appellants for violation of the order dated 7th April, 2009 which was also dismissed by the Hon'ble First Court. Since the Court refused to grant stay of the operation of the order so passed by the Hon'ble First Court, this appeal is filed.
It is the case of the appellant that the respondent Nos. 1 to 4 obtained the said order by suppressing and mis-representing the material facts and by misleading the Hon'ble First Court. It is further submitted that there is no material particulars were furnished by the said respondents to get the order from the Court.
It further appears from the facts that allegations and counter- allegations have been made for suppression of material facts either before this Court or before the Company Law Board by the parties.
Mr. S.K. Kapoor, learned Senior Counsel, appearing on behalf of the appellant contended that the scope of query in the instant appeal is limited to two questions which are as follows :-
(a) Whether on the basis of the pleadings in the plaint and in the respondents' interlocutory application filed under Order 39 Rules 1 and 2 of the Code of Civil Procedure, the ex parte order dated 7th April, 2009 could or should have been made and whether notwithstanding the factum of suppression of material facts in the said application, even on the basis of the allegati9ons the said order should or could have been continued on 17th April, 2009?
(b) Whether in view of the documents disclosed by the appellants in the vacating application clearly evidencing the fact that they were in control of the respondent No. 5 company and that the respondents had deliberately suppressing and mis-representing the material facts in their application, the said order dated 7th April, 2009 as extended on 17th April, 2009 should have been set aside and/or stayed on 23rd April, 2009?
He further submitted that in paragraphs 5 and 13 of the respondents' application the respondents have admitted that as under :-
(a) the respondent No. 5 company was a family company, its initial share capital was clearly divided amongst the appellant No. 1 and the respondent Nos. 1 and 2 and that the three directors of the company were also the appellant Nos. 1 and the respondent Nos. 1 and 2;
(b) that the appellant No. 1 was a bank signatory of the respondent No. 5 company;
(c) that the appellant No. 2 being the son of the appellant No. 1 is still working as the Chief Executive Officer of the respondent No. 1 company and that by way of a Board Resolution passed on 30th May, 2007 he was also included as a bank signatory of the said company;
and
(d) that on 3rd September, 2009 the appellant No. 2 was inducted as Additional Director of the company.
Mr. Kapoor further submitted that the application made by the respondents is vague and lacking in material particulars.
He further contended that the documents annexed as annexures to the application and the complaint annexed as annexures, are fabricated documents and has been procured by the respondents from some of the workmen of the respondent No. 5 company after 24th March, 2009, being the date on which the said order was passed by the Company Law Board. According to him, none of the said letters of complaint were served on the appellant Nos. 1 and 2 prior to 24th March, 2009. The allegations have been made in the letters and those documents are false and made only to get benefit before the Company Law Board in respect of Murlidhar Ratanlal Exports Ltd. He further submitted that from the complaints it would be evident that the complaints were caused to be filed by some of the workmen of the respondent No. 5 against the appellant Nos. 1 and 2. The false predated letter dated 19th March, 2009 was served on the Punjab National Bank on 26th March, 2009 notifying the alleged change in the bank signatories of the company. It would be further evident from the facts that on 25th March, 2009, the wives of Ajay Kajaria and Sanjay Kajaria requisitioned an extraordinary general meeting to remove the appellant Nos. 1 and 2 from Office Directors of the respondent No. 5. On 28th of March, 2009, a Board Meeting of the respondent No. 5 company was purportedly held recording that the respondent Nos. 3 and 4 being the sons of the respondent Nos. 1 and 2 had consented to the Additional Directors of the respondent No. 5 and had been given signing authority.
Mr. Kapoor further pointed out that the appellant Nos. 1 and 2 were Directors of the respondent No. 5 company. The appellant No. 2 is still the Chief Executive Officer of the said company and both of them admittedly were bank signatories of the company. Therefore, there is no reasonable basis or justification to either pass the ex parte order, restraining the appellants from "Intermeddling with the affairs of the company and/or transacting in the business or transaction on behalf of the company".
He further contended that the respondent No. 5 was continued to be a family company of the appellant No. 1 and the respondent Nos. 1 and 2 are their respective family members. The appellant Nos. 1 and 2 were in fact in the management and control of the said company. There was no reason to take away their powers as bank signatories of the said company and purporting to appoint the respondent Nos. 3 and 4 as Directors of the company and giving them power to sign the cheques.
He further contended that the respondents have suppressed the following facts :-
(a) The purported Board meeting of Murlidhar Ratanlal Exports Ltd. alleged to have been held on 15th March, 2008 recording that the whole time directorship of the appellant No. 1 in Murlidhar Ratanlal Exports Ltd. was being discontinued by reason of his preoccupation with the business of the respondent No. 5 Kajaria Yarns & Twines Ltd.
(b) The handwritten offer made by the respondent No. 1 Ajay Kumar Kajaria to take over Murlidhar Ratanlal Kajaria Exports Ltd. alongwith Sanjay Kajaria, the respondent No. 2 and to give the appellant No. 2 the respondent No. 5 Kajaria Yarna & Twines Ltd. The said handwritten proposal clearly mentioned that the appellant No. 1 was in control of the respondent No. 5 company.
(c) The resolution passed by the respondent No. 5 company on 16th February, 2009 granting several administrative powers to the appellant No. 1.
(d) The factum of filing of 397 and 398 application by the appellants against the respondent Nos. 1 to 4 in respect of Murlidhar Ratanlal Exports Ltd. and the misdeeds of the said respondents as complained or therein; and
(e) The website of the Kajaria Group clearly acknowledging that both Murlidhar Ratanlal Exports Ltd. and the respondent No. 5 Kajaria Yarns & Twines Ltd. were family companies of the Kajarias of which the appellant No. 1 was a part and which the said appellant had to a very large extent help to prosper.
He further submitted that the allegations which have been made by the respondents are that their shareholdings and/or their group company have been reduced to a paltry 14% which is totally wrong. In any event, he submitted that the subject matter of the determination by the Company Law Board in the application filed by the appellants under Sections 397 and 398 of the Companies Act, 1956 relating to the affairs of the respondent No. 5. He further submitted that the matter is pending before the Company Law Board relating to the affairs of the respondent No. 5 company and, accordingly, he submitted that the appeal should be allowed and the order so passed by the Hon'ble First Court should be stayed and/or set aside and further necessary control with the assets of the company and the properties of the company should not be encumbered or allowed to be sold and further the monies should not be allowed to be siphoned of by the respondents.
In these circumstances, he further submitted that at this stage the matter should be decided by the Company Law Board and the order so passed by the Court should be vacated.
On the contrary, Mr. Anindya Kumar Mitra, learned Senior Advocate, appearing on behalf of the respondent No.1 contended that the vacating application was filed on 22nd April, 2009, after the order was extended on 17th April, 2009. The vacating application could be governed by Order 39, Rule 4 Code of Civil Procedure and 2nd proviso of the said rule since the order dated 17th April, 2009 was passed after giving the appellant an opportunity of being heard. The appellant has failed to make out a case that in between 17th April, 2009 and 22nd April, 2009 there was any change in circumstances. It is also not the case of the appellant in the vacating application that the order is causing undue hardship to the appellant. The case of hardship as made out by the appellant in the vacating application is the hardship allegedly caused by the order dated 7th April, 2009.
He further drew our attention to paragraphs 15 and 16 of the vacating application. No further events subsequent to 17th April, 2009 have been pleaded in the vacating application affirmed on 22nd April, 2009. Therefore, he submitted that the order dated 17th April, 2009 cannot be recalled and/or modified in any application made under Order 39 Rule 4 of the Code of Civil Procedure and he drew our attention to 2nd proviso of Rule 4 of Order 39 of the Code of Civil Procedure and submitted that the said provision is an explanatory.
He further relied upon the decisions in the case of (Sri) Govinda Ramanuja Das Goswami Vs. (Appala) Vijiaramaaraju & Anr., reported in AIR 1929 Madras 803; in the case of Sitaram Madan Ahir Vs. Rajkunwarabai & Ors., reported in AIR 1959 MP 275 and in the case of Naba Kishore Das & Anr. Vs. Umakanta Mohapatra & Ors., reported in AIR 1985 Orissa 222 in support of his contention.
He further submitted that the scope of appeal from an ad-interim order passed by the Court and at this stage the statements made in the plaint and petition have to be taken as true and correct if appeal is from an ad-interim order. He also relied on the decision in the cases of Sm. Muktakesi Dawn & Ors. vs. Haripada Mazumdar & Anr., reported in AIR 1988 Cal. 25; in the case of Jitesh Pandey Vs. Smt. Urmilata Sinha & Ors., reported in 2000 (2) CHN 856 and in the case of Intime Spectrum Registry Ltd. Vs. MCS Ltd., reported in 2007(2) CHN 109; in support of his contention.
He also contended that the order of the Hon'ble First Court is a discretionary order. The order cannot be set aside unless the Court comes to a finding that "in exercise of its discretion the trial Court had acted un-reasonably or capriciously or has ignored relevant facts".
He further referred to the decision in the case of Pratima Dutta Vs. Nilima Seal, reported in 1997 (2) CLJ 409 and in the case of Uttar Pradesh Co-operative Federation Ltd. Vs. Sunder Bros., Delhi, reported in AIR 1967 SC 249. Therefore, he submitted that if the Court finds that the discretionary order so passed without affecting such condition as laid down by the Court, then the Court should not interfere with the order so passed by the Hon'ble First Court.
He further contended that from the facts it would be evident that the appellants have removed the assets of the company behind the back of the management. The appellants who were primarily in charge of the factory in nexus with the erstwhile Manager (Commercial) of the company, had adopted a policy aimed at stripping the company of its assets and properties which would have ultimately resulted in closure of the factory. This led to serious labour problems and the Head Office received representations from the Union Leaders against the appellants and the then Manager (Commercial). The appellants were also found to have entered into fictitious transactions and siphoned out monies in the process. Evidence of siphoning out of a sum of Rs.17,54,566.00 with full particulars have been given. In these circumstances, there are sufficient materials which warranted the passing of an order restraining the appellant from intermeddling with the affairs of the company.
He further contended that the powers of Directors of the company did not include the right of a Director to act independent of the Board or in any manner intermeddle with the affairs of the company and he drew our attention to Articles 101 and 102 of the Association of the company. He further pointed out that the meeting was called to remove the appellants as Directors. For the majority shareholders, to remove a Director, it is necessary to give reason thereof, although in this case there had substantial reasons for such removal.
He also drew our attention to Section 284 of the Companies Act, and submitted that it is that power under the said Act. He further submitted that the shareholders have a right to call an extraordinary General Meeting on a requisition under Section 169 of the Companies Act. Therefore, even if there existed no charge of mis-appropriation, misdemeanor or the like against the appellant, their removal cannot be challenged, if carried out in accordance with the provisions of Sections 169 and 284 of the Companies Act. 1956. In the instant case, the appellants have not shown any departure from the relevant provisions of the Companies Act in convening the Extraordinary General Meeting for removal of the appellants as Directors. Even if a company is in the nature of a family concern, it is none the same controlled by its shareholders and the majority shareholders are entitled to run the company. He also relied upon a decision in the case of Kilpest Vs. Shekhar Mehra reported in 1996(10) SCC 696. He also relied upon another decision in the case of Kamal Kumar Dutta Vs. Ruby General Hospital Ltd., reported in 2006(7) SCC 613 in support of his contention.
He further pointed out that even after the order dated 7th April, 2009 passed in the present suit was served upon the appellants, instead of making a vacating application. They suppressed this order and filed an application under Section 397 of the Companies Act, 1956 and got an order from the Company Law Board which is in direct conflict with the order dated 7th April, 2009. Such conduct of the appellants was noted not only by the Hon'ble First Court but also by the Company Law Board in its order dated 27th April, 2009.
Since the appellants and their group company transferred for valuable consideration of a large bulk of the shareholding in the company in the year 2003, the appellant No. 1 sold off the bulk of the shareholding in the company on 28th March, 2008. Therefore, they cannot on one hand sell their shares in the company and receive substantial consideration on the other and yet claim indefeasible rights in the company over-riding the wishes of the majority shareholders.
Mr. Mitra further pointed out that the appellants are defendants in the suit and they have not made a counter claim. Therefore, they cannot claim any substantial relief in any manner whatsoever. On one point of time he submitted that the prayer has been made by the appellants that the advocates-on-record of the parties should be appointed as a Receiver over the company but the Court usually do not appoint a Receiver over a running company. In support of his contention he relied upon a decision in the case of State Bank of India Vs. Jayashre Ceramics Pvt. Ltd., reported in AIR 1987 Calcutta 194. Accordingly, he submitted that the appeal should be dismissed.
He further submitted that the appellants are guilty of suppression of the order of the Company Law Board dated 27th April, 2009. It is also the contention of the appellants that the respondents suppressed the alleged documents recording the family settlement and Section 397 proceeding filed against Murlidhar Ratanlal Export Ltd. (hereinafter referred to as the MREL) by the appellants.
Mr. Mitra further submitted that there is no family settlement and document is the result of forgery and fabrication. No such documents exist when inspection was sought, and the appellant's Advocates produced the Xerox (not the original) which also differs from one annexed to the stay petition. This has been recorded in the respondent's Advocates' letter.
He further contended that the present suit has nothing to do with MREL. No relief has been claimed in respect of MREL or its assets or business.
After considering the facts and circumstances of this case and after analyzing those facts and the decisions cited before us, we have found that this scope of appeal is very limited. We accept that the facts which have been stated in the plaint and the petition have to be taken as true and correct. At this stage, after following the decision of the Division Bench of this Court in the cases of Sm. Muktakesi Dawn (supra); Jitesh Pandey (supra); Intime Spectrum (supra), we accept the contention of Mr. Mitra that when a discretionary order has been passed by the Court, the said order cannot be set aside when such order is being passed by the Trial Court applying its discretion and without acting unreasonably or capriciously or after taking into account all the relevant facts of the case. Therefore, we do not find any reason to interfere with the order and furthermore the company whether it is in the nature of family concern or not can stand in the way of any means to follow the norms and practice as laid down in the Companies Act. The company will always be controlled by its majority shareholders as has been stated in the decision in the case of Kilpest (supra) where the Supreme Court held as follows:
"11. The promoters of company, whether or not they were hitherto partners, elect to avail of the advantages of forming a limited company. They voluntarily and knowingly bind themselves by the provisions of the Companies Act. The submission that a limited company should be treated as a quasi-partnership should, therefore, not be easily accepted".
Furthermore the challenge has been thrown by the appellants in respect of an order which was passed by the Court as an ad-interim stage and in our considered opinion, the Court has already been taken into account the applications filed by the appellants for vacating the ad-interim order.
After perusing such vacating application, the Court has passed an order. In our considered opinion we do not find any illegality or irregularity in respect of the said order. We do not find any suppression of material facts as tried to be made out by the appellants before us at this stage. However, we feel that the appellants have directed to file their affidavits before the Trial Court and the matter can be sorted out after filing such affidavit. At this stage, we do not find that it is necessary for us to interfere with the order so passed by the Hon'ble First Court. Hence, we dismiss this appeal. We also make it clear that the order so passed by us will not stand in the way to decide the matter by the Trial Court after filing the affidavits by the parties.
For the reasons stated hereinabove, this appeal is dismissed.
Urgent Xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(PINAKI CHANDRA GHOSE, J.) I agree.
(SANKAR PRASAD MITRA, J.)