Company Law Board
Shri Jodh Raj Laddha And Ors. vs Birla Corporation Limited And Ors. on 13 July, 2005
Equivalent citations: [2006]68SCL261(CLB)
ORDER
S. Balasubramanian, Chairman
1. In CP 57 of 2004, the petitioners have filed this application CA 137 of 2005 seeking for the following interim reliefs:
(a) That this Hon'ble Board may be gracious enough to pass an order appointing a Local Commissioner with background of Company Law and having good standing and man of repute who will have a team, and who may be directed to inspect, take photo copies, to make enquiries and/or to sign and/or initial: (i)All Returns, Registers, Books, Documents, Deeds, Papers, Files, Records maintained under the Companies Act, 1956 and/or any other applicable law or otherwise however maintained/kept by the Respondent Nos. 1 and 9 to 34, and in particular the changes in the Board of Directors in case of companies and the changes in the trustees/members of the Managing Committee or the members of the Society in case of the Charitable Societies, since the financial year 1998-99 and the share transfer registers and deeds and papers relevant to transfer and transmission of shares since July, 2004 and all the documents relating thereto including shareholders attendance records and ballot papers of the Annual General Meeting of the Respondent No. 1 held on 15th September, 2004; (ii) and for that purpose, visit and enter the Registered Office of the Respondent Nos. 1 and 9 to 34 wherever they are situated and further they be authorized to ask for all information, documents and papers connected with the aforesaid returns, registers, documents, books, deeds, papers, files and records, (iii) to visit any other place in case the Local Commissioner has a reasonable belief that such returns, registers, booh, documents, deeds, papers, files and records including minutes books or any other supporting, ancillary and connected documents and papers are kept/stored there; (iv) and submit an inspection and enquiry report thereon along with photo copies of all the relevant documents and records in such manner and within such time as to this Hon'ble Board may deem fit and proper;
(b) any other order or orders or relief or reliefs as this Hon'ble Board deems fit and proper.
2. Shri Sarkar, Sr. Advocate appearing for the petitioners submitted: The respondents 9 to 27 are companies and respondents 28 to 34 are charitable societies. These entities collectively hold 63.75% shares in Birla Corporation Limited (BCL). All these entities were under the control of Late Priyamvada Birla and as such she was controlling the affairs of BCL through these entities. This Board has in its order dated 25th April 2005, has given a finding that after the demise of Priyamvada Birla, the 2nd respondent viz. Shri R.S. Lodha is in control of the shares held by respondents 9 to 34 in BCL. It is necessary to find out as to how the 2nd respondent came to control respondents 7 to 34. In the petition, the petitioners have alleged instances of manipulation of records of some of the respondent companies/societies either in relation to composition of the Board of Directors/Trustees of these entities or in the shareholding of these entities, with the view to control these entities. Therefore, to ensure that no further manipulation of the records of these entities take place, the interim reliefs sought for should be granted.
3. Shri Sundaram appearing for respondents submitted: The respondents waive the right to file a reply to the application. This application is a malafide application. No grounds have been given in the application for seeking the interim reliefs. The only ground stated in the application is that there is a dispute going on between some members of Birla family and the 2nd respondent regarding grant of probate and therefore there is likely to be manipulation of records of BCL and respondents 9 to 34. The petitioners have not established that there had been any instance of manipulation. Further, there is no averment in the application as to how these reliefs are relevant or would be in aid of deciding the main petition. There is absolutely no material in the application justifying grant of the reliefs sought for. In Rev. C.S. Joseph v. T.J. Thomas 62 CC 504, the Kerala High Court, while considering a prayer for appointment of a Receiver, has held that the power to appoint a receiver is not to be generally exercised as matter of course and that it can do no harm to appoint a receiver is no reason for allowing an application. Similarly in Purna Investments Ltd. v. Southern Steelmet & Alloys Ltd. (47 CC 752), the Karnalaka High Court has observed that the burden of establishing that the inconvenience which the applicant would suffer by refusal of the injunction is greater than what the respondent will suffer, if it is granted, lies clearly on the applicant. In the same analogy, in the present case since no justifiable grounds have been given in the application for appointment of a local commissioner, the application should be dismissed. Appointment of the local commissioner in the absence of any justifiable grounds to do so would prejudicially affect the respondents. Further, a perusal of the reliefs sought would indicate that the petitioners are seeking for inspection and taking of copies of not only the records maintained under the Companies Act but also all other applicable laws and grant of such sweeping reliefs is unheard of in a petition under Sections 397/398 leave alone at an interim stage.
4. I have considered the arguments of the counsel. I am in full agreement with the counsel for the respondents that no justifiable grounds have been given in the application for the reliefs sought for. Shri Sarkar pointed out that in the petition, the petitioners have cited certain instance of manipulation of records of these entities, and therefore, the interim reliefs sought now should be granted. In a petition under Sections 397/398, if any interim relief is to be granted during the pendency of the petition, the same should be justified on proper grounds. No doubt the petitioners have pointed out certain instances of alleged manipulation in the records in the petition, but they did not seek any interim reliefs in respects of these entities in she petition. The petition was filed in September 2004 and the pleadings have been completed. Therefore, for grant of interim reliefs at this stage, the petitioners should have pointed out instances of manipulation of records during the interim period. As is seen from the application itself, that the reliefs are sought on the apprehension of the petitioners that the records might be manipulated. No interim reliefs can be granted on apprehensions. Further, it is an admitted position that respondents 9 to 34 are only shareholders of BCL and are not even subsidiaries of BCL. The petitioners are neither shareholders of the respondent companies nor beneficiaries of respondent socities Under these circumstances. I am of the prime facie view that the petitioners have no right of inspection in respect of respondents 9 to 34 leave alone the right to seek for appointment of a local commissioner. However, Shri Sarkar contended that since the petitioners are questioning the manner by which the 2nd has gained control of the affairs of BCL, in terms of Section 398, the petitioners have the right to ascertain how and in what manner the 2nd respondent gained control over the management of BCL. This argument would require consideration at the time of fonal hearing and not at this interim stage especially when the petitioners have not sought for such a relief in the main petition and the present reliefs are not based on any event subsequent to filing of the petition. Further the reliefs sought are so wide and far reaching, the same cannot be granted without solid grounds. Accordingly, I decline to grant the reliefs sought for. However, considering the facts and circumstances of the case, I direct respondents 9 to 34 to file affidavits clearly indicating every change that has taken place in the shareholding/directorship/trusteeship in these entities and also the changes that have taken place in their shareholdings in BCL. In so far as BCL, in which the petitioners are shareholders, is concerned, for the same reason that no valid grounds have been given for appointment of a local commissioner, the reliefs sought for cannot be granted. However, the petitioners are at liberty to inspect the statutory records of BCL which any shareholders is entitled to and if such a request is made to BCL by the petitioners, inspection should he allowed, within 10 days of receipt of the request.
5. The application is disposed of in the above terms.