Company Law Board
S.T. Ganapathy Mudaliar And Anr. vs S.G. Pandurangan And Ors. on 31 August, 1998
Equivalent citations: [1999]96COMPCAS919(CLB)
ORDER
1. Two shareholder-petitioners claiming to hold about 66 percentage of shares in Esteji Hotels Private Limited (hereinafter referred to as "the company") have filed this petition under Sections 397, 398, 400, 402, 403 and 404 of the Companies Act, 1956 (hereinafter referred to as "the Act"), alleging various acts of oppression and mismanagement in the affairs of the company.
The alleged acts of oppression and mismanagement relate to the following :
(1) Issue of additional shares.
(2) Transfer of 680 shares to the third respondent at the meeting held on December 30, 1994.
(3) Transfer of 1,015 shares from the first respondent to the second respondent on December 30, 1994.
(4) Alleged vacation of the second petitioner as director under Section 283.
(5) Removal of the first petitioner as director at the extraordinary general meeting held on April 30, 1996.
(6) Failure to furnish copies of certain documents sought for.
(7) Appointment of respondents Nos. 2 and 3 as directors.
2. Shri Harikrishnan, appearing for the petitioners, initiating the arguments, submitted that the company was incorporated in January, 1989, as a family company consisting of petitioner No. 1, the father ; petitioner No. 2, his second son ; and respondent No. 1, his first son, each holding 9,770, 9,600 and 9,980 shares, respectively, in the company while five other shareholders held among themselves 650 shares. This company was mainly incorporated to run a hotel to be built on a certain land in Kodaikanal, which was collectively purchased by petitioner No. 1 and his sons. All the three of them were directors of the company. Originally, the authorised capital of the company was Rs. 25 lakhs which was later increased to Rs. 30 lakhs and the shareholdings, as indicated above, emerged after such increase. The land in question was leased to the company for a period of three years and the company also availed of certain financial assistance from the Tamil Nadu Industrial Investment Corporation (TIIC). The shares of the family shareholders were pledged with TIIC. Since the company by itself could not run the hotel, the same was leased to a partnership firm in which the family shareholders were also partners. This arrangement was going on till March, 1994, after which certain disputes have arisen among the family shareholders and respondent No. 1 has unilaterally taken over the management of the company by adopting various oppressive and dishonest acts against the other two family shareholders, resulting in filing of this petition.
3. Shri Harikrishnan submitted that since the company was not holding any board meeting for a long time, the second petitioner wrote to the company on December 23, 1994, complaining that there has been no board meetings of the company and as such efforts should be taken to convene board meetings and notices of such meetings should be sent to him by registered post. He also sent a letter to the company on February 10, 1995, intimating that if any board meeting was to be held till March, 1995, he should be given leave of absence. Since the petitioners did not get any notice for any meeting, on their own, they issued a notice on April 2, 1996, convening a board meeting on April 7, 1996, at the residence of the first petitioner. However, the first respondent sent a telegram to the petitioners stating that no board meeting could be held at a place other than the registered office of the company and as such he did not attend the meeting. The petitioners convened the board meeting in which they removed the first respondent from the position of managing director and appointed the first petitioner as the chairman of the company. They also filed Form No. 32 with the Registrar of Companies on April 8, 1996. The first petitioner also issued a circular to all the workers of the company that they should report to him instead of the first respondent. However, on May 4, 1996, respondent No. 1, circulated a circular that the second petitioner had vacated his office and that the first petitioner had been removed from the position of director. In view of the circular, the petitioners took inspection of the documents filed with the Registrar of Companies, Chennai, from which they came to know of the following :
(1) There had been changes in the shareholding pattern of the company by non-family shareholders having transferred the shares to respondents Nos. 1, 2 and 3 and that respondent No. 1 has also transferred certain shares standing in his name to respondent No. 2 .
Shri Harikrishnan submitted that the transfer of shares to non-shareholders is in violation of Article 17 of the articles of association of the company and, as such, has no validity.
(2) There had been further increase of shares in respect of respondent No. 1, thus increasing the paid-up capital from Rs. 30 lakhs to Rs. 40 lakhs.
This, Shri Harikrishnan submitted, is also in violation of the family understanding according to which further shares should have been allotted to all the family shareholders in the earlier proportion. As a matter of fact, he contended that neither the issue of further capital nor could the transfer of shares have been possible in a board meeting when both the petitioners holding substantial shares in the company were not present. He further added that even the issue of further shares and transfer of shares could be a matter of fabrication.
(3) The second petitioner is reported to have vacated his office by virtue of the provisions of Section 283.
Shri Harikrishnan submitted that there had been no notice of any meeting of the board issued to the second petitioner and, therefore, the question of his non-attendance in three consecutive meetings did not arise and the purported meetings in which the second petitioner is alleged to have been absent were never held and only to oust the second petitioner from the board this stand of vacation of office by him has been set up by respondent No. 1.
(4) The first petitioner is found to have been removed from the position of director in the alleged extraordinary general meeting held on April 30, 1996.
Shri Harikrishnan submitted that there was no notice in respect of this meeting and while the holding of the meeting itself is doubtful, even if it had been held, the same would have no effect inasmuch as the majority shareholders had not received any notice of this meeting.
(5) The second and third respondents had been appointed as directors in a board meeting alleged to have been held on March 30, 1995.
4. Shri Harikrishnan submitted that, in view of the fact that no notice of any board meeting had been received by the petitioners-directors and that, even if a board meeting had been held, in the absence of any notice neither the first petitioner nor the second respondent attended the said alleged meeting. In the absence of their presence in the board meeting, respondents Nos. 2 and 3 could have never been appointed as directors as there would have been no quorum.
5. Summing up these allegations, Shri Harikrishnan submitted that, by transfer of shares against the provisions of the articles in the name of wife and son of respondent No. 1 and by issue of further shares to the first respondent, the petitioners' majority holding has now been converted into minority, which is a grave act of oppression against them. The act of oppression has further been aggravated by not only inducting the- second and third respondents into the board of directors but also getting both the petitioners ousted from the board of directors. In other words, Shri Harikrishnan submitted that in a family company in which the three members of the family were holding more or less equal number of shares, the sharing pattern of the management of the company has now been completely tilted by the grave acts of oppression committed by the first respondent by which the company has been hijacked. Therefore, he prayed that the various reliefs sought in the petition should be granted so that the original family nature of the company should be maintained and that equal participation in the management of the company by the original family shareholders should be restored.
6. Shri Vedantham Srinivasan, appearing for the respondents, submitted that there is no basis for any of the allegations contained in the petition in view of an oral family settlement that had been reached between the original family shareholders in respect of various properties belonging to the family including that of the company. Pursuant to the oral family settlement, various steps had been taken by which the control of certain properties and companies under respondent No. 1 were transferred to petitioner No. 2 and that a part of the settlement was that control of respondent No. 4-company would vest in respondent No. 1. In view of the settlement, the petitioners never took any interest in the affairs of the company and they never attended any of the meetings of the board in spite of notices. Since they continued to be directors, in spite of the family settlement, the company used to send notices of all meetings, whether board or general body, to the address of the petitioners as registered with the company. The said address as registered in the company was 32, Nammalwar Street, Madras. All notices for meetings were being sent to this address by certificates of posting. He submitted that keeping this in view, the allegation as contained in the petition should be looked into.
7. Dealing with the complaint that the additional share capital has been issued only to the first respondent, Shri Srinivasan submitted that the need for issue of additional capital arose at the instance of the TIIC. While the authorised capital was increased from Rs. 30 lakhs to Rs. 40 lakhs as early as in 1990 against which there is no complaint from the petitioners since they were parties to the said decision, the paid-up capital was increased to Rs. 40 lakhs by issue of additional shares only on June 27, 1994. In this meeting, the TIIC nominee was present. The first petitioner not only attended the said meeting, but also signed the minutes of the said meeting and he also signed the attendance slip. The reason why the first petitioner did not object to the issue of shares was because of the family settlement as already mentioned. He further submitted that in the absence of anything to the contrary, the minutes of the board meeting are prima facie evidence of the proceedings of the meeting as per Sections 193 and 195 of the Act. By virtue of Article 6 of the articles of association of the company, the board was fully competent to allot shares. Therefore, according to learned counsel for the respondents, there has been nothing illegal or oppressive in allotment of additional shares only to the first respondent.
8. Dealing with the transfer of shares, he submitted that the transfer of shares was approved in a board meeting held on December 30, 1994, in which the first petitioner was present. In view of the family settlement, the control of Esteji Exports was transferred to the second petitioner. The petitioners had no interest in acquiring any further shares of the company. Accordingly, with the approval of the first petitioner who was present in the board meeting, the transfers were effected in favour of the wife and son of the first respondent, viz., respondents Nos. 2 and 3. In view of this, according to learned counsel for the respondents, there has been no violation of Article 17 of the articles of association of the company.
9. With regard to co-option of respondents Nos. 2 and 3 as directors, learned counsel for the respondents submitted that the co-option took place in a board meeting held on March 30, 1995, in which the first petitioner was present and since the control of the company had already been vested with the first respondent as per the family settlement, it was decided to induct his own wife and son as additional directors. This co-option had the full approval and consent of the first petitioner who was present in the board meeting. In view of this, he submitted that there was nothing wrong in the co-option.
10. In so far as the cessation of office of the director by the second petitioner is concerned, Shri Vedantham Srinivasan submitted that in view of the family settlement, the second petitioner was never attending any board meeting right from September 2, 1993. While he could have been deemed to have vacated his office much earlier for failure to attend three consecutive board meetings, yet the same was not given effect to. However, in a board meeting held on September 12, 1995, it was recorded that the second petitioner did not attend three consecutive meetings on December 30, 1994, March 30, 1995, and June 30, 1995. Even though it is contended by the second petitioner that lie had written a letter on February 10, 1995, seeking leave of absence for the board meetings to be held, yet no such letter was received by the company. The letter is supposed to have been addressed to the "managing director, Esteji Hotels Private Limited, Madras". It is difficult to understand how the letter addressed in this fashion without giving the full address could have reached the company. The holding of the meetings on June 27, 1994, and September 2, 1994, could never be doubted inasmuch as the first petitioner attended these meetings and he also signed the attendance slips of the meetings. Since vacation of office is due to a statutory stipulation the question of respondent No. 1 having had any hand in this affair does not arise. He also stated that this fact had been incorporated in the annual return filed on November 28, 1995.
11. Shri Vedantham Srinivasan further submitted that the removal of the first petitioner as a director was on account of a requisition received from the shareholders for his removal. Proper notice of the meeting was sent to the address of the petitioner as registered with the company. In spite of the notice, the petitioner did not attend the meeting in which the general body decided to remove the first petitioner as a director. A democratic act done by the shareholders cannot be questioned in a petition under Section 397/398 especially when this section relates to rights and obligations of a member in his capacity as a shareholder.
12. Summing up his arguments Shri Vedantham Srinivasan reiterated his earlier submission that the family settlement stipulated the control of the company to be with the first respondent and with a view to scuttling the family settlement, this petition has been filed alleging acts of oppression and mismanagement. Even this allegation, as explained by him, does not call for grant of any relief in view of what he has already submitted. He further submitted that one of the ingredients of the provisions of Section 397 is that the grounds of complaint should be of such nature justifying winding up of the company under the just and equitable ground. According to him, none of the allegations made by the petitioners could justify such a winding up under the just and equitable ground. He relied on the following cases to substantiate his various arguments ;
I. (a) Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp Cas 351 (SC), and
(b) Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 Comp Cas 743 (SC) to state that-
". . . there should be continuous acts on the part of the directors which are burdensome, harsh and wrongful and that the petitioners should show that the alleged acts of oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder."
II. (a) Bharat Bhushan v. H. B. Portfolio Leasing Ltd. [1992] 74 Comp Cas 20 (Delhi) ;
(b) Paramanand Choudkary v. Smt. Shukla Devi Mishra [1990] 67 Comp Cas 45 (MP) to state that-
". . . directors failing to attend three consecutive meetings of the board ceased to be directors."
III. Shekhar Mehra v. Kilpest (P.) Ltd. [1986] 3 Comp LJ 234 (MP) to state that-
". . : vacation of office of director by reason of Section 283(1)(g) is automatic."
IV. Jadabpore Tea Co. Ltd. v. Bengal Dooars National Tea Co. Ltd. [1982] 55 Comp Cas 160 (Cal).
Mrs. Achamma Thomas v. E. R. Fairman, AIR 1970 Mys 77, to state that-
"... when notice is sent under certificate of posting, presumption arises that the notice has been duly delivered to the addressee."
V. Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estates Enterprises (Pvt.) Ltd. [1991] 70 Comp Cas 211 (Kar) to state that-
". . . the relief under Sections 397 and 398 of the Companies Act, 1956, is equitable relief which is entirely left to the discretion of the company court. Because of the equitable and, therefore, discretionary character of the court's jurisdiction, the requirement of good faith on the part of the petitioner is necessary."
Shri Harikrishnan replying to the arguments of learned counsel for the respondents, submitted that it is wrong on the part of the respondents to claim that there was an oral family arrangement. He submitted that the alleged signature of the first petitioner in the purported family settlement is a forgery and he relied on the opinion given by a handwriting expert which is annexed to the petition. He further submitted that the company cannot take cognizance of any family settlement controlling the affairs of the company unless and otherwise the company itself had been a party to the same and such terms of family settlement are incorporated either in the articles of association or memorandum failing which the governance of a company should be governed by the provisions of the articles of association/memorandum. For this proposition he relied on V. M. Rao v. Rajeshwari Ramakrishnan [1986] 1 Comp LJ 1 ; [1987] 61 Comp Cas 20 (Mad).
13. We have considered the pleadings and arguments and the written brief given by both learned counsel. After the filing of the petition, a miscellaneous application was filed seeking directions for production of documents for inspection by the petitioner. Accordingly, while allowing such inspection, we also directed that the Bench officer of the Southern Region Bench of the Company Law Board would authenticate all the documents inspected by the petitioners. After the inspection, the petitioners filed another application incorporating therein the result of their inspection and seeking certain other additional relief. We are considering this application in this order. In view of the fact that the dispute relates to a family company wherein the petitioners are father and younger son and the main respondent is the eldest son, we advised the parties that the matter should be resolved amicably in the interest of every one. With our assistance and interaction, the parties were close to a settlement by which respondent No. 1 and his group were to purchase the shares held by the petitioners for a total consideration of Rs. 2.7 crores. However, for some reason, this settlement did not take place and we heard the matter on the merits. After the hearing was over, we again persuaded the parties to attempt an amicable settlement, which unfortunately also failed. Accordingly, this order is being issued.
14. It is an admitted position that the company was incorporated as a family company by a single family comprising father and two sons, each holding roughly one-third of the shares in the company with nominal holdings by five outsiders. All the three were directors of the company and the land belonging to all the three was collectively leased to the company for construction of a hotel. All of them pledged their shares as security for mobilising loans from the financial institutions. Thus, the association among the family members/shareholders as far as this company is concerned is in the nature of a partnership. In such an association, notwithstanding that the same is in the nature of a limited liability company, trust and mutual confidence are of utmost importance. It is evident from the pleadings that right from 1994, respondent No. 1 was gaining control over the company both by virtue of increasing his shareholding and by issue of additional shares to himself and getting the outsiders' shares transferred to his group and by virtue of controlling the board by inducting his wife and son as directors.
15. The justification for doing so, as given by respondent No. 1, is that there was a family arrangement by which he was to have the control of the company. The purported family arrangement is questioned by the petitioners. No documentary evidence has been produced before us showing that the purported family arrangement is one which has been accepted by all the three parties, viz., the petitioners and respondent No. 1. Even though the respondents have annexed in their reply a photostat copy of a deed of partition between respondent No. 1 and the second petitioner showing that the control of the company was to go to respondent No. 1, without going into the question as to whether it is a genuine one and or whether it has been signed by petitioner No. 2 and respondent No. 1, in view of the fact that this- deed is dated March 15, 1996, i.e., after most of the alleged acts of oppression and mismanagement had taken place, we do not consider that this document is of any relevance to advance the cause of the respondents, especially when the removal of petitioner No. 1 as a director on April 30, 1996, could have never taken place within such a short span of time after the deed of partition on March 15, 1996.
16. Except stating that there is a family arrangement in existence prior to the first act of the alleged oppression by way of allotment of further shares to the first respondent and handing over of the control of Esteji Exports to petitioner No. 2, the first respondent has not been able to cite any document by which the alleged family arrangement has been implemented in such a way that he could claim control over the company. This is essentially important, inasmuch, as even assuming that there was a family arrangement and handing over of the control of Esteji Exports to petitioner No. 2, nothing has been produced as to the status of petitioner No. 1 in the family settlement. He continued to be a director on the board of the company and who was also reportedly attending all the board meetings. If the non-attendance of petitioner No. 2 was on account of the family arrangement, how petitioner No. 1 continued to be attending the board meetings is a question which has not been answered satisfactorily. Therefore, we have to, per force, decide the issue before us relating to the company, keeping away the alleged family arrangement, which has not been proved. Even otherwise, as rightly pointed out by Shri Harikrishnan, the family arrangement relating to the affairs of the company unless otherwise has been approved by the company either in the board meeting or in a general body meeting or incorporated in the articles cannot be binding on the company.
17. We shall deal with various allegations :
(1) Allotment of additional shares to respondent No. 1 on June 27, 1994.
The articles of association of the company provide that shares shall be at the disposal of the directors and they can allot or otherwise dispose of them to such persons at such time and on such terms and conditions as they deem fit. In other words, the articles do not provide allotment on proportionate basis. When the allegation is that the allotments to certain shareholders to the exclusion of others have been made with a view to converting a minority into majority, we have to look into the purpose for which the allotment was made. It is the contention of the respondents that the allotment was made pursuant to the requirement of TIIC for additional funds. It is also their contention that the allotment to respondent No. 1 was approved in a meeting in which petitioner No. 1 along with the TIIC nominee was present. Petitioner No. 2 who was a director and who was holding over 30 per cent. shares in the company did not attend the meeting, We find from the minutes which according to the petitioners is a fabricated one, that respondent No. 1 is reported to have informed the board that "another Rs. 10 lakhs will be paid by him alone". It transpired during the hearing that the allotment had actually been made against certain credits standing in the name of respondent No. 1 and no fresh cash had been brought by him. In other words, no additional funds had come into the company towards shares. Normally, as we have already indicated, allotment of shares to the exclusion of shareholders especially in a family company without the need of any additional funds, has to be construed to have been made with a view to gaining undue advantage in the shareholding against other shareholders. In the present case, the allotment of additional 10,000 shares had tilted the entire shareholding in such a way that respondent No. 1 who held just about 30 per cent. shares in the company has become a shareholder of nearly 55 per cent. resulting in reduction of the percentage of the shareholdings of petitioners Nos. 1 and 2 from about 66 per cent. to 45 per cent. In other words, the majority has been converted into a minority and vice versa. We have taken note that according to respondent No. 1, such change in the acquisition was brought about with the consent of petitioner No. 1 since he was present in the meeting even though it was denied by petitioner No. 1, yet the fact remains that petitioner No. 2 holding about 30 per cent. shares in the company was not present in the meeting.
18. In regard to transfer of shares, Article 17 stipulates that no shares shall be transferred to a person who is not a member of the company so long as any member is willing to purchase the same at the fair value to be determined by the auditors. However, there is an exception to this provision as contained in the said article itself that the directors can sanction, through a resolution of the board, a transfer without complying with the provisions of the articles. Admittedly, respondents Nos. 2 and 3 to whom the shares were transferred were not members of the company when the transfers took place, when the non-family shareholders transferred their shares. These transfers reportedly took place on December 30, 1994, in which respondent No. 1 and petitioner No. 1 were allegedly present. The spirit of the exception to this article is that if all the family shareholders who were also directors, agree for transfer of shares without following the procedure in that article, then shares could be transferred to non-members. At the time when the transfers were approved in the board meeting on December 30, 1994, admittedly petitioner No. 2 was not present. Any action relating to transfer without following the provisions of this article, would, according to us, not be in consonance with the spirit behind the exception provided in the article, even assuming that petitioner No. 1 was present and that he had expressed that he was not interested in acquiring the shares. Therefore, we hold that the transfer of the impugned shares held by non family shareholders to respondents Nos. 2 and 3 is in violation of the spirit of Article 17 of the articles of association of the company. In the same way, the transfer of 1,015 shares from respondent No. 1 to respondent No. 2 has also to be held to be against the spirit of the said article and as such set aside.
19. In regard to the alleged vacation of office by the second petitioner as a director of the company due to operation of law under Section 283 of the Act, the argument of the petitioners is that notice of the board meeting had never been received by the petitioners. The case of the respondents is that notices for the board meetings had been sent to the addresses of the petitioners registered with the company. While legally it may be absolutely valid that notices are to be sent to the address as shown in the register of members, considering the family nature of the company and that respondent No. 1 himself was residing in that address and that he was fully aware that the petitioners were not residing in that address, we are of the view that considering the fact that respondent No. 1 has been relying on a family settlement by which there has been a sort of partition of properties/business of the company, we do not find any reason as to why respondent No. 1, being the managing director of the company could not have ensured that the notices are sent to the addresses where the petitioners were residing. Therefore, without looking into whether the three meetings which are reported to have been held were held at all or not, the absence of proper notices to petitioner No. 2, in the facts and circumstances of the case, we find that no proper notice has been served on the petitioner No. 2 so as to invoke the provisions of Section 283. In other words, petitioner No. 2 has not vacated his office by operation of law.
20. In regard to co-option of respondent No. 2 and respondent No. 3 as directors in a board meeting held on March 30, 1995, while according to the petitioner, neither of them was present in the board meeting and, therefore, there would have been no quorum for inducting additional directors, it is the contention of respondent No. 1 that petitioner No. 1 was present in that meeting and, therefore, there was not only proper quorum, but also in view of the control of the company having already passed on to respondent No. 1 as per the family arrangement, there is nothing illegal in inducting respondents Nos. 2 and 3 as directors. It has to be noted that at the relevant time, when the co-option took place, the TIIC nominee was no longer a director and petitioner No. 2 did not attend this meeting as it is one of the meetings which had been considered for his vacation of office. Respondent No. 1 has produced the attendance slip signed by petitioner No. 1 for his attendance in the meeting on March 30, 1995. As we have already pointed out, this company is a family company having three family shareholders each holding more or less equal percentage of shares and all the three were on the board of directors. Even assuming that petitioner No. 1 was present in that meeting to constitute valid quorum and with his consent, the two directors were co-opted, since such co-option would completely upset the equilibrium in the board by which one family shareholder would have majority on the board as against two other family shareholders who hold majority shares, we consider that this co-option of directors was really an act of oppression against majority shareholders and as such this co-option has to be set aside.
21. In regard to removal of the first petitioner as a director, he was removed as such in an extraordinary general meeting held on April 30, 1996. The requisition for holding the meeting was given by respondent No. 1 and the board consisting of himself and respondents Nos. 2 and 3 being the wife and son resolved to convene the extraordinary general meeting. In other words, one of the three original family shareholders who incorporated the company to conduct the business of the company collectively, having declared one family member to have vacated his office, has now issued a notice for removal of the remaining family shareholder director. As rightly pointed out by the counsel for the petitioners the last act of taking full control over the company has been executed by the removal of the petitioner No. 1 from the board, one of the promoters of the company more so, in this case, father by his son, which according to us is a grave act of oppression; While we do concur with the counsel for the respondents that the right of a member to convene an extraordinary general meeting to remove a person from directorship cannot be questioned, in the facts and circumstances of this case, such a removal even assuming that all other formalities have been complied with, has to be treated as invalid.
22. We have given findings on each and every one of the allegations and while giving such findings, we have taken into consideration the fact that the Company Law Board being a court of equity has to bear in mind the relevant facts in dealing with the petition under Sections 397 and 398. The relevant facts are that the company was incorporated by three family members contributing more or less equal amount of capital that they collectively leased out their respective lands to the company for running a hotel and that all three were directors of the company. Therefore, it is a pure and simple family company. Guided by the pronouncement of courts, more particularly, by the Supreme Court in Needle Industries' case [1981] 51 Comp Cas 743 that illegal acts need not be oppressive and that legal and valid acts also could be oppressive, in giving our findings, we have confined ourselves to find out whether the various allegations, irrespective of whether they were legal or otherwise, were acts of oppression against the shareholders and our conclusion in respect of almost all the allegations is that the acts alleged are all oppressive to the majority by minority which would justify winding up of the company under the just and equitable ground. Accordingly, the following directions are given :
(i) the additional share capital of Rs. 10 lakhs allotted in favour of respondent No. 1 shall either stand cancelled or at the option of the parties respondent No. 1 will transfer proportionate shares out of this additional allotment to petitioners Nos. 1 and 2 ;
(ii) respondents Nos. 2 and 3 shall cease to be directors of the company ;
(iii) petitioners Nos. 1 and 2 will continue as directors on the board ;
(iv) the 680 shares of non-family shareholders transferred to respondent No. 3 shall be transferred to respondent No. 1, petitioner No. 1 and respondent No. 2 in equal proportion and they shall also pay the consideration for the shares as was originally paid by respondents Nos. 2 and 3 ;
(v) transfer of 1,015 shares from first respondent to second respondent stands cancelled ;
(vi) the board consisting of the petitioners and respondent No. 2 will meet within a week from the date of this order and decide on these directions we have given on the shares and also on the allocation of responsibilities among themselves ;
(vii) the bank accounts of the company will stand frozen with immediate effect and the company's bankers will act as per the decision of the board that comes into being in terms of this order.
With the above directions, we dispose of this petition. No order as to costs.