C.P. No. 121 of 2013. Case: Girdharlal Nathubhai Dalal Vs K.C. Agro Pvt. Ltd. and Ors.. Company Law Board

Case Number:C.P. No. 121 of 2013
Party Name:Girdharlal Nathubhai Dalal Vs K.C. Agro Pvt. Ltd. and Ors.
Counsel:For Appellant: Haresh Jagtiani, Sr. Advocate, Yashpal Jain, Vandana Kumawai, Khalid Khimani, Advocates, i/b. Haresh Jagtiani & Associates and For Respondents: Rahul Narichania, Sr. Advocate, Ankit Lohia, Pooja Tidke, Monisha Mane, Mihir Mekal, Advocates, i/b. ALMT Legal
Judges:Ashok Kumar Tripathi, Member (J)
Issue:Companies Act, 1956 - Sections 111, 111A, 171, 266-A, 274, 283(g), 284, 397, 398, 399, 402, 403, 81; Indian Evidence Act, 1872 - Section 44
Judgement Date:April 29, 2015
Court:Company Law Board
 
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Judgment:

Ashok Kumar Tripathi, Member (J), (Mumbai Bench)

  1. The above captioned company petition has been filed by the Petitioner invoking the provisions contained in Sections 397, 398 read with Sections 402 and 403 of the Companies Art, 1956 (hereinafter referred to as "the Act" in short) complaining therein the acts of oppression and mismanagement purportedly committed by the Respondents in the conduct and affairs of the Respondent No. 1 Company. The Petitioner has sought various reliefs as set out in the Petition.

  2. The facts in brief as set out in the petition leading to filing the present petition are as follows:-

    2.1. Since 1951 the Petitioner, along with his brother, late Kantilal Dalal, carried on business, principally through a partnership firm styled "Kantilal & Co.", with the increasing spread up business of other partnership firms formed and private limited companies floated, but Kantilal & Co., continued to be the flagship concern. Most of the real estate, either on ownership or on lease, was acquired by the said Kantilal and the Petitioner in the name of one of these partnership firms and private limited companies.

    2.2. The sons of the Kantilal Dalal, being one Surendra Dalal and the Respondent No. 2 were joined as partners in the said Kantilal & Co. during 1969-71. The Petitioner is the paternal uncle of the Respondent No. 2 and grand uncle of the Respondent Nos. 3 and 4.

    2.3. In 1985, the Respondent No. 1 Company was incorporated with the Petitioner and Kantilal Dalal as equal shareholders and a rice processing mill was installed and operated from Plot No. 1, Phase III, Badli Industries Estate, Samaypur Badli, Delhi-42.

    2.4. The Petitioner is one of the promoters and founders of the Respondent No. 1 Company and one of the two subscribers to the Memorandum of Association of the Company. The Petitioner was also one of the first directors of the Company. The Petitioner holds 15000 fully paid up equity shares in the Company comprising 50% of the original issued paid up equity share capital of the Company. However, due to illegal increase of the authorised equity share capital and its allotment to the Respondent Nos. 2 to 4, which augmentation and allotment is impugned herein, the Petitioner's present shareholding is reduced to 5.08% of the issued equity share capital of the Company.

    2.5. The said Kantilal and Surendra Dalal decided to retire from the Indian business and the Petitioner and the Respondent No. 2 continued as partners/joint holder in the Indian partnership firms and private limited companies, which were in the nature of glorified partnership business. Post reconstitution, the Petitioner continued to have 30% to 50% stake in most of these entitles, with the Respondent No. 2 as the other stakeholder. Post the reconstitution, the Petitioner remained a 50% shareholder of the Company and the Respondent No. 2 stepped into the shoes of Kantilal Dalal and thus the Respondent No. 2 and the Petitioner were the only shareholders of the Company. The Petitioner remained as a Director of the Company.

    2.6. The Respondent No. 2 is presently the controlling director and majority shareholders of the Company. The shareholding of the Respondent No. 2 in the Company was 50% of the old issued paid-up share capital. The Respondent Nos. 3 and 4 are the sons of the Respondent No. 2 and they recently have been made shareholders and directors of the Company. It is alleged that the Respondent No. 2 has also illegally transferred 12 shares to the Respondent Nos. 5 to 12 to make them members of the Company.

    2.7. From 2004 or so, the Respondent No. 2 started sidelining the Petitioner from the management and control of the said Kantilal & Co. and its various affiliated companies/firms, including the Company. Though the Petitioner continued to be the Chairman and Director of the Company, he was not always consulted and several decisions were taken without informing him and without obtaining his consensus.

    2.8. However, post retirement of the said Kantilal and Surendra Dalal, the Respondent No. 2 started disregarding the advices and suggestions of the Petitioner with respect to the business of the Company. As a result, because of the Respondent No. 2's egoistic and greedy attitude in treating the business as solely his and disregarding the set practices and standards, and the experience of the Petitioner, the well reputed and established business of rice exports was severely affected and this ultimately led to the closure of the aforesaid rice unit at the Badli plot somewhere around 2005-2006.

    2.9. On 19/10/2006, the Respondent No. 3 was illegally appointed as an additional Director of the Company. The Petitioner was never informed about such appointment nor has he ever subsequently ratified such appointment.

    2.10. In the year 2007, on several occasions the Respondent No. 2 humiliated the Petitioner when he attended the office of the Company, which were also the operational office of the other joint entities. The Petitioner was being kept in dark about the goings on of the businesses. Around April 2007, the Respondent No. 2 came to the Petitioner and suggested that he should retire from the said Kantilal & Co. and all the affiliated companies. The Petitioner, having realised by now that continuing business relations with the Respondent No. 2 was becoming increasingly unviable and stressful, asked the Respondent No. 2 to give full, correct and genuine details of all his dues in the said Kantilal & Co. and all the affiliated companies, including the Company, and on payment thereof to provide him with a set of dissolution deeds and other necessary paper work. But that never happened as this was obviously not acceptable to the Respondent No. 2, whose Idea was to oust the Petitioner simplicitor without paying him his dues/value for his shareholding in any of the entities including the Company. The dissolution, thus, was not affected and the Petitioner continues to be a shareholder In the Company without any participation in its management.

    2.11. In or about June 2007, the Respondent No. 2 came to the Petitioner room and told in an abusive and grossly insulting manner that he should not step in the office of the Company or the offices of the other Companies/partnership Firms. The Petitioner was completely shaken and feared for his fife as the Respondent No. 2 was very mendacious in his demeanour. Further, the Respondent No. 2 compelled the Petitioner to leave his residence at 51 and 52, Khushnuma Apartment, 29, Carmicheal Road, Cumbala Hill, Mumbai - 400026 (hereinafter referred to as "the said Khushnuma House"), which was a joint family property, and did not even give him an opportunity to collect his clothes etc from the house. The Respondent No. 2 thus illegally and unlawfully ousted the Petitioner from the house, the joint businesses and the Company. Somewhere around this time, the Petitioner was informed by the said Kantilal that he (said Kantilal) and Respondent No. 2 had decided to involve some neutral third person to facilitate resolution of their differences with respect to the amounts rendered to the Respondent No. 2 under the settlement of offshore funds in 2001. However, the Petitioner was not aware about the exact nature of the disputes and the on goings before the Sole Arbitrator. The Petitioner was later informed that the said Kantilal was dissatisfied with the conduct of such mediator and had discovered certain facts, which cast a shadow on his neutrality. Thereafter, the said Kantilal had apparently withdrawn from the resolution talks with the Respondent No. 2. That being so, the Petitioner himself was not concerned with the progress or otherwise of the matter.

    2.12. On 15/2/2010, a notice was issued to convene an Extraordinary General Meeting (EOGM). In the EOGM held on 15/2/2010, a resolution was passed to increase the authorized share capital of the Company from Rs. 25 Lakhs to Rs. 1.5 Crores. No notice of this EOGM was provided to the Petitioner.

    2.13. Pursuant to said illegal increase in the authorized share capital of the Company, on 30/3/2010 the Company illegally allotted 1,15,000 equity shares of Rs. 100/- each to the Respondent No. 2 and thereby illegally increased his shareholding in the Company from 14,900 shares to 1,29,900 equity shares of Rs. 100/- each. The Petitioner was never informed of any such alleged allotment of shares to the Respondent No. 2 nor was the Petitioner given any opportunity to purchase the additional shares when the Company sought to increase its issued capital by issuing additional shares.

    2.14. Further, on 15/6/2010, a notice was issued by the Company to convene an EOGM, Consequently, an EOGM was held and the authorized share capital was further illegally increased to Rs. 3 crores vide a resolution passed in this EOGM. No notice of this EOGM was provided to the Petitioner.

    2.15. On 12/8/2010, the Company issued additional 1,50,000 equity shares of Rs. 100/- each. These shares were illegally allotted to the Respondent Nos. 2 to 4. The Respondent No. 2 was allotted 1,47,000 equity shares of Rs. 100/- each while both the Respondent Nos. 3 and 4 were allotted 1500 equity shares of Rs. 100/- each respectively, thereby illegally increasing the shareholding of the Respondent No. 2 from 1,29,900 to 2,76,900 equity shares i.e. from 50% to 93.37%. Similarly, the shareholding of the Respondent No. 3 was increased from 100 equity shares to 1600 equity shares.

    2.16. On 13/8/2010, the Respondent No. 4 was illegally appointed as an additional Director of the Company. The Petitioner was never informed about such appointment nor has he ever subsequently ratified such appointment.

    2.17. In July 2011, the Petitioner was shocked to know of an Arbitral Award dated 10/7/2010, apparently passed in the arbitration proceedings between the Respondent No. 2 and the said Kantilal Dalal. The Petitioner was never served with a copy of the said Award but he came to know of the...

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