before the company law board - Company Law Board Mumbai Bench

BEFORE THE COMPANY LAW BOARD, 

MUMABI BENCH, AT MUMBAI 

PRESENT: SHRI KANTHI NARAHARI, MEMBER (JUDICIAL) 

COMPANY PETITION NO. 116 of 2008 

IN THE MATTER OF THE COMPANIES ACT, 1956, 

SECTIONS 397, 398, 399, 402,403 & 406 

AND 

IN THE MATTER OF M/S.MATHERAN REALTY 

PRIVATE LIMITED & Ors. 

BETWEEN: 

M/s. Alibante Developments Ltd. (Cyprus) 

having its registered office at 

29A, Annis Komninis, 

Nicosia, Cyprus. 

And 

1. M/S. Matheran Realty Private Limited, 

having its registered office at 

1 st floor, Adore House, 

6, K-Dubash Marg, 

Fort, Mumbai. 

…Petitioner 

2. Joseph E. Silva, 

3. Aboyne Mauritius Ltd., 

4. Divakar Gatti, 

5. Jose Mathew 

6. Nikhil Naik, 

7. Praveen Banavalikar, 

8. Gopi Resorts Pvt.Ltd. 

…Respondents 

CP 116/2008 

Matheran

2 

PRESENT FOR PARTIES; 

Shri S.V. Kamdar Sr. Counsel ) 

Shri Rahul Chitnis, Advocate, ) 

Shri Ameya Gokhale, Advocate ) … For Petitioner. 

Shri Chirag Mody, Advocate ) 

Shri Saharan Jagtiani, Advocate ) 

Ms. Anushka Sharda, Advocate ) 

Shri Nikhil, Advocate ) … For Respondents. 

O R D E R 

The present petition is filed by invoking various 

provision of the Companies Act, 1956 (‘the Act’) alleging certain 

acts of oppression and mismanagement in the affairs of the 

Company and sought various reliefs as prayed in para VII of the 

petition. Shri Kamdar, Learned Sr. Counsel appearing for the 

petitioner narrated the brief facts. He submitted that the 

Respondent Company was incorporated on 27 th October, 2006 and 

engaged inter-alia in the business of real estate development and 

trading in properties and transferable development rights. The 

petitioner and Respondent No.2 were the promoters and 

shareholders of R 1 Company from its incorporation till 26 th July, 

2007. The petitioner, Respondent No.2 and 3 entered into Share 

Subscription Agreement (SSA) and Shareholder Agreement both 

dated 26 th July, 2007 wherein the R3 being an investment company 

CP 116/2008 


3 

agreed to invest a sum of Rs.131,20,00,000/- in the Company in 

various instalments. In return, the Company agreed to issue and 

allot 1,25,160 equity shares of Class A having face value of 

Rs.10/- each per share aggregating to a total economic interest of 

55% and voting rights of 44.99% of the total paid up share capital 

of the Company. In July, 2007 Mr.M.Fysh, the nominee Director 

of the petitioner in R1 Company was appointed the Chief 

Executive Officer of the said Company. The CEO suggested and 

began to arrange for external finance for affordable housing 

development from financial co-investment partners, the World 

Bank and other related institutions and also began to arrange for 

credit financing from Japanese and Korean institutions. R3 in 

contravention of the said SSA and SHA, started to interfere in day 

to day affairs and decision making of the Company including 

preventing the Company from raising any external finance for its 

development. R3 forced the Company to appoint a Local Chief 

Operational Officer and Head of Technical. Mr.Fysh, the CEO of 

the Company made several attempts to explain R2 to 7 the 

strategies for enhancing shareholder value in the Company using 

external finance. Mr. Fysh had already identified potential 

investors and suggested to invite the said potential investors for 

financing the project of the company. The Respondent no. 2 & 3 

did not accept the said strategies. Further, in contravention of the 

CP 116/2008 


4 

SSA and SHA, the R3 demanded counter signature rights for any 

payments to be made by the Company and for recruitment of staff 

by the Company. R3 was also interfering in the management and 

financial decisions of the Company. The R2, 4 to 7 were also 

accepting the unreasonable demands of the R3 in contravention of 

the provisions of the SSA and SHA to the detriment of the interests 

of the Company. As per the SHA and Articles of Association of 

the Company, the Directors appointed by the R3 were the non 

executive directors and would not be responsible for the day to day 

management of the Company and the Directors appointed by the 

petitioner and R2 would be executive directors and would be 

responsible for day to day affairs of the Company. R2 and R3 

being in majority were taking all the decisions of the Company 

without prior information and approval of the petitioner or the 

CEO of the Company. In view of the complete deadlock created 

by the Respondents in functioning the Company, therefore the 

CEO of the Company was constrained to resign from his post in 

February, 2008. In December, 2008 the Company agreed to 

purchase 100% of the shares of the R8 as the R8 was the owner of 

100 acres of land in Karjat. It is significant to note that the said 

purchase of 100% shares of R8 by the Company was done keeping 

in view the assets owned by R8 viz. 100 acres of land in Karjat, in 

State of Maharashtra. 

CP 116/2008 


5 

2. On 20 th March, 2007 a board meeting of the Company was 

held, wherein petitioner’s nominee director was also present. At 

the said meeting it was agreed by the Board 

to pursue the projects at Karjat and Kasara and expansion of land 

acquisition as per SHA with the funds of the Company. After the 

said Board meeting, the R2, 4 to 7 had not given any notice to 

the petitioner for any of the Board Meetings of the Company 

(except the meeting held on 19 th June, 2008) and R8 which is 

evidently a breach of clause 4.2(b) of SHA and clause 28(b) of 

Memorandum and Articles of Association of the Company. The 

petitioner vide its email dated 18 th Sept., 2008 sent on 22 nd Sept., 

2008 requested R2, 4 to 7 to provide the full corporate information 

of the Company and Respondent No.8 and also all proposed board 

meetings to be held or any meetings held after the board meeting 

of 20 th March, 2008. In spite of the said request, R4 to 7 failed to 

provide any details. The Petitioner is given to understand that 

Board meeting was called on 26 th Sept., 2008 to approve audited 

accounts of the Company and R8, but no proper notice or 

information was given to the petitioner’s nominee director. It was 

deliberate attempt on the part of the R2, 4 to 7 to restrain the 

petitioner’s nominee director from attending the said Board 

CP 116/2008 


6 

Meeting with relevant and material information and to ensure that 

R2, 4 to 7 approve the accounts of the Company and R8. 

However, the petitioner came to know about the said meeting and 

Mr. Fysh attended the said meeting via teleconference. At the said 

meeting, the petitioner’s nominee director was informed that the 

investment agreement dated 2 nd April, 2008 had been executed 

between the Respondent No. 3 & Respondent No. 8 wherein in the 

Respondent No. 3 had directly invested some money in R8. The 

petitioner’s nominee director also requested the Company to 

provide the minutes of all the board meetings held after 20 th 

March, 2008 and also a copy of the purported investment 

agreement entered into between R3 and R8, neither of which has 

been provided despite being material subject matter of the business 

of the meeting. 

3. It is further submitted that as per Articles of 

Association of the Respondent Company, the notice of all the 

Board Meetings should be given to all the Directors of the 

Company. The petitioner therefore states that the R2,4 to 7 

contravened the provisions of the Articles of Association of the 

Company. The minutes of the Board meeting held on 26 th 

September, 2008 mentions that the petitioner’s nominee director 

attended the said meeting by telecom. In the said meeting the 

audited profit and loss account, balance sheet of the Company and 

CP 116/2008 


7 

the auditors report were approved. No proper notice or information 

of the said meeting was served upon the petitioner or its nominee 

director. However, the petitioner came to know about the said 

meeting and petitioner’s nominee director attended the said 

meeting via teleconference. The agenda and information of the 

meeting was not provided to the petitioner. After repeated requests 

to R4 to 7 by the petitioner, the said purported Investment 

Agreement was forwarded to the petitioner for the first time on 30 th 

Sept., 2008. The said agreement was never approved by the 

petitioner and the R2 to 7 and deliberately concealed the said 

Agreement from the petitioner with an intention to dilute the 

holding of the petitioner in the Company and R8, the R2 to 7 had 

deliberately not obtained any approval of the said Agreement from 

the petitioner. R3 without the consent and approval of the 

petitioner subscribed directly to the shares of the R8. The 

petitioner is given to understand that the Board Meeting of R8 was 

called on 2 nd April, 2008 wherein in furtherance of the said 

Investment Agreement, R3 was issued 476 class A shares (voting 

shares) and 19,99,524 class B (non voting shares but are given 

preferential rights on liquidation) of R8 aggregating to 32.24% of 

the total equity shares of R8. At the said meeting the board 

approved and adopted new Articles of 

Association without any reference or authorization of R1 or the 

CP 116/2008 


8 

directors and shareholders of R1. The petitioner was never 

informed about the said meeting nor was any approval or consent 

taken from the petitioner for adopting the new Articles of 

Association of R8. By an e-mail of 1 st October, 2008 the petitioner 

was informed by the Respondents that a purported board meeting 

of the Company was held on 6 th Sept., 2008 and the Annual 

General Meeting of the Company was held on 29 th Sept., 2008. 

The consent of the petitioner was sought by the respondents for 

holding the AGM at a short notice i.e. in a period less than the 

statutory notice provided by the provisions of the said Act. It is 

significant to note that the petitioner was kept completely in dark 

about the said AGM and only a post-facto information was 

provided. The minutes of the said AGM held on 29 th Sept., 2008 

the R2,5 to 7 have falsely recorded that the petitioner’s 

representative director, Mr. Max Fysh was present by telecom. 

This is completely false as the said director did not attend the said 

AGM by Telecom or otherwise. Vide e-mail dated 28 th November, 

2008 the Director of the petitioner was given a notice that a 

meeting of the board of directors of the Company would be held on 

15 th December, 2008 at Corporate office at 10.00 a.m. and all the 

directors were requested to attend the meeting in person. The 

agenda and the Note on item No.3 of the Agenda were attached to 

the said email. It is significant to note that in the said agenda, it is 

CP 116/2008 


9 

proposed inter-alia that to confirm the minutes of the previous 

meeting held on 26 th Sept., 2008. 

4. It is submitted that this Bench was pleased to pass an ex-parte 

interim order dated 15 th December, 2008 whereby the meeting of 

the Board of Directors of R1 dated 15 th December, 2008 was 

postponed till the petition was heard and R1 to 8 were directed to 

maintain status quo of their fixed assets, composition of Board of 

Director and shareholding pattern as on 15 th December, 2008. 

Despite the above order, the Respondents sought to approve 

matters with serious financial consequences to R1 and in the form 

of Circular Resolutions. Vide a circular resolution dated 14 th 

February, 2009, the R8 sought to, inter alia, open bank accounts 

for the purpose of availing loans and without any serious 

discussion on the issue. On 9 th March, 2009, the meeting of the 

Board of Directors of R1 was convened vide which the R1 sought 

to confirm the minutes of the previous Board Meeting held on 26 th 

Sept., 2008. The Representative on the Board of R1, Max Fysh, 

pointed out that the said meeting held on 26 th Sept., 2008 was the 

subject matter of the Company Petition No.116 of 2008 filed by 

the petitioner before this Bench and therefore dissented to any 

confirmation of the minutes of the said meeting. Despite the 

dissent of the petitioner, which was both in accordance with the 

CP 116/2008 


10 

order of this Bench and in the interests of R1 and 8, the said 

Agenda items were approved by the Board of Directors, excluding 

Max Fysh, showing scant regard to the orders of this Bench and 

interests of R1 and 8. Furthermore, the petitioner’s repeated, fair 

and reasonable request for information on vital projects of the R1 

and 8 fell on deaf ear and no information has been provided to the 

petitioner till date, for reasons best known to respondents. 

5. A meeting of the Board of Directors of R8 was also held on 

9 th March, 2009. Once again, R8 in cohorts with the other 

respondents, sought to adopt resolutions on items which were 

either sub-judice or those for which no information was provided 

to the director Max Fysh and which authorized persons, who were 

massively conflicted to take vital decisions on behalf of R8. 

Furthermore, and once again showing complete disregard to the 

orders of this Bench which required R8 to maintain a status quo of 

its fixed assets, it was also proposed that “Mr.Pravin Banavalikar, 

Director of the Company, be and is hereby authorized to exercise 

the powers and functions for and on behalf of the Company, to 

discuss, negotiate on behalf of the Company, for the transfer of 

land or other properties on the said land, in favour of MMRDA, 

subject to such restrictions and limitations as he may deem fit and 

proper in the interest of the Company.” Despite the dissent of Max 

Fysh the said agenda items were assented to by all the other 

CP 116/2008 


11 

directors, showing scant regard to the orders of this Bench and 

interests of R1 and 8. The respondents were aware that this Bench 

vide its order dated 15 th December, 2008 and 10 th February, 2009 

had ordered the respondents to maintain status quo of the 

composition of the Boards of R1 and 8. However, with scant 

regard to the orders of this Bench the R8 with active support of R2 

to 7, attempted to appoint one Mr.Arun Altekar as a director of R8. 

Mr. Max Fysh, therefore, dissented to the appointment of Mr. 

Altekar and reminded the Board about the CLB orders and the fact 

that the Investment Agreement was under challenge. However, the 

Board of R8 ignoring the valid objection of Mr. Max Fysh, 

approved the Resolution appointing Mr. Altekar as the director of 

R8. When the same matter was brought to the notice of this 

Bench, the Bench allowed the appointment of Mr. Altekar only on 

the Board of R1 and not on the Board of R8. Despite the orders of 

this Bench, Mr. Altekar has been projected as the director of R8 

and has been participating in the Board Meetings of R8 despite 

oral and written objection by Mr. Max Fysh. R8 vide Circular 

Resolution dated 25 th March, 2009 sought to, inter alia, avail of 

loans from Dewan Housing Finance Ltd. in the form of 

Advanced Disbursement Facilities. Once again this resolution was 

sought to be passed on the basis of little or no information given to 

Max Fysh despite repeated requests, underlying malafide 

CP 116/2008 


12 

intentions of the other directors in taking decisions which were 

inspired by reasons other than the best interests of R8 and thereby 

underlining the gross mismanagement of R8. Mr.Max Fysh, inter 

alia, pointed out to the Board that the purported supporting 

documents circulated along with the said circular resolution, 

revealed very little information about the Advance Disbursement 

and did not contain crucial information in relation to R8’s 

financial, accounts, land titles, personnel, agreements, master 

plans, development option documentation and financial forecasts 

relating either to the whole TMC development or the part of the 

development proposed to participate in the Advance Disbursement 

Facility scheme, which were earlier requested by the Board of 

Directors on 9 th March, 2009. 

6. It is further submitted that the R8 & R3 filed Company 

Applications No. 50 and 51 of 2009 respectively, praying for, inter 

alia, that the R1 be permitted to create mortgage in respect of their 

fixed assets in favour of lenders/banks/financial institutions and 

that R3 be permitted to appoint and/or nominate directors on their 

Board from time to time. The prayers in these applications were 

also the subject matter of the aforesaid Circular Resolutions dated 

25 th March, 2009 and 26 th March, 2009. The respondents, 

therefore, ought to have waited for the disposal of the said 

CP 116/2008 


13 

applications rather than adopted the circular resolutions, knowing 

fully well that the matter was sub-judice. It is further submitted 

that the petitioner had on numerous occasions, both orally and in 

writing requested the respondents to furnish vital information on 

the working of R1 and 8 to the petitioner/Max Fysh. The same was 

required by the petitioner as a shareholder and Max Fysh as a 

director to enable them to take decisions which were in the best 

interests of R1 and R8. However, the petitioner and Mr.Max Fysh 

have been kept in the dark about the management and business of 

both R1 and R8 and the same was a serious cause of concern for 

both the petitioner as a major shareholder of R1 and Max Fysh 

who is a director with fiduciary duties to discharge. However, for 

reasons best known to them, the respondents have till date not 

furnished any information requested made by the petitioner. A 

meeting of the Board of Directors of R1 was convened on 26 th 

June, 2009. During the meeting in relation to the discussion on the 

“Progress of the TMC Project”, Mr.Fysh pointed out that no full 

information despite the same being reasonably requested by the 

petitioner on various occasions had been provided and it is 

impossible therefore to comment or meaningfully discuss state of 

project, financing, contractors requirement for pace of construction 

or other requirements and appropriate course of action. Under 

explanatory notes for Agenda item No.5 of the said meeting being 

CP 116/2008 


14 

“replacing Mr. Jose Mathew’s signature, for bank account 

operations”, the names of Mr. Divakar Gatti and Mr. Nirav Shah 

were proposed as the signatories instead of Mr. Jose Mathew. The 

nomination of Mr. Gatti and Mr. Shah to be the signatories of R1 

reflects the state of gross mismanagement of R1. During the 

meeting on 26 th June, 2009, Mr. Fysh dissented to the names of 

Mr. Gatti and Mr. Shah. However, on such dissent, Mr.Anto Jacob 

and R7 Mr. Pravin Banavalikar, were appointed as signatories 

despite R7 being in a massively conflicted position. It is further 

submitted that a meting of the Board of Directors of R8 was 

convened on 26 th June, 2009. During the said meeting it was, inter 

alia, proposed that confirmation be accorded to an inaccurate 

version of the minutes of the previous meeting of the Board of 

Directors dated 9 th March, 2009 which failed to record vital 

discussion that took place during the said Board Meeting. 

Furthermore, in relation to agenda item No.4, it was proposed Mr. 

Arun Altekar be appointed as the nominee of R3 on the Board of 

R8 despite the fact that R3 had no right to nominate anyone as a 

director and the same had to be done by R1 which held 100% of 

the shares in GRPL. During the meeting of the Board of Directors 

of R8 on 26 th June, 2009 it was proposed that a “Steering 

Committee” be constituted for “proper guidance of the day to day 

workings of the Company”. Many of the items under “Proposed 

CP 116/2008 


15 

Rights and Responsibilities to be given to the Steering Committee 

contained right of appraisal of and action on information that had 

been repeatedly and reasonably requested by the petitioner and 

Max Fysh and had been denied to them. 

The entire idea of constituting the purported “Steering Committee” 

was inspired by the fact that the respondents wish to keep the 

petitioner and Max Fysh out of the working of R1 and R8 which 

clearly shows the gross mismanagement of R1 and 8 with the 

malafide intention of gaining personal benefits at the expense of 

the interest of the petitioner. 

7. It is submitted that to Mr. FYSH’s surprise, and for 

reasons best known to him, Mr. Naik the R6 herein said that 

attendance by teleconference would not be allowed by him and 

said that attendance of Board Meetings of Indian Companies by 

teleconference was not allowed in Law. Mr. FYSH disagreed with 

R6 proposal. R6 said that the proposed weekly meetings would not 

be Board Meetings but that all directors were required to attend. 

The petitioner submitted that the motive of above discussion was 

to deny the petitioner chance to be part of the working of R1 & R8. 

It is submitted that the affairs of the R1 and R8 are being carried 

out in violation of the orders of this Bench. The actions of the 

directors amount to gross mismanagement of the affairs of R1 and 

8 and are oppressive and detrimental to the interests of the 

CP 116/2008 


16 

petitioner. In fact, Mr. Max Fysh despite repeated oral and written 

requests for vital information in respect of the functioning and 

business of R1 and 8 has been repeatedly denied such information 

and therefore has not been in any position to constructively take 

part in any decision making of R1 and 8. 

8. It is submitted that subsequent to filing of the first 

amendment application, vide their email dated 4 th September, 

2009, through their Company Secretary Mr. Anto Jacob, 

Respondent Nos. 1 and 8 circulated Forms DD- A and 24 AA. The 

contents of the forms in respect of both Respondent Nos. 1 and 8 

were incorrect inter alia in respect of the shareholding patterns of 

the Companies. The Petitioner states that vide an email dated 13 th 

November, 2009, Respondent No. 1 through Mr. Anto Jacob 

forwarded a circular resolution dated 13 th November, 2009 to Mr. 

Max Fysh for his assent thereon. Vide the said circular resolution, 

it is pertinent to note, that it was claimed that “because of preoccupation, 

it may not be possible for Mr. Pravin Banavalikar to be 

in office, all the time, Cheques are to be issued to 

customers/creditors/for expenses, in time. Hence it is proposed that 

one more person should be authorised to operate the bank accounts 

of the Company.” As Mr. Banavalikar’s alternative, the name of 

one Mr. Prakash K. Bangera was proposed. The Petitioner submits 

that Mr. Bangera is neither a director nor an officer of Respondent 

CP 116/2008 


17 

No. 1. Max Fysh, vide his letter dated 17 th November, 2009 sent 

under cover of his email dated 17 th November, 2009 dissented to 

the nomination of Mr. Bangera. The Petitioner submits that an 

attempt was made even in the Draft Minutes of the Meeting of 

Board of Directors of Respondent No. 1 dated 25 th June, 2009, to 

propose the names of persons who, neither directors nor officers of 

Respondent No. 1, to sign on bank documents/papers on behalf of 

Respondent No. 1. In that instance the names of Mr. Diwakar Gatti 

and Mr. Nirav Shah were proposed as signatories to the 

Company’s bank accounts. During the meetings of the Board of 

Directors of Respondent Nos. 1 and 8 held on 7 th December, 2009, 

the Petitioner discovered that Mr. Pravin Banavalikar had resigned 

from the Boards of both Respondent Nos. 1 and 8 on 20 th October, 

2009 and that in fact a letter dated 12 th November, 2009 has been 

received from Mr. Joe Silva, nominating one Mr. Prakash Bangera 

as his “personal nominee director” on the Board of Directors of 

Respondent No. 1. The Petitioner states that on 12 th December, 

2009 Mr. Max Fysh received an email, with Notice for Annual 

General Meeting to be held on 31 st December, 2009 from Mr. Anto 

Jacob whereby receiving, considering and adoption of Balance 

Sheet as on 31 st March, 2009 together with the reports of the 

Directors and Auditors thereon was one of the transactions to be 

made at the Annual General Meeting. The Petitioner vide his letter 

CP 116/2008 


18 

dated 21 st December, 2009 dissented to this transaction as the 

documents and information required by it to check the correctness 

of the Balance Sheet and the reports were not provided. The above 

facts clearly reflect the oppression tactics being used by the 

Respondents. 

9. The Petitioner states that it received the Construction 

Agreement from Respondent no. 8 very recently which was 

entered into on 1 st August, 2009 between Respondent no. 8 and 

Sterling Construction System Pvt. Ltd. The said Construction 

Contract is very poorly drafted, leaving a lot of loopholes in it 

which in future could prove to be absolutely fatal to the company. 

The said Construction Contract also assigns a lot of role to Silvex 

Realty Pvt. Ltd. without the Respondent no. 8 having any formal 

contract with it. The main flaw in the said Construction Contract is 

that Mr. Anto Jacob had signed on behalf of Respondent no. 8 

whereas Mr. Pravin Banavilkar was authorised by the Board to 

enter into the said Construction Contract on behalf of Respondent 

no. 8. Further the Petitioner vide its letter dated 22 nd December, 

2009 addressed to Respondent no. 8 brought some of the 

discrepancies to light in the said Construction Contract clearly 

envisaging the instability of the said Construction Contract and 

also requested for all those documents relating to the said 

CP 116/2008 


19 

Construction Contract which have been mentioned in the said 

Construction Contract but have not been provided to it till date. 

These facts clearly demonstrate that the following acts of 

oppression and mismanagement have been committed by R2 to 7 

as set out hereinafter. 

a) Interference by the Respondent No. 3 in day to day 

business and affairs of the Company making impossible 

for the CEO to function in accordance with the SHA 

and Articles of Association. 

b) Contravention of the provisions relating to Notice, 

taking management actions etc. as enumerated in the 

SHA and Articles of Association of the Company. 

c) Breach of the Articles of Association of the Company 

with regard to the preparation of the Minutes of the 

Board meetings and AGM. 

d) Divesting the assets of the Company. 

e) Diluting the economic shareholding of the Petitioner in 

the Company. 

The aforesaid acts of deliberately not informing the Petitioner or its 

nominee Director of the board meetings and EOGM is clearly 

oppressive as well as amounts to mismanagement and is also in 

contravention of the provisions of the Articles of Association of 

the Company. It is further submitted that the execution of the 

CP 116/2008 


20 

investment agreement without the consent and approval of the 

Petitioner is oppressive as well as illegal. It is submitted that as a 

result of the said investment in Respondent No. 8, the economic 

interest of the Petitioner in Respondent No. 8 has significantly 

reduced. The said act was done by Respondent Nos. 2 & 3 with an 

intention to alienate the Petitioner and to take charge and control 

the affairs of the Company and Respondent No. 8. The aforesaid 

instances also clearly demonstrate that the Respondent Nos. 2, 5, 6 

and 7 have violated their fiduciary duty for their personal gain. 

10. The Learned Senior Counsel in summarizing his 

arguments submitted that the Petitioner holds 42.24% and R2 holds 

12.77% and R3 holds 44.99% in R1 Company. The SSA dated 26 th 

July, 2007 is between the Petitioner 1 and Respondent No. 2 & 3. 

From the Petitioner there is only one director and from R2 one 

director and from R3 two directors on the Board of the R1 

Company. The CEO suppose to be from Petitioner side. However 

the CEO resigned in February, 2008 and the Company is in 

deadlock situation. Clause 20 of AOA provides restriction on 

transfer of shares. Clause 20(B) provides first refusal. The R1 

holds 100% shares in 

R8 Company. The Respondent No. 3 entered in to an investment 

agreement dated 02.04.2008 with the said agreement the R3 

CP 116/2008 


21 

became 32.25% of the equity share holding in R8. The shares of 

R8 have not been offered to Petitioner. The R8 Company was 

having four directors and the Petitioner is one of the directors in 

R8. The Board Meeting of R8 was held on 02.04.2008 for which 

no notice was given to the Petitioner and no approval of Board of 

Directors of R1 either for increase of capital of R8 or dilution of 

capital of R8. If the meeting is held without notice to the director, 

it is invalid as held in the matter of Sri Parmeshwari Prasad 

Gupta Vs. Union of India reported in (1973) 2SCC 543. It is held 

“ now, it cannot be disputed that notice to all the directors of 

meeting of the Board of Directors was essential for the validity of 

any resolution passed at the meeting and that as, admittedly no 

notice was given to Mr.Khaitan one of the directors of the 

company, the resolution passed terminating the services of the 

appellant, was invalid.” It is submitted that the R3 entered 

agreement with R8 surreptitiously. The agreement dilutes the 

shareholding of R1. R1 is only a paper company whereas the R8 is 

the real company. No opportunity was given to other shareholders 

to subscribe to or for allotment in R8 Company. It is first Act of 

oppression and mismanagement. 

11. The Learned Senior Counsel submitted the second Act of 

oppression is that under the AOA the petitioner is having right to 

appoint director and CEO of R1 Company however the 

CP 116/2008 


22 

Respondents violated the Articles. It is submitted that the 

Petitioner is challenging the resolution of the Board Meetings 

dated 09.09.2008, 26.09.2008. The Petitioner addressed several 

letters to the Company to provide information and details but the 

Respondents have not allowed the Petitioner to inspect the 

documents and records of the company. In this regard he placed 

reliance reported in Manu/MH/0116/1991 (High Court of 

Bombay) In the matter of Rajdhani Roller Flour Mills Private 

Limited vs. Mangilal Bagri & Ors. It is of the view “Whether 

Respondent entitled to photo copies of documents already 

inspected by them – such copies required for proving case of 

respondent regarding mismanagement of companies fund – claim 

of appellant that only directors has got right to take copies of such 

book untenable – held, application for taking books of accounts 

maintainable since it will not be prejudicial to interest of appellant 

company.” 

12. The Learned Senior Counsel in furtherance made some 

points and stated that the company is run by some other persons 

who are not connected to the company and the unauthorized 

persons operating the bank account viz. Mr. Prakash, who is not 

an employee of the company, which constitutes an Act of 

mismanagement. The Respondents want to hold the Board 

Meetings at the site and the Respondents creating problems to the 

CP 116/2008 


23 

Petitioner who holds more than 40% stake in the company. The 

learned senior counsel relied upon the following citations on 

mismanagement. 1. (1981) 3 SCC 333 In the matter of Needle 

Industries (India) Limited vs. Needle Industries Newey (India) 

Holding Limited & Ors. Para 49. 2. (2008) 6 SCC 750 In the 

matter of M.S.D.C. Radharaman Vs. M.S.D. Chandrasekara 

Raja & Anr. Para 15. He further submitted that the Petitioner is 

willing to exit the Company on payment of fair value. This Bench 

has wide powers to pass orders in the interest of the Company. 

However, the valuation should be prior to 31.03.2008 and placed 

the following reliances: 3. (1980) CC Volume 50 page 771(High 

Court of Calcutta) in the matter of Debi Jhora Tea Co.Ltd. Vs. 

Barendra Krishna Bhowmick & Ors. It is held “it should be 

born in mind that when a Court passes an order under Sec.397,398 

and 402 as has been done in the instant case, there could be no 

limitation on the Court’s power under the sections. Instead of the 

winding up of a Company, the Court under the above mentioned 

sections has been vested with ample power to continue the 

corporate existence of a company by passing such orders as it 

thinks fit in order to achieve the objective by removing any 

member or members of a Company or to prevent the Company’s 

affairs from being conducted in a manner prejudicial to the public 

interest.” 4. (2005) 11 SCC page 314 In the matter of Sangram 

CP 116/2008 


24 

Sinh P. Gaekwad & Ors. Vs. Shantadevi P. Gaekwad (Dead) 

through LRS & Ors. Para 181, 199. It is held “the jurisdiction of 

the Court to grant appropriate relief under Sec.397 of the 

Companies Act, indisputably is of wide amplitude. The Court 

while exercising its discretion is not bound by the terms contained 

in Sec.402 of the Companies Act if in a particular fact situation a 

further relief or reliefs, as the Court may deem fit and proper are 

warranted. Moreover, 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 the parties.” 

In the circumstances he prayed this Bench to grant reliefs. 

13. Respondent Nos. 3, 5 & 6 have filed their counter/reply. 

Shri Chirag Mody, Learned Counsel appearing for the respondents 

submitted that the present petition is filed by the petitioner with an 

ulterior motive and malafide intention and the real purpose of the 

present petition is (a) to exit from R1 (MRPL) in whatever manner 

the petitioner can, including by pressurizing the respondents by 

stalling the only on going project under the development by R8 

(GOPI) and (b) to preempt any actions that the Respondents may 

take against the petitioners and/or their nominees for their 

nominee’s failure to perform as the CEO of R1 and for violations 

and breaches of the terms and conditions of the Shareholders’ 

Agreement. The present petition is an abuse of the legal process 

CP 116/2008 


25 

and machinery of Sec. 397 and 398 of the Act, and hence ought to 

be dismissed with costs. The petition suffers from “suggestio 

falsi” and “suppressio veri” The petitioner having come to this 

Bench with unclean hands is not entitled to any relief whatsoever, 

much less the discretionary, equitable and/or extraordinary relief 

under Sec.397 and 398 of the Act. Without prejudice to the 

aforesaid, the correct and relevant facts are that some time in the 

end of 2006 and beginning of 2007 one Mr. Marcus John Hudson 

Fysh (Mr.Max Fysh) an Australian national approached R3 to 

invest in affordable housing and ancillary Urban Development 

projects. The said Max Fysh is the beneficial owner of one 

Wessex Capital Limited (Wessex) and the said Wessex is the 

majority owner of petitioner herein. Max Fysh identified R1 as the 

Indian Company for investment in the development of affordable 

housing in India. Max Fysh further represented that R1 would 

carry out projects to develop and construct low income housing 

units for weaker sections of the society on outskirts of Mumbai 

and required investment of monies for the said projects. As such 

said Max Fysh approached R3 to invest in the R1 to enable the 

financing of projects. Accordingly, a Share Subscription 

Agreement (SSA) and Share Holders’ Agreement (SHA) were 

executed on 26 th July, 2007 by and between R1, R2, petitioner and 

R3. In terms of the said SSA and SHA which was executed by 

CP 116/2008 


26 

Max Fysh, land was to be acquired and the conditions of the said 

SSA and SHA were required to be complied with by Max Fysh 

and the petitioner against which R3 was to make the investment in 

tranches. As a matter of record till date R3 has already invested a 

sum of Rs.82 crores as against Rs.1.73 crores which was brought 

in originally by Max Fysh. The R3 has invested substantial 

amount in R1 on the false assurance and representations given by 

Max Fysh. The shares of R1 were initially subscribed by 

Mr.Divakar Gatti (R4) and by Mr.Prakash Bangera. Pursuant 

thereto Max Fysh through his holding in Wessex and Joseph 

E.Silva (R2) as the promoters invested in R1 and by virtue thereof 

R2 holds about 12.94% and the petitioner held about 42.06% 

equity in R1. Pursuant to the execution of SSA and SHA, R3 on 

29 th Sept., 2007 nominated Nikhil Naik (R6) and Jose Mathew 

(R5) as their nominees on the BOD of R1. Subsequently R7 i.e. 

Pravin Banavalikar was appointed on the Board of R1 on 17 th 

July, 2008 as the alternate director to R4. In view of the above, 

the current status of shareholding in R1 is as follows: 

Name of Shareholder Number of shares %of shares. 

Divakar Gatti (R4) 1 0.00 

Max Fysh (Petitioner) 1,17,000 42.06 

Joe Silva (R2) 35,999 12.94 

Aboyne Mauritius (R3) 1,25,160 45.00 

CP 116/2008 


27 

Total 2,78,160 100.00 

14. Under Clause 41(a), (c) of the Articles of R1 and Clause 

4.1(a)(b) of the SHA, the BOD of R1 was to comprise of a 

maximum of four directors, out of which R3 as the investor and the 

petitioner and R2 as promoters, were entitled to nominate two 

directors each. The nominee directors of R3 (investor) are the non 

executive directors and are not responsible for the day to day 

management. The nominee directors of petitioner and R2 

(promoters), are to be executive directors of R1, and responsible 

for the day to day management of R1. Mr. Max Fysh was 

nominated by the petitioner to the BOD of R1 on and from 

24.1.2007 as the Executive Director. By an agreement dated 

27.7.2007 R1 appointed Max Fysh as its Chief Executive Officer 

(CEO). Max Fysh inspite of being a promoter of R1 demanded 

salary, reimbursements, etc. as alleged services as the CEO of R1 

amounting to Rs.13.75 lacs per month. To the shock and surprise 

of the respondents, Max Fysh, as CEO and/or Executive Director, 

instead of carrying out the day to day management of R1 remained 

out of the country most of the time, leading to impaired 

management of R1. 

CP 116/2008 


28 

15. It is further submitted that R8 a Private Limited 

Company, is duly incorporated and registered under the 

Companies Act, 1956. R8 is engaged in business of real estate 

construction and development, more particularly low cost housing 

units under the Brand ‘Tanaji Malasure City’ for weaker section of 

the society in collaboration with MMRDA (as statutory body). 

The current BOD of R8 comprises of the following: 

Name of Director 

Date of appointment 

Max Fysh 24 th March, 2008 

Respondent No.6 24 th March, 2008 

Respondent No.5 24 th March, 2008 

Respondent No.7 9 th Sept., 2008 

Nirav Shah 9 th Sept., 2008 

The current paid up shareholding in R8 is as follows: 

Respondent No.1 1,000 (Class ‘A’) 

Respondent No.3 

476 (Class ‘A’ and 

19,99,524 (Class ‘B’) 

Max Fysh and R2 came up with the proposal of acquisition of R8 

(Gopi) and commenced development and construction so that at 

least some progress can be achieved and shown to R3 under the 

SSA and SHA. It was also represented to these Respondents that 

the land belonging to R8 was required to be developed on/or 

before 31 st March, 2008 failing which it would lose the tax benefits 

that it had obtained. Since R1 did not have any funds whatsoever, 

R3 (Aboyne) was requested to invest further funds immediately for 

CP 116/2008 


29 

the development of the said 112 acres of land. Accordingly, the 

BOD of R1 in its meeting held on 12 th December, 2007 (with Max 

Fysh as CEO) resolved inter alia to acquire R8 by taking over of 

equity of R8, however, development and construction activity was 

to be undertaken through R8 in order to avoid payment of 

additional stamp duty. It would not be out of place to mention 

that Max Fysh (as CEO and/or Executive Director) also failed and 

neglected in dealing, negotiating and/or concluding the acquisition 

of R8 from Wearology Limited. It was only due to efforts of R2 

that an Escrow Agreement was executed between Wearlogy 

Limited and R1 for acquisition by R1 of R8. Under the Escrow 

agreement, an advance of Rs.8 crores was paid by R1 to Wearlogy 

Ltd. and balance amount of Rs.32 crores was required to be paid 

by R1 to Wearlogy Ltd. on or before 6.3.2008, failing which the 

advance of Rs.8 crores would be forfeited by Wearlogy Limited 

which amounts and investments were brought in by R3. The 

directors of R8 in their meeting held on 2 nd April, 2008 decided to 

accept investment from R3. Max Fysh did not attend or participate 

in the said Board meeting of R8 which was held on 2 nd April, 

2008. Notice of Board meeting was verbally given by 

representative of R8 to Max Fysh, however, he could not attend 

this board meeting as he was traveling. A Share Subscription 

and Share Holders’ Agreement (SSSHA) dated 2 nd April, 2008 

CP 116/2008 


30 

was duly executed between R8, R3 and R1 to record inter alia 

the terms and conditions for the financing operation and 

management of R8 and their mutual rights and obligations as 

shareholders of R8. Also the BOD of R8 by its meeting held on 

2.4.2008 duly resolved inter alia to and did issue to R3, 476 

class ‘A’ ordinary voting right equity shares and 19,99,524 

class ‘B’ non-voting participating equity shares of Rs.100/- 

each of R8. The Steering Committee of R1 (constituted under 

clause 41(h) of the Articles and Clause 4.1(g) of SHA recorded in 

its meetings that Max Fysh (as CEO and/or Executive Director) 

instead of carrying out day to day management in India of R1 was 

generally outside India leading to impaired management of R1. 

The BOD of R1 by its meeting held on 15 th Feb., 2008 discussed 

the findings of the Steering Committee of R1 that Max Fysh was 

not suitable to perform or handle the projects of R1 as CEO of R1. 

Max Fysh acknowledged said findings and offered to resign from 

the post of CEO of R1. As such the BOD of R1 duly resolved to 

accept the resignation of Max Fysh as CEO of R1. The BOD of 

R1 then requested R2 to run the business of R1 until alternative 

arrangements are finalized by the BOD. The BOD of R1 by its 

meeting held on 20.3.2008 resolved iner alia to complete the 

acquisition of R8 by R1 and develop the lands of R8. The meeting 

of BOD of R1 held on 20.3.2008 was the last meeting attended by 

CP 116/2008 


31 

Max Fysh (as Executive Director) in person. Thereafter Max Fysh 

despite being Executive Director and substantial shareholder 

(through petitioner) of R1 apparently forsook R1 and left India for 

abroad. As such Max Fysh kept himself aloof from responsibility 

of day-to-day management of R1 notwithstanding that he was 

Executive Director of R1 because he had decided to exit totally 

from the projects and run away from any responsibility 

whatsoever. 

16. The apparent withdrawal of Max Fysh from R1 is 

highlighted by the fact that Max Fysh did not direct the BOD of R1 

to appoint an alternate director for and in place of himself, even 

though Clause 41(d) of the Articles of R1 and Clause 4.1 ( c) of the 

SHA executed by R1 provide for appointment of Alternate 

Director. Also Max Fysh did not provide R1 with a local 

forwarding address in terms of Sec.286 of the Companies Act, 

1956 read with Cluase 28(b) of the Articles and clause 4.2(b) of 

the SHA, to enable BOD of R1, to formally correspond with 

him. The BOD of R1, however, periodically kept Max Fysh 

notified or updated telephonically about the administration of 

R1. The impropriety of such forbearance by Max Fysh is more so 

as under clause 28(a) of the Articles and clause 4.2(a) of the SHA, 

the meetings of the BOD are to be held at least once in every three 

calendar months and least four such meetings are to be called 

CP 116/2008 


32 

every year. The said meetings are to be held at Mumbai unless 

otherwise mutually agreed between the shareholders of R1. The 

directors of R1 and/or R8, however, continued to periodically keep 

Max Fysh abroad notified or updated telephonically about the 

administration of R1 and/or R8. The BOD of R1 and/or R8 also 

entrusted Max Fysh with discharge of specified administrative 

duties, but no avail. It is pertinent that Max Fysh whimsically 

participated in some of the meetings of BOD of R1 by 

teleconference pursuant to clause 28(j) of the Articles and clause 

4.2 (g) of the SHA. However, all attempts made by R1 to seek 

confirmation from Max Fysh of the Resolutions passed by the 

BOD of R1 were avoided and the resolutions disregarded by Max 

Fysh. Max Fysh had concluded his exit from the R1 by 

negotiating with Rheanta Corporation and respondents therefore 

had no reason to believe otherwise, till the receipt of an E-mail 

from him dated 22.9.2008 to R1 and R8 and their directors 

respectively, alleging non receipt of notices, agendas or minutes of 

Board and steering committee meetings from R1 or R8 since 

20.3.2008. The R1 by E-mail dated 23.9.2008 notified Max Fysh 

about a meeting of BOD of R1 and AGM of members of R1 for 

inter alia approval of audited accounts of R1. Max Fysh, however, 

chose not to attend personally but participated by teleconference in 

the meeting on 26.9.2008 of BOD of R1 and in the AGM on 

CP 116/2008 


33 

29.9.2008 of R1. The BOD of R1 by its meeting held on 

26.9.2008 duly resolved inter alia to approve the audited accounts 

of R1 and obtain consent of all members [(including petitioner 

(through its beneficial owner, Max Fysh)] of R1 for holding the 

AGM of R1 at short notice. R1 by E-mail dated 26.9.2008 

forwarded to Max Fysh the minutes of meeting of BOD of R1 held 

on 26.9.2008 for confirmation. It is pertinent that Max Fysh, after 

receipt of E-mail dated 26.9.2008, not only refrained from 

responding to R1 thereupon, but also did not allege against and 

complain to R1 except by later filing of the petition which is 

reflective on the petition as an afterthought stratagem. Max Fysh, 

however, chose not to personally attend but participated by 

teleconference in the AGM of R1 on 29.9.2008. The members of 

R1 by AGM held on 29.9.2008 duly resolved inter alia to approve 

the audited accounts of R1. The R1 by E-mail dated 28.11.2008 

notified Max Fysh about a meeting of BOD of R1 on 15.12.2008 

and requested Max Fysh to personally attend to resolve upon inter 

alia the E-mail by Max Fysh about non receipt of notices, etc. from 

R1 to R8. The E-mail dated 28.11.2008 noted that R1 had sent 

notices of meetings of BOD of R1 to every director present and 

having address in India, pursuant to Sec.286 of the Act. Also R1 

after receipt of said E-mail from Max Fysh had forwarded by E- 

mail on 27.9.2008 to Max Fysh copies of the minutes of meeting of 

CP 116/2008 


34 

BOD held after 20.3.2008, Moreover, Max Fysh participated by 

teleconference in the BOD meeting held on 26.9.2008 and the 

AGM held on 29.9.2008 for adopting of audited accounts for year 

ending 31 st March, 2008. Max Fysh instead of responding to or 

participating in the meeting of BOD of R1 to be held on 

15.12.2008, malafidely filed the petition and applied on 

15.12.2008 ex-parte for and obtained interlocutory relief in the 

petition, to harass and prejudice R1 and R8. 

17. It is pertinent to note that R8 and R1 (as holding 

company of R8) since about 26.3.2008 have been engaged in due 

and regular construction of low cost housing units under the brand 

‘Tanaji Malasure City’ on the land of R8 for weaker section of the 

society in collaboration with MMRDA. The R8 and/or R1 through 

a system of computerized lottery, already accepted applications 

and have issued more than 3,500 letters of allotment for 

consideration, for such low cost housing units. The petition and its 

proceedings are not only misconceived and not maintainable but 

also vitiated by mala fides, which is apparent from the following 

amongst other preliminary points. (a) The petitioner willfully has 

not impleaded Max Fysh as a necessary and proper party, though 

he is the beneficial owner of the petitioner. As such the petition 

gravely suffers from non joinder of Max Fysh who indispensable is 

a necessary and proper party. (b) The fact that Max Fysh 

CP 116/2008 


35 

(beneficial owner of petitioner), has duly acknowledged his 

incompetence and resigned as the CEO of R1 and, shortly 

thereafter, being disgruntled, has shirked from R1 and/or R8 by 

exiting India for abroad even though it was incumbent upon him to 

be a Director in India or substantial shareholder, through 

petitioner, of R1 and/or R8 which are closely held private 

companies. (c) The fact that petitioner or Max Fysh, until the 

filing of the petition, has not alleged or documented/recorded about 

any interference by R3 in affairs or business of R1 and/or R8. (d) 

The fact that petitioner or Max Fysh until the filing of the petition, 

has not alleged or documented/recorded about any oppression in 

affairs of R1 and/or R8. (e) The fact that petitioner or Max Fysh 

until filing of the petitioner has not alleged or 

documented/recorded about any mismanagement in affairs of R1 

and/or R8. (f) The fact that although the petition in its para No.25 

vaguely refers to “terms of separation” but suppresses receipt by its 

beneficial owner Max Fysh from R2 and his associates, substantial 

amounts towards complete exit by petitioner and Max Fysh from 

R1 and R8, under the understanding arrived at between petitioner 

and/or Max Fysh and R2 (on behalf of R1 and/or R8). The fact 

that the petitioner or Max Fysh, save and except the E-Mail of 

22.9.2008 from Max Fysh, has not alleged or 

documented/recorded any grievance regarding affairs of R1 

CP 116/2008 


36 

and R8 until the filing of the petition. The so called investment 

of petitioner No.1 in R1 was only to the extent of Rs.1.73 crores, 

the benefits of which Max Fysh had already reaped in the course of 

his position as CEO. The investment of R2 was to the extent of 11 

Acres of land approximately valued at Rs.1.70 crores, whereas the 

investment of R3 is approximately Rs.82 crores, thus, the main 

interest was that of R3 in R1 which would have been severely 

jeopardized. 

18. The Learned Counsel for the respondents in nut shell 

contended the oppressive acts as alleged by the petitioner are that 

(a) no notice was given for the Board Meetings, (b) dilution of 

investment in the Company (c) too much interference by the 

respondent No.3, nominee director, (d) no information is supplied 

to the petitioner or Max Fysh. The respondents have replied to 

each and every allegation in the pleadings and also during oral 

submissions. It is submitted that the petitioner attended the Board 

Meeting and no prejudice was caused to the petitioner. The 

Learned Counsel for the respondents submitted that the petitioner 

has not made out any case either on oppression or on 

mismanagement and relied upon the following decisions in its 

support: 

(1) AIR 1962 Calcutta 127. In the matter of Maharani 

CP 116/2008 


37 

Lalita Rajya Lakshmi, M.P. Vs. Indian Motor Company 

(Hazari Bagh) Limited & Ors. Para 6 (2) AIR 1965 SC 1535. In 

the matter of Shanti Prasad Jain Vs. Kalinga Tubes Para 18, 19. 

(3) (2008) 3SCC 363. In the matter of V.S. Krishnan & Ors. Vs. 

West Fort Hi-Tech Hospital Limited & Ors. Para 14. 

19. The Respondent No.1, 2, 7 & 8 have filed affidavits 

stating that whatever stated in affidavit in reply dated 19.1.2008 of 

R3, 5 & 6 is being adopted the same. Shri Jagtiani, Learned 

Counsel for the Respondent No.8 during the course of oral 

submissions submitted that the R8 is a subsidiary of R1. The R1 

holds 67.75% in R8 and the 3 rd respondent holds 32.25% in R8. In 

the Board Meeting held on 12 th Dec., 2007 of R1, it was decided to 

acquire R8. The contention of the petitioner that R1 shareholding 

in R8 was reduced because of issue of R8’s shares to R3 is 

concerned the petitioner is not a shareholder of R8 and he is not 

concerned with the affairs of R8. He contended that before issue 

of shares to R3 in R8 company, the R1 was holding 100% shares in 

R8. The petitioner had invested only Rs.1.6 crores in R1 

Company. The reliefs sought by the petitioner are completely 

against the interest of R8 on the ground that the petitioner has 

nothing to do with R8 and they are completely strangulating the 

business of R8. The petitioner contended that the respondents 

diluting the economic shareholding of the petitioner, is not correct. 

CP 116/2008 


38 

In this regard they relied upon Article 20(e) of AOA of R1 

Company which has no application. The petitioner or R2 have no 

affirmative vote. However, R3 being investor has affirmative vote. 

The Learned Counsel for the R8 relied upon the propositions on 

the points that to file a petition under Sec.397-398 of the Act (a) 

rights as shareholder must be affected. (b) though petitioner is not 

a shareholder in R8, however, the reliefs sought against R8, hence 

the CP should be dismissed. (c) The R8 is a separate entity and its 

shareholding is also different. On the first point the following are 

the propositions (1) AIR 1965 SC 1535. In the matter of Shanti 

Prasad Jain Vs. Kalinga Tubes Para 18, 19. (2) AIR 2001 SC 

1416 In the matter of Hanuman Prasad Bagri & Ors Vs. Bagress 

Cereals Pvt.Ltd. & Ors. Para 11. On the second point the 

following citations relied upon. (1) AIR 1959 SC 775 In the matter 

of M/s.Howrah Trading Co.Ltd.. Vs. Commissioner of Income 

Tax Para 8,9. (2) AIR 1985 SC 520 In the matter of Balkrishan 

Gupta & Ors. Vs. Swadeshi Polytex Limited & Anr. Para 15. 

(3) 1983(2) Bom.C.R. 631 In the matter of Killick Nixon Limited 

& Ors. Vs. Bank of India & Ors. Para 5 (4) AIR 2005 SC 83 In 

the matter of J.P.Srivastava & Sons Pvt.Ltd. Vs. M/s. Gwalior 

Sugar Co.Ltd.. Para 46. On the third point the following 

propositions relied upon. (1) AIR 1964 SC 1486 In the matter of 

A.P.S.R.T.C. V/s Income Tax Officer Para 17. (2) AIR 1955 SC 

CP 116/2008 


39 

74 . In the matter of Mrs. Bacha F. Guzdar Vs. Commissioner 

of Income Tax, Bombay. Para 7. The Learned Counsel further 

submitted that the director resides outside India, need not be issued 

notice as per Sec. 286(1) of the Act and relied upon the following 

citations in his support. (1) (2004) Vol.120 (High Court of 

Bombay) Comp. cases Page 560 In the matter of Maharashtra 

Power Development Corporation Ltd. Vs. Dabhol Power 

Company & Ors at page 602. (2) AIR 2005 SC 809 In the matter 

of Sangram Sinh P. Gaekwad & Ors. Vs. Shantadevi P. 

Gaekwad Para 191. On the point of access to the Books of 

Accounts, the Learned Counsel relied upon the following decision. 

(1) (1970) Vol. 40 Comp. Cases Page 119 In the matter of Mohta 

Brothers Pvt. Ltd. & Ors. Vs. Calcutta Landing & Shipping 

Co. Ltd. & Ors. at page 128. In view of the submissions and 

reliances placed, the Learned Counsel prayed this Bench to dismiss 

the petition. 

20. Heard, the Learned Counsel for the parties and perused 

the pleadings, documents and citations relied upon by them. After 

analyzing the pleadings the following issues are felt for 

consideration and the same are need to be addressed. 

(1) Whether any contravention of the provisions relating 

to notices for the Board and General Meetings as enumerated 

in the SHA and AOA? 

CP 116/2008 


40 

(2) Whether the petitioner was offered shares in R8 

company and whether any dilution of economic shareholding 

of the petitioner? 

(3) Whether the petitioner was provided inspection of 

documents? 

(4) To what relief? 

21. Now I deal with the Issue No.1 

The petitioner is challenging the Board Meetings dated 

9 th Sept., 2008 and 26 th Sept., 2008 and 15 th December, 2008 and 

the AGM held on 29 th Sept., 2008 and also sought directions to 

serve notice to the petitioner for all the future Board Meetings and 

AGM along with the necessary documents. The main grievance of 

the petitioner is that the respondents have not given any notice for 

the Board Meetings and the General Meetings and contravened the 

provisions of shareholder agreement and Articles of Association. 

The petitioner, R1, R2, R3 entered into a shareholders’ agreement 

dated 26 th July, 2007 which was incorporated in the Articles of 

Association of the Company. The Articles interpreted the 

petitioner and the Respondent No.2 as promoters and the 

Respondent No.3 as investor and the R1 is the Company. Clause 

28 of the Articles provides the Board meetings. As per sub-clause 

‘a’ of Clause 28 of AOA the Board Meeting of the Company shall 

CP 116/2008 


41 

be held at least once in every three calendar months and four such 

meetings in every year. Sub-clause (b) of Clause 28 of AOA 

provides for notice. According to the said clause the notice of any 

meeting shall be given to each director and must specify the date 

and time of the meeting (which may generally be no earlier than 

fifteen days following the date of the notice). The shorter notice 

also provided with consent of all the directors. Admittedly the 

petitioner is a shareholder holding 42.24% of the paid up capital. 

The company also entered into share subscription agreement dated 

26 th July, 2007 with R2, petitioner and R3. As per the 

shareholders’ agreement dated 26 th July, 2007, the Board consists 

of four directors, the investor i.e. R3 and the promoters i.e. 

petitioner and R2 shall be entitled to nominate the directors. The 

petitioner nominated one Mr.Max Fysh as its director and was 

appointed as Chief Executive Officer in July, 2007. The 

respondents contended that the nominee director of the petitioner 

attended the Board meeting held on 20 th March, 2008, 19 th June, 

2008 and for which meeting the petitioner admitted the receipt of 

notice for this meeting in the petition itself and the Board meeting 

dated 9 th Sept., 2008 the respondents stated that they have given 

notice and the petitioner’s nominee director sought for leave of 

absence and the leave of absence was granted as he was traveling. 

The Board meeting dated 26 th Sept., 2008 the respondents stated 

CP 116/2008 


42 

that the petitioner is aware of the meeting and e-mail was sent to 

the nominee director of the petitioner on 23 rd Sept., 2008. The 

AGM dated 29 th Sept., 2008, the respondents contended that the 

petitioner is aware through e-mail sent on 26 th Sept., 2008. It is 

further contended that all the Board meetings and general meetings 

are held regularly and the nominee director is aware of all those 

meetings. The respondents also contended that the nominee 

director of the petitioner i.e. Mr. Max Fysh does not have mailing 

address in India and the notices will have to be sent to the directors 

residing in India to their address as per Sec.286(1) of the 

Companies Act. The relevant provision is extracted hereunder for 

better appreciation “Sec.286(1): Notice of every meeting of the 

Board of Director of a Company shall be given in writing to every 

director for the time being in India and at his usual address in 

India to every other director.” I have perused the minutes of the 

Board Meeting as stated above. The nominee director of the 

petitioner signed the minutes of the 1 st Board meeting dated 28 th 

March, 2008 and attended the Board meeting dated 19.6.2008. 

The petitioner is challenging to the Board Meetings dated 9.9.2008 

and 26.9.2008 and 15.12.2008 and AGM dated 29.9.2008. The 

Board meeting held on 9.9.2008 from the minutes it is apparent 

that the leave of absence was granted to the nominee director of the 

petitioner as he was traveling. In the Board meeting it was 

CP 116/2008 


43 

resolved that one Mr. Pravin Banavalikar was appointed as 

additional director and some other decisions have been taken in the 

said Board Meeting. Since the petitioner is aware of the meeting 

and I do not find any illegality in conducting the Board Meeting. 

The Board meeting dated 26 th Sept., 2008, from the minutes it is 

apparent that the nominee director of the petitioner is aware of the 

meeting and participated through teleconference. It is also evident 

that the respondents sent e-mail on 23 rd Sept., 2008 to the nominee 

director of the petitioner wherein it is categorically stated that the 

Board meeting to be held and also will adopt the accounts for the 

year ended 31 st March, 2008. After the meeting the Company 

Secretary sent mail to the petitioner duly attaching the final 

accounts of R1 and R8 Company. Therefore, the decisions taken 

in the meetings are binding on the petitioner and I do not find any 

illegality conducting the said meeting. The Board meeting held on 

15 th December, 2008 the notice was sent to the petitioner’s 

nominee by e-mail on 28 th November, 2008 intimating that the 

meeting of the Board of Directors will be held on 15 th December, 

2008 at 10.00 A.M. The nominee director vide his reply dated 29 th 

November, 2008 addressed to one Mr. Murali stating “I have been 

through the first draft Company Law Board application and will 

send you my comments later today”. From the reply it is evident 

that the petitioner received the notice for the Board Meeting, 

CP 116/2008 


44 

however, he did not participate for the reasons best known to them. 

It is also pertinent to note that the Company Petition filed before 

this Bench on 12 th December, 2008. Therefore, the petitioner 

cannot allege that notice has not been given to them. So far as 

AGM dated 29 th Sept., 2008, the Company Secretary sent notice of 

AGM and directors’ report with annexure to the petitioner’s 

nominee director by e-mail on 26 th Sept., 2008. From the minutes 

it is evident that the petitioner participated in the meeting through 

teleconference and the Board has taken decision to adopt the 

Annual Accounts dated 31.3.2008 and resolved to appoint directors 

and reappointment of Mr. Pravin Banavalikar as director. 

Therefore, it is presumed that the petitioner was given notice for 

the General meeting. As per Sec.286(1) of the Act, the notice is to 

be given to the directors who are in India and not to the directors 

who reside outside India. The respondents also relied upon the 

judgement of the Bombay High Court in the matter of 

Maharashtra Power Development Corporation vs. Dabhol 

Power Company & Ors. wherein the Bombay High Court is of 

the view that “Section 286 requires that the notice to be given to 

those directors who are for the time being in India.” In view of 

the clear provisions of law and also supported by the Judgement of 

the Bombay High Court, I fully agree with the submissions of the 

respondents. I do not find any illegality in conducting the said 

CP 116/2008 


45 

meeting. From the records it is evident that the Company informed 

the nominee directors and updated by mail and telephonically 

about the meetings and administration. It is also evident from the 

records that Mr.Max Fysh, nominee director of the petitioner 

participated in the meetings by teleconference and the same is 

allowed as per clause 28( j) of the Articles and clause 4.2 (g) of the 

SHA. More over it is a pertinent to note that shorter notice also 

provided with the consent of all the directors in the Articles, it 

appears the Company followed the same procedure and there was 

no quarrel in that regard. Therefore it cannot be said that the 

company contravend the provisions. I do not find any 

contravention of the provisions of the shareholders’ agreement or 

the Articles relating to issue of notices for the Board and General 

Meetings. Therefore, the Board and General meetings are not 

illegal. Accordingly the issue is answered. Nevertheless, it is 

needless to say that the notices for the Board and General Meetings 

shall be issued to all the shareholders and directors respectively in 

accordance with the Articles and Law. The Learned Senior 

Counsel for the petitioner contended that the petitioner holds 

42.24% of the paid up capital and as per the SHA the investor and 

the petitioner shall entitled to nominate its directors according to 

the proportion of shareholding subject to a minimum of two 

directors. As per clause 4(b) of SHA the nominee director of the 

CP 116/2008 


46 

promoter shall be the executive director and shall be responsible 

for day to day management of the Company. He submitted that 

from the petitioner’s side there is only one director. The CEO 

supposed to be from the petitioner’s side, however, the CEO 

resigned in February, 2008 and the Company is in deadlock 

situation. The respondents contended that the CEO resigned 

himself and did not direct the Board to appoint an alternate director 

in his place, even though clause 41(d) of the Articles and clause 

4.1(c) of SHA provides for appointment of alternate director. 

Since CEO resigned himself and the petitioner has not 

recommended any name for appointment of either CEO or 

alternate director. Therefore, the Company cannot be found at 

fault for their lapse. The Company is not in deadlock situation as 

contended by the Learned Senior Counsel. 

Now I deal with the issue No.2 

The other grievance of the petitioner is that the respondents 

allotted shares of R8 to the R3 without allotting to the petitioner 

which amounts to dilution of economic shareholding of the 

petitioner in the Company. It is an admitted fact that the R8 is a 

subsidiary of R1. The R1 holds 100% shares in R8 Company and 

is only the shareholder. The R8 is an independent entity having 

four directors on its Board. The respondent No.3 entered into an 

investment agreement dated 2 nd April, 2008, thereby the R3 

CP 116/2008 


47 

became 32.25% of the equity shareholding in R8. Thus, the R8 is 

having two shareholders i.e. the R1 and R3. It is contended that 

the Board Meeting of R8 was held on 2nd April, 2008 for which no 

notice was given to the petitioner and no approval of Board of 

Directors of R1 either for increase of capital of R8 or dilution of 

capital of R8. It is further contended that if the meeting is held 

without notice to the directors, it is invalid as held by the Supreme 

Court in the matter of Parmeshwari Prasad Gupta Vs. Union of 

India. It is also contended that the respondents have breached the 

Article 20 of the AOA and clause 3.1 of the SHA. The 

respondents contended that the petitioner had invested only a sum 

of Rs.1.60 crores and whereas the respondent No.3 had invested 

Rs.82 crores in the Company. The R3 further invested a sum of 

Rs.20 crores in R8. The directors of R8 in their meeting held on 

2 nd April, 2008 decided to accept investment from R3. However, 

the nominee director did not attend or participate in the said 

meeting of R8. It is stated that notice of Board Meeting was 

verbally given by the representative of the Respondent No.8 to 

Max Fysh. However, he could not attend the said meeting as he 

was traveling. I have perused the minutes of the Board meeting of 

R8 dated 2.4.2008 wherein three directors participated in the said 

Board meeting and resolved to adopt new set of Articles of AOA 

pursuant to Sec.31 of the Act, and also resolved allotment of 476 

CP 116/2008 


48 

class ‘A’ shares and 19,99,524 class ‘B’ shares. The respondents 

stated that in the past for all the previous Board meetings the 

nominee director of the petitioner accepted oral notices as he did 

not have any mailing address in India. The petitioners in their 

rejoinder have stated that no notice either written or oral of the said 

Board meeting was ever received by the petitioner or its nominee 

director and the oral notice is not a valid notice under clause 4.2(b) 

of the SHA. One of the crucial points raised by the respondents is 

that the petition gravely suffers from non joinder of Max Fysh who 

is the nominee director of petitioner. I find there is force in the 

submissions of the respondents that the Max Fysh who is acting on 

behalf of the petitioner is not a party to the petition and in his 

absence it is difficult to find out the veracity in the allegations. 

However, from the correspondence between the nominee director 

of the petitioner and the Company and its representatives, it is 

unequivocal that the nominee director is corresponding with the 

Company and through e-mail and by letters and updating the 

affairs of the Company. Even otherwise allotment of shares by R8 

to R3 is exclusive domain of R8 and will not amount to dilution of 

economic interest of the petitioner on the ground that the petitioner 

is not a member of the R8. The R8 is an independent entity and the 

person who is not a shareholder does not have any right in the 

Company. The contention of the petitioner that the Article 20 

CP 116/2008 


49 

provides restriction on transfer of shares without prior written 

permission of the other shareholders, (a) create an encumbrance 

on any of the shares held by them either in whole or part or (b) sell, 

transfer, grant any option or right to purchase or otherwise dispose 

off any of such shares or (c) enter into any agreement or 

arrangement in respect of the votes attached to the shares, (d) 

publicly announced their intention to sell, transfer, grant any 

option or right to purchase or otherwise dispose off any of such 

shares, (e) enter into any swap or other agreement or any 

transaction that transfers in whole or in part, directly or indirectly 

the economic consequences of beneficial ownership of any shares 

owned by such shareholders. Article 20(B) provides for right of 

first refusal. Also 3.1 of SHA provides for restriction on transfer 

of shares. Sub-clause (e) of clause 3.1 is identical to sub-clause (e) 

of Article 20A of AOA. The respondents contended that the above 

clauses of Articles and SHA are not applicable to the petitioner’s 

case. They contended that the management will have the power to 

take decision in the Board Meetings by its majority directors as 

contemplated under clause 29 of AOA. I have perused the clauses 

of the Articles and SHA. There is no dispute that the clauses 

specifically restrict to sell, transfer, create an encumbrance and 

enter into any agreement. However, the Learned Counsel for the 

petitioner stressed that sub-clause ‘e’ of clause 20 of Articles 

CP 116/2008 


50 

restricts to enter into any swap or other agreement or any 

transaction that transfers in whole or in part directly or indirectly, 

the economic consequence of beneficial ownership of any shares 

owned by such shareholders. According to the said clause he 

contended that the petitioner is a shareholder in R1 Company and 

the R1 Company being holding company of R8 and holds 100% 

shares in it, any allotment of shares of R8 to any other person 

without offering to the petitioner will amount to dilution of 

economic interest. I do not agree with the contention of the 

petitioner. Clause 20(e) states the beneficial interest of R1 only 

and not R8. The petitioner can seek relief against R1 in case any 

allotment of shares in violation of above clause. However, he is 

not a shareholder in R8 and the beneficial interest cannot be said to 

be adversely effected. The beneficial interest always will be upper 

level, because the R8 does not own R1 whereas the R1 owns R8. 

The rights of petitioner will be in R1 and not in R8. Even 

according to clause 29 of the Articles the management actions in 

the affairs of the Company and it empowers the Board to take 

decisions by majority on the matters as stated from (a) to (z) of the 

said clause. Sub-clause (a) of clause 29 reads thus “All decisions 

of the Board shall be taken by majority, except that decisions on 

the following matters shall, whether at the Board Meeting or at the 

shareholders’ meeting require, besides majority the affirmative 

CP 116/2008 


51 

vote of at least one nominated by the investor present at the 

meeting either by himself or through their alternate directors. Subclause 

(c) reads thus “Acquisition and disposal of assets of other 

businesses, creation of joint ventures, partnerships, mergers, demergers 

and consolidations”. From the above clause it is apparent 

that the management consisting of majority of Board of Directors 

can take decisions in the interest of the Company. The Board 

meeting in which the decision has been taken to allot shares to 

respondent No.3 was attended by three directors out of four 

directors, therefore, the Board meeting convened and transacted 

and taken decisions by majority of directors. Therefore, I do not 

find any illegality in allotting the shares to the Respondent No.3 in 

the interest of R8. It is also stated that the only project of the R8 is 

land for development and it was not proceeded further lack of 

funds. It is also contended that R1 is only a paper company. The 

decision taken by the Board is perfectly valid. Clause 20 of AOA 

clearly envisages that none of the shareholders shall directly or 

indirectly without the prior written permission of the other 

shareholders sell, transfer, encumber etc. Admittedly, the R8 is 

only one shareholder i.e. R1 prior to its allotment. The shareholder 

i.e. R1 and the R8 have taken the decision to allot the shares. 

Pursuant to allotment the R1, R8 and R3 have entered into share 

subscription agreement whereby the R3 was allotted 476 class ‘A’ 

CP 116/2008 


52 

shares and 19,99,524 class ‘B’ shares which constitutes 32.25% 

and the promoter i.e. R1’s holding goes down to 67.75% in R8. 

The question arises whether the petitioner is entitled to be offered 

shares prior to allotment to R3. It is an admitted fact that the 

petitioner is not a shareholder of R8 and need not be offered any 

shares to them and the petition is not maintainable against the R8 

in which he is not a shareholder. The counsel for the respondent 

No.8 also contended that to file a petition under Sec. 397-398, right 

as shareholder must be affected and relied upon the proposition of 

the Apex Court in the matter of Shanti Prasad Jain Vs. Kalinga 

Tubes. The Apex Court has held that “oppression involved at 

least an element of lack of probity or fair dealing to a member in 

the matter of his proprietary rights as shareholder.” As stated 

above the petitioner is not a shareholder in R8 and no need to offer 

any shares to them. A beneficial reference is drawn from the 

judgement of the Division Bench of Madras High Court decided in 

LPA Nos. 129 to 131 of 2002 dated 7.9.2011 in the matter of 

Amalgamations Limited Vs. Shankar Sundaram, at para 29 

wherein the Hon’ble High Court held that “therefore, when a 

person is not a member of a Company, his alleging oppression and 

invoking the provisions of Sec.397 against that Company does not 

arise. Therefore, a shareholder of a holding company cannot 

complain of oppression by a subsidiary in which he is not a 

CP 116/2008 


53 

member as there is not legal relation between him and the 

subsidiary company.” I follow the judgement and it is fully 

applicable to the facts of the present case. The R8 is a separate 

entity and its shareholding is also different. By allotting shares to 

R3 there is no dilution of economic shareholding of the petitioner 

as alleged and the respondents have acted for the benefit of the 

Company. Accordingly the issue is answered. 

Now I deal with the issue No.3 

It is contended that the petitioner was not given the 

inspection of the records and was not provided the information. 

The respondent contends that the petitioner has for the first time 

addressed e-mail requiring the information. Whatever may be the 

reason, the petitioner is entitled to inspect the registers, records and 

other documents of the R1 company in the capacity as shareholder 

and director according to law and can obtain copies thereof. 

Now I deal with the issue No.4: 

The petitioner contended that the Respondent No.3 

interfering the affairs of the Company and the petitioner intends to 

exit the Company. as per the shareholders’ agreement, it is 

unequivocal that the R3 is an investor and can nominate director 

on the Board of R1 Company. The nominee director of the 

investor shall be non executive director and shall not be 

responsible for the day to day management of the Company and 

CP 116/2008 


54 

shall not be liable to any failure by the Company to comply with 

any law or rules. However, the nominee director of the promoter 

i.e. the petitioner and the respondent No.2 shall be executive 

directors of the company and shall be responsible for the day to 

day management of the Company. The nominee director of the 

petitioner was appointed as CEO of R1, however, he resigned as 

CEO but continues as Executive Director. The R1 is governed by 

the Articles of Association and SHA and SSA which are part of the 

AOA and it is binding on the Company. The petitioner has not 

brought to the notice of this Bench any interference by the 

Respondent No.3 in contravening the Articles. The R3 being 

investor holds 44.99% in R1 Company. The Learned Senior 

Counsel for the petitioner during the course of arguments stated 

that the petitioner is ready to buy or sell their shares and this Bench 

under Sec.402 of the Act has power to order buy out or sell out and 

in case the Company buy out the shares, the petitioner will exit the 

Company. He quoted Rs.3,149/- per share. On this submission the 

Learned Counsel relied upon various citations. There is no doubt 

that this Bench has ample power under Sec.402 of the Companies 

Act. If the Company or any of its shareholders are willing to buy 

out the shares on the basis of valuation arrived by the valuer and 

the valuation is to be taken as on the date of the filing of the 

petition i.e. 12 th December, 2008 and the Company may appoint an 

CP 116/2008 


55 

independent valuer in consultation with the petitioner. In case of 

buy out of shares the Company is permitted to reduce its capital. 

The petitioner and the Company shall share equally the 

remuneration and expenses of the valuer. In view of the reasons 

and facts stated above the petitioner has not made out any case 

either on oppression or on mismanagement and not entitled for the 

reliefs and the CP is dismissed. No orders as to cost. All the 

interim orders stand vacated and all applications stand disposed 

off. 

Dated this the 3 rd Oct., 2011 

(KANTHI NARAHARI) 

MEMBER 

CP 116/2008

before the company law board - Company Law Board Mumbai Bench

Create successful ePaper yourself

Delete template?

Save as template?