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. 118 of 2009
IN THE MATTER OF THE COMPANIES ACT, 1956,
SECTIONS 111, 397-398,402, 403 read with Sections
237(b),239(b),(c),(d) and 408
AND
IN THE MATTER OF M/S.CAMBATA AVIATION
PRIVATE LIMITED
BETWEEN:
1. Mr.Albert Cambata,
through his constituted attorney
Mr.Rashmikant Mehta
at Via Casarico D,
CH-6932,
Breganzona, Switzerland.
…Petitioner
AND
1. M/s.Cambata Aviation Private Limited,
having its registered office at Hangar No.3A,
Juhu Aerodrome,
Vile Parle (W),
Mumbai-400 054.
2. Mr.Nelson Cambata,
3. Mr.Burjor N.Nicholson,
4. Mr.Bruce Cambata,
5. Eros Theatre & Restaurant Pvt.Ltd.
6. Cambata Helicopters Pvt.Ltd.
….Respondents
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PRESENT FOR PARTIES:
Mr.Zal Andhyarujina, Advocate
Mr.Zubin Morris, Advocate
Ms.Pratibha Mehta, Advocate
Ms.Divya, Advocate
Mr.Pradeep Sancheti, Sr.Counsel
Mr. Raj Chakrabarti, Advocate
Mr.Ajit Anekar, Advocate
Mr.Vishal Lohire, Advocate
….For petitioner
….For respondents
O R D E R
1. The present petition is filed by invoking various
provisions of the Companies Act, 1956 (‘ the Act’) alleging certain
acts of oppression and mismanagement in the affairs of the R1
Company and sought various reliefs as prayed in para 16 of the
petition.
2. Shri Zal Andhyarujina, Learned Counsel, appearing for
the petitioner categorized broadly the issues to be decided by this
Bench are the illegal enhancement of shareholding of R2 and R4,
entered in joint venture with Menzies thereby the respondents
attempt to siphon off the funds of the R1 and alleged that the
petitioner was not provided the statutory records of the Company
for inspection etc.. Accordingly, the Learned Counsel sought
reliefs to be granted as prayed in the petition.
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3. He summarized the brief facts as follows:
The R1 Company was promoted by the petitioner’s father
Mr.Kershi Cambata. The R1Company is engaged in the business
of ground handling at various major airports in India. At the time
of incorporation i.e. in the year 1954 Mr. Kershi Cambatta and Mr.
Rustom Cambata had equal stake of 50% each in the Company.
The shareholding of the R1 thereafter changed from time to time.
In the years 1998 and 1999 the shareholding of the R1 was as
follows:
Sr.
No
Name Percentage of
shareholding
No.of shares
1. Mr.Kershi Cambata 39.15% 44025
2. Mr.Nelson Cambata 0.59% 664
3. Mr.Albert Cambata 34.46% 38751
4. Mr.Burjor Nicholson 0.0008% 1
5. Eros Theater & Restaurant 0.0008% 1
Pvt.Ltd.
6. Mr.Bruce Cambata 25.78% 28986
4. The petitioner was made as director of the Company on
15 th Sept., 1974 by his father Mr.Kershi Cambata. He was closely
associated with the affairs of the R1 until January, 2000 and
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actively took part in the business of the R1 Company as a director
and shareholder. The R2 was made as director of R1 on 1 st Sept.,
1983 and R3 was made as director on 3 rd December, 1981. The
petitioner in the year 2000 moved to USA and subsequently to
Switzerland. The petitioner in complete faith left the affairs of the
Company to be managed and run by his own father Mr.Kershi
Cambata and R2 & R3. Mr.Kershi Cambata died in May, 2008.
Upon his father’s death the petitioner made enquiries with his
brother R2 and also R3 about the business affairs of the Company.
But the said R2 and R3 instead of providing details of the business
affairs of the Company gave evasive and vague replies to the
petitioner. Sometime in May, 2009 when the petitioner visited
Mumbai to ascertain the affairs of the Company, he was
intentionally not allowed access to the books and records of the
Company. Thereafter, on making enquiries the petitioner learnt
about the illegal, unauthorized acts of oppression and
mismanagement in the affairs of the Company.
5. Sometime in May, 2009 the petitioner
came to know about the Joint Venture Arrangement between
Menzies Aviation and R1. The said Joint Venture arrangement
had obtained a letter of award for ground handling operations at
the Delhi International Airport which had subsequently been
withdrawn. Diverse correspondence had been addressed by
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Menzies to the R1 requesting the R1 to fulfill its obligations.
However, the R1 had refused to carry on with the joint venture
which had been unable to commence operations at the Delhi
airport. Due to alleged failure on the part of the R1 to perform its
obligations, the Menzies was in the process of initiating suitable
legal action against the R1. It is submitted that the petitioner as a
shareholder and a Director was never made aware of any such joint
venture with Menzies Aviation. The petitioner by one of its said
letters viz. the letter dated 8.7.2009 to the Respondents also stated
that after the notice received for the Board Meeting which was to
be held on 12.9.2008 he had not received any notice of any other
Board Meeting. The R2 for the first time vide his letter dated
3.8.2009 informed the petitioner that the authority to deal with
Menzies Aviation and to enter into a Joint venture was given to R2
in its Board Meeting dt.12 th Sept., 2008. In the meanwhile since no
information from the respondents was forthcoming the petitioner
was therefore left with no option but to question the authority of
the Respondent to enter into the joint venture with Menzies for
which the petitioner did not receive any satisfactory response. The
petitioner therefore wrote a letter dated 13 th July, 2009 to Menzies
Aviation. In the said letter the petitioner inter alia stated that he
was a director and shareholder of the R1 and that he had learnt that
Menzies Aviation was entering into some arrangement with the R1
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for acquiring its business either by a joint venture or purchasing
shares of some of the existing shareholders of the Company. On
his requisition made vide his letter dated 8.7.2009 the R1 after
much delay decided to hold a meeting of the Board of Directors in
London on August 26, 2009. The petitioner initially objected to
the venue of the meeting. However, R2 and R3 vide their letter
dated July 07, 2009 refused to hold the meeting in Mumbai and
insisted to hold the same in London to suit their own convenience.
In the interest of the Company the petitioner agreed to visit
London to attend the meeting. The R1 then circulated the Notice
of the Board Meeting on 17 th August, 2009. The petitioner
requested R1 to postpone the meeting through his advocate’s letter
dated 25.8.2009. It is further submitted that sometime around
21.8.2009 the petitioner was surprised to be served with a copy of
plaint being Suit No. 2266 of 2009 filed by the R1 against the
petitioner inter alia praying for a permanent injunction to restrain
the petitioner from communicating, whether orally or in writing
with the employees of the R1 and any other individuals. This act of
R1 itself speaks about the motivated intentions of R1 from
preventing the petitioner from taking part in the business affairs of
the Company. The issue of ground handling policy and its effect on
the business of R1 was discussed in the Board of Directors
Meeting of R1 held on 12.9.2008. At the said meeting the Board
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authorized R2 to identify a suitable joint venture partner.
Correspondence thereafter ensued between the parties. It is the
petitioner’s contention that he must be provided with all the
information sought for (and in particular all the documents
mentioned in the said order of the Bombay High Court dated
2.9.2009), and that the Board meeting must be held in India.
However, the respondents insisted to hold the Board Meeting in
Bahamas and declined to provide all the information sought by the
petitioner. The R1 has failed to comply with the order of the
Hon’ble Bombay High Court dated 2.9.2009.
Despite the express directions contained in the said order dated
2.9.2009, the same have been deliberately and willfully flouted by
the respondents. The R1 has insisted on holding the meeting of the
Board of Directors at far off place Nassau, Bahamas with a
deliberate view to make it as inconvenient as possible for the
petitioner to attend and effectively participate therein. The
respondents have sought to frustrate the petitioner from having
access to the documents. The R1 was not willing to disclose all
documents and give a clear picture of deal with regard to the JV
arrangement with Menzies Aviation and/or with one Krystal
Aviation Services Pvt.Ltd.. It is further submitted that the Notice
of Motion No.3463 of 2009 (filed by the petitioner) was mentioned
for circulation on 24.9.2009 before the Bombay High Court. The
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High Court declined to pass any orders therein. However, the said
order records that the petitioner was at liberty to take out the
appropriate proceedings in the matter, which the petitioner has now
done by way of the present proceedings. It is further submitted that
after making several requisitions to the Respondents the petitioner
received copies of the minutes of the AGM from 1994 to March,
10, 2006 and the register of shareholders.
6. The petitioner was shocked to learn that from May,
2000 till 2003, soon after he left for USA, the R3, R5 and R6
acting at the behest of Respondents arbitrarily convened an EOGM
of R1 dated 25.4.2000 and 3.7.2000 and 20.9.2001 whereby they
increased the Authorised Capital of Respondents by an aggregate
of Rs.12,50,00,000/- by issuing 1,25,000 shares of face value of
Rs.1000/- each. Subsequently it appears that all but one share of
this increased share capital was allotted to the R2 thereby illegally
increasing the shareholding of the R2 from 0.59% to 64.77% by
issuing around 104996 shares to the R2 alone and by transferring
around 38,000 shares from Kershi Cambata to R2 . The issuance
of such shares is arbitrary and illegal as no notice in accordance
with Article 74 of the Articles of Association of the Company was
issued to the petitioner. The said article 74 strictly requires that
subject to any direction to the contrary that may be given by the
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meeting that sanctions the increase of capital all new shares shall
be offered to the members in the proportion to the existing equity
shares held by them. Accordingly, pursuant to Article 74 the
respondent No.1 was bound to offer the new shares in proportion
to the existing equity shares held by the petitioner. No notice in
accordance with Article 74 was issued to the petitioner with regard
to the new shares to be issued and allotted as the said EOGMs and
needless to say no offer has ever been made to the petitioner of
such new shares. The petitioner challenging illegal transfer of
shares done in the Board Meetings and the transfer forms are not
available with the Company. The increase of share capital could
be done in general meetings and not at the Board meetings, hence
the Board Meetings are bad in law. The respondents increased the
share capital to marginalize the other group and gain control is an
act of oppression. On this Learned Counsel relief upon the
following citations:
1) (2002) 1 CLJ Page 552 CLB In the matter of Kshounish
Chowdhury & Ors. Vs Kero Rajendra Monolithics Ltd. & Ors.
2) AIR 2005 SC 4074 In re: Sakal Papers.
However, the general meetings were held and attended by
only two persons who are very marginal shareholders. The R1
Company is a family Company and articles provide maintaining
the parity in the shareholding pattern. The respondents have not
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given any notice to the petitioner inspite of the fact that the
petitioner resides abroad i.e. Switzerland. On the point that notice
was not given to the petitioner/director, the Learned Counsel relied
upon the following citations:
1) (2005) 59 SCL page 282 CLB. In the matter of Navin R.
Shah Vs Simshah Estates & Training Co.Pvt.Ltd..
2) AIR 2005 SC 4074 In the matter of Smt.Claude – Lila
Parulekar Vs Sakal Papers Pvt.Ltd. & Ors.
3) (2002) 39 SCL 943 (CAL) Para 59 In the matter of
Bhagirath Agarwala Vs Tara Properties Pvt.Ltd..
4) (2000) 36 CLA Page 214 CLB In the matter of Dr.Kamal
K. Dutta & Anr. Vs. Ruby General Hospitals
7. The minutes of the meeting dated 25 th April, 2000 and
3 rd July, 2000 whereby additional shares were issued and allotted
to R2 shows that the quorum of the meeting was not constituted.
The register of R1 shows that on 3.7.2000, 17.9.2001 and
25.11.2003 around 12,000, 24,000 and 70,000 shares respectively
have been allotted to R2. Accordingly an aggregate of around
104996 shares were illegally allotted to R2. No notice of the
aforesaid meetings of the Board of Directors has ever been given
to the petitioner. The petitioner from time to time by various
letters sought copies of the following documents:
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a. Register of Members and Index of Members, b. Transfer
forms of shares since 1994, c. Minutes of all meeting of the Board
of Directors held since 1994 till date along with copies of the
resolutions that may have been passed, d. Minutes of all the
General Meetings held since 1994 till date along with the copies of
the resolutions that may have been passed, e. Last three years’
balance sheets. However, respondents with ulterior motives and
for reasons best known to them with mala fide intentions have, till
date, only provided copies of the following documents:
a. Register & Index of Members, b. Register of Directors
c. Register of directors’ shareholding, d. Minutes of the General
Meeting upto March10, 2006, e. Request for proposal (REP)
documents issued by Mumbai International Airport Private
Limited (MIAL). This shows the clear intention of the
Respondents to keep the petitioner out of the affairs of the
Company and thereby run the same arbitrarily and in their own
high handed manner, and for the personal benefit of the
respondents.
8. It is further submitted that the respondents have unauthorizedly
and illegally created charge on all the assets of the
Company without sanctioning the same in any general meeting.
Further, the remuneration to R2 was significantly increased from
the year 2005 to 2008 as follows:
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For the year 2005 - Rs.27,46,667/-
For the year 2006 - Rs.36,66,667/-
For the year 2007 – Rs.95,50,000/-
For the year 2008 – Rs.1,39,60,000/-
The petitioner has not received any notice of any meeting of the
Board of Directors in which the increase in remuneration to the
directors and parties having a significant interest has been
discussed and/or resolution was passed. The audited accounts for
the year 2008 show that an amount of Rs.8,66,50,000/- was
received as loan from a related party. The petitioner is not aware
of any such transaction, being sanctioned in any General Meeting
or General Body. In order to hide this transaction from the
petitioner the respondents deliberately have not provided the
Minutes of any General Meeting held after March, 10, 2006. It is
further submitted that from a search conducted by the petitioner on
the Internet he for the first time learnt that the respondents are in
the process of incorporating several new companies, some of
which are narrated below:
a, Cambata Aviation Ground Handling Services
Mumbai Private Limited. b. Cambata Aviation Ground
Handling Services Delhi Private Limited. c. Cambata
Menzies (Delhi) Handling Private Limited.
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9. He further submitted that though the Company has been
making profits over the years, the petitioner as a shareholder not
received any dividends since 2000 till date. It is also learnt that the
R1 and Mr.R.C.Shah, are party to criminal complaint filed by one
M/s.Chakshu Enterprises. This has not just exposed the R3 and
Mr.R.C.Shah being criminally prosecuted but has also exposed the
other directors including the petitioner to a potential criminal
liability. In order to hide their own wrongful, unauthorized and
illegal acts, the respondents are restraining the petitioner to take
part in the affairs of R1. Further, the respondents do not want the
petitioner to take part and or get involved in the affairs of the
Company and for such other reasons and/or malafide intentions
best known to them. The same is evident from the following
events:
(i) Non production of documents
(ii) Non disclosure of information
(iii) Resistance from attending the office
It is further submitted that this Bench restrained the respondents
from removal of petitioner from the post of directorship.
The R2 and R4 are residing in the United States of America. The
R3 resides in New Zealand. None of the other directors are
personally present on a day to day basis in India to conduct the
affairs of the R1. R1 predominantly conducts its business in India.
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The business of the R1 is such that it requires the personal
supervision of the management on a regular if not day to day basis.
Petitioner is presently ready and willing to reside in Mumbai to
manage the affairs of R1. R1 Company is a family company
which at all material times has been run for the benefit of the
members of the Cambata family. The Board meetings are to be
held at the registered office of the Company and not outside India.
Presently the Board Meetings are conducted outside India and the
petitioner has to travel thousands of kilometers which is an act of
oppression. It is submitted that there is no period of limitation to
approach this Bench for the acts of oppression and
mismanagement. On the point of delay in approaching this Bench,
the Learned Counsel relied upon a decision reported in (1999) 35
CLA page 97 (Cal) in the matter of Smt.Nupur Mitra & Anr. Vs
Basubani Pvt.Ltd. & Ors. The affairs of the R1 are being
conducted in a manner which is oppressive to the petitioner who is
a minority shareholder and also prejudicial to the interest of the
Company. The various acts of oppression and mismanagement by
the respondents, who are in control of the affairs of the Company,
would justify an order of winding up of the Company on just and
equitable grounds. However, to wind up the Company would
unfairly prejudice the members of the Company. In the premises
the reliefs sought in the present petition be granted.
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10. The respondents have filed details reply to the petition.
Shri Pradeep Sancheti, Learned Senior Counsel
appearing on behalf of respondents submitted that the present
petition is frivolous, misconceived and nothing but a ploy adopted
by the petitioner with a malafide intention of causing harassment to
the R1. The acts complained of pertain to the period 2000, 2001
& 2003. It is a known fact that the parties live in abroad and the
petitioner is aware of the business all along but suddenly woke up
and alleging the acts of the R1 Company after eight years. The
reliefs which are sought are general and in respect of the events
occurred ten years ago. It is an admitted fact that the R1 Company
was promoted by late Mr.Kershi Cambata, i.e. the father of the
petitioner and R2 and 4. The day to day affairs of R1 were
managed by R2 & 3 along with Mr.Kershi Cambata who was
based in USA till his death on 10 th May, 2008. After his demise,
R2 & 3 are managing the affairs of the R1. Petitioner admittedly
residing in Switzerland for the last few years, has never shown any
inclination to participate in the affairs of R1. Pursuant to
introduction of Ground Handling Policy in 2007, it became
necessary for the survival of R1 to negotiate with third parties
(Menzies and/or Krystal) for creating strategic alliances/joint
ventures. This was perceived by the petitioner as an opportunity to
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interfere in the affairs of R1. The petitioner has been attempting to
jeopardize the business interests of R1 by causing prejudice in the
minds of third parties and instigating the employees of the R1.
Instigation of employee and disruption of the joint ventures with
Menzies and/or Krystal is nothing but a ploy adopted by the
petitioner to settle personal disputes with the other shareholders
and directors of the R1. After the R1 offered inspection of the
corporate records to the petitioner, a meeting of the Board of
Directors was held on 26 th August , 2009 in London. The
petitioner was admittedly in London at the relevant time, however,
he failed and/or neglected to attend the said meeting. Thereafter,
on or around 30 th November, 2009 the R1 with a view to amicably
resolve the differences between the petitioner and his family
members, in good faith offered the petitioner the position of
“Station Manager, Chennai Airport”. The petitioner however
neither visited the Chennai station nor took an active role in
performing the duties of said position. Save and except
participating in very few Board meetings, that too upto the year
2001, has never actively or otherwise participated in the
management and/or affairs of R1. The petitioner has no cause of
action for filing the present petition. He is questioning the acts of
the Company conducted in the year 2000 which is illegal, void and
non-est after a period of 10 years despite the fact that he was very
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much a party to such acts i.e. resolution passed at the meeting of
Board of Directors which was duly attended by the petitioner. The
alleged cause of action is not continuing as claimed by the
petitioner and therefore the petition is required to be dismissed on
the ground of limitation alone. The petitioner was never interested
in participating in the affairs of the R1. Therefore he migrated
initially to USA in the year 2000 and thereafter to Switzerland
where he is currently residing. The petitioner may be called upon
to produce his passport before this Bench in order to ascertain as to
how many times he visited India during the period from January,
2000 till filing of the present petition. Any dispute amongst the
petitioner and R2 & R3, should not be permitted to affect smooth
and efficient functioning of R1. In any event the petitioner is
questioning the allotment of or transfer of shares in favour of R2
from the period 2000 onwards when in fact he was personally
present during the meeting of the Board of Directors which
approved such transfer/allotment. R1 has not signed any joint
venture agreement with Menzies Aviation Plc (Menzies).
11. It is further submitted that on 28 th Sept.,2007 the
Government of India issued a circular titled “Grant of permission”
for providing ground handling services at airports other than that
belonging to the Airports Authority of India (Ground Handling
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Policy). Vide ground handling policy, the Government of India
decided that the ground handling services at the airports other than
those belonging to the Airport Authority of India can be
undertaken by the following entities only:
i) The airport operator itself or its joint venture partner;
ii) Subsidy companies of the national carrier i.e.
National Aviation Company of India Limited or other joint
ventures specialized in ground handling services. Due to the
Ground Handling Policy per force, R1 was required to identify a
joint venture partner for conducting the operations in Mumbai and
Delhi airports and, therefore, R1 engaged in discussions with
Menzies for a potential joint venture. However, no definitive joint
venture agreement was ever executed with Menzies and the same
is the position even today. The petitioner despite notice, did not
participate in the meeting of the Board of Directors of R1 and
never raised any objection or aired his grievances against the
formation of a joint venture with Menzies. Instead of raising the
issue in the Board Meeting, the petitioner in a high handed manner
in a complete breach of his duties to R1 addressed a
communication dated 13 th July, 2009 directly to Menzies and tried
to derail the ongoing negotiations with Menzies for a potential
joint venture. Despite getting the due notice of the meeting of the
Board of Directors held in London, on 26 th August, 2009, the
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petitioner visited London and met other directors of R1, but chose
to remain absent in the meeting of the Board of Directors. The
conduct of the petitioner itself suggests that he has no concern
about the affairs of R1. Admittedly, the petitioner resides in
Switzerland and it is more convenient for him to travel to London
in order to attend the Board Meeting than to travel all the way to
Mumbai which in any case the petitioner rarely does, as can be
ascertained from his passport. He further confirmed that there was
no joint venture agreement between R1 and Menzies and the
allegations made by the petitioner that Technical Management
Service Agreement amounts to a joint venture agreement is
nothing but a figment of imagination. The document referred to in
paragraph 8(g)(j) of the petition, is merely a Letter of Intent by
virtue of which no rights and/or liabilities were created qua the R1
and it was signed by one Sarosh Contractor as authorized signatory
of the R1. However, he was inadvertently referred to as a director
on the said letter of intent which in any case was not acted upon by
either party and was treated as null and void. It is further
submitted that R1 never insisted on holding the meeting of the
Board of Directors in the Bahamas to make it convenient for the
petitioner to attend the same. Since the petitioner resides in
Switzerland, it is more convenient for him to travel to Bahamas
than travel to India to attend the Board Meeting. In any event the
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R1 had offered to reimburse reasonable travel and other expenses
of the petitioner for attending the said Board Meeting.
12. He submitted that the authorized share capital of the
Company was duly increased from time to time and it was within
the knowledge of the petitioner. The petitioner was aware of the
fact that the paid up share capital of the Company was required to
be increased from time to time by issuing fresh shares to the
relevant shareholders. The meeting of Board of Directors of R1
dated 3 rd July, 2000 which was attended by the petitioner, a
resolution for increase of share capital of R1 was unanimously
passed by the Board. Even in the meeting of the Board of Directors
held on 17 th Sept., 2001 wherein the paid up share capital of R1
was again increased, the petitioner was very much present and
never objected to the same. Thereafter, the petitioner has never
attended any of the meetings of the Board of Directors or general
meetings of the R1 as he was not at all concerned about the affairs
of the R1. Transfer of shares from Kershi Cambata to R2 was
affected during the life time of Mr.Kershi Cambata, therefore the
petitioner has no right to question such transfer which was carried
out as per the desire of Mr.Kershi Cambata. As per Article 55 of
the Articles of Association of the R1, any transfer of shares made
by a member to his near relative, in the present case his son i.e. R2
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was outside the purview of the right of preemption available to
other shareholders by virtue of Article 46 of the Articles of
Association. In the present case the petitioner by not objecting to
issue of fresh shares to a particular shareholder to the exclusion of
all others has waived the qualified right available under Article 74
of the Articles of Association of the R1. The petitioner having
participated in the meeting is now acquiescent to raise the issue.
On the point of waiver and acquiescence, the Learned Senior
Counsel relied upon the following judgements:
1) (1969) 1 SCR Page 807 In the matter of Maharashtra
State Road Transport Corporation Vs Shri Balwant Regular
Motor Service Amaravati & Ors.
2) AIR 1995 SC 1991 In the matter of State of Maharashtra
Vs. Dingambar
3) (1970) 1 SCC Page 84 Para 32 & 33 In the matter of
Rabindranath Bose & Ors. Vs. The Union of India & Ors.
4) (2008) 146 Company Cases 314 (CLB) In the matter of
Lilly Uppal Vs Shiva Cemetech Pvt.Ltd. & Ors.
The petitioner is raising all issues after the death of the father
which are after thought. It is further submitted that Mr.R.C.Shah
and Mr.Iyengar have been representing M/s. Eros Theatre and
Restaurant Private Limited and M/s. Cambata Helicopters Pvt.Ltd.
which are the members of the R1 in several general meetings of the
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R1 held from time to time. Mere inadvertent error of recording
incorrect name of the member would not invalidate the minutes of
the general meeting, their resolutions and the other business
conducted at such general meetings. He submitted that on the one
hand the petitioner is alleging that charge on all the assets of the
Company has been created by the respondents, on the other hand
the petitioner has failed to produce any of the documents under
which such alleged charge has been created. Further, the
remuneration to the Directors/Officers of R1 is in accordance with
the Articles of Association of the Company. The increase in the
remuneration from time to time was approved by the Board of
Directors of the R1. The petitioner was not entitled to receive any
notice of the Meeting of Board of Directors as he was out of India
and in any case he was not concerned about the affairs of the R1
ever since he left India in the year 2000. R1 is being managed in
most professional and profitable manner. R1 is not involved in any
criminal activities as alleged by the petitioner. The proceedings
referred to in para 13 of the petition are currently pending before
the competent court and are being duly defended by R1 and no
finding of guilt has been rendered against the R1 and the matter is
presently sub-judice. The conduct of the petitioner is causing
immense loss and prejudice. Hence the petition deserves to be
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dismissed with exemplary costs. In support of his contentions the
Learned Senior Counsel relied upon the following citations:
1) (1986) 1 SCC 264 In the matter of LIC of India Vs
Escorts Ltd. & Ors.
2) AIR 1965 SC 1535 In the matter of Shantiprasad Jain
Vs. Kalinga Tubes Ltd..
13. The petitioner filed rejoinder and denied the statements
and contents made in the counter affidavit and reiterated the stand
made in the petition. The respondents also filed sur-rejoinder and
denied the averments made in the rejoinder.
14. Heard the Learned Counsel appeared for the respective
parties at a length and perused the pleadings, documents and
citations relied upon by them. Upon hearing them the following
issues are felt for consideration and the same are need to be
addressed:
1) Whether the enhancement of shareholding and
allotment of shares to the respondents are legal and valid?
2) Whether entering into joint venture with Menzies
by the Respondents has any adverse impact to the interest of
the petitioner and other shareholders?
3) Whether the respondents have given full
inspection of the statutory records to the petitioner.
4) To what relief?
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Now I deal with the issue No.1
The grievance of the petitioner that the respondents have increased
the capital of the Company and allotted the shares to the
respondents without allotting to him, thereby violated the Articles
of Association and sought declaration that the EOGMs held on
25.4.2000 and 3.7.2000 are illegal and void. It is contended that
the minutes of the meetings have been fabricated and no procedure
was followed, hence the said meetings are bad and illegal. The
stand of the respondents that the petitioner challenging the
allotments made in the year 2000 after a lapse of more than eight
years, hence the petition is barred by limitation and the petitioner
does not have the locus-standee to challenge the same since the
allotment of shares done when the father of the petitioner and the
2 nd respondent was alive and the petitioner is full aware of the
facts. The petitioner has enclosed the copy of the minutes of the
EOGM dated 25.4.2000. In the said EOGM the Authorised
Capital of the Company has been increased from Rs.12,50,00,000/-
to Rs.15,00,00,000/- and empowered the Board to issue/offer and
allot the equity shares of aggregate amount not exceeding Rs.3
crores to the members. Thereafter, another EOGM was held and
conducted on 3.7.2000 and in the said EOGM the Authorised
Capital of the company was increased from Rs.15 crores to
Rs.21.50 crores and empowered the Board to issue, allot the shares
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to the members. From the perusal of records the said increase and
allotment of shares have been recorded and approved in the
subsequent Board Meetings and the same has been shown in the
Annual Returns filed by the Company. The petitioner himself
admits that he is a shareholder and director of the Company and
took active participation in the affairs of the Company till 2000.
From the minutes of the general meetings from the year 1994, it is
evident that the petitioner was present. It is also admitted by the
petitioner that he shifted to London, thereafter to Switzarland.
From the minutes of the EOGM it is evident that it is not for the
first time the Authorised Capital of the Company was increased
only on 25.4.2000 and 3.7.2000. The Authorised Capital of the
Company was increased in the EOGM held on 4.12.1995 from
Rs.2 crores to Rs.5 crores and in the said meeting the petitioner
was present. Thereafter, the capital was further increased from
Rs.5 crores to Rs.7.50 crores in the EOGM held on 30 th July, 1997
and the petitioner was present at that meeting. Further, the capital
was increased from Rs.7,50,00,000 to Rs.12,50,00,000/- in the
EOGM held on 12.1.1998 in which meeting the petitioner was
present. Further the capital was increased from Rs.12.50 crores to
Rs.15 crores in the EOGM held on 25.4.2000 and further the
capital was increased from Rs.15 crores to Rs.21.50 crores in the
EOGM held on 3.7.2000. The Annual Returns filed by the
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Company for the years 2003-2004, 2004-2005, 2005-2006 and
2006-2007. The increased capital of the Company was shown and
the petitioner’s shares shown as 38,749 for all the years. The
petitioner himself stated that he is not actively participated after
2000. From the records it is clear that whatever decision taken by
the Company is on record and has been reflected in the statutory
records and with the statutory authorities. Once the documents are
filed with the statutory authorities, they become the public
documents. Having non participation in the affairs of the
Company , it is not fault of the respondents. Moreover, the
decisions have been taken during the life time of his father, who
was the Chairman of the Company. I do not find any illegality in
increase of Authorised Capital and allotment of shares. The
petitioner is acquiescent with the acts. It is contended by the
petitioner that the said increase in shareholding is ultra vires of
Article 74 of the Articles of Association. As per the said article,
the new shares will be offered on a pro-rata basis. However, the
petitioner contended that the said article was violated and the
shares were allotted to the 2 nd respondent and others. It is relevant
to extract the Article for better appreciation. The Article expressly
provides that “subject to Article 54 and subject to any discretion to
the contrary, that may be given by the meeting that sanctions the
increase of capital, all new shares shall be offered to the members
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in proportion to the existing equity shares held by them and such
offer shall be made by notice specifying the number of shares to
which the member is entitled and limited a time within which the
offer if not accepted will be deemed to be declined and after the
expiration of such time, or on receipt of an intimation from the
member to whom such notice is given, that he declines to accept
the shares offered, the directors may dispose off the same in such
manner as they think most beneficial to the Company.” From the
plain reading of the Article, it is clear that if the EOGM approves
the increase of authorized capital and empowers the Board to allot
the shares to the members in absolute discretion, it can do so. In
both the EOGMs the resolutions were passed empowering the
Board to take decision. The Board has taken decision accordingly.
I do not find any violation of articles. The Company also
transferred 38,000 shares from the father of the petitioner to the 2 nd
respondent and the same was approved by the Board of Directors
in the meeting held on 27 th Feb., 2000. The issue is answered
accordingly.
Now I deal with the Issue No.2
It is contended by the petitioner that the Respondents
have without the knowledge of the petitioner entered into Joint
Ventures agreement with the Menzies. The petitioner through his
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advocate addressed letter dated 13.7.2009 to the Menzies Aviation
wherein it is stated that they learnt that the Menzies Aviation is
negotiating to enter with some arrangement with the Company for
acquiring its business or purchasing the shares to the existing
shareholders. It is stated in the letter that no person has been
authorized to negotiate with the Menzies. From the documents
filed by the petitioner it is evident that there was lot of
correspondence between the petitioner’s advocate and the
respondent’s advocate. The respondent company vide their letter
dated 16.7.2009 through their advocate addressed to the
petitioner’s advocate, where in it is denied that the Company
sought to enter into a joint venture agreement. It was stated that the
purported joint venture being referred to was, in the context of
ground handling policy of the Government of India which was to
come into effect on 1.1.2009. It was stated that the said policy
was made to known to the officers and the directors of the
company and petitioner had full knowledge of the same and
refused to attend the Board Meeting wherein due authority was
conferred on R2 in that regard. The respondents have categorically
stated in the reply that the proposal for joint venture became
necessary in view of the impending policy of the Government of
India . It is also stated by the respondents that the bids have not
been processed and therefore, there is no proposal for the joint
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venture with the Menzies and the, Respondent No.1 company has
not entered into JV with Menzies Aviation and the said JV has
come to an end. In view of the categorical statement made by the
respondents that the joint venture come to an end and I do not find
it fit to consider to go into the details of this issue in view of the
above and there is no necessity to give any finding.
Now I deal with the issue No.3 & 4.
The petitioner alleges that the respondents have not provided the
inspection of the statutory records inspite of the order of this
Bench. There was sequence of correspondence between the
petitioner and the respondents with regard to the inspection of the
documents. In one of the letters of the petitioner, it has been stated
that in compliance of the order dated 22.10.2009 made by this
Bench, the petitioner recorded receipt of documents in detail. It
also recorded that the respondents have not furnished the
documents forming part of exhibit ‘D’. The respondents have
categorically stated that the statutory records are available at the
registered office of the Company for inspection and it is also stated
that the Annual Returns including directors’ report, profit & loss
account, balance sheet of the Company, were filed with the
Registrar of Companies, on a year to year basis and the same are
public documents. Further, it is submitted that the petitioner has
been given inspection of all the statutory records including the
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minutes of the meetings of the Board of Directors, the minutes of
the AGMs, the minutes of the EOGMs. From the perusal of
documents it is seen that most of the documents have been filed by
the petitioner himself. The petitioner being a shareholder and
director of the Company is entitled to inspect the records of the
Company. The rights are vested in the statute itself. The other
allegation of the petitioner is that no notices have been given for
the Board Meetings and the Board Meetings have been conducted
outside India and the petitioner has to travel thousands of
kilometers to attend the meetings. The defense of the respondents
is that the petitioner had attended earlier Board Meetings which
have been held outside India and he has not raised any disputes in
respect of the Board Meetings which have been conducted outside
India. It is an admitted fact that the petitioner himself stated that
he is now residing in Switzarland. From the documents filed by
the petitioner it is evident that in the Board Meetings held from the
year 1994 till 1999, the petitioner was present. It presumes that the
petitioner had notice of the said meetings. It appears that some of
the meetings have been held at the registered office of the
Company in which the petitioner was present. It is not the case of
the petitioner that the notices have not been given since he become
a director. From the documents it is evident that the petitioner was
present in the Board Meeting held on 27.2.2000 which was held at
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London. In the said Board meeting the transfer of 38,000 equity
shares in favour of R2 has been approved. Further, the petitioner
was also present in the Board meetings held on 2.6.2000 at
Virginia and also the Board Meeting held on 12.7.2000 at Virginia.
All those meetings held outside India and the petitioner did not
raise any issue of that. Thus, it is clear that the petitioner did
receive the notices for the said board meetings held outside India
and outside the registered office of the Company. The Learned
Counsel for the petitioner relied upon the judgements to show that
failure to give notice reflects a conduct lacking in probity as
decided in Dr.Kamal K.Dutta Vs. Rubi General Hospitals
Pvt.Ltd.. The judgements cited by the Learned Counsel for the
petitioner are not of much assistance to the facts of the case. The
Company registered in India, however the Board meetings are held
outside India. The petitioner as well other directors also reside
outside India. As per Sec.286 (1), notice of every meeting of the
Board of Directors 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. According to the said provision the notice
is to be given to directors who reside in India, at their usual address
in India. In the present case all the directors reside outside India.
Having attended some Board Meetings outside India, the petitioner
now cannot allege that he has not received notices for the said
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Board meetings and there is no substantial evidence to prove that
the notices have not been received by him. In absence of the same,
I do not accept the stand of the petitioner. Further, I do not find any
force in the allegations of the petitioner. Hence I negate the issue.
The petitioner prayed this Bench that he will look after the affairs
of the Company residing in Mumbai/India on the ground that none
of the directors is residing in India. The Board of Directors is
competent to decide who is to manage the affairs of the Company.
It is their exclusive domain and this Bench will not interfere in the
affairs of the Company. The other allegation of the petitioner that
he was not provided the documents and he was non accessible to
the records thereby he contended that the respondents have
excluded him from the affairs of the Company. The petitioner
being a member/shareholder and director of the Company is
entitled to inspect the statutory records of the Company as per law.
Mere non providing the copies of documents and non accessible to
records does not imply that he was excluded from the affairs of the
Company. Prior to 2009 there is no iota of evidence that he wanted
to inspect the records and the respondents have refused the same.
Further, the petitioner alleged that he was not paid dividend inspite
of the fact that the Company is making profits. This allegation has
come for the first time in the petition. It is for the Board to decide
and declare the dividend to its shareholders. This Bench will not
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interfere in the matter of dividend. Thus, the issue 3 & 4 answered
accordingly. On the overall, the petitioner has not made out any
case either on oppression or mismanagement and the petition is
liable to be dismissed. Accordingly, the petition is dismissed. No
orders as to costs. All the interim orders stand vacated and all the
applications stand disposed off.
15. The Learned Counsel for the petitioner relied upon the
following citations. Now I deal with the same.
In the matter of Navin R.Shah, (supra) the CLB was of
the view that there was no attendance register to substantiate that
the petitioner was present in the meeting. However, in the present
case the challenge to the allotment was made in the year 2009
pertains to the year 2000 and the petitioner is aware of those facts
and had not challenged the same at appropriate time and the same
is being under challenge belatedly and it is held that the petitioner
is acquiescent of the same. Hence the said decision is not of much
assistance to the facts of this case. In re: Sakal Papers, the Apex
Court ordered compensation in lieu of rectification of register. The
facts of that case are entirely different and are not of much
assistance to the facts of this case.
In the matter of Tara Properties, it was the case of the
petitioners that the respondents acted with an object to grab control
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of Company and its assets and properties. In the present case,
there is no such case made out by the petitioner that the
respondents try to grab the Company. Hence the said decision is
not applicable. The other citations relied upon by them are on the
issue of notice. Since the petitioner himself admits that he is not
actively participated in the affairs of the Company from 2000
onwards and the respondents have categorically stated that the
petitioner is aware of the meetings and one of the Board Meeting
held on 26.8.2009 the petitioner was present in London but did not
participate. I do not see any reason that the petitioner is not aware
of the Board Meetings.
16. The citations relied upon by the respondents on the
point of acquiescence/waiver are much assistance on the legal
point, more particularly, (1995) Supreme Court 1991 wherein the
Apex Court held that no person is entitled to obtain the equitable
relief under 226 of the Constitution of India, if his conduct is
blameworthy because of latches, undue delay, acquiescence,
waiver and the like. As already held the petitioner is aware of the
facts about the allotment of shares and transfer of shares in favour
of the respondents during the lifetime of father of the petitioner. It
is also a fact that the said allotments made in the EOGMs have
been approved in the Board Meetings held later to that. It is also a
fact that the Company has filed its statutory returns with the
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authorities, reflecting the increase of capital and allotment/transfer
of shares in the year 2000. Hence, I do not accept the stand of the
petitioner that he knew such allotments only in the year 2009.
Dated this the 16 th day of May, 2011
(KANTHI NARAHARI)
MEMBER
CP 118/2009
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