before the company law board - Company Law Board Mumbai Bench

53. It is further submitted that the petitioners decided to inspectthe records of the R1 with the ROC and inspected the records of theR1 on 10 th April, 2008 and shocked to know that further 49,960equity shares have been allotted by R1 Company and the paid upshare capital has been increased to 50,000 equity shares. Thepetitioners have also come to know that R2 to 6 are using the propertyof R1 situated at Andheri (East), Mumbai for their own personal useand not for the purpose of the business of R1; and it is found thatthere is no revenue generating for R1 which is clear and unambiguouscase of diversion and siphoning off the funds of R1 Company. Thepetitioners have also come to know that the R2 to 6 have given theproperty of R1 Company situated at Andheri (East), Mumbai on leaseto R7 without the knowledge and consent of the petitioners. Thepetitioners requested the R2 to 6 as well as the R7 to produce thecopy of the Lease Agreement entered into between the R1 and R7.The petitioner No.1 has come to know from the correspondenceexchanged with the R7 that the said purported lease agreement wasapproved in the alleged Board Meeting held on 15 th December, 2005while the fact is that the petitioner No.1 never received any notice ofthe said alleged Board Meeting of the R1 Company. The respondentsare using the R1 Company as a vehicle for their personal enrichment.The petitioners have now also learnt that as a part of their design todeny and deprive the legitimate rights and expectations asCP 15/2008P Exports

6shareholders, as also of the fruits of their labour and vision, the R2 to6 have been siphoning away valuable assets and rights of the R1Company. The sole motive of R2 to 6 is to exclusively take over theR1 and its management to the exclusion of the petitioners, with theultimate aim and objective of converting the Company into theirpersonal business for their personal benefits and enhancement. It isfurther submitted that R2 to 6 are not interested in the welfare andwell being of the R1 but is actively engaged in illegalities andmisconduct and misappropriating assets to their personal accountsunder his control which is prejudicial to the R1 and the petitioners asthe 50% shareholder of R1. Such actions are bound to result intowinding up of the R1. The Learned Counsel further submitted thatthe respondents admitted the fact that the petitioners and therespondents are equal shareholders. After Sept., 2003 the petitionerswere excluded from the management and the respondents are only inthe management. The R2 appointed R3 as director. He contendedthat there must be clear denial in respect of pleadings if there is noadmission either denial or admission it amounts to admission of factand in support thereof he relied upon the following citations:CP 15/2008P Exports(1) AIR 1964 SC 538 In the matter of Badat & CompanyVs East India Trading Company at Para 11 & 13. (2) AIR 2004SC 230 In the matter of Sushil Kumar Vs. Rakesh Kumar. Headnote ‘G’.

74. Respondents have filed detailed reply to the petition. ShriMadon, Learned Senior Counsel narrated the brief facts andsubmitted that the present Petition proceeds on the basis of totallyfalse and/or misleading allegations to the effect that the Petitionersare the shareholders and are entitled to act as directors and have aninterest in the property and asset owned by the Gyandev SadhCompany. The Petitioners have also suppressed from this Hon’bleBench that in fact and on the contrary, by and under a familyarrangement arrived at inter alia between the Petitioners and therespondents, on 30 th August 2004 and 11 th September 2004, it hasbeen inter alia agreed between the parties that the shares held in thename of the Petitioners belong to Mr. Bazzardev Sadh and thepetitioners shall resign as directors of the Respondent No. 1Company. The said family arrangement/settlement has beensubstantially implemented and pursuant to such implementation, interalia, the possession, of the property held in the name of the GyandevSadh Company has been handed over to the Respondents and they arein exclusive use, occupation, possession and enjoyment. Therespondents are receiving and appropriating the income and profits aswell as making payment of the outgoings in respect of suchproperties. Since the Petitioners have failed and / or neglected and /ordelayed completing the remaining part of the implementation, theCP 15/2008P Exports

8respondents have filed a Suit in the Hon’ble High Court being SuitNo. 1937 of 2008. The Petitioner No. 1 and R2 are brothers and sonsof late Mr. Parmeshwar Narain Sadh. The Bazzardev Sadh Group andthe Gyandev Sadh Group are parties to the familyarrangement/settlement and accordingly the division has taken placein the following manner, M/s. Ananya Fashions Pvt. Ltd., M/s. ArshFashions Pvt. Ltd., M/s. Parmeshwar Exports Pvt. Ltd. (hereinafterreferred to as “the Bazzardev Sadh Group Companies”) and one M/s.Club-3 Apparels Pvt. Ltd. (hereinafter referred to as “the GyandevSadh Group Company”) wherein the Bazzardev Sadh Group and theGyandev Sadh Group held more or less 50% share each. Theproperties held in the name of the Bazzardev Sadh Group Companies,by and under the family arrangement/settlement have been allotted tothe Bazzardev Sadh Group and the property held in the name of theGyandev Sadh Group Company, has been allotted to the GyandevSadh Group. As per such family arrangement/settlement, the sharesheld by the Gyandev Sadh Group in the Bazzardev Sadh GroupCompanies belong to and have to be formally transferred in favour ofthe Bazzardev Sadh Group and similarly, the shares held by theBazzardev Sadh Group in the Gyandev Sadh Group Company belongCP 15/2008P Exports

9to and have to be formally transferred in favour of the Gyandev SadhGroup.5. To resolve the disputes and differences between thepetitioners and the respondents, the above family arrangement cameto be arrived at. It is an admitted fact that the Bazzardev Sadh Groupand the Gyandev Sadh Group held certain, inter alia, immovableproperties, either in the individual names of the members of thefamily or in the name of partnership firms or limited companies.Certain disputes and differences arose between the parties, inter alia,in respect of such immovable properties. The parties referred suchdisputes and differences to the mediation of their family Advocate &Solicitors and their family Chartered Accountants for division and/orsegregation and/or separate allotment of such properties, among thesaid 2 brothers and their respective family members. Pursuant to suchmediation, family arrangement/settlement was arrived at between theBazzardev Sadh Group and the Gyandev Sadh Group, whereby siximmovable properties were divided and/or segregated andconsequently allotted to the Bazzardev Sadh Group and the GyandevSadh Group. The heads or main features of such familyarrangement/settlement have been recorded in writing byMemorandum duly signed by the parties and such familyarrangement/settlement has been substantially implemented. Pursuantto such family arrangement/settlement and in implementation thereof,CP 15/2008P Exports

10inter alia the possession of the properties coming to the share of eachGroup has been handed over to each Group and each of the saidGroups are in exclusive use, occupation, possession and enjoyment ofthe properties coming to their respective share. The concerned Groupis also in complete control and management of suchcompany/companies and is enjoying the income, profits and assets ofsuch company. Virtually the only part of the implementation thatremains pending of such family arrangement/settlement, being thatthe parties are required to execute certain formal documents toformally convey title in respect of such properties coming to the shareof respective Groups and/or to execute documents inter alia necessaryfor formal retirement by the concerned members of each group, aspartners of the concerned partnership firm and/or formally transferthe shareholding held by the concerned members of each group. Mostof the documents required to be signed by the Bazzardev Sadh Groupin respect of the properties coming to the share of the Bazzardev SadhGroup, have in fact been executed by them. The Gyandev SadhGroup, however with mala fide intention and ulterior motive, havefailed and/or neglected and/or avoided to execute such documents andconsequently to complete the implementation of the familyarrangement/settlement arrived at between the parties and is nowappear to be interested in resiling and/or wriggle out of the familyarrangement/settlement already arrived at and not implementing theCP 15/2008P Exports

11remaining part of the same. The Bazzardev Sadh Group therefore wasconstrained to file the said suit before the Hon’ble High Court.Needless to state that the respondents i.e. the Bazzardev Sadh Grouphave always been ready and willing to fulfill their part of theobligations under the family arrangement/settlement and toimplement the same as agreed including by executing appropriatedocuments for formally conveying the title in respect of the propertiescoming to the share of the Petitioners i.e. the Gyandev Sadh Group.6. In or about November 2007, to the shock and surprise ofthe said respondents viz. the Bazzardev Group, the said respondentslearnt that the Gyandev Sadh Group, and in particular the concernedmembers of Gyandev Sadh Group indulged into several acts ofoppression and mismanagement in respect of the income andproperties of and belonging to another Pvt. Ltd. Company of the SadhFamily Group viz. M/s. River Technoplast Pvt. Ltd., not forming apart of the said family arrangement/settlement already arrived at. Inthe circumstances, the Bazzardev Sadh was constrained to file apetition being CP No. 6 of 2008 under section 397 & 398 ofCompanies Act, before the Company Law Board, Principal Bench atNew Delhi. The Hon’ble Company Law Board has passed appropriateorder granting protection to the petitioner therein.7. The Learned Senior Counsel made his submissions to thespecific allegations made in the petition. He submitted that Mr.CP 15/2008P Exports

12Varundev Sadh i.e. R3 is not a Director of R1 Company although R4has been appointed as Director of the Company on or about 29 thSeptember 2007. Similarly, R6 is not a shareholder of R1. It isParmeshwar Fashions, a partnership firm who is the shareholder ofParmeshwar Exports Pvt. Ltd. It is also incorrect that R7 is thelicensee of any premises owned by the R1 Company. The License infavour of R7 has been terminated long ago and from December 2007onwards Global Travel Solutions Pvt. Ltd. is the licensee in respect ofthe basement, ground and first floor and thereafter the premises on thesecond floor has also been given on license to the said licensee,pursuant to agreement dated 7 th November 2007 and 17 th December2007. It is reiterated that in view of the said familyarrangement/settlement no question arises of the shareholding patternof the R1 Company remaining the same and under the said familyarrangement/settlement the said company and the properties andassets held in the name of the said company solely and exclusivelybelong to the Bazzardev Sadh Group and the shares formerly held inthe name of the members of the Gyandev Sadh Group are formerlyliable to be transferred in favour of Mr. Bazzardev Sadh. After thesaid family arrangement/settlement the petitioners are not concernedwith the said company or its management and/or its affairs.However, the staff of the company as in a routine manner sent allnecessary accounts to all the shareholders including the Petitioners asCP 15/2008P Exports

13their names continue to be shown as shareholders of the company,save and except in respect of the year 2007-2008, as the accounts forthe same are not yet audited and finalized. The R6 is one of theshareholders of the R1 Company. It is false to state that theRespondents are using the property of the company for their personaluse and the same is being used for the purpose of the company as setout in the books of accounts of the company. In any event, it is noneof the business of the petitioners as under the said familyarrangement/settlement the said company, the management, controlthereof as well as the properties, assets and income solely andexclusively belong to the Bazzardev Sadh Group and the GyandevSadh Group have no right, title or interest of any nature whatsoever inrespect of the same. When the property was given on licence to theRespondent No. 8, the same was appropriately recorded in theminutes of the meeting of the Board of Directors.8. The Learned Senior Counsel further submitted thatpetitioner admitted at para 2.5 of the petition that the R1 is a familybusiness and quasi partnership between the Petitioner No.1 familyand Respondent No.2 family. The family settlement dated 30 thAugust, 2004 and 11 th Sept., 2004 are binding upon all the parties. Itis also pertinent to note that all the properties/assets reflected in thefamily settlement have been purchased out of a common pool offunds/assets jointly owned by the Sadh Family.CP 15/2008P ExportsOn this point he

14relied upon the decision of the Apex Court reported in (1) AIR 1976SC 807 In the matter of Kale & Ors Vs. Dy.Director ofConsolidation & Ors.CP 15/2008P ExportsIt is held “Family arrangements aregoverned by principles which are not applicable to dealings betweenstrangers. The Court, when deciding the rights of parties underfamily arrangements or claims to upset such arrangements, considerswhat in the broadest view of the matter is most for the interest offamilies and has regard to considerations which in dealing withtransactions between persons not members of the same family, wouldnot be taken into account. Matters which would be fatal to thevalidity of similar transactions between strangers are not objectionsto the binding effect of family arrangements.” (2) AIR 1971 SC 1337In the matter of Shambhu Prasad Singh Vs. Phool Kumari & Ors.Para 9. (3) AIR 1966 SC 1836 In the matter of Maturi Pullaiah &Anr. Vs. M.Narasimham & Ors. Para 17. (4) AIR 2000 SC 2488 Inthe matter of Harishankar Singhania & Ors. Vs. GaurHarisinghania & Ors. Para 43, 44. (5) (2004) 9 SCC 204 In thematter of M.S.Madhusoodhanan & Anr. Vs. Kerala KaumudiPvt.Ltd. & Ors. Para 137, 139.He further contended that thepetitioners sought declarations and no relief can be granted in view ofSec.34 of Specific Relief Act and relied upon the following decisions:1) Vol.XIII MADRAS SERIES Page 75 In the matter ofKombi Vs Aundi & Ors. 2) AIR 2004 Jharkhand 92 In the matter

15of Chhabi Dushadh & Anr. Vs. Bhuneshwar Pandey & Anr. Para16. The Learned Counsel further submitted that the petitionerobtained ex-parte orders from this Bench which he is not entitled toand relied upon the decisions: (1) (1994) 1 SCC Page 1 In the matterof S.P. Chengalvaraya Naidu Vs. Jagannath & Ors. Para 5.(2) (2006) 7 SCC 416 In the matter of Hamza Haji Vs. State ofKerala and Anr. Para 24. (3) (2007) 4 SCC 221 In the matter ofA.V.Papayya Sastry & Ors. vs. Government of A.P. & Ors. Para21, 29.9. While rejoining to the submissions of the respondents, theLearned Counsel for the petitioner submitted that MOU cannot bepart of Corporate Governance and not binding on shareholders orCompany and relied upon the following decisions. (1) AIR 1992 SC453 In the matter of V.B. Rangaraj Vs. V.B.Gopalakrishnan. Para7 and 9. (2) AIR 1955 SC 74 In the matter of Mrs.Bacha F. GuzdarVs. Commissioner of Income Tax. (3) 2000 Comp.Cases Vol 100page 19 (Bombay High Court) In the matter of Rolta India Limited& Anr. Vs. Venire Industries Limited & Ors. Page 32. (4) 2003Comp.Cases Vol.113 Page 298 CLB In the matter of RadheshyamTulsian & Ors Vs. Panchmukhy Investments Limited. It is toshow “The Company Law Board will not consider privateagreements between parties.CP 15/2008P ExportsMemorandum of Understandingbetween shareholding groups will not be considered.” (5) (2010) 7

16SCC Page 1 In the matter of Reliance Natural Resources LimitedVs. Reliance Industries Limited. Para 32910. The Learned Counsel for the petitioner relied upon thefollowing citations during the course his arguments: (1) (2005) 7 SCC764 In the matter of Ajit Kumar Nag Vs. General Manager, IOC.Para 44. (2) (2007) 1 CLJ 437CLB In the matter of Smt.VijayKhanna & 8 Others Vs. V.K.Kafoor & Associates Pvt.Ltd.. Para5. (3) (2009) 8 SCC 257 In the matter of Sardar Associates & Ors.Vs. Punjab & Singh Bank & Ors. Para 27 (4) (2011) 1 SCC 466 Inthe matter of Motiram (Dead) through Lrs. Vs. Ashok Kumar &Anr.. (5) (2010) 1 SCC 83 In the matter of Grasim IndustriesLimited & Anr. Vs. Agarwal Steel. Para 6. (6) (2003) 2 SCC 355 Inthe matter of B.L.Sreedhar & Ors. Vs. K.M.Munireddy (Dead) &Ors. Para 13 & 5. (7) (2009) 12 SCC 378 In the matter of State ofOrissa & Ors. Vs. Haripriya Bisoi. Para 40.11. Heard the Learned Counsel appearing for the parties andperused the pleadings, documents and citations relied upon by them.After analyzing the pleadings the following issues are felt forconsideration and the same are needed to be addressed.1) Whether the R1 Company is run on the basis ofprinciples of quasi partnership?CP 15/2008P Exports

172) Whether the respondents denied the inspection ofrecords and registers to the petitioners?3) Whether this Bench has any power to direct theparties to enforce the family arrangement/settlement?4) To what relief?Now I deal with the issue No.1.CP 15/2008P ExportsThe R1 Company was incorporated 27 th April, 1976 as aprivate company and the transfer of shares are restricted. It is anadmitted fact that the R1 Company consists of only family membersof the petitioner No.1 and Respondent No.2 and there is no otheroutside person. The petitioners contended that they are holding 50%and the respondents also holding 50% of the paid up capital and theR1 Company is a family business and quasi partnership between thePetitioner No.1 family and Respondent No.2 family and also averredthat the same ratio of 50% each will be maintained in future as well.However, from the Articles it is seen that there is no such clause orprovision with respect to the understanding that the 50% ratio will bemaintained in future between the petitioners and the respondents.The respondents in their reply have stated that in view of the familyarrangement no question arises of the shareholding pattern of R1Company remaining the same and contended that according to thefamily arrangement, properties and assets held in the name of the R1

18Company belong to the Respondent Group. The respondents in theirrejoinder to the reply filed by the defendants to the Notice of MotionNo.2487 of 2008 in Suit No.1937 of 2008 before the Hon’ble HighCourt of Bombay at para 5 wherein it was averred that “it is alsopertinent to note that all the properties/assets reflected in the familysettlement have been purchased out of a common pool of funds/assetsjointly owned by the Sadh family.” Thus the respondents clearlyadmitted that all the properties/assets have been purchased out of acommon pool of funds jointly owned by the Sadh family. Thepetitioners have filed search report dated 10 th April, 2008, it reflectsthat the petitioner No.1 and the respondent No.2 and other twopersons are directors of the Company and 1 stCP 15/2008P Exportspetitioner andRespondent No.2 still continuing as directors. According to theshareholding pattern of the Company, the petitioners’ group holds25,000 shares and the respondents’ group holds 25,000 shares.There is no denial to this report and it further strengthens the standthat the petitioners’ group and the respondents’ group hold 50% each.Moreover the respondents have neither specifically denied noradmitted with respect to the averment made by the petitioners that theR1 Company is a family business and a quasi partnership exceptstating that in view of family arrangement the question of 50% ratiodoes not arise. The Learned Counsel for the petitioners contended thatthere must be clear denial in respect of pleadings, if there is no

19admission either denial or admission it amounts to admission of factsand relied upon the judgements cited supra. I agree with thesubmissions that the respondents have not denied neither admitted thefact of family business and quasi partnership. Therefore, I am of theview that the R1 Company is a family run company and the principlesof quasi partnership will apply since the petitioners and therespondents hold 50% each and there is no change in the shareholdingpattern. Accordingly the issue is answered.Now I deal with the issue No.2:CP 15/2008P ExportsThe petitioners contended that the respondents have notprovided the inspection of the records and registers to them. It is theircase that they had signed the Annual Accounts for the year ended31.3.2003 and after that the R2 has not signed any Annual Accountsfor the year ended 31 stMarch, 2004 to 2008. The respondentscontended that the petitioners are not concerned with the managementor its affairs after the family arrangement dated 30 th August, 2004 and11 th Sept., 2004. However, they sent necessary accounts to all theshareholders including the petitioners as their names continue to beshown as shareholders of the Company. The respondents along withtheir reply produced documents wherefrom it is seen that there iscorrespondence between the respondents’ solicitors and thepetitioners. It is relevant to mention that the Respondent No.2 filedCP No.6 of 2008 before the CLB Principal Bench, New Delhi in the

20month of January, 2008 and the petitioners have filed CP Nos.15, 16and 17 of 2008 before this Bench in the month of May, 2008. Afterfiling of the petitions the petitioners’ solicitors and the respondents’solicitors have addressed letters to each other. The petitioners havesought inspection of the documents vide their letters dated 23rd June,2008 and 26 th June, 2008 addressed to the Company. The respondentsthrough their solicitors have replied vide para 10 wherein it is statedthat “in the circumstances aforesaid kindly let us know how youclaim to make or maintain any request for inspection of documentspertaining to the said Company? After receipt of your response weshall thereafter deal with your request on merits.” From thecorrespondence it is seen that there is no clear intention of therespondents to provide inspection of the documents to the petitioner.It is an admitted fact that the petitioners are 50% shareholders of theCompany and they are entitled to inspect the records and registers inthe capacity as shareholders and directors. Therefore, it is herebydirected the Company to provide the inspection of registers andrecords to the petitioners in accordance with law. The petitioners arealso entitled to the notices for the Board and General Meetings as perthe Articles of Association and the law. Accordingly the issue isanswered.Now I deal with the issue No.3CP 15/2008P Exports

21CP 15/2008P ExportsThe respondents in their counter dated 18 th July, 2008heavily relied upon that under a family arrangement arrived atbetween the 1 st petitioner and the 2 nd respondent on 30 th August, 2004and 11 th Sept., 2004, according to which the properties were dividedbetween them. The respondents enclosed the said family arrangementalong with their reply. The family arrangement dated 30 th August,2004 wherefrom it shows that the petitioner No.1 and RespondentNo.2 and solicitor and Chartered Accountants present and shown theimmovable properties divided and distributed between the petitionerNo.1 and Respondent No.2. The family arrangement dated 11 th Sept.,2004, is in continuation of the earlier arrangement dated 30 th August,2004. However, it is captioned as Sadh Family Business Separationand signed by the petitioner No.1 and Respondent No.2. Thepetitioners have not mentioned about the said family arrangement inthe petition and no relief to that effect has been sought. Therespondents in their reply stressed that the family arrangement hasbeen substantially implemented and pursuant to such implementationthe possession of the property held in the name of the 1 st petitionerhas been handed over to the respondents and the respondentsappropriating the income and profits. It is also stated that since thepetitioners failed and neglected and delayed in completing theremaining part of the implementation, the respondents filed Suit beingNo.1937 of 2008 before the High Court of Bombay. It is further

22stated that in view of the family arrangement the present petition isnot maintainable and the petitioners have no subsisting right, title orinterest of any nature in the shareholding and the management of theproperty which belongs to the respondents. The respondents havedetailed out the properties/companies which belong to the Sadhfamily in the reply. The petitioners have filed rejoinder on 23 rd Sept.,2008 and stated that the Suit was filed by the respondents herein as acounter blast to the petition. It is stated in the rejoinder that the R1Company is an artificial legal entity and has nothing to do with anyalleged family business separation between the shareholders. Thepetitioners also filed an additional affidavit dated 12 th April, 2010 byenclosing affidavit in reply filed by the defendants (petitioners herein)to notice of Motion No.2487 of 2008 dated 13 th January, 2010. In thesaid reply it is stated that the suit filed by the plaintiffs (respondentsherein) seeking specific performance against the independent entitiesand the same cannot be enforceable. The stand of the petitioners hasmuch bearing on the stand taken by the respondents with regard to thefamily arrangement before this Bench in their counter affidavit. Theletter dated 15 th Sept., 2006 addressed by the 2 nd respondent toKuwait Petroleum Corporation, Mumbai wherein it is stated that “weregret to inform you that we have not reached any family agreementwith Mr.Gyandev Sadh as yet. If he has informed you so he ismisleading you.” The petitioners have relying upon this letter andCP 15/2008P Exports

23contended that the respondents also have admitted the fact that theyhave not reached any agreement with the petitioner. Whatever maybe the reason, whether this Bench can go into the merits of the familyarrangement/settlement in a petition under Sec.397-398 of the Actwhen such family arrangement is sub-judice and subject matter of theHon’ble High Court of Bombay. In this regard the relevant provisionis necessary to emphasis. Any member of the Company whocomplains that the affairs of the Company are being conducted in amanner prejudicial to public interest or in a manner oppressive to anymember or members, may apply to the CLB by invoking theprovisions of Sec.397 of the Act and in case of mismanagement in theaffairs of the Company the member can invoke the provisions ofSec.398 of the Act, provided they qualify the required criteria asenumerated under Sec.399 of the Act. The proceedings before theCLB are summary in nature and the Bench upon adjudicating thematter after completion of its pleadings can pass orders as vestedunder Sec.402 to put an end to the affairs complained thereof to avoidwinding up of the Company in equitable manner. It is well settledlaw that if there is conflict between law and equity the law as suchmust prevail as held by the Hon’ble Apex Court in the matter ofVijay Narayan Thatte & Ors Vs State of Maharashtra & Ors.reported in ( 2009) 9 SCC 92. The legislation vested the powers toCLB, to deal with the oppression and mismanagement in the affairs ofCP 15/2008P Exports

24the Company complained by any member or members. In the presentcase there is no controversy/conflict in respect of law and equity. Theprovision of the Companies Act is very clear on this aspect. But eventhough the petitioners have not sought any relief seeking enforcementor implementation of family settlement in the petition, howevertaking into consideration the law of equity, the stand of therespondents that the petition is not maintainable on the basis of familyarrangement arrived between them, is necessary to be addressed.Admittedly the respondents have filed suit before the Hon’ble HighCourt of Bombay for specific performance of familyarrangement/settlement. Even otherwise this Bench sitting under thejurisdiction of 397-398 cannot decide the private agreements,contracts and settlements, more particularly when the Company is nota party to it. I am of the view that this Bench has ample power underSec.402 to pass an order in regulating the affairs of the Company inits best interest avoiding winding up provided that the facts to do theequity shall emerge from uncontroversial facts and bare truth. Asstated supra the family settlement is not the subject matter ofoppression and mismanagement and this Bench has no jurisdiction.The Learned Counsel for the respondents relied upon variouscitations contending that the parties have acted upon the familysettlement and the petitioners have received the monies and have notexpressed any grievance after the family agreement and it is bindingCP 15/2008P Exports

25on them. On the other hand the Learned Counsel for the petitionerrelied upon various citations on the point that the MOU is not bindingon the shareholders. The Hon’ble Apex Court in the matter of V.B.Rangaraj (supra) the Apex Court held that the private agreementswhich are contrary to the Articles are not binding either onshareholders or on the Company. The CLB in the matter of RadheShyam Tulsian & Ors (supra), is of the view that the Company LawBoard will not consider private agreements between parties. Therecent judgement of the Apex Court in the matter of RelianceNatural Resources Limited vs. RIL (supra) at para 329 held thatMOU is a private pact between the members of Ambani Familywhich is not binding on RIL. I follow the law laid down by the ApexCourt that the private agreements between the parties, however, willnot be considered by the CLB. The private agreements can neither besought to be enforced nor their breach give any cause of action to filea petition under Sec.397-398 of the Act. The said provisions are theexclusive domain of the members and shareholders of the Companyagainst acts of oppression and mismanagement in the affairs of theCompany, but cannot seek any specific performance of privateagreements. Since I hold that the family arrangement/settlement isnot within the purview of this Bench, therefore the citations reliedupon by the respondents will not apply squarely to the core point.Accordingly, the issue is answered.CP 15/2008P Exports

26Now I deal with the issue No.4CP 15/2008P ExportsOne of the allegations in the petition is that theproperty of the R1 Company situated at Andheri (East), Mumbai isused by the Respondents 2 to 6 for their own personal use and not forthe benefit of the R1 Company. It is also contended that the saidproperty is given on lease to the respondent No.7 without theknowledge and consent of the petitioners. The respondents havedenied the misusing of the property, however, admitted that it wasgiven on license to Respondent No.7 and the same was recorded inthe minutes of the meeting of the Board of Directors. From thesequence of documents filed by the petitioners it is evident that theproperty which is referred by the petitioners was allotted to the R1Company and in that regard a letter was addressed by the ClothingExport Processing Zone on 21.6.1983. Thereafter the R1 Companybecame a member of the Society. The petitioner vide his letter dated26 th August, 2006 addressed to the Chairman, WICEL stating that theproperty is owned by the R1 Company and he is the Chairman of theCompany and also 50% shareholder of the same and endorsed thatthey have a family dispute on all the properties including the R1.They also stated that the property has not been transferred inanybody’s favour and nobody remains the sole owner. The 1stpetitioner vide his letter dated 29 th August, 2006 addressed to R7asking them to vacate the premises occupied by them. In turn the R7

27vide their reply dated 13.9.2006 clarified that the R1 Company intheir Board Meeting held on 15 thCP 15/2008P ExportsDecember, 2005 resolved andauthorized the R2 to enter into an agreement and to execute the saidagreement and in exercise of the said power the R2 had entered andexecuted the agreement of lease on behalf of R1 Company andhanded over the peaceful possession to them. They vehementlydenied that the property was occupied illegally. From the reply of therespondents and the reply of the R7 to the letters addressed by thepetitioner it is apparent that the R1 entered into agreement with R7 asan independent entity and not in individual capacity. Therefore,addressing the letters by the petitioner No.1 as shareholder is notcorrect. The R1 Company is only competent to take decision with R7in respect of lease according to the terms and conditions of the leaseagreement. Be that as it may, the respondents stated that leaseagreement has been terminated with R7. In view of the statement Iam of the view that it is a closed controversy with R7. The petitionersin their prayer prayed this Bench to declare all the Board Resolutionsand shareholders’ resolutions passed by the Respondents 2 to 6 fromSept., 2003 are illegal, null and void. It is seen that except the prayerno documents/copies of the Resolutions have been produced beforethis Bench showing that the Respondents have taken decisions whichprejudiced the petitioners. In absence of any evidence, the prayer ofthe petitioners seeking declaration is vague and the same is rejected.

28The petitioners also sought declaration that any agreements to sell,transfer, alienate the property of the R1 Company to be set aside isconcerned, except prayer in the petition they have not given anydocumentary proof to show that the respondents are trying to sell oralienate the property. Therefore, I am of the view that the prayer isvague and baseless hence rejected. The Learned Counsel for thepetitioners during the course of arguments orally submitted that thepetitioners are willing to exit the Company on receipt of fair valuedetermined by the independent valuer whereas in the petition thepetitioner prayed this Bench at para 8.3 that the 50:50 ratio by thepetitioner No.1 family and the Respondent No.2 family should bemaintained in future in all respects. Since I hold that the R1Company is a family business and quasi partnership, the ratio of50:50 should be maintained as it was prior to familyarrangement/settlement if it is not implemented with free will,conscience of the parties. I am of the view that the interest of theCompany is paramount. Irrespective of above, if the parties i.e.petitioners and the respondents act in good faith to resolve theirdifferences and disputes permanently, it would not be an impedimentto any of the observations/views in this order to part ways byamicable means of settlement if necessary by appointing anCP 15/2008P Exports

29independent valuer to value the assets of the Company. Thisobservation is not obligatory. With the above the CP is disposed off.No orders as to cost. All applications stand disposed off. All interimorders stand vacated.(KANTHI NARAHARI)MEMBERDated this the 5 th day of October, 2011.CP 15/2008P Exports