1. In the order I am considering Company Petition No. 97 of 2006 filed by Shri Nagesh Kumar and Smt. Renu Mehra under section 397 of the Companies Act, 1956 (?the Act?) against Nagesh Hosiery Exports Ltd. and others alleging certain acts of oppression and mismanagement.
2. The undisputed facts of the case are Nagesh Hosiery Exports Ltd. (R-1) was incorporated in 1980 having its registered office at G-32, Masjid Moth, Greater Kailash-II, New Delhi. The authorised share capital of the company was initially Rs. 5,00,000 divided into 50,000 equity shares of Rs. 10 each. However, in the year early 1980, the authorised capital of the company was increased from Rs. 5,00,000 to Rs. 20,00,000 divided into 2,00,000 equity shares of Rs. 10 each. The main objects of the company are to carry on business of manufacturing, trading rebuilding, refinishing, exporting, importing and dealing both in wholesale and in retail in tools, articles, substances, plant, machinery and commodities of all kinds.
3. The petitioner?s case is that his father (R-2) and his brothers (R-3 and R-4) are guilty of fraud and manipulation to remove him from the Board and to keep him out of management, the respondents were also responsible for withdrawing various amounts without authority and siphoning the profits of the company at the cost and interest of the other shareholders of the closely held company. It was pointed out that since the image of the family was being tarnished in the society, attempt was made to settle differences by way of memorandum of understanding executed on 10-4-1993, confirming that the company would complete all the pending contracts as well as some contracts which were in the pipeline and that no new order would be taken in the name of Nagesh Hosiery Exports Ltd. or Nagesh Hosiery Exports; all the four parties would do their independent businesses of any kind in any name but would not use the name of Nagesh Hosiery Exports Ltd. or Nagesh Hosiery Exports, till the question of goodwill was decided amongst all the four parties; all the properties including the land, building, machinery, whatsoever assets visible or invisible shall be divided in four equal parts as shares to the parties representing the groups; the operation of the bank account of the company was required to be done with signatures of the two directors and out of those two signatures one signatory was to be R-3 or R-4 and other signatory would have to be R-2 or P-1; the understanding arrived at between the parties was not to be subject to any challenge to any court of law. It was contended that, in view of the memorandum of understanding (?MoU?) the affairs of the company were being pursued accordingly and the respondents were prevented from dealing with the properties except as under the MoU. Status quo with regard to the constitution of the Board of directors and the shareholding were maintained. It was pointed out that sometime in the month of August 2006 the petitioners had come to know that R-3 and R-4 had clandestinely and without authority and without convening the Board meeting of the company, had made an application to the State Bank of India, Civil Lines, Ludhiana, purportedly on behalf of the respondent-company seeking loan to the tune of Rs. 1 crore. Being vitally concerned with the interest of the company the petitioner was constrained to represent to the State Bank of India that the respondent-company was not authorised to seek loan nor authorised to pledge any of the movable or immovable assets/properties of the company. In response to the letter dated 16-8-2006 the R-3 and R-4 replied through their advocate, Mr. C.A.K. Sareen, admitting that the shareholding of the petitioners was duly recorded and correct and that also they had applied for loans/financial assistance to the bank. In the said representation for the first time it was also alleged to the shock of the petitioners that the petitioner No. 1 had been allegedly removed from the directorship in the month of January 2006 and that the intimation to the said effect had been duly lodged with the Registrar of Companies (?RoC?). The petitioners made number of enquiries and also raised the issue as to how P-1 could have been removed and how the understanding arrived earlier by way of MoU could be ignored.
4. Further, Shri Krishna Kumar, the counsel for the petitioner, contended that R-2 and R-3 are guilty of various offences including criminal offences and also owe substantial amounts to various persons taken by them as loan or, amounts not paid during the course of business, indulged by them in their personal capacity. My attention was also drawn to the various proceedings which have been initiated against respondent Nos. 3 and 4 and are pending in various courts/forums (a) a winding up petition has been filed by Vikas Fabrics before the High Court of Punjab and Haryana, against Flow More Apparels (P.) Ltd., inter alia, seeking a decree for more than 43 lakh on account of goods supplied to the respondent-company. The company, Row More Apparels (P.) Ltd., is owned and controlled by R-4 and R-3, who is also the managing director. The High Court of Punjab and Haryana, by an order dated 20-2-1997, directed notice and also directed that the company will not alienate or encumber the assets of the company or dispose of the same in any manner; (b) a petition has been filed by one Mr. G. R. Grover, being a suit for recovery of Rs. 19,64,105 in the Court of Senior Sub-Judge, Ludhiana, against Mohan Agencies, a firm also owned and controlled by R-3 and R-4; R-4 is also party to the said suit; (c) a criminal complaint being complaint under section 138 of Negotiable Instruments Act has been filed against Santa Clause Apparels, a firm whose partners are R-5, wife of R-3 and R-6, wife of R-4. By the said complaint penal action had been sought to be taken against the said two persons for having not honoured the cheque issue by them on behalf of the firm.
5. Shri Sanjay Maria, counsel for the respondents, contended that CP No. 97/06 is not maintainable. This frivolous petition has been filed with mala fide intentions and the petitioners have come with unclean hands before the Company Law Board (?CLB?). It was pointed out that they have been running several business firms, directly and/or indirectly, particularly Nagesh Classic, Nagesh Exclusive and NRS Knitwears, etc., in competition with the respondent No. 1-company for a number of years using the building and plant and machinery located at G. T. Road, Ludhiana, and owned by the respondent No. 1-company wrongly and unlawfully. It was prayed that the petitioners be directed to handover back the possession of the said assets of he respondent No. 1-company. Reliance was placed on the cases of Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad  57 SCL 476 (SC), Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises (P.) Ltd.  72 Comp. Cas. 211 (Kar.); Smt. Abnash Kaur v. Lord Krishna Sugar Mills Ltd.  44 Comp. Cas. 390 (Delhi) (paragraph 2) and it was pointed out that the petitioner seeking equity had failed to do equity. Further, it was contended that the petitioners have suppressed the material fact from the hon?ble CLB that the petitioner has received letter dated 25-8-2006 issued by Mr. V. K. Sareen, advocate, on behalf of the respondents in reply to the letter dated 16-8-2006 issued by Mr. Parveen Garg, advocate, on behalf of the petitioners, to the State Bank of India, Ludhiana, which clearly stated that the said letter issued by the petitioners to State Bank of India, Ludhiana, was blatant act prejudicial to the interest of the respondent No. 1-company; further that around 50 per cent of the building and the plant sad machinery situated at G.T. Road, Ludhiana, which are owned by the respondent-company are in unlawful and wrongful possession of the petitioners and the petitioners have been running competitive business in total disregard to the fiduciary duty towards the respondent No. 1-company, causing huge irretrievable financial and reputation loss to the respondent-company over a period of time; the petitioners have suppressed the material fact that they had filed civil suit before Civil Court, Delhi, on 8-2-2007, after filing above petition, in respect of immovable property situated at G-32, Masjid Moth, Greater Kailash-II, New Delhi, which is also the subject-matter of the above petition; eventually the said civil suit was dismissed by hon?ble Civil Judge, Delhi, on 5-10-2007, and the petitioners had also suppressed this material fact from the hon?ble CLB. Placing reliance on the case of Arun Mehra v. Durga Builders (P.) Ltd.  75 SCL 1 (Delhi - CLB) respondent reiterated their contention that the petitioners who seek equity must do equity. It was argued that the petitioners have not come with clean hands before the Hon?ble CLB and the above petition is not maintainable in law. The above petition is liable to be dismissed and no order in equity can be made by hon?ble CLB; it is well-settled law that the law prevails over the equity. Equity can only supplement the law, but it cannot supplant or override it. Reliance was placed on the case of Raghunath Rai Bareja v. Punjab National Bank  2 SCC 230.
6. Shri Maria placing reliance on the case of Hanuman Prasad Bagri v. Bagree Cereals (P.) Ltd.  4 SCC 420, contending that the petitioners have failed to state any facts which justify the making of a winding up order on the ground of it being just and equitable being indispensible for any petition under sections 397 and 398 of the Act.
7. Further, it was argued that the petitioners have filed the above frivolous petition in respect of removal of the P-1 as a director of the respondent No. 1-company; petition is qua director and not qua shareholding; the petitioners have failed to produce any evidence in support of the above petition as required under section 399 of the Act; the petitioners have tried to mislead hon?ble CLB by stating different percentage of shareholding in the respondent No 1-company without producing any evidence for the same. It was stated that they hold around 20.47 per cent of the total equity shares of the respondent No 1-company as on the date of the above petition but they have purportedly claimed 25 per cent and 27 per cent of the total equity shares of the respondent No. 1-company in their additional affidavit dated 25-9-2007 without stating number of equity shares held by them and the mode of holding and evidence of holding such purported percentage.
8. Further, it was pointed out that the petitioners are habitual litigants and are doing forum shopping from one court to another court which is clear from the fact that the petitioners have filed the above petition before hon?ble CLB and then filed the civil suit before Civil Judge, Delhi, on the same subject-matter; the petitioners have raised the dispute out of purported MoU dated 10-4-1993 before hon?ble CLB, which is the subject-matter of arbitration proceedings. The petitioners have not stopped here and they have entered into purported compromise with R-2 in respect of dissolution of partnership firm - Nagesh Exclusive have again tried to, muddle up the issue of unlawful and wrongful possession of the building and plant and machinery located at GT Road, Ludhiana, and owned by respondent No. 1-company with the purported compromise in respect of dissolution of partnership firm - Nagesh Exclusive, in which the respondent No. 1-company is not the party and it was contended that the petition deserves to be dismissed on this ground alone.
9. As regards the purported MoU between family members, it was argued that the petitioners have raised the dispute in respect of purported MoU dated 10-4-1993 in the above petition and referred to the said MoU, which is around thirteen years old, again and again, at several places, in the above petition; the respondent No 1-company is not party to the said purported thirteen years old MoU, any such reference is also barred due to delay and laches. Reliance was placed on the case of V. B. Rangaraj v. V. B. Gopalakrishnan AIR 1992 SC 453.
10. Further, it was argued that the petitioners have filed the above petition with ulterior motive to recover their alleged investment in the equity shares of the respondent No. 1-company which is outside the scope of sections 397 and 398 of the Act. Reliance was placed on the case of Palghat Exports (P.) Ltd. v. T.V. Chandran  79 Comp. Cas. 213 (Ker.).
11. Further, it was pointed out that the petitioners have filed and produced the copies of complaints, suit, etc., of the personal cases of commercial nature against R-3 and R-4, in which respondent No. 1-company is not the party, to show that the said cases involves moral turpitude. It was submitted that the personal case of commercial nature does not normally involve moral turpitude.
12. It was pointed out that petition has been filed by P-1 and P-2 respectively. However, P-1 has not signed the rejoinder and the additional affidavit, dated 25-9-2007 and February 2008, respectively, therefore, petitioner No. 1 has abandoned the petition altogether.
13. Shri Krishan Kumar, counsel for the petitioners, responding to the contentions on maintainability of the company petition pointed out that, as the records would show, each of the parties was to do its own business and the company was to be there only for investment purpose. It was contended that the case of Sangramsinh P. Gaekwad (supra), does not apply as this is not a case of allotment of shares illegally; the facts in the said case are totally different. As regards the allegation of suppression of material facts it was contended that there is no suppression of facts, the records placed before the Board clearly show that the land belonging to the company is a barren land and there are no construction on it, the other land is a land belonging to the partnership firm. My attention was drawn to the details of the firm to show that the land belongs to the three brothers and divided equally between them. The report of their own valuer records that the land on which building is constructed belongs to partnership firm. It was pointed out that, in the present case, the petitioners are seeking reliefs under the Act and not under the MoU, MoU dated 10-4-1993 has been referred as a fact and to show what was the understanding and why the respondents were indulging in mismanagement and oppression and also to show that the shareholding at all material times was equal and the petitioners are entitled to in any event 25 per cent of the net worth of the company. It was reiterated that the building in occupation of the petitioners does not belong to the company. Further, the value of the plant and machinery as per the balance sheet is hardly of any significance, the building is in a dilapidated condition.
14. As regard the allegation of forum shopping and multiplicity of litigation, it was contended that the civil suit filed by the petitioner was with regard to civil rights pertaining to the rights that had accrued by virtue of the petitioner being legal heirs. The civil suit did not seek relief as prayed for in the present petition. As a matter of fact the suit was dismissed in view of the proceedings before this hon?ble Court and the objections taken by the respondents in the said proceedings.
15. Arguing the case on merits, drawing my attention to the alleged acts of oppression and mismanagement it was pointed out that the removal of director was without following procedure prescribed in the Act; the profits and fund of the company were siphoned off; the respondents illegally disposed of the assets of the company; the respondents sought to create third party interest in the assets of the company without any valid reasons; the respondents were guilty of large scale fabrication and manipulation of the statutory records and other records including minutes, etc.
16. Shri Krishna Kumar argued that P-1 was removed from directorship without following the procedure and by fabricating the documents to show that meeting had been held and he had been removed; no details of the explanatory statements circulated for removal were given; the removal was only an afterthought and an attempt to prevent the fraud being brought to light and action being taken against the respondent by the petitioner; the respondents carried on business as if it was their proprietorship business; profits were siphoned out, huge amounts were transferred in the names of their personal partnership companies like Flow More Apparels (P.) Ltd., Rs. 1,22,68,824.30, Santaclaus Apparels, Rs. 8,11,391, Nagesh Hosiery , Rs. 13,14,767 which remains unexplained, the instances of siphoning of crore were only illustrative.
17. The counsel for the petitioner pointed out that admittedly there were reserves of more than Rs. 4,50,35,023, these reserved have been therefor more than 10 years. Reliance was placed on the report of Mr. Naresh Arora Associates filed by the respondents themselves by letter dated 29-5-2007. It was pointed out that the respondents have clearly reduced the said reserves. It was contended that removing the reserves fraudulently constitutes gross mismanagement and oppression. As the respondents are presently going through financial crisis personally and as a consequence of which they are faced with various litigation and criminal complaints against them, they have been attempting to mortgage the properties of the company and, in particular, the land at GT Road, belonging to the company fraudulently and wanting to render the company into a shell company. It was argued that the respondents are manipulating the records to confuse the issues by claiming, properties pertaining to the partnership which are different and distinct from the assets of the company to be part of the proceedings. The present petition can only deal with the property of the company, namely, the land at GT Road, Village, Bhoura, HB No 1.8 8, Distt. Ludhiana, Punjab bearing khasra No. 6/Z2/2, 3/2, 4/1/2/2, 6/2-6/3/7/1, 7/3/8, 9/1, 9/3, 3/1/1, 13/1/2, 14/1, 14/1/2, 18/2/1/1, 18/2/1/2, 19/1/1, 19/1/2, 22/1/1. The other land at being M.C. No. B-XXXI 1-933, GT Road, Village Bhoura, Ludhiana bearing Khasra No. 6/9/4, 10/4, 11/3, 12/1, 12/2, 19/1/4, 19/1/5, 20/1, 21/1/2, 7/15/3, 16/2, 17/1, 24/1, 25/1, belongs to petitioner No. 1 and respondent Nos. 3 and 4 who are brothers and in whose favour division and partition has been done. The fact that the land measuring 22,506 sq. yards situated bearing MC No. B-XXXII 933, GT Road West, Ludhiana, at 933, GT Road, does not belong to the company is borne out of the report of Kapoor & Associates filed by respondents themselves.
18. Arguing the case on merits, the counsel for the petitioner contended that the case of mismanagement and oppression is made out and the respondents should be held guilty for their fraud, mismanagement and oppression. The petition should be allowed and the Board of the company should be constituted with the petitioner as a director and the other respondents should be debarred from being director or carrying on the business of the company. In the alternative and without prejudice to the aforesaid, the petitioner should be given one-fourth of net worth of company which was the position prior to acts of mismanagement and oppression of the respondents, i.e., Rs. 14,09,92,270, as would be apparent from the report of Mr. K.B. Jain, dated 23-6-2007, on record and given on the basis of facts which are apparent and admitted. The value of the shares of petitioners works out to nearly Rs. 3.8 crore. The petitioner stated that the current net worth of the company would be much less in view of the fraud perpetuated by the respondents and siphoning of funds by them. The petitioner vehemently argued that the company reserves, as per balance sheet, are more than 4.50 crore and whereas the sales of the company are more than Rs. 2,87,08,089.60 but the net profit shown in the balance sheet is only Rs. 4,89,593.42. This makes it apparent on the records that the respondents have siphoned off the profits of the company more than what profit and loss account is reflecting. It was contended that Kapoor & Associates, approved valuers and chartered accountants, were appointed by the company and respondents voluntarily and of their own freewill during the course of the proceedings and it is this report, dated 24-5-2007 which specifically provides that the value of the property by the company is worth more than Rs. 4,75,79,000. Naresh Arora & Associates, chartered accountants, filed a certificate that the worth of the company excluding land works out to be Rs. 4,50,35,023. Consequently, going by the aforesaid two items alone, the total value comes to Rs. 9,26,14,023 (Rs. 4,50,35,023 + 4,75,79,000).
19. Further, it was argued that, during the course of the arguments, the counsel for respondents who had argued the matter finally and at length, had confirmed that the respondents had agreed that the petitioners should be allowed to go out on payment of fair value for the shares and in this connection they had themselves appointed a valuer. CLB?s order dated 30-4-2007 recorded this fact. It was contended that the respondents are bound to stand by their commitments and, hence, in any event, notwithstanding the fact that there has been mismanagement and oppression, the hon?ble CLB could direct sale of petitioners? shares on payment of fair value, the respondents are bound to pay fair value for the shares of the petitioner to enable petitioner go out of the company. The value of the shares of the company has to be as its stood prior to the fraud and mismanagement having been committed by the respondents or, in the alternative, the shares of the respondents should stand reduced to the extent they have already siphoned of the profits of the company. Taking into consideration all these facts the petitioner is entitled to more than Rs. 3.5 crore for the value of the shares. Further, it was stated that the petitioner is willing to take land belonging to the company valued at Rs. 4.75 crore, subject to the payment of the balance of Rs. 1.25 crore and in lieu thereof relinquish his share which is more than 25 per cent of the total share capital. Reliance was placed on the valuation report filed before the hon?ble CLB. Reference was made to section 634A of the Act, which provides for direction being given to enforce orders of the CLB. My attention was drawn to the judgment of the High Court of Kerala, at Ernakulum, dated 16-1-2007 passed in CP No. 60 of 1994 in the matter of Subhash Jain v. Pioneer Shopping Complex (P.) Ltd.  79 SCL 289 (Ker.), and also to section 402 which specifically provides that the CLB can give directions for purchase of shares by the company or reduction of share capital. Further, my attention was drawn to the cases of Consulting Engineer Service India Ltd. v. Kaikhosrau K. Franoji  39 SCL 647 (Delhi) and Pawan Kumar Bajaj v. Prakash Singh Sanghi  1 Comp. LJ 585 (CLB).
20. With regard to [immovable property at] G-32, Masjid Moth, GK-II, New Delhi, it was contended by the counsel for the petitioner that the company had made investments for the building. No details have, however, been provided; it is for this reason that the company should be allowed to exercise its right in the said property and not allowed to treat as a property of an individual. It was argued that the company deliberately withheld information by not allowing inspection of documents prior to 2000.
21. The respondents? counsel contended that the petitioners have made ambiguous and false allegations that the immovable property at G-32, Greater Kailash-II, New Delhi, was built from the funds of respondent No. 1-company. The petitioners had failed to produce any documentary evidence to substantiate their allegations in this respect in spite of taking detailed inspection of statutory records and books of account of respondent No. 1-company. In fact, the said property was purchased by Smt. Suhag Rani, wife of R-2 way back in the year 1983 from her own funds and she passed away in the year 2000 leaving behind a Will in favour of her husband, R-2. Moreover, the petitioners had filed civil suit in respect of the said immovable property before Civil Court, Delhi, on 8-2-2007, after filing the above frivolous petition, the said civil suit was dismissed by hon?ble Civil Judge on 5-10-2007, as being frivolous. Reliance was placed on the case of Sangramsinh P. Gaekwad (supra).
22. Responding to the allegations of oppression and mismanagement Shri Maria, counsel for the respondents, argued that there are no continuous acts of oppression by the respondents against the petitioners as alleged and, on the contrary, the petitioners have been doing continuous acts of oppression against the respondents as the petitioners have been carrying on several business-firms, directly and/or indirectly, particularly Nagesh Classic, Nagesh Exclusive and NRS Knitwears, etc., in competition with respondent No. 1-company for number of years using unlawful and wrongful possession of the building and plant and machinery located at GT Road, Ludhiana, and owned by the respondent No. 1-company.
23. It was argued that P-1 had attended Board meetings of respondent No. 1-company regularly and, particularly, Board meetings held on 1-9-2004 and on 1-9-2005, respectively, and petitioner No. 1 had approved the annual accounts for the year 2003-04 and 2004-05 respectively of the respondent No 1-company. As a result, petitioners are stopped from making any allegation of diversion and siphoning of profits or funds.
24. Further, it was argued that petitioner is qua director. The respondents have failed to prove that the petitioner was duly removed as director of the company. The respondents have not argued the matter relating to the removal of the petitioner at all. The respondent-company has not produced copy of the attendance register, copy of the despatch register and copy of the explanatory statement, notices issued seeking to remove, or any other documents to show that removal had taken place. Further, no grounds for removable had been given at any time even during the arguments. The mala fides are writ large. As regards the contention that there is no evidence of the shareholding of the petitioner, it was pointed out that this is a false allegation, the shareholding as a matter of fact is admitted.
25. As regards siphoning of profit or funds, it was argued that the petitioners have failed to produce any details of alleged siphoning of profits or funds. Reliance was placed on the cases of Sangramsinh P. Gaekwad (supra) and Dr. Raj Kachroo v. DSM Healthcare (P.) Ltd.  137 Comp. Cas. 592 (CLB - New Delhi).
26. Shri Maria further argued that the petitioners have done blatant acts which are prejudicial to the interest of respondent No. 1-company as the petitioners have issued letter dated 16-8-2006 through Mr. Parveen Garg, advocate, addressed to State Bank of India, Ludhiana, asking the said bank not to sanction the loan of Rs. 1 crore. It was pointed out that, on the basis of the said letter. State Bank of India had refused to provide financial assistance of Rs. 1 crore and the respondent No. 1-company has suffered heavy irretrievable financial loss and reputation loss in the international market. This is blatant act prejudicial to the interest and development of the respondent No. 1-company. Reliance was placed on the case of Ruby General Hospital Ltd. v. Dr. Kamal Kumar Dutta  129 Comp. Cas. 1 (Cal.).
27. The counsel for the respondents argued that the petitioners have admitted in paragraph 8 of their additional affidavit, dated 12-2-2008, that the petitioners have restricted their allegations to (i) the extent of their shareholding; and (ii) the valuation of their shareholding. This is clear unequivocal and unambiguous admissions of the fact that the petitioners have abandoned majority of the allegations made in the above petition. Reliance was placed on the case of Sangramsinh P. Gaekwad (supra).
28. Alternatively, it was argued that if this hon?ble CLB arrives at the conclusion that the petitioners will not contribute anything to the functioning of respondent-company and the petitioners may exit the respondent-company on receiving the fair valuation of the equity shares held by them in the respondent No. 1-company, the petitioners should be directed to first handover the possession of the building and plant and machinery situated at GT Road, Ludhiana, which are owned by the respondent-company but the same are in unlawful possession of the petitioners back to the respondent-company. In case the petitioners are not interested in handing over the building and plant and machinery situated at GT Road, Ludhiana, to respondent No. 1-company, the value of the building and plant and machinery situated at GT Road, Ludhiana, which are owned by the respondent No 1-company but the same are in unlawful and wrongful possession of the petitioners, should be deducted from the fair valuation of their equity shares held in the respondent-company.
29. It is noted that R-1 has chosen not to file any reply to CP No. 97/06. As regards the other respondents? preliminary objections to the maintainability of the petition on account of unclean hands of the petitioners before the CLB having equitable jurisdiction, the allegations that the petitioners have been carrying on competitive businesses, have been using the land and plant and machinery and other assets of the R-1 for their own business and that wrote a letter to the SBI, Ludhiana, prejudicing the interest of the R-1 if seen in the context of the facts of the present case, in the backdrop of the MoU dated 10-4-1993, referred to by the petitioners in the case of a family company, no case is made out for dismissing this petition at the threshold on account of unclean hands. The cases relied upon by the respondents have been distinguished on facts to be not applicable in the facts of the present case. Instead, the petitioners have drawn my attention to the conduct of the respondents even in other pending civil and criminal proceedings.
30. As regard the respondents? next contention that the petitioner has failed to make out a case that it shall be just and equitable to wind up the company but winding up would be unfair and prejudicial to the petitioner?s interest and other shareholders, it is true that if the facts fall short of the case set out for winding up of the company on just and equitable grounds, no relief could be granted to the petitioner. There is a difference in a winding up proceeding and a proceeding under section 397. In a winding up proceeding on just and equitable grounds, the court may order winding up once the grounds are established. However, in a section 397-petition, which is alternative to a winding up petition, first, one has to establish that there is oppression. Without the element of oppression being established, the question of grant of relief does not arise. However, it is difficult, if not impossible to lay down specific instances which alone would be considered to be acts of oppression. Whether an act amounts to oppression or not would depend on the facts of a case. Since section 397/398 proceedings are alternative to a winding up proceedings, it is not that only those grounds which are considered to be just and equitable in a winding up proceedings to be the grounds in a section 397/398-petition. The words, ?oppressive? is not defined, but it is possible, by way of illustration, to figure a situation in which majority shareholders, by an abuse of their predominant voting power, are treating the company and its affairs as if they were their own property to the prejudice of the minority shareholders and in which just and equitable grounds would exist for the making of a winding up order but in which the alternative remedy provided by section 397 by way of an appropriate order might well be opened to the minority shareholders with a view to bring to an end the oppressive conduct on the minority to end the matters complained of. However, proceedings under section 397/398 are beneficial provisions to get grievances redressed without recourse to winding up of a company since such winding up would be prejudicial to the interests of the members. As regards making out a case of winding up on just and equitable-grounds, in this regard the CLB?s decision in the case of Girdhar Gopal Dalmia v. Bateli Tea Co. Ltd.  73 SCL 84 (CLB - New Delhi) deserves to be mentioned. It was forcefully argued by learned counsel for the respondents, that in view of the decision of the Supreme Court in Hanuman Prasad Bagri?s case (supra), that unless the petitioners establish that the company is liable to be wound up on just and equitable grounds and that such winding up would be prejudicial to them and also the company, no relief can be granted in the petition as the petitioners had not so established. In this connection, it had become necessary to examine the provisions of section 397(2) which reads : If, on any application under sub-section (1), the CLB is of the opinion: (a) that the company?s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up. The CLB had held that it is for this Board to form an opinion that the affairs of the company are being conducted in an oppressive manner and once it forms such an opinion, the just and equitable grounds for winding up of the company become established and this Board has to grant relief in terms of section 402, if it again forms an opinion that such winding up would prejudicially affect the interest of the members/company. In other words, once this Board gives a finding that acts of oppression have been established, winding up of the company on just and equitable grounds become automatic. Further, in the judgment of the Delhi High Court in Pearson Education Inc. v. Prentice Hall India (P.) Ltd.  136 Comp. Cas. 294, the court has held that once, oppression is established, reliefs under section 402 could be granted. In the present petition in view of the uncontroverted allegations of acts of oppression and mismanaging the affairs of the respondent-company, resulting in depletion of the reserves of R-1-company though it is a fit case of winding up, the winding up order would clearly prejudice the interests of the petitioner and other shareholders. On consideration of the facts and circumstances of the case and the law applicable in this regard I find that this petition cannot be thrown out at the threshold itself on account of preliminary objections which I find are not tenable.
31. As regards the respondents? contention that the petition is qua removal as director and not qua reduction in shareholding, normally, as a principle, directorial complaints cannot be a ground in a petition under section 397/ 398 as the complaints in such a petition should be relating to the rights qua a member. While, as a proposition, it is so, in normal circumstances, yet, in cases of family companies or companies in the nature of partnership, depending on the facts of the case, directorial complaints have been adjudicated by this Board in section 397/398 proceedings. In the present case, the petition is a composite petition wherein not only directorial complaints are made, but also complaints relating to siphoning of funds resulting in depletion of reserves, etc., have been made. Hence, the respondents? contention is untenable.
32. It is noted that th
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e MoU, undoubtedly, is thirteen years old. It has been referred to only for collateral purpose of the giving of the backdrop or the context of the facts and circumstances of the present case. 33. As regards the allegation that the petitioners have indulged in forum shopping, it is noted that the allegations and the prayers sought in CP No. 97/06 are different from that as contained in the other civil proceed-ings. 34. In view of the fact that the proceedings have been duly prosecuted by the petitioners, the respondents? allegation that the rejoinder and further additional affidavits have not been signed by P-1 is of little consequence. 35. As regards the rival contentions pertaining to the allegations of acts of oppression and mismanagement, it is noted that the petitioners? contentions regarding depletion of the reserves of R-1-company remain uncontroverted. On the other hand, the respondents? contention that the P-1 had attended the Board meetings of the R-1-company regularly and particularly the Board meetings held on 1-9-2004 and on 1-9-2005, respectively, and that the P-1 had approved the annual accounts for the years 2003-04 and 2004-05, respectively, of R-1-company also remain uncontroverted. However, petitioners have themselves restricted their prayers to the determining of their shareholding to 27.106 per cent instead of 20.47 per cent, that is, instead of admitted 40,940 shares further 13,137 totalling 54,077 shares are claimed. 13,137 shares being one-fourth of the total shareholding of the deceased late Mrs. Suhag Rani and one-fourth of the total shareholding of the HUF held through the karta, Shri Vidya Prakash (R-2), and further the petitioners have restricted their prayers to the valuation of their shareholding to enable them to go out of the company as they are not willing to continue with the respondents. Therefore, hereby restrict my findings to the revised prayers of the petitioners. 36. P-1 and P-2 admittedly hold only 27,750 and 13,190 shares, respectively totalling 40,940 shares. As regards the petitioners? claim of one-fourth shares of 25,950 held by the deceased late Smt. Suhag Rani who died in 2000 leaving Will in favour of her husband (R-2), I find no way to entertain the claim of the petitioners. As regards the petitioners? claim of one-fourth of shares totalling 22,600 held by R-2 as the karta of the HUF also cannot be entertained in the facts and circumstances of the case. Only admitted shareholding of 40,940 amounting to 20.47 per cent of the total shareholding of the R-1-company can validly be held to be the shareholding of the petitioners. 37. Considering the petitioners? prayer to go out of R-1-company and the facts and circumstances of the case as well as the rival contentions in this regard, I hereby hold that to end the matters complained of directing the petitioners to go out of the R-1-company on receipt of fair value of their shares totalling 40,940 at the rate of Rs. 706.73 being admitted value per share total value being 2,89,33,526.20 within six weeks of the receipt of this order so as to enable them to go out of the R-1-company would meet the ends of justice. Accordingly, I hereby direct the respondents to pay the total value so determined. The R-1-company is entitled to get back the vacant possession of its assets from the petitioners or receive market value of occupied premises, building, plant and machinery from the petitioners on determination from a valuer whom the parties agree to appoint. If the petitioners fail to co-operate with the R-1 for the determination of the value of their occupied premises including land, plants and machinery and do not accept the fair value determined for their shareholding the petition shall be deemed to have been dismissed and all interim orders shall also be deemed to have been vacated. 38. CP No. 97 of 2006 is disposed of in the above terms. All CAs stand disposed of. All interim orders stand vacated.