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Pravin C. Chheda & Others v/s M/s. Simplex Crane Services Pvt. Ltd. & Others

    C.A. Nos. 54, 53 of 2011, 23, 24, 25 of 2015 & C.P. No. 36, 37, 39 of 2011

    Decided On, 09 April 2015

    At, Company Law Board Western Region Bench Mumbai

    By, THE HONOURABLE MR. ASHOK KUMAR TRIPATHI

    For the Appearing Parties: Dhiren Akbari, Pratap D. Sampat, Erach H. Kotwal a/w M.H. Sharma i/b Rajiv J. Deokar, Advocates.



Judgment Text

1. The above captioned Company Petitions have been filed by the Petitioners invoking the provisions contained in Sections 397 and 398 of the Companies Act, 1956 complaining therein various acts of oppression and mismanagement and seeking various reliefs more particularly set-out in the petition.

2. It is to be noted here that in the above captioned C.P. Nos. 36 of 2011 and 37 of 2011, Mr. Pravin C. Chheda is the Petitioner and Mr. Kirti C. Chheda, is the Respondent No.3. In C.P.No.39 of 2011, the Petitioner is Mr. Kirti C. Chheda and the Respondent No.3 is Mr. Pravin C. Chheda. The Respondent No.2 in all the Company Petitions is Mr. Rasiklal C. Chheda who has filed reply for himself and on behalf of the Respondent No.1 Company in all the three Company Petitions. Further, having gone through the pleadings in all the three Company Petitions, it is seen that the allegations, issues and reliefs sought are common. Therefore, to avoid repetition, I thought it proper to club all the three Company Petitions for the purpose of hearing and hence a common judgment is being passed in these Company Petitions. For the sake of clarity, Mr. Pravin C. Chheda and Mr. Kirti C. Chheda who have common grievances against Mr. Rasiklal C. Chheda shall hereinafter be referred to as the "Petitioners" and as and when necessary they will be referred to by their individual names also. In so far as the Respondent No.1 Company in these Company Petitions are concerned, the Respondent No.1 Company M/s Simplex Crane Services Pvt. Ltd. in the C.P. No.36 of 2011 shall hereinafter be referred to as 'Simplex' and the Respondent No.1 Company M/s Lirin Road Lines Pvt. Ltd. in C.P. Nos. 37 and 39 of 2011 shall hereinafter be referred to as 'Lirin', in short. The Respondent Nos.1 and 2 shall hereinafter be referred to as "the Contesting Respondents" collectively and as and when required shall be referred to by their individual name. Copy of the Judgment/order shall be kept on the record of the other petitions.

3. The facts of the case, in nutshell, are as follows:-

3.1 The Petitioners, namely Mr. Pravin C. Chheda and Mr. Kirti C. Chheda, and the Respondent No.2, Mr. Rasiklal Chheda, are real brothers who were carrying or business of transport since January, 1980. Until 1993, the said business was carried on as a partnership firm and somewhere in the year 1993 the said partnership firm was converted into a Company namely Lirin. The Petitioners and the Respondent No.2 have been directors of Lirin since 14/1/1993. For a brief period, Smt. Laxmiben Chheda, the mother of the Petitioners and the Respondent No. 2 was also a director of Lirin. Lirin was incorporated on 14/1/1993 having its registered office in Mumbai. The Petitioners and the Respondent No. 2 are also equal shareholders of Lirin, holding approximate 33% each of the total subscribed and paid up equity share capital of the said Company. Hence Lirin is a closely held family Company.

3.2 The Respondent No.1 Company in C.P. No.36 of 2011 i.e. Simplex was formed in the year 1994. Later on, the Company was taken over by the family of the Petitioners and the Respondents.

3.3 The primary business of Simplex and Lirin is transportation as public carriers, Transporters and Carriers of Goods, Parcels, Passengers, Merchandise, Commodities and other products and luggage of all kinds and descriptions in any part of India and elsewhere on land, by any mode of transport or to do such transport through other agency or agencies and hiring of cranes, trailers, forkilifts and other heavy and earth moving equipments more particularly set out in the Objects Clause of Memorandum of Simplex and Lirin.

3.4 It is the case of the Petitioners that the financial records of Simplex and Lirin demonstrate that the said Companies have grown significantly since their inception upto the beginning of 2007. Initially, the entire business activities of the said Companies were carried from their registered office, which premises stands in the name of the Petitioner, Mr. Kirti C. Chheda. Even presently, though the office is being used by the Companies and the outgoings i.e. rent is being paid by the Petitioner and he has granted a gratuitous license to Lirin to use the premises for the sake of its business.

3.5 It is further case of the Petitioners that the business of Lirin was growing and hence by an Agreement dated 9/8/1991, the Petitioner Mr. Kirti C. Chheda, on behalf of Lirin purchased a godown, being Godown No.7, Sector 4E, TT, Kalamboli (hereinafter referred to as the Kalamboli property) from CIDCO, which was later converted into traffic/operations office of the said Companies due to their proximity to the various highways, Jawaharlal Nehru Port Trust and the Western regions. Though presently, the Kalamboli property is being partly used as the traffic/operations office of the said Companies, the son and the son-in-law of the Respondent No.2 are using the said Kalamboli property to promote their business by the name M/s Lirin Logistics Ltd., which is identical to the business of Lirin in competition with Lirin, with the malafide intention of diverting the business of the Simplex and Lirin for their own personal benefits.

3.7 It is stated by the Petitioners that by the end of 2000, Lirin had a fleet of almost 350 vehicles. By the year 2003, the business of Lirin was doing extremely well. However, there was a liability of about Rs. 18 Crores. Sometime in mid-2003, Mr. Pravin C. Chheda, though not being active in the said Companies approached Mr. Kirti Chheda, demanding his share in the said Companies. At that time Mr. Kirti Chheda requested him to wait or a period of 2-3 years for the Company to dear all its liabilities. As promised, in the year 2006, as almost all the liabilities of the Companies were cleared, Mr. Kirti Chheda proposed the valuation of the assets of the Companies to be undertaken to demarcate his share. However, the proposal to pay his share was opposed by the Respondent No.2 on the ground that he had not taken any active part in the management and development of Lirin and Simplex.

3.8 It appears that due to the partition issue, in due course of time, the dispute and differences between the parties ascended with respect to which several communications took place between them as set out in all the Company Petitions, but they failed to resolve their disputes and, as a result thereof, the aforesaid petitions came to be filed under Section 397/398 of the Act.

3.9 The Petitioners have ventilated the following grievances against the Respondents in their respective Company Petitions:-

a. Illegal removal of the Petitioners as the Directors of the Company.

b. Illegal appointment of additional director(s) without following due course of law and with a malafide motive to gain control over the affairs of the Companies.

c. Illegal holding of AGM in contravention of the provisions of the Companies Act and AOA of the Companies.

d. Failure to hold EOGM.

e. Siphoning/Diversion of funds by the Respondent No.2 of the Petitioners as the Directors.

f. Sale or vehicles without consent of the Petitioners for under value and for personal gains.

g. Stopping of the payment of salary and creating false liabilities, manipulation and tampering of accounts of the companies.

h. Non-disclosure of Accounts/ Documents/ Financial Details.

f. Committing acts to the detriment of the Companies and their shareholders.

g. Attempt to dilute the shareholding of the Companies

3.10 Based on the above complaints the Petitioners have sought following reliefs:-

a. To declare the sale of vehicles, made if any, pursuant to the letter of the Respondent No.2 dated 25/1/2011 to be illegal and to make the Respondent No.2 liable and accountable for the loss suffered by the Company and its members on account of any such transactions, the loss on this account being quantified by a qualified external agency.

b. To direct the Respondent No.2 to provide details and documents relating to the vehicles/ properties which have been sold by him since April, 2008 till date and to direct the Respondent No.2 to compensate the company for the loss suffered by the Company and its members on account of loss being quantified by a qualified external agency.

c. To direct the Respondents that all the cheques, negotiable instruments and other orders/ instructions to all the Bankers of the Respondent Company shall be made under the signatures of any two of the three directors.

d. To appoint an appropriate person/ nominee as this Board thinks fit as a Director and Chairman on the Board of the Company to hold office for a period of minimum 6 months and to conduct Board Meetings under his chairmanship.

e. To direct the person so appointed to take charge of the affairs of the company and its management.

f. To assess the damages suffered by the company because of wrongful acts and mismanagement by the Respondent No.2 and the Respondent No.2 be directed to compensate the company. For this purpose an independent Chartered Accountant or any appropriate person be appointed to scrutinize the books of accounts of the Company, transactions happened, property disposed and affairs of the Company during last 3 years or any other methods be adopted as the Board thinks fit to assess the loss caused by the wrongful acts of the Respondent No. 2.

g. To release the salary of the Petitioner for the previous months unpaid for and to continue their salaries to the Petitioner and his son.

h. To issue appropriate directions to all the Respondents to give inspection of all the books of accounts, vouchers, and other relevant documents, minutes books of General Meetings and Board Meetings of the Respondent No.1 Company alongwith all other relevant material documents to the Petitioner and persons authorised by the Petitioner.

i. To declare all the liability created in whatever form from the Company for the benefits of Lirin Logistics Pvt. Ltd., to be illegal and to make the Respondent No.2 liable and accountable for any such transaction and order to compensate the Respondent No.1 company for the unlawful use of the name, goodwill and reputation of the Respondent No. 1 Company.

4. The Respondent Nos. 1 and 2 appeared and filed their reply to the petitions. In their reply(s) the Contesting Respondents raised preliminary objections and sought dismissal of all the Company Petitions contending that the same have been filed by Mr. Pravin C. Chheda and Mr. Kirti C. Chheda in connivance with each other, and they (the Respondent Nos.1 and 2) being the majority shareholders in the Companies, the Petitioners are not entitled to maintain this petition under Section 397/398 of the Act.

5. It is further submitted that the Petitioners have made complaints with respect to the acts purportedly committed in the year 2006 and, therefore, the petitions suffer from unexplained delay and laches and hence deserve to be dismissed on this ground alone.

6. On merits, the Respondents have denied all the allegations made against them. The said Respondents have justified the removal of the Petitioners as the Directors of the Company and have asserted that the Petitioners ceased to be directors by operation of law under the provisions contained in Section 283 (1) (g) and (i) of the Act. The Contesting Respondents have further denied that they have illegally appointed the directors on the Board of the Companies. On the contrary, they have justified their action for appointment of the Directors. In addition to the above, the Contesting Respondents have denied the allegations with respect to the siphoning of the funds and/or misappropriation of funds and mismanaging the affairs. In short, they have denied each and every allegation.

7. It may be mentioned here that, in the course of proceedings, the Petitioners sought amendments in the petitions with respect to the subsequent events. After the amendments were carried out, further pleadings were exchanged between the parties.

8. It is pertinent to note here that alongwith the petitions, I will also deal with the Company Applications being C.A. No.54 of 2011 in C.P. No.36 of 2011 and C.A. No. 53 of 2011 in C.P. No.37 of 2011 both filed on behalf of the Petitioner/Applicant Mr. Pravin c. Chheda. Record reveals that these applications have not been disposed of till date and are shown pending. In both the Company Applications, the Petitioner/Applicant Mr. Pravin C. Chheda has sought various reliefs as set out therein.

9. It may be mentioned here that in Company Application Nos.23, 24 and 25/2015 filed by the Respondent Nos.1 and 2/Applicants in the respective company petition, the grounds submitted and prayer, made therein are common, and therefore, all these applications are also being disposed by this common judgement. In these applications, the parties shall be referred to in the same manner as they referred in the original petitions. In other words, Mr. Pravin C. Chheda and Mr. Kirti C. Chheda shall collectively be referred as the 'Petitioners' and the Respondent No.2 shall be referred to as 'the Respondent No.2'.

10. It may be added here that by this common judgement, I propose to dispose of the prayers made in the precipe filed on behalf of Respondent No.2 Mr. Rasiklal C.Chheda in the above numbered C.Ps. as well as Company Applications, being C.A. Nos.23, 24 and 25 of 2015 filed by him in C.P Nos. 36, 37 and 39 of 2011 praying therein for permission to sell the vehicles, more particularly described in the Annexure 'C" to the respective Applications, subject to the approval of the creditor Banks and on the terms and conditions as may be considered appropriate by this Bench.

11. For the sake of clarity, I reproduce the entire contents of the precipe dated 16/2/2015 herein below:-

'i The Respondents state that subsequent to the filing of the said precipice on 15/2/2015, the Respondents received the copy of the order dated 13/2/2015 upon making the application to CLB, Mumbai. The said order was not circulated earlier and therefore it is required to be read while deciding the precipe.

ii. The said order dated 13/1/2015 contains following errors on the face of it and therefore requires corrections

a) It is stated that

Quote -

'……… It may be mentioned that initially Mr. Rasiklal Chheda, the Respondent No. 2 kept on insisting to direct the parties to sign the MOU specifying the terms for mutual settlement and then to carry out the 'due diligence' with respect to the Respondent Companies, as agreed between them When the Petitioners agreed to this proposal saying that the implementation of the MOU Shall be subject to the report received dafter 'due diligence'…………….'

-Unquote

iii. The Respondents say that there is nothing on record and there is no reply to the applications made by the Respondents and there was no acceptance of consent terms by the Petitioners on the basis of the 'draft consent terms" submitted by the Respondents. All along, even while submissions were made previously on 18/11/2014, 11/2/2015 and then when the earlier order dated 2/1/2015 for holding a meeting to discuss the settlement terms between the advocates of the parties was made, and the meetings were held, the Petitioner denied signing of the consent terms. What was then proposed by CLB was to make draft consent terms, which also was not agreed. The Respondent insisted on carrying out 'due diligence' by M/s. Haribhakti Co., appointed by the CLB, Mumbai, with exorbitant fees of Rs.7.50 lakhs, which exercise was futile as brought to the notice of CLB, Mumbai, because it would create an excuse to deviate from the amount of Rs. 5.00 Crores, valuation agreed by the Petitioner, and modified by the Respondents by reducing it to Rs. 4.00 Crores to avoid any dispute in the valuation and the financial status of the Company for purchase of shares by the Petitioners. Hence, according to the Respondents, the minutes of the meeting are contrary to the facts on record and need rectification.

b) It is further stated in order

Quote-

' ……..the Ld Counsel appearing for the Respondent No. 2 changed his stand and submitted that he is willing to submit a revised proposal as, according to him, the offer of Rs. 4.00 Crores made by the Respondent No. 2 to exit from the Companies may not be viable to the Petitioners. Today, he, sought time to submit another proposal within 3 days………. "

iv. The Respondents submit that there is no deviation, in view of the refusal of the Petitioners to sign the consent terms. Upon suggestion by the CLB that draft consent terms may be signed between the parties prior to "due diligence", the Respondents' Counsel refused to do so and stated that they would reject the draft if they, consider that the consent terms are against the Petitioners. They insisted "due diligence" being carried out by the Chartered Accountant (CA) appointed by them instead of M/s V B Haribhakti and Co. and they were ready to bear the cost of the said CA. The Respondents had earlier submitted the quotation of Rs.3.00 Lakhs from M/s. SHR and Co., which shows the true intention of the Respondents to do "due diligence" upon signing of the consent terms. The minutes of the order are contrary to the above facts and, therefore, there is apparent error on the face it, which needs to be rectified.

v. It is true that the Counsel for the Respondents submitted that valuation of Rs. 5.00 Crores reduced to Rs, 4.00 crores, as stated above, is "over valuation" based on earlier valuers' erroneous valuation and the errors therein are on the record of the CLB, Thereafter, a modified valuation of the lower amount was given by the Respondents, which was not gone into or discussed in the course of proceedings in the CLB. Here also, the offer of Rs. 5 crores from Rs.4 cores was made in zest by the Petitioner, who wanted to receive large amount upon expecting exit from the company and payment by the Respondents, What happened in the Lok Adalat meeting, was in complete contradiction of their expectation to receive money, and instead, the Respondents agreed to exit the company for the settlement amount of Rs. 5 crores. The compromise terms were then expected to be recorded, which never got recorded and CLB suo moto directed the 'due diligence' be done without the consent terms being agreed upon. Under such circumstances, the counsel suggested to bring on record the true valuation of the company, which he has done by submitting latest a revised statement of valuation as of 31/3/2014, which is as per the latest audited account. The Counsel has suggested that the bidding process to be undertaken between the parties and the matter be settled subject to the draft of the bidding terms submitted by him and that the bidding process may be undertaken by any professional person under the supervision of the CLB.

vi. This proposal of the Element remains to be decided as per the application made by the Respondents. However, the minutes of the order does not record anything about the above facts and simplicitor comes to the conclusion that the matter be decided by an order of the CLB based on initial arguments advanced by the parties about six months ago.

vii. There has been a subsequent development in the affairs of the Company after lapse of over six months period after initial arguments, and they need to be brought on record. Hence, the minutes of the order based by recording as if final arguments, apparently defective or erroneous on the face of it, which need rectification.

12. I have heard the Ld. Counsels appearing for the respective parties. I have also perused the minutes of the proceedings and other material available on record in all the petitions. Before I proceed further, it seems necessary to refer to the background of the cases based on the records.

13. As stated earlier, in all the Company Petitions, the Parties being common and the pleadings being identical, they were consolidated for the purpose of hearing and were heard together accordingly. After completion of the pleadings, the parties' counsels advanced their arguments. Ultimately, the arguments were finally concluded in all the Petitions. After seeking time, the written submissions were filed by the Petitioners and the Respondents after long delay.

14. It is pertinent to mention here that in the course of the arguments, Mr. Sampat, Ld. Advocate, appearing for the Respondent No.2, kept on saying that the Respondent No.2 is willing to enter into an amicable settlement with the rival parties, This Board, therefore, explored this option and sought suggestions from the otherside. Although, the negotiation were held between the parties and their Counsels but for one reason or the other, the same failed to materialize. However, the Ld. Counsel appearing for the Respondent No.2, after conclusion of final order, once again requested this Board to intervene in the matter and persuade the otherside to settle the matter amicably, keeping in view that the individual parties are the real brothers and the companies are the closely held family companies. It will not be out of place to mention here that such attempts were also made before the Hon'ble High Court in the course of an appeal filed against an order of this Bench, but the said attempts also did not succeed. However, the parties once again agreed to hold a meeting for resolving their disputes amicably. I, therefore, directed the parties to appear-in-person for deliberations before the Lok Adalat, which was held on 16/10/2014. In pursuance to the direction of the CLB, the parties appeared. Although discussions and deliberations took place in the Lok- Adalat between the parties, yet no final settlement could be arrived at. In the course of negotiation between the parties, it was principally agreed between them that the Respondent No.2 Mr. Rasiklal Chheda would exit from the Companies on receiving a total sum of Rs.4 Crores as consideration for transfer of the shares held by him in the Companies. However, the Petitioners put a condition that before such deal is finalised, a due diligence in respect of both the Companies shall be carried out by an Auditor to be appointed by the CLB and if the Petitioners are satisfied with the due diligence report, the Petitioners will get the shares transferred in their favour subject to receiving a sum of Rs.4 crores from the Respondent No.2 in accordance with the law. Since the matters were not unconditionally settled, these cases again came up for hearing for appointment of an Independent Auditor for conducting the due diligence of the Companies However, the parties failed to reach at a consensus to a particular name of a firm(s) to be appointed as an independent auditor. Therefore, the Bench applying its discretion, appointed M/s. Haribhakti & Co. to conduct the due diligence. Thereafter, the Respondent No.2 started raising objection to the effect that the remuneration of the said auditor could be very high which he may not be able to pay. He, therefore, started insisting for conduct of due diligence through some other auditor(s) to be suggested by him, to which the other parties did not agree. In view of difference of opinions, this Bench thought it appropriate to adjudicate the petitions finally.

15. In the meantime, the Respondent No.2 moved these precipe and filed these applications insisting that in view of the urgent nature of these applications, appropriate orders may be passed immediately. The Ld. Counsel appearing for the Respondent No.2 mentioned the precipe on 20/2/2015 and pressed for grant of reliefs as mentioned therein. The prayers were strongly opposed by the Ld. Counsels appearing for the Petitioners. The Ld. Counsel appearing for the Petitioners alleged that the Respondent No.2 was dragging the matters with the sole purpose to delay the final disposal of the petitions. The Ld. Counsels in support their contentions invited my attention to the order dated 4/12/2013 passed in Company Appeal (L) No.92 of 2013 in C.P. No.36 of 2011 alongwith Company Application (In Appeal) No.85 of 2013 by the Hon'ble High Court of Bombay, the relevant portion of which is extracted as below:-

'7. The CLB in the present case has considered the conduct of the appellants, apart from other grounds. When the arguments of the Respondents/ Original Petitioner were concluded and the Appellants were to commence then arguments, at that stage a request for cross- examination is made. The Appellant No.2 is a elder brother who is in control of the Company. The other two brothers have been kept out of the management. The hearing of the petition has been dragged on inspite of time bound direction given by this Court. The case is based primarily on documents. Attempts of the appellants is to somehow delay the proceedings pending he before the CLB. The manner in which the application is made, and the fact that almost every order of the CLB is being challenged by the appellant leaves no doubt that entire attempt of the appellants is to protract the hearing of the petitions. In the circumstances, I do not find any fault in the discretion used by the CLB in refusing permission to the appellants to cross-examine the respondents at such belated stage.

8. The tendency of a party to challenge every interim order by way of a Company Appeal and to protract the hearing of petitions before CLB needs to be deprecated. Company Appeal is accordingly rejected with costs of Rs. 10,000/-.

16. After hearing the parties' counsels at length, the matters were reserved for judgments. It is pertinent to mention here that the Bench was in the process of preparation of the judgments in these petitions. The Ld. Counsel appearing for the Respondent No.2 once again mentioned these matters for amicable settlement. On 30/3/2015, when the matters were taken up, the Ld. Counsel appearing for the Respondents made a fresh statement on behalf of the Respondent No.2 that the said Respondent is now inclined to exit the Company subject to that the Parties may be called upon to enter into interse bidding for sale/purchase of shares, keeping the reserve price at Rs.1,91,00,101/-. However, the Petitioners categorically refused to accept this proposal and requested the Bench to pronounce judgments in the C.Ps. They further alleged that this is another attempt by Respondent No.2 to delay the matter.

17. Having considered the background narrated above, one thing is very clear that despite genuine and sincere efforts made by all the parties, unfortunately the parties could not reach at an amicable settlement. Since, all the parties were involved in the process to reach at an amicable settlement, some delay has been occurred in disposal of these Petitions. Be that as it may, now I proceed to dispose of these petitions in view of the fact that there is absolutely no chance of amicable settlement.

18. In the backdrop of the aforesaid, firstly, I proceed to consider the C.As filed by the Respondent No.2 seeking permission to sell the vehicles more particularly described in the Annexure 'C' annexed to the respective Applications, subject to the approval of the creditor Banks and on the terms and conditions as may be considered appropriate by this Bench. It is pertinent to mention here that during the course of the proceedings in these C.Ps. the Respondent No.2 had sought permission to sell certain vehicles saying that on account of old age, the said vehicles were outlived. After hearing the parties, the said permission was granted and the order passed by this Bench was also confirmed by the Hon’ble High Court, Bombay. Now coming to the present applications, admittedly, majority of these vehicles are hypothecated in favour the Banks in connection with the loans advanced by them. Undisputedly, these vehicles cannot be sold without obtain prior permission/approval from the Creditor Bank(s). Without their approval and/or without giving them an opportunity of hearing, it does not seem j and appropriate to grant permission. The Respondent No.2 has stated t he will seek approval later on. In my view, the Banks are not going to g approval unless they examine the entire aspect, particularly when account of the Borrowers is at the verge of NPA. I am, therefore, not inclined to consider these applications at this stage. Let the Respond; No.2 to seek approval from the Creditor Bank(s) first for safe of the vehicle, and thereafter, the Board may consider the request after hearing both t sides with respect to the prayer made by him. At this juncture, I am not inclined to grant the reliefs sought for by the Respondent No.2. The C.As filed by the Respondent No.2 are disposed off accordingly.

19. Now, adverting to the issues raised and the prayers made in the precipe as contained therein. I have carefully examined the averments as well as the prayers made the Respondent Nos.1 to 2 therein. In my opinion, the Respondent No.2 is trying to create confusion with a view to further, delay the proceedings. On perusal of the record, it may be noted that whatever transpired in the course of submissions, the same is correctly recorded in the proceedings. It is a matter of record. Hence the contentions advanced on behalf of the Respondent No.2 for seeking modifications in the orders are not tenable. The prayers are accordingly rejected.

20. In addition to the above, the Respondent No.2 in the precipe has also submitted that since the final arguments were conducted about 6 months back in these petitions, the subsequent events which have arisen during this period are required to be considered. In my considered view, this is a further attempt to delay the final disposal of the cases. It may be mentioned here, that the Hon’ble High Court of Bombay had directed the CLB to dispose off the C.As within a period of 12 weeks. These C.As. were accordingly disposed off. Record reveals that the Petitioners, thereafter, moved applications for amendments in the petitions to place on record the subsequent events. The said applications were considered on merits and the same were allowed. Against this order, the Respondent Nos. 1 and 2 preferred an appeal being C.As(L) No.67 and 68 of 2013 which came to be disposed off vide Order dated 25/09/2013 by Hon'ble Mr. Justice N. M. Jamdar, thereby dismissing the Appeals and confirming the order passed by the CLB, permitting the Petitioners to carry out the amendments. In this order, no time limit was given although the CLB made sincere and genuine efforts to dispose off the C.Ps at an earliest possible time but the parties counsels argued the matters at length for many days. As indicated herein above, after conclusion of arguments, the parties represented to the Court that they wish to negotiate for one time settlement covering all the litigations pending between them. It is pertinent to note here that between the parties, several criminal and civil cases are pending before venous forums. Believing the representation of the parties to be genuine with the purpose to give quietest to various disputes pending between the parties, at their request the CLB intervened in the matter. Unfortunately, the parties could not reach at mutual settlement. Now, further giving time to the Respondent No. 2 to bring on record the subsequent events does not appear bonafide. The prayer is, therefore, declined.

21. Now, I proceed to consider three C.Ps. At the outset, I would like to deal with the preliminary issues raised on behalf of the Respondent Nos.1 and 2. The Ld. Counsel appearing for the Respondent Nos.1 and 2 has strenuously argued that the Petitioners, Mr. Pravin C. Chheda and Kirti Mr. C. Chheda, collectively hold majority shareholding , and therefore, the petition filed by the majority shareholders against the minority shareholders is not tenable. I have considered this aspect, but in my opinion, this preliminary objection is not tenable. It is an established law that even the majority shareholders can file a petition under Section 397/398 of the Act relating to the acts of oppression and mismanagement against a minority shareholders. There is no bar in law to file a petition by majority shareholders against the minority shareholders. This objection is, therefore rejected being devoid of merit.

22. The other preliminary objection challenging the jurisdiction of the CLB to enter the Company Petition is raised on behalf of the Respondent No.2 on the ground that these are personal disputes between the brothers, which according to the Ld. Counsel, are beyond the scope of the provisions contained in Section 397/398 of the Act. In my view, this objection is also unfounded. Petitions reveal that the disputes have been raised by the Petitioners in the capacity of they being shareholders of the Companies and not in their personal capacity. I, therefore, reject this contention of the Respondent No.2 as well.

23. The last preliminary objection is with respect to the delay in filing the petition. Dealing with this issue, it has been contended on behalf of the Respondent No. 2 that the alleged complaints as to the oppression and mismanagement pertain to the period from 2008 to 2011 and further the same are not in continuing in nature, therefore, the petitions are barred being not maintainable on account of law relating to limitation and unexplained delay and laches.

24. As regards the limitation, it is an established proposition of law as held in the cases of Sangramsinh P. Gaekwad & Ors. v. Shantadevi P. Gaekwad (dead) through L.Rs & Ors. (2005) 11 SCC 314 that an act of oppression is a continuous wrong until it is brought to an end by passing an appropriate order. In the case of Pearson Education Inc. V/s. Perntice Hall India (P) Ltd. & Ors. 134(2006) DLT 450, it was held that if the act complained off amounting to oppression has a continuing effect, in that case, the question of limitation does not arise. In the case of Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd., AIR 1966 Cal 512, it was held that a petition under section 397 would be maintainable if the effects of the alleged act of oppression persists indefinitely. In the case of Suhasini p. Kurkure v. Metalurgical Laboratories (P) Ltd. & Ors [2012] SCC 112 (CLB), it has been laid down as follows :

"The doctrine of laches is based on equitable consideration and depends on general principles of justice and fair play. There is no presumption that delay is deliberate. To be the laches delay should be such that it could be said that the Petitioner is not entitled to relief on account of gross negligence or inaction or for want of bonafide imputable to him or that he has given up (waived) his right by acquiescence or by his conduct or neglect. Further, this Board has consistently taken the view that in case of allotment of shares, even if it is a single act, since it has continuous effect allegations relating to the same can be entertained in a petition under Section 397. In a 397 petition, if the alleged act of oppression has a continuous effect, then the issue of limitation is of no consequence.'(Emphasis supplied)

25. I have considered the arguments of the Respondent No.2's Counsel. In light of the law laid down in the aforesaid decisions, in my view, the ground on the face of it, is untenable. The Petitioners are aggrieved by the unilateral decisions taken by the Respondent No. 2 at the back of the Petitioners in the year 2011 and immediately the petitions were filed. The complaints made in the petitions reveal that they are continuing in nature. I, therefore, hold that there is no delay in filing the petitions. The petitions do not suffer from any delay and laches. This objection is also rejected being without substance.

26. Coming to the appreciation of rival contentions on the merits of the cases, in this regard the principal complaint alleged by the Petitioners against the Respondent No.2 is that the Petitioners have been removed as the Directors of the Company in contravention of the provisions prescribed in the Companies Act, and in violation of the Articles of Association of the Company. In this connection, it is contended on behalf of the Petitioners in their respective petitions that the Company being a closely held family company, the principles of quasi partnership is applicable, and therefore, the removal of the Petitioners as Directors from the Board of the respective companies is a gross act of oppression. To support his contention, the Ld. Counsel has referred to a decision in the case of Gautam Kapoor v/s Limrose Engineering Works (P) Ltd. [2005] 128 Comp. Cas 237. In addition to the above, it has been contended that the Respondent No.2 did not serve any notice on the Petitioners in respect of the Board Meetings under challenge, and at the back of the Petitioners, he took all the decisions which are oppressive in nature. It is, therefore, submitted that the Board Meetings, under challenge, held by the Respondent No.2 without serving a mandatory notice on the Petitioners being the directors of the Company, are non-est, invalid, illegal and the decisions taken thereat are invalid, ineffective, illegal and deserves to be set aside.

27. The Ld. Counsel appearing for the Petitioners also argued that the alleged service of notice through UPC as sought to be contended by the Respondent No.2 is not a valid service as no notice was ever received by the Petitioners with respect to the Board Meetings under challenge. The Ld. Counsel further submitted that no corroborative evidence has been produced by the Respondent No.2 that the notices for these Board meetings under challenge were served upon the Petitioners. Referring the decision in the case of M.S. Madhusoodhan V/s Kerala Kaumudi (P) Ltd. [2004] 9 SCC 204, it was contended that the service of notice through UPC, in the absence of corroborative evidences, cannot be held valid in the eye of law, if the service of notice has been served by the Sender of such notice. The Ld. Counsel further submitted that removal of the Petitioners as the directors of the Company by invoking the provisions of section 283 (1) (g) is also bad in law on account of non-service of notice of the Board Meetings-in-question. To support his contentions, the Ld. Counsel relied upon the decisions in the case of LammertzindustrienadelGmbh H Vs. AltekLammertz Needles Ltd. [2009] 148 Comp Cas 669 wherein it is held as follows:-

'Any unilateral action taken which results in vacation of office of a director without notice to him and without providing him with an opportunity to seek leave of absence is bad in law as held in Dr. Kamal K. Dutta V Ruby General Hospital [2002] 108 Comp. Cas 312 (CLB) and Tea Brokers P. Ltd. V/s Hemendra Prasad Barooah [1998] 5 Comp L.J. 463 (Cal.). In view of this the vacation of office of director by the petitioner's nominees has to be set aside'.

It has been held in Parmeshwari Prasad Gupta V/s Union of India [1973] 2 SCC 543 and Vijay Krishnan Jaidka Motor Co. Ld. [1997] 1 Comp L.J. 268 (CLB), that the operation of Section 283 (1) (g) and vacation of office by directors cannot be upheld in the absence of any material to establish convening of board meetings and sending of proper notices. The accusation levelled against the Petitioner's nominees that they never attended any board meetings over the last eight years cannot justify their removal under the guise of the provisions of Section 283(1) (g), without strict proof of their absenting themselves from three consecutive meetings of the board of directors of the company, as envisages therein, especially when the respondents never invoked Section 283 (1) (g) of the Act at any earlier point of time during their absence for several years. The fairness demands that the respondents ought to have cautioned them before invoking the provisions of section 283 (1) (g), whereas they failed to conform the probity, as laid down by the Supreme Court in Kamal Kumar Dutta V. Ruby General Hospital Ltd. (2006) 134 Comp Cas 678. In view of this, the vacation of office of director by the Petitioner's nominee directors is bad in law'.

28. On the other side, the Ld. Counsel appearing for the Respondent No.2 has tried to justify the validity of the service of notice and the removal of the Petitioners as the directors of the company saying that despite service of notice since the Respondent deliberately absented in three consecutive Board Meetings without seeking leave or exception by virtue of the provisions contained in Section 283 (1) (g) of the Act they denied to have vacated the office of Directorship. It was therefore, contended that the removal of the Petitioners as Directors happened by operation of law.

29. I have carefully considered the submissions and scrutinized the material available on record.

30. Firstly, I would like to consider the law laid down with respect to the application of principles of quasi-partnership in a company. Time and again it has been held in various decisions that there is no readymade yardstick to determine as to when an incorporated company could be considered to be a quasi-partnership for a purpose of petition under Section 397/398. It would depend on the facts of a particular case. The case cited by the Ld. Counsels for the parties indicate some of the instances such as equal shareholding, deadlock in the management, conversion of a pre-existing partnership into a company, agreement for equal participation in the company, etc. These propositions have been laid down by the Hon’ble Apex Court in the case of Hind Overseas (supra), wherein the Hon'ble Supreme Court after examining the features in the case of Ebrahimi and Westbourne Galleirs Ltd. concluded that the facts in the case of Hind Overseas did not disclose application of principles of quasi-partnership. I may like to extract the relevant part of the said decision here as under:

"The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements:

(i) an association formed or continued on the basis of a personal relationship, involving mutual confidence-this element will often be found where a pre-existing partnership has been converted into a limited company;

(ii) an agreement, or understanding, that all, or some (for there may be ‘sleeping’ members), of the shareholders shall participate in the conduct of the business;

(iii) restriction upon the transfer of the members' interest in the company-so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere."

31. In the said case the Hon'ble Supreme Court examined the principles keeping in view the background and conditions of Indian society, and came to a narrow reading of the Ebrahimi principles, thus -

"It is more opposite now that the background, conditions and circumstances of the Indian society, the needs and requirements of our country call for a somewhat different treatment. We will have to adjust and adapt, limit or extend, the principles derived from English decisions, entitled as they are to great respect, suiting the conditions of our society and the country in general always, however, with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company."

32. The Hon'ble Apex Court went on to hold that:

"When more than one family or several friends and relations together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked. Besides, it is only when share-holding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the just and equitable ground. In a given case the principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership. On the allegations and submissions in the present case, we are not prepared to extend these principles to the present company."

33. It is an admitted fact that the Petitioners and the Respondent No.2 are the real brothers and the Companies are closely held family Companies. The Petitioners and the Respondent No.2 were actively participating in the business of the Companies. It has not been denied that prior to incorporation of the Company until 1993 the business was carried on as a partnership firm and that was converted into a private limited Company. The Petitioners and the Respondent No.2 have been directors since 14/1/1993 in M/s Lirin Roadlines Pvt. Ltd., the Respondent No.1 in C.P. No.39 of 2011. In my view, all these facts clearly demonstrate that the company is in the guise of a quasi-partnership. Further, it is an established law that in a closely held family company in which the principles of quasi-partnership are applicable, the shareholders have legitimate expectation to be on the Board of Directors of the Company. I, therefore, hold that in a Company where the principles of partnership are applicable, the removal of the Petitioners as Directors without following due course of law amounts to a gross act of oppression as defined in Section 397of the Act. The aforesaid view finds support from the decision in the case of Hanuman Prasad Bagri Vs. Bagress Cereals (P) Ltd. (2001) 33 SCL 78 (SC).

34. I am, therefore, now required to examine the question as to whether the Petitioners were removed as Directors in accordance with law as sought to be contended by the Contesting Respondents.

35. In this regard, the Ld. Counsel for the Contesting Respondents has justified the removal of the Petitioners on two fold grounds. The first ground is that the Petitioners did not disclose their interest as required by the provisions contained in Section 299 of the Act, therefore, the Petitioners were ceased to be directors by operation of law as provided in Section 283 (i) of the Act. It is further contended that the Petitioners did not attend three consecutive board meetings without obtaining leave of absence from the Board and on this ground also they were ceased to be directors of the company by virtue of operation of law as contemplated in Section 283 (g) of the Act.

36. On the contrary, the Ld. Counsel appearing for the Petitioners have refuted the aforesaid allegations saying that the Petitioners were not served any notice with respect to the Board meetings allegedly held by the Company(ies) as contended by the Respondents. Therefore, the question of their presence in the said board meetings and/or obtaining leave of absence from such Board meeting does not arise. The Ld. Counsel submitted that this is a false ground taken by the Contesting Respondents to justify the removal of the Petitioners as Directors of the Company. The Ld. Counsel further contended that the allegation of the Contesting Respondents that the Petitioners did not disclose their interest and contravened the provisions contained in Section 299 of the Act, is also misconceived. According to the Ld. Counsel, the Petitioners were not served with any show cause notice with respect to such charge levelled by the Respondents against them at any time prior to it. It is further alleged that the Respondents have levelled this charge on the Petitioners in order to make an attempt to justify the removal of the Petitioners as Directors of the Company.

37. In addition to the above, it was argued on behalf of the Petitioners that as per Articles of Association of the company, namely M/s. Lirin Roadlines, the Petitioners and Respondent No.2 are the permanent directors of the Company and, therefore, the removal of the Petitioners who are permanent directors of the Company on the alleged grounds i.e. the non-disclosure of interest and non attending three consecutive Board Meetings, is completely illegal and unlawful being in violation of the provisions of the Articles of Association of the Company.

38. I have carefully considered the rival submissions and perused the record. It is seen from perusal of para Nos. 10 and 11 of the C.P. No.36 of 2011, Mr. Pravin C. Chheda and Mr. Kirti C. Chheda, have been removed from the Board of Directors of Simplex under Section 283(1)(i) of the Act in the Board meeting held on 26/3/2011. It is further noted that the Respondent No.2, thereafter, sent a letter dated 28/3/2011 informing removal of the Petitioners from the directorship of the Company and Respondent No.2 filed Form 32 with the ROC intimating removal of the Petitioners from directorship of the company and appointing another director Mr.Sajjiv Menon as Additional Director.

39. It is further seen from perusal of the C.P. No.36 of 2011 and the Additional Affidavit filed vide Diary No.2455 dated 2/7/2013 on behalf of the Petitioners that they have denied the fact of having received any notice in respect of Board meetings held on 8/6/2010, 3/9/2010 and 10/12/2010.

40. Further, it is found upon perusal of the petitions being C.P. Nos.37 and 39 of 2011, that the Petitioners Mr. Pravin C. Chheda and Mr. Kirti C. Chheda have been removed from the Board of Directors of Lirin under Section 283(1)(i) of the Act in the Board meeting held on 28/3/2011. The Respondent No.2 sent a letter dated 26/3/2011 informing removal of the Petitioner from the directorship of the company and Respondent No. 2 filed Form No.32 with ROC intimating removal of the Petitioner and Respondent No.3 from directorship of the company and appointing another director Mr.Sajjiv Menon as Additional Director.

41. Similarly, on a perusal of C.P. Nos.37 and 39 of 2011, it is seen that in respect of the Board meetings held on 8/6/2010, 3/9/2010 and 10/12/2010, the contention of the Petitioners is that no notices have been received by them.

42. For the sake of convenience, I would like to extract the relevant provisions of Section 283 (g) and (i) and Section 299 of the Act under which the Petitioners are stated to have been removed as Directors, are here as under:-

Section 283.

(1) [The office of a director shall become vacant if-]

(a).....

(b)…..

(c)…..

(d)…..

(e)…..

(f)…..

(g) he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board;

(h)....

(i) he acts in contravention of section 299;

(j) ….

(k)…..

(l)……

Section 299

Disclosure of Interests by director.

299. (1) Every director of a company who is in any way, whether directly or Indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disciose55 the nature of his concern or interest at a meeting of the Board of directors.

(2) (a) In the case of a proposed contract or arrangement, the disclosure required to be made by a director under sub-section (1) shall be made at the meeting of the Board at which the question of entering into the contract or arrangement is first taken into consideration, or if the director was not, at the date of that meeting, concerned or interested in the proposed contract or arrangement, at the first meeting of the Board held after he becomes so concerned or interested.

(b) In the case of any other contract or arrangement, the required disclosure shall be made at the first meeting of the Board held after the director becomes concerned or interested in the contract or arrangement.

(3) (a) For the purposes of sub-sections (1) and (2), a general notice given to the Board by a director, to the effect that he is a director or a member of a specified body corporate or is a member of a specified firm and is to be regarded as concerned or interested in any contract or arrangement which may, after the date of the notice, be entered into with that body corporate or firm, shall be deemed to be a sufficient disclosure of concern or interest in relation to any contract or arrangement so made.

(b) Any such general notice shall expire at the end of the financial year in which it is given, but may be renewed for further period of one financial year at a time, by a fresh notice given in the last month of the financial year in which it would otherwise expire.

(c) No such general notice, and no renewal thereof, shall be of effect unless either it is given at a meeting of the Board, or the director concerned takes reasonable steps to secure that it is brought up and read at the first meeting of the Board after it is given.

(4) Every director who fails to comply with sub-section (1) or (2) shall be punishable with fine which may extend to 56 [fifty] thousand rupees.

(5) Nothing in this section shall be taken to prejudice the operation of any rule of law restricting a director of a company from having any concern or interest in any contracts or arrangements with the company.

[(6) Nothing in this section shall apply to any contract or arrangement entered into or to be entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than two per cent of the paid-up share capital in the other company.]

43. It is a fundamental law that any board meeting, without service of a proper notice of it upon the directors of the Company, is not valid in the eye of law. Having carefully scrutinized the documents relating to the Board meetings under challenge and the resolutions passed thereat, it cannot be disputed that in these meetings the Petitioners were not present. A question then arises for my consideration is as to whether the Petitioners were served with a valid notice, as required by law. On a careful examination of the records, I have come to the conclusion that the Petitioners have successfully established that no valid notice was served upon them as required by law. The Respondent No.2 has failed to produce any cogent, reliable and corroborative piece of evidence like attendance register, dispatch register or any other supportive material to show that the notices were served upon the Petitioners to attend the Board meeting under challenge in which he impugned resolutions removing them as a directors were served. In view of this, I have no option but to hold that the Board meetings under challenge in all the petitions are invalid, and consequently the resolutions passed there at are also unlawful and liable to be set aside. To support my finding, I would like to produce relevant extracts of the decisions in the following cases:

a. M.S. Madhusoodhan V/s Kerala Kaumudi (P) Ltd. [2004] 9 SCC 204,

'As far as the certificate of posting is concerned, it is not explained why it does not dispatch of notices to any other shareholder. When the relationship between the parties was already so embittered, the proof of service of notice by certificate of posting must be viewed with suspicion. Judicial notice has been taken that certificates of posting are notoriously 'easily’ available.'

b. Ketki Research Institute of Medica; Sciences Ltd. V/s Dr. Ashok P. Arbat [2008] 144 Comp. Cas 663 {Bom].

'What section, therefore contemplates is that when a director does not attend voluntarily for three consecutive meetings, he shall be deemed to have automatically vacated the post of director, he shall be deemed to have automatically vacated the post of director. When a person is, however, prevented from attending the meeting by any order of the court or is detained in the prison and not produced for the meeting, his absence could not be said to be voluntary and such person cannot incur any disqualification.'

c. LammertzindustrienadelGmbh H Vs. AltekLammertz Needles Ltd. [2009] 148 Comp Cas 669 wherein it is held that 'all resolutions passed at the meetings of the Board without giving notice to any director are bad in law and void ab initio even if the director himself waived notice.'

d. Gautam Kapoor V/s Limrose Engineering Works (P) Ltd. [2005] 128 Comp. Cas 237 wherein it is held as under:

'In the present case, there are three distinct groups of shareholders holding equal percentage of shares and having on representative of each group on the Board. Any disturbance in the directorship could be considered as an act of oppression as each group has the legitimate expectation of being represented on the Board. In the present case, it is not a case of removal of a person from the board but cessation of office in terms of Section 283 (1) (g) which mandates that if a director absents himself from 3 consecutive meetings of the board or from all meetings of the board for a continuous period of 3 months, whichever is longer, without obtaining leave of absence from the board, he would cease to be a director. In the present case, according to the respondents, the first and third petitioners did not attend board meetings on 15/1/2000, 3/3/2000, 5/5/2000, 3/7/2000 and as such they were declared to have ceased to be directors in the Board meeting held on 14/8/2000. The Petitioners have denied receipt of any notice for these board meetings even though the respondents have produced certificates of posting to establish that notices were sent to these directors. however, the Respondents did not establish that these meetings did take place by enclosing copies of the minutes of the impugned board meetings. Further, it is on record that, the first and third petitioners were shown to have been present in the board meeting held on 1/9/2002... I declare that the first and third petitioners have not ceased to be directors in terms of section 283 (1) (g) of the Act and they continue to the directors on the Board of Limrose."

e. Sushma Harish Sharma V/s Hotel Horizon Pvt. Ltd. [2007] 79 CLA 73 (CLB) wherein it has been held that :

'When the provisions of Section 283 (1) (g) are invoked, it should be established that notices for Board meetings had been issued and that the concerned director absented himself/ herself without leave of absence from three consecutive meetings... The Respondents have produced the returned envelope sent by registered post containing the notice for the Board meeting convened on 5/07/2003 but no evidence that notices for the Board meetings on 5/09/2003, 5/10/2003 and 5/12/2003 were sent her, has been produced. Further, if the contention of the respondents is that in view of her absence in these Board meetings without leave of absence, she had vacated her office there is no answer as to why Form 32 was filed only on 18/11/2004 recording that she had vacated her office on 5/9/2004. Therefore, I am of the view that the Respondents were not justified in invoking the provisions of Section 283 (1) (g) of the Act and by doing so, they had acted in a manner oppressive to the Petitioner No. 1. '

44. Relying upon the aforesaid decisions and taking into consideration all the material available on record. I hold that the removal of the Petitioners as Directors of both the Companies is illegal, non-est, ineffective and such resolution, therefore, deserves to be set aside and they are required to be re-instated. I have also considered the removal of the Petitioners on the ground that they contravened the provisions of Section 397 and I hold that this allegation is also not established.

45. Elaborating the next instance of an act of oppression, it was submitted on behalf of the Petitioners that the Respondent Nos.1 and 2 have, not only by fabrication and manipulation, allegedly removed the Petitioner and Respondent No. 3 as directors of the company, but they have also illegally and fraudulently appointed additional directors for the Company. According to the Petitioners, the Respondent Nos. 1 and 2 have appointed. (i) Mr. Sanjeev Menon with effect from 26/03/2011 pursuant to Board of Directors Resolution No.04 dated 26/03/2011 and (ii) Mr. Tilak Maisheri with effect from 19/04/2011 pursuant to Board of Resolution No.03 dated 19/04/2011.

46. It was further submitted that the said appointments are ex-facie illegal and on the basis of false and fabricated documents. No Board meeting was ever held on 26/03/2011. According to the Ld. Counsel, the Petitioner and Respondent No. 3, as directors of the company, have not received any notice for the same. The Ld. Counsel added that the said resolutions could not have been unilaterally passed by the Respondent No.2. It was next contended that the Petitioner has also not received any notice for any Board meeting allegedly held on 19/4/2011. The Petitioner submits that Respondent No. 2 had fraudulently fabricated records to oust the Petitioners from the company.

47. It is further pointed out that the Petitioners also learnt from the ROC records that the Respondent No. 2 also filed another Form 32 changing the designation of the said illegally and purportedly appointed two directors from additional directors to professional directors on 31/12/2012. In addition, the Respondent No. 2 also purportedly filed another Form 32 changing their designation from Directors to the professional directors on 25/06/2012. It was, therefore, submitted that the appointments of the said additional directors are liable to be set aside.

48. Now, I proceed to consider the allegations of the Petitioners as to the mismanagement committed by the Respondent No.2 in the conduct of affairs of the Company. Dealing with the Siphoning/Diversion of Funds, the Petitioners submitted that Respondent No. 2 and his family members have incorporated another company viz. M/s Lirin Logistics Private Limited. According to the Ld. Counsel, this company is entirely owned and controlled by Respondents family members. The Ld. Counsel submits that till 2011, the registered office of this company and Respondent No. 1 was also the same. It is contended that after taking over control of Simpex and Lirin and ousting the Petitioners from the management and control thereof, the Respondent No.2 has deliberately and with a motivated plan diverted all business of the Simplex and Lirin to M/s Lirin Logistic Pvt. Ltd. a company owned by Respondent No.2's family members. According to the Petitioners’ 30/6/2011, wherein, as on 31/3/2010, there was no liability against the name of the Petitioner Mr. Praveen Chheda and all of sudden in balance sheet as on 30/3/2011 the liability against the name of Petitioner Mr. Praveen C. Chheda is shown as Rs. 1,15,54,162/-. The Ld. Counsel pointed out that the present Petitions were filed in March, 2010 and the accounts and records were in control of the Respondent No. 2. The Petitioners have denied all such liability created in their names and sought an investigation of each and every transaction of the Companies starting from 1/4/2010 to reveal the correct facts and also the losses caused by such manipulation in accounts by the Respondent No. 2.

53. The Ld. Counsel attracted my attention to the documents available on record to contend that the Respondent No. 2 has manipulated the accounts as may be seen from the Statement of Accounts filed with the ROC and the figures mentioned in the summary suit filed in 2013 in the Hon'ble High Court of Bombay.

54. Pointing out the illegalities in holding the Annual General Meetings, the Petitioners' Counsel submitted that the Annual General Meetings from 2011, 2012 and 2013 were not held as per the provisions of the Act. In this regard, it was argued that the notice of AGM for 2011 dated 30/11/2011 was hand delivered to the Petitioners on 24/11/2011 at evening time for the AGM to be held on 31/12/2011. According to the Ld. Counsel, the AGM for 2011 was held beyond the statutory period stipulated by the said Act. He added that the Respondent No.2 has failed to produce any evidence to show that they obtained permission from the ROC for extension of time for holding the AGM. Further, when the balance sheet for the year ending on 31/3/2011 was ready and signed by the Respondent No. 2, there cannot be any reason for extension of AGM. The Ld. Counsel pointed out that the AGM thus was held beyond the statutory period. Further, according to him, the intention for the same was to unlawfully regularized the appointment of said additional directors and to keep the Petitioners in the dark about the operation and financial details of the Companies. It was submitted that after realizing the fact that the statutory period for AGM has over, the Respondent No. 2 prepared another balance sheet as on 30/6/2011 and submitted the same to the ROC. It is submitted that all subsequent AGMs allegedly called and held by the Respondent No. 2, are, therefore, illegal and unlawful for want of authority. Similarly, all the accounts prepared by Respondent No. 2 starting from 2010 and all forms filed with the ROC, Counsel, Simplex and Lirin from being a profit making Companies have been driven to make losses while the said M/s Lirin Logistics, which had no business as on 31/03/2010, is making stupendous profits as of 31/03/2012. It is submitted on behalf of the Petitioners that it is, therefore, apparent that Respondent No.2 is diverting the business of the Companies to his own family company. According to the Ld. Counsel for the Petitioners, the Respondent No.2 in the aforesaid manner has turned the aforesaid two Companies into a hollow of loss making Company to the detriment of the Petitioners and Respondent No.3 and thus this act of the Respondent No.2 amounts to mismanagement in the affairs of the Company.

49. The Ld. Counsel for the Petitioners then levelled another charge upon the Respondents saying that the Respondent No. 2, in order to grab the business and goodwill of the Respondent Companies, incorporated M/s Lirin Logistics Private Limited with his son, daughter and wife as shareholders and directors. Prior to this, the name 'Lirin Roadlines' had earned enormous goodwill and reputation in the transport industry. According to the Petitioners, no consent whatsoever was obtained from Lirin for using the similar name 'M/s Lirin Logistics Private Limited' and the said fact was confirmed by the ROC in reply to an application under RTI Act.

50. On behalf of the Petitioners, it has been next submitted that Respondent No. 2 has also arbitrarily stopped the salary which the Petitioners were drawing from the company. It may be noted that the salary to the Petitioners have been stopped and the Respondent No.2 is drawing enhanced salary of Rs. 18,00,000/- per annum as per alleged Balance sheet filed with the ROC, despite the fact that the Company has turned to a loss making company. The Petitioners’ Counsel submitted that these steps are taken to create acute financial pressure of the Petitioners and are nothing but attempts to arm twist the Petitioners.

51. It was further submitted that the Respondent No. 2 also paid salary to his son and daughter who are also directors in M/s Lirin Logistics Private Limited. This is a glaring example of siphoning of funds by debiting salary in name of family members, and that too, at the enhanced rate every year.

52. It is next alleged by the Petitioners that the Respondent No. 2 is manipulating the accounts and records of the Company in order to create false liability in name of the Petitioners. According to the Counsel appearing for the Petitioners, it is evident from the alleged balance sheet upto cannot be relied upon and deserves to be set aside and a thorough investigation is required in order to reveal the exact amount siphoned off and losses caused by the Respondent No. 2. Lastly, it was submitted on behalf of the Petitioners that the oppressive acts and other unlawful activities were continued despite pendency of the present Petitions and ultimately, the Respondent No. 3 sent a notice dated 10/3/2012 in respect of requisition for holding the Extra Ordinary General Meeting (EOGM) for the purpose of removal of Mr. Sanjiv Menon and Mr. Tilak Mahesheri, Additional Directors appointed by the Respondent No. 1 Companies after removing the Petitioners and for their restoration on the Board of Directors. However, the Respondent No.2 had never intended to restore the Petitioners as Directors who are in total 2/3 shareholders of the Company, on the Board of Directors and did not wanted to divulge into his sole power to handle the Companies.

55. Responding to the allegations of mismanagement in the Companies’ affairs, the Ld. Counsel Mr. Sampat, appearing on behalf of the Respondent No.2 submitted that, the main cause in the petition is that the Respondent No.2 is acting in oppression and mismanagement of the two group Companies but according to him, there are cross allegations against the parties and claim of companies’ assets by the Petitioners as his personal assets, show the malafide intention in making the petitions.

56. Pointing out the misconduct on the Petitioners, it was argued on behalf of the Respondent Nos. 1 and 2 that the Petitioner Mr. Pravin, had suo moto advised the Company's bankers to stop the operations of the account of the Companies inspite of available balance of Rs.60 lakhs. For the said reason, the Bankers stopped the accounts of the companies jeopardizing its operations. He added that it was with persuasion of the Respondent No.2 and after considering illegality of the action of the Petitioners that, the Bank opened the account after considerable delay. According to him, the Companies' prestige was affected. It was further submitted that the Petitioner Mr. Pravin Chheda had refused to sign the cheques sent to him for the operation of the account and holding the Respondent No.2 at ransom for refusing to permit personal withdrawal of funds when debt outstanding against him was exceeding in crores. Further, the Petitioner, Mr. Kirti C.Chheda, after having disassociated himself from the day to day operation of the Companies since 2006, now belatedly claimed that the immovable properties of the Companies were his personal properties. Although, a title suit in that respect is pending in the High Court, Bombay.

57. It was further argued on behalf of the Respondent No.2 that the Petitioners are holding on the properties of the Companies as the personal properties, namely, at Hyderabad and several properties in Mumbai and Navi Mumbai, and they have started their own family companies in competition with the Companies’ business.

58. It was, therefore, submitted on behalf of the Respondent No.2 that there is no act of oppression and/or mismanagement by the Respondent No.2 but, all actions are with the intention to protect the business of the Companies. The petitions, therefore, need to be adjudicated in the light of above circumstances.

59. It was further submitted with respect to allegations of financial irregularities by the Respondent No.2’s Counsel that the accounts of the Companies have been audited by the Statutory Auditor from time to time. While the parties to the petitions were participating in the operations of the Companies, they did not take any objections to the contents of the said Annual Accounts. Particularly, even after the filing of petitions when the accounts were approved in the AGM, no cause of action relating to their adoption in the meeting has been reported immediately to the CLB, Mumbai. However, any belated objection is unjustified. There are no adverse remarks in the Auditor's Report. It is further submitted that the Company Secretary has issued certificate of compliance from time to time in the relevant years as required under the Companies Act, 1956. The contents of the said certificate have no adverse remarks against the Companies. Moreover, the said Certificate remained unchallenged by the parties to the petitions. It is further submitted that all the general body meetings have been held under the supervision of the CLB, Mumbai, and proceedings of next AGM (2011-2012) have been held without agitating any cause concerning the proceedings therein. The operations of the company subsequent to the filing of the petitions are in compliance with the orders of the CLB, Mumbai and also the Hon'ble High Court, Bombay and no cause contrary to such compliance is made out.

60. In continuation of the aforesaid, it was further submitted on behalf of the Respondent No.2 that the matters of holding general meetings and board meetings, passing of accounts, appointment of directors, compliance of Memorandum and Articles of Association of the Company, etc. have not been agitated before the Company Court or other competent courts under their respective jurisdiction wherein, CLB jurisdiction is absent.

61. Lastly, it is submitted that the scope of reliefs under Section 397/398 of the Act, is to remove the cause of oppression and mismanagement as an alternative to 'just and equitable' cause for winding up of the company. According to the Ld. Counsel, in a family company, where three brothers are equal partners, any reliefs to restore them to the Board of Directors would result into deadlock and persistent litigation in view of disagreement and disputes between the three brothers. It is, therefore, contented that the said disputes require resolution and adjudication in the competent court/ forums which are pending and/or may be initiated in future.

62. Based on the above, the Ld. Counsel contended that no case of mismanagement as alleged by the Petitioners is made out.

63. I have also considered all the allegations with respect to the mismanagement in the conduct of affairs of the Companies. The Contesting Respondents have not denied that their son and son-in-law are running a parallel company in the name of M/s Lirin Logistics Pvt. Ltd. The Respondent No.2 being a director of the Companies owes a fiduciary capacity vis-a-vis the companies and its shareholders.

64. It is a settled law that the Director of the Company(ies) is supposed to act in good faith for the benefit of its members, as a whole, and in the best interest of the Company, the shareholders and public at large. Further, he is required to exercise his duties with due and reasonable care, skill and has to take independent judgment, without involving himself directly or indirectly in conflict with the interest of the Company. In the cases, where the Company is in the guise of quasi-partnership, the Director owes a special duty. He is required to act with bonafide and utmost care, honesty and fair-play towards other partners in the capacity of trustee, agent and representative of the Company. The utmost good faith is due from every member of a partnership towards every other member; and if any dispute arises between partners touching any transaction by which one seeks to benefit himself at the expense of the firm, he will be required to show, not only that he has the law on his side, but that his conduct will bear to be tried by the highest standard of honour. In other words in the partnership, there should be the utmost good faith between the constituted members. In this regard, I would like to extract the proposition laid down by the Hon'ble Apex Court in the case of Dale & Carrington Invt. (P) Ltd. and Anr. Vs. P.K. Prathapan & Ors. (2005) 1 Supreme Court Cases 212, which is as under:

'At this stage it may be appropriate to consider the legal position of Directors of companies registered under the Companies Act. A Company is a juristic person and it acts through its Directors who are collectively referred to as the Board of Directors. An individual Director has no power to act on behalf of a company of which he is a Director unless by some resol

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ution of the Board of Director of the Company specific power is given to him/her. Whatever decisions are taken regarding running the affairs of the company, they are taken by the Board of Directors. The Directors of Companies have been variously described as agents, trustees or representatives, but one thing is certain that the Directors act on behalf of a Company in a fiduciary capacity and their acts and deeds have to be exercised for the benefit of the Company. They are agents of the company to the extent they have been authorised to perform certain acts on behalf of the company. In a limit sense they are also trustees for the shareholders of the company. To the extent the power of the Directors are delineated in the Memorandum and Articles of Association of the Company, the Director are bound to act accordingly. As agents of the company they must act within the scope of their authority and must disclose that they are acting on behalf of the company. The fiduciary capacity within which the Directors have to act enjoins upon them a duty to act on behalf of a company with utmost good faith, utmost care and skill and due diligence and in the interest of the company they represent. They have a duty to make full and honest disclosure to the shareholders regarding all important matters relating to the company. It follows that in the matter of issue of additional shares, the Directors owe a fiduciary duty to issue shares for a proper purpose. This duty is owned by them to eh shareholders of the company. Private limited companies are normally closely held i.e. the share capital is held within members of a family or within a close-knit group of friends. This brings in considerations akin to those applied in cases of partnership where the partners owe a duty to act with utmost good faith towards each other.' 65. Based on the above, I have come to the conclusion that the Respondent No.2 has committed breach of fiduciary duty in the capacity of he being a director of the Companies, In addition to the above, it is further established from the record that the business of the Companies has gone down substantially and now it is at the verse of the NPA. The Contesting Respondents, after having permission from the Board, have sold the old vehicles and purchased the new ones. Despite this, the Company failed to generate the positive network. This fact clearly demonstrates that the Companies have been mismanaged by the Contesting Respondents. 66. I have also considered the counter allegation made by the Respondents with respect to alleged misconduct on the part of the Petitioners. I do not find any substance in the said allegation. The same is, therefore, rejected. 67. In conclusion, the Ld. Counsel appearing for the Respondents have failed to rebut the contentions raised by the petitioners. The charges with respect to removal of the Petitioners as directors, the illegal appointment of other persons as directors, running a competitive business in the name of his family members under the name and style of M/s Lirin Logistics Pvt. Ltd., are established from the material available on record. In addition to the above, the Petitioners have successfully proved the financial irregularities in the statement of account of the company and the irregularities in holding the meetings. All these acts, if taken together, are oppressive to the Petitioners. The counter allegations made by the Respondents of the Petitioners’ conduct do not have any material substance. The cases pending in the Civil Court with respect to the title of the property have no concern with these petitions. It has not been denied that the Respondents are in complete control of the Respondent companies. The Petitioners has no access to the Companies’ record. It is the Respondent No.2 who is dealing with the assets of the companies and running the entire business. On a critical examination of the facts and the circumstance, as well as the other material available on record, I have come to the conclusion that the actions and deeds of the Respondent No.2 are wrongful, burdensome, harsh and unfair to the Petitioners. There are consistent acts of oppression. I, therefore, hold that the Petitioners have thus succeeded to prove their allegations. 68. It is a settled proposition of law that where any shareholder is denied his most valuable rights in utter disregard of the statutory provisions, the making of a winding of order, on the ground that it is just and equitable, would be justified. Therefore, having regard to the facts of the case in hand, the necessary ingredients of the provision contained in Section 397 which provides 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 a equitable that the company should be wound up'; also stands proved. 69. Having held that the case of oppression and mismanagement is established, now the next question that arises for my consideration is as to what orders would be appropriate, just and proper to bring an end to the acts of oppression and mismanagement? Having given my serious thoughts to all the aspects, in my opinion, to do substantial justice to the parties, the C.Ps. may be disposed off with the following directions:- Order a. The removal of the Petitioners, Mr. Pravin C. Chheda and Mr. Kirti C. Chheda, as the Directors of the Board of both the Companies namely, M/s Simplex Crane Services Pvt. Ltd. and M/s Lirin Roadlines Pvt. Ltd., is declared as null and void and their removal as such is set aside. They are re-instated as the Directors on the Board of these Companies. The Companies are directed to file statutory Form 32 with the concerned ROC showing their re-instatement. The concerned ROC shall remove the earlier Forms 32 showing cessation of the Petitioners as the Directors of the Companies from the MCA Portal. b. The Directors as on the date on the Board of both the Companies i.e. Simplex and Lirin, other than Mr. Rasiklal Chheda, the Respondent No.2 are hereby removed. The Forms 32 uploaded by the Companies showing their appointment as Directors from the MCA Portal shall be removed. c. The Petitioners, namely, Mr. Pravin C.Chheda and Mr. Kirti C. Chheda and the Respondent No.2 Mr. Rasiklal Chheda, shall hold a Board Meeting within 30 days from the date of receipt of copy of this judgment and in the said Board Meeting necessary resolution(s) shall be passed authorizing any of them to do the needful for the compliances of the directions made above. Any of the two directors shall form quorum for the Board Meeting. In the event, the Company fails to do so, Mr. Pravin C. Chheda is hereby authorised to file statutory forms to comply with the directions made above. d. The Companies are directed to hold their EOGM, in accordance with the law for consideration of the appointment/re-appointment of its statutory Auditor. After appointment/re-appointment of such statutory auditor, such auditor shall conduct a special audit of the Companies w.e.f 1/4/2010 onwards. In case, it is found that the Respondent No.2, namely Mr. Rasiklal C. Chheda has diverted and/or misappropriated of such audited funds of the Companies and caused losses to the Companies by committing misappropriation and diversion of the funds, such losses shall be recovered from him from his personal resources. The Companies shall handover all the requisite documents desired by such auditor for the purpose of undertaking a special audit. e. It is directed that the notices in respect of Board meetings, AGMs, EOGMs shall be served through R.P.A.D. f. The Books of accounts shall be kept at the registered office of the Companies and shall be open for inspection in accordance with the law. The certified copies thereof shall be provided to the person entitled to in law, upon payment of the requisite charges. g. In case of any difficulty in implementation of the directions made above, the parties are at liberty to approach this Bench. h. The other prayers made by the Petitioners are hereby declined. i. The C.Ps. stand disposed of in the above terms. j. Interim reliefs are disposed off accordingly. Pending C.As., stand disposed of in the above terms. Prayers made in the precipe dated 16/02/2015 stands disposed off. k. No order as to costs. l. Copy of the order be issued to the parties.
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