ORDER
K.C. Ganjwal, Member
1. Dr. Mrs. Usha Chopra of UK has filed this petition under Section 397/398 against Mrs. Chopra Hospital Pvt. Ltd. and Ors. The petitioner is a qualified doctor having obtained MDBS degree from Ranchi and MORCOG from London. The present petition has been filed through the petitioners’ power of attorney holder, Shri Kamal Kapoor. The petitioner went to UK. after her marriage and started working there and became non resident Indian.
2. The respondent company is a private limited company and was incorporated on 13.5.1999 with only two promoters, shareholders and directors, namely the petitioner and her husband Dr. Satish Kumar Chopra. The registered office of the company is situated at DDA Community Centre, Yusaf Sarai, Delhi-110049. The authorized share capital of the company was Rs. 1 lakh divided into 10,000 equity shares of Rs. 10. The issued, subscribed and paid up capital of the company on its incorporation was 2000. The entire share capital of the company was held by, the petitioner and her husband namely, Dr. Satish Kumar Chopra.
3. The fact of the case is that in the year 1981, Delhi Development Authority floated a scheme for grant of perpetual lease – hold rights in respect of Nursing Home Plots to NRIs. The petitioner applied for allotment of land for construction of a Nursing Home in the year 1981 under the scheme. The petitioner constructed the Nursing Home in or about the year 1990 as a sole proprietorship concern. The petitioner took a loan of Rs. 18.50 lakhs from the City Bank in Sep. 1990 and purchased the essential equipment and other gadgets for successful running of the running home. This loan was paid back by the petitioner in 1997.
4. The learned counsel for the petitioner submitted that respondent NO. 2 Dr. Dwaraka Das Motiwala with the active assistance of his wife Respondent No. 7 and his mother respondent NO. 3, practiced deception on the petitioner with a calculative motive of grabbing the property of the petitioner over a period of 10 years. This came to the knowledge of the petitioner only on her visit to India in Feb. 2002. The respondent No. 2 Dr. Dwaraka Das Motiwala for the first time met the petitioner some time in the year 1999 and requested for permission to do his consultancy in one of the cabins of the petitioner Nursing Home known as Chopra Nursing and Pediatric Centre, DDA Community Centre, Yusaf Sarai New Delhi. Soon thereafter, the respondent NO. 2 gave the petitioner confidence so much that he succeeded in pursuing the petitioner to leave the Nursing Home in the care of respondent NO. 2 while proceeding to UK. Thereafter the petitioner came to India only on short visits. During these visits the respondent No. 2 and his associates kept the petitioner in dark regarding the real state of affairs. In the year 1999 the respondent No. 2 told the petitioner to form a private limited company to manage the affairs of the Nursing Home and produced an MOU (Memorandum of Understanding) for the petitioner signature when the petitioner and her husband were proceeding to the international airport for taking a flight to UK. Trusting the respondent NO. 2 the petitioner and her husband signed the said Agreement although her husband was not a party to the agreement. In pursuance of the said agreement dated 19.4.1999, the respondent company was incorporated with an authorized capital with the petitioner and her husband as only promoters/directors. The petitioner and her husband left for UK on 3.5.1999. They came back to India for two short trips from 5.12.99 to 12.12.99 and 7.2.2000 to 20.2.2000 in next two years.
5. The learned counsel for the petitioner further submitted that as on 30.7.1999 the petitioner and her husband was the only two shareholders and were not present in India on the said date. However, Dr. Dwaraka Das Motiwala illegally convened an EOGM of the respondent company without the knowledge and consent of the petitioner and illegally increased the capital of the respondent company from 1 lakh to 50 lakhs. This was in violation of provisions of Clause 12(2) of the Articles of Association of the company which provides that atleast two members must be present in person to form a quorum for the meeting. The petitioner shocked to know that she has been deceived by Respondent No. 2 and his associates including his wives and mother. Having come to know the petitioner no longer trusted R-2, he tried to forestall any action by the petitioner to regain the control of the management of her Nursing Home and filed a Civil Suit No. 374/2002 in the court of civil judge, Delhi asking per permanent injunction in favour of respondent NO. 1 restraining petitioner NO. 1, from leasing, selling, mortgaging or creating a third party interest in the property. The Civil Suit filed by respondent NO. 2 is still pending and in that plaint the respondent No. 1 has stated that the petitioners are holding 34.95% voting power. The present shareholding as a result of unauthorized increasing of the capital of the respondent company is as follows:
Shareholder No. of shares Value percentage
held
--------------------------------------------------------
Dr.(Mrs. Usha Chopra 1,74,641 17,46,410 34.93%
Dr. Satish Chopra 100 1,000 .02%
Dr. Nalin Nag 15,000 1,50,000 3.0%
Dr. Ashish Gupta 7,500 75,000 1.5%
Dr. Arvind Kumar 47,759 4,77,590 9.55%
Dr. Dwarkadas and Family and Associates
Dr.(Mrs.) Nirmala 1,42,500 14,25,000 28.50%
Ms. Smita A. Motiwala 42,240 4,22,400 8.45%
Dr. Ashoka Mohan 70,260 7,02,600 14.05%
Dwarakadas Motiwala
6. The respondent No. 2 had illegally allotted to himself and his family members the above shares in the respondent company. But for the aforesaid illegal allotment, the respondent No. 2 and his associates do not hold any shares. Similarly respondent No. 3 to 7 are the associates of respondent No.2 who have been illegally allotted shares and appointed as additional directors with a view to reduce the petitioners to minority. The respondent No. 2, by false pretext, got signed blank papers and other sets of forms including Form No. 32. All the pretext that he might require them in connection with formation of the company. But respondent No. 2 fraudulently used the form No. 32 for conveying to the office of the Registrar of Companies, the appointment of his family members as additional directors. It is pertinent to mention that no share certificates were issued at all and the petitioner has not received any share certificate bearing her name. The petitioner and her husband were residing in the UK and they were the only two directors of respondent company, as is clear form the articles of association of the respondent company. There was no meeting of Board of Directors held in India or Abroad of respondent company and as such form 32 filed with the Registrar of Companies be declared null and void under the Companies Act, 1956. There was no notice of any Board Meeting or Annual General Meeting or EOGM or statutory meeting issued on behalf of respondent company. Any such meeting could not be held in the absence of the petitioner and her husband who were the only two directors and shareholders of the respondent company. The additional directors can only appointed by the board of directors in their meeting cc by the company in a general meeting and none of these meetings could ever be held as per provisions of companies Act, 1956, as both the directors and shareholders, being the petitioner and her husband, were in UK. The meeting alleged to have been held in their absence on 14.5.99 is invalid as no such meeting was ever held.
7. The learned counsel for petitioner further submitted that the respondent NO. 2 got the authorized capital of respondent company increase from 1 lakh to 50 lakhs in a Board Meeting purportedly held on 30.7.99. As per Clause 12(2) of Article of Association of the respondent company two members must be present in person to constitute a quorum. And since neither the petitioner nor her husband attended any meeting, no valid meeting could be held in their absence. No notice of any meeting whatsoever was ever received by the petitioner and her husband. Therefore, the appointment of Mr. Ashish Gupta and Anil Agarwal and several other persons as directors was illegal and void. The respondent NO. 2 also allotted to himself and his family members and associates shares worth more than Rs. 32.52 lakhs. Thus trying to illegally obtain the control of the Nursing Home valued at about Rs. 3 crores by showing an investment of Rs. 32.52 lakhs and also by manipulation and falsification of figures. The respondent NO. 2 has not invested even a single penny in the Nursing Home. The petitioner is a victim of deep routed conspiracy and calculated fraud played by respondent NO. 2 in order to grab the property of the petitioner worth more than Rs. 3 crores by reducing the petitioner to a minority. The authorized share capital of the respondent company was increased for personal benefits and not the interest of the company. The respondents are conducting the affairs of the company in an illegal, proper and irregular manner. The respondents have also violated various provisions of the Companies Act interalia Sections 166, 169, 210, 224/225 and Section 285. The petitioner has already filed complaints under Section 209A and 234 with ROC in June, 2002. The ROC has written a letter to respondent company in June, 2002 and other directors seeking their explanations on these points.
8. The learned counsel for petitioner further submitted that neither MCD nor DDA nor the director of health services have ever accepted any person other than the petitioner NO. 1 as the sole owner of the aforesaid Nursing Home. The Director of Health Services has cancelled the license issued to the Nursing Home. The petitioner has also filed a complaint against the auditors with the Institute of Chartered Accountant of India for not being upright and impartial and colluding with respondents in manipulation of accounts and fabrication of documents. The complaint filed by the respondent against the petitioner was investigated by the police and they did not find any material against the petitioner and closed the case. On the contrary, the petitioner filed a complaint against the respondent NO. 2 and his associates which is still pending. The series of acts and conduct of the respondent detailed in the petition established that there is a danger of the petitioners shares being eroded further. The respondents have fraudulently taken control over the Nursing Home for no consideration whatsoever and would dispose of the same causing irreparable harm and injury to the petitioner. The petitioner therefore prays that the purported meetings of Board of Directors of respondent company and the resolutions passed thereat be declared illegal. The purported appointment of Board of Directors of respondent company as well as raising of the authorized share capital of the respondent company from Rs. 1 lakh to 50 lakhs be declared illegal and void. Similarly the purported allotment of shares to respondent Nos. 2 to 7 be declared illegal and void. The respondents have also not provided the petitioner with any account of funds that were invested by the petitioner from time to time.
9. The learned counsel for petitioner also submitted that the petitioner had given some blank signed papers to Dr. Dwaraka Das Motiwala in good faith which have been utilized by him to show certain documents written by her or on her behalf including form No. 32 filed with the ROC which she had signed blank and was filled up subsequently by the respondent fraudulently alongwith other papers. The respondents have played a fraud on the petitioner to usurp the property of the petitioner worth several crores while giving her shares worth 17.46 lakhs which itself was a gross violation of MOU which indicated 49% shares to be retained by the petitioner after forming the company by taking several steps in this connection. Accordingly the prayer made by the petitioner be allowed. The learned counsel for respondent in reply submitted that they had filed an appeal before Delhi High Court against the order of this Bench dated 16.11.2004 wherein it had been mentioned about Power of Attorney given by the petitioner to Shri Kamal Kapur that the petitioner alone can vouch for and confirm her signatures. Accordingly, the petitioners were directed to file affidavit from Dr. Usha Chopra reiterating and confirming that she has given general power of attorney to Shri Kamal Kapur and also authorize him to file petition. The petitioners have complied with.
10. The learned counsel for petitioner in rejoinders submitted:-
It is a case of high jacking the company by the respondents. He has submitted that the appointment of two additional directors namely, Ashish Gupta and Mr. Arun Agarwal, who are the relatives of the respondent No. 2 were appointed additional directors on 14.5.99, just one day after the incorporation of the respondent company, whereas the respondent company has been incorporated on 13.5.99. Both the directors of the company, namely, Dr. Usha Chopra and Satish Chopra went abroad on 3.5.99 and arrived India only on 5.12.99. As such no meeting of directors could be held on any date much less on 14.5.99 when both additional directors were appointed contrary to the provisions of Article 22 of the Article of Association of the respondent company. Mere filing of form 32 with the concerned Registrar of Companies does not effect that appointment of directors of company if it was not in compliance with the provisions of the Companies Act and the Articles of Association of the company and would render such appointments as voidable. The respondents have failed to produce minutes of the meetings of the Board of Directors held on 14.5.99 wherein Mr. Ashish Gupta and Mr. Anil Agarwal had allegedly been appointed as directors. The learned counsel for petitioner submitted that no such meeting of Board of Directors was ever held and no minutes could be produced by the respondents of the Board Meeting and the appointment of directors are false and bogus. Referring to the provisions of Article 22 of the Article of Association, the leaned counsel submitted that it provides for prior notice of 7 days for appointment of director of the company. No such notice was sent to the company or nor it could have been sent as the company was incorporated one day earlier i.e. on 13.5.99. The validity of resolution passed at the meeting of the Board of Directors for which notice has not been sent is contrary to the provisions of Section 286(1) of the Companies Act, and such resolution has to be struck down as invalid as held in the case of Hansraj Gokuldas Ved v. Nitin Dyeing and Bleaching Mills P. Ltd.(2005) 64 CLJ 64 (clb). These two appointments are nothing but the employee of respondent No. 2 to hijack the company from the petitioner and her husband who are the only shareholders holding 100% shares of the company.
11. The learned counsel for petitioner dealing with the purported increase of authorized capital in the extraordinary general meeting held on 30.7.99, submitted that the company had only two shareholders namely, Dr. Usha Chopra and Dr. Satish Chopra. No notice of any EOGM of the respondent company was issued or served upon the shareholders as per provisions of Section 172 of the Companies Act nor any explanatory statement to the Agenda for EOGM was circulated. No EOGM could be held in the absence of petitioner and her husband, both of them together, held 100% share capital of the company. The respondents have failed to produce any notice for the meeting and thereby failed to comply with the provisions of the Companies Act. Article 12 of the Articles of Association of the company provides that no business shall be transacted at any General Meeting unless a quorum of members is present when the meeting proceeds to business and two members present in person shall be a quorum. As already submitted no General Meeting could be held in the absence of the petitioner and her husband holding 100% shares. Hence filing of form 23 and form 5 by the respondents are bogus and false with malafide intentions.
12. The learned counsel for petitioner replying in rejoinder further submitted that the proprietorship of the petitioner cannot be converted into private limited company as the Chopra Hospital and Nursing Home was established in 1990 as a sole proprietary firm of Dr. Usha Chopra. The Chopra Hospital P. Ltd was incorporated as a private limited company on 13.5.99 with an authorized capital of Rs. 1 lakh and a paid up capital of Rs. 2000 subscribed by both petitioner and her husband with 100 equity shares each of Rs. 10. Mere incorporating a private company does not mean that the existing proprietorship firm was convened into a private limited company such private partnership firm can be converted if it fulfils all requirements of the Company Law. The Chopra Hospital & Nursing Home, being a proprietary firm, having unlimited liability of its proprietors, cannot be converted into a company having the liability of the members as limited without prior permission of the statutory authorities like Banks/DDA, Municipal Corporation etc. The main objects of the company does not provide for conversion of firm Chopra Hospital & Nursing Home — the company and taking over of the existing or continuation of the business. A memorandum of understanding was signed on 19.4.99 which was never acted upon by either side. The alleged agreement is only a plain paper document and without having attested witness on the basis of which respondents are claiming that the proprietorship concern of the petitioner was converted into private limited company. The respondent No. 2 was neither a promoter nor a shareholder of the respondent No. 1 company and as such it is not binding on either party. It is worthwhile to point out that the alleged conversion as stated in Clause IV of the alleged agreement, could have been possible by disinvestment of 51% of the holding by the petitioners in favour of Respondent No. 2. Therefore, the respondent No. 2 could not have acquired any stake in the respondent NO. 1 company unless and until there is disinvestment of 51% in the existing equity in the company in favour of respondent No. 2 or his family members. No consideration had ever been paid by the respondent to the petitioner. Before alleged transfer of the assets and liabilities of the Chopra Hospital to respondent company, no valuation of assets and liabilities was undertaken for the specific purpose of taking over the Chopra Hospital. The petitioner has not signed the balance sheet as on 31.7.99. In view of these submissions, the proprietorship firm and Chopra Hospital & Nursing Home was not converted into a private limited company and the respondent company is having distinct legal entity under the Companies Act, 1956. It is submitted that Clause IV of the perpetual lease deed executed between the petitioner and DDA on 28.4.1983 for allotment of Hospital land clearly restrict the sale, transfer, assign or otherwise part with possession of the whole or any part of this Hospital land except with previous consent from the DDA. The petitioner paid a sum of Rs. 5,02,000 to DDA +registration charges about 25 years 120 and the same figure was shown in the balance sheets ending 313.99 and 31.7.99. But the value of the building was shown as Rs. 18,27,117 in the balance sheet of 31.7.999 and 31.3.99 which were signed by the respondent No. 2 with a purpose to hijack the company. The transfer/sale of land and building cannot be done at a book value but it has to be made on the market value.
13. The learned counsel for petitioner in rejoinder further submitted that the Respondent have filed some additional papers on 27.12.2004 and balance sheet as on 31.3.1997 filed by the Respondent is not signed by any of the petitioner. It also shows a FDR under the head “Investment” in the name of Dr. Usha Chopra amounting to Rs. 44,04,304.16. Similarly, the balance sheet filed by the Respondent ending 31.3.98 has also not been signed by anyone. This balance sheet again shows a FDR under the Head “Investment” in the name of Dr. Usha Chopra amounting to Rs. 4388850.26. In the balance sheet for the year ending 31.1.1998, a sum of Rs. 32,92,51.26 is shown as loan from Indus India Bank Ltd. but it has not been deliberately mentioned by Dr. Drawaka Das that the security against which the loan was advanced in fact was provided by Dr. Usha Chopra against her own FDR. However, the balance sheet for the year 31.3.99 is signed by Dr. Motiwala but this amount of fixed deposit of Rs. 44 lakhs disappeared altogether without any explanation and any supporting documents. This was a device to reduce the capital of Dr. Usha Chopra in her Proprietorship concerns. If this manipulated and fictitious entry have not been made in the capital account of Dr. Usha Chopra, her capital would have been approximately Rs. 44 lakhs. In this balance sheet itself an amount of Rs. 38,41,183.53 is shown as loan from Indus India Bank Ltd. This amount in fact advanced by the bank against the FDR of Dr. Usha Chopra as admitted by Respondent in the foot note of the balance sheet filed in reply of Respondent No. 1 company and signed by Dr. Motiwala which reads as under: “additional to the capital a/c represent the loan from Indus India Bank Ltd Against FDR’s of the assessee made in foreign exchange, taken over by the assessee.” It is therefore incorrect that Dr. Motiwala and Anil Dutt paid any part of this loan to Indus Ind Bank Ltd. The amount of Rs. 56,58,534.26 shown in the balance sheet for the year ending 31.3.1999 as drawn was not received by the petitioner, the Learned counsel for petitioner also submitted that regarding the loan advanced by Canara Bank, Green Park Branch as shown in the balance sheet of 31.7.99 to the tune of Rs. 21,94,194.48 this amount plus interest was repaid by Dr. Usha Chopra and this fact has been admitted by the Respondents by showing Rs. 24,41,230.00 as loan from Dr. Usha to Chopra Hospital Pvt. Ltd. It is thus clear that the loans were actually paid by Usha Chopra and no one else.
14. The respondent has also not approached this Board with clean hands, the documents filed by the respondents are false, frivolous and concocted documents and it has been affirmed by the corporation bank vide their letter 4.6.2002 stating that the letter dated 26.11.2001 filed by the respondent company has never been received by the Corporation Bank, Haus Kaus, New Delhi. The alleged letter by Dr. Usha Chopra to Deputy Director, DDA was never written by her. If this letter was written to DDA then how the same was available with the respondent. A bare look at this letter will make any average person to reach to the conclusion that how this letter was forged as there is no mention on ‘records’ or ‘sincerely’ or at the bottom of this letter before the signatures, the handwriting expert Shri Kamal Kant Khandelwal also affirmed in his opinion dated 7.6.2002. The petitioner never authorized in his capacity as director of the respondent No. 1 company by the name of Mr. Sudhanshu Bhushan Chadda to write to any authorities like Delhi Vidyut Board or Municipal Corporation Delhi. It is admitted case of the respondent that the petitioner is not residing in Delhi. It is interestingly to note that the suit No. 374 of 2002 filed by respondent No. 1 company through Respondent No. 2 for permanent injunction had specially admitted at para 10 of the suit that “the petitioner is a NRI and has left India and has been working and living in United Kingdom since then. The petitioner has not been working or taking any active part in the running of the respondent No. 1 company since August 1999 and has visited India for short periods only to visit her relatives.” Now in order to avoid the truth, the respondents arc making stories that the petitioner was actively participating the affairs of the respondent No. 1 company. It is thus obvious that signatures were taken on various documents such as loan guarantees etc. in blank in good faith and later on misused by counter signing by the other directors and antedating or post dating the same documents. When the respondents specifically admit in the Civil Suit mentioned above that petitioner was mostly residing outside India then how come the petitioner has signed papers along with other directors specifically when he was not available in India.
15. The learned counsel for petitioner further submitted that the respondents have failed to produce any of the Minutes of the Board Meeting, EOGM, and other statutory records by saying that the same had been forcibly taken away by the petitioner whereas the respondents have filed four volumes of documents containing about 600 pages except the statutory records. The petitioner had taken her personal income tax file and not any document pertaining to Board Minutes, resolutions, statutory records etc as alleged. Even otherwise it is not understood as to how statutory records of the respondent company which are maintained at the Registered Office of the respondent company were lying with the Chartered Accountant. Therefore, all the voluminous records/documents were filed by the respondents except the relevant ones and it cannot be presumed that it is the petitioner who had stolen the entire records of the company.
16. With respect to the contention of the respondents regarding allotment of 174541 shares to the petitioner on 19.8.99, the learned counsel for petitioner submitted that the alleged return of allotment is bogus and false, as the petitioner never paid any cash for these shares. The return of allotment in Form 2 is in contravention of proviso to Sub-section (1) of Section 75 of the Companies Act, 1956.
17. The learned counsel for petitioner relied on following judgments:-
1. Tea Brokers P. Ltd. and Ors. v. Hemendra Prasad Barooah (1998) 5 CLJ 463 (Cal) wherein it is held that a member holding majority of shares in a company reduced to position of minority by an act of company or by its Board of Directors malafide – such act must ordinarily be considered to be an act of oppression to the said member.
It is well settled that directors may exercise their powers bonafide and in the interest of the company. An exercise of power by the directors in the matter of allotment of shares, if made malafide and in their own interest and not in the interest of the company, will be invalid even though the allotment may result incidentally in some benefit to the company. In a similar situation to consolidate their position and power and to grab effectively the control of the company the majority shareholder was reduced into a minority with the sole intention. The said allotment was malafide, improper, invalid. The allotment has an effect which is persistent and persisting as also continuous and continuing and clearly constitutes an oppression.
2. Kshounish Chowdhury and Ors v. Kero Rajendra Monolthics Ltd. and Ors. (2002) 1 CLJ 552(CLB) wherein it is held that the appointment of additional directors made to gain majority control of the Board, neither bonafide nor in the interest of the company was made only with a view to gain majority control of the Board was an oppression.
3. M. Moorthy v. Drivers and Conductors Bus Service P. Ltd.(Mad) (1991) CC (vol.71) wherein it is held that Section 290 of the Companies Act, 1956 will have no application where there had been usurpation of the office of director and managing director. Section 290 of the Act would not cover cases where there is total absence of appointment or a fraudulent usurpation of authority.
4. Dale and Carrington Investment P. Ltd and Anr. v. P.K. Prathapan and Ors. (2004) 4 CLJ 1 (Supreme Court) wherein it is held 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 owed by them to the shareholders of the company. Non applicability of Section 81 of the Act, to private companies does not mean that the directors have absolute freedom in the matter of management of the affairs of the company. It will be seen from the judgment in the Needle Industries (1982) I CLJ 1 (Supreme Court) Supra and Tea Brokers (1998) 5 CLJ 463 (Cal) Supra, that the courts in India have applied the same tests while testing exercise of powers by directors of companies as another common wealth countries. The allotment of additional shares was not bonafide nor in the interest of the company nor a proper and legal procedure was followed to make the allotment. The motive for allotment was malafide, the only motive gained being to gain control of the company. Therefore, the entire allotment of shares was set aside.
The second judgment relied upon by the learned counsel for petitioner is in the case of IT Cube INC and Anr. v. IT Cube India (P) Ltd. and Ors. In (2004) 3 Comp. LJ 441 (CLB) wherein it is held that where there is further allotment of shares without general meeting of shareholders of the company which is in breach of articles of company and provisions of the Companies Act for reducing the petitioners in the company to 23.85% and appointing additional directors -allotment of further shares and appointment of additional directors set aside being wrongful, illegal & void ab initio. The next judgment cited was in the case of Kshounish Chowdhury and Ors. v. Kero Rajendra Monolithics Ltd. and Ors. (2002) 1 Comp. LJ 552 PB New Delhi wherein it is held that the appointment of four additional directors in the meeting held on 27.7.97 were neither bonafide nor in the interest of the company. The appointment of additional directors was made only with a view to gain majority of Board. Again, in the matter of M. Moorthy v. Drivers and Conductors Bus Service P. Ltd. Re 199(71) Comp. Cases 136 wherein it has been held that admittedly there was no general meeting of the company at all after the incorporation of the company and in the absence of evidence to show how other respondent actually became the managing director of the company, such appointment was non-est and declared void and illegal. In the matter of Rashmi Seth v. Chemon (I) P. Ltd. and Ors. Re. 1995 Vol (82) Comp. Cases this Hon’ble Board held that, Directors of a company could not utilize their fiduciary powers over the shares purely for the purpose of destroying an existing majority or creating a new majority. If the power to issue further shares is exercised by the directors not for the benefit of the company but simply and solely for the purpose of consolidating and improving their voting power to the exclusion of the existing majority shareholder, the court cannot allow exercise of such powers which have been delegated by the Company to the Board of Directors.
18. The learned counsel for respondent in reply submitted that the High Court of Delhi has given liberty to respondent to raise the issue of general power of attorney given to Shri Kamal Kapur by Dr. Usha Chopra, the petitioner and the affidavit filed by her, in case the respondent loose this case before this Board and goes an appeal before the High Court. Accordingly, the learned counsel for respondent submitted that the affidavit filed by the petitioners of Dr. Usha Chopra signed in UK is not in order and the petition should not be heard in the absence of legal authorization. It was noticed that High Court has not given any stay and had taken into account the affidavit filed by the petitioner. This bench is already held that the affidavit filed by the petitioner is valid if reconfirmed by her, which she has done.
19. The learned counsel for respondent further submitted that the petition is not maintainable and is an abuse of the process of law. The company in its reply has given the facts pointing out the malafide actions of the petitioner which are detrimental to the interest of the company. The company has lodged criminal complaints with Crime Branch of Police for first time on 7.5.2002. Such complaints culminated in an investigation by the Crime Branch of the Police. The petitioner had forcibly taken away original records belonging to the company from its Chartered Accountant. The company reported such incident to ROC on 16.7.2002. The petitioner has lodged several complaints against the company before several authorities, including Registrar of Companies. The reliefs sought from the Registrar of Companies, Delhi are in no away different from the same as in this petition. The company had already filed reply to the notices received from ROC, Delhi. In the absence of certain original documents of the company, it is not feasible to file a detailed reply with supporting documents. Narrating the facts of the case, the learned counsel for the respondents submitted that the petitioner, who initiated the process of incorporation of this company, had taken all steps required for the formation of the company during Apr. 1999 to May, 1999. The respondent company was incorporated on 13.5.99. Before and during the incorporation of the company, the petitioner and her husband acted as promoters and its first directors thereafter. Copies of the incorporation certificate along with From No. 18 and 32 which were prepared signed and filed by the petitioner and her husband with ROC Delhi have been placed on record. The formation of the company is based on an agreement dated 19.4.99 signed between the petitioner and the respondent No. 2 and this position has been accepted by the petitioner in the last part of the paragraph No. 3.6 of the petition. This agreement also narrates the background of incorporation of the company in detail. As per this agreement, the petitioner not being able to look after day to day affairs of the Chopra Hospital and Nursing Home, her erstwhile proprietary concern, desired to convert the same into a private limited company. This agreement further emphasized the revision of controlling the shares between the petitioner and the respondent NO. 2 in the ratio of 49:51. Also the respondent No. 2 was made incharge of the hospital to look into all aspects related to and connected to the hospital management. It is pertinent to mention that the petitioner herself has time and again declared and communicated the fact that erstwhile proprietorship was converted into a private limited company before several institutions/authorities including banks, Delhi Development Authority, Municipal Corporation of Delhi.
20. The learned counsel for respondent submitted that on 1.8.99 the respondent company took over M/s Chopra Hospital and Nursing Home with all its assets and liabilities as working business undertaking into as on 31.7.99. On this date, the assets and liabilities of the company were quantified/determined by Jerath and Co., the Chartered Accountants. Pursuant to such assessment the petitioner has allotted shares worth Rs. 17,45,410 on 19.8.99 against available cash in the balance dated 31.7.99 of the Chopra Hospital and Nursing Home. The liabilities worth Rs. 45,10,221,48 as on date was also taken over by the company as a conciliation for assets movable and immovable of the erstwhile proprietorship concern which includes lands, building, equipments, fixtures and fittings. This can be seen from the balance sheet for the period ending 31.7.99 of the Chopra Nursing Home and the balance sheet dated 31.3.2000 of Chopra Hospital Pvt. Ltd., the respondent company. This has also been reflected in the audited reports of the company. The first balance sheet of the respondent company for the period ending 31.3.2000 has been duly approved by the Income Tax Department. It is suited that there is ample evidence in existence to prove allotment of shares to the petitioner as per her investment by way of merging her proprietorship concern into the respondent company. These balance sheets and Income Tax Report have been placed on record. As already submitted, based on the valuation of erswhile proprietorship concern, the petitioner was allotted shares proportionate to her investment as mentioned above. The petitioner informed all institutions concerned including DDA, MCD, DESU and more particularly the banks of erstwhile proprietorship firm and her wishes to settle the accounts finally. The petitioner at no point of time has stayed/lived in India for the sake of the company. According to her own admission the petitioner despite being a founding director has been acting like a visitor to the company on certain occasion.
21. The learned counsel for respondent further submitted that subsequent to incorporation of the company the number of directors was increased by the promoter director as they realize that it was impossible for them to manage the affairs of the company from abroad. It is again mentioned that incorporating of the respondent company was dependent upon or governed by the agreement dated 19.4.99 between the petitioner and the respondent No. 2. In due course of time, new directors were appointed, some of them resigned and some were reappointed. The copies of compliance under Section 302 of the Companies Act submitting form NO. 32 have been placed on record. Thereafter, on 30.7.99 a resolution was passed whereby decision was taken to enhance the authorized share capital of the company from 10,000 equity shares of Rs. 10 each to Rs. 5 lakhs equity shares of Rs. 10 each under the provisions of Article 41, 42 and 49 of the Article of Association of the company. Such resolution was passed by the company under instructions given by the then shareholders. The share allotment of the company till date is completely lawful and within the strict parameters of the company law. A copy of form NO. 23 filed with ROC has also been placed on record. Pursuant to such resolution and agreement dated 19.4.99 between the petitioner and the respondent NO. 2, the respondents No. 2 specifically and his two family members i.e. respondent NO. 6 and 7 applied for equity shares of the company on various dates between 6.8.92 to 15.3.2002. The applications were processed according to the process of the company and all transactions were through the designated banks/financial institutions of the company. On the date of allotment of shares i.e. 11.12.99 to respondent No. 6 and 7 the petitioner was present in India and this fact has been admitted in paragraph 3.7 of the petition. The learned counsel also brought to the notice a letter dated 10.2.2002 and a fax dated 26.11.2001 written by the petitioner in her capacity as the director of the company addressed to Canara Bank, Green Park Extn. New Delhi and Corporation Bank, Haus Kaus, New Delhi which demonstrates conversion of erstwhile proprietorship concern into a private limited company on 31.7.99 and enhancement of share capital of the company to Rs. 34,72,410.00 and also appointment of respondent No. 2 as director of the company and he was authorized to sign important papers. The petitioner as a director of the company stood as surety/guarantor for the loans availed by the company from certain banks/financial institutions till Feb. 2002 and the same person now denies the functioning of the company.
22. The learned counsel for respondent dealing with the fiduciary duties as directors of, the respondent company and her actions detrimental to the interest of the respondent company submitted that the public notice was issued by the petitioner in National Herald dated 16.5.2002 wherein she claimed the respondent company to be an exclusively proprietary concern belonging to her. The petitioner had also entered into certain clandestine deals to dispose of the assets and properties of the respondent company. The respondent company to protect its interest, filed a suit bearing NO. 374/2002 before the learned Civil Judge, Delhi. The petitioner also claimed the company as defunct as non existence while replying in the aforesaid suit and claim the property/assets of the respondent company to be of M/s Chopra Nursing Home, which have already ceased. The learned counsel for respondent relied on the following judgments in relation to fiduciary duties of the directors of the company of Hon’ble Supreme Court in the case of Nanalal Zaver and Anr. v. Bombay Life Assurance Co. Ltd. and Ors. The Hon’ble Supreme Court has held that —“So long as these two requirements are complied with, the action of the directors in selecting the time when they will issue the shares as also, the proportion in which they should be issued is a matter left to their discretion and it is not province of the court to interfere with the exercise of that discretion. This is of course subject to the general exception that the directors are not to set against the interest of the company or malafide.”
At page 410 the Hon’ble Supreme Court has held –
“—It is well settled that in exercising their powers whether general or special, the directors must always bear in mind that they hold a fiduciary position and must exercise their powers for the benefit of the company and for that alone and that the Court can intervene to prevent the abuse of a power whenever such abuse is held proved, but it is equally settled that where directors have a discretion and are bonafide acting in the exercise of it, it is not the habit of the Court to interfere with them.”
The next judgment relied upon was in the case of Chavalier I.I. Iyyappan and Anr. v. The Dharmodayam Company 1963 SCR 85 wherein the Hon’ble Supreme Court has held “….Thus when the appellant was making the offer for creating a trust he was not merely an agent of the company; he was also a trustee of the assets of the company and was in fiduciary relationship with the respondent Therefore the appellant could not do anything in regard to the assets of the company which would prejudicially affect its right…..”
The next judgment relied upon was in the case of Sangramsinh P. Gaekwad and Ors. v. Shantadevi P. Gaekwad and Ors. SCALE 493 wherein it is held that “The interest of the company vis-a-vis the shareholders must be uppermost in the mind of the Court while granting a relief under the afore mentioned provisions of the Companies Act.”
The next judgment relied upon was the case of Shoe Specialties Ltd. v. Standard Distilleries and Breweries (P) Ltd. and Ors. (1997 (1) Comp.LJ 243) wherein it is held that “While exercising the powers under Sections 397 and 402 of the companies Act, the Court is considering not only the relief that is sought for but also considers as to how the same has to be rectified. It is the interest of the company that is being considered and not the individual dispute between the petitioner and the respondent. If that be so, the interest of the company required that the majority shareholders must have their say in the management.”
The respondent company took over the petitioners erstwhile proprietary concern with all its liabilities. In another suit NO. 934/98 pending before Delhi High Court wherein the subject matter was excess billing Delhi Vidyut Board/BSES, the petitioner falsely claimed existence of M/s Chopra Hospital and Nursing Home and forced BSES to disconnect the electricity supply to the respondent company for which act of the petitioner, the respondent company has incurred huge losses. Deliberate disruption of electricity also invited adverse media publicity to the respondent company. The petitioner has admitted in writing the responsibility for such disconnection of electricity in her communications to the banks. In the same proceedings the petitioner moved an application before Delhi High Court wherein she had sought substitution of her non existent proprietor concern as the plaintiff in place of the respondent company. However, Delhi High Court directed restoration of electricity. The petitioner preferred an appeal against this order which was dismissed on 27.5.03. AS a consequence of the act of the petitioner the company suffered eminence financial losses. The petitioner also lodged a complaint with the Directorate of Health seeking the registration of the respondent company as a hospital. The registration was cancelled and the company had preferred an appeal against this ex-parte order. The petitioner had filed similar two complaints on 4.6.2002 and 17.6.2002 with ROC, Delhi which have been replied by the respondent company. The conduct of the petitioner in all these cases behind the back of the respondent company is aimed at ruining the respondent company. The petitioner and her confidence also attempted to criminally assault respondent No. 2 on 24.7.2003 and a complaint has been filed with the police.
23. The learned counsel for respondent winding up the arguments submitted that the company has been formed legally after agreement between the petitioner and respondent No. 2. The initial two directors have been appointed by the petitioner by filing form NO. 32 with ROC. The subsequent appointment of additional directors and enhancement or share capital had been done as per provisions of the Companies Act and Articles of Association of the company. The petitioner has only two grouse against the respondent that the additional directors had not been appointed by her and the increase in share capital by which her share holding has been decreased. These two instances are not such as to claim oppression against the petitioner as she was party to all these decisions. On the contrary the petitioner failed to fulfill her fiduciary responsibility as director and got the electricity connection disconnected as well as wrote to the health authorities and got the license cancelled of the company. As such the petitioner has not come before this board with clean hands and therefore petition deserves to be dismissed on this ground itself. The learned counsel relied on the judgment of Needle Industries (I) Ltd and Ors. v. Needle Industries Newey (I) Holding Ltd. and Ors. (CA Nos. 2139 and 2484 of 1978) and submitted that there is no oppression to the petitioner. Two isolated cases of appointment of directorship and increase in share capital, even though not done in a proper way will not form are in no way oppression to the petitioner. The learned counsel specifically referred to para 49, 50, 51 and 52 of the judgment and submitted that the fact that the company is prosperous and make substantial profits is no obstacle its being wound up if it is just and equitable to do so. Also some time a question arises as to whether an action in contravention of law is perse oppressive. A resolution passed by the directors may perfectly legal and yet oppressive and conversely a resolution which is in contravention of the law may be in the interest of the shareholders and the company. This indicates that the conduct which is technically legal and correct may nevertheless be such as to justify the application of the just and equitable jurisdiction and conversely, that conduct involving illegality and contravention of the act may not suffice to warrant the remedy of the winding up, especially where alternative remedies are available. Moreover the true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a malafide intention or that such violation was burdensome, harsh and wrongful. But a series of illegal acts falling upon one another can, in the context lead justifiably to the conclusion that they are part of the same transaction of which the object is to cause or commit the oppression of persons against whom the acts are directed. The learned counsel submitted that in the present case isolated two acts of appointment of two directors and increase of shareholding cannot be construed as oppression against the petitioner and therefore, the petition is liable to be dismissed with costs.
24. The Learned Counsel relied upon the judgment of DR. Karan Singh v. S.P. Jain and Ors. (204) 5 SCC 698 wherein it is held that the principal laid down the appellant has waived and /or abundant his right and the petitioner acquiesced to the acts and omissions, no complaint of being oppressive to the petitioner. The learned counsel also relied on the judgment in the case of Smt. Abnash kaur v. Lord Krishna sugar Mill ltd. (1974) 44 company cases 390 (Delhi) where it is held that it is an expected principal that where the Article provide for a solution for resolving a dead law, the court would not interfere in the instance case all acts in the petition or in agreement 19.4.1999 and the Article of Association and therefore these acts cannot be oppressive or mismanagement. The learned counsel for also relied upon the judgment of Hon’ble Supreme Court in the case of S.P. Jain v. Kalinga Tubes Pvt. Ltd. 1965 2 SCR 720 wherein it is held that it is not enough to show that there is just an equitable cause of winding up the company though that must be shown as preliminarily to the application of Section 397 it must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of majority shareholders upto the date of the petition, showing that the affairs of the company being conducting in a manner oppressive to some part of the members. The learned counsel also relied on the judgment of Kerala High Court in the case of Palghat Exports (P) Ltd. v. Chandran – 1993 (2) KLT 556 wherein it is held that it is pertinent to note that in even case under Section 397 of the Act, it is obligatory on the part of the complainant to establish persistent and persisting course of unjust conduct. The present petition is not maintainable as the acts complaints are of past and have no present / continuous existence in the terms of Section 397 of the Companies Act. The learned counsel also relied on the judgment of S.P. Jain v. Kalinga Tubes Pvt. Ltd. AIR (1965) Supreme Court 1525 wherein the Hon’ble Supreme Court found that issuing of shares by majority shareholder to their friends or outsider would not amount to an act of oppression. The learned counsel also relied on following case laws to indicate that one of conditions essential seeking relief Under Section 397 of the Act, is that there should be continued oppression over a period of time and he relied on the judgment of Suresh Kumar Sangli v. Supreme Motors Ltd. (1983) 54 Com. Cas 235; in re Motion Pictures Association (1984) 85 Com. Cas 375. In Chander Krishnan Gupta v. Pannalal Girharilal pvt. Ltd. (1984) 55 Com cas 702. The learned counsel for Respondent also submitted that the present petition is barred by limitation in terms of limitation of Act 1963. The acts complained are of May 9 and July 99 whereas the petition has been filed on 24.7.2003 which is clearly beyond 3 years under Article 137 of the Limitation Act and he relied on the judgment of Delhi High Court in the case of Surender Singh Bindra v. Hindustan Fasteners Pvt. Ltd. (AIR) 1990 Delhi 32 the petitioner according the petition is liable to be dismissed.
25. I have carefully considered the pleadings and arguments of learned counsel of both sides as well as written submissions of both parties. It is admitted position that Dr. Mrs. Usha Chopra, the petitioner, is a non resident Indian and a qualified doctor. The Delhi Development Authority in the year 1981 floated a scheme for grant of perpetual lease hold rights in respect of Nursing Home plots to NRIs. The petitioner purchased a plot of land under this scheme in 1990 as a sole proprietor and started Chopra Nursing Pediatric Centre at Yusuf Sarai, New Delhi. Dr. Dwaraka Das Motiwala Respondent No. 2 met the petitioner first time in the year 1999 and requested for permission to do his consultancy in one of cabin in petitioner’s Nursing Home. He gave the petitioner confidence and the petitioner trusting him signed an agreement dated 19.4.1999. Both petitioner and her husband have signed the agreement whereas husband was not a party to this agreement. The petitioner and her husband left for UK on 3.5.1999. They came to India in two short trips from 5.12.99 to 12.12.99 and 7.2.2000 to 20.2.2000 in next two years.
26. The case of the petitioner is that while going to UK she hurriedly signed alongwith her husband the agreement dated 19.4.99 alongwith some blank papers. Respondent NO. 2 was to take action as per this agreement to incorporate a company which was supposed to finally take over all assets and liabilities of the Nursing Home of which the 100% shareholding was with the petitioner and her husband. There are two main allegations. In the first instance she has complained that form 32 which had been signed blank by her was used by respondent NO. 2 to appoint two additional directors Mr. Ashish Gupta and Mr. Anil Agarwal, both relatives of respondent No. 2 immediately on next day on 14.5.99 after incorporation on 13.5.99 of the respondent company. Both the directors of the company namely, the petitioner and her husband were abroad and had gone to UK on 3.5.99. As such, no meeting of directors could be held on any date between 3.5.99 to 14.5.99 Merely filing form 32 with the Registrar of Companies does not effect that the appointment has been made which is contrary to provision of Article 22 of the Articles of Association of the respondent company. The second allegation in respect of allotment of 174541 shares to the petitioner on 19.8.99 as the petitioner has never paid any cash for these shares. The Respondents have submitted that all acts complained in the petition are as per the agreement dated 19.4.99 and the Article of Association and therefore these acts cannot be oppressive or mismanagement to the petitioner they have also relied on the judgment in the case of Sh. Abnash Kaur v. Lord Krishan Mill already discussed. The petitioner on the other hand have also not dented signing of agreement except that it was signed in good faith and trust while leaving to Airport for going to UK along with some other blank documents. The question of facts and law in this case , therefore, have evolved around agreement signed between the parties on 19.4.99 and whether the provisions of companies Act, 1956 as well as Article of Association were adhered to while implementing agreement in question .
27. Let me examine the agreement made on 19.4.99 between Dr.(Mrs. Usha Chopra), (UC) the petitioner and Dr. Ashok Mohan Dwaraka Das Motiwala, (DD) respondent No. 2 as to how the new company was formed as respondents have totally relied upon this agreement. The respondent company was formed in pursuance of this agreement. The parties entered into this understanding for achieving and attending their respective objectives for mutual benefits. The relevant Clauses 2 to 6 which are relevant are reproduced below:-
1. UC would re-organize the aforesaid business by converting the sole proprietorship then into a private limited company which is under incorporation, by the name and style of “Chopra Hopsital Pvt. Ltd.” As certain formalities are to be complied with the proposed conversion would take effect from the May/June 1999.
2. All the assets, liabilities, rights and obligation of the sole proprietorship firm shall be computed by closing and drawing up the account as on the day immediately preceding the date of conversion. The sole proprietorship firm shall cease to exist upon conversion of the firm to the company.
3. UC and DD have agreed to own and share the business in the ratio of 49% and 51% respectively. For this purpose, UC would disinvest its existing equity in the company to the extent of 51% in favour of DD and/or his family members.
4. As this agreement is being entered into earlier than the date of conversion and is effective from 1st April 1999, the profits and losses and the capital expenses and receipts for the period from 1st April 1999 to the date of conversion would be shared between UC and DD in their respective ratios as per Article 4.
5. That the liabilities of CHNH prior to 1st April, 1999 shall only be borne by UC and DD shall not have to share the same. Similarly, any income or receipt, contingent or otherwise, received after 1.4.99 as a result of any action step or doing of CHNH prior to 1.4.99 shall be to the credit on only UC and DD shall not be entitled to share the same.
28. According to Clause 4 of the agreement mentioned above, UC was to disinvest its existing equity in the company to the extent of 51% in favour of DD and/or his family members. The petitioners have submitted that this first step after formation of the company was not taken. The respondents have failed to place on record that UC dis- invested her equity shares. There is nothing to sustain or prove that UC disinvested her shares. Without her equity share having been disinvested, the total shares remain with the petitioner. Till this first step had been taken of disinvestment, no further share allotment could be made to any one. Hence the share allotments to various persons would not hold good much less when nothing has been placed on record of any Board Meetings or its decisions to allot shares to others. It is interesting to note that the shareholding of the petitioner has been arbitrarily reduced to 34.95% by showing some figures by the Chartered Accountant whereas the equity share of DD and his family members remain intact to 51%. The respondents explained that some loans taken by the petitioner had been adjusted and the liabilities of the respondent company were liquidated out of the shareholding of the petitioner whereas nothing was deducted form the shareholding of the respondent. If the company did have some liabilities, the shareholding of both the parties would have come down proportionately. This being not so the transactions do not seem to be in order.
29. The petitioners have submitted in the rejoinder that in the balance sheet as on 31.3.97 and 31.3.98, loan from Indus India Bank Ltd., the respondent have not deliberately mentioned that the security against which the loan was advanced in fact was provided by Dr. Usha Chopra against her own FDRs. This has been dealt at length in the rejoinder filed by the petitioners and in the written submissions. Therefore, there is no doubt that all investments had been made by the petitioner through her FDRs and therefore, the same have been taken out subsequently by the respondents by manipulating the documents. Nothing has been placed on record that any Board Meeting was held or any notice to such Board meeting was issued while taking decision for allotment of shareholding to the petitioner as well as to respondent NO. 2 and his family members.
30. The learned counsel for respondent submitted that they do not have full document as the petitioner had taken away all documents from the Chartered Accountants office and thereby they are constrained not to file these documents. This story does not hold good for the reasons that all the material documents should have been kept in the premises of the respondent company and not in the premises of the Chartered Accountant. Secondly, it is pertinent to note that respondents have filed four volumes with 600 odd documents except the material documents required to prove whether any Board Meeting was held or notice was issued. When the respondents are in possession of all these documents including Form 32 of appointment of directors and all other papers, it is difficult to accept that material papers in question were taken away by the petitioner from the Chartered Accountant. The explanation of petitioner seems to hold good that she had taken her own Income Tax Papers from the Chartered Accountant which has not been denied by the respondents. Therefore, all allotments of the shareholdings seem to have been done by manipulation without following the relevant provisions of the Companies Act as well as Articles of Association of the respondent company. Therefore, all allotments of shareholding are bad in law and void abinitio.
31. The second main allegation of the petitioner is that there being only two directors in the company and when they had left for UK on 3.5.59, no Board Meeting could have been held between 3.5.99 to 14.5.99 when two additional directors were appointed and form 32 was filed with ROC, Delhi. The learned counsel for respondent submitted that they are not aware whether Board Meeting was held by two directors and how and by whom form NO. 32 was filed with the ROC. The petitioners have submitted that they never held any Board Meeting nor they filed any Form No. 32 with ROC. Interestingly the copy of form 32 has been filed by respondents alongwith other documents. The respondents have failed to produce even on queries made by this Board regarding any papers relating to holding of Board Meeting or notice given for any such Board Meeting. It is also interesting to note that the company was incorporated on 13.5.99 and next day itself when Board Directors were in UK, form 32 of appointment of two directors, who are relatives of the respondent No. 2, was filed. In the absence of any document of Board Meeting and any notice issued for such board meeting I am inclined to accept the version of the petitioners that mere filing of form 32 without following procedure laid down in Articles of Association of the Company as well as the relevant provisions of the Companies Act, shall not hold good. Therefore I have no choice but to struck down the appointments of these two directors in the absence of relevant papers of Board Meeting and the notice of such Board Meeting. Accordingly, the subsequent appointments made by these directors shall also not hold good.
32. The learned counsel for respondent submitted that these were only two isolated acts of the past and have no present/continuous existence in terms of Section 397 of the Companies Act. The learned counsel relied on the judgment of Hon’ble Supreme Court in the case of S.P. Jain v. Kalinga Tubes Ltd. as well as the case of Palghat Exports Pvt. Ltd. v. Chandran of the Kerala High Court. No doubt these are two isolated acts but they have assumed a proportion of continued oppression for the petitioner in as much as the petitioner has lost her shareholding and got reduced to minority and the company has been hijacked by manipulation taking the shelter of agreement in question signed by both the parties. Therefore the case laws relied by the respondents will not come to their rescue. The isolated acts if not having perpetual and continuous effect of oppression on the petitioner, would only fall in this category and not the present case. The judgments cited by the respondents are therefore not applicable in the present facts and circumstances of this case.
33. I am not going into the other small issues like non performance of fiduciary duties by the either parties when the action taken from day 1 onward are illegal and void. It is pertinent to mention that the Corporation Bank vide their letter dated 4.6.2002 have stated that the letter dated 26.11.2001 purported to have been written by the petitioner and filed by the respondent company has never been received by them. Similarly, few other papers filed by the respondent company clearly indicate that the typing has been done after the signatures had been appended on the paper. This leads to the conclusion that the petitioner had signed few blank papers while going to UK and the respondent company was incorporated based on those papers. The respondents have not denied this fact. Similarly, it is admitted case of respondent that the petitioner is not residing in Delhi and this position has been explained by the respondents in the suit NO. 374 of 2002 filed by respondent No. 1 company through respondent No. 2 which reads that “the petitioner is a NRI and has left India and has been working and living in UK since then. The petitioner has not been working or taking any active part in the running of respondent NO. 1 company since Aug. 1999 and has visited India for short periods only to visit her relatives.” It thus clearly shows that whatever actions have been taken by the respondent NO. 2 are without the concurrence and knowledge of the petitioner as she is away to UK according to their own admission. The limitation of time shall not apply in this case as the acts/omissions of the respondents are of perpetual in nature.
34. In the light of above discussions, the petition is allowed. I hereby set aside the appointments of initial directors of Shri Ashish Gupta and Mr. Anil Agarwal. Their appointments having been held illegal, all other appointments made by these Directors, without holding Board Meeting and notice to the petitioner, would also fall. Similarly, all allotments of shares made by the respondent company are contrary to the provisions of relevant sections of Companies Act 1956 as well as the provisions of Memorandum and Articles of Association of the respondent company and are bad in law.
35. The respondent company is restored back to its original position with only two directors holding 100% shareholding i.e. the petitioner and her husband. All other appointments and shareholding are set aside.
36. With the above directions, the petition is disposed of.