ORDER
S. Balasubramanian, Vice-Chairman
1. The petitioner holding 500 shares in
Nanda Devi Builders (P) Ltd. (the company) has filed this petition under sections
397/398 of the Companies Act, 1956 (the Act) alleging acts of oppression and
mismanagement in the affairs of the company.
2. A summary of the petition is : The company was incorporated in July, 1989, and
the present paid up capital of the company is Rs. 4,62,000 divided into 4,620 equity
shares of Rs. 100 each of which the petitioner holds 510 shares and his wife another
50 shares. In addition, the petitioner has also advanced a sum of Rs. 1 lakh to the
company as loan. He has been a director of the company right from its incorporation
and the company has proposed to remove him as a director in the EOGM held on
24.2.2001. The company has built a multi-storey complex known as Nanda Devi
Tower in Prasant Vihar, Delhi, consisting of 5 floors including a basement. Even
though the company has taken advance from prospective buyers, as early as in 1989,
possession has not been handed over to many of the allottees. The 2nd respondent
had given 3/4th portion of the basement of the Tower to be Shri Gurmeet Chauhan,
Managing Director of Surf Side Systems Limited, at the rate of Rs. 12,000 per month
some time in September, 1999, and had also received a sum of Rs. 75,000 as security
deposit. These monies are not being accounted for in the books of accounts of the
company. This is notwithstanding the fact that half portion of the basement had
already been booked in the name of Shrimati Neelam Jhulka and Shri Ram Kumar
Sahrawalt on payment of Rs. 2.5 lakhs in 1999. Thus, a property which has already
been booked for sale has been clandestinely leased out by the 2nd respondent.
Likewise, the 2nd respondent had rented out shop Nos. 4 and 5 in the first floor to
one Shri Madhur Aggarwal at the meagre rent of Rs. 900 per month, and had also
collected security deposit of Rs. 5,000. These amounts have not been accounted for
in the books of accounts of the company. This is notwithstanding the fact that these
shops had already been sold to one Shri S.P. Jindal in June, 2000, on receipt of
advance from him. Even though the petitioner has written to the 2nd respondent and
also to the auditors of the company complaining that the rentals and advances had
not been accounted for in the books of accounts of the company, no reply had been
received from them. In November, 2000, the petitioner also filed a complaint with the
police in this regard and also complained to the Registrar of Companies, Delhi,
seeking for investigation into the affairs of the company. The 2nd respondent has
been disposing of the assets and properties of the company illegally to his own
friends and relations as is evident from the fact that some of the properties have been
sold to his close relations in February, 1994. Further, no Board meeting or general
body meeting of the company had been held right from incorporation. Since the
petition has been raising objections on the illegal activities of the 2nd respondent,
he has engineered to have the petition removed as a director in an EOGM
convened on 24 February, 2001, so that he could carry on the affairs of the company
at his own will and pleasure and at the cost of minority shareholders. Accordingly, it
has been prayed that investigation into the affairs of the company should be ordered,
a receiver be appointed to take over the properties of the company and all the
agreements entered into in relation to the sale of the properties should be cancelled
and the 2nd respondent should be surcharged.
3. In the reply, the respondents have submitted : The petitioner being a director
right from incorporation is fully aware of the business or the company and has been
participating in all its decision. He has signed most of the balance sheets of the
company. After the disputes started, the petitioner has removed all the records of
the company, like minute book, statutory records etc. The petition has also
siphoned off funds of the company. In respect of shop No. 5, the petitioner had
executed a sale agreement in June, 2000, for a consideration of Rs. 6 lakhs without the
authority from the Board to one of his close relations Shri. S.P. Jindal. The same shop
had been sold by the company for Rs. 12.28 lakhs in February, 2001. Shri S.P. Jindal
has filed a suit in this regard, and as such, the matter is sub judice. The petition has
sought for cancellation of the sales made by the company which prayer cannot be
considered since the purchasers of these shops have not been made parties to the
proceedings. Most of the issues praised by the petitioner relate to 1993-1994, and as
such are hopelessly time barred. From the statement at paragraph 5 of the reply on
the status of the various shops in Nanda Devi Tower, it may be seen that almost all
the shops had been handed over possession in 1993-94, and wherever full money had
not been paid, the bookings had been cancelled. As far as the allegation relating to
non-deposit of security deposit and rental received by the company is concerned, all
the moneys received by the company/2nd respondent have been properly accounted
for in the books of the company. It is the petitioner who had acted against the interest
of the company by selling shop No. 5 for Rs. 6 lakhs while the company could get Rs.
12.28 lakhs for the same shop. The alleged letters of complaint written by the
petitioner to the 2nd respondent and to the auditors of the company are all fabricated
since they had not received these letters. The company has been holding regular
Board meetings and general meetings and the petitioner is fully aware of the same as
is evident form the fact that the balance sheets for 1998-99 and 1999-2000 annexed to
the reply have been signed by the petitioner in his capacity as a director. Since the
petitioner has been acting against the interest of the company in an EOGM held on
24.2.2001, he was removed as a director in terms of section 284 of the Act and the
same has not been implemented in view of the restraint order passed by this Bench.
4. The counsel appearing for the parties reiterated their respective submissions
made in the pleadings. Shri Mathur, appearing for the respondents, submitted that
none of the allegations against the respondents could be either considered to be an
act of oppression or mismanagement. All the allegations in the petition relate to the
period during which the petitioner was a director of the company. The motive of
filing the petition is that the respondents have questioned the authority of the
petitioner in selling shop No. 5, and in view of the decision of the respondents to
remove the petitioner as a director. He prayed that the interim order passed by this
Bench on 5.2.2001 restraining the company from giving effect to the resolution of the
general body to remove the petitioner as director be vacated as his removal was due
to his prejudicial act against the interests of the company.
5. We have considered the pleadings and arguments of the counsel. In the hearing
held on 5.2.2001, the learned counsel for the respondents submitted that his clients
would be willing to purchase the shares held by the petitioner so that the dispute
between the parties could be put to an end. However, the petitioner did not react to
this suggestion. We do concur with the learned counsel for the respondents that most
of the allegations relate to events that took place nearly 7 years back. The only
allegation which is proximate to the date of petition relates to sale of shop No. 5
which is already a subject matter in a civil suit. As far as the allegation relating to
non-credit of the security deposit and rental received, the respondents have averred
that they have been properly accounted for in the books of accounts of the company
and, therefore, nothing survives on this allegation. As far as non-holding of the
Board meeting and general body meetings is concerned, we find that the petitioner
has signed the balance sheets of the company as late as of 1999-2000, i.e., just before
the filing of this petition. This could not have happened unless Board meetings had
been held. We cannot accept the contention of the petitioner, who has been a director
that the company has failed to hold annual general meetings for so many years.
Thus, we find that the petitioner has not made out a case for us to grant any of the
reliefs sought for in the petition, and as such, we dismiss this petition. However,
since the respondents have expressed their desire to purchase the shares held by the
petitioner, they are directed to do so on a fair value to be determined by the statutory
auditors of the company in case the petitioner intimates the company in writing,
within 30 days from the date of this order, his desire to sell the shares held by him
and his wife. If he does so, then the company should ensure that the fair value is
determined within 60 days thereafter and pay the consideration within 30 days
thereafter for the shares held by the petitioner and his wife. The company should
also refund the amount of Rs. 1 lakhs given by the petitioner as a loan to the
company along with the consideration for the shares. The interim order dated
5.2.2001 is vacated since we find that he had been removed as a director on account
of his prejudicial acts.