Calcutta High Court
Narendra Kumar Berlia And Ors vs Om Prakash Berlia And Ors on 17 May, 2022
1
OD-1
IA NO. GA/12/2022
In CS/12/2009
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
NARENDRA KUMAR BERLIA AND ORS.
Vs.
OM PRAKASH BERLIA AND ORS.
BEFORE :
The Hon'ble JUSTICE KRISHNA RAO
Date: 17th May, 2022.
Appearance:
Mr. Abhrajit Mitra, Sr. Adv.
Mr. Jishnu Chowdhury, Adv.
Mr. Sarvapriya Mukherjee, Adv.
Mr. Arif Ali, Adv.
Mr. Ratul Das, Adv.
Mr. Arnab Sardar, Adv.
...For the plaintiff/petitioner
Mr. K. Thaker, Adv.
Mr. S. E. Huda, Adv.
Mr. Varun Kedia, Adv.
...For the respondent no. 15.
Ms. Iti Dutta, Adv.
...For the respondent no. 8
Mr. Shiv Ratan Kakrani, Adv.
2
Mr. T. Kakrani, Adv.
Mr. Karanjeet Sharma, Adv.
Mr. Tanujit Chakraborty, Adv.
...For the defendants no. 1 & 2
Mr. Deepan Kr. Sarkar, Adv.
Ms. D. Adhikari, Adv.
...For the defendant/respondent no. 3
ORDER
The plaintiffs have filed the instant application for grant of injunction
with respect of piece and parcel of land measuring 20.90 equivalent to 84,858
sq. mts. bearing Gat Nos. 1/1/A, 1/4/B,1/5,1/6/C.2/2,2/5,7/1 and 7/2
and/or structures standing thereon, situate at Village Chitalsar Manpada,
Taluka Thane, District Thane, Maharashtra, and prayed for following orders:
"(a) Direction upon the respondents to immediately circulate the valuation
report of the CBRE South Asia Pvt. Ltd. in terms the order dated 27 th
January, 2022 passed in G.A. No. 10 of 2022 and G.A. No. 11 of 2022 in
C.S. No 12 of 2009 [Narendra Kumar Berlia & Ors. Vs. Om Prakash Berlia
& Ors.];
(b) A fit and proper person be appointed as Special Officer/ Receiver who
may be directed to do the following:
(i) Obtain a copy of the valuation report from the appointed valuer,
namely, CBRE South Asia Pvt. Ltd. and thereafter circulate the same
to all the parties;
(ii) Conduct sale of the said property by public auction or in such other
transparent manner as this Hon'ble Court nay so direct in order to
ensure maximization of the sale value;
(iii) Retain and hold the sale proceeds in a separate bank account subject
to such further order or orders that may be passed by this Hon'ble
Court.
(c) Injunction restraining the respondent Nos. 1, 2 and 15, their agents,
servants and assigns from dealing with, disposing of or transferring the
said property more fully described in the schedule hereunder pending
disposal of the present application;
(d) Ad interim orders in terms of prayers above;
(e) Such further and/or other order or orders be passed, direction or
directions be given as Your Lordships may deem, fit and proper."
Mr. Abhrajit Mitra, Senior Counsel appearing on behalf of the plaintiffs
submits that earlier the plaintiffs have filed an application being G.A.No. 9 of
2021 in CS No.12 of 2009 praying for an injunction on the sale of the aforesaid
property and the said injunction application was disposed of on 4 th
October,2021 by passing the following order :
"14. Since the first plaintiff only holds 500 shares which is approximately
0.05% of the shareholding of the defendant no.15 Company and the
resolutions for sale of the Thane property were passed by a requisite
majority, the said resolution cannot be defeated and the defendants
cannot be restrained from giving any effect to the said resolutions or
restrained from disposing of or dealing with the said property. However,
since the cause of action in the present suit is in the nature of a derivative
action, it is necessary for the court to ensure that the sale of the Thane
property is conducted in a transparent manner and fetches the best price
for the ultimate benefit of the defendant no.15 Company and its
shareholders. Further, since the Valuation Reports of the land at Thane
are inconsistent in terms of the classification of the land, the valuation and
other particulars arrived at, this Court is of the view that a fresh valuation
of the land should be done by an accredited Valuer based in Maharashtra
with the required credentials and expertise to conduct the exercise. The
plaintiffs and the defendant nos. 3 on one hand and the defendant nos.
15, 1 and 2 on the other are directed to appoint an independent Valuer of
their choice for conducting a fresh valuation of the Thane property
described in prayer (b) of the Notice of Motion. The Valuer shall be
appointed within four weeks from the date of this order and if the parties
are unable to arrive at a consensus on the choice of Valuer, they shall be
at liberty of approaching the court for appropriate orders but only to the
extent of appointment of an independent Valuer for a fresh valuation of the
Thane property.
15. G.A. 9 of 2021 is disposed of in terms of the above."
Ld. Senior Counsel further submits that in terms of the order dt. 4 th
October 2021, an application for appointment of valuer was filed being G.A.No.
10 of 2022 and this Court had disposed of the said application on 27 th January
2022 by passing the following order:
"After hearing the parties, who have indicated that the choice of
Valuer may be decided by this Court, I am appointing CBRE South Asia
Pvt. Ltd., 11th Floor Raheja Towers, G Block, Bandra Kurla Complex,
Mumbai, as the Valuer for carrying out the above exercise.
The fees of the Valuer shall be borne by the company and the
exercise of valuation should be completed within six weeks from date.
IA No.GA/10/2022 is, accordingly, disposed of."
At the time of hearing of the instant application the counsel for the
plaintiffs has handed over the Valuation and Advisory Report dt. 10 th March
2022 and submits that the said report was received by the plaintiff on 29 th
March 2022 i.e. after the filing of the instant application.
Mr. Mitra, Ld. Senior Counsel by referring the said report submits that
as per the opinion of the Valuer the market value of the property is Rs. 2,977
Mn. Ld. Counsel further submits that the said value is only with respect of
piece of land and not with respect of any structure standing in the said
property.
The plaintiffs have also filed a supplementary affidavit by enclosing
copies of the particulars of the Deeds registered with respect of the property in
question and submits that on 31st March 2022 the defendant no.15 has
executed conveyance deeds in favour of third party namely Dhruva Woolen
Mills Pvt. Ltd for a total sum of Rs. 471,00,00,000/- and as per the said
valuation, the value of the said property is Rs. 54,000/- per sq.mts. though as
per order passed in G.A. No. 9 of 2021 dt. 04.10.2021 the value of the said
property would be Rs. 1,31,300/- per sq. mtrs.
Mr. Mitra, Ld. Senior Counsel further submits that the company which
is a family company is protected by ensuring that the sale of the property is to
be done in a fair and transparent manner and the valuation report of the
valuer ought to have been circulated amongst the parties for taking appropriate
steps but the defendant no. 15 of his own had executed conveyance deed in a
lower consideration by depriving the right of the plaintiffs. It is further submits
that defendant no. 15 ought to have fetch the best price for the benefits of the
company and its shareholders.
Ld. Counsel for the plaintiff submits that as the defendant no. 15 has
already executed conveyance deed on 31. 03.2022 behind the plaintiffs herein
and prayed for injunction in terms of prayer (b)(iii) of the instant application.
Mr. Krishnaraj Thaker, Ld. Counsel representing defendant no. 15
submits that the plaintiff only holds 0.05% of shareholding of the defendant
no.15 company and resolutions for sale of the property in question were passed
by requisite majority. In an earlier application filed by the plaintiff being G.A.
No. 9 of 2021 in the said order this Court categorically held that the resolution
cannot be defeated and the defendants cannot be restrained from giving any
effect to said resolution or restrained from disposing of or dealing with the said
property.
Mr. Thaker further submits that the property in question is sold to cover
the huge loss faced by the Company during the Covid-19 pandemic and the
demands made by financial creditors. It is further submits that as the company
was in urgent need of money and as such the defendant no. 15 had filed an
application before this Court for appointment of valuer in terms of order
dt.04.10.2021 and on the prayer of the defendant no. 15 valuer was appointed.
Mr. Thaker further submits that valuer was appointed by this Court with
the consent of the parties and is an approved valuer. The valuer had assessed
the value by adopting the Discounted Cash Flow Methodology. It is further
submitted that in an earlier proceeding being G.A.No.09 of 2021 the plaintiffs
have prayed for similar relief but the plaintiff could not succeed in the said
proceeding and thus the instant application is barred by Res judicata.
Ld. Counsel for the defendant no.15 further submits that the plaintiffs
are having only 0.05 % of share in the company and the shareholders acquires
a right to participate in the profits of the company and are not entitled to
acquire any interest in the assets of the company.
Ld. Counsel for the defendant no. 15 relied upon the judgment reported
in AIR 1964 SC 993 in the case of ( Arjun Singh -versus- Mohindra Kumar
&Ors) and AIR 1955 SC 74 in the case of ( Bacha F. Guzdar, Bombay -versus-
Commissioner of Income Tax, Bombay).
Heard the Ld. Counsel appearing for the parties, documents available on
record and the judgment referred by the counsel for the defendant no. 15.
Admittedly the plaintiffs have filed an application before this Court being
G.A. No. 9 of 2021 earlier and in the said application also the plaintiffs have
prayed for an injunction against the defendant no. 15 by restraining the
defendant no. 15 for dealing with, disposing of and encumbering the property
in question. In the said application this court vide order dt. 04.10.2021 had
categorically held that defendants cannot be restrained from giving any effect to
the resolutions or restrained from disposing of or dealing with the said
property. The plaintiffs have accepted the said order and have not carried the
said order in appeal and thus the order dt. 04.10.2021 reached its finality.
It further transpires from record that during the pendency of the instant
application the defendant no. 15 had executed deed of conveyance with respect
of the suit property on 31. 03 2022 and thus third party interest has been
accrued and the plaintiffs have not made the purchaser as party to the instant
application. The plaintiffs are also not challenged the report of valuer and the
deed of conveyance though the plaintiff had the knowledge of both documents.
As regard the prayed (b)(iii) of the instant application as prayed for by the
plaintiff it is settled law that the shareholder of the company acquires right to
participate in the profits of the company but not in the assets of the company
as reported in AIR 1955 SC 74 (supra) wherein the Hon'ble Supreme Court
held inter alia :
"7. It was argued by Mr. Kolah on the strength of an observation
made by Lord Anderson in Commissioners of Inland Revenue v. Forrest,
that an investor buys in the first place a share of the assets of the
industrial concern proportionate to the number of shares he has purchased
and also buys the right to participate in any profits which the company
may make in the future. That a shareholder acquires a right to participate
in the profits of the company may be readily conceded but it is not possible
to accept the contention that the shareholder acquires any interest in the
assets of the company. The use of the word 'assets' in the passage quoted
above cannot be exploited to warrant the inference that a shareholder, on
investing money in the purchase of shares, becomes entitled to the assets
of the company and has any share in the property of the company. A
shareholder has got no interest in the property of the company though he
has undoubtedly a right to participate in the profits if and when the
company decides to divide them. The interest of a shareholder vis-a-vis the
company was explained in the Sholapur Mills Case. That judgment
negatives the position taken up on behalf of the appellant that a
shareholder has got a right in the property of the company. It is true that
the shareholders of the company have the, sole determining voice in
administering the affairs of the company and are entitled, as provided by
the Articles of Association to declare that dividends should be distributed
out of the profits of the company to the shareholders but the interest of the
shareholder either individually or collectively does not amount to more
than a right to participate in the profits of the company. The company is a
juristic person and is distinct from the shareholders. It is the company
which owns the property and not the shareholders. The dividend is a
share of the profits declared by the company as liable to be distributed
among the shareholders. Reliance is placed on behalf of the appellant on a
passage in Buckley's Companies Act (12th Ed.), page 894, where the
etymological meaning of dividend is given as dividendum, the total
divisible sum but in its ordinary sense it means the sum paid and received
as the quotient forming the share of the divisible sum payable to the
recipient. This statement does not justify the contention that shareholders
are owners of a divisible sum or that they are owners of the property of the
company. The proper approach to the solution of the Question 1 st to
concentrate on the plain words of the definition of agricultural income
which connects in no uncertain language revenue with the land from which
it directly springs and a stray observation in a case which has no bearing
upon the present question does not advance the solution of the question.
There is nothing in the Indian law to warrant the assumption that a
shareholder who buys shares buys any interest in the property of the
company which is a juristic person entirely distinct from the shareholders.
The true position of a shareholder is that on buying shares an investor
becomes entitled to participate in the profits of the company in which he
holds the shares if and when the company declares, subject to the Articles
of Association, that the profits or any portion thereof should be distributed
by way of dividends among the shareholders. He has undoubtedly a
further right to participate in the assets of the company which would be
left over after winding up, but not in the assets as a whole as Lord
Anderson puts it."
In view of the circumstances mentioned above this court is of the view
that the application filed by the plaintiffs is misconceived and the plaintiffs are
not entitled to get any injunction as prayed for. However, this court has not
gone into the point raised by Mr. Thaker with regard to Res judicata .
G.A. No. 12 of 2022 is thus dismissed.
(KRISHNA RAO, J.)
pd
