Calcutta High Court
Narendra Kumar Berlia & Ors vs Om Prakash Berlia & Ors on 30 September, 2024
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Civil Appellate Jurisdiction
Original Side
Present :- Hon'ble Mr. Justice I. P. Mukerji
Hon'ble Mr. Justice Biswaroop Chowdhury
IA No. GA 1 of 2022
APO No. 102 of 2022
with
CS No. 12 of 2009
Narendra Kumar Berlia & Ors.
Versus
Om Prakash Berlia & Ors.
And
APO No. 52 of 2022
Vijay Kumar Berlia
Versus
OM Prakash Berlia & Ors.
And
APO No. 113 of 2022
with
CS No. 12 of 2009
Vijay Kumar Berlia for Self and
as Karta of Gurdayal P Berlia HUF
Versus
OM Prakash Berlia for Self and
as Karta of Om Prakash Berlia HUF
For the appellants :- Mr. Abhrajit Mitra, Sr. Adv.
(APO 102 of 2022) Mr. Arif Ali, Adv.
Mr. Arnab Sardar, Adv.
Mr. Ratul Das, Advs.
For the Appellant :- Mr. Ahin Choudhury, Sr. Adv.
(APO 52 of 2022, APO 113 Mr. R. Bhattacharya, Adv.
of 2022) & Mr. Lalit Baid, Adv.
For the respondent Mr. Tamoghna Saha, Advs.
(APO 102 of 2022)
For the Dhruva Woolen Mills :- Mr. Jishnu Saha, Sr. Adv.
Mr. Pranit Bag, Adv.
Mr. Vikram Wadehra, Adv.
Ms. Aisia Hasan, Adv.
Mr. Prathik Choudhury, Adv.
Mr. Mayank Shah, Adv.
Mr. Arghya Chakraborty, Adv.
Mr. Devdutt Saha, Adv
Mr. Riddhiman Mukherjee, Advs.
For the respondent :- Mr. S. N. Mookherji, Sr. Adv.
(APO 102 of 2022 & Mr. Varun Kedia, Adv.
APO 52 of 2022 Mr. Yash Singhi, Adv.
Mr. Avee Jaiswal, Adv.
Mr. Himadri Roy, Advs.
For the respondent Nos.1&2 :- Mr. Sakya Sen, Sr. Adv.
Mr. S. R. Kakrania, Adv
Ms. Shreya Goenka, Advs.
For the respondent nos.4,5,6:- Mr. Aditya Kanodia, Adv.
APO 102 of 2022 & respondent Ms. Suparna Sardar, Advs.
For the respondent No.9 :- Ms. Reshmi Ghosh, Adv.
APO 102 of 2022 Ms. Parna Mukherjee, Advs.
For the Dhruva Woolen Mills :- Mr. Pranit Bag, Adv.
Ms. Jayashree Ramacharan, Adv.
Mr. S. S. Banerjee, Adv.
Mr. Vikram Wadehra, Adv.
Mr. Mayukh Roy, Adv.
Mr. Indradeep Basu, Adv.
Swagata Roy, Advs.
Judgment On :- 30.09.2024
Biswaroop Chowdhury, J.:-
The above appeals are taken up together for their interconnectiveness. These
appeals arise out of the order dated 17th May 2022, passed by the Hon'ble
Justice Krishna Rao in IA GA. 12 of 2022 in C.S. 12 of 2009 and order dated
4th October 2021 passed by the Hon'ble Justice Moushumi Bhattacharya as
her ladyship then was in IA. GA 9 of 2021 in C.S. 12 of 2009. As the Appeal
APO No-102 of 2022 was preferred against the Order dated 4th October 2021
passed by the Hon'ble Justice Moushumi Bhattacharya in IA. GA. 12 of 2022
in C.S. 12 of 2009 refusing to pass an order of injunction restraining sale of
land at Thane and during pendency of the Appeal Land at Thane had already
been sold, the Appeal APO No. 102 of 2022, has become infructuous and is
treated as disposed of without further discussion.
The instant appeal APO-113 of 2022 arises out of the interlocutory Order
dated 17th May 2022 passed by a Learned Single Judge of this Court wherein
the Learned Judge was pleased to dismiss the application being IA GA 12 of
2022 in C.S. 12 of 2009 where the plaintiffs prayed for the following reliefs.
a) Direction upon the respondents to immediately circulate the valuation
report of the CBRE South Asia Pvt Ltd in terms of the order dated 27th
January 2022 passed in G.A. No. 10 of 2022 and GA No-11 of 2022 in
C.S. No. 12 of 2009 [Narendra Kumar Berlia and ors. VS Om Prakash
Berlia and 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 may 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 fully described in the schedule
hereunder pending disposal of the present application.
d) Ad interim orders in terms of prayer above;
e) Such further and/or other order or orders be passed direction as
directions be given as Your Lordships may deem fit and proper.
During pendency of the above application GA 12/2022, the subject land with
regard to which relief was sought by the Plaintiffs/Appellants, was disposed
by the defendant/respondent no-15 by executing 3 deeds of conveyance on
31.03.2022.
The Learned Judge while dismissing the application filed by the
Plaintiffs/Appellants was pleased to observe as follows:
"Heard the Ld counsel appearing for the parties, documents available on
record and the judgement 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 have also not challenged the report of
valuer and the deed of conveyance though the plaintiff had the knowledge of
both documents.
As regards 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(1), 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 is 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.
The appellants being aggrieved by the order of Learned Single Judge has
come up with the instant appeal.
It is the contention of the appellants that C.S. 12 of 2009 was originally a
suit combining a derivative action with a partition suit but pursuant to the
order dated 6th April 2011 the suit has been bifurcated. After amendment the
present suit (CS 12 of 2009) has become a pure derivative action while a
separate partition suit (C.S. No. 79 of 2011) was also filed by the plaintiff
No.1. It is further contended that the present suit ie. C.S. No. 12 of 2009 is a
derivative suit which has been held by a Learned Division Bench of this
Court by Order dated 16th June 2011. Although the matter went upto the
Hon'ble Supreme Court but the Hon'ble Court by Order dated 12th August
2014 refused to interfere in the Order passed by the Learned Division Bench
of this Court.
Learned Advocate also submits that Gurdayal Berlia had five sons. The
eldest Satyanaryan Berlia died issueless in the year 2003 ie. before family
disputes arose. Another son Shiv Kumar Berlia had special needs, he died in
the year 2022. He was unmarried and issueless. The three remaining sons
who are all at loggerheads are Vijay Kumar Berlia (defendant no-3) Om
Prokash Berlia (defendant no-1) and Narendra Kumar Berlia (Plaintiff no-1).
Learned Advocate submits that each of the remaining three brothers also
have only 500 shares each in the defendant no-15 (pesticides and Brewers
Limited now PB Global Limited) being the Company against which the
present derivative suit has been filed, and the rest of the controlling shares
(ie. 42. 69%) are held through a network of family companies. It is submitted
that the last admitted shareholding of the family in the defendant No. 15 is
42.69% shares held primarily through different family companies till 2004
before Om Prakash Birla at an alleged Extra Ordinary General Meeting
without notice to the other brothers caused 500,000/- preferential shares to
be allotted to his associates where defendant no-1 purported to gain control.
The present suit was filed immediately after this fact was discovered by the
plaintiff no-1. Learned Advocate submits that the Learned Trial Judge
completely overlooked the fact that the suit has been filed not by the plaintiff
as a shareholder but it is a derivative suit where the plaintiff qua
shareholder espouses the cause of action of the company. Thus the concept
of a shareholder not having any interest in the company's property does not
apply. Learned Advocate has also relied upon the Order dated 16th June
2011 passed by the Learned Division Bench in Appeal APO-167 of 2011 and
Order dated 12th August 2014, passed by the Hon'ble Supreme Court.
Learned Advocate submits that the sale of Thane Property on 31st March
2022 is against the interest of the Company and in violation of the order
dated 4th October 2021 passed by a Learned Single Bench of this Court.
Learned Advocate further submits that there is faulty valuation, under value
sale, and sale consideration payable 5 years after absolute transfer. Learned
Advocate also submits that by absolute transfer the buyer gets the property
and is free to deal with it in any manner it so chooses without paying the
consideration amount. In case of default the seller will have to sue the buyer
who by that time may have already transferred/mortgaged the property.
Learned Advocate submits that setting aside of the sale of the Thane
Property, which is in the defendant No153 only asset is in the interest of the
company, whether it is a derivative suit or in an oppression mismanagement
petition the interest of the company is paramount since the company is the
eo-nominee plaintiff Learned Advocate submits that if at all the sale of Thane
Property is not set aside or stayed for the time being appropriate orders are
required for protection of the consideration yet to come. (Rs 185.91 crores).
Learned Advocate relies upon the following Judicial decision.
Syed Mahomed Ali Vs M.R.Sundaramurthy and ors. (Reported in AIR
1958. Madras 587)
MSDC. Radharamanan Vs MSD. Chandrasekara Raja and Anr (Reported
at (2008) 6 SCC P 750)
Learned Counsel for the respondent/defendant no-15 submits that the
appellants have not come with clean hands as they are pursuing the said
land for self interest in the garb of a suit for derivative action praying for an
injunction restraining the respondents from dealing with the land in any
manner. Learned Counsel further submits that the Appellants namely
Narendra Kumar Berlia and Vijay Kumar Berlia merely hold 500 shares that
is 0.05% shareholding of the company. Learned Counsel submits that it is
well settled proposition that shareholders have no right over assets of the
company. Learned Counsel relies upon the order of the Hon'ble Supreme
Court of India dated 12th August 2014, in SLP(c) No. 16759-16760 arising
out of Order dated 16th June 2011 vacating the interim order and directing
that the sale of subject land to abide by the outcome of the suit. Learned
Counsel that the said land was sold at the best possible price in accordance
with the valuation report prepared by independent Court appointed valuers
and the funds from the said sale was utilized for paying back the creditors
and enhancing the working capital of the company. It is submitted that the
Company sold the land in haste to the reasons above at the best possible
price.
Mr. P. Chidambaram Learned Counsel for the purchaser submits that his
client is a bona-fide purchaser and its interest must be protected Learned
Counsel for the purchaser submits that in view of the provisions contained
in Section 241 and Section 430 of the Companies Act 1956 the instant suits
are not maintainable. Learned Counsel further submits that the reliefs
prayed for in the suit do not fall under the purview of the jurisdiction of a
civil Court.
Learned Counsel relies upon the following decisions.
1. ICP Investment (Mauritius) Ltd. Vs UPPAL Housing Pvt Ltd and
Ors.
(CS (COMM) 1079/2018. And IA No. 17779/2018
Dated 30th August 2019)
2. Valluvur Kurkuman Private Limited Vs APC Drilling and
Construction Private Limited and ors.
(CRP (NPD) No. 2044 of 2022 and CMP Nos. 10516 and 10518 of 2022.
dated 30.11.2022.)
3. Foss Vs Harbottle.
(67 ER 189.)
4. The Asansol Electric Supply Co. and ors. Vs Chunilal Daw and ors.
(75 CWN-704.)
5. Nurcombe Vs Nurcombe and Anr. [(1985) 1 WLR-370.]
The decisions relied upon by Learned Counsel for the purchaser are the
authorities with regard to non-maintainability of derivative suit where
sufficient remedial measures is provided under Section 241 of the
Companies Act.
The Hon'ble Delhi High Court in ICP Investments (Supra) was pleased to
observe as follows:
"37. I must however hasten to add that while an application under Section
397 of the Companies Act, 1956 for relief in cases of oppression was
available to a member of the company, only when the affairs of the
company were being conducted in a manner oppressive to such member or
other members, but under section 398 thereof an application for relief in
cases of mismanagement could lie even on complaint that affairs of the
company were being conducted in a manner prejudicial to the interests of
the company itself, just like section 241 of the companies Act, 2013 is that
the separate remedies of oppression and mismanagement under sections
under 397 and 398 of the erstwhile Act of 1956 have been combined,
though under the 1956 Act also, a petition was mostly filed, both under
sections 397 and 398. However notwithstanding which, derivatives actions
for the benefit of a company were held to be maintainable in India.
However, my research does not reveal the said aspect to have been
considered in any of the judgments holding a derivative action to be
maintainable in India. I therefore take the liberty of a holding derivative
action to be per se not maintainable, specially claiming a relief of
declaration, which under Section 34 of the Specific Relief Act, 1963 is a
discretionary relief, and which discretion will not be exercised in favour of
the plaintiff when a statutory remedy for a relief is available."
With regard to the submission of Learned Counsel for the purchaser
regarding maintainability of the suit this Court is of the view that as the suit
is pending for about fifteen years and this appeal is from an interlocutory
order it would not be proper to make any observation with regard to
maintainability as the parties have liberty to take this plea before the Trial
Court.
Moreover issue of maintainability may be framed as a preliminary issue and
necessary orders may be passed. In this regard it is necessary to consider
the provisions contained in order XIV Rule 20 of the Code of Civil Procedure.
Order XIV Rule 2 provides as follows:
2) Court to pronounce judgment on all issues-1) Notwithstanding that a
case may be disposed of an a preliminary issue, the Court shall subject to
the provisions of sub-rule (2) pronounce judgment on all issues.
2) Where issues both of law and of fact arise in the same suit, and the
Court is of opinion that the case or any part thereof may be disposed of on
an issue of law only, it may try that issue first if that issue relates to-
a) the jurisdiction of the Court or
b) a bar to the suit created by any law for the time being in force, and for
that purpose may if it thinks fit, postpone the settlement of the other issue
until after that issue has been determined and may deal with the suit in
accordance with the decision on that issue.
Thus considering the provisions contained in Order XIV Rule-2 it would not
be proper to make any observation while disposing appeal from an
interlocutory order and the issue of maintainability is left open for the trial
Court to decide.
In the written notes of argument the purchaser/intervener has repeated the
stand taken by the Learned Counsel Mr. Chidambaram in the Course of
hearing. In the written notes the purchaser has taken the stand that it was
not made party to suit and jurisdiction lies with NCLT. The decision for sale
was approved by 100% of the majority of the general body of the company
through a validly held voting. The Plaintiff has not come to the Court with
clean hands and this Court does not have jurisdiction, and the valuation
was correctly made.
As the point of jurisdiction of this Court is an issue with regard
maintainability as observed above the point of maintainability will be decided
by the trial Court. The stand taken that the decision of the director for sale
of the land was not wrong as it was approved by 100% of the majority of the
general body of the shareholders is not so important at this stage as the
bone of contention is under valuation of the land, and arbitrary sale process
in undue haste by defendant no-15. Now, with regard to the issue whether
plaintiff has come with clean hands and whether valuation is properly made
is to be considered from materials on record and upon considering the
arguments of the other parties. However impleading of the purchaser is
necessary, thus we have heard the purchaser and intervener in this appeal.
Now with regard to the locus standi of the appellant in praying for injunction
restraining transfer of immoveable property it appears that the Hon'ble
Division Bench of this Court in APO 167 of 2011 considered the decision of
the Hon'ble Supreme Court in the case of Mrs. Becha F Gurdar reported in
AIR-1955 S.C. 74 regarding position of a shareholder in a company with
regard to the assets of the company. It modified the order passed by the
Learned Single Judge of this Court regarding restraining respondent no-6 in
dealing with the entire share composition by directing defendant no 1 to 5 to
maintain status quo in respect of shares held by them in respect of
defendant no-6 and modified the order of injunction imposed upon
defendant no. 1 to 5 by Learned Single Judge by directing respondent no. 1
to 5 to maintain status quo in respect of properties standing in their names
and by not modifying restrain order of alienation of assets in respect of
respondents no 7 to 18 as no appeal was preferred by the said respondents
from the order of Single Judge but nowhere in the said Order the Learned
Division Bench observed about the locus standi of the appellants, to
maintain the suit.
The Learned Bench made the following observations with regard to
maintainability of the suit.
"At this stage, we propose to deal with two technical points raised by Mr.
Mukherjee as regards the maintainability of the present suit on account of
being barred by order 2 rule 2 of the Code and that his client should not be
vexed with the same case twice over the same subject- matter.
We do not for a moment dispute that in the matter of grant of discretionary
relief in the nature of injunction, a court, if finds that in the past on the
basis of similar facts the plaintiff failed to obtain the same relief and
thereafter, has come up with a second litigation on the basis of same
allegation, will refuse to grant the relief. But the position will be different if
on the earlier occasion, the relief was refused not on merit but on a technical
ground. In such a case, if the plaintiff by removing the defect comes up with
a properly constituted suit, the failure on the earlier occasion on technical
reason cannot be a ground for refusing the relief. In the case before us, the
plaintiff along with others filed a suit where interim relief was granted but
the same was vacated not on merit but on a technical ground that the earlier
suit was a derivative and representative action where the claim for partition
could not have been made. The merits of the case were not dealt with while
passing such order. It appears that the plaintiff has abandoned and is not
pressing prayers (a) to (e) and (o) in the earlier suit and a separate
application has also been filed in the said earlier suit recording this fact. It
was the appellant before us, who raised such objection and such objection
was upheld and thereafter, the present suit has been filed removing the
defect."
We, thus, find that the principles laid down in the case of Amir Din Shahab
Din vs. Shiv Deb Singh (supra), relied upon by Mr. Mukherjee has no
application to the facts of the present case.
The other points regarding maintainability of the second suit being barred by
Order 2 rule 2 are equally devoid of any substance. In order to appreciate the
scope Order 2 Rule 2 of the Code, it will be appropriate to quote the same:
"2. Suit to include the whole claim.-(1) Every suit shall include the whole of
the claim which the plaintiff is entitled to make in respect of the cause of
action; but a plaintiff may relinquish any portion of his claim in order to
bring the suit within the jurisdiction of any Court.
(2) Relinquishment of part of claim.-Where a plaintiff omits to sue in respect
of, or intentionally relinquishes, any portion of his claim, he shall not
afterwards sue in respect of the portion so omitted or relinquished.
(3) Omission to sue for one of several reliefs.-A person entitled to more than
one relief in respect of the same cause of action may sue for all or any of
such reliefs; but if he omits, except with the leave of the Court, to sue for
all such reliefs, he shall not afterwards sue for any relief so omitted.
Explanation.- For the purposes of this rule an obligation and a collateral
security for its performance and successive claims arising under the same
obligation shall be deemed respectively to constitute but one cause of action.
Illustration
A lets a house to B at a yearly rent of Rs. 1,200. The rent for the whole of the
years 1905, 1906 and 1907 is due and unpaid. A sues B in 1908 only for the
rent due for 1906. A shall not afterwards sue B for the rent due for 1905 or
1907."
In the case before us, the earlier suit was filed by the plaintiff with other two
persons, and the earlier suit was a derivative and representative action and
thus, the prayer of partition was foreign to such a proceeding. Therefore, in
that suit there was no scope of claiming partition and consequently, the
provision of Order 2 Rule 2 of the Code does not stand in the way of the
plaintiff in filing an appropriate suit claiming the relief which was not
available in the earlier suit. We, thus, find no substance in the aforesaid
contention of Mr. Mukherjee.
The other contention of Mr. Mukherjee that the order impugned was violative
of the provisions of the Companies Act by placing reliance upon Section
111A thereof, since we propose to modify the order of injunction by
restricting the transfer of shares only to the extent held by the parties and
not in respect of other shares of the defendant no. 6, Mr. Mukherjee cannot
have any grievance.'
The matter went up before the Hon'ble Supreme Court but there was no
observation with regard to the locus standi of the appellants.
In the case of Syed Mohamed Ali V.R. Sundarmorthy and others reported
in AIR-1958 Madras P 587 the Hon'ble Madras High Court observed as
follows
'We are not hampered by such rigid technicalities of procedure and if the
minority in a company complains of an oppression and disclosed certain
grounds of complaint in the petition which are made the basis for the relief,
we would hold that the Court should ordinarily investigate the charges. Such
investigations may in certain cases be necessary even to regulate the future
conduct of the company for providing against recurrence of such abuses of
power by the majority.
We are, therefore, of opinion that notwithstanding the omission in the
petition to pray for relief against the delinquent directors, an inquiry into the
charges against them was properly within the scope of the petition. Sections
402 and 406 of the Indian Companies Act give ample jurisdiction to the
Court to dispose of the matter in the larger interests of the company. The
question then is whether it would be in the interest of the company and even
of the disappointed minority to set aside the compromise and start an
inquiry on the petition.'
In the case of Radhasamanan MSDCV Chandrasekara Raja MSD reported in
(2008)6 SCC P-750 the Hon'ble Supreme Court observed as follows:
'42. A similar question came up for consideration in Sangramsinh P.
Gaekwad V. Shantadevi P. Gaekwad wherein this Court upon noticing a large
number of decisions including Needle Industries (India) Ltd. Observed: (SCC P.
375 para 191)
"191. In Shanti Prasad Jain referring to Elder case it was categorically
held that the conduct complained of must relate to the manner of management
of the affairs of the company and must be such so as to oppress a minority of
the members including the petitioners qua shareholders. The Court, however,
pointed out that law, however, has not defined what oppression is for the
purpose of the said section and it is left to the court to decide on the facts of
each case whether there is such oppression."
It was furthermore held: (SCCpp. 377-78.paras 196-99 & 201)
"196. The court in an application under Section 397 and 398 may also look
to the conduct of the parties. While enunciating the doctrine of prejudice
and unfairness borne in Section 459 of the English Companies Act, the
court stressed the existence of prejudice to the minority which is unfair
and not just prejudice per se.
197. The court may also refuse to grant relief where the petitioner does not
come to court with clean hands which may lead to a conclusion that the
harm inflicted upon him was not unfair and that the relief granted should
be restricted. (See London School of Electronics Ltd., In re 11.
198. Furthermore, when the petitioners have consented to and even
benefited from the company being run in a way which would normally be
regarded as unfairly prejudicial to their interests or they might have
shown no interest in pursuing their legitimate interest in being involved in
the company. [See RA Noble & Sons (Clothing) Ltd., In re 12.]
199. In a given case the court despite holding that no case of oppression
has been made out may grant such relief so as to do substantial justice
between parties.
201. In Shanti Prasad Jain V. Union of India13 it was held that the power
of the Company Court is very wide and not restricted by any limitation
contained in Section 402 thereof or otherwise."
Although the decisions relied upon by Learned Advocate for the Appellants
are with regard to oppression and mismanagement in Company Court but
the principles laid down with regard to beneficial interest of the Company
may be followed by Civil Courts having jurisdiction to hear derivative suit
with regard to mismanagement in the Company.
It is true that in the absence of Order of injunction restraining defendant no-
15 from selling the Land at Thane the said defendant committed no illegality
but it is to be remembered that although sale cannot be restrained but the
effects of sale can be regulated. It is within the power of the Court to monitor
utilization of the proceeds of the sale of assets of company for the interest of
the Company and its share holders.
Although the valuer appointed by the order 22nd January 2022 completed
the valuation but copy of the report was not served upon the plaintiffs after
completion for which the plaintiffs filed an application being GA 12 of 2022
praying for a direction upon defendants to immediately circulate the
valuation report and for appointment of Receiver to conduct sale of the
property concerned by public auction or in any other transparent manner
and to retain and hold the sale proceeds in a separate bank account subject
to further orders from the court. Pursuant to filing of the application the
Defendant No-15 through its Learned Advocate by email forwarded the
valuation report. Although the valuation report was prepared by the valuer
on 10th March 2022, but the copy of the same was provided by the defendant
no-15 to the plaintiffs on 29th March, 2022 after application G.A. 12 of 2022
was filed on 18/03/2022. Pursuant to service of valuation report on
29/03/2022 the defendant no-15 executed 3 registered deeds in favour of
one Dhruva Woolen Mills Private Limited on 31/03/2022 which the plaintiffs
came to know on 20/04/2022 at the time of hearing of the application GA 12
of 2022. The defendant no-15 thus gave no reasonable time to the plaintiffs
to consider the valuation report and give views or move the Court for
necessary orders. The Learned Single Judge also had no opportunity to
consider as to whether the direction of sale by public Auction should be
given upon considering valuation report. This act of undue haste shows
some elements of mala-fide of the defendant no-15. Moreover opportunity is
given to the purchaser by the said defendant to pay the full consideration
money within 5 years. The Learned Judge had no occasion to consider the
reliefs prayed for except the prayer to keep the sale consideration amount in
a separate Bank Account which the Learned Judge refused. Learned
Advocate for the Appellant submits that even though transfer of the land is
with immediate effect on 31st March 2022 out of the net consideration of Rs.
342.55 crores Rs. 185.91 crores is to be paid in future between 2025 and
2027 which is unusual in real estate transactions. In other words, the buyer
gets the property and is free to deal with it in any manner it so chooses
without paying the consideration amount. In case of default the seller will
have to sue the buyer who by that time may have already
transferred/mortgaged the property. Learned Advocate submits that in the
event sale is not set aside a special officer should be appointed to whom
purchaser will pay the balance consideration money which is for the benefit
of the company.
We order as follows:
The purchaser Dhruva Wollen Mills Private Limited shall disclose in all
Agreements for sale or Deed of Conveyance or Deed of Lease or any transfer
entered into by them with a third party in respect of the subject Land at
Thane the subject matter of dispute in C.S. 12 of 2009. This compliance
should continue till the entire consideration amount is paid. Upon the entire
consideration amount being paid the purchaser may pray for waiving the
condition before Trial Court.
We appoint Smt. Manimala De Advocate Bar Association Room No-1 Mobile-
8240965507 and Smt. Jyotsna Mukherjee Advocate Bar Association (m)
9433146289 as Joint Special Officers to conduct inspection at the site of
subject land and to submit a report as to the construction which has taken
place with necessary photographs and the persons if any in possession
thereof. Such inspection should be conducted within a period of thirty days
from the date of communication of the order upon notice to all parties and
their Learned Advocates. The report of such inspection should be submitted
before the Trial Court within ten days from the date of completion of
inspection. In the event any agreement for sale is made or conveyance
executed or any transfer of portion of the subject property is made such
intimation shall be given to the Learned Special Officers by the purchaser.
Special Officers upon receiving the information shall file a supplementary
report in Court regarding the development. The special Officers are entitled
to an initial remuneration of 6000 gms to be paid by the plaintiffs. The
expenses of conducting inspection of the Thane property shall be paid by the
plaintiffs.
Urgent certified photo copy of this judgment and order if applied for be
furnished to the appearing parties on priority basis upon compliance of
necessary formalities.
I Agree:-
(I. P. Mukerji, J.) (Biswaroop Chowdhury, J.)
