Calcutta High Court
Rajib Paul And Ors vs Veteran Company Private Limited & Ors on 2 September, 2025
Author: Ravi Krishan Kapur
Bench: Ravi Krishan Kapur
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IN THE HIGH COURT AT CALCUTTA
ORIGINAL SIDE
ORDINARY ORIGINAL CIVIL JURISDICTION
BEFORE:
The Hon'ble Justice Ravi Krishan Kapur
APO/114/2010
IA NO: ACO/6/2015 (Old No: ACO/23/2015),
ACO/7/2017 (Old No: ACO/95/2017),
ACO/8/2017 (Old No: ACO/114/2017),
ACO/9/2018 (Old No: ACO/43/2018)
RAJIB PAUL AND ORS.
VS
VETERAN COMPANY PRIVATE LIMITED & ORS.
For the appellant : Mr. Kalyan Bandhopadhayay, Sr. Adv.
Ms. Manju Bhuteria, Sr. Adv.
Mr. Ram Anand Agarwala, Adv
Ms. Nibedita Pal, Adv
Ms. Ananda Gopal Mukherjee, Adv
Ms. Sonam Ray, Adv.
Ms. Nasrin Khatoon, Adv.
Ms. Arundhati Barman Roy,Adv.
Mr. Abhishek Jain, Adv.
For the respondents : Mr. Arif Ali, Adv.
Ms. S. Bhattacherji, Adv.
Judgment on : 02.09.2025
Ravi Krishan Kapur, J.:
1. This is an appeal under section 10F of the Companies Act, 1956 directed
against an order dated 5 June, 2009 passed by the Company Law Board
(CLB).
2. The brief facts culminating in the filing of this appeal are as follows:
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a) In or about 1973, the Ministry of Defence had recommended the names
of the following individuals for running a retail outlet at Haldia:
i) Rakhal Chandra Paul,
ii) Beni Madhab Das,
iii) Niranjan Ghosh,
iv) Sukumar Ray,
v) Provakar Das Gupta,
vi) Nilmani Sarkar and
vii) Major Nityananda Ray.
b) Pursuant to the above, on 21 January, 1974, the respondent no.1
namely Veteran Company Private Limited (the company) was
incorporated by the above 7 ex-servicemen. At the time of
incorporation, the Articles of Association of the company, inter alia,
provided as follows:
"Article 6 - Subject to the provisions of these Articles the shares
shall be under the control of the Board who may allot or otherwise
dispose of the same to such persons on such terms and conditions
at such times either at par or at a premium and for such
consideration as the Board thinks fit, subject to the provision that
no such share of the company be allotted to any person unless he is
a person, who is an ex-military/retired personnel from military
service under the Ministry of Defence, Government of India."
"Article 37: No transfer shall be made to a minor or person of
unsound mind and to any person unless he is a person who is an
Ex-Military/Retired Military personnel from Military service under
the Ministry of Defence, Govt. of India."
"Article 41 - The executor or administrator of a deceased member
(not being one of several joint holders) shall be the only person
recognised by the company as having any title to this share
registered in the name of such member, and in the case of the
death of any one or more of the joint holders of any registered
share. The survivor shall be only person recognised by the
company as having any title to or interest in such share but nothing
herein contained shall be taken to release the estate of a deceased
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joint holder from any liability on this share held by him jointly with
any other person. Before recognising any executor or administrator
the Board may require him to obtain a Grant of Probate or Letters of
Administration or other legal representation, as the case may be
from a competent Court in India and having effect in Calcutta.
Provided nevertheless shall be lawful for the Board to dispense
with the production of probate or Letters of Administration or such
other legal representation upon such terms as to indemnify or
otherwise as the Board, in its absolute discretion, may consider
adequate."
"Article 78 - Director must hold at least one ordinary share.
Amended Article 37- No transfer of shares shall be made to a minor
or a person of unsound mind or to any outsiders, excepting the next
generation and kith and kins only of the existing directors and in
case of the admission of ex-military/retired personnel from the
military services under the Ministry of Defence, Govt. of India,
subject to such approval of the Board of Directors and necessary
permission of the Director General Resettlement, Ministry of
Defence, Government of India at New Delhi. "
c) Sometimes in 1984, one of the shareholders, Major Nityananda Ray
died intestate. Despite his demise, none of his legal heirs applied for
transmission of the shares held by him.
d) On 6 February, 1998, Nilmani Sarkar informed the company that he
had transferred his entire shareholding aggregating 243 shares to one
Amal Kirshna Das. Such transfer was in violation of Article 37 of the
Articles of Association. Amal Krishna Das was neither a member of the
company nor a legal heir of any of the shareholders and is a rank
outsider. In this context, the Articles of Association categorically
stipulates transfer of shares only to the next generation or to the kith
and kin of an existing director and shareholder. As such, any transfer
in favour of Amal Krishna Das was illegal, null and void.
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e) Subsequently, in or about March 1998, 280 shares was allotted to all
the shareholders except Nilmani Sarkar since on that date the said
Nilmani Sarkar was not a shareholder of the company. As a
consequence, no additional shares could be allotted to him.
f) On 14 May, 1998, the said Provakar Das allegedly transferred his
entire shareholding to the said Amal Krishna Das. The said allotment
was also in contravention of the Articles of Association for similar
reasons as stated above. Incidentally, the alleged transfer in favour of
the said Amal Krishna Das is also the subject matter of a suit being
Title Suit No.124 of 1998 pending before the Learned Civil Judge,
Senior Division at Alipore.
g) In or about June 1998, Beni Madhab Das submitted his resignation
from the company and also transferred his shareholding to Amal
Krishna Das. Subsequently in the year 2000, 600 shares of the
company were allotted to Rakhal Chandra Paul and Niranjan Ghosh.
In the same year, Rakhal Chandra Paul transferred his 500 shares to
Rajib Paul and 100 shares to Sanjib Paul. Niranjan Ghosh also
transferred his 500 shares to Premangshu Ghosh and 100 shares to
Sudhangshu Ghosh.
h) Pursuant to the above, the appellant nos.1, 2, 4 and 5 were inducted
as directors of the company.
i) In 2002, Provakar Das Gupta, Beni Madhab Das, Sukumar Roy and
Nilmani Sarkar filed the instant Company Petition No.23 of 2002 under
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sections 397 and 398 of the Companies Act, 1956 praying for the
following reliefs:
"a) The impugned appointments made by the respondent Nos.2 and
5 in favour of the respondent nos.3, 4, 6 and 7 in the post of
directors of the company on 30th September, 2000 be quashed
and/or set aside and/or all other impugned actions of the
respondent nos.2 to 7 in connection with the affairs of the
company in respect of which no notice had been served upon
the petitioners during the period from 1998 and till date be
quashed and/or set aside:
b) The respondent nos.3, 4, 6 and 7 be permanently restrained from
acting in the capacity of the directors/members/shareholders of
the company and the respective membership and shares of the
said respondent nos.3, 4, 6 and 7 be also cancelled and
appropriate additional directions be passed in that regard;
c) An appropriate order and/or direction be passed by this Learned
Bench for proper administration of the business of the company
in future;
d) An extraordinary general meeting be directed to be held for the
purpose of election of the directors to take charge of the
management of the company;
e) A declaration be made to the effect that the petitioner no.1 is
entitled to another 280 equity shares of the company and
appropriate additional direction in that regard be also passed;
f) An order restraining the respondent nos.2 to 7 from interfering
with the right of the petitioners to have entry into the business
and to carry on the business alongwith the other lawful
directors/members/shareholders thereof be passed.
g) Any other order or orders to which the petitioners may be found
entitled be passed;"
j) In the year 2007, 1000 shares each were allotted to Rakhal Chandra
Paul & Niranjan Ghosh. In the same year, Rakhal Chandra Paul
transferred his 500 shares to Rajib Paul and 500 shares to Sanjib Paul
whereas Niranjan Ghosh transferred his 500 shares to Premangshu
Ghosh and 500 shares to Sudhangshu Ghosh.
k) During the pendency of the above proceedings, on 3 June 2009,
Niranjan Ghosh expired. By an order dated 5 June, 2009, the
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Company Law Board, inter alia, directed that Sukumar Ray be
appointed as a director of the company and that the company be jointly
managed by Sukumar Ray, Rakhal Chandra Paul and Niranjan Ghosh.
3. By the impugned order, the Company Law Board inter-alia set aside the
allotment of shares made in the year 2000 and 2006-2007 respectively
and directed that the appellant nos.1, 2, 4 and 5 cease to be directors of
the company with immediate effect.
4. Upon the filing of the instant appeal, by an order dated 13 July, 2009, a
Co-ordinate Bench passed the following order:
"....so far as holdings of the individual shareholders of the company
has continued for quite sometime now, I am of the view that status
quo ought to be mentioned as regards holdings of the individual
shareholders as on date, and also operation of the petrol pump, which
appears to be the main business of the company shall not be
disturbed until further order, subject to any order passed in any other
Court of competent jurisdiction as this Court is informed that there are
connected matters pending in this Court as well as in the District
Court at Alipore of 24-Parganas (South)."
5. The primary grievance of the appellants is that the impugned judgment
passed by the Company Law Board is perverse inasmuch as the finding of
CLB that the sons of respondent nos. 2 i.e. the respondent nos. 3 and 4
alongwith the sons of the respondent no.5, i.e., the respondent nos.6 and
7 did not become members by transfer of shares but became shareholders
by allotment of shares is contrary to the records. The respondent nos. 3,
4, 6, and 7 before the Company Law Board are the appellant nos. 1, 2, 4 &
5 herein.
6. It is contended on behalf of the appellants that the shares were never
allotted in favour of Rajib Paul, Sanjib Paul, Premangshu Ghosh and
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Sudhangshu Ghosh being the appellant nos.1, 2, 4 and 5 respectively. In
fact, the shares were allotted in favour of the original shareholders who
thereafter transferred the said shares in conformity with the amended
Article 37 of the Articles of Association. On the basis of the above
erroneous finding, the shares transferred in favour of the appellant nos.1,
2, 4 and 5 were cancelled and they were removed as the directors of the
company. All the consequential directions have been passed on such
mistake of fact which is ex facie apparent from the admitted records. The
impugned order is also assailed on the ground that the above finding of
fact is ex facie perverse based on no evidence at all and is liable to be set
aside.
7. On behalf of the respondent no.2, it is contended that the instant appeal
is not maintainable since there is no question of law which arises for
consideration. In support of such contention, the respondent no.2 relies
on the decisions of Bhagwati Developers Private Limited vs. Peerless
General Finance and Investment Company Limited and Ors. (2005) 128
Comp Cas 444 and C.Sri Hari Rao vs. Sri Ramadas Motor Transport Ltd.
(1999) 97 Comp Cas 685.
8. Admittedly none of the original shareholders of the said company are alive.
There has also been no challenge to the amended Article 37 of the Articles
of Association. The amended Article 37 continues to be lawful, binding
and enforceable inter se the shareholders and members of the company.
Those shareholders having transferred their shares in contravention of the
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Articles of Association to a rank outsider have clearly acted against the
interests of the company. In any event, and any such transfer is void.
9. There is also no challenge to the finding in the impugned order that
"Therefore, not only their shareholding is under challenge, they have also
resigned from the Board. Therefore, till such time, in either of the pending
proceeding, the transfer of shares effected by them is declared as null and
void, the petitioners cannot participate in the affairs of the company even
though their names continue to be in the register of members".
10. In Dale and Carrington(P) Ltd And Another vs. P.K. Prathapan and Others
(2005), 1 SCC 212, it has been held as follows.
"Section 1O-F refers to an appeal being filed on the question of law. The
learned counsel for the appellant argued that the High Court could not
disturb the findings of fact arrived at by the Company Law Board. It was
further argued that the High Court has recorded its own finding on certain
issues which the High Court could not go into and, therefore, the judgment
of the High Court is liable to be set aside. We do not agree with the
submission made by the learned counsel for appellants. It is settled law that
if a finding of fact is perverse and is based on no evidence, it can be set
aside in appeal even though the appeal is permissible only on the question
of law. The perversity of the finding itself becomes a question of law. In the
present case we have demonstrated that the judgment of the Company Law
Board was given in a very cursory and cavalier manner. The Board has not
gone into real issues which were germane for the decision of the controversy
involved in the case. The High Court has rightly gone into the depth of the
matter. As already stated, the controversy in the case revolved around
alleged allotment of additional shares in favour of Ramanujan and whether
the allotment of additional shares was an act of oppression on his part. On
the issue of oppression the finding of the Company Law Board was in
favour of Prathapan i.e. his impugned act was held to be an act of
oppression. The said finding has been maintained by the High Court
although it has given stronger reasons for the same."
11. There is nothing on record to substantiate the cancellation of the
shareholding of the appellant nos. 1, 2, 4 and 5 and their consequential
removal as directors. This direction is unsustainable and contrary to the
admitted records before the CLB. As a consequence, all the directions on
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this aspect of the matter are unsustainable and have been passed on an
erroneous interpretation of the facts. [Dale and Carrington (P) Ltd And
Another vs. P.K. Prathapan and Others (Supra)].
12. In view of the above, the impugned order dated 5 June 2009 is modified to
the extent that the transfer of shares in favour of the appellant nos. 1, 2, 4
and 5 are declared to be valid and their consequential appointment as
directors are also declared to be valid. Subsequent to the demise of the
said Rakhal Chandra Paul and Niranjan Ghosh, their shares could only
have been transmitted in favour of their legal heirs. Thus, there is no
embargo in them acting as directors of the company. In such
circumstances, the legal heirs of the deceased shareholders i.e. Rakhal
Chandra Paul and Niranjan Ghosh are granted liberty to apply to the
company in accordance with law and in conformity with Article 41 of the
Articles of Association of the company to effect such transmission.
13. Insofar as group of Provakar Das Gupta is concerned, it is unequivocally
and unconditionally submitted on their behalf that they are ready to
transfer their entire shareholding in the company in favour of the
appellant nos.1, 2, 4 and 5 at an agreed consideration of Rs.30 lakhs by
way of cheque and/or equivalent bank instrument and shall be solely
responsible in respect of any claim which may be raised in the future by
the said Amal Krishna Das or any of his heirs or legal representatives or
any one claiming through him. In this connection, the said Provakar Das
Gupta undertakes to sign all necessary documents in favour of the
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appellant nos.1, 2, 4 and 5, subject to payment of the agreed
consideration Rs.30 lakhs.
14. In view of the above, and in the best interests of the company, the
questions of law raised in this appeal are answered.
15. It is agreed that the above exercise will be completed within a period of
four weeks from date.
16. To the above extent, the impugned order stands modified, APO/114/2010
alongwith all pending applications stand disposed of.
(Ravi Krishan Kapur, J.)
S.Pal/SK.
