Rattan Chand Jain vs Uberoi Limited And Ors.
1992 Latest Caselaw 130 Del

JUDGMENT

Gokal Chand Mital, C.J.

(1) The Uberoi Limited, an enterprise of Uberoi family, had total share-holding of 5000 shares of RS.IOO.00 each and the shares were exclusively held by Uberoi group till March 1972. In March, 1972, Uberoi group sold 74 per cent of the shares equal to 3695 shares to Jaggi group, one per cent shares equal to 53 shares were kept in the miscellaneous and Uberoi group retained 25 per cent shares equal to 1252 shares. In April 1979, the Uberoi group was bifurcated into two groups. It transferred 12 per cent shares equal to 600 shares to Taneja group, retaining the balance of 13 per cent shares to the remnant Uberoi group.

(2) In May 1979 Jaggi group transferred 51 per cent shares equal to 2551 shares to Rattan Chand Jain for short 'Jain' and the Jaggi group was left with 23 per cent shares equal to 1144 shares. The Jaggi group then divided the shares between its two members: R.P.Jaggi group got 18 per cent shares equal to 900 shares and D.L.Jaggi group was left with 5 per cent shares equal to 244 shares.

(3) In 1978 the Uberoi group filed Cp 115 of 1978 under sections 397 and 398 of the Companies Act against Jaggi group on account of oppression and mismanagement. During the pendency of the petition, Taneja group had been created from amongst the share- holding of Uberoi group and was joined as a petitioner in the same Company petition. On purchase by Jain from Jaggi group of majority of shares, Jain was added as a respondent to the same Company petition. It may be noticed at the out set that the Company petition is still pending before the learned Company Judge.

(4) After Jain purchased 51 per cent shares of the total share- holding, Taneja group filed Ca 318 of 1979 before the learned Company Judge for non allowing registration of shares purchased by Jain as it was a device of the Jaggi group to run away from their responsibility and liabilities towards the company. The learned Company Judge considered this matter at length in his order dated 24th October, 1979 and having regard to all the circumstances, made the following directions:- "(A)M/s. K.C.Khanna & Co., Chartered Accountants and failing them M/s. Khanna & Annadhanam, Chartered Accountants, would complete the accounts of the company todate, prepare the balance sheets and profit and loss accounts and complete the audit of the accounts todate. The Chartered Accountants concerned would be paid remuneration as may be agreed to between them and the counsel for Jaggi group and Oberoi group, and failing that, as may be determined by this court. The completion of account and audit would be completed within period of four months. (b) Transfer of shares by Jaggi group in favor of Jain be registered in accordance with law. The transfer and registration would, however, be subject to the outcome of the present proceedings and the suit of the minors and to any directions that may be made in these proceedings. The interim order made by this Court in the present proceedings and in the aforesaid suit are accordingly modified. (c) Jaggi group would deposit in this court within two weeks the consideration received by them from Jain for the transfer of the shares. (d) Jain would make available to the company working capital, as may be required by the company, from time to time not exceeding Rs.5,00,000.00 . (e) Parties are restrained from transferring any share without the prior concurrence of this court. (f) Jain and a nominee are hereby appointed as Directors of the Company in substitution of two of the nominees of Jaggi group. Jaggi group would have the option to name the directors in whose place Jain and his nominee would be substituted. (g) Oberoi and M.P.Saxena would continue to be the member of the Board and Chairman of the Company and nominee Director respectively in terms of the order made on Sept.l2, 1979. In view of this the induction of Taneja in the Board would be unnecessary. (h) Liberty to parties to obtain further directions."

(5) A reading of the aforesaid directions would show that a firm of Chartered Accountants was appointed to complete the accounts of the Company up to-date, to prepare balance sheet and profit and loss accounts and to complete the audit, transfer of shares by Jaggi group to Jain be registered in accordance with law, which was subject to the out come of the proceedings and the suit of the minors and to any direction that may be made in those proceedings and that Jain and a nominee were appointed Directors of the company in substitution of two of the nominees of Jaggi group, besides other directions as noticed above.

(6) Later on Taneja group filed Ca 647 of 1979, an application, before the same learned Company Judge for review/modification of his order dated 24th October, 1979. The same Company Judge by order dated 18th February, 1981 modified his earlier order, which mainly affected Jain and feeling aggrieved he has come up in this appeal.

(7) On a consideration of the matter, we are of the view that the appeal deserves to succeed. Assuming for the sake of arguments that in company matters, the Company Judge can pass orders from time to time as the exigency of the facts and circumstances of the case require, but in this case, we are of the view that no such exigency or fact existed justifying the modification of the earlier order, which is being demonstrated from the following facts.

(8) Admittedly, the position all through till date has been that Jain had 51 per cent of the shares and therefore, was holding the majority of the shares. This fact was noticed by the learned Company Judge in his order dated 24th October, 1979 in the following words of the Judge as contained in para 2 of his order: "DURING the pendency of this petition, Jaggi group claim to have transferred 51% of the total equity capital of the company, out of their holding, to one Rattan Chand Jain, for short Jain, allegedly with a view to invest the proceeds in the company and to pursuade Jain to provide finance through his sources to provide working capital required for the company."

(9) While passing the impugned order, in para 3, the learned Company Judge went on to consider on the surmises that Jaggi group had sold 51 per cent of their holding i.e. equal to 37 per cent of the total share capital to Jain. The actual words of the learned Company Judge deserve to be reproduced:    "IN this situation, Jaggi group had sold 51 per cent of their holding i.e. near 37 per cent of the total share capital to Jain,...."  

(10) During the pendency of the review/modification application, Jaggi group also joined hands with Taneja and Uberoi groups and taking note of that situation, the learned Company Judge observed that they represented 60 per cent of the issue capital. In the words of the learned Company Judge-in para 4, the following sentence would be relevant:    "THEY admittedly represent over 60 per cent of the Issued Capital"  

(11) This further shows that the learned Company Judge thought that about 37 per cent of the shares had been purchased by Jain and not 51 per cent shares. On this factual mistake, the learned Company Judge proceeded to reverse his earlier decision. If the correct facts had been kept in view, the learned Company Judge would not have reversed his earlier decision. We may notice that Mr.B.Mohan, learned counsel appearing for other shareholders fairly conceded that Jain held 51 per cent of the total share- holding and not 51 per cent out of the share-holding of Jaggi group. Accordingly, the review order has been passed on facts, which are beyond pleadings and admission and cannot be sustained.

(12) The learned Company Judge in reviewing the order, took notice of the fact that Jaggi group had also joined Taneja and Uberoi groups and, therefore, change in the working of the Company was necessitated as they held over 60 per cent shares. In spite of their joining, they were holding less than 50 per cent shares. That apart, before us R.P.Jaggi, holding 18 per cent of the shares is left alone and Uberoi group has joined hands with Jain, with the result that Jain and Uberoi group are holding more than 64 per cent shares and in terms of the review order of the learned Company Judge, the management of the Company should remain with the majority shareholders group, namely, Jain and Uberoi group. Therefore, on this ground also, the review order passed by the learned Company Judge cannot be allowed to stand.

(13) We have gone through both the orders of the learned Company Judge carefully and find that while the first order was a duly considered order and all aspects, which were considered earlier, were not considered in the review order. Accordingly, we are of the view that the order of the learned Company Judge dated 18th February, 1981 cannot stand and after setting aside that order, we restore the order of the learned Company Judge dated 24th October, 1979. That order would be operative in letters and spirit and would be carried out by all concerned till it is found by the learned Company Judge that it deserves modification. The interim orders passed, subsequently to order dated 18th February, 1981 would also stand vacated. However, in the circumstances of the case, we leave the parties to bear their own costs.

(14) Before parting, we may observe that Shri H.S.Uberoi has died and Pradeep Uberoi would be a member of the Board in his place.

(15) This brings us to the consideration of C.M.2110 of 1990, an application filed by the employees of the company under Order I rule 10, Civil Procedure Code. This matter is not for us to go into. The employees should file an application before the Company Judge, who will consider the same in accordance with law.