P.N. Magan vs Karma Processors (P) Ltd.
1996 Latest Caselaw 145 Del

JUDGMENT

Manmohan Sarin, J.

(1) The plaintiffs one Sh. P.C. Magon and Sh. D.K. Magon have instituted the above suit for permanent and mandatory injunction, seeking inter alia a decree of permanent injunction restraining the defendant No.l Company M/S. Karma Processors pvt. Ltd., from transferring the shares allotted to the plaintiffs in favour of defendant Nos.2 and 3 i.e. Sh. F.C.Dhawan and Sh. Rakesh Dhawan, and also from removing the plaintiffs from the post of the Managing Director and Director.

(2) The plaintiff Nos. 1 and 2 claim to have substantial shareholding in the defendant No.l Company. It is averred in the plaint that since the plaintiffs were involved also in the other running business in Agra, the defendant Nos. 2 and 3 who were also directors, were also called upon to look after the affairs of defendant No.l Company. It is alleged that actions of defendant Nos. 2 and 3 were detrimental to the interest of the share holders of defendant No.l. Disputes had arisen between the parties.

(3) The defendant Nos. 2 and 3 wanted plaintiffs to be ousted so that they could run defendant No. I Company as per their whims and caprices. The defendant Nos. 2 and 3 had since January, 1995 started demanding of the plaintiffs to resign from the Board of Directors and transfer their shares but the plaintiffs had declined. It is averred that on 4-2-1995, when the plaintiffs alongwith their brother Sh. Satish Magon were coming from their factory at 54, Industrial Estate, Nunhai, Agra some unidentified persons by threatening and pressurising the plaintiffs and their brother, obtained their signatures on blank as well as typed papers. The papers lying in the bag of Sh. Satish Magon, were also snatched. It is stated that sh. Satish Magon lodged a complaint with the police station concerned i.e. Etmadulla, Agra. The plaintiffs also informed the Registrar of Companies of the act of obtaining the signatures of the plaintiffs forcibly and under duress. The aforesaid acts were alleged to be at the instance of defendant Nos. 2 and 3. The plaintiffs' case being that aforesaid papers are sought to be misused by defendant Nos. 2 and 3 for transferring the shares of plaintiffs and their family members and far ousting the plaintiffs from the Company.

(4) Vide an ex parte order in I.A. No. 1644/95 i.e. application under Order 39 Rule I and 2 Cpc, the defendant No.l was restrained from transferring alienating the shares allotted to plaintiff Nos. I and 2 in favour of defendant Nos. 2 and 3 or any other person otherwise than in accordance with Law. The the defendant No.l was further restrained from removing the plaintiff No.l from the Board of Directors of defendant No.l, otherwise than in due course of Law.

(5) Pleadings were completed by the parties. The defendants in addition to the written statement filed have also filed on record an additional affidavit. Statement of the parties was also recorded under Order 10 CPC. Arguments have been heard on the application under Order Xxxix rules I and 2 Civil Procedure Code and the order was reserved on 9-2-1996.

(6) The case of the plaintiff has already been outlined by me. The defense set out by the defendants in the written statement may be briefly noted:-

I) The plaintiff No.1 and defendant NO. 2 and 3, were promoter Directors of the defendant No.l Company. The parties are related, plaintiff Nos.1 and 2, are real brothers of the wife of defendant No.2, Smt. Kanta Dhawan. The defendants have set out in detail the shareholding of the parties from inception of the Company. As a result of increase in the share capital of the company and allotments being made from time to time, as on 30-9-1994 the defendant No.2 and their families held 4395 shares and the plaintiff and their group held 605 shares.

II) Disputes had arisen between the plaintiff and defendant Nos. 2 and 3. A settlement was arrived at whereby the plaintiff No.1 agreed to resign from the Board of Directors of the Company and plaintiffs agreed to transfer the shares held by them and their family members in defendant No.1, to defendant Nos.2 and 3 and their family members/nominees. The settlement is stated to have been arrived with the good offices of Sh. Shanti Swaroop Magon, who is an elder in the family as also in the presence of Sh. K.K. Sansi. In pursuance to the settlement made, on 19-12-1994 and 4- 02-1995, the plaintiffs and their family members transferred their entire share holding to defendant Nos. 2 and 3 and their nominees for consideration. The transfer deeds were executed and payments of the agreed consideration was made by cheques and demand drafts, which were duly got encashed. The transfer by plaintiff Nos. 1 and 2 on 19-12-1994, was followed by transfer by their family members. The transfer deeds were signed by family members on 4-2-1995. The particulars of transfer of shares and payments made are as under:-

Name No. of Amount Paid by shares Sh. P.N. Magon 110 1,52,900.00 vide Smt. Naini Dhawan Ch. No.326287 1 1,390.00 vide Ch. No.326289 both dtd. 19-12-94 Sh. D.K. Magon 86 1,19,540.00 vide ch. Smt.Naini Dhawan Nos. 326288 1 1,390.00 vide Ch.No. 326290 both dtd. 19-12-1994 Smt.Chander Kanta 141 1,95,990.00 vide Dd M/s.Karma Tax-Prints Magon No.430139 dtd. Pvt. Ltd. 28-1-1995 Smt. Sneh Lata 150 2,08,500.00 vide Lata M/s.Karma Tax-Prints Magon Magon Dd No.430140 Pvt. Ltd. dtd. 28-1-95 Sh. Alok Magon 8 11,120.00 vide Dd M/s.Karma Tax-Prints No.430141 dtd.28-1-95 Pvt.Ltd. Sh. Satish Magon 108 1,50,120.00 vide Dd M/s. Karma No.034576 dtd. 2-2-95 Tax-Prints Pvt.Ltd.

In the first instance the plaintiff Nos. 1 and 2 had transferred on 19-12-1994, 111 and 87 shares in favour of Smt. Naini Dhawan @ Rs.1390.00 per share. The defendants have also placed on record an affidavit of Sh. Shanti Swaroop Magon dated 10-3-1995. The defendants have claimed that certain relations of the plaintiffs had deposited amounts with the defendant No.1. These were also returned to the said relatives by demand drafts, which have been encashed by the said relatives. The defendants have also produced on record the certificates from the bankers certifying the encashment of the monies paid for transfer of the shares of the plaintiffs and their family members.

III) The defendants thus claimed that the suit filed by the plaintiff was patently false one and the pleas taken are dishonest. The plaintiffs had turned dishonest and wished to resile from the settlement reached and acted upon.

(7) In the statement recorded under Order X Civil Procedure Code plaintiff No.1, reiterated the case set out in the plaint regarding the plaintiffs and their brother being way laid and their signatures being obtained on certain documents, which were now sought to be misused by defendants. He, however, admitted the receipt of payments of Rs. 1,52,900.00 vide cheque bearing No. 326287. However, he denied the receipt of Cheque No. 326289 for Rs.1390.00 . The receipt of Rs. 1,19,540.00 vide cheque bearing No. 326288 in favour of Sh. D.K. Magon was admitted. But, the receipt of the second cheque of Rs. 1390.00 was denied. He denied having received the drafts favouring Smt. Chander Kanta Magon, Smt. Sneh Lal Magon, sh. Alok Magon and brother Sh. Satish Magon. It was claimed that the said amounts have not been credited to the accounts of the said persons notwithstanding him being shown the certificates issued by the Banks confirming encashment of cheques/drafts.

(8) Plaintiff No.l denied that the cheques were for payment of consideration for the transfer of shares. An ingenious explanation was put forward. It was claimed that it had been decided to purchase the "Flat belt screens" required in the factory. For this purpose funds were required, defendant No.l had entered into an agreement with M/s. Sidharth Motors and General Finance Limited for financing the purchase and supply of the said equipment. As part of the finance was to be arranged by the Directors Sh. Rajesh Dhawan issued cheques from the account of his wife Smt. Naini Dhawan. These cheques bearing Nos. 326287 and 326289 both dated 19-12-1994 for Rs. 1,52,900.00 and Rs. 1,19,540.00 were given to the plaintiffs who were to arrange for the balance amount required to pay the instalments to M/s. Sidharth Motors tod General Finance Limited. Thereafter, it was claimed that the plaintiffs arranged the balance funds and paid the amount to M/s. Sidharth Motors and General Finance Limited. These payments were said to have been made in March, 1995. Plaintiffs also claimed that the payments were made out of the account opened of defendant No.1 in the Allahabad Bank. The Statement of Account from the Allahabad Bank shows that the transfer was made vide a Pay Order dated 3-4-1995 in the sum of Rs. 7,66,611.917-. In another words, it is stated that the allegation of the defendants that the amount paid to the plaintiffs were towards the sale consideration of shares was absolutely false. It was reiterated in the replication that blank transfer deeds were forcibly got signed alongwith other papers on 4-2- 1995, which were sought to be misused. The plaintiffs have also produced on record an agreement dated 30-11- 1994 purportedly entered into with M/s. Sidharth Motors and General Finance Limited whereby the said Company was to purchase and supply 3800 different sizes of "Flat belt screen". The amount was to be paid by the defendant No.l Company in 18 monthly instalments of Rs. 1,44,222.22 paise. The agreement is dated November, 1994. The machines are said to have been supplied in December, 1994. The photocopy of undated receipt issued by M/s. Sidharth Motors and General Finance Limited receipt of Rs. 7,66,227:91 vide Pay Order No. 020474 dated 17-5-1995 has been Filed.

The defendants have denied that any contract was entered into with M/s. Sidharth Motors and General Finance Limited or any equipment was supplied or payments made. The entire transaction has been called a fabricated, forged and manipulated one.

(9) Learned counsel for the plaitniff apart from the case as set out earlier sought to urge that the defendants are taking false pleas in as much as the plaintiff No.1, who was the Managing Director has been described as Additional Managing Director. Further that the plaintiffs had issued fabricated share certificates which is evident from comparison with the that original share certificates filed on record. It was also contended that the ex parte order was passed on 23-2-1995 but the defendants filed the written statement only in September, 1995 i.e. belatedly seven months later taking the false plea of a settlement. These pleas and submissions are of no material consequence. Counsel for the defendant further reiterated the averments made in para Nos. 8 and 9 of the replication regarding the contract with M/s. Sidharth Motors and General Finance Limited. Further that the machines were supplied in December, 1994. The account of defendant No.1 was opened in the Allahabad Bank on 30-1-1995. The amount of the cheque received from the plaintiffs had been deposited in the account on 29-3-1995. A Pay Order was issued in April, 1995. However, due to certain technical difficulties a fresh Pay Order was made and payments made to M/s. Sidharth Motors and General Finance Limited in May, 1995. Counsel urged that the plaintiffs had a prima facie case which required investigation and plaintiffs were therefore, entitled to the injuction sought.

(10) I have heard the counsels at length and perused the pleadings and documents filed on record. The plaintiffs' case as set out earlier is that there was no settlement and the defendants had misused the transfer deeds and papers that had been forcibly got signed on 4-2-1995. Let me analyse the case of the plaintiffs starting from the alleged incident of 4-2- 1995. The alleged incident itself, having Fictional moorings is a bizarre one. The plaintiffs and their brother claim to have been way laid by five Unarmed persons. The plaintiffs and their brother did not notice the car number. The plaintiff No.l, does not recall whether he signed blank, typed or printed papers or even a register. Papers are said to have been taken from the brother's brief case, who is not even a Director of defendant No.l. A report is lodged by the brother Sh. Satish Magon. The report also has an over writing on the date. The police does not appear to have investigated the matter and the counsel for the plaintiff was unable to point out whether any farther investigations were carried out or the case has been filed. As against this you have an affidavit of Shri Shanti Swaroop Magon, uncle of the plaintiffs, who confirms a settlement and payments made pursuant thereto. The defendants have also produced on record a photocopy of the affidavit dated 4-2-1995 sworn by the plaintiff Nos. 1 and 2, whereby they acknowledge having sold the shares on 19-12-1994 and having received consideration therefor. Of course, the plaintiff No.l in the statement denies the execution of the affidavit. The defendants have also produced on record the copies of transfer deeds signed by the defendants. The particulars of the payments made to the plaintiffs computed @ Rs. 1390.00 per share. The certificates from the bankers regarding encashment of the consideration paid to both the plaintiffs. As regard the admitted cheques and drafts encashed by both the plaintiffs, the explanation tendered is that this money was paid by the defendants from the account of Smt. Naini Dhawan with a view to finance the purchase of "Flat Belt Screening" for which agreement was eventually entered into with M/s. Sidharth Motors and General Finance Limited. However, no explanation whatsoever has been tendered with regard to the payments made to the relations of the plaintiffs who transferred their shares as a part of the total settlement. The plaintiffs have chosen to simply make a bald denial of the money having not been received by them for the said relations which stands belied by the certificates of the bankers showing their encashment and the execution of the transfer deeds by the said relations. Moreover, as far as the transfer by the said relations is concerned, it is not even the plaintiffs' case that their signatures were forcibly obtained in the bizarre incident of 4-2-1995 as none of the relations were claimed to be in car.

Now, let us consider the plea with regard to the amounts received by the plaintiffs from the defendants on 19-12-1994 being for the purposes of financing the "Flat Belt Screening." The plaintiffs have filed an agreement which is dated November, 1994. It is rather strange that without a single paise being paid under the said agreement, the lessor therein supplies the equipment to the defendant No.l in December 1994. No evidence of any past dealing or any security being furnished in Allahabad Bank. The account is opened on 30-1-1995. It is apparent that the account appears to have been opened only for creating the entry for present transaction. Curiously the money received on 19-12-1994 by plaintiffs is deposited only on 24-3-1995 for use. The amounts received by the plaintiffs and the amounts deposited do not tally. The plaintiffs explanation is that they arranged the balance amount details of which are not forthcoming. It is not understood why the cheques should have been received from Smt. Naini Dhawan in the name of the plaintiffs especially when the plaintiffs' case is that the money was required for Financing the purchase of the equipment. The cheques would have been in the name of defendant No. I rather than going through the convulsed process of the plaintiffs first depositing the amount in their individual names and then depositing it in the account of defendant No.1. The payment made from the Allahabad Bank is on 3-4-1995, while the undated receipt issued by M/s. Sidharth Motors and General Finance Limited is in respect of a different pay order dated May, 1995 and for a different amount. I have no hesitation in reaching the finding that the plaintiffs have set up the facade of this transaction with M/s. Sidharth Motors and General Finance Limited only to somehow attempt a futile explanation for the amount received as consideration for the transfer of shares in December 1994. The plaintiffs' case as discussed above and specially the incident of 4-2-1995 is a false one and deserves no credence. The facts and circumstances of the case, the course of events, encashment of the cheques and drafts as borne out by the Bankers certificates and the documents on record clearly repel and negate the case set out by the plaintiffs.

(11) The plaintiffs do not have a prima facie case. The plaintiffs have misused the legal process and obtained an ex parte injunction by false representations and concealment of material facts. This kind of dishonest legal adventurism needs to be curbed and discouraged. In view of the foregoing discussion, the application of the plaintiffs is dismissed with costs of Rs. 6,000.00 . The ex parte order dated 23rd February, 1995 stands vacated.