Delhi High Court
Capital Land Building & Ors. vs M/S. Shaheed Memorial Society ... on 6 November, 2009
Author: Sanjay Kishan Kaul
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 14.10.2009
% Date of decision: 06.11.2009
+ FAO (OS) No.337 of 2009
CAPITAL LAND BUILDING & ORS. ...APPELLANTS
Through: Mr. Rajive Sawhney, Sr. Adv.
with Mr. Viraj R. Datar &
Mr. Vineet Jhanji, Advocates.
Versus
M/S. SHAHEED MEMORIAL
SOCIETY (REGD.) & ORS. ...RESPONDENTS
Through: Mr. Subodh K. Pathak &
Mr. S.P.M. Tripathi, Advocates
for R-1 to 8.
Mr. K.P.S. Kohli, Proxy counsel for
Ms. Maneesha Dhir, Advocate
for R-9 & 10.
AND
+ FAO (OS) No.423 of 2009
SHAHEED MEMORIAL
SOCIETY (REGD.) & ORS. ...APPELLANTS
Through: Mr. Subodh K. Pathak &
Mr. S.P.M. Tripathi, Advocates.
Versus
CAPITAL LAND BUILDERS PVT. LTD. & ORS. ...RESPONDENTS
Through: Mr. Rajive Sawhney, Sr. Adv.
with Mr. Viraj R. Datar &
Mr. Vineet Jhanji, Advocates
for R-1 to 4.
Mr. K.P.S. Kohli, Proxy counsel
for Ms. Maneesha Dhir, Advocate
for R-6 & 7.
_____________________________________________________________________________________________
FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 1 of 31
CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON‟BLE MR. JUSTICE AJIT BHARIHOKE
1. Whether the Reporters of local papers
may be allowed to see the judgment? Yes
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be
reported in the Digest? Yes
SANJAY KISHAN KAUL, J.
1. A dispute between two family groups to control M/s. Capital
Land Builders Private Limited, appellant No.1 in FAO (OS)
No.337/2009 (for short „the said Company‟), and
consequently deal with valuable land owned by the said
Company has given rise to a spate of litigation. The present
appeals arise from one branch of that litigation. The said
Company is stated to have been incorporated in the year
1959 with the object of acquisition of properties, promotion
and development of land & building, and other objectives
as specified in the Articles & Memorandum of Association.
The original authorized capital of the said Company is
stated to have been Rs.1.00 lakh divided into one thousand
equity shares of Rs.100.00 each and a paid up capital of
Rs.56,000.00. There were only two original subscribers -
Shrimati Satya Chowdhry, wife of late Chowdhry Brahm
Prakash, the first Chief Minister of Delhi holding ten shares
of Rs.100.00 each and Mr. Kishor Lal Sachdeva holding five
shares. Chowdhry Brahm Prakash is stated to have
acquired 500 shares of the Company out of the total share
capital of 560 shares in the year 1962 for which three share
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certificates were issued. In the year 1963 he formed a
Society by the name of M/s. Shaheed Memorial Society
(Regd.), respondent No.1 herein, of which he became the
President. The 500 shares held by him in the said Company
were transferred to the Society of which he continued to be
the President till his death. It is the claim of appellants 1 to
4 that in the year 1983 the Society was allotted 150
additional shares by the said Company but during the
period 1968-1989 these shares were transferred to
different parties leaving the Society with no share holding
in the Company by the end of the year 1989 and the name
of the Society was removed from the register of
shareholder of the said Company. In a nutshell the claim of
the appellants is that the family of appellants 2 to 4 got the
control of the Company and the Company was managed by
Shri Kishor Lal Sachdeva and his family members. Plaintiffs
3 & 4 claim to have acquired 20 shares each of the
Company from the Society in the year 1974 vide share
certificate No.3A (1) (A) & 3A (1) (B) of the Company.
2. It is post the demise of Chowdhry Brahm Prakash in the
year 1989 that disputes are stated to have arisen between
two family groups and representations were made by the
representatives of Chowdhry Brahm Prakash to Registrar of
Company claiming interest in the said Company through
the Society.
3. It is in the year 1997 that a Company Petition was filed by
respondent No.1 Society under Section 100 & 111 of the
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Companies Act, 1956 (hereinafter referred to as the said
Act), being Company Petition No.15/111/1997. The Society
filed this petition through one Shri Sidharth Chowdhry,
respondent No.7, claiming to be the Secretary of the
Society. In that Company petition it was averred that the
Society had been formed amongst other objectives for
promoting social welfare of the community in the field of
health, education, sciences, etc. as also for promoting
national integration, socialism, democracry and diffusion of
political knowledge. The said Company (respondent No.1 in
those proceedings) was stated to be a private limited
Company whose registered office earlier was at Pataudi
House, Darya Ganj, Delhi, which was shifted to B-49,
Connaught Circus, New Delhi and Society had learnt that
the said Company had shifted its registered office at No.5-
A, Doctors Lane, Gole Market, New Delhi. Shri Janardhan
Rai, respondent No.2 in those proceedings, was stated to be
the Director of the said Company. In para 11 of the
petition, the Society averred that a copy of the share
certificate in favour of the Society issued by the Company
was being annexed as Annexure „C‟ and that "the original
will be shown to the court at the time of hearing". We may
note at this stage itself that this original share certificate
has not seen the light of the day till the conclusion of the
hearing of the present appeal. The application goes on to
state that the Society wanted to be better informed about
the affairs of the Company and on an inquiry found that no
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annual returns had been filed for a number of years nor any
notice or information had been sent about the holding of a
general or special meeting. The Society alleged that it had
learnt that the Company had without any cause omitted the
name of the Society from the register of members of the
Company and the Directors of the Company had transferred
the shares belonging to the Society to themselves or their
nominees or friends. No proper instrument of transfer duly
stamped and executed by or on behalf of the Society is
stated to have been delivered to the Company along with
the certificate relating to the shares. This transfer is
alleged to be irregular surprisingly on the ground that as
per Rule 6 of the Articles & Memorandum of Association
vested in the governing body of the Society though it is
really a matter of running of the Society and not of the
Company. No Board resolution is stated to have been
passed by the Society for transfer of its shares. The claim
was made that the name of the Society should be recorded
in the register of the members of the Company for 61 to
560 shares.
4. This petition filed before the Company Law Board by the
Society was resisted on behalf of appellant No.1 herein by
filing a reply alleging that the Society was no more a
shareholder of the said Company. The share scrip was
stated to have been split into lesser denomination and fresh
share certificate is stated to have been issued to make
transfer of shares more convenient and practicable. A
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subsequent affidavit filed by the said Company has given a
history of the transfer of the shares. It was averred in the
affidavit that in the year 1975 there was a fire accident at
the registered office of the Company in which the minutes
books and other record maintained by the Company had
been destroyed and this fact forms a part of the record in a
civil case pending in the High Court of Delhi. The
information was compiled from other records including of
annual returns filed with the Registrar of Companies, New
Delhi as mandated by Section 159 of the said Act. The 500
shares bearing No.61-560 are stated to have been originally
allotted to late Chowdhry Brahm Prakash on 20.5.1962 and
his name continued to appear in the annual returns filed up
to 31.12.1962. The 500 shares were transferred on
24.7.1963 to the Society and the name of the Society
continued in the annual returns filed up to 31.12.1963. In
the year 1968 the three share certificates with distinctive
numbers 61-560 was split into 100 scrips of 5 shares each.
A number of transactions are stated to have been done in
respect of shares including re-transfer of shares to
Chowdhry Brahm Prakash and transfer of shares by him. It
would be useful to reproduce the relevant portion in this
behalf, which is as under:
S.No. Share No. of Date of Name of the Transferee along
Scrip Nos. Shares Transfer with Address
1. 061-210 150 26.2.68 Sh. Chowdhry Brahm Prakash,
15, Curzon Lane
New Delhi
2. 211-310 100 26.2.68 Sh. G.D. Sehgal
Vidhya Mandir
Dharmshala, Himachal Pradesh
3. 311-315 005 10.7.72 Smt. Satya Chowdhry
15, Curzon Lane
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New Delhi
4. 316-320 005 10.7.72 Shri Ajai Chowdhry
15, Curzon Lane
New Delhi
5. 321-325 005 10.7.72 Shri Sidharth Chowdhry
15, Curzon Lane
New Delhi
6. 326-335 010 29.1.74 Sh. Madan Singh
Village Chattarpur
New Delhi
7. 336-365 030 29.1.74 Ms. Usha Kiran
Outram Lines
Kingsway Camp
Delhi-110009
8. 366-395 030 29.1.74 Sh. Susheel Khera
G/68, Bali Nagar
New Delhi
9. 396-425 030 29.1.74 Sh. Rakesh Kumar
G/68, Bali Nagar
New Delhi
10. 426-455 030 29.1.74 Sh. H.S. Gulat
23, Mohan Park
Delhi-110009.
11. 456-475 020 29.1.74 Sh. Om Prakash
313-F, Outram Lines
Kingsway Camp
Delhi-110009
12. 476-505 030 29.1.74 Smt. Sharda Devi
C-2, Bali Nagar
New Delhi.
13. 506-535 030 29.1.74 Smt. Vidya Khera
G/68, Bali Nagar
New Delhi
14. 536-555 020 29.1.74 Smt. Promila Kishore
309-F, Outram Lines
Kingsway Camp
Delhi
15. 556-560 005 1989 Sh. Chowdhry Brahm Prakash
New Delhi
5. A perusal of the aforesaid shows that these transfers have
occurred from 1968 to 1974 except five shares in 1989.
6. It is important to note that in the affidavit it has been
alleged that in the year 1986 the Society had filed a case in
the city civil court alleging that the land sold by the
Company does not actually belong to it and the land in
question actually belonged to the Society which suit had
been dismissed. The relevance of this averment will be
discussed later as in the course of hearing of the appeal the
details were made available and the record of that suit was
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summoned and put to the respondents including the
Society.
7. The Company has also alleged in the affidavit that the
Society was, thus, fully aware of the three share scrips
representing 500 shares split into 100 scrips of 5 shares
each as late Chowdhry Brahm Prakash himself purchased
150 shares in his own name on 26.2.1968 by making
payment to the Society of which he was the President,
which was also included in the income tax returns of the
Society.
8. The aforesaid petition remained pending when a new
development arose in the year 2006. On a letterhead of
the Company, Mr. Ajay Yadav, respondent No.4, addressed
a letter to Ajay Chowdhry, respondent No.2, in the capacity
of the President of the Society with regard to the 500 equity
shares. The letter refers to a meeting of the Board of
Directors of the Company and a Board Resolution being
passed on 25.5.2006 where the failure of the past
management about transfer of shares not being supplied
was noted and the decision was taken to take on record
shares of the Society in the register of members of the
Company after adhering to the provisions and procedure of
the said Act along with applicable rules and regulations.
Mr. Ajay Yadav is the brother-in-law of Mr. Ajay Chowdhry.
Mr. Ajay Yadav was not originally a Director. The petition
under Section 111 of the said Act was pending. The letter
has been issued from the address of Mr. Ajay Yadav being
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shown as that of the Company. This letter was placed
before the Company Law Board on 29.5.2006 and the
Society sought to withdraw the petition which permission
was granted and the petition was dismissed accordingly.
9. It appears that inter se the Society there were also some
disputes for an application came to be filed on behalf of the
Society by Mr. Sidharth Chowdhry, who had filed the
original petition, seeking recall of the order dated
29.5.2006 permitting the petition to be withdrawn. It was
averred in the application that Shri Ajay Chowdhry had
fraudulently changed the constitution of the Society and
has shown himself as President of the governing body for
the year 2004-2005. Some persons were inducted as
shareholders of the Company and Mr. Ajay Chowdhry had
an ulterior motive of disposing of the assets of the Society.
The petition having been filed originally by the applicant, it
was alleged that Mr. Ajay Chowdhry had no right to
extinguish the cause of action of Company petition. There
was no opposition to the restoration of the petition by the
Company and on 29.6.2006 the Company Law Board
passed an order restoring the petition and directed it to be
listed for final arguments on 23.8.2006.
10. The Society and Mr. Ajay Chowdhry thereafter filed a writ
petition under Articles 226 & 227 of the Constitution of
India on 27.4.2007 seeking to challenge the order of the
Company Law Board dated 29.6.2006 restoring the
Company Petition to its original number. In the mean time
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subsequent orders had also been passed by the Company
Law Board numbering six on the later dates which were
also sought to be challenged in this writ petition. The writ
petition, however, was directed to be registered as a
Company Appeal and assigned a Company Appeal number,
being Co.A. (SB) No.9/2007. In the Company appeal Co.
Appl. No.723/2008 was filed. The said application in the
appeal came up for consideration before the learned
Company Judge on 30.4.2009. In the said proceedings it is
recorded that on the previous date of hearing the counsel
for the Society urged that it was not concerned with inter se
disputes between the Directors of the Company and that
irrespective of the status of Shri Ajay Yadav as to whether
or not he was or is a Director of the Company and whether
the letter dated 26.5.2006 was issued under the authority
of the Company or not, the Society was not interested in
prosecution of the case filed before the Company Law
Board and it cannot be compelled to do so. The counsel
representing the Company submitted that Mr. Ajay Yadav
was never a Director of the Company nor he had any lawful
authority to represent the Company at any point of time
which position was disputed by Mr. Ajay Yadav. However,
in view of the stand of the counsel for the Society that it did
not want to prosecute the petition before the Company Law
Board filed under Section 111 of the said Act for
rectification of register irrespective of the authority of Shri
Ajay Yadav to have issued the letter dated 26.5.2006,
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learned counsel for the Company gave no objection to
withdrawal of the appeal. The result was that the learned
Company Judge taking note of the statement made by the
counsel for the Society that the Society cannot be
compelled to prosecute the petition before the Company
Law Board directed that Company Petition No.15/111/97
would stand dismissed as withdrawn and as a consequence
thereof nothing survived for adjudication in the appeal. The
upshot of this was that the Society withdrew the
proceedings before the Company Law Board in which it
could have got adjudicated the right of the Society to get its
name recorded in the register of members of the Company.
11. The matter, however, did not rest at this since the learned
Company Judge took a serious view of the conduct of Mr.
Ajay Yadav. This conduct was a consequence of an order
passed on 6.10.2006 in an interlocutory application filed in
CS (OS) No.1906/2006 by the Company in terms whereof
the Society, Mr. Ajay Chowdhry and other members of that
group who were defendants in the suit (respondents herein)
had been restrained from representing themselves as
shareholders/representatives of the Company till further
orders. This order is stated to have been breached and
applications under Section 39 Rule 2A of the Code of Civil
Procedure, 1908 (hereinafter referred to as the said Code)
were filed in the suit proceedings which culminated in an
order dated 20.4.2009 being passed holding that
respondent Nos.3 to 6 herein had violated the injunction
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order and their act amounted to civil contempt. The
learned Company Judge came to the conclusion that in the
light of the prohibition it was not open to Shri Ajay Yadav to
represent the Company and this fact had not been informed
to the court by the counsel representing Mr. Ajay Yadav.
The vakalatnama filed by the counsel on behalf of Shri Ajay
Yadav as if he was representing the Company was found to
be in teeth of the order of injunction and the action of Shri
Ajay Yadav in signing the vakalatnama was observed to be
a blatant attempt to lower the authority of the court in
violation of the order dated 6.10.2006 passed in CS (OS)
No.1906/2006. The conduct of Shri Ajay Yadav was held to
be an effort to prejudice due course of judicial proceedings
and would fall within the definition of criminal contempt and
the matter was thereafter directed to be placed before the
appropriate Bench after registering the petition as such.
12. The aforesaid detailed history was necessary to appreciate
the circumstances in which CS (OS) No.1906/2006 came to
be filed in the present court, the present appeals arising
from the decision on the interlocutory applications in that
suit. The suit has been filed for injunction and damages.
The plaint alleges that the present authorized capital of the
Company is Rs.25.00 lakh divided into 25,000 equity shares
of Rs.100.00 each while the issued and paid up capital is
Rs.24,92,000.00 divided into 24,920 equity shares of
Rs.100.00 each. The initial share capital of the Company is
stated to be Rs.1,500.00 comprising of 15 equity shares of
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Rs.100 each but this capital continued to increase from
time to time. As on 1985 the share capital was 1,550
shares while in 1998 it was increased to 22,405 shares for
which Form-2 dated 1.2.1998 was duly filed with the
Registrar of Companies on 22.12.1998 incorporating all the
information. The share certificates earlier issued to
shareholders on incorporation of the Company are stated to
have been cancelled, withdrawn and replaced with the new
share certificates pursuant to the decision taken by the
Board of Directors of the Company at its meeting dated
28.9.1983 and again on 20.1.1998. The Company is stated
to have been maintaining its statutory record and filing
annual returns with the Registrar of Companies. The
balance sheets and annual returns for the various years
filed from time to time were placed on record. The
registered office is stated to have been shifted to Doctors
Lane and Form-18 filed with the Registrar of Companies on
7.1.2000. The present share holders of the Company were
stated to be as under:
a. Janardhan Rai 135 shares No transfer
records
b. H.C. Sachdeva 55 shares
c. M/s. Runwell India Pvt. Ltd. 430 shares
d. Smt. Promila Kishor 2480 shares
f. O.P. Sachdeva 3800
g. Smt. Annu Sabharwal 2500
h. Smt. Alka Sahni 2500
i. Sh. Ankur Sachdeva 2500
j. Sh. Ashish Kishor 4500
k. Sh. Kishor Lal 3000
l. Smt. Prema Sachdeva 2000
m. Smt. Ashima Arora 1000
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13. The list of Directors as per Form-32 filed is stated to be as
under:
Director Appt. On
Mrs. Promila Kishor 21.7.1995
Mr. Ankur Sachdeva 2.9.1996
Mr. Om Prakash Sachdeva 8.8.1982
Mr. Harichand Sachdeva 31.12.1968
Mr. Ashish Kishor 30.9.1999
Mr. Gaurav Sachdeva 23.2.2005
14. The plaint thereafter sets out the setting up of the Society
and how the shares came to be transferred and from whom
the present shareholders purchased share holding the
details are as under:
Year No. of Shares Seller Buyer
1968 150 Shaheed Mem. Society Ch. Brahm Prakash
1968 100 -Do- Sh. G.D. Sehgal
1972 5 -Do- Smt. Satya Ch
1972 5 -Do- Sh. Ajay Ch
1972 5 -Do- Sh Sidharth Ch
1974 10 -Do- Sh. Madan Singh
1974 30 -Do- Smt. Usha Kiran
1974 30 -Do- Sh. Sushil Kh.
1974 30 -Do- Sh. Rakesh Sach.
1974 20 -Do- Smt. Promila Kish.
1974 20 -Do- Sh. Om Prakash
1974 30 -Do- Sh. H.S. Gulati
1974 30 -Do- Smt. Sharda Rai
1974 30 -Do- Smt. Vidya Kh.
1983 150 New Allotment Shaeed Mem.
1989 55 Shaheed Mem. Sh. J. Rai
1989 100 -Do- Sh. G.D. Sehgal
The aforesaid, thus, shows that all the share transfers are
stated to have occurred from 1968 to 1989. The Society
was stated to have been defunct without any activity for 20
years and no returns had been filed till 2005. Thereafter
the filing of the Company Petition under Sections 108 & 111
(4) of the said Act have been referred to and the factum of
the Company contesting the same as also the proceedings
which transpired thereafter. The letter dated 26.5.2006 is
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naturally stated to have been forged and fabricated. The
Company goes on to state that it received a letter dated
3.2.2006 from the Office of the Assistant Registrar of
Companies about complaints from one of the shareholders,
i.e. the Society. There were subsequent exchanges and
correspondence in this behalf.
15. The plaint states that in April 2006 the Company received
information from the market that some persons are holding
out themselves as Directors of the Company and
negotiating for sale of the properties of the Company. The
Company, thus, issued public notices on 11.4.2006. The
Company also came to know that a Form-32 had been filed
with the Registrar of Companies on 18.3.2006 showing
change of Directorship. This Form-32 gave the registered
office of Doctors Lane and the date of appointment of Mr.
Arjun Chowdhry, Mr. Ajay Yadav and others as 10.3.2006.
Further a Form-18 was filed for change of registered office
w.e.f. 18.3.2006 from Doctors Lane to A-3, Indian Express
Apartments, Mayur Vihar, Delhi, the address of Mr. Ajay
Yadav. A Form-2 about return of allotment was also filed in
respect of issue of additional shares in pursuance to a
Resolution of the Board on 18.3.2006 and the Form-5 for
notice of consolidation, division, etc. or increase in share
capital or increase in members was filed purportedly and in
pursuance to a meeting held on 6.6.2006 increasing the
share capital from Rs.25.00 lakh to Rs.75.00 lakh as per a
Board Resolution dated 15.5.2006. It may be interesting to
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note as pointed out by learned senior counsel for the
appellants that Form-18 has been signed by Mr. Ajay
Chowdhry on behalf of the Society (member) even though
such a form could have been filed only by a Director of the
Company and not by a member which was the claim of the
Society. The claim, thus, was that the forms were filed by a
stranger and no meeting as required under Section 169 of
the said Act in respect of calling for an extraordinary
general meeting had been held and thus no change was
possible. It is filing of these forms and the action of the
respondents herein which is stated to have compelled the
appellants to file the suit seeking an injunction against the
respondents from representing or holding themselves out
as shareholders, writing on letter heads of the appellant
Company, removing any records, disclosure of any
transaction, dealing with assets of the Company and
claiming damages. This plaint dated 4.10.2006 was listed
before the learned single Judge on the original side on
18.10.2006 along with the interlocutory application filed
under Order 39 Rules 1 & 2 of the said Code seeking
interim relief. The respondents herein were restrained from
representing themselves as shareholders/representatives of
the appellant Company till further orders.
16. The suit was resisted by the respondents. The story set up
by the respondents is in the same manner as their claim set
out above. In reply to paragraphs of the plaint dealing with
the registered office and the increase of authorized capital
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all that has been stated is that it warrants no reply. It is
material to once again note that para 1.5 of the plaint deals
with the increase of issued capital and the respondents in
response to the same have once again reiterated the
aspect of their holding the share of the Company which is in
possession of the Society. Similarly while dealing with para
1.7 of filing the balance sheet it has again been stated that
the same is a matter of record. Para 1.10 deals with
existing Directors as per Form-32 and the defendants state
that the same warrants no reply.
17. The hearing on the interlocutory applications under Order
39 Rules 1 & 2 of the said Code, Order 39 Rule 4 of the said
Code and also under Order 39 Rule 2A of the said Code
were concluded on 9.5.2008. The judgement on the
applications for contempt pronounced on 20.4.2009 and on
the said date when the concerned respondents were found
guilty of contempt, further directions were passed pending
pronouncement of judgement on the interim injunction
applications that appellants 2 to 4 should also be restrained
from disposing of any property which should be standing in
the name of appellant No.1 Company. The impugned
judgement was thereafter pronounced on 6.8.2009
whereby the ex parte injunction order was vacated. The
learned single Judge has, however, observed while vacating
the said order that in the facts and circumstances of the
case both the groups may be able to squander the assets of
the Company without waiting for final adjudication and thus
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during the pendency of the suit neither the original
plaintiffs nor the defendants should be permitted to dispose
of the assets standing in the name of the Company in any
manner.
18. FAO (OS) No.337/2009 was filed by the appellants (original
plaintiffs). The arguments were concluded on 20.8.2009
but learned counsels for the parties requested the matter to
be placed for directions. In view of the nature of
submissions advanced on 4.9.2009 we considered it
appropriate to summon the file of Suit No.141/1986 titled
Shaheed Memorial Society Vs. Capital Land Builders Pvt.
Ltd. which was pending before the Sub-Judge, 1st Class and
decided on 17.11.1986 and a reference to which case had
been made by the appellants though copies of the order
had not been filed. The record being summoned was
placed before us and was perused by us and it was put to
the learned counsel for the respondents as to why this suit
file inter se parties earlier cannot be looked into in view of
the provisions of Order 41 Rule 27 read with Order 43 Rule
2 of the said Code especially as it has been referred to in
the pleadings. The counsels for the respondents sought
time to inspect the records and make submissions as
recorded in the proceedings of 18.9.2009. Further
submissions in this behalf were heard on 14.10.2009 when
judgement was reserved in the appeals.
19. The respondents filed an appeal being FAO (OS)
No.423/2009 on 16.9.2009 by which time arguments had
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been heard in FAO (OS) No.337/2009. This appeal was
listed on 18.9.2009 and we noted that at the stage when
the hearing was going on in FAO (OS) No.337/2009 the
respondents had not expressed any intention of filing an
appeal against the impugned order and that the then senior
counsel appearing had defended the order. The new senior
counsel appearing in FAO (OS) No.423/2009 stated that the
appellants were only concerned with the operative portion
of the directions in the impugned order since despite
vacating the order of ex parte injunction the learned Judge
in the operative portion of the order had passed interim
injunction against both the parties. The parties were heard
on this aspect also on 14.10.2009 when judgement was
reserved.
20. A reading of the impugned judgement shows that after
discussing the factual matrix the learned Judge found that
this was really a fight between two groups. The appellants
were stated to be fighting to get the declaration that they
are the persons who alone can represent the Company but
they were yet to establish as to how and when they entered
into the Company. It is noticed that the question whether
the Society had sold its entire share holding to the
Company was a controversy already pending decision
before the Company Law Board and thus there was no need
to initiate an independent new suit. The purchase of shares
by plaintiffs 3 & 4 are stated not to have been explained
and the relevant documents not brought on record. The
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learned single Judge has noticed the fact that the original
share certificates were not produced by the respondents
despite claiming to be in possession of the same. No doubt
the plea of the appellants was that new share certificate
had been issued which had been transferred. The learned
single Judge found that it was for the plaintiff to establish
the prima facie case.
21. The impugned judgement is sought to be challenged by
learned senior counsel for the appellants by pointing out
that in terms of Section 164 of the said Act the register of
members is prima facie evidence of any matters directed or
authorized to be inserted therein by the Act. The said
provision reads as under:
"164. REGISTERS, ETC., TO BE EVIDENCE.
The register of members, the register of debenture
holders, and the annual returns, certificates and
statements referred to in section 159, 160 and 161 shall
be prima facie evidence of any matters directed or
authorised to be inserted therein by this Act."
22. Learned counsel submits that the entry of the names of the
existing shareholders and Directors and the absence of the
name of the Society is, thus, prima facie proof of who is the
shareholder and Director of the Company.
23. The respondents had a grievance of non-inclusion of their
name in the register of members and that is what caused
them to file the petition before the Company Law Board
seeking relief under Section 111 of the said Act. The claim
of the respondents, however, never came to be adjudicated
finally by the Company Law Board as the proceedings were
prematurely terminated on account of the disputed letter
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dated 26.5.2006 which was purportedly written on behalf of
the Company by Mr. Ajay Yadav to Mr. Ajay Chowdhry, his
brother-in-law, stated to be the President of the Society.
The address of the Company was shown to be that of Mr.
Ajay Yadav. Learned counsel, thus, emphasized, and in our
considered view, rightly so, that it is only when the Society
would have succeeded in its petition under Section 111 of
the said Act would the question of entering the name of the
Society on the register of members arise. It is the own case
of the Society and the group of late Chowdhry Brahm
Prakash that their names had been wrongly excluded from
the register of members. The termination of the
proceedings were, however, re-activated on an application
filed by the Society itself through Mr. Sidharth Chowdhry
who had filed the original application and the Company
petition was restored to its original number. A grievance in
that behalf was raised by other group representing the
Society who are the respondents herein and who tried to
close the proceedings that there should be no re-activation
of the proceedings before the Company Law Board. The
Company Appeal came to be decided by the learned Judge
of this Court on a categorical plea of their counsel that he
was not interested in prosecuting the Company Petition
before the Company Law Board irrespective of the fact
whether the rights were recognized or not under the letter
dated 26.5.2006. It is on that condition that the petition
before the Company Law Board was directed to be treated
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as dismissed as withdrawn and so also the Company Appeal
before the learned Company Judge. The result of these
proceedings is that the avenue which was open to the
Society and the group representing it to get the question of
inclusion of their names in the register of members
adjudicated remained unadjudicated and closed.
24. In order to appreciate the scope of Section 111 of the said
Act dealing with the provisions for rectification of register of
members, learned senior counsel for the appellants referred
to the judgement in Ammonia Supplies Corporation (P.) Ltd.
Vs. Modern Plastic Containers Pvt. Ltd. & Ors. (1998) 94 CC
310. The Supreme Court was seized with the question of
the power of the court to rectify the register of members
which was then contained in Section 155 (now Section 111)
of the said Act. The power was held to be summary in
nature. The Supreme Court observed that if it truly is a
case of rectification all matters raised in that connection
should be decided by the court under Section 155 (now
Section 111) and if it finds adjudication of any matter not
falling under it, it may direct a party to get his right
adjudicated by the civil court and the civil court would have
jurisdiction unless the jurisdiction is expressly or impliedly
barred under a statute. It was observed that the
jurisdiction of the civil court was impliedly barred in case of
matters of rectification.
25. The plea of the learned senior counsel, thus, is that it was
for the Company Law Board to decide this question arising
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from the claim of the respondent seeking rectification and
only the Company Law Board would have been competent
to relegate the parties to a civil suit in case of appropriate
parameters. The respondents are, thus, stated to have
abandoned their relief in this behalf by withdrawing the
proceedings. Learned counsel also drew the attention of
this Court to Order 23 Rule 1 sub-rules 1 & 4 of the said
Code to contend that where a party abandons its suit or
part of the claim, such party shall be precluded from
instituting any fresh proceedings in respect of the subject
matter or part of the claim. Learned counsel submits that
the same position would apply to the actions of the
respondents in abandoning their claim before the Company
Law Board and sought support from the observations of the
Supreme Court in Sarguja Transport Service Vs. State
Transport Appellate Tribunal, Gwalior and Ors. AIR 1987 SC
88 where a petition under Article 226 of the Constitution of
India had been withdrawn without permission to institute a
fresh petition and it was observed that a fresh petition
would not be maintainable in the absence of such
permission as the rule of public policy as contained in Order
23 Rule 1 of the said Code would apply in such cases and
the exception is a habeas corpus petition.
26. We find force in the contention of the learned counsel for
the appellants in this behalf. It was the own case of the
respondents that their name had been wrongly excluded
from the register of members and thus they had filed the
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appropriate proceedings under Section 111 of the said Act
to get the claim adjudicated. It has obviously been a folly
on their behalf not to have taken the matter to its logical
conclusion where either they would have been able to
establish their claim or the same would have been rejected.
The claim stands withdrawn by them. The respondents
seem to have proceeded on the premise that the letter
dated 26.5.2006 would serve their purpose. Prima facie the
manner and origination of the said letter itself is not free
from doubt. The claim of the respondents was yet to be
adjudicated and as to how they could have held a Board
meeting of the Company ostensibly claiming to be the
Directors is a moot point. It was of course for the
respondents to establish that they have been wrongly
excluded. It was during the pendency of the proceedings
before the Company Law Board that unilaterally Form-32,
Form-18, Form-2 & Form-5 were filed in surreptitious
manner by the respondents to achieve their objective even
when the petition was still pending before the Company
Law Board. It has already been noticed that Form-32 is
signed by Ajay Chowdhry for the Society alone. The Society
was a stranger as per the own admission of the
respondents since it had been wrongly excluded. No details
of how the meeting could have been called contrary to the
provisions of the said Act has been explained.
27. There is no material on record to show either a proper
requisition being made for extraordinary meeting of the
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Company nor any notice was given under Section 284 of
the said Act to plaintiffs 2 to 4 in respect of a proposal for
their removal. The act of filing different forms and trying to
change the composition of the Board, the share holding and
the registered office were clearly only a prelude for issuing
the letter dated 26.5.2006 by falsely creating evidence in
their favour by the respondents.
28. The Company Law Board by restoring the petition sought to
examine the validity and consequences of the letter dated
26.5.2006. In the Company Appeal the counsel for the
respondents sought to withdraw the Company Petition
irrespective of the claim under the letter dated 26.5.2006.
The result is that it is as if having approached the Company
Law Board with a claim for rectification of register the same
stands unilaterally withdrawn by the respondents without
recognition of any rights in the Company.
29. In the course of proceedings in the suit and while hearing
interim applications on 20.9.2007 the Company was
directed to produce the complete records including transfer
deeds signed on behalf of the Society. In pursuance to this
direction original documents have been filed in a sealed
cover/trunk while the respondents have not filed any
documents. Even photocopies were not filed except of one
share. It appears that these plethora of documents filed in
original have escaped the attention of the learned single
Judge while considering the aspect of the documents filed
in support of the case of the plaintiff.
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30. The original documents filed by the appellant and which
were on record before the learned single Judge have been
perused by us. The register of shareholders is available
reflecting the transfer of shares. Similarly, the share
certificates with transfer deeds have also been filed.
Annual returns for some of the relevant years have also
been placed on record. The position as existed in 1989 is
reflective from these original documents by which time the
Society had no share holding left in the Company. The
claim of the respondents is predicated on the Society
owning a part of share holding which is not borne out of the
records. This claim is also falsified by the own stand of the
Society in the proceedings initiated under Section 111 of
the said Act whereby they wanted their names to be
inserted in the register of members of the Company. The
shares have been transferred in pursuance to the transfer
deeds filed. No doubt learned counsel for the respondents
contended that when these documents were sought for
before the Company Law Board, they were not available
and were stated to have been destroyed in fire and only
some of the returns were filed but the fact remains that in
the suit these documents have been filed after locating and
on a perusal of the same appear to be prima facie
authentic. The absence of scrutiny of these documents by
the learned single Judge has resulted in a finding that the
appellant had not supported their case with documents and
thus finding is contrary to record. We may also note that
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the original share certificate relied upon by the respondent
has not seen the light of the day.
31. We find that there is also merit in the plea of the learned
senior counsel for the appellant that the last bit of shares
held by the group of the respondents was transferred as far
back as 1989. The matter was sought to be raked up by
the respondents for the first time in 1997 after eight years
before the Company Law Board and those proceedings also
dragged on and now stands withdrawn. The respondents
have no explanation for their silence over this long period
of time.
32. The details of the manner of transfer of shares right up to
1989 has been fully explained by the appellants along with
documents. Learned counsel for the respondents did seek
to plead that when a direction was passed by the Company
Law Board these documents were not produced and it was
claimed that there had been a fire in the office. Be that as
it may even at that stage it was pleaded by the appellants
that the records were old and whatever they had been able
to lay hands on had been produced. Whatever further
documents have been located have been produced which
substantiate the case of the appellants.
33. The appellants had further pleaded the factum of the
Society having filed a suit before the trial court. The
relevant certified copy in this behalf had been filed and we
have noticed above that we had already called for the
records and deemed it appropriate to examine the same
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especially it is the suit filed inter se the parties. We gave
time to the Society to make submissions in this behalf. The
Civil Suit No.141/1986 was filed by the Society through its
then Secretary against Capital Land Builders Pvt. Ltd. and
others. This was during the lifetime of Chowdhry Brahm
Prakash. The subject matter of this suit for declaration and
permanent injunction was once again the allegation of
properties being transferred of the Company. The Society
claimed ownership of a plot and sought cancellation of a
sale deed dated 18.11.1985 which had been effected in
respect of a plot No.B/45, Satyawati Colony, Ashok Vihar,
Phase-III measuring 300 sq. yds. Summons in the suit and
the application were issued and the Company entered
appearance. The suit was, however, dismissed for non-
prosecution on 17.11.1986. This suit is material for the
purpose that disputes between the persons managing the
Society and the Company had even arisen during the
lifetime of Chowdhry Brahm Prakash and those claims were
abandoned when the suit was dismissed for non-
prosecution.
34. The appellants, in our considered view, have undoubtedly
been able to establish a prima facie case that they are In-
charge of the Company having share holding and the
Society does not figure in the list of shareholders. Once the
Company is controlled by the appellants group, its
functioning cannot be brought to a standstill by the nature
of the impugned order passed whereby both the parties
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have been restrained from dealing with the assets of the
Company. This would amount to throttling the Company
and would cause irreparable prejudice and harm to the
functioning of the Company which is primarily dealing with
the landed estate. The balance of convenience has to be in
favour of the appellants as they have been running the
show for decades and the respondents kept silent from
1989 to 1996 when for the first time they instituted the
petition before the Company Law Board claiming the
exclusion of their shareholding from the register of
members. The original documents filed by the appellants
clearly show that after 1989 there is no shareholding
reflected of the group of the respondents. Without first
getting their rights to be entered into the shareholders
register established the respondents cannot have a say in
the running of the Company.
35. It is trite to say that the said Act is comprehensive enough
to look after the aspects of management of the affairs of a
Company. In case of an allegation of mismanagement the
minority group, if has sufficient members, can always move
the Company Law Board. The Company is a separate legal
entity and it is not as if any shareholder irrespective of its
percentage of shareholding can interfere with the affairs of
the Company. They would, of course, have a right to speak
in a shareholders meeting. The very pre-requisite of being
a shareholder was absent in the case of the Society and
thus as a recourse to their grievance they rightly preferred
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the Company Petition under Section 111 of the said Act
before the Company Law Board. For the reasons best
known to them they abandoned that remedy. During the
pendency of that Petition they surreptitiously tried to steal
a march by manipulating documents and having failed in
the same appeared to have backtracked. Despite their
failure to establish a status in the Company, they sought to
deal with the properties of the Company and in fact, dealt
with the properties and that too contrary to an injunction
order of the court which has given rise to their conviction
for contempt. Even before the Company Court they sought
to represent themselves on behalf of the Company resulting
in a reference of criminal contempt.
36. We are, of course, in agreement with the submission of the
learned counsel for the respondents that there can be no
injunctive relief in such a suit unless triple test of prima
facie case, balance of convenience and irreparable loss and
injury is satisfied. This position is not even disputed by
learned senior counsel for the appellant. The present
proceedings are not in the nature of Sections 397 & 398 of
the said Act where the Company Law Board is enshrined
with the responsibility of protecting the assets of the
Company. The lis is between two groups in the civil suit.
The aforesaid would, thus, imply that once the triple test is
satisfied in the case of the appellants, the appellants would
be entitled to interim relief. The appellants cannot be
restrained during the pendency of the suit in view of the
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discussion aforesaid and the respondents cannot seek
protection of the assets of the Company once prima facie
they are found to have no status in the Company.
37. We are, thus, of the considered view that the impugned
judgement cannot be sustained and we hold that the
appellants have made out a case for interim relief having
satisfied the triple test for grant of interim injunction and no
order can operate against them or in favour of the
respondents. The respondents, their agents and employees
are, thus, restrained from representing themselves as
shareholders or Directors of the said Company and
consequent thereto are restrained from acting on behalf of
the Company by using any letterhead, bank accounts or
dealing with the assets of the Company in any manners
whatsoever and cannot be permitted to file any statutory
forms or returns on behalf of the Company. This injunction
would operate during the pendency of the suit.
38. FAO (OS) No.337/2009 is accordingly allowed with costs of
Rs.25,000.00 while FAO (OS) No.423/2009 is dismissed
leaving the parties to bear their own costs.
39. Needless to say that any observations made in this order is
only prima facie in nature and would not prejudice the final
trial in the suit.
SANJAY KISHAN KAUL, J.
NOVEMBER 06, 2009 AJIT BHARIHOKE, J.
b'nesh
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