Tilak Raj & Anr. vs M/S Gora Mal Hari Ram P. Ltd.
2012 Latest Caselaw 3473 Del

17
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*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CO.PET. 20/1988 & CO. APPLS. 1175/1989, 7502/1989, 7555/1989,
       7595-7596/1989, 7633/1989, 85/1990, 141/1991, 447/1992, 870/1993,
       631/1994, 498/1995, 350/1997, 196/1998 & 1115/2001.

       TILAK RAJ & ANR.                 ..... Petitioners
                     Through:           Mr. C.M. Oberoi, Advocate for
                                        Petitioner No.1
                                        Mr. Ashwani Kumar, Advocate for
                                        Petitioner No.2.
                     versus

       M/S GORA MAL HARI RAM P. LTD.          ..... Respondent
                    Through: Mr. B.K. Sood, Advocate with
                             Mr. Ravi Bhardwaj and Mr. Naveen
                             Dahiya, Advocates.

       %                                Date of Decision: 24th May, 2012

       CORAM:
       HON'BLE MR. JUSTICE MANMOHAN


                              JUDGMENT

MANMOHAN, J (ORAL):

Co. Appl. 887/2012 in Co. Pet. 20/1988

1. Present application has been filed by the applicant-Mr. Prithvi

Manaktala-petitioner No.2 seeking to place on record a copy of the

Revocation Deed dated 19th April, 2012.

2. The facts relevant for the purposes of present application are

that in 1986 applicant-petitioner No.2 and his brother Mr. Tilak Raj,

petitioner no. 1 owned 685 shares each totaling to 1370 shares in the

respondent company-M/s. Gora Mal Hari Ram Private Limited. The

shareholding of both the petitioner No.1 and applicant-petitioner No.2

aggregated to about 40% of the issued and paid up share capital.

3. It is the case of the petitioner No.1 and applicant-petitioner

No.2 that subsequently the respondents arbitrarily reduced their

shareholding by 10% i.e. from 40% to 30.44% of the issued and paid

up share capital.

4. In order to safeguard their rights, petitioner No.1 as well as

applicant-petitioner No.2 filed the present Company Petition in this

Court under Sections 397 and 398 of the Companies Act, 1956,

challenging the issue of further shares. The petitioners also sought

court orders/directions for restoration of the originally agreed parity in

shareholding.

5. Since this petition had been pending for more than twenty-three

years, this Court in May, 2011 requested both Mr. C.M. Oberoi,

learned counsel for petitioners as well as Mr. U.K. Chaudhary, learned

senior counsel and Mr. B.K. Sood, learned counsel for respondent to

explore the possibility of an amicable resolution of the dispute.

6. When both the learned counsel informed this Court that the

matter was nearing settlement, present application was filed by the

applicant-petitioner No.2.

7. In the present application, it was stated that the applicant-

petitioner no. 2 had earlier authorised his elder brother i.e. petitioner

No.1 as General Power of Attorney holder "to pursue the above said

company petition on behalf of the applicant". It was further stated in

the application that the applicant-petitioner No.2 had recently come to

know that petitioner No.1 was acting detrimental to his interest and

was indulging in some kind of negotiation/settlement with the

respondent without disclosing the said terms to the applicant. It was

alleged that it was in these circumstances that applicant-petitioner no.

2 vide Revocation Deed dated 19th April, 2012 had revoked the earlier

General Power of Attorney in favour of petitioner No.1 and his son.

8. The applicant-petitioner no. 2 requested this Court not to take

cognizance of any compromise executed between the parties without

the specific consent of the applicant-petitioner No.2. A prayer was

also made that the applicant-petitioner no. 2 should be allowed to be

represented by another advocate. The relevant portion of the

Revocation Deed dated 19th April, 2012 is reproduced hereinbelow:-

"2. Because of some cogent reasons I now intend to revoke cancel the said General Power of Attorney.

NOW KNOW YE ALL that by this Deed executed at Delhi on this the 18th day of April, 2012 I, Prithvi Manaktala, the Principal above named do hereby cancel the said General Power of Attorney and absolutely and completely revoke also all powers of authorities thereby and thereunder given to the said General Attorney(s), namely Vikas Manaktala son Sh. Tilak Raj and Sh. Tialk Raj son of Late Shri Hari Ram.

I further declare that all or any of the act done or executed by aforesaid Sh. Tilak Raj and Sh. Vikas Manaktala under or in pursuance of the aforesaid General Power of Attorney dated December, 2005, shall not be deemed to be my acts nor done in my name or on my behalf after the execution of the present deed."

9. Petitioner no. 1 in its reply affidavit disclosed that applicant-

petitioner No.2 had executed a Memorandum of Agreement in

December 2005 with petitioner No.1 by virtue of which applicant-

petitioner No. 2 had assigned, transferred and conveyed all shares held

by him in the equity capital of M/s. Gora Mal Hari Ram Ltd. in favour

of petitioner no. 1 for a mutually agreed consideration of ` 25 lacs,

out of which, ` 1,00,000/- had already been paid to the applicant-

petitioner No.2. It was further stated that an irrevocable Power of

Attorney had been executed by the applicant-petitioner No.2 in favour

of petitioner No.1 in respect of exercise of his rights as a shareholder

as also to deal with the applicant-petitioner No. 2's shares including

making of any agreement for disposal of the same. It was pointed out

that applicant-petitioner No.2 had suppressed the execution of Share

Transfer Forms, in furtherance of the aforesaid Memorandum of

Agreement.

10. Petitioner No. 1 in his reply affidavit, also disclosed that

applicant-petitioner No.2 had executed another Memorandum of

Agreement/Settlement in December, 2005 by virtue of which he had

assigned, transferred, conveyed and/or released/relinquished all his

rights and interest in respect of his 1/3rd share in property bearing No.

39, Rama Road, Najafgarh Industrial Area, New Delhi in favour of

petitioner No. 1 for a total consideration of ` 30 lacs. It was

specifically agreed in the said Memorandum of Agreement that in the

event of Settlement being effected in suits pertaining to the said

property, applicant-petitioner No.2 would be bound by whatever

proposal was accepted or acceptable to petitioner No.1.

11. During the course of arguments Mr. Ashwani Kumar, learned

counsel for applicant-petitioner No. 2 submitted that the alleged

Memorandums of Agreement referred to and relied upon by the

petitioner No. 1 were void on the ground of uncertainty. According to

him, as quantum of shares had not been specified, the object of

Memorandum of Agreement was uncertain. In this connection, he

relied upon Section 29 of the Indian Contract Act, 1872 which reads

as under:-

"29. Agreement void for uncertainty - Agreements, the meaning of which is not certain, or capable of being made certain, are void.

12. Mr. Ashwani Kumar further submitted that as the

Memorandum of Agreement and Power of Attorney had been

revoked/cancelled prior to said documents being fully

performed/implemented, this Court should not permit the petitioner

No. 1 to execute any settlement with the respondent.

13. On the other hand, Mr. C.M. Oberoi, learned counsel for

petitioner no. 1 reiterated the contentions and submissions set out in

petitioner No. 1's reply-affidavit. He specifically denied that the

Memorandum of Agreement was vitiated on the ground of

uncertainty.

14. Mr. Oberoi also submitted that as the Memorandum of

Agreement and Power of Attorney had been executed for a valuable

consideration, said documents could not be revoked. According to

him, the only right which survived with the applicant-petitioner No. 2

as of today was to receive the balance consideration mentioned in the

aforesaid two Memorandums of Agreement. To prove the bona fides

of petitioner No. 1, Mr. Oberoi produced in Court two pay orders

details of which are as under:-

             Pay Order No. and             Drawn on            Amount
             dated

062691 dated 05.05.2012 Indian Bank, Service Rs. 24,00,000.-

Branch, Delhi 062690 dated 05.05.2012 Indian Bank, Service Rs. 29,00,000.-

Branch, Delhi

15. Mr. B.K. Sood, learned counsel for respondents emphatically

denied the applicant-petitioner No.2's allegation that the matter was

being compromised behind his back. In this connection, he handed

over in Court a letter dated 28th May, 2011 written by the applicant-

petitioner No.2 to one of the respondents. The said letter is

reproduced hereinbelow:-

"28th May 2011.

Dear Vinod ji, It was a matter of somewhat relief to know that court has given time to all the parties for an amicable settlement.

During the period 1974-76, myself, Shri Tilak Raj and your late father Shri Satya Pal had arrived at an oral family settlement, under which the Soap business was to be enjoyed exclusively by late Shri Satya Pal and import business by both of us jointly. It was unfortunate that some provision of the settlement were met while others remained unmet, because of which undesired litigation got started amongst brothers. The start of litigation was extremely unfortunate.

With the passage of time, lot of perceptions have undergone change, some of the persons who made the commitments and some under whose guidance the commitments were made are no longer present in this World. Still we should all strive for an implementation of the old settlement. I will assure that I have a very open mind, and will make sincere efforts in convincing Mr. Tilak Raj to arrive at a consensus.

We must start the process of discussions either direct or through mediators, and try to resolve the matter within the time allowed by court.

Looking forward to hear from you.

Kind Regards,

Sd/-

Prithvi Manaktala"

(emphasis supplied)

16. Having heard the parties at length, this Court is of the view that

the applicant-petitioner No.2 in his application has not only mis-

represented, but also suppressed facts. The applicant-petitioner No.2

did not disclose in his application that he had executed two

Memorandum of Agreements in December, 2005.

17. The relevant covenants of the Memorandum of Agreement

executed between the petitioner No.1 and applicant-petitioner No.2

with regard to his shares and rights in the respondent company are

reproduced hereinbelow:-

"1. PM has offered and agreed to assign, transfer and convey all the Shares presently held by him in the Equity Capital of Gora Mal Hari Ram Ltd. together with all his rights pertaining to his entitlement to the share holding to the extent of 40% of the issued and paid up Equity Capital and/or all additional Shares that may be determined as PM's entitlement consequent upon any decision that may be made in CP No. 20 of 1988 in favour of TR for a total consideration of Rs. 25 lakhs (Rupees Twenty lakhs only) out of which Rs. 1 lakhs (Rupees One lakh only) has been received as part payment and the balance to be paid within three months from the date of final decision of the said Company Petition.

2. It is agreed that whatever further Shares are issued by the Company to the existing Share Holders including TR from the date of execution of this

Agreement till the completion of the transaction in terms of Clause (1) herein above, the same shall also be the property of TR subject, however, to TR effecting payment of whatever amounts may be payable in respect of such issue of Shares. Any Bonus Shares issued to said period shall belong to TR without involving any payments.

3. PM has also offered and agreed that he shall not enter into any transaction for sale, pledge or otherwise in relation to the said Shares or any further issue and confirm that he has not so far entered into any Agreement or Arrangement concerning the same and that he has full and absolute right to assign and transfer the said Shares.

4. Further in pursuance of the of the undertakings Satya Pal and his three sons were to hold shares to the extent of about 60% and TR and PM to the extent of 40%.........

5. PM has also agreed to provide an irrevocable Power of Attorney to TR in respect of exercise of the rights as a Share Holder as also to deal with the shares including making of Agreement for disposal of the same. Parties agree and recognise that the said holding of Shares in the Family Company is of special value and significance.

6. PM has also agreed to execute and register Deeds of Transfer of Shares as and when desired by TR and in any case at any time during the three months period after the decision of CP No. 20 of 1988 pending in the High Court of Delhi."

xxxx xxxx xxxx xxxx

8. In the event of PM failing to adhere to the understanding/Agreement hereby recorded, in addition to TR's rights to claim Specific Performance and other Specific Relief in respect of the same without prejudice thereto, TR shall have the right and the option to claim payment of losses and expenses, that may have been incurred/suffered and refund of payments made under this Agreement with interest at 18% p.a. compounded quarterly."

(emphasis supplied)

18. The relevant covenants of the Memorandum of Agreement/

Settlement executed with regard to property 39, Rama Road,

Najafgarh Industrial Area, New Delhi, are reproduced hereinbelow:-

"1. (a) In consideration of settlement of various matters regarding their business relationships and interests in said Property at 39, Rama Road, Najafgarh Road Industrial Area, New Delhi and the payments hereinafter specified PM has agreed to assign, transfer and convey and/or release and relinquish all his rights and interests in respect of his 1/3rd Share in the said Property No. 39, Rama Road, Najafgarh Road Industrial Area, New Delhi in favour of TR and/or his nominee(s).

b) TR has agreed to pay to PM a sum of Rs. 30 Lakhs (Rupees Thirty Lakhs Only) in the following manner:-

i) Rs. 1,00,000/- (Rupees One Lakh Only) at the time of execution of this Memorandum as part payment.

ii) The balance amount of Rs. 29,00,000/-

(Rupees Twenty nine Lakhs only) to be paid within three months from the date of ultimate decision of Suit No. 2850 of 1987 pending in the High Court of Delhi subject however, to an option of TR to make such balance payment at any earlier point of time against an appropriate receipt and execution of such Deed(s) and document(s) as shall be considered by TR as necessary, appropriate and adequate and required for completion of the transaction.

2. It is also understood that PM shall continue to pursue and defend his rights to the extent of 1/3 rd Share in the said property in the pending Suit No. 2850 of 1987 and take all necessary steps at all stages including any appeals or Revisions as may become necessary for ensuring that his rights which have been agreed to be assigned are not adversely affected.

3. PM has represented to and assured TR that he has not entered into any Agreement/Understanding/ Arrangement concerning his 1/3rd rights and interests in the said Property with any other person or persons and has assured and undertaken not to do so at any time hereafter. This Agreement shall not be revoked by PM at any time, For ensuring its due implementation PM has offered to grant an irrevocable General Power of Attorney in favour of TR and/or his Nominee(s).

4. PM has agreed to provide to TR or his nominee or nominees an irrevocable General Power of Attorney in a form and with the consents as have been mutually agreed and get the same Registered

with concerned Registrar/ Sub-Registrar of Assurances.

xxxx xxxx xxxx xxxx

6. It is understood and agreed that in respect of any Settlement Proposal pertaining to Compromise or Settlement of the subject matter of Suit No. 2850 of 1987 or Suit No. 2530 of 1995 TR shall be entitled to take a decision and any decision so taken shall be accepted by PM and PM hereby expressly consents to TR being authorised and empowered to agree upon any Compromise or Settlement on the subject matter of the Suit including PM's 1/3 rd interest in the said Property No. 39, Rama Road, Najafgarh Road Industrial Area, New Delhi."

(emphasis supplied)

19. The applicant-petitioner No.2 also suppressed the fact that the

Power of Attorney executed by him was irrevocable.

20. Moreover, this Court on a perusal of both the Memorandum of

Agreements/Settlement is of the view that the irrevocable Power of

Attorney was a part of a Scheme of Arrangement executed by

applicant-petitioner No. 2 by virtue of which he divested himself of all

rights in relation to the respondent company including those relating

to its shares and the property at 39, Rama Road, Najafgarh Industrial

Area, New Delhi for valuable consideration.

21. In fact, on a composite reading of the two Memorandums of

Agreement, this Court is of the view that only right which survives in

favour of the applicant-petitioner No.2 is to receive the balance

consideration of Rs. 24 lacs under the Memorandum of Agreement

with regard to the shares as well as Rs. 29 lacs under the

Memorandum of Agreement/Settlement with regard to property at 39,

Rama Road, Najafgarh Industrial Area, New Delhi.

22. This Court is also of the opinion that the Memorandum of

Agreement qua the shares of the respondent company is certain. In

fact, the said Memorandum of Agreement clearly stipulates that the

applicant-petitioner No. 2 has assigned, transferred and conveyed all

the shares held by him in the equity capital of respondent company in

favour of petitioner No. 1.

23. A perusal of the aforesaid Memorandum of Agreement itself

reveals that there is no uncertainty of transfer of 685 shares held at the

time of institution of the present petition by the applicant-petitioner

No. 2. Also the said Memorandum of Agreement incorporates a

mechanism through which the exact quantum of shares of the

applicant-petitioner No. 2 can be arrived at, namely, a Court's

decision. In the opinion of this Court, the present Memorandum of

Agreement is quite similar to Illustration e of Section 29 of the

Contract Act, 1872, which reads as under:-

"e) A agrees to sell to B "one thousand maunds of rice at a price to be fixed by C". As the price is capable of being made certain, there is no uncertainty here to make the agreement void."

24. Consequently, this Court is of the view that the said

Memorandum of Agreement cannot be said to be vitiated on the

ground of uncertainty.

25. This Court is further of the view that in the facts of the present

case and by virtue of Section 202 of the Indian Contract Act, 1872,

the applicant-petitioner No.2 has no right to terminate/revoke the

Power of Attorney. Section 202 of the Indian Contract Act, 1872 is

reproduced hereinbelow:-

"202. Termination of agency, where agent has an interest in subject-matter.--Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest."

26. Moreover, as the Power of Attorney is an irrevocable one for

valuable consideration, the same could not have been revoked

unilaterally by the applicant-petitioner No.2, as has been done in the

present case. Chitty on Contracts under the heading of "Irrevocable

authority" has observed as under:-

"Irrevocable authority. Though an agent's authority is, as stated above, normally revocable at will (without prejudice to his right, if any, to damages for breach of contract) there are some cases where this is not so. If there is an interest coupled with the authority, that is, if an agreement is entered into by deed or on a sufficient consideration, whereby an authority is given for the purpose of providing a security, such an authority is irrevocable, even by death, mental disorder or bankruptcy......"

(emphasis supplied)

27. In view of the aforesaid conclusion, this Court is of the view

that the Revocation Deed dated 19th April, 2012 cannot be taken on

record.

28. Accordingly, the present application is dismissed with costs of

Rs. 25,000/- to be paid to petitioner No.1.

Co.Pet. 20/1988 & Co. Appls. 1175/1989, 7502/1989, 7555/1989, 7595-7596/1989, 7633/1989, 85/1990, 141/1991, 447/1992, 870/1993, 631/1994, 498/1995, 350/1997, 196/1998 & 1115/2001.

List on 31st May, 2012.

MANMOHAN, J.

MAY 24, 2012/js-rn