Present: 1.
Shri S. Balasubramanian, Vice-Chairman.
2. Shri K.K.Balu, Member.
IN THE MATTER OF COMPANIES ACT, 1956 (1 OF 1956)
AND
IN THE MATTER OF M/S PEREIRA
& ROCHE PRIVATE LIMITED
PETITIONERS:
1. Sanjeev Joy
2. Yeshwant Joy (Minor)
3. Leoni Jayakantha Joy, alias Kantha Joy
4. J.J. Joy
RESPONDENTS:
1. Pereira & Roche Private Limited
2. Bonaventure Roche
3. Hilwiah Roche
4. Ms. Prema Roche
5. Samsudeen
6. S. Velayuthan
7. Ms. Kasturi Muthukrishnan
PRESENT ON BEHALF OF PARTIES:
1. Ms. Chitra Narayan, Advocate …for Petitioners.
2. Shri R.Venkataraman, Advocate …for 3rd
Respondent.
3. Shri V. Venkadasalam, Advocate …for 1st, 2nd,
4th and 5th
Respondents.
4. Shri R. Murari, Advocate …for 6th & 7th
Respondents.
O R D E R
(DATE OF FINAL HEARING: 14.03.2002)
K.K.
BALU:
1.
The petitioners constituting
more than one-tenth of the total members of M/s Pereira & Roche Private
Limited (“the Company”) as well as holding more than 10 per cent of the issued
shares have filed this petition under Section 397/398 of the Companies Act,
1956 (“the Act”) alleging acts of oppression and mismanagement in the affairs
of the Company.
2.
The main acts of oppression
and mismanagement relate to non-holding of the board meetings, annual general
meetings and non-adoption of accounts of the Company inclusive of the Madras
branch transactions for several years, non-transmission of the shares in favour
of the petitioners, exclusion of the petitioners 3 & 4 from the affairs of
the Company, diversion of the business of the Company to the detriment of the
members and mismanagement of the funds of the Company.
3.
Ms. Chitra Narayan, Advocate
appearing for the petitioners, while initiating her arguments has submitted that
the Company was incorporated in July, 1954 with the main object to do business
in India of Steamer Agents and obtained the agency of the Shipping Corporation
of India. The authorized share capital
of the Company is Rs.2 lakhs divided into 200 ordinary shares of Rs.1,000/-
each. The issued, subscribed and
paid-up share capital is Rs.75,000/- divided into 75 equity shares. The petitioners 3 & 4 being directors
are the wife and husband and the petitioners 1 & 2 are their children. The petitioners together are holding 35
shares. The second respondent is the
husband of the third respondent and uncle of the third petitioner holding 20
shares. The fourth respondent is the
sister of third petitioner holding 10 shares in the Company. The fifth respondent is the internal auditor
of the Company. The sixth and seventh
respondents are managing the affairs of the Madras Office of the Company. The second respondent has been the Managing
Director since April, 1992. The third
respondent is also director since April, 1992.
According to the petitioners, the second respondent has been grossly
mismanaging the affairs of the Company since 1992. No board meetings have been convened and annual general meetings
have not been held since 1992. The
Company has not adopted the annual accounts inclusive of its Madras Office
within the statutory period. The second
respondent failed to transmit ten shares bequeathed in favour of the third
petitioner and fourth respondent by their mother and also failed to transmit 25
shares bequeathed in favour of the petitioners 1 & 2 by their grand father
on the ground that 35 additional shares must be allotted in his favour, forcing
the petitioners 1 & 2 to file a petition under Section 111 in CP No.11/2000
against the Company to transmit 25 shares, stated ante, in their favour which
was allowed by the CLB, subject to the outcome of the probate revocation
proceedings in CP 1/2001 pending before the Civil Court at Tuticorin. The second respondent being the uncle has
always been having dominance over the third petitioner. The second respondent in connivance with the
fifth and sixth respondents have been mismanaging the Company and diverting its
business through a partnership firm ostensibly created in Madras since the year
1994. The respondents never divulged
the nature of the transactions of the Madras branch. The accounts pertaining to Madras branch have never been included
in the accounts of the Company. The
Company has passed the accounts for the past six years availing the Company Law
Settlement Scheme without inclusion of the branch transactions in spite of the
opposition by the petitioners 3 & 4. It transpired that the Madras branch
was maintaining a second bank account with Bank of Baroda, viz. Current A/c
No.54277. However, no details were made
available in respect of this account.
The petitioners estimate that a sum of Rs.22 lakhs is available in the
aforesaid account. The respondents have
been drawing enormously and spending lavishly at the expenses of the
Company. Ms. Chitra Narayan pointed out
that the respondents 2, 5 & 6 have influenced the third petitioner in
signing the partnership agreement in the year 1994 in an attempt to convert the
operations of the Madras branch into a separate partnership firm. According to her, the partnership
transaction is a surreptitious transaction with an attempt to regularize the
accounts of the Madras branch.
According to her, the partnership deed has been back dated by five years
and all the business held and adopted by the Madras branch office have been
effectively transferred to the firm.
The turn over and profits of the Company have been in fact further
transferred to the partnership firm.
Consequently, the profits and turn over of the Company all these years
had been unilaterally given to the firm, thereby the Company has suffered
losses and the respondents are liable to account for the diversion of business
and make good the losses caused to the Company on account of these
transactions. At present, the Madras
office has been closed down and the sixth respondent has taken away all the
assets and records of the partnership with him. The sixth respondent has also taken away certain clients of the
Company, thereby the Company has been put to losses. In the circumstances, the petitioners have sought for the reliefs
made in the petition.
4.
Shri V.Venkadasalam, Counsel
appearing for the 1st, 2nd, 4th and 5th
respondents, while denying the allegations of oppression and mismanagement in
the affairs of the Company, pointed out that the petitioners 3 & 4 being
the whole-time directors are equally responsible for the management and
day-to-day affairs of the Company. The
third petitioner is solely in-charge of the accounts of the Company. The petitioners 3 & 4 are responsible
for statutory compliance. The second
respondent is in-charge of the field operations of the Company and decisions
are taken in consultation of the third petitioner. Shri Venkadasalam further pointed out that board meetings were
regularly held in accordance with the Act. Even otherwise the petitioners 3 & 4 being the directors are
always at liberty to convene board meetings.
The respondents 5 & 6 have no dominant role in the affairs of the
Company. The fifth respondent is an
internal auditor of the Company and his role is only auditing the
accounts. The sixth respondent is
neither a shareholder nor a director of the Company. The fifth respondent has already resigned from the post of
internal auditor of the Company. In the
circumstances, these respondents have no opportunity to intervene in the
affairs of the Company and indulge in the acts of oppression and
mismanagement. According to Shri
Venkadasalam, the petitioners 3 & 4 had visited the office of partnership a
number of times and collected all the details relating to the firm. They have also taken all the books of
accounts and they are at present under the custody of the third
petitioner. The accounts of the firm
cannot be included in the company’s accounts.
The Company has no branch office.
He further pointed out that the third petitioner left the board meeting
held on 4.10.2000 abruptly and the accounts were passed by the remaining
majority of the directors. According to
Mr. Venkadasalam, the third petitioner was not co-operating with the second
respondent in finalizing the accounts of the company. With great difficulty the accounts were finalized in March, 2000
and the entire accounts were filed with the Registrar of Companies, pursuant to
the Company Law Settlement Scheme. Once the accounts have been approved and the
AGMs are held and the accounts are filed with the Registrar of Companies, the
petitioners have no right to challenge the same, especially when the majority
of the directors and shareholders have approved the accounts. He further pointed out that the business of
the partnership is different from the business of the Company and hence the
petitioner cannot seek to club the partnership with the Company. Moreover the partnership deed provides for
arbitration in case of any dispute among the partners. The sixth respondent has already invoked the
arbitration clause in which case, the petitioners cannot make any claim in
regard to the partnership before the CLB. Shri Venkadasalam while concluding
his submissions expressed the willingness of the second respondent to buy the
shares of the petitioners for a sum of Rs.10,00,000/-, taking into account the
value of the assets of the Company, receivables due to the Company and the
outstanding liability payable by the Company.
In the alternative, if the petitioners are willing to buy the shares of
the second respondent, the petitioners will have to pay Rs.10,00,000/- in which
case, the second respondent will not be liable on account of any claim which
may be made by the Shipping Corporation of India against the Company.
5.
Shri R.Murari, Advocate
appearing for the respondents 6 & 7 submitted that they are neither
shareholders nor directors in the Company.
These respondents need not be a party to the proceedings and no relief
can be claimed against them under Section 397/398. These respondents never interfered with the affairs of the
Company. He pointed out that the
partnership commenced in the year 1994 was being carried on by the sixth
respondent as Managing Partner. He
denied the huge expenses said to have been incurred on account of gifts and
telephone by these respondents. The operations at Madras are of the partnership
and not of the Madras branch of the Company.
The accounts of the partnership cannot be included in the accounts of
the Company and hence the Company never adopted the accounts of the partnership
along with the Company. Moreover, the
accounts of the partnership were under the control of the Company and all the
major payments are made by the firm with the consent and knowledge of the
partners. The petitioners were aware of
the transactions of the partnership and drew monies from the partnership firm
and utilized the services rendered by the firm. The entire books of accounts are lying with the third
petitioner. She has not finalized the
accounts on account of which the partners could not settle their dues. He further pointed out that the partnership
firm was closed with effect from 31.3.99 on account of the differences among
the partners. The partnership deed
envisages settlement of the disputes among the partners by way of
arbitration. The sixth respondent has
already invoked the arbitration clause and hence the allegations relating to
affairs of the firm cannot be entertained before the CLB. He further pointed out that the current
account No.54277 of the Bank of Baroda is the account of the partnership which
has been maintained in the name of the first respondent in view of the fact
that the Customs CHA License was in the name of the Company. The monthly statement relating to this account
were used to be sent to the first respondent.
The third petitioner who was monitoring the partnership received the
bank statement and aware of the affairs of the partnership. In the circumstances, he urged for dismissal
of the petition.
6.
We have considered the
pleadings and arguments of counsel for the petitioners as well as
respondents. The main dispute relates
to the clearing and forwarding business carried on at Madras, which according
to the petitioners, form part of the business of the Company, but as per
version of the respondents, relate to the business of a partnership firm formed
by the Company and the respondents 6 & 7.
It is observed from the available records that the Company has been
carrying on the business of clearing and forwarding agents holding the
requisite license at Tuticorin for the past several years. While so, the Company, the respondents 6
& 7 had entered into a deed of partnership dated 1.4.1994 to carry on the
business of clearing and forwarding in the name and style of M/s Pereira &
Roche and Co. The capital of the firm
was to be contributed by the Company and respondents 6 & 7 in the following
manner:-
The Company - Rs.50,000/-
Respondent No.6 - Rs.1,00,000/-
Respondent No.7 - Rs.1,00,000/-
Clause 7 of
the Partnership Deed shows that the Company shall extend its CHA license to
Madras Customs House for the business of clearing and forwarding operation of
the partnership firm. Contracts and
tenders should be participated in the name of the Company on behalf of the partnership
firm and should be executed in the name of the Company by raising bills,
vouchers etc. receiving payments by cheques, drafts, cash statements and TDS
certificate in the name of the Company and opening of bank account and
operating the same in the name of the Company.
All the transactions should be in the name of the Company “on account”
in the clearing and forwarding business at Madras of the partnership firm. The profit and loss arising there from on
this account should go to the partnership firm. The profit or loss should be shared among the partners at ratio
of 33-1/3% each. The sixth respondent
would be managing partner, who was authorized to sign all documents and
contracts on behalf of the firm on account of M/s Pereira & Roche Private
Limited. It is specifically stipulated
by Clause 12 of the Partnership Deed that bank accounts should be opened in the
name of the Company on behalf of the firm and should be operated by one of the
partners. Clause 13(a) of the
Partnership Deed provides that the turn over and profit and loss arising in the
transactions at Madras shall belong to the partnership firm. It is specifically stipulated that the
Company is authorized to use its license to carry on the clearing and
forwarding business at Madras for and behalf of the partnership firm and
empowered to apply for tenders, contracts and also sign the tender applications
and enter into necessary agreements on behalf of the partnership. The partnership deed has been signed by the
third petitioner and second respondent on behalf of the Company. Even though, Counsel for the third
petitioner meekly submitted that the said deed of partnership dated 1.4.1994
came to be executed at a later point of time, the letter dated 5.4.1999 written
by the third petitioner to the second respondent, page 246 of the petition
shows that the parties have been running the Madras partnership for the last
four years. The correspondence exchanged between the respondents 3, 6 & 7
produced by the respondents at page nos. 1 to 12 (Index of Documents) establish
the fact of carrying on the clearing and forwarding business by the partnership
in the name of the Company at Madras.
The letter of December, 2000 sent by the second respondent (Page 12 of
Index of documents produced by the respondents) to one of the constituents of
the Company shows that with effect from April, 1999, the Company is not
carrying out any clearing and forwarding work in Chennai. It further shows that the sixth respondent
is continuing the business independently in Chennai. Admittedly, the partnership business has been closed down from 1st
April, 1999. When the third petitioner
herself has signed the partnership deed on behalf of the Company, she is
estopped from questioning the factum of the Madras business being carried on by
the partnership. If so, in a company
petition, the affairs of an independent firm cannot be looked into to find out
whether there is mismanagement in that firm.
Further, Clause 14 of the partnership deed provides that in the event of
any partner not agreeing to any decision of the majority of the partnership in
respect of any dispute, the same shall be referred to the arbitrators and whose
decision shall be final binding on all the partners. It is also on record that the sixth respondent has already
invoked this arbitration clause. The
second account i.e. Current Account No.54277 of the Bank of Baroda is the
account maintained by the partnership, which is in the knowledge of the third
petitioner, as borne by the letter dated 5.4.99 (Page 246 of the petition), the
relevant portion of which runs as follows:
…… “Why did Mr. Samsudeen allow this second Bank account
to be opened in the name of M/s Pereira & Roche?”
The plea of non-holding of the board meetings, annual
general meetings and non-adoption of accounts of the Company must fail in view
of the fact that the Company has adopted the accounts for the years commencing
from 1995 till 2000 in various annual general meetings, attended but opposed by
the petitioners and that the copies of the accounts have been submitted before
the Registrar of Companies. In regard
to the plea of non-transmissions of 25 shares in the name of the petitioners 1
& 2, this Bench has already by its order dated 10.12.2001 ordered the
Company in CP No.11/111/2000 and CP No.1/2001 to transfer 25 shares in favour
of the petitioners 1 & 2 subject to the outcome of the probate revocation
proceedings pending before the Civil Court at Tuticorin initiated by the third
respondent. In so far as the
non-transmission of 10 shares in favour of Petitioner No.3 and Respondent No.4,
it is observed that Mrs. Mercy Roche, since deceased, had bequeathed 10 shares
of the Company in their favour, being daughters and the Company had refused to
transmit the said shares in their favour on the ground that they should produce
probate of the Will. Admittedly, the
shares are held by the family members of Roche. There has been no counter claim for these shares since the demise
of Mercy Roche. It is also observed
that the Company had on earlier occasion effected transmission of the shares of
the deceased mother of the Managing Director without the formality of
probate. In the circumstances, the
Company will transmit 10 shares of Mercy Roche in favour of the petitioner No.3
and respondent No.3 in terms of the Will executed by the former. In regard to the other reliefs claimed in
the petition, it is observed that the Company is not now carrying on any
business. The petitioners have not
established any act of mismanagement in the affairs of the Company. In the circumstances, admittedly, the
parties are not getting on well in pursuing the objects of the Company. In the circumstances, it is desirable that
the petitioners go out of the Company by selling their holdings to the
respondents. In this connection, the
second respondent has already made an offer in writing that he is willing to
buy shares of the petitioners for a total sum of Rs.10 lakhs taking into
account the value of the assets of the Company, receivables due to the Company
and outstanding liability payable by the Company. In the alternative, if the petitioners are willing to buy the
shares of the second respondent, the petitioners will have to pay Rs.10 lakhs
in which case the second respondent should be discharged from all the liabilities
of the Company. Therefore, the
petitioners are at liberty to choose either of the two options. In case they wish to sell their shares to
the second respondent for a total consideration of Rs.10 lakhs, the same will
be binding on the respondents. In case,
the petitioners chose this option, they should exercise their option in writing
within a month from the date of this order by sending a notice to the Company
and the second respondent should arrange to purchase these shares within three
months thereafter. As and when the
consideration is paid, the petitioners should execute blank transfer forms and
hand them over to the second respondent with the original share
certificates. In case, they choose the
2nd option, they should pay Rs.10 lakhs to the 2nd
respondent within 3 months of exercising the option and release him of all
liabilities of the Company.
7.
With the above directions, we
dispose of this petition, however, without any order as to cost.
(K.K. BALU) (S.
BALASUBRAMANIAN)
Dated this the 23rd day of May, 2002