BEFORE THE COMPANY LAW BOARD
PRINCIPAL BENCH
NEW DELHI
Dated  28th August, 2002
C.P. No. 56 0f 2001
 
                 Present: 1. Justice A.K. Banerji, Chairman
2. Shri S. Balasubramanian, Vice Chairman
 
In the matter of Companies Act, 1956- Sections 111/397/98
And
In the matter of Shyamall Dey & Ors.
Versus
Homco Engineering Works Pvt. Ltd. & Ors.
 
PETITIONERS:
1.     Mrs. Shyamali Dey
2.     Mrs. Nilima Basu
3.     Mrs. Sanghamitra Bose
4.     Mrs. Keya Mitra
5.     Shri Biresh Dey
6.     Ms. Gargee Haldar
7.     Shri Ananda Dey
8.     Shri Indra Nath Dey
9.     Shri Saumendra Nath Dey
10. Mrs. Sikha Dey
11. Shri Gaurab Raj Dey
 
RESPONDENTS:
1.     Homco Engineering Works (Pvt.) Ltd.
2.     Shri Raghunath Dey
3.     Shri Partha Sarathi Dey
4.     Shri Anirban Dey
5.     Mrs. Debjani Dey
6.     Shri Adinath Dey
7.     Shri Aniruddha Ghosh
8.     Shri Santimoy Mishra
9.     Shri Debaprosad Dey
10. Shri Sanat Kumar Dey
11. Nalini Krishna Sen
Present on behalf of the parties:
1. Shri S.N. Mookherjee, Advocate                   .. for petitioners
2. Shri Ratnanko Banerji, Advocate                   .. for petitioners
3. Ms. Reema B. Chatterjee, Advocate               .. for petitioners
4. Shri Himadri Chakraborty, Advocate    .. for respondents
5. Shri Anil B. Divan, Sr. Advocate                   .. for respondents
6. Shri Sanjiv Sen, Advocate                    .. for respondents
7. Shri U.P. Mathur, Advocate                          .. for respondents
8. Shri D.D. Pande, Advocate                           .. for respondents
 
O R D E R
(Date of final hearing: 26.7.2002)
 
S. BALASUBRAMANIAN:
 
1.     In this petition filed under Sections 397/398 of the Companies Act, 1956 ( the Act) alleging acts of oppression and mismanagement in the affairs of M/S Homco Engineering Works Pvt. Ltd. ( the company), the main allegation is that  by issue and allotment of further shares and cornering the shares of other shareholders by transfer, the respondents have converted the majority holding of the petitioners into a minority. 
2.     The facts of the case are that one late Atindra Nath Dey started a company in the name of Howrah Motor company Ltd in 1939. He had four sons. The 1st respondent company was incorporated in 1946 having the majority shareholders among the descendants of late Atindra Nath Dey. All the petitioners and respondents 2 to 6 and 9 are  descendants of late Atindranath Dey. The company has properties in Siliguri and Calcutta. According to the petitioners, their group had an effective control over 45% shares in the company in 1997 while the respondents group controlled 34%, the balance 21% being ineffective due to the death of the original shareholders.  The company had issued and allotted 2285 shares in a Board Meeting held on 5th March, 1998.  In addition, there had been certain transfer of shares in favour of the respondents’ group.  The petitioners have challenged the allotment and the acquisition by transfer on the ground of the same being in violation of the provisions of the Articles and was done only with a view to create a new majority.
3.     Shri Mookherjee, Advocate appearing for the petitioners submitted: The company is a family company consisting of the descendents of Shri Atindera Nath Dey who was the promoter of Howrah Motors. One of his sons, Shri Sunil Dey started a proprietorship which was taken over by the company as is evident from Annexure P-36.  The father of the 1st petitioner being another son of Late Atindera Nath Dey was one of the signatories to the Memorandum. Most of the shareholders of the company were/are the descendants of late AN Dey and the admitted position is that the petitioners’ group was in the majority in the year 1997. However, with the view to reduce the majority of  the petitioners, the respondents group consisting of respondents 2 to 6  had issued and allotted 2285  shares on 5.3.98 to their group without offering any shares to the petitioners’ group. This issue and allotment was also in violation of Article 18 according to which shares are to be allotted on a proportionate basis to al the existing shareholders. Even though the respondents contend that the Article 18 has been omitted and that now the issue and allotment of shares is governed by Articles 7 to 10 of  the Amended Articles of Association, yet, a reading of Article 10 would indicate that at least some shares should be offered to the existing shareholders, if not on a proportionate basis.  No shares were offered to any of the petitioners. Since Article 20 of the new Articles clearly restricts the free right to transfer, it is apparent that the object is to keep the company as a closely held company. Originally, only the petitioners’ group had representation on the Board when the company was managed by Managing Agents. After abolition of the Managing Agency system, all the branches were represented on the Board. As on 29/7/97, as per the the shareholding position admittedly as per Annexure R 17 was that  the petitioners held the majority. On 5/3/98, the Board had allotted 2885 shares without any offer to the petitioners. Further, as per Article 10, the Board is to decide as to whom and  how many shares are to be offered to each. There is nothing on record to show that any such decision was taken in a Board meeting.  Without such a decision, no shares could have been issued and allotted as done by the company.  On 30.3.98, the 2nd  petitioner wrote to the company, expressing her grievance of not having been offered any shares and expressing her desire to subscribe to her and her group proportionate entitlement but no reply was received by her (Annexure P-3).  However, the petitioners did not pursue this matter in as much as some settlement talks were going on. Further, the very fact that the total amount collected by issue of shares is only Rs.2.86 lacs, the purpose of allotment could not be considered to be  for mobilizing funds for the company. The purpose of allotment being for creation of new majority is obvious from the fact that of 1921 shares allotted to Sachi Nath Dey on 5.3.98, the respondents got sustantial shares transferred to the 5th respondents on 31.3.99, i.e. a day after the 2nd petitioner had written a letter dated 30.3.1998 expressing her desire to subscribe to the shares.  If the purpose had not been to create a new majority, instead of getting sustantial shares  transferred to the 5th  respondent, these shares could have been given to the petitioners especially since, according to the company, offers were made on proportionate basis to all the shareholders.  If the claim of the respondents that 1921 shares were allotted to only on the ground that late Sachi Nath had given a guarantee on behalf of the company is correct, then, there is no need for him to have transferred the shares within a period of 3 weeks. Perhaps, the transfer itself is anti dated as the list of shareholders as on 31st March, 1998 as at Annexure P-4 does not disclose the transfer and the shares are continued  to be shown in the name of late Sachi Nath.  All these facts would reveal that the purpose of issue and allotment of shares was with a view to reduce the petitioners into minority and to create majority in favour of the 2nd respondent and his group and as such either this allotment should be cancelled..
4.     The  learned counsel further submitted:  The 2nd respondent is also guilty of getting a number of shares transferred in favour of his group  from other shareholders.   Shri Sachi  Nath Dey held 2160 shares in the company.  He died on 24th June, 1998.  It transpires that the 2nd respondent had got substantial number of shares held by late Shri Sachi  Nath Dey, to himself even though the original share certificates in respect of all the shares are reportedly with the wife of the deceased.  This transfer appears to have been effected without the approval of the Board and without the consent of the legal heirs of late Shri Sachi  Nath Dey. The petitioners have also come to know from a letter written by the company to the Registrar of Companies (Annexure P-6) that 1580 shares held by 8 shareholders had been transferred in favour of the 5th respondent on 16th March, 2001.  As per this letter, 11 shares held by one Shri Santosh Kumar Dey had also been transferred on 16th March, 2001 while the fact is that the said person had died 15 years back.  The acquisition of 1580 shares had been done surreptitiously, illegally and with the malafide motive of ousting the petitioners and their group from management and control of the company and as such should be declared as null and void.
5.     He further submitted: The respondents have also been guilty of diversion of the funds of the company. The company has given substantial amount of loans to one M/s Atindra Private Ltd in which the respondents 3 and 4 are directors. The company has not taken any steps to recover the amount, even though the respondents contend that the company needed funds and resorted to raising share capital by issue of further themselves. Further, the respondents 2 to 7 have been stripping the company of all its assets in spite of the injunction order passed by this Bench on 24.9.2001.  Most of the machineries have been disposed of and the company has ceased to function.  The respondents are trying to dispose of the landed properties of the company at Siliguri and Calcutta.  Even though in the Board Meeting held on 31st March, 1998, the Board decided to develop Siliguri land, yet,  in the reply to the petition at Page 61, the respondents have proposed sale of the immovable property of the company.  If at all this property is to be sold, it should be for a proper consideration.  The value of this land has been assessed at Rs.2.89 crores and the petitioners have a firm offer for Rs.2 crores.  Therefore, the respondents should be directed that if at all this property is to be sold, it should not be less than for Rs.2 crores. Even though, this land is under tenancy with Howrah  Motors, this tenancy could be released as Howrah  Motors also a family company and is no longer doing any business.
6.     Summing up his argument, Shri Mookherjee submitted that the only manner in which the disputes between the parties could be put to an end to is by directing the company to purchase the shares held by the petitioners for  a fair consideration.  The net worth of the company as on date is about Rs.6.4 crores and the value of the fair consideration for the shares held by the petitioners after omitting the new shares, would be roughly Rs.1.75 crores.  He relied on the following cases in support of his submissions:
·        Clemens Vs. Clemens ( 1976 2 AER  268): When a person holds more than 25% shares with which he could stop special resolutions, any deduction in his shareholding below 25% , then, it is an act of oppression.
·        Piercy Vs. S Wells Co. Ltd. (1920 1  Ch.D 77 ):  Issue of further shares is a fiduciary power of the directors to be exercised for the general advantage of the company and when there is no need for further capital, directors cannot issue shares to maintain their control over the company.
·        Yashovardhan Sabu Vs. Groz Peckers Sabu Ltd.- (83 CC 371 CLB):  Even if no case of oppression is made out, relief to be granted in the facts of a particular case and that one group can be directed to sell the shares to the other group. 
·        P.P. Vohra Vs. Vohras Exclusives Tools Private Ltd.)-CLB: Disturbance in the shareholding in a family company is an act of oppression.
·        Ashok Kumar Oswal Vs. Panchsheel Trading & Mfg. Co. Ltd.    ( 110  CC 800): In a family company even if acts of oppression are not established, appropriate relief can be granted.
7.     Shri Anil Divan, Sr. Advocate appearing for the respondents submitted: The petitioners have not come with clean hands.  They have made two delierate major false statements in the petition.  One is about the Articles of Association of the company and the other is about Shri Santosh Kumar Dey. The petitioners have enclosed with the petition an old copy of the Articles of Association which had actually been replaced by an amended Articles of Association in 1965. By relying on the old and non-existent Articles, the petitioners have obtained an ex-parte relief from this Bench, which is a gross abuse of process of this Bench.  The petitioners, claiming to be majority shareholders with  representatives on the Board for a long time, could not be unaware of amendment to the Articles. The entire thrust of the petition is that in terms of Articles, proportionate shares should have been offered to all the shareholders and that since the petitioners have not been offered the shares, the allotment of further shares was invalid. No doubt Article 18 of the old Articles provided for proportionate offer but this Article has been omitted at the time of amendment in 1965 and as per the present Articles, there is no such stipulation of proportionate allotment. However, the Board of Directors on their own offered shares to all the shareholders as is evident from the copy of the letter of offer dated 19th January, 1998 (Annexure R-3).  At that time, there was no group among the family members and the question of exclusion of one group did not arise. None of the petitioners evinced any interest in subscribing to the shares offered.  The offer letters were handed over to the shareholders under acquaintance as is evident from the signature of the 4th and the 6th petitioners in the list of offers( Annexure R-2 ) .  The 7th petitioner had indicated in writing that he was not interested ( Page 70 of the reply ). Likewise, 8th petitioner also had said so ( Page 72 of the reply). Therefore to contend that no offer was made to the petitioners is not correct. Further, the petitioners were fully aware of allotment of further shares and they never made any complaint about the same till they filed the petition.  Only the 2nd petitioner wrote a letter expressing her desire to go in for the shares but the company could not do anything since the entire authorized capital had been exhausted by that time. In view of this, the 2nd petitioner did not press the matter further.  Other than this letter, no other complaint was received by the company in regard to this allotment.  The 5th petitioner who was present in some of the Board meetings also did not make any representation to the Board in this regard. In the General Meeting for the year 1998-1999, 1st, 7th and 8th petitioners were present and they never raised any objection and the annual accounts of the company indicating the enhanced capital were unanimously approved.  Therefore, this complaint relating to issue of further shares has to be dismissed on account of waiver, estoppel etc.
8.     As far as the need for further issue of shares is concerned, in the beginning of 1996, due to accumulated loss and financial obligations, the company needed further funds.  This matter was discussed among all the family members and as a matter of fact, the 9th petitioner, in his capacity as a director, prepared a chart to indicate the proposed proportionate entitlement of all the shareholders as exhibited at Annexure R-1.  Therefore, the 9th petitioner was convinced of the requirement of funds for the company and as such the petitioners cannot now claim that the company was not in need of funds. It is to be noted that the 9th petitioner has not filed any rejoinder when the respondents have taken a stand that he was aware of the need for the funds and that he himself had prepared the chart indicating the individual entitlement of the shareholders on a  proportionate basis.
9.     As far as the allegation relating to transfer of shares is concerned, the Articles do not provide for any pre-emption rights for shareholders in case of transfer of shares.  Therefore the transfer of shares is between the transferor and the transferee and the company is bound to register the transfer.  The allegation that Shri S.K. Dey had died 15 years back and the shares had been transferred in the year 1998 is nothing but a deliberate false statement  in as much as Shri S.K. Dey is still alive  as is evident from his photograph produced by the respondents. In this photograph he is found to be reading a news paper with a 2002 calendar hanging behind him. The respondents have also produced a letter from him dated 1.5.2002 with an attestation by an Advocate from Patna, where the said S.K Dey is residing.  Since he was earlier a manager of the company, the petitioners cannot disclaim of either his identity or that he is still alive. As far as the shares held by Mr. Sachi Nath Dey is concerned, the transfer was approved in a Board Meeting held on 31st march, 1998.  He was allotted the shares only because he was a guarantor of the company and when other shareholders did not apply for the shares, he applied for the same to protect his interest as a guarantor. None of his legal heirs has complained about this transfer and as such the petitioners have no locus standi in this matter. Further the petitioners were fully aware of all the transfers and they have relied on the letter to ROC only to justify the delay in making complaint  about the transfers
10.                        In regard to the  loans to M/S Atindra Private Limited, while it is a fact that loans had been given to this company, yet, the said company is not under the control of the 2nd respondent.  Neither the 2nd respondent nor his family members hold any shares in that company except that the company is a closely held company of Deys. It is incorrect to say that the company had not taken any steps to recover the loans given to Atindra Private Limited. The company initiated proceedings and there was a decree in terms of the award and the same was to be satisfied in installments.  Since that company could not pay the installments, it was decided to put the decree into execution which was not pursued in as much as that company had no free assets.  With a view to get the money back, it was decided to acquire90% shares held by Atindra Private Limited in Forum  Trust Private Limited, an old and established advertising company.  This job was entrusted to the 8th petitioner who was at that time the Chief Administrative Officer of the company.  However, he did not take any action as he was a director of Forum  Trust Private Ltd. and had substantial business interest in that company.  Therefore to allege that 3rd and 4th respondents being directors of M/S Atindra Private Limited has not taken any action to recover the loans is not correct.
11.                        The learned counsel further submitted: As far as the sale of machinery  is concerned, the allegations against the respondents are totally baseless.  The petitioners have not given any details as to the list of machinery sold by the respondents. In January 2002. the petitioners had complained to the Chief Judicial Magistrate, Howrah that the respondents had taken away all the machinery from the factory and on conducting an enquiry into the complaint, the police had found the same to be untrue. Actually it is the 8th petitioner who is guilty of unauthorized sale of machinery. The 8th petitioner,  being the deponent of the petitioner was appointed as CEO in December, 1999.  He was authorized to sell  unutilized machinery of the company to meet its capital expenditure.  However, he sold further machinery and he did not account for the sale proceeds.  On being questioned, he submitted his resignation which was not accepted and he was asked for accounts and explanation. Aggrieved by this act of the Board, he has filed this petition.  In spite of these allegations in the reply, the 8th petitioner has not filed any rejoinder and the rejoinder has been affirmed by the 1st petitioner.   This itself goes to show that a person who is responsible for unlawful sale of machinery is none but the 8th petitioner being the deponent of the petition.
12.                        Summing up his arguments, Shri Divan submitted: This petition is wholly misconceived.  The 8th petitioner, having been the CEO of the company and being responsible for unauthorized sale of machinery has no locus standi to file this petition.  Since none of the allegations has been established  and especially when the petitioners have chosen to make false affidavits in relation to the Articles, they are not entitled for any equitable reliefs, more so when applying the principles of estoppel, waiver etc. The company is functioning and M/S Howrah Motors is a large public company and as such it cannot be asked to surrender the tenancy rights for the purposes of sale of Siliguri land.  As far as the reliefs sought for by the petitioners that valuation be made of the shares and the shares held by the petitioners be purchased by the company is concerned, this prayer has arisen out of the contention of the petitioners that the company is a family company. Even though it was so earlier, it is no longer so, as the number of shareholders has multiplied and as such it has lost the status of a family company. Further,  such a relief cannot be granted in the facts of this case as the main property of the company being the Siliguri property cannot be valued in view of the existing tenancy rights. Therefore, this petition should be dismissed.
13.                        Shri Mookherjee in rejoinder submitted: The Balance Sheet as on 31st March, 1998 indicates the subscribed capital as 7115 equity shares.  Therefore on perusal of this Balance Sheet, the petitioners could not have known that the balance 2885 shares had been issued and allotted before 31st March, 1998.  Therefore the question of attributing knowledge to the petitioner of the allotment of 2885 shares before 31st March, 1998 does not arise It is only now that the respondents have explained with a Certificate from the Chartered Accountants that the actual subscribed capital on that date comprised of 10,000 shares.  The petitioners could not have been aware of this allotment in as much as none from the petitioners’ group was on the Board of Directors.  Even though the justification for issue of further shares is reportedly for working capital needs as per the minutes of the Board Meeting dated 17.12.1997, meeting statutory liabilities, now the company has taken a stand that it was for working capital needs.  This contradiction in the stand of the respondents would clearly show that the motive behind issue of further shares was to create a new majority. As far as the chart prepared by the 9th petitioner is concerned, the same is fabricated.  The usual practice in the company had been that the directors leave signed papers in the registered office of the company.  Following this practice, the 9th petitioner who was a director had left some signed papers, one of which has now been fabricated by the respondents and produced in these proceedings claiming that he had calculated the proportionate entitlement of the shareholders.  Even otherwise the said chart pertained to September, 1996 and could not have been used for an allotment in March, 1998.
14.                        He further submitted: As far as sale of machinery by the respondents is concerned, in January, 2002, the respondents had removed practically all the machinery and therefore the petitioners had to file a complaint to the Chief Judicial Magistrate, Howrah.  This was done while the restraint order passed by the CLB was in force.  As per the List of Machineries prepared in July, 1998, there were 30 pieces of machinery while as per the report of the Police on the complaint of the petitioners, there were only 10 pieces of machinery.  Therefore, the respondents must have removed other machinery.  As far as the contention of Shri Diwan that the petitioners had knowingly made false statement in the petition relating to the Articles and Shri S.K. Dey are concerned, the fact is that the old copy of the Articles was furnished to the petitioners by the Secretary of the company and as such they relied on the same.  According to the Register of Death of Howrah Municipality, Shri S.K.Dey had died on 2.1.1970 and a copy of the extract of the Register is placed at Annexure P-34. Therefore, on both these issues, the petitioners have not made any false statement. 
15.                        The learned counsel countered the statement of Shri Diwan that the company is not a family company. Referring to para 17(b) of the Reply, he pointed out that the respondents had clearly stated that the company “ was and was to be a family company”.  Having made an averment to that effect that the company is a family company, the respondents cannot take a different stand during the arguments. Therefore, as this Bench has decided in a number of family companies, equitable consideration should weigh in granting appropriate relief with a view to put an end to the disputes.  In this case, since the company is not doing any business and has valuable properties, the only manner by which this disputes can be put to an end is that the respondents/the company should be directed to purchase the shares held by the petitioners on a proper valuation. For a proper valuation, correct value of Siliguri land has to be assessed, which according to the valuation done by the petitioners is over Rs.2.7 crores and the petitioners have a firm offer for Rs.2 crores.  The contention that M/S Howrah Motors is not a family company is not correct in as much as it was incorporated as a private limited company and became a deemed public company and that now it has again been converted into a private limited company. Therefore, there will be no difficult in getting the tenancy held by that company in Siliguri properties.
16.                        We have considered the pleadings and arguments of the counsel. Before we deal with merits of the case, it is necessary to record that after the hearing was completed and orders reserved, the 1st petitioner filed an affidavit on 12.8.2002 affirmed on 8.8.2002 bringing on record certain facts reportedly coming to the knowledge of the petitioners after conclusion of the arguments. We would not have taken cognizance of the same  but for certain important  disclosures based on copies of certain court proceedings, which ought to have been disclosed  by the respondents themselves during the proceedings in regard to Siliguri property. This aspect will be considered later.
17.                        This is a case wherein both the sides are guilty of suggestio falsi and suppressio veri. It is very difficult for us to believe that the petitioners group claiming to be majority shareholders and having  position on the Board in the past could disown knowledge of the amendment to the Articles way back in 1965 and file an old and outdated copy of the Articles to base their case on the same. Their stand that the old copy of the Articles was given by the Secretary of the company is not convincing and our presumption is that they had knowingly filed a copy of the wrong Articles. Like wise, the respondents who took such a strong stand that Siliguri property cannot be sold in view of the tenancy rights held by Howrah Motors suppressed the information that an agreement to sell had been entered into with one Maonil Estate Pvt Ltd on 25.9.2001 and that an advance of Rs 5.5 lakhs had also  been taken. Such actions of the parties is nothing but abuse of process of this Board.
18.                        The main complaint of the petitioners is that their group has been reduced from a majority into  a minority by issue of further shares and by transfer of shares in favour of the respondents. The respondents have denied the concept of group in the company. We have seen the geneological table of Dey family at Annexure P-2.  The parties before us are the family members of 4 sons of Atindra Nath Dey, the head of the Dey’s family and the promoter of the group. Normally, to invoke the concept of groups in a family company after the death of the father, all the members of a one or  more sons  should be together to form a particular group. In the present case, we do not find such grouping of families by the members of a single or more sons. For instance, while Ananda, a son of Shri Sushil is the 7th petitioner, Shri Devaprasad , another son of Shri Sushil is the 9th respondent.  In the same way, Shri Raghunath, son of Hemanta is the 2nd respondent while Shri Soumendranath and Indranath, two other  sons of Shri Hemanta are 8th and 9th petitioners respectively.  Therefore, the group concept  cannot be easily  applied in this case especially when the petitioners have not furnished any detail as to when the so called group concept came into the company.  Therefore, to complain that a  majority group had been converted into a minority, the petitioners should have been able to establish that all the family members had recognized the existence of groups in the family company. Mere coming together of a few members, without indicating the point of time of coming together,  cannot give raise to a claim that a particular group was in the majority. However, this Bench has been taking a view that in family companies, notwithstanding the provisions in the Articles otherwise,  any disturbance in the shareholding of members disproportionately is an act of oppression against the affected members. Therefore, we shall only examine as to whether such a case has been made out by the petitioners.  It is the case of the respondents that shares were offered on proportionate basis even though no such requirement is provided in the Articles. They have relied on various documents like offer letters, signatures of some of the petitioners on the list of offers and the letters of rejection of the offers by some of the petitioners. The only defence of the petitioners on these documents is that they are all fabricated. We are unable to accept this defence. Even though the petitioners disclaim their knowledge of the issue and allotment for a long time, the letter of  the 2nd petitioner dated 30.3.98 does not support this disclaimer. In a family company, it is very difficult to believe that the family members would not be aware of issue and allotment of shares and the very fact, that the petitioners themselves have averred that they did not pursue the matter further in view of settlement talks would show that they had at that point of time no objection in their not being allotted further shares. Another important aspect we note is that even in the petition there is no prayer that they should be allotted proportionate shares in cancellation of the shares allotted on 5.3.98 other than seeking for declaring the allotment as null and void. Therefore, the only conclusion that we could arrive at is that the petitioners were offered shares and that they did not subscribe to the same. Next limb of the arguments of the learned counsel was that the company did not need funds and the issue and allotment was with the view to create a new majority. We have already held that the petitioners have  not established any group concept in the company and that proportionate shares had been offered to them and therefore the complaint that the shares were issued and allotted to create a new majority is not substantiated. Further, when we examine an issue of further shares to ascertain whether the same was for raising funds for the company, one  need not necessarily go only  by the quantum of the money received. The fact is that the authorized capital of the company comprised of 10,000 shares and the new allotment consisted of 2885 shares accounting for 28% of the authorized capital. It is on record, even though contested by the petitioners that, in 1996 itself the company had decided to issue and allot further shares as is evident from Annexure R-1 signed by the 9th petitioner, who has not chosen to file any affidavit contradicting this annexure. Thus on an overall assessment of the matter, we find that the petitioners have not established this allegation.
19.                        In regard to the transfer of shares which is also alleged to be for the purposes of creating a new majority, our observation in regard to the allotment of shares holds good. When there is no preemption provision in the Articles, there can be also be no allegation of violation of the Articles. In regard to the transfer of shares held by Sachi Nath Dey, even though we find justification in the stand of the petitioners that there could be no reason for him to transfer substantial shares which he acquired on the ground of his having given guarantee, within 3 weeks of allotment, yet, in the absence of any complaint from his legal heirs, we do not consider that we should look into the genuineness of this transfer. In regard to the dispute as to whether Shri Santosh Dey whose photograph was produced to indicate that he is still alive is the shareholder whose shares were transferred or that of late Santosh Dey who had expired, we feel that this issue is trivial as the number of shares transferred is only 11 shares.
20.                        As far as the allegation relating to disposal of the machinery of the company is concerned,  each side is complaining about the other side in this regard.  The main contention of the petitioners is that the respondents had disposed of machinery of the company during the currency of the restraint order passed by this Bench.  Other than filing a copy of the complaint made by them to the Chief Judicial Magistrate, Howrah, the petitioners have not furnished any details of the machinery allegedly sold by the respondents.  The respondents have produced a copy of the report of the Police stating that only  scraps were being sold by the company.  On the other hand the respondents have complained that it was the 8th petitioner who was the CEO of the company  who disposed of the machinery unauthorisedly.  Any way one aspect in regard to the machinery has not been made clear by the petitioners.  They relied on Annexure P-31 to indicate that there were 30 pieces of machinery as in July, 1998. They have also produced before us a valuation report of one Shri Kalyan Bhattachary dated 10.4.2002  wherein the said Shri Bhattacharya having referred to the list as on July, 1998 has also observed that of the 30 pieces of machinery, 6 were out of order and the other were in good working  condition and accordingly he had valued these machineries for a total value of Rs.1.1 crores.  Whether his report indicating good working condition of 24 pieces of machinery was made after physical examination or otherwise has not been made clear.   If it was on the basis of physical examination, then, the complaint of the petitioners that the respondents had sold the machinery of the company during the currency of the restraint order does not survive. Any way, this issue would become irrelevant in view of the final order that we propose to pass.
21.                        Having given our findings on the major allegations, the question of relief arises. Shri Mookherjee heavily relied on the company  being a family company for  seeking  equitable relief in view of strained relationship between the parties. The respondents have taken a stand that in view of there being more than 50 members in the company, it has lost its identity as a family company and as such the principles applicable to a family company cannot be applied in the present case. The admitted position is that most of, if not all the members of the company  are the descendents of Late Atindra Nath Dey. All the petitioners and respondents are descendents of the four sons of late Late Atinder Nath Dey. Not only in paragraph 17 (b), the respondents have  averred that the company was and was to be a family company, with regard to the allotment of further shares, they have averred “ In or about beginning of 1996, there were huge accumulated loss and financial liabilities and obligation of the company which had to be made urgently. In order to meet the exigencies of the situation, it was necessary to issue fresh shares.  The matter was fully discussed amongst the members of the Dey family”. Having averred that the matter of issue of further shares was discussed amongst the family members, which is possible only in  family company, the respondents cannot now contend that the company is not a family company.
22.                         Having held that the company is a family company, presently with 2 groups of shareholders fighting with each other, the only way by which the disputes could be put an end to is, as prayed for by the learned counsel for the petitioners, is that we should direct the company /respondents to purchase the shares held by the petitioners.  One main objection on this suggestion was that the Siliguri property cannot be sold in view of the tenancy rights held by M/S Howrah Motors.  This objection can no longer survive in view of the respondents having already entered into a sale agreement as indicated earlier which fact was not revealed either in the reply filed after the date of the agreement or during the hearing. As a matter of fact the petitioners in their affidavit dated 8th August, 2002 have even contended that this agreement was entered into after the restraint order of this Bench dated 24th September, 2001.  We find from the agreement to sell that it was entered into on 25.9.2001 showing very clearly that it was done after the restraint order dated 24.9.2001.  However, for us to hold that the agreement was entered into violation of our order dated 24.9.2001, the petitioners have not indicated as to when this order was served on the respondents since it was an ex-parte order.  Further, we also note that the date on the Stamp Paper on which this agreement is written is 18.9.2001.  In view of these two aspects, we cannot hold that the said agreement was entered into in breach of our order dated 24.9.2001. The only aspect in regard to this agreement is whether  the property  is being  to be sold for a  proper consideration.  During the hearing, a valuation report indicating the value of this land at Rs.2.89 crores was produced by the petitioners and the learned counsel also submitted that there was a firm offer for Rs.2 crores for the property. If the said valuation and the offer were factual, then, sale of the property for Rs.1 crore as per the agreement to sell  would be against the interest of the company and the shareholders.  In terms of Section 402(e) of the Act, this Board has the power to terminate, set aside or modify any agreement between the company and any person with a notice to that person.  In the present case, we do not propose, for the present, to exercise this power in view of a civil suit pending before the Court of Civil Judge ( Senior Division), Siliguri wherein the said court has passed some interim order also. In case, the court passes a decree in favour of the plaintiff and if the petitioners still feel that the price of Rs.1 crore is lower than the market price, we grant the liberty to the petitioners to apply to this Bench for considering the matter in terms of Section 402 (e) of the Act.
23.                        Considering the entire facts of this case and also the strained relationship between the two groups of shareholders in this family company,  in exercise our powers under Section 402 of the Act, we  direct the respondents/the company to purchase the shares held by the petitioners on fair price of the shares to be determined by the Statutory Auditors of the company on the basis of the Balance Sheet as on 31.3.2001 being the proximate date of filing the petition. The Statutory Auditors should complete this exercise latest by 30.11.2002. Both the sides are liberty to make both oral and written submissions before the valuer who should take all these submissions into consideration  in determining the fair price.  The fair value so determined shall be binding on both the sides. In case the company purchases the shares, it is authorized to reduce the subscribed/paid up capital of the company to the extent of the face value of the shares so purchased. The consideration for the shares,  whether purchased by the company or by the respondents,  shall be paid within one month from the date of the determination of the fair price to each of the petitioners according to the number of shares held by each.   
24.                        The petition is disposed of in the above terms giving liberty to the petitioners to apply in terms of Paragraph 22 ante.  No order as to cost.
 
 
 
(S.Balasubramanian)                                                   (A.K.Banerji)