NEW DELHI

Dated 16^th November 2001

C.P. No. 7 of 2001

Present: 1. Sh. A.K.Banerji, Chairman

2. Sh.S.Balasubramanian, Vice Chairman

In the matter of Companies Act, 1956-Sections 397/398

AND

In the matter of Shri M.R. Jindal

Versus

M/S Nanda Devi Builders (P) Ltd. And Ors.

PETITIONER

1. Shri M.R. Jindal

RESPONDENTS

1. M/S Nanda Devi Builders (P) Ltd.

Shri Deen Dayal Aggarwal
Shri I.C. Bansal

Present on behalf of parties:

1. Shri Anurag Kr. Aggarwal, Advocate .. for petitioner

2. Shri U.P. Mathur, Advocate .. for respondents

3. Shri D.D. Pandey, Advocate .. for respondents

O R D E R

(Date of final hearing: 3.7.2001)

S. BALASUBRAMANIAN:

1. The petitioner holding 500 shares in M/S Nanda Devi Builders (P) Ltd. ( the company) has filed this petition under Sections 397/398 of the Companies Act, 1956 ( the Act) alleging acts of oppression and mismanagement in the affairs of the company.

2. A summary of the petition is: The company was incorporated in July, 1989 and the present paid up capital of the companyis Rs.4,62,000 divided into 4620 equity shares of Rs.100/- each of which the petitioner holds 510 shares and his wife another 50 shares. In addition the petitioner has also advanced a sum of Rs.1 lac to the company as loan. He has been a director of the company right from its incorporation and that the company has proposed to remove him as a director in an EOGM held on 24.2.2001. The company has built a multi storey complex known as Nanda Devi Tower in Prasant Vihar, Delhi consisting of 5 floors including a basement. Even though the company has taken advance from prospective buyers as early as in 1989, possession has not been handed over to many of the allottees. The 2^nd respondent had given 3/4^th portion of the basement of the Tower to one Shri Gurmeet Chauhan, Managing Director of M/S Surf Side Systems Limited at the rate of Rs.12000/- per month sometimes in September, 1999 and had also received a sum of Rs.75,000 as security deposit. These monies are not being accounted for in the books of accounts of the company. This is not withstanding the fact that half portion of the basement had already been booked in the name of Shrimati Neelam Jhulka and Shri Ram Kumar Sahrawalt on payment of Rs.2.5 lacs in 1999. Thus, a property which has already been booked for sale has been clandestinely leased out by the 2^nd respondent. Likewise, the 2^nd respondent had rented out Shop No.4 and 5 in the first floor to one Shri Madhur Aggarwal at the meager rent of Rs.900/- per month and had also collected a security deposit of Rs.5000/-. These amounts have not been accounted for in the books of accounts of the company. This is not withstanding the fact that these shops had already been sold to one Shri S.P. Jindal in June, 2000 on receipt of advance from him. Even though the petitioner has written to the 2^nd respondent and also to the auditors of the company complaining that the rentals and advances had not been accounted for in the books of accounts of the company, no reply had been received from them. In November, 2000, the petitioner also filed a complaint with the Police in this regard and also complained to the Registrar of Companies, Delhi seeking for investigation into the affairs of the company. The 2^nd respondent has been disposing of the assets and properties of the company illegally to his own friends and relations as is evident from the fact that some of the properties have been sold to his close relations in Feb. 1994. Further, no Board Meeting or General Body Meeting of the company had been held right from incorporation. Since the petitioner has been raising objections on the illegal activities of the 2^nd respondent, he has engineered to have the petitioner removed as a director in an EOGM convened on 24^th February, 2001 so that he could carry on the affairs of the company at his own will and pleasure and at the cost of minority shareholders. Accordingly, it has been prayed that an investigation into the affairs of the company should be ordered, a receiver to be appointed to take over the properties of the company and all the agreements entered into in relation to the sale of the properties should be cancelled and the 2^nd respondent should be surcharged.

3. In the reply, the respondents have submitted: The petitioner being a director right from incorporation is fully aware of the business of the company and has been participating in all its decisions. He has signed most of the balance sheets of the company. After the disputes started, the petitioner has removed all the records of the company, like Minutes Book, Statutory Records etc. The petitioner has also siphoned of funds of the company. In respect of shop No.5, the petitioner had executed a sale agreement in June, 2000 for a consideration of Rs.6 lacs without the authority from the Board to one of his close relation, Shri S.P. Jindal. The same shop had been sold by the company for Rs.12.28 lacs in Feb. 2001. Shri S.P. Jindal has filed a suit in this regard and as such the matter is sub judice. The petitioner has sought for cancellation of the sales made by the company which prayer cannot be considered since the purchasers of thses shops have not been made parties to the proceedings. Most of the issues raised by the petitioner relate to 1993-1994 and as such hopelessly time barred. From the Statement at Paragraph 5 of the Reply on the status of the various shops in Nanda Devi Tower, it may be seen that almost all the shops had been handed over possession in 1993-94 and wherever full money had not been paid, the bookings had been cancelled. As far as the allegation relating to non deposit of security deposit and rental received by the company is concerned, all the money received by the company/2^nd respondent have been properly accounted for in the books of the company. It is the petitioner who had acted against the interest of the company by selling shop no.5 for Rs.6 lacs while the company could get Rs.12.28 lacs for the same shop. The alleged letters of complaint written by the petitioner to the 2^nd respondent and to the auditors of the company are all fabricated since they had not received these letters. The company has been holding regular board meetings and general meetings and the petitioner is fully aware of the same as is evident from the fact that the balance sheets for 1998-99 and 1999-2000 annexed to the reply have been signed by the petitioner in his capacity as a director. Since the petitioner has been acting against the interest of the company in an EOGM held on 24.2.2001, he was removed as a director in terms of Section 284 of the Act and the same has not been implemented in view of the restraint order passed by this Bench.

The counsel appearing for the parties reiterated their respective submissions made in the pleadings. Shri Mathur, appearing for the respondents submitted that none of the allegations against the respondents could be either considered to be an act of oppression or mismanagement. All the allegations in the petition relate to the period during which the petitioner was a director of the company. The motive of filing the petition is that the respondents have questioned the authority of the petitioner in selling shop no.5 and in view of the decision of the respondents to remove the petitioner as a director. He prayed that the interim order passed by this Bench on 5.2.2001 restraining the company from giving effect to the resolution of the general body to remove the petitioner as director be vacated as his removal was due to his prejudicial act against the interests of the company.
We have considered the pleadings and arguments of the counsel. In the hearing held on 5.2.2001, the learned counsel for the respondents submitted that his clients would be willing to purchase the shares held by the petitioner so that the dispute between the parties could be put to an end. However, the petitioner did not react to this suggestion. We do concur with the learned counsel for the respondents that most of the allegations relate to events that took place nearly 7 years back. The only allegation which is proximate to the date of petition relates to sale of shop no.5 which is already a subject matter in a civil suit. As far as the allegation relating to non credit of the security deposit and rental received, the respondents have averred that they have been properly accounted for in the books of accounts of the company and therefore nothing survives on this allegation. As far as non holding of the Board Meeting and General Body Meetings is concerned, we find that the petitioner has signed the Balance Sheets of the company as late as of 1999-2000 i.e. just before the filing of this petition. This could not have happened unless Board Meetings had been held. We cannot accept the contention of the petitioner, who has been a director, that the company has failed to hold annual general meetings for so many years. Thus we find that the petitioner has not made out a case for us to grant any of the reliefs sought for in the petition and as such we dismiss this petition. However, since the respondents have expressed their desire to purchase the shares held by the petitioner, they are directed to do so on a fair value to be determined by the Statutory Auditors of the company in case the petitioner intimates the company in writing, within 30 days from the date of this order, his desire to sell the shares held by him and his wife. If he does so then the company should ensure that the fair value is determined within 60 days thereafter and pay the consideration within 30 days thereafter for the shares held by the petitioner and his wife. The company should also refund the amount of Rs.1 lacs given by the petitioner as a loan to the company along with the consideration for the shares. The interim order dated 5.2.2001 is vacated since we find that he had been removed as a director on account of his prejudicial acts.

(S. Balasubramanian ) (A.K. Banerji )