Abdul Wahid Abdul Gaffor Khatri vs M/s.Safe Heights Developers Pvt. Ltd.

The present appeal has been filed under Section 10 F of

the Companies Act 1956 and impugns the order dated 18.12.2012

passed by the Company Law Board (CLB) in the petition filed by the

appellants, inter alia, under Sections 397 and 398 of the Companies

Act 1956 alleging oppression and mis-management on the part of

respondent nos.2 to 10.

The brief facts as it appears from the appeal memo are as

under :-

(i) On 4.7.2005 respondent no.1 company was

incorporated. The authorized, issued and paid up equity

share capital of respondent no.1-Safe Heights Developers

Pvt. Ltd. (the Company) at the time of incorporation was

Rs.2,00,000/- divided into 20,000 equity shares of Rs.10/-

each. Appellant no.1 and appellant no.2 and respondent

no.2 and respondent no.3 were the first directors and

shareholders of the company at the time of incorporation

and account was opened in the name of the company on

7.7.2005 with Samata Sahakari Bank Ltd. in which

appellant no.1 and respondent no.2 were the signatories.

(ii) On 27.6.2006 an account was opened in the name of

company with HDFC Bank, Goregaon branch in which

appellant no.2 and respondent no.2 were joint signatories.

Respondent no.2 resigned from office of director on

2.11.2006 which was accepted by Board and form 32 was

filed accordingly with Registrar of Companies (ROC).

(iii)On 6.11.2006 an Extra-ordinary General Meeting was

called in which the authorized capital of the company was

increased from Rs.2,00,000/- to Rs.5,00,000/-.

(iv) On 14.3.2007 in another Extra-ordinary General

Meeting the authorized share capital of the company was

increased from Rs.5,00,000/- to Rs.55,00,000/-.

(v) On 3.9.2007 form 32 was filed by the company for

appointment of respondent nos.3,4 & 5 as additional

directors. On 3.9.2007 form no.2 was filed by respondent

no.2 for allotment of 2,30,000 equity shares of Rs.10 each

at par and 25,000 preference shares at par of Rs.10 each to

himself.

(vi) On 3.9.2007 Resolution was passed by the company to

shift the registered office of the company to a Fort office by

filing form no.18. Thereafter registered office was shifted

to Nasik.

(vii) On 7.9.2007 it is alleged by appellants that

respondent no.2, to bring appellants share holding under

minority, allotted 2,26,000 equity shares of Rs.10 each at

premium of Rs.120 and 25,000 preference shares of Rs.10

each at par by filing form no.2 w.e.f 23.8.2007 to the

family members and company in which respondent nos.4 &

5 were interested and this allotment was without any

notice, meeting, knowledge and consent of Board of

Directors. It is also alleged that on 15.12.2007 respondent

no.2 again filed form no.2 for allotment of 24,000 equity

shares of Rs.10 each at a premium of Rs.120 per share

w.e.f. 22.9.2007 to one Geeta Constructions Pvt. Ltd.

wherein respondent no.5 is an interested director.

(viii) On 5.11.2007, appellants caused a Show

Cause Notice issued to respondent nos.2 & 3 calling upon

them to explain their misconduct and activities detrimental

to the interest of the company and to return the books of

accounts, correspondence, original agreements, records

and registers of the company.

(ix) On 7.11.2007 respondent no.2 replied stating that

appellants had sold their stake in the Company and the

matter was settled, with one Mr.Deepak M.Mehta, who

was acting as mediator/escrow agent for the purpose.

It should be noted that the appellants'' counsel made oral

submissions and followed it with 49 pages of written submissions. I

have to note that the written submissions filed on behalf of appellants

far exceed what was argued before the court and raises new points

which were not pressed before the court. Reliance has been placed on

several new judgments on points which were neither urged before the

Company Law Board nor pressed before this Court when the matter

Broadly stated, the issues raised by the appellants were as

under :-

(a) By a rights issue in 2007, the shareholding of the

Petitioners had been diluted; allegedly no notices were

given for the meetings pertaining to the rights issue;

(b) The Respondents had caused the registered office of

the Company to be shifted on two occasions; allegedly no

notices were given for the meetings pertaining to the

shifting of the registered office; and

(c) disputes pertaining to appointment and removal of

directors.

The CLB has analysed in detail the various submis-

sions made by the Appellants, and after considering the factual

matrix, the submissions made on both sides and the position in

law, passed a detailed, comprehensive judgment dismissing the

Petition, but directing the Respondents to buy out the Petitioners''

shareholding.

Limited Scope of Section 10-F

It is well settled, as held, inter alia, by the Hon''ble Supreme

Court in (2008) 3 SCC 363, V. S. Krishnan & Ors .v. Westfort Hi-Tech Hospital Limited

& Ors . and followed in (2016) 1 SCC 237, Purnima Manthena & Anr. v. Renuka

Datla & Ors that an Appeal under Section 10-F of the Companies Act,

would lie only on a question of law. Section 10-F expressly states that

the Appeal will lie only on a question of law arising out of the order. It

is further held by the Hon''ble Supreme Court that the CLB is the final

authority on facts, unless, such findings are perverse, based on no

evidence or are otherwise arbitrary.

It is further well settled that an order passed by the CLB under

Sections 397 and 398 is a discretionary order as held by the Hon''ble

Supreme Court in V. S. Krishnan (supra) and in AIR 2005 SC 809 Sangramsinh P.

Gaikwad v. Shantadevi P. Gaikwad . Being a discretionary relief, the

Appellate Court, i.e. this Court ought not to interfere with the judg-

ment or replace the same with its own exercise of discretion, particu-

larly given the restrictive scope of Section 10-F .

The Hon''ble Madras High Court in the case of , [2011] 101 CLA 346 (Mad.) M. Palanis-

amy & Ors. v. S.V.T. Spinning Mills (P) Ltd &Ors. reiterated the

aforesaid principles and held that as the CLB is the final authority on

facts, while exercising powers under Section 10-F of the Act, the

Hon''ble High Court ought not to re-appreciate the evidence analysed

by the CLB. Reliance was placed on the judgment of the Hon''ble

Andhra Pradesh High Court in D.Ramkishore Vs. Vijaywada

Shavebrokes Ltd. (2008) 86 CLA 285 (AP) which in turn had relied

upon various judgments of the Hon''ble Supreme Court to hold that

there was no jurisdiction under Section 10-F to entertain an Appeal on

the grounds of erroneous findings of fact, however gross the error

may seem to be. It was further held by the Hon''ble Andhra Pradesh

High Court that absent a conclusion that the judgment was not sup-

ported by any evidence or that it was unreasonable and perverse, the

decision of the CLB is final even though the Hon''ble High Court might

not, on the same materials, have come to the same conclusion.

Shri Khare relied upon the judgment in , (2005) 1 SCC 212 Dale Carrington

Invt Private Limited & Anr. v. P. K. Prathapan & Ors . to contend

that the Hon''ble High Court could go into questions of fact. This con-

tention is misplaced; in paragraph 36 of this judgment the Hon''ble Su-

preme Court held that the judgment of the CLB "was given in a very

cursory and cavalier manner" and that the CLB has not gone into the

issues which were germane for the decision of the controversy in-

volved in the case. This is not applicable to the detailed and compre-

hensive judgment rendered by the CLB in the present case.

The Appellants'' submissions proceed on a fundamentally

erroneous basis that the scope of this Court''s jurisdiction under Sec-

tion 10-F is not limited to adjudication of questions of law arising out

of the order, but also extends to questions of facts in certain circum-

stances. This is a misreading of the judgments of the Hon''ble

Supreme Court. It is clear that the scope of jurisdiction of this Court

is restricted to a question of law and only if it can be held that a find -

ing of fact is perverse and based on no evidence, then that perversity

itself may be treated as a question of law. This is not to say that this

Court would be required to minutely analyse the judgment of the CLB

on all factual aspects and arrive at a conclusion that a particular fact

ought to have been considered differently, or that some other conclu-

sion ought to have been arrived at on the facts. This Court would tru-

ly be required to assess the judgment of the CLB holistically to ascer-

tain whether the judgment is based on no evidence and is therefore

perverse. In the present case, under no circumstances can it be said

that the judgment of the CLB is either perverse or cursory or based on

no evidence. The Appellants are attempting to treat the present pro-

ceedings as a First Appeal and are in effect seeking that this Court

delve deeply into the facts and exercise its discretion to replace the

discretionary judgment of the CLB. This is impermissible in law and is

contrary to the judgments of the Hon''ble Supreme Court and High

Courts which were cited on behalf of the Respondents.

In my view, the order of the CLB in the present case can in

no circumstances be said to be either perverse, based on no evidence

or arbitrary. The CLB has analysed the factual and legal position in

depth and has arrived at a conclusion on facts that no case of oppres-

sion and / of mismanagement has been made out by the Appellants.

From paragraphs 23 to 45 of the judgment at pages 84 to 95, the CLB

has analysed all the issues raised including but not limited to:

* service of notice by UPC (paragraphs 23 to 25);

* the Appellants having exited the Company after receiving

the loan amount given by them, (paragraph 25);

* the rights issue and the reasons for the same being to in-

fuse funds into the Company (paragraphs 26 to 28);

* shifting of the registered office (paragraphs 29-30);

* termination of directorship being outside the ambit of

sections 397 / 398 (paragraph 35);

* the Appellants having come with unclean hands and hav-

ing suppressed material facts (paragraphs 36 to 38); and

* gross delay and laches in the Appellants'' having ap-

proached the CLB (paragraphs 39-40).

The above findings of fact cannot be interfered with by this

Court in the exercise of the narrow jurisdiction under Section 10-F of

the Companies Act, 1956.

Shri Khare submitted that there were various facts that the

CLB, in the present case, ought to have noticed from the record but

did not. Even if what Shri Khare says is correct, i.e., if it is the griev-

ance of the Appellants that any material facts which were relied upon

or any submission which was raised were not reflected in the judg-

ment, it was incumbent upon the Appellants to draw the attention of

the CLB to the same by filing a proper application for review or clari-

fication. As held by the Hon''ble Supreme Court in , AIR 1985 SC 973 Daman Singh v.

State of Punjab, when no such application for review or clarification

has been made, a party or its counsel is not entitled to submit to the

superior court that a certain ground had been argued to which no ref-

erence is found in the judgment. Delay and Laches in filing the Petition

This Court, in the context of a similarly discretionary order un-

der Section 111 of the Companies Act, 1956, in 2016(4)Bom.C.R.272 Sulochana

Neelkanth Kalyani v. Takle Investments Co. & Ors ., has held that

exercise of such discretion could certainly be affected by inordinate

and unexplained delay and laches and that any such delay may

render granting of the relief inequitable, as there could be equities

arising in favour of other parties as a result of such delay and also

such delay may give rise to a case of acquiescence, waiver or estoppel.

These aspects would be for the CLB to assess and would depend upon

the facts and circumstances of each case.

In the Petition filed by the Appellants before the CLB, the Ap-

pellants have set out the various acts, which according to them con-

stituted oppression and mismanagement, including the rights issue

and the shifting of the registered office. Thereafter it is the case of the

Appellants that when they became aware of the purported conduct of

Respondent Nos. 2 and 3 "then on 5th November 2007" they issued a

show cause notice to Respondent Nos. 2 and 3. This show cause no-

tice was followed by a letter on the same date addressed to Respond-

ent Nos. 2 and 3. This letter was replied to by a letter dated 7 th

November 2007 addressed by Respondent No. 3 setting out, inter

alia, that the Appellants had exited the Company after accepting their

loan, and that the registered office of the Company had been shifted .

In response, the Appellants, through Appellant No. 2, addressed a let-

ter dated 6th December 2007, inter alia, threatening that the Appel-

lants would take necessary action under the provisions of the Com-

panies Act. As per the stated case in the Appellants'' Rejoinder in the

petition before CLB, the Appellants claimed that they conducted an

ROC search and learnt of the acts of oppression and mismanagement

in or about December 2007 - January 2008.

Pertinently, despite full knowledge from November 2007 -

January 2008 of all the acts complained of in the Petition, no steps

were taken by the Appellants to approach the CLB until July 2011 as

noted by the CLB in paragraph 39 of the judgment. There was no ex-

planation whatsoever from the Appellants to explain this significant

delay aside from stating that they had preferred a representation to

the Registrar of Companies. This explanation was rightly rejected by

the CLB while noting that the reliefs which could be granted by the

CLB could never have been granted by ROC, and therefore this could

not be a reason for not approaching the CLB earlier.

In the written submissions of the Appellants also, there is no

cogent explanation for the Appellants'' delay in approaching the CLB.

It is simply contended that the alleged acts of oppression were contin-

uing and culminated in the removal of the Appellants as Directors in

2011. Firstly, from the record before the CLB, as reflected in the

judgment, the only ground to justify the delay pressed before the CLB,

and indeed before this Court in arguments, was that the Appellants

were prosecuting proceedings before the Registrar of Companies. No

case of continuous oppression and/or mismanagement appears to

have been pressed before the CLB and certainly not before this Court

and it is impermissible to seek to introduce a new case in Written

Submissions, particularly one which is on a factual basis. Even other-

wise, there is no justification for the gross delay in approaching the

CLB, and the CLB in the exercise of its discretion has held that the de-

lay was excessive. This exercise of discretion by the CLB ought not to

be interfered with by this Court in its narrow jurisdiction under Sec-

tion 10-F of the Companies Act, 1956.

Therefore, I find nothing wrong in the CLB concluding that on

the ground of delay and laches alone, the Petition could have and

ought to have been dismissed even without going into the allegations

raised by the Appellants. Unclean Hands

The CLB has, after a detailed consideration of the Appellants''

conduct, arrived at a finding of fact that the Appellants had sup-

pressed material facts and had not come with clean hands, having in-

dulged in various acts of misconduct as set out in the order, including

running a parallel Board of Directors, holding meetings without any

notice (as opposed to the Respondents having shown UPC records for

service of notice for their meetings) and appointing / removing direct-

ors at their whim. The CLB has rightly noted that a party seeking re-

lief in an equitable jurisdiction must itself act equitably (i.e., a person

who wants equity must do equity), and has arrived at a conclusion

that the Appellants have not acted equitably.

In their submissions, the Appellants have sought to deflect atten-

tion from their own defaults by alleging defaults on the part of the

Respondents. The Appellants have not been able to deny the illegali-

ties committed by them, but have simply alleged that the same yard-

stick was not applied to the Respondents. This stand is factually in-

correct in as much as the Appellants did not give any notice for their

meeting, whereas the Respondents had given notice by UPC. Even

otherwise, it is the Appellants who have approached the CLB in the

exercise of its equitable jurisdiction, and it is the Appellants who must

show that they have acted equitably and with clean hands. It is no an-

swer to contend that their illegalities are justified by alleged illegali-

ties on the part of the Respondents, which in themselves have been

denied.

In these circumstances, on this ground also, I see no reason to

interfere in factual findings of the CLB

ON THE THREE ISSUES RAISED

As stated earlier, the Appellants had broadly raised three issues

of alleged oppression and mismanagement. It should be noted that

they are issues of fact which have been conclusively decided by the

CLB and as held in M.Palanisamy & Ors. (supra), the CLB is the final

authority on facts.

The rights issue of shares and the service of notices by

UPC:

Respondents, in their Affidavit in Reply to the Company

Petition have set out at length the sequence of events pertaining to

the rights issue of shares, the funds raised by virtue of the rights issue

and the details of service of notices for various meetings in this re-

gard. The Respondents have also placed on record the relevant docu-

ments in relation to the rights issue, including the UPC register for

service of notices on Appellant Nos. 1 and 2. The UPC register admit-

tedly bears a stamp sufficient for service upon both Appellant Nos. 1

and 2 and no other party has raised a grievance that notices were not

served upon them.

A grievance was raised by the appellants that the UPC proofs at

pgs. 351 and 354 appear to be identical. While this is purely a factual

matter which ought not to detain this Court, the Appellants ought to

have pointed out that the UPCs at pgs. 351 and 354 pertain to com-

munications both dated 19th February 2007, and therefore potentially

the same UPC proof would be sufficient if both communications were

forwarded under the same UPC certificate and/or in the same packet.

These are factual matters, which if had been pressed before the CLB

would duly have been answered by the CLB after hearing both sides,

but this aspect was not urged, as is apparent from the judgment of the

CLB.

In this context, the CLB has rightly held on the basis of Section

53 of Companies Act, 1956, that there arises a rebuttable presumption

that the documents were served on the Appellants under certificate of

posting. As held by the Hon''ble Supreme Court in the case of V. S.

Krishnan (supra) relying on the judgment of the Hon''ble Supreme

Court in (2004) 9 SCC 2004 M. S. Madhusoodhanan v. Kerala Kaumudi Private Lim -

ited, the burden was on the addressee, i.e., the Appellants herein, to

rebut the statutory presumption and show that the notice had not

been received by them. Admittedly in the present case no such at-

tempt has been made by the Appellants to show that the notice was in

fact not received by them. In the circumstances, it cannot be said that

the CLB judgment is perverse or unreasonable or arbitrary on this

score.

The Appellants have sought to rely upon certain judgments on

the aspect of service of notice for meetings. Broadly stated, the said

judgments only lay down the accepted proposition that notice of a

meeting ought to be given to the shareholder / director. The said

judgments have no application in the present case, as it is not the case

of the Respondents that no notice was given, but in fact notices were

sent by post under certificate of posting (UPC). As aforesaid, the re-

buttable presumption under Section 53 having arisen, and having not

been rebutted by the Appellants, the CLB has rightly held in favour of

the Respondents in this regard. The judgments cited by the Appel-

lants are dealt with hereunder:

1998 SCC On Line Ker 367 (i) Dr. T. M. Paul v. City Hospital (Pvt.) Ltd. & Ors. This

judgment only states that notice of a meeting ought to be

given under Section 286, with which principle there can

be no dispute. However, in the present case CLB has ac-

cepted that notices were in fact given under UPC.

(1973) 2 SCC 543 (ii) Sri Parmeshwari Prasad Gupta v. The Union of India

In this case, it was an admitted position that no notice

was given to the director of the Company, which is com-

pletely different from the facts of the present case.

(217 SCC On Line NCLT 339 (iii) Mr. Satish Kumar Singh v. Omkaleshwar Colonisers

Private Limited - again this judgment only lays down

the principle that notice must be served, which has been

done in the present case;

(iv) (2002-4-L.W.394), M/s. Micromeritics Engineers Pvt. Ltd. & Ors. v. S. Mun

usamy- in the facts of the case in question, there was no

proof that the notice of the meeting was sent by post as

held by the Hon''ble Madras High Court in the last sentence

of paragraph 34. This is very different from the facts of

the present case.

(1994 SCC Online Mad 552) (v) Malleswara Finance and Investments Co. P. Ltd. v.

Company Law Board and Others -in the facts of that case

the CLB, after taking into consideration all the materials,

held that there was no evidence of posting, which is oppos-

ite to the factual finding in the present case.

(vi) M. S. Madhusoodhanan v. Kerala Kaumudi Private Lim

ited (supra) - This judgment in fact aides the Respondents

and has been followed in the context of Sections 397 / 398

in V. S. Krishnan''s case (supra) to hold that once a rebut-

table presumption arises under section 53, the burden lies

on the addressee, i.e., the Appellants herein to rebut the

same.

Reliance was placed by the Appellants on paragraph 115 of

M.S.Madhusoodhanan (supra) to contend that when the relationship

between the parties was embittered the proof of service of notice by a

certificate of posting must be viewed with suspicion. It is pertinent to

note that in the present case, after the meeting of 14 th March 2007 as

set out later, in which the Appellants have participated in raising the

share capital, and until the issuance of the show cause notice on 5 th

November 2007, (during which time the notices were sent by UPC)

there is no record whatsoever to show that the relationships between

the parties was in any manner embittered. During this period between

March 2007 and November 2007 there was no embitterment whatso-

ever and it was during this period that the rights issue took place cul-

minating on 22nd September 2007, as also the shifting of the re-

gistered office in April 2007 and July-August 2007. Hence, the notices

sent for these meetings under UPC during this period, cannot possibly

be required to be viewed with any suspicion on the ground of purpor-

ted embitterment, or otherwise.

Before the CLB, the case of the Appellants was that the UPC no-

tices were infirm and should not be relied upon because relations be-

tween the parties were embittered. Before this Court, it was urged

that the UPCs could not be relied upon in respect of Board Meetings

and that the presumption under Section 53 applied to general meet-

ings of the company. This contention is misleading. While Section 53

does raise a presumption in respect of notices for meetings of mem-

bers of the company, under Section 286 of the Companies Act, 1956,

there is no format provided for service of notices to Directors. The

CLB has dealt with the argument which was urged, namely that the

notice through UPC should not be presumed as sufficient proof of ser-

vice; this argument of UPC notice for Board Meeting does not appear

to have been urged before the CLB. Even otherwise, under Section

286 of the Companies Act, 1956 no specific mode of service is provid-

ed for. The UPC proofs were duly produced before the CLB even for

meetings of the Board of Directors, and there was nothing placed on

record by the Appellants to show that they were either not available at

the time when the notices were served or that they could not or were

not in a position to receive the same. Even otherwise, the CLB has

rightly held that after knowledge of those resolutions being passed by

November 2007 - January 2008, no steps were taken by the Appel-

lants to approach the CLB for redressal of their grievances for close to

four years. On the contrary, the Appellants held their own meetings

without even attempting to send notices thereof to the Respondents;

what has weighed with the CLB therefore is the inequitable conduct

on the part of the Appellants and this factual finding cannot to be in-

terfered with.

Even otherwise, the rights issue having been done in the in-

terest of the Company with a view to infuse funds into the Company,

can under no circumstances be said to be an act of oppression. The

Hon''ble Supreme Court in the case of AIR 1981 SC 1298 , Needle Industries (India)

Limited v. Needle Industries Newey India Holdings Limited - relied

upon in V. S. Krishnan (supra), has held that if the shares are issued in

the larger interest of the Company and bonafide with a view to enable

capital to be raised, the rights issue cannot be termed as oppressive.

In the present case, in the meeting of the Board of Directors

held on 14th February 2007 and confirmed in an EGM held on 14 th

March 2007 it was decided to raise the authorised share capital of the

Company from Rs. 5,00,000/- to Rs. 55,00,000/-. The explanatory

statement for the meeting held on 14 th March 2007, placed on record

by the Appellants themselves, bearing Appellant No.1''s digital signa-

ture, expressly records that the shareholding was being increased as

the Company "wishes to enhance its current business greatly", and that

the present authorised capital of the Company was "very small and

would be a constraint to the growth of the Company". Admittedly,

validity of these meetings which were referred to in paragraphs ii(a)

and (b) of the Respondents'' Reply, and the Appellant Nos. 1 and 2''s

presence have been accepted in paragraph 6 of the Appellants'' Rejoin-

der .

The rights issue was thus obviously contemplated as being the

avenue for increasing the funds of the Company and for the growth of

the Company. The CLB has recorded a finding of fact (in paragraph

28) that the rights issue was necessary for the growth of the Company

and therefore the action of issuing the shares could not be termed as

oppressive to the Appellants and/or mismanagement of the affairs of

the Company.

Pertinently, despite being party to the above meetings, at no

point did the Appellants seek to subscribe to the rights issue, and did

not even make such enquiries for several years prior to filing the

present Petition. The reason for this was clearly because the rights is-

sue which commenced from April 2007, was not of interest to the Ap-

pellants, as the Appellants had received back the sum loaned by them

to the Company to the tune of Rs.73,00,000/- . The Appellants had

accepted back the loan as they did not desire to partake in the func-

tioning of the Company.

The Appellants have no explanation for their having taken back

their loan, save and except to contend that this was not reflective of

their disinterest in the company. In this regard, the CLB has arrived

at a finding of fact, based on the conduct of the Appellants and this

finding ought not to be interfered with in exercise of jurisdiction un-

der Section 10-F . As a matter of fact, after accepting their loan

amounts back in or about March 2007, at no point did the Appellants

write a single letter or demand to participate or show any interest in

participating in the company until issuance of the show cause notice

on 5th November 2007. If the Appellants truly desired to partake in

the management of the company and felt that they had been wrongly

prevented from doing so, any reasonable person would have ap-

proached the appropriate forum, i.e., the CLB in 2007 itself. Howev-

er, no such steps were taken by the Appellants until July 2011.

In the circumstances, even on merits it cannot be said that the

rights issue was either oppressive or done behind the back of the Ap-

pellants. Shifting of registered office:

The Appellants have sought to raise certain factual contentions

as to where the notices for the Registered Office shifting were posted

from. These are all factual matters, which would turn on evidence as

to where Respondent No.2 resided and where he posted the notices

from. It is not necessary that the notices be posted only from the Post

Office adjacent to the Registered Office of the Company. Be that as it

may, this factual analysis is beyond the scope of this Court''s jurisdic-

tion under Section 10-F of the Companies Act, 1956.

The Appellants raised a grievance that the registered office of

the Company was shifted from Jogeshwari to Sir P. M. Road in April

2007 and thereafter from Mumbai to Nashik in July - August 2007.

It has to be noted that the jurisdiction of the ROC was not

changed, and there was no prejudice whatsoever caused to the Com-

pany by virtue of the change of the registered office. The sequence of

events relating to the shifting of the registered office have been set

out in paragraphs (i) to (iii) of the Reply filed by the Respondents in

the CLB .

As laid down by the Hon''ble Supreme Court in [2001] 33 SCL 78 (SC), Hanuman

Prasad Bagri v. Bagress Cereals Private Limited, shifting of the re-

gistered office by itself may not be a reason or a ground to be raised

in a Petition under Sections 397 / 398 as long as the Company did

not suffer much loss on account of the shifting and no case was made

out to show that such exercise was undertaken to put oppressive pres-

sure or pain upon the Petitioners. As in the case that was before the

Hon''ble Supreme Court, there is nothing in the present case to show

that any prejudice was/is caused to the Appellants or that any waste-

ful expenditure amounting to mismanagement was incurred on behalf

of the Company by shifting of the registered office.

Pertinently, it is the admitted position that the UPC amount

paid was Rs.3/-. It is more than sufficient for service on Appellant

Nos.1 and 2; the other Directors and Shareholders being part of the

Respondent Group, may well have been served by other means - they

have raised no objection as to service or receipt of the notices. Once

again this aspect is purely factual and is being dealt with only in light

of the contentions raised by the Appellants. The crucial factor re-

mains that shifting of the Registered Office has caused no prejudice to

the Company, and is not oppressive in the least. There is nothing to

show that the shifting was done to prejudice the Appellants.

Thus this contention does not constitute oppression or misman-

agement. Directorial disputes

The Appellants have relied upon an RTI Application of 2012 to

contend that no notice was received of the meeting for removal of the

Appellants as Directors. It appears from the impugned judgment that

this issue of the RTI Reply was not pressed before the CLB. Even oth-

erwise, it is pertinent to note that in all the various allegations of not

having received notice for various meetings, the Appellants have not

sought to obtain any RTI on the delivery of notices for all the meet-

ings which are the subject matter of dispute between 2007 and 2010,

but have only purported to obtain an RTI for a meeting held in 2011.

Be that as it may, the Appellants have been removed by resolutions

and with appropriate Form 32''s filed, to the satisfaction of the ROC.

It is nobody''s case that the ROC has thereafter raised any objections to

the filing of the Forms or indeed to the manner of removal of the Ap-

pellants.

As held by the Hon''ble Supreme Court in Hanuman Prasad Bagri

v. Bagress Cereals Private Limited (supra) directorial disputes are bey-

ond the jurisdiction of the CLB under Sections 397 and 398 . Thus, the

same cannot be raised before the CLB as rightly held by the CLB in

paragraph 35 of the judgment.

Further the Company is not under any circumstances either a

family company or a closely held quasi partnership, in which circum-

stances potentially directorial disputes may be raised. The judgments

relied upon by the Appellants in this regard will have no application

to a company such as Respondent No.1. Further, it does not appear

that this issue of ''quasi-partnership'' was pressed before the CLB, and

was not pressed in arguments before this Court.

The judgments placed in the Written Submissions, are, to a sub-

stantial extent, on points not raised before the CLB or before this

Court in the arguments canvassed by the Appellants. The said judg-

ments pertain to several aspects which were neither pressed before

the CLB or before this Court, and to the extent that the same are

placed in reliance of a case not pressed before the CLB or this Hon''ble

Court, the judgments ought to be disregarded. Nevertheless, the said

judgments are broadly dealt with hereinbelow:

As regards 2001(1)Mah. L.J.701, Dushyant D.Anjaria Vs. M/s.Wall Street Finance

Ltd. ; 2011 SCC Online Gau 143, Yogendra Kumar Maheshwari Vs. Registrar of Companies;

and , (2004) 1 CTC 340, P.Natarajan V/s. Central Government, of the Compilation are

in cases which were not under Section 397 / 398 .

As regards Dushyant D.Anjaria (supra), Yogendra Kumar

(supra); P.Natarajan (supra) ; (1983) 53 Comp Cas 883, Sishu Ranjan Dutta Vs. Bhola

Nath Paper House Ltd.,; , (1999) 19 SCL 391 (Mad) Harikumar Rajah V/s.Sovereign Dairy

Ltd. (Mad) ; , (1961) 31 Comp Cas 193 (Cal) Hindusthan Co-operative Insurance Society Ltd. In

re ; (2010)156 Comp Cas 367, Sintex Industries Ltd., In re, pertain to appointment of (Addi-

tional) Directors and the tenure thereof. The appointment and dura-

tion of Directors is a matter beyond the scope of jurisdiction of the

CLB, and in any case is not the grievance urged before this Court.

As regards , (2009) 149 Comp Cas 328 (P&H) Zora Singh V/s. Amrik Singh Hayer; (2010) 153 Comp Cas 370 (CLB), Rajiv Ku-

mar Singh V/s. Shree Narayan Developers P. Ltd. and Ors.;

(2010) 153 Comp Cas 222, Ashok Kumar and Ors. V/s. Shree Janki Cold Storage P. Ltd. and

Ors.; (1988) 64 Comp Cas 562 (Cal), Swapan Dasgupta Vs. Navin Chand Suchanti, pertain to

notices for meetings and the issue of UPC. This issue has been dealt

with above. The judgments turn purely on the facts of their respective

cases. In the present case, the CLB has arrived at a conclusion that

the notices appear to have been served on the Appellants, and even in

respect of the Board Meetings, it cannot be disputed that there are

UPC proofs of the notices.

As regards Needle Industries India Ltd. (supra) ; , (1996) 87 Comp Cas 290 CLB, Mrs.-

Farhat Sheikh V/s. Esemen Metalo Chemicals Pvt. Ltd. ; (1995) 82 Comp Cas 563 (CLB), Rashmi

Seth V/s. Chemon India Pvt. Ltd. ; (2009) 151 Comp Cas 71 (CLB), Ram Babu V/s. Target Con-

structions Pvt. Ltd. and Ors. ; and (2010) 158 Comp Cas 195 (CLB), Mrs.Gurpreet Gill V/s. Pump-

kin Studio P. Ltd. & Ors., the same pertain to issue of shares. As set

out earlier, the impending Rights Issue was to the knowledge of the

Appellants; even otherwise, at no point had they sought to exercise

their purported right of pre-emption as is now sought to be contended

in the Appellants'' Written Submissions. The Appellants in fact had ac-

cepted repayment of their loan by March 2007 and were clearly not

interested in the functioning of the company. Pertinently, even after

having full knowledge, as per their own case, in November 2007, the

Appellants did not take steps to challenge the Rights Issue or to seek

allotment of shares to them in the ensuing several years. In any

event, the judgments relied upon take the position that if the Rights

Issue is not bonafide but is only for the purpose of enabling a party to

obtain a majority, then such action will constitute oppression; this is

not so in the present case. The CLB has concluded that funds were re-

quired for which the Rights Issue was carried out, and therefore it

cannot be said that the same was not bonafide.

As regards (2008) 141 Comp Cas 270 (CLB), Sanjay Paliwal and Anr. Vs. Paliwal Hotels Pvt.

Ltd., ; (2008) 141 Comp Cas 482 (CLB), Rajesh Patil V/s. Moonshine Films Pvt. Ltd. ; , (2008) 142 Comp Cas 320 (CLB) M.L.Arora

V/s. Green Valley Frozen Food Ltd. & Ors. ; and (2004) 119 Comp Cas 974 (CLB), A.Kalyani V/s.

Vale Exports P. Ltd., the same pertain to the allegation of continuous

oppression and mismanagement, to justify the delay in filing of the

Company Petition. As set out above, the contention of continuous op-

pression and mismanagement culminating in the removal of the Ap-

pellants as Directors in 2011, was not the ground urged before the

CLB to justify the delay. The ground urged was as to the pendency of

proceedings before the ROC, and it is in that context that the CLB has

rightly held that the explanation for the delay is unjustifiable. Even

otherwise, the explanation given by the Appellants cannot be counte-

nanced, as the events of which they complained, had to a material ex-

tent, culminated in 2007 itself, and there is no justification for the de-

lay in approaching the CLB.

In the circumstances, the Appeal ought to be dismissed as it

does not give rise to any question of law. The factual findings are

strictly matters which were within the province of the CLB. The CLB

having exercised its discretion after analysing the evidence before it,

this Court cannot to replace the discretionary order passed by the CLB

with any contrary order.

Even otherwise, on the findings of delay/laches and unclean

hands, the present Appeal ought to be dismissed as the CLB has

rightly declined to exercise its equitable jurisdiction in favour of the

Appellants.

As noted earlier, even on the merits, the Appellants'' case is un-

tenable and contrary to the record.

No case of oppression or mismanagement has been made out,

and the Appeal ought to be dismissed, with costs which is fixed in the

sum of Rs.2 lakhs. Appellants to pay this amount within 4 weeks by

way of cheque drawn in favour of the advocate on record for Re-

spondents.