In Re: Darjeeling Tea and Cinchona Association Ltd.

Salil K. Roy Chowdhury, J.—This is an interim application in the main application under Sections 397, 398, 399, 402, 403 and 406 of the Companies Act, 1956, The Petitioner, inter alia, asked for supersession of the Board of Directors, appointment of Special Officer and/or Administrator to carry on the management of the Respondent company and various other consequential declaration, injunction and directions.

The facts of the case shortly are that the Respondent company Darjeeling Tea and Cinchona Association Ltd. was incorporated on January 16, 1879 and its registered office until recently was at No. 2 Fairlie Place, Calcutta. The authorised capital of the company is Rs. 10 lakhs divided into 10,000 ordinary shares of Rs. 100 each. The amount of capital of the company paid up or credited as paid is Rs. 5 lakhs 64 thousand divided into 5,640 ordinary shares of Rs. 100 each. The Petitioner is admittedly a Director and shareholder of the company and he has the requisite qualification u/s 399 of the Companies Act, 1956, having the consent of the other share-holders in moving the application under Sections 397 and 398 of the Companies Act. The company was managed by the Macneill and Barry Ltd. and it belonged to the said group. The Petitioner is the owner and registered holder of 16 ordinary shares and was appointed as a Director of the company in 1963 and he is still a Director of the company. The Petitioner alleged that from the search of the records at the office of the Registrar of Companies, it appears that Macheill and Barry Ltd. was the registered holder of 1,642 shares which is the largest single block of shares held by any share-holder. It further appears from the annual reports and accounts of the company as on December 31, 1972, that the Directors of the company apart from the Petitioner were C.J.N. Will, Lord Sinha of Raipur, S.C. Bhandari and A. Singh and the auditors of the company were Messrs. Lovelock and Lewes. It is alleged by the Petitioner that a notice of the Board meeting was to be held on May 3, 1973, at 3-30 p.m. to consider (a) confirmation of the minutes of the meeting held on April 27, 1973, (b) opening of Bank accounts, (c) shifting of registered office, (d) resignation of Lord Sinha, C.J.N. Wills and S.C. Bhandari from the directorship of the company and (e) appointment of R.K. Chowdhury as Director of the company. It is alleged by the Petitioner that the said notice of the meeting was served on the Petitioner at 3 p.m. on May 3, 1973. A copy of the said notice is annexed to the main petition in the application under Sections 397 and 398 and marked with annEx. ''C''. I may point out that the entire main petition has been made an annexure to the affidavit in support of the Judges Summons in this interim application. It is alleged by the Petitioner that the said notice was too short and was served on the Petitioner only half an hour before the time fixed for holding the said meeting on May 3, 1373, to consider such vital and important business as indicated in the notice of the said Board meeting. The Petitioner further states that prior to the said notice he was not made aware of any proposed change in the Board of Directors or in the registered office or the appointment of R.K. Chowdhury. It is alleged by the Petitioner that the said R.K. Chowdhury is the maternal uncle of Mahabir Prosad Poddar, the Respondent No. 4. It is further alleged that the said R.K. Chowdhury is a benamdar and nominee and stooge of the said Mahabir Prosad Poddar. The Petitioner also alleged that the registered office of the company was originally at No. 2 Fairlie Place, Calcutta. It was shifted to No. 42/1 Strand Road, Calcutta and then subsequently to No. 4 Fairlie Place, Calcutta, as a tenant of Hemraj Mahabir Prosad Pvt. Ltd., a domestic concern of Mahabir Prosad Poddar. It is further alleged by the Petitioner that the Petitioner challenged the validity of the Board meeting dated May 3, 1973, by a letter dated June 2, 1973. The Petitioner further alleged that he had no notice of the subsequent Board meetings which ought to have been held at least once every month. The Petitioner further alleged that he did not receive the minutes of the Annual General meeting of the company which was purported to be held on May 31, 1973. The said letter dated June 22, 1973, is set out hereunder:

22nd June, 1973

From: Balmukund Bajoria, 6/1/3 Queens Park, Calcutta-19.

To

R.K. Chowdhury, Executive Director, Darjeeling and Cinchona Association Ltd., 42/1 Strand Road, Calcutta.

Dear Sir,

After the meeting of the Board of Directors of the Company held on 3rd May, 1973, at 2 Fairlie Place, Calcutta-1, I have not received any notice of the meeting of the Board of Directors for the month of May and also for the month of June as was usually held previously.

No information has also been given to the share-holders about the change of the address of the registered office.

I am of the opinion that the notice of meeting of the 3rd May, 1973, to the Directors was illegal inasmuch as the same was received by me on the 3rd May, at 3 p.m. and as such, I could not attend the meeting. I feel that the above meeting was illegal and all the proceedings thereto are illegal.

Please note that I am of the opinion that the meeting of the Board of Directors should be held every month and notice of such meetings should be sent to the Directors by registered post. I have not received the minutes of the meeting of the Annual General Meeting which was held on 31st May, 1973, as well as of the Board of Directors held on 3rd May, 1973.

Please note that I want to visit the estates within a fortnight or so and arrangements for my stay should be made over there.

I have not also received the statement of crop and sales as well as the production figures.

Please also let me know the position of the Bank Accounts.

I am awaiting to receive your reply of this letter within a week from you.

Yours faithfully, Sd/- Illegible.

c.c. Registrar of Companies (West Bengal) 27 Brabourne Road, Calcutta-1.

c.c. Secretary, Company Law Board, Narayani Building, 27 Brabourne Road, Calcutta-1.

The said letter was addressed to R.K. Chowdhury, Executive Director of the company at No. 42/1 Strand Road, Calcutta. It appears that by a letter dated July 12, 1973, the said company replied to the Petitioner''s said letter dated June 22, 1973, which is set out hereunder:

Darjeeling Tea and Cinchona Association Limited.

Regd. with A/D.

42/1 Strand Road, (2nd floor) Calcutta-7.

33-9771-73

Ref: DTCA/P/1/73 Sri Balmukund Bajoria, 6/1/3 Queens Park, Calcutta-19.

12th July, 1973

Dear Sir,

With reference to your letter dated 22nd June, 1973 and your subsequent call on the undersigned, we would advise as follows:

The change of registered office of the company was effected in due compliance with the requirements of the Companies Act, 1956. Kindly note that no information is required to be given to the share-holders in this regard. Due intimation was given ( to you for the Board meeting held on 3rd May, 1973. Since the Board meeting was duly held notwithstanding your unfortunate absence therefrom your contention regarding the meeting and the proceedings is not correct. Your opinion regarding holding of Board meeting and sending of notices has been noted. This will be placed before the next Board meeting for consideration by the other Directors. A copy of each of the minutes of the Annual General Meeting held on 31st May and the Board meeting held on 3rd May, 1973, is being sent to you shortly. It is surprising, however, that you did not receive a copy of the letter. Detailed information regarding crop, sales and production are made available at Board meeting and will be similarly available in respect of current period at the next meeting of the Board.

Your request regarding arrangement for your stay during your proposed visit to the Tea Estate of the company is not understood. It is observed that although you have been a Director of this company for a long time you have very seldom attended the Board meeting so far. Since the company was thus denied the benefit of your guidance as a Director and since it appears to be your intention that you do not intend to actively participate in the management and affairs of the company, the significance or necessity of such visit, as proposed by you may kindly be indicated at your earliest convenience.

In the meantime, you are earnestly requested to regularly attend Board meetings henceforward, in order to assume due responsibility for your office of Director.

Kindly note that your sudden call on the undersigned without any prior notice or appointment was rather embarrassing and your hostile and rude behaviour on such occasion is highly regretted. The undersigned and other Directors of the company look forward to receiving your full co-operation on the Board in future and to start with, a change of attitude on your part is most needed to enable the Board to work in harmony as a team. Also please note that the undersigned is a Director of the company and not an Executive Director as referred to in your letter under reply.

The need for your copying your letter to various authorities must be known to you only, but for the sake of regularity in correspondence, this letter is being copied to the Registrar of Companies (West Bengal). We trust that we have been able to clarify the position as desired by you and that it may be expected that you would try to improve your attendance at the future Board meetings.

Yours faithfully, Darjeeling Tea and Cinchona Asscn. Ltd. R.R. Chowdhury Director.

Copy to:

The Registrar of Companies (West Bengal) 27 Brabourne Road, Calcutta-1.

The Petitioner on July 2, 1973, sent a letter to the company asking for copies of Articles and Memorandum of Association of the company with amendment up to date and a list of shareholders of the company as on May 31, 1973 and as on June 30, 1973. In reply to the said letter of the Petitioner the company by its letter dated July 13, 1973, intimated that the Memorandum and Articles of Association had been exhausted and asked for deposit of Rs. 50 for copies of list of share-holders to be supplied to the Petitioner. It is alleged that the Petitioner on July 5, 1973, attended the premises No. 42/1 Strand Road, Calcutta, which was supposed to be new registered office of the company where, it is alleged by him, that no name-plate of the company was found in the said premises and in one room of the second floor of the said premises the Petitioner met the Respondent No. 2, R.K. Chowdhury, who represented himself to be a Director of the company. The Petitioner asked him to produce the minute books of the Board of Directors'' meetings of the company as well as share-holders'' minute book of the share-holders'' meetings and the statutory books of the company for his inspection, but it is alleged that the Petitioner was refused by the said R.K. Chowdhury and was asked to take any action he chose and under no circumstances he was to be given any inspection of such books. The Petitioner alleged to have recorded the said facts by his letter dated July 17, 1973, sent by registered post with acknowledgment due to the said address at 42/1 Strand Road, Calcutta, which was supposed to be the registered office of the company at that time. But the said registered letter came back with postal remark ''not known''.

Thereafter, various correspondence took place between the parties and the most relevant correspondence being the letter dated July 23, 1973, written by the Petitioner to Mahabir Prosad Poddar regarding the alleged benami purchase of the shares, controlling block of shares in the said company from the Macneill and Barry group and also exercise of ownership in respect of the said shares of Mahabir Prosad Poddar at the tea gardens of the company and the alleged sale of tea by him. The said letter is set out hereunder:

From: Sri B.M. Bajoria 6/1/3 Queens Park, Calcutta.

Registered with A/D. 23rd July 1973

Dear Mahabir Prasadji,

I have yet to receive your reply to my earlier letter to you. However, I once again write to you with concern that with regard to Darjeeling Tea and Cinchona Association Ltd. you seem to have fallen back on your words and the understanding arrived at by and between us.

You will recall that on or about last week of January 1973 you had approached me for the sale of my share-holdings including that of my wife and sons in the said company when I expressed my desire to purchase the shares of Macneill and Barry group. Thereafter, you informed me that Macneill and Barry group was not interested in selling but were interested in purchasing the shares belonging to my group at the rate of Rs. 125 per share. Having regard to the fact that the company was running at a loss, I agreed to sell the shares of my group. In fact, a contract in respect thereof Was forwarded to you by the broker.

After receiving such contract you once again requested me to meet you and accordingly, I met you at your office at No. 4 Fairlie Place, Calcutta, when you told me that you had been successful in persuading Macneill and Barry group to sell its holding to me for Rs. 125 per share and that such sale would take place in the month of May or June 1973. I readilly accepted the offer to purchase the shares from them as I was sure that the future of the company was bright provided it is managed properly. You, as such, requested me to treat the said contract sent to you, as stated aforesaid, as cancelled to which I agreed.

Recently I have come to know that you have purchased the Macneill and Barry group shares in the said company in the name of your friends, relations, nominees and benamdars. No sooner I came to know of this fact I wrote to you but to no avail.

My suspicion in this regard has been further strengthened due to the fact that when I was in Darjeeling during 1st week of July 1973 I was reliably told that you had visited and stayed at the tea garden of the said company in the second week of May 1973 for a period of about a week and that you sold the tea in cash and were managing the affairs of the said tea garden although you were and are not the Director of the company.

I am very much shocked at your such irregular activities. It seems that your only plan was to stop me from approaching directly Macneill and Barry for sale or purchase of the respective shares in the said company.

All my efforts to make a contact with you have been frustrated as you have been avoiding me. It is in the interest of the company its share-holders and creditors if you sell the shares so purchased by you or at your instance from Macneill and Barry group to me forthwith.

I shall await your early reply.

Sri Mahabir Prosadji Poddar 4, Fairlie Place, Calcutta.

Yours sincerely, (B.M. Bajoria)

Ultimately, the present application was presented on September 17, 1973 and an interim order was obtained by the Petitioner. Thereafter, directions were given for filing of affidavits in this matter. At one stage it appeared to me that both the interim application and the main application could be heard together as the copy of the petition in the main application had been made an annexure to the affidavit which is the ground of this application and has been made part of this application. The Respondent has dealt with the allegations in the main petition and as such, practically the interim application has been converted into the main application so far as the pleadings are concerned, But as the Central Government and was not served with the notice at that stage, I directed notice to be served on the Central Government so that directions in the main application could be given in their presence. On the returnable date fixed for such direction, the Central Government appeared and asked for longer time to consider the position. In the interim application the Central Government appeared to have taken no instruction or was not in a position to appear. Therefore, the Petitioner insisted that the interim application should be heard first as the affidavits were complete and directions might be given for hearing of the main application at the proper time as there was great urgency in the matter. Having regard to the conduct of the Respondents, prime facie looking into the allegations, that appeared to me to be a quite legitimate prayer by the Petitioner. Therefore, I decided to hear the interim application and gave direction in respect of the main application when it appeared in the list in the usual course. I may also note here that when the main application appeared in the list for direction, the Respondent No. 1 appearing through Shyam Sundar Bose of Bose and Dutt, Solicitors, asked for longer time for filing affidavits and it is my impression that the whole object of the Respondent was to delay the matter as long as possible thereby to prevent any interference by the Court by any interim order to be made in this application after hearing the same. However, at present the Petitioner pressed only Section 398 aspect of the matter mainly dealing with the question of acts and conducts which are prejudicial to the interest of the company and also prejudicial to the interest of the public due to material change in the management and control of the company and its share-holdings. Now I shall deal with the respective submissions of the parties.

Mr. Somnath Chatterjee with Mr. S.B. Mukherjee and Mr. B.P. Gupta appearing for the Petitioner submitted that in this interlocutory application the Petitioner was presenting Section 398 aspect of the petition. Mr. Mukherjee has drawn my attention to the provisions of Section 398, Companies Act, 1956 and submitted that if the Court is satisfied that a prima facie case has been made out by the Petitioner that the change in the share-holdings of the company and its management which he has admittedly taken place since May 3, 1973 and by reason of such change it is likely that affairs of the company will be conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the company, the Court will afford protection by way of appointing Special Officer and supersede the Board of the company. Mr. Mukherjee placed before me the main petition under Sections 397 and 398 of the Companies Act, 1956, which is annexure to the affidavit of Balmukund Bajoria affirmed on September 17, 1973, being the ground of this application. Mr. Mukherjee elaborately placed the facts and the correspondence passed between the parties regarding the subject-matter of this application and he submitted that it was quite clear that material change had taken place in the management and control of the company by alteration of the Board of Directors and also in the ownership of the company''s shares. The said changes, according to Mr. Mukherjee, are:

(a) Change in the Board of Directors of the company: (i) resignation of Lord Sinha, Mr. C.J.N. Will and Mr. S.C. Bhandari; (ii) purported co-option of R.K. Chowdhury, O.P. Jain and Deoki Nandan Poddar who are near relations of Mahabir Prosad Poddar.

(b) Change in the share-holdings of the company the shares held by Macneill and Barry Ltd. and their group are alleged to have been purchased by R.K. Chowdhury.

(c) Change of registered office from No. 2 Fairlie Place to 42/1 Strand Road, Calcutta and thereafter again to 4 Fairlie Place, Calcutta.

(d) Change of Auditors: M/s. Lovelock and Lewes have been substituted by M/s. Kothari and Company without assigning any reasons.

Thereafter, Mr. Mukherjee submitted that admittedly Hemraj Mahabir Prosad Pvt. Ltd. which is a family concern of Mahabir Prosad Poddar in which he, his wife and mother are Directors were purported to be appointed to carry out the secretarial work of the company and such appointment is alleged to have been made on August 16, 1973, with retrospective effect from May 3, 1973. Mr. Mukherjee further submitted that various other persons have been appointed at salaries of about Rs. 750 per month without any disclosure. Mr. Mukherjee submitted that the purported Extra-ordinary General Meeting held on September 18, 1973, a resolution is alleged to have been passed authorising the Board to mortgage, charge, sell or dispose of the company''s tea gardens. The said resolution is '' alleged to have been passed because the company''s bankers were insisting upon creating of a charge in respect of the company''s tea gardens. Mr. Mukherjee submitted that the necessity for passing a resolution authorising the sale of the company''s tea gardens has not been explained. Mr. Mukherjee contended that no resolution has yet been disclosed which would go to show that the alleged transfer of shares by the Macneill and Barry group to R.K. Chowdhury and others have been approved by the Board of Directors. In spite of specific charges that the shares have really been purchased by Mahabir Prosad Poddar and that R.K. Chowdhury is only his nominee, nothing has been disclosed to refute the said charge of the Petitioner. Mr. Mukherjee submitted that no notice of the alleged Board meeting of May 10, 1973, had been given and no agenda of the alleged Board meeting of August'' 16, 1973, was disclosed. He submitted that it is very significant that the alleged Board meetings dated May 10, 1973 and August 16, 1973, were not mentioned in any letter till August 17, 1973. The minutes of this alleged meeting of May 10, 1973, does not appear to have been confirmed in the meeting alleged to have been held on August 16, 1973. Mr. Mukherjee, thereafter, submitted that C.J.N. Will was Director due to retire by rotation at the Annual General Meeting held on May 31, 1973. He, however, alleged to have resigned on May 3, 1973. Mr. Mukherjee submitted that in the circumstances there was no election of any Director in place of Mr. Will at the said Annual General Meeting. He further pointed out that it transpires from the alleged Board meeting dated August 16, 1973, that Mr. O.P. Jain was purported to be appointed a Director in place of C.J.N. Will. Mr. Mukherjee submitted that this purported appointment is in contravention of Section 262 of the Companies Act, 1956. It is further contended by Mr. Mukherjee that it is significant that although very many important matters were purported to be transacted at the alleged Board meeting of August 16, 1973, there was no circulation of an agenda of the said meeting and at the said alleged meeting Hemraj Mahabir Prosad Pvt. Ltd. was purported to be appointed to carry out secretarial work of the company at a remuneration of Rs. 1,000 per month. The said meeting purported to co-opt a Director and at the said meeting it is alleged that the registered office of the company was purported to be changed to No. 4 Fairlie Place, Calcutta, at which the office of Hemraj Mahabir Prosad Pvt. Ltd. is also situate. Mr. Mukherjee submitted that all these resolutions have been concocted and brought into existence behind the back of the Petitioner and the said resolutions are not conducive to the interest of the company. Relying on those facts Mr. Mukherjee submitted that the same show:

(a) That the affairs of the company are being conducted in a manner prejudicial to the interest of the company and prejudicial to public interest. He submitted that it need not necessarily be a case of actual mismanagement resulting in loss of profits by the company. He submitted that the expressions ''affairs of the company'' are wide enough and where the provisions of the Act and the Articles are violated and the affairs are not conducted regularly, they amount to acts prejudicial to the interest of the company or acts prejudicial to public interest.

(b) Mr. Mukherjee submitted that the admitted position is that there has been a change in the management as pointed out by him. In such a case, it is not necessary to show actual mismanagement but that by reasons of such change it is likely that the affairs of the company will be conducted in a manner prejudicial to the interest of the company or in a manner prejudicial to public interest.

(c) Mr. Mukherjee submitted that both the tests laid down in Section 398 have been fully satisfied in this case. More than a prima facie case has been made out on the materials which are sufficient to invoke the Court''s jurisdiction u/s 398 at this stage. Therefore, Mr. Mukherjee submitted that Special Officer should be appointed and the Board should be superseded. Mr. Mukherjee, in course of his arguments, referred to the English decision in Re H.R. Harmer Ltd. (1958) 3 All E.R. 688 (703), where there is an observation of Jenkins L.J. as follows:

The oppression must, no doubt, be oppression of members as such, but it does not follow that the fact that the oppressed members are also Directors is a disqualifying circumstance when the question of relief u/s 210 arise.

Mr. Mukherjee submitted that the Petitioner has made out a strong prima facie case for interim relief as asked for in this application.

Mr. Prabir Sen with Mr. R.K. Lala appearing for the Respondents Nos. 1 and 3 submitted that in the interlocutory application for an interim order the Petitioner''s counsel has only argued on the basis of Section 398 of the Companies Act, 1956. Mr. Sen submitted that for the purpose of this interim application the Petitioner has given a go by to the case u/s 397 of the Companies Act, 1956. Mr. Sen submitted that one of the preconditions for attracting the provisions of Section 397 of the Companies Act, 1956, is that the Petitioner must be able to make out a case for winding up of the company. He referred to the decision in Lokenath Gupta and Ors. v. Creditors Pvt. Ltd (1968) 1 C.L.J. 253. Secondly, to attract the provisions of Section 397 it has also been held by numerous authorities that the Petitioner must have been dandified in his capacity as a share-holder of the company. Mr. Sen submitted that it is clear from the petition that each and every allegation made by the Petitioner is made as a Director of a company. Therefore, Mr. Sen submitted that the Petitioner is not entitled to any order u/s 397 of the Companies Act, 1956. Thereafter, Mr. Sen submitted that the main ground in which the intervention of the Court is asked for by the Petitioner by appointment of Special Officer and supersession of the Board of Directors of the company is based on the applicability of the provisions of Section 398 of the Companies Act. Mr. Sen submitted that it is true that the management of the company has changed, but the question arises for consideration is as to whether any case has been made out by the Petitioner which shows that the affairs of the company are being conducted in a manner (a) prejudicial to public interest or (b) prejudicial to the interest of the company or (c) it is likely that the affairs of the company will be conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the company. Mr. Sen submitted that no facts or particulars can be found anywhere in the petition that the affairs of the company are being conducted in a manner either prejudicial to public interest or prejudicial to the interest of the company or likely to be conducted prejudicial to the public interest or to the interest of the company. Mr. Sen submitted that the allegations regarding the applicability of Section 398 of the Companies Act, 1956, can only be found in paras. 27 and 28 of the, petition. Mr. Sen submitted that no such allegations regarding prejudicial to public interest or prejudicial to the interest of the company are to be found there. He submitted that so far para. 28 of the petition is concerned except maligning Mahabir Prosad Poddar about his activities, no other evidence or particulars either prejudicial to the interest of the company or prejudicial to the interest of the public could be found there. Mr. Sen analysing the pleadings submitted that the general trend of the allegations contained in the petition concerned the position of the Petitioner as a Director of the company. He submitted that the Petitioner is complaining about the legality or holding the Board meetings, non-receipt of notices, short notice, absence of agenda of the Board meeting. Mr. Sen submitted that the very, condition of the applicability either u/s 397 or Section 398 is the oppression of affecting the rights of the share-holders in his capacity as regarding the affairs of the company not in his capacity as a Director or otherwise. Mr. Sen submitted that it is significant that there is no allegation in the petition as to how the Petitioner or the persons who have signed the consent letters have been damnified in their capacity as share-holders of the company. Therefore, Mr. Sen submitted that the very precondition of the Sections 397 and 398 being absent, the Petitioner is not entitled to any order in this petition. Mr. Sen, thereafter, submitted relying on the affidavit of R.K. Chowdhury affirmed on November 20, 1973, in this application that instead of the affairs of the company being conducted in a manner prejudicial to the interest of the company, it has been conducted in a manner to the utmost benefit of the company and the financial position of the company has vastly improved so far the share-holders of the company are concerned. Mr. Sen referred to the annexure of the said affidavit showing the position of the overdraft of the company since April 13, 1973, to October 18, 1973, where the overdraft amount appears to have been reduced from Rs. 22,80,125 to Rs. 13,18,432-57. That was during the present management which came in on May 3, 1973. Mr. Sen thereafter submitted from the comparison of the balance-sheet for the year ending December 31, 1971 and December 31, 1972, it would appear that the company was running at a loss and the overdraft stood at Rs. 16,53,362. Mr. Sen also referred to the letter of the United Bank of India dated September 21, 1973, which is a certificate of good conduct of the company and also a certificate of the company having bright prospects. Mr. Sen also referred to the letter of Carrit Moran and Company Pvt. Ltd., Tea Broker, dated September 20, 1973, annexed to the said affidavit in support of his argument that the company was running to the utmost benefit of the share-holders under the present management. He submitted that the Petitioner has not been in a position to deny those facts in his affidavit-in-reply. Therefore, Mr. Sen submitted that it is conclusively established that no case has been made out by the Petitioner that the Petitioner is entitled to any relief u/s 398 of the Companies Act, 1956. Mr. Sen relied on the various decisions in support of his proposition that no case has been made out u/s 398 of the Companies Act, 1956. Shanti Prasad Jain Vs. Kalinga Tubes Ltd., , Mohta Bros. (P.) Ltd. and Others Vs. Calcutta Landing and Shipping Co. Ltd. and Others, and an unreported decision of Sabyasachi Mukharji J. in a case of C.D. Mining if Export Company Pvt. Ltd. Thereafter, Mr. Sen dealt with the allegations by the Petitioner and the answers given by the Respondent in respect of the charges regarding the meeting dated May 3, 1973, Annual General Meeting dated May 31, 1973, Board meeting dated August 16, 1973 and an Extraordinary General Meeting dated September 19, 1973. He submitted that the allegations are false. He further submitted that the Petitioner instead pf fighting the issue regarding the appointment, of Auditors in a domestic forum, that is, the Board meeting of the company has chosen to make the same a ground for the instant petition to obtain an order from this Court to which he is not entitled. Mr. Sen further submitted that even assuming that the explanatory statement to the Extra-ordinary General Meeting held on September 18, 1973, was tricky but even then that would not be a ground for relief under Sections 397 and 398 of the Companies Act, 1956. He relied on the decision in Maharani Lalita Rajya Lakshmi M.P. Vs. Indian Motor Co., (Hazaribagh) Ltd. and Others, , for the said proposition. Mr. Sen submitted that from the allegations in the petition and answer to the same by the Respondents it would appear that even if it is assumed that the Petitioner''s allegations are true, it would be at best the Petitioner''s grievance, as a Director and not as a share-holder of the company, nor the company or the public interest has suffered and prejudiced thereby. Mr. Sen in that connection relied on the decision in Re Bellador Silk Company Ltd. (1965) 1 All E.R. 667. Mr. Sen, thereafter, submitted that the Petitioner cannot be heard to urge new grounds in the supplementary affidavit is a well-known proposition. He submitted that the allegations of appointment of Mr. O.P. Jain and Mr. Deokinandan Poddar as Directors without any proposal and seconding the same at the time of their appointment amounts to running the-said appointment bad has no force as Mr. Sen submitted that the company on previous occasions even in the appointment of the Petitioner as a Director on October 31, 1963, was also without proposal and seconding of such appointment. Mr. Sen submitted that the present application has been made mala fide and with an oblique intention. He submitted that the real purpose behind making the present application is to be found in the allegations in para. 16(d) read with the letter dated July 23, 1973, at p. 75 and affidavit-in-opposition of Mr. R.K. Chowdhury, para. 31, last few lines at pp. 30 and 31. Mr. Sen, therefore, submitted that it is an admitted case that the real intention of the Petitioner is to put pressure on the present management being out-manoeuvred in the scramble for acquiring the controlling share in the company from Macneill and Barry Ltd. group. Mr. Sen submitted that the petition should fail on the ground of inordinate delay. Mr. Sen submitted that in the affidavit-in-opposition, para. 58, specific allegations were made that the Petitioner had full knowledge of each and all the acts complained of in the petition and in spite thereof the Petitioner made the application. Mr. Sen submitted that the real grievance of the Petitioner, if any, arose as early as on May 3, 1973. He submitted that it is significant that the first letter was written by the Petitioner on June 22, 1973 and petition was presented on September 18, 1973. Mr. Sen also referred to para. 21 of the affidavit-in-reply where the Petitioner had not even denied the fact that he had full knowledge of every act complained of by him in the petition as alleged in the affidavit-in-opposition of Mr. R.K. Chowdhury. Mr. Sen submitted that the allegation of the Petitioner that Hemraj Mahabir Prosad Pvt. Ltd. was appointed for private secretarial services to the company at a remuneration of Rs. 1,000 per month is bad. Mr. Sen submitted that it would appear from the balance-sheet for the year ending 1972 that Macneill and Barry Services Ltd. used to pay Rs. 1,02,000 to private secretarial services to the company. He, therefore, submitted that the compactly has saved about Rs. 80,000 approximately by the appointment of Hemraj Mahabir Prosad Pvt. Ltd. Mr. Sen submitted that it is not I alleged that the appointment of Hemraj Mahabir Prosad Pvt. Ltd. could either be prejudicial to the public interest or the interest of the company. Mr. Sen submitted that the Petitioner has miserably failed and should not be granted any relief by way of any interim order.

Mr. S.K. Kapoor appearing for Mahabir Prosad Poddar submitted that his; client is not in any way interested in the affairs of the company save and except that the secretarial work is being performed by Hemraj Mahabir Prosad Pvt. Ltd. which is his client''s concern. He further submitted that the allegations in the petition in paras. 23 to 28 are vague, wild and reckless without any material particulars. He submitted that there is no iota of evidence to show that Mahabir Prosad Poddar is the real owner of the said shares or R.K. Chowdhury is the nominee and/or benamdar of the said Mahabir Prosad Poddar. He further submitted that the Petitioner himself is an unreliable person who was arrested in 1964 under the Defence of India Rules as would appear from the Statesman news item dated September 16, 1964, copy of which was annexed to the affidavit of Mahabir Prosad Poddar affirmed on November 27, 1973. He also submitted that the allegations against Mahabir Prosad Poddar that he was in the tea garden of the company and sold the tea there and all such allegations are made on hearsay evidence and should not be [relied on. He further submitted that in providing accommodation in its registered office is for the benefit of the company in the facts and circumstances of this case. In short, Mr. Kapoor denied that Mahabir Prosad Poddar is the real owner of the shares after purchase from Macneill and Barry group of share-holders of the said company. He further denied the allegations in the letter of the Petitioner addressed to Mahabir Prosad Poddar relating to the purchase of the shares of the company held bythe Macneill and Barry group of share-holders. Mr. Kapoor admitted that the letter dated July 23, 1973, at p. 75 of the main petition under Sections 397 and 398, application was received by Mahabir Prosad Poddar but the allegation are entirely false. Mr. Kapoor submitted that the allegations themselves and the conduct of the Petitioner clearly indicate that the real grievance of the Petitioner is that he has been out-manoeuvered in the purchase of the shares of Macneill and Barry group in the said company. He submitted that the allegation in the said letter of July 23, 1973, are based" on information alleged to have been received by the said Petitioner during the first week of July 1973 that Mahabir Prosad Poddar stayed at the tea garden of the company in the second week of May 1973 and stayed there for a week and sold tea in cash and managing the affairs of the company at its tea garden. He submitted that all those allegations are based on no authentic material but on hearsay evidence and should not be relied on in any way. He submitted that his client did not think it necessary to reply to the said allegations of the Petitioner in the letter dated July 23, 1973. Mr. Kapoor really submitted that no ground has been made out in this application for superseding the Board of Directors of the company and appointment of Special Officer as asked for by the Petitioner. He further submitted that that would prejudicially affect the interest of Hemraj Mahabir Prosad Pvt. Ltd. which is discharging secretarial work of the company and pursuant to the resolution of the company duly passed. Mr. Kapoor placed the affidavit of Mahabir Prosad Poddar affirmed on November 29, 1973, in this application and submitted that his client is not interested in the management and control of the company and Mahabir Prosad Poddar is not the real owner of the shares or a de facto Director of the company as alleged by the Petitioner. He really adopted the contentions of Mr. Prabir Sen made on behalf of the company and R.K. Chowdhury.

Considering the respective contentions, I am of the view that the Petitioner has made out a prima facie case for interim protection and that circumstances requires that Special Officer should be appointed superseding the Board of Directors of the company pending the disposal of the main application. As usual in Sections 397 and 398 application attacks on the pleadings have been elaborately made by Mr. Prabir Sen appearing on behalf of the Respondent and Mr. Kapoor appearing for Mahabir Prosad Poddar as to the lack of particulars and proper pleadings. Further, it is also been contended by Mr. Prabir Sen that the Petitioner cannot rely on subsequent facts in this application but must proceed on the basis of the facts as existed at the date of presentation of this petition. Mr. Sen relied on various decisions referred to before, but, in my view, particulars as to pleading in cases of this nature would depend on the peculiar facts and circumstances of each case and the Court is to see whether there are sufficient materials on which the Court can act and it is not required at this stage that the fraud or allegations of similar nature should be established by evidence. What is required that there are materials and circumstances pleaded with particulars from which it can be prima facie legitimately be inferred that there are grounds for the said allegations. See L.A. Creet Vs. Firm Gangaraj-Gulraj and Others, , Satish Chandra Chatterji v. Kumar Satish Kantha Roy and Ors. AIR 1923 P.C. 73 and Sailendra Nath Bhattachrjee Vs. Bijan Lal Chakravarty and Others, .

Here, I may quote a passage from an old decision in Mothoora Pandey v. Ram Ruchya Tewaree and Ors. 11 W.R. (Suth.) 482, where Dwarkanath Mitter J. dealing with a question of pleading and proof of fraud observed as follows:

It is a truth confirmed by all experience that in the great majority of cases fraud is not capable of being established by positive and express proofs. It is by its very nature secret in its movements; and if those whose duty it is to investigate questions of fraud are to insist upon direct proof in every case, the ends of justice would be constantly, if not invariably, defeated. We do not mean to say that fraud can be established by any less proof, or by any different kind of proof, from what is required to establish any other disputed question of fact, or that circumstances of mere suspicion which lead to no certain result should be taken as sufficient proof of fraud, or that fraud should be presumed against anybody in any case; but what we mean to say is, that in the generality of cases, circumstantial evidence is our only resource in dealing with questions of fraud; and if this evidence is sufficient to overcome the natural presumption of honesty and fair dealing and to satisfy a reasonable mind of the existence of fraud by raising a counter-presumption, there is no reasons whatever why we should not act upon it.

I may also here quote a passage from the Supreme Court decision in Seth Gulabchand Vs. Seth Kudilal and Others, , where proof of bribery in a case came up. Sikri J. after setting out the definition in Section 3 of the Evidence Act regarding ''proved'', ''disproved'' and ''not proved'' observed as follows:

It is apparent from the above definitions that the Indian Evidence Act applies the same standard of proof in all civil cases. It makes no difference between cases in which charges of a fraudulent or criminal character are made and cases in which such charges are not made. But this is not to say that the Court will not, while striking the balance of probability, keep in mind the presumption of honesty or innocence or the nature of the crime or fraud charged. In our opinion, Woodroffe J. was wrong in insisting that such charges must be proved clearly and beyond reasonable doubt.

Then again in para. 13 Sikri J. (as he then was) observed:

As we have said before the fact that the party is alleged to have accepted bribe in a civil case does not convert it into a criminal case and the ordinary rules applicable to civil cases apply.

The Court will not, in my view, be swayed by technicalities of pleading if there are sufficient materials pleaded and there are circumstances wherefrom it can be legitimately inferred that it is a case of fraud or benami or of like nature. In cases of benami the Supreme Court in a latest decision in Jaydayal Poddar (Deceased) through L.Rs. and Another Vs. Mst. Bibi Hazra and Others, , has laid down the following principles:

Though the question, whether a particular sale is benami or not, is largely one of act and for determining this question, no absolute formulae or acid test, uniformly applicable in all situations, can be laid down; yet in weighing the probabilities for gathering the relevant indicia, the Courts are usually guided by these circumstances: (1) the source from which the purchase money came; (2) the nature and possession of the property, after the purchase; (3) motive, if any, for giving the transaction a benami colour; (4) the position of the parties and the relationship, if any, between the claimant and the alleged benamdar; (5) the custody of the title deeds after the sale; and (6) the conduct of the parties concerned in dealing with the property after the sale.

The above indicia are not exhaustive and their efficacy varies according to the facts of each case. Nevertheless, No. 1, viz., the source whence the purchase money came, is by far the most important test for determining whether the sale standing in the name of one person, is in reality for the benefit of another.

Those being the guiding principles have to be applied to the facts and circumstances of the present case and in my view, it leaves no doubt at this stage that the Petitioner has established a prima facie case of benami purchase of the said shares by Mahabir Prosad Poddar in the name of his maternal uncle and others in the said company from the Macneill and Barry group of share-holders. At least the said circumstances Nos. 2, 3, 4, 5 and 6 as laid down in Supreme Court decision have been sufficiently satisfied at this stage that the said purchase of the shares of the company from Macneill and Barry group was by Mahabir Prosad Poddar in the name of R.K. Chowdhury.

Regarding the question of subsequent fact whether it can be relied upon by the Petitioner in this application and the question of pleading, I may refer to the decision in Ramshankar Prosad and Ors. v. Sindri Iron Foundry Pvt. Ltd. and Ors. C.W.N. 520 (Paras. 45, 55), where it has been held by G.K. Mitter J. (as he then was) that the Court must guide itself by all the evidence before it including subsequent affidavits filling up what was originally lacking. It would not be right to measure the rights of the parties only in terms of the petition.

So, in my view, from the facts which have been disclosed in this proceeding at this stage, there are sufficient materials in the pleadings about the circumstances in which the shares of the company held by Macneill and Barry group have been purchased and the conduct of Mahabir Prosad in relation to the affairs of the said company not only gives rise to very strong suspicion, but in my view fairly and clearly indicate and it is legitimate to infer that the said purchase is for the benefit of Mahabir Prosad Poddar. It is true that at this stage save and except bare allegations by the Petitioner that the said purchase was by Mahabir Prosad Poddar in the name of his maternal uncle R.K. Chowdhury, nothing definite has been indicated about the source of money. But in a case like this, Court must not ignore the realities as it has now become sufficiently notorious fact to be taken judicial notice of dealing between foreign share-holders and the Indian purchasers of a controlling block of shares of the erstwhile British Managing Agents. Those types of transactions are generally clandestine and on the surface it does not show the real purchaser or the real value paid for the said shares. It has become a common occurrence that erstwhile gilt-edged securities, that is company managed by foreign managing agencies, particularly British, have been gradually taken over by groups of inefficient, dishonest business groups in India through shady deals and thereafter rendered the company''s shares worthless after dissipating and misappropriating the assets of the company. In large number of such cases, the management of the company had to be taken over by the Central Government after exercising its power under the Industries (Development and Regulations) Act, 1951. In fact, one of such companies which was taken over from Macneill and Barry Ltd. by Mahabir Prasad Poddar is Containers and Closers Ltd. Large number of winding up petitions were presented against the said Containers and Closers Ltd. after the said Mahabir Prasad Poddar took it over, both the controlling block of shares belonging to the erstwhile Managing Agents Macneill and Barry group and the management and control of the said company and failed to pay the legitimate debt of the company on various false, untenable and highly improbable pleas. A matter being Company Application No. 115 of 1972 connected with Company Petition No. 118 of 1972 Containers and Closers Ltd. v. Gobinda Ganguli in an application of stay of winding up, I delivered a judgment on June 20, 1972, which is unreported and has been placed before me by the Petitioner. I had to hold in the circumstances of that case that the attitude of the management of the company, after Mahabir Prosad Poddar took it over, appeared to me to be sinister and dangerous against healthy and honest commercial practice. It is admitted that ultimately the management of the said Containers and Closers Ltd. has been taken over by the Central Government under the Industries (Development and Regulations) Act, 1951, after investigation into the affairs of the company under the said Act. It is further alleged that another company which was also taken over by Mahabir Prosad Poddar being Frazer and Company Ltd. has also been mismanaged. It is true that details of the said Frazer and Company have not been given by the Petitioner, but, in my view, at this stage it is sufficient consideration for the Court to take into account the said facts. Another company is Pahargoomiah Tea Company Ltd. under the management of Mahabir Prosad Poddar from which a Manager of the Tea Estate was posted at the tea garden of the Respondent company. It is true that the allegations of the Petitioner in the supplementary affidavit affirmed by him on November 7, 1973 and the said allegations are not admitted, but I am not at the proof stage of the proceedings, but prima facie the said allegations seem to be not without foundations or lacking in material particulars. The Petitioner has made the statements on oath.

The letter dated July 23, 1973, written by the Petitioner to the said Mahabir Prosad Poddar positively, definitely and clearly recorded the negotiations and purchase of the controlling block of shares in the Respondent company held by Macneill and Barry group of share-holders has remained unreplied. The said letter I have set out before which is clear enough about the circumstances of the purchase of the said shares by Mahabir Prosad Poddar. It is also quite true that from the said letter of the Petitioner it appears that the Petitioner was also trying to purchase the shares of Macneill and Barry group of share-holdings in the Respondent company. As I have stated that the said letter was received by Mahabir Prosad Poddar and was never replied to seems to me to be very strange although it may be quite clear that the Petitioner has put the said facts on record at a stage after his bid to purchase the said Macneill and Barry group shares in the Respondent company was frustrated by Mahabir Prosad Poddar. But I am not concerned at this stage as to the bid for purchase of the said group of shares of the said company. But I am concerned only to find out whether Mahabir Prosad Poddar is the real owner of the said shares and R.K. Chowdhury and others are his benamdars. From that point of view the said letter seems to me very vital and practically contains uncontradicted facts about the nature of benami purchase of the shares belonging to the Macneill and Barry group in the Respondent company by Mahabir Prosad Poddar. So, that admitted letter, in my view, gives a clue about the source of money for the purchase of the said shares of the Macneill and Barry group of shareholders in the Respondent company. It cannot be said that there is no evidence of the source of money in the petition as the said letter is an annexure to the petition and forms part of it and question of proof by further evidence may arise at the stage of hearing of the main application. But at the present moment, it is sufficient to raise a presumption on the said materials in favour of the source of the purchase money of the said shares of Macneill and Barry group in the Respondent company is Mahabir Prosad Poddar. Now, it was within the special knowledge of Mahabir Prosad Poddar and R.K. Chowdhury to rebut the said presumption at the trial stage of the main application. I may point out that nothing has been stated anywhere in the affidavit-in-opposition either of R.K. Chowdhury or of the company or of Mahabir Prosad Poddar as to the price of the said group of shares at which they were purchased or wherefrom the money came and I may also point out that in spite of repeated requisitions and requests made by the Petitioner for inspection of the relevant resolution of the company recording the said transfer of the shares from Macneill and Barry group of share-holders to R.K. Chowdhury in the Respondent company nothing has been produced. Those materials at this stage prima facie satisfied the condition No. 1 as laid down in the Supreme Court decision as to the source of purchase money being provided by Mahabir Prosad Poddar.

Regarding the second condition that the nature and possession of the said shares in the Respondent company after the purchase, it appears that Mahabir Prosad Poddar is playing a vital role in the management of the company and at this stage there are prima facie materials to show from the said letter dated July 23, 1973 and the allegations in the petition and supplementary affidavit and affidavit-in-reply of the Petitioner that Mahabir Prosad Poddar is exercising the rights as share-holder of the company and is the de facto Director of the said company. The change of registered office to 4 Fairlie Place, Calcutta, as a tenant of Hemraj Mahabir Prosad Pvt. Ltd. by a resolution in the alleged Board meeting dated August 16, 1973, is also an indication of exercise of right by Mahabir Prosad Poddar in getting the control of the company after purchase of the said shares. All the Directors, that is, R.R. Chowdhury, O.P. Jain and Deokinandan Poddar are near relations of Mahabir Prosad Poddar. Hemraj Mahabir Prosad Pvt. Ltd. is a family concern of Mahabir Prosad Poddar in which his wife and mother are the other share-holders and it is prima facie Mahabir Prosad Poddar in the name of the said Private Limited Company which has taken over the secretarial work of the Respondent company by an altered Board resolution passed in the alleged meeting dated August 16, 1973, with retrospective effect from May 3, 1973 and lastly, in the alleged Annual General Meeting on May 31, 1973, Kothari and Company, Chartered Accountant, has replaced the old auditors of the company M/s. Lovelock and Lewes, an unquestionable reputed firm of auditors of long standing. It is also strange that the present auditors of the Respondent company are connected with the auditors of Hemraj Mahabir Prosad Pvt. Ltd. Those are sufficient materials to show that the exercise of the right after purchase of the said shares of the Macneill and Barry group in the Respondent company is by Mahabir Prosad Poddar and no one else.

Regarding the condition No. 3 as laid down by the Supreme Court the motive seems to be quite apparent that Mahabir Prosad Poddar wants to be in the background as either the transactions of the purchase of the shares were shady and entered in a clandestine manner or to avoid the consequences of the Companies Act and Rules made thereunder and other legislative provisions relating to taking over of management of companies and if possible, denude the company of its assets in the same manner in which he has dealt with Frazer and Company Ltd. and Containers and Closers Ltd.

Regarding the condition No. 4, as laid down by the Supreme Court, the near relationship between the benamdars, that is, R.K. Chowdhury, O.P. Jain and Deokinandan Poddar with Mahabir Prosad Poddar are admitted.

Regarding the condition No. 5, it prima facie appears that the said Mahabir Prosad Poddar is exercising the rights in respect of the said shares and is the de facto Director of the said company and in the garb of rendering secretarial work through Hemraj Mahabir Prosad Pvt. Ltd. and getting the registered office transferred at his office at No. 4 Fairlie Place, Calcutta and visiting the tea garden is exercising the rights of management in respect of the same by selling-tea as alleged by the Petitioner, I have clearly indicated the custody of documents, or at least the rights under the said shares are being exercised by Mahabir Prosad Poddar after the purchase. Regarding the condition No. 6, it is clear from the conduct of the parties, that is, Mahabir Prosad Poddar, R.K. Chowdhury, O.P. Jain and Deokinandan Poddar who are concerned in dealing with the said shares vis-a-vis the management and control of the company after the alleged purchase. The resignation of the former Board of Directors except A. Singh, the Respondent No. 3 and appointment of R.K. Chowdhury and subsequently, of O.P. Jain and Deokinandan Poddar and participation of Mahabir Prosad Poddar through Hemraj Mahabir Prosad Pvt. Ltd. in the secretarial work of the said company are enough to show the conduct of Mahabir Prosad Poddar that his ownership is being exercised in respect of the said shares by taking over the management and control of the said company. But all the facts must be taken as a whole and in the context and background of the case of a take-over bid from a foreign group of share-holders of an old tea company, the facts and circumstances of such transaction cannot be identical or similar to transaction between close relations, that is husband and wife, which was the case for consideration before the Supreme Court. But the Supreme Court has itself laid down that those indicia are not exhaustive and their efficacy varies according to the facts of each case. So, in the transaction of purchase of controlling block of shares through a benamdar and particularly, when such purchase is made from foreign share-holders, the erstwhile Managing Agents of an old and established company, the source of purchase money cannot be clear as nobody is going to purchase after making public declaration of a controlling block of shares in an established and reputed company. It may be transaction, both in this country and also in foreign country, when it relates to sale by foreign shareholders. Therefore, the relationship between the benamdar and the real owner is very vital for consideration and the conduct of the parties, as I have indicated before, leaves no doubt in my mind at this stage that the shares were purchased by Mahabir Prosad Poddar in the benami name of R.K. Chowdhury and others for getting control of the said company.

Now, the next question would be whether the conditions of Section 398 of the Companies Act, 1956, have been satisfied, that is, there is actual mismanagement or apprehension of mismanagement of the affairs of the company as laid down in the said section and interpreted by the Supreme Court. I may here quote the passage from the Supreme Court decision in Shanti Prasad Jain v. Kalinga Tubes Ltd. Supra (para. 32), which was relied on by both the parties.

(32) We now come to the case u/s 398. It provides that any members of a company who have rights to apply in virtue of Section 399 may complain (i) that the affairs of the company are being conducted in a manner prejudicial to the interest of the company, or (ii) that a material change has taken place in the management or control of the company and that by reason of such change it is likely that the affairs of the company will be conducted in a manner prejudicial to the interest of the company. On such application being made, if the Court is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the matter of management or control, it is likely that the affairs of the company will be conducted as aforesaid, the Court may, with a view to bringing to an end or preventing the matters complained of '' or apprehended, make such order as it thinks fit. This section only comes into play as the marginal note shows, when there is actual mismanagement or apprehension of mismanagement of the affairs of the company.

In the present case, there is no dispute that material change has taken place both in the management or control of the company by alteration of the Board of Directors and in the ownership of the company''s shares, that is, the Macneill and Barry group has gone out of the management and Mahabir Prosad Poddar through his nominees R.K. Chowdhury, O.P. Jain and Deokinandan Poddar has come into control. The shares of the Macneill and Barry group have been purchased by Mahabir Prosad Poddar in the name of R.K. Chowdhury and in fact, the Board of Directors has been changed on May 3, 1973, as alleged by the Respondents. Now, the question would be whether prima facie the affairs of the company are conducted in a manner prejudicial to the interest of the company or prejudicial to the public interest or there is a reasonable apprehension of such prejudice in the facts and circumstances of the case. In my view, carrying the management and control of a company through a benamdar is itself a prejudicial act both in the interest of the company and also in the public interest. The Companies Act and other relevant legislations in relation to the management and control of the company make it quite clear and for obvious reasons of efficient economic and commercial trade practices, that it should be fair, honest and perfectly clear both to the share-holders and to the public as to who are the persons in the management and control of the company and if there is a benamdar who is in ostensible management and control of the company and the real person is behind the scene, then certainly it is not the true picture that the share-holders of the company and public would get about the management and control of the company. Therefore, it would be dangerous and unsafe to deal with such company as the real position is not apparent on the face of the company. Particularly, in the present atmosphere and business climate, it would be very harmful and against public interest to allow control of a company to the benamdars as it is not uncommon knowledge and widespread practice in this country that companies are utilised for the purposes of generating black money utilising assets and properties of a company for personal use and treating the same as the private and personal property of the group of share-holders who are controlling the said company, that is, house, building and office of the company are being utilised for their own purposes and cars and employees of the company are used for personal purposes of these persons in management and control. The company might be running at a loss, but the persons in management and control of the company and their relatives and friends are employed at high salaries, allowances and remuneration to drain out the company''s assets and income so as to show loss and thereby, deprive the shareholders and the company and ultimately, the country of the said commercial enterprise. The facts are so notorious that I cannot ignore the same but possibly be bound to take judicial notice. Therefore, if on technicalities of pleading and proof at this stage as contended on behalf of the Respondents and Mahabir Prosad Poddar, I refuse any relief that will be practically denial of realities and failing to discharge the duty of the Court to gender social justice in the progressive society which is the aim and object of the Companies Act, Monopolies Trade Practices Act, Industries (Development and Regulations) Act, 1951 and other allied legislations. The Court must exercise its commonsense, experience and weigh the probabilities in every case and dispense justice accordingly. Here, I have observed that it is abundantly clear that Mahabir Prosad Poddar is the real person who was present in the Court practically all through when this matter was taken up for hearing. His affidavit filed in this application although repeated like a parrot that he is not interested in the management and control of the company, but if it is read as a whole the anxiety and fear of loosing control and management by any interim order was abundantly clear by his personal presence and the statements in the affidavit. He was not in a position to deny the said letter dated July 23, 1973, in any way. It is only after such a state of affairs during the hearings of this application that it appeared to me to be very significant and asked Mr. Prabir Sen who appeared for R.K. Chowdhury as to whether his client was taking any interest then and the only after some time, R.K. Chowdhury came in the Court and overacted his part by asking the Court''s leave before he left the Court after being present for some time. These are significant facts which, in my view, indicate the real thing behind the apparent thing, that is, Mahabir Prosad Poddar is the real purchaser of the said shares and R.K. Chowdhury is a mere benamdar who acts according to the dictates of Mahabir Prosad Poddar, apart from being a close relation, is practically a replica of Mahabir Prosad Poddar in physical appearance. Therefore, the fact of company being managed and likely to be managed through a benamdar is itself prejudicial conduct both for the interest of the company and public interest. It prima facie satisfies both the conditions u/s 398 of the Companies Act, 1956, at this stage. The apparent reduction of loss of the company''s working and showing improvement cannot be real thing, but when a company is being managed in the benami name and the real state of affairs is not what it appears on the surface, such type of alleged improvement and a certificate from the Bank and Carrot and Moran Company is of no significance or value at this stage. On the other hand, it should be prima facie against the Respondents who are making attempts of face-lifting and window-dressing of the company and trying to give a misleading and wrong picture before the Court at this stage only to avoid an interim order to put an end to the present state of affairs and also with a view to bring to an end or preventing the matters complained of or apprehended. Therefore, in my view, the Petitioner has made out a prima facie case for interim relief.

It is the quality and nature of the conduct or wrongful act alleged and prima facie established at this stage which are for consideration of the Court and not the quantity and the material evidence. A single act may be so far-reaching and devastating in its effect, as the management and control of a company through a benamdar is a dangerous and pernicious practice which cannot be permitted to be any longer carried on, when from the facts, as I have discussed before, it appears to me a clear case of benami at this stage.

Mr. Prabir Sen has cited several decisions dealing with the pleadings and the principles to be applied in an application under Sections 397 and 398 of the Companies Act, 1956. In my view, those have no applications in the facts and circumstances of this case as they are clearly distinguishable both on facts and on law. I may deal with the same very briefly as follows.

The decision in Maharani Lalita Rajya Lakshmi M.P. v. Indian Motor Company (Hazaribagh) Ltd. (Supra) was a case u/s 397 of the Companies Act, 1956, where inter alia, the question of explanatory statement u/s 173(2) of the Companies Act, 1956, arose and it was held that failure to comply with the said provision does not make it a case ipso facto an oppression in conducting the affairs of the company as the breach at best would make the meeting called invalid and no more. In my view, that has no application in this case at this stage so far as the question of benami is concerned. Further, in the facts of that case the Court came to the said conclusion. The next decision being Lokenath Gupta v. Credits Private Ltd. (Supra) which was a case of a winding up petition, inter alia, on the ground of mismanagement or misconduct and general allegations of oppression of minority it was held that those are no grounds for winding up. I do not think that the said case has any application to this case at this stage as u/s 398 of the Companies Act, 1956, it is not necessary to make out a ground for winding up of the company which is a condition precedent of making an order u/s 397 of the Companies Act. As I have indicated that the Petitioner in this interim application is only presenting Section 398 aspect of the application. Regarding the Supreme Court decision in Shanti Prasad Jain v. Kalinga Tubes Ltd. (Supra), para. 32, which I have quoted before, laying down the guiding principle for application u/s 398 of the Companies Act, 1956, it was in fact entirely different from the facts of this case. There was no question of control and management of a company through a benamdar but was a case of breach of agreement between groups regarding the control and management of the company by purchase of shares. The facts of that case are clearly distinguishable from the facts of this case. So is also the unreported decision of Sabyasachi Mukharji J. in Company Application No. 76 of 1973 and Company Petition No. 470 of 1972 in Re C.D. Mining and Export Company Pvt. Ltd. delivered on June 21, 1973. It is elementary that all decisions are authority on the particular facts of each case. The decision in Mohta Bros. Pvt. Ltd. v. Calcutta Landing and Shipping Company Ltd. (supra) lays down, inter alia, that in an application under Sections 397 and 398 of the Companies Act the Court must confine itself to the case as made out in the petition and to the allegations in the petition itself and supporting affidavits, if any and not look at other evidence with regard to the events that might have happened subsequent to the petition and full particulars must be given in an application under Sections 397 and 398 of the Act as to acts of mismanagement and oppression etc. But in my view, this is not a case of the Petitioner relying on all subsequent events which happened after the petition under Sections 397 and 398 was presented, but it is a case of supplementary affidavit giving further and additional facts some of which happened prior to the date of filing of the present application. I have already referred to the decision in Ramshankar Prosad v. Sindri Iron Foundry Pvt. Ltd. (supra) where a Division Bench of this Court has laid down the correct principle to be followed in dealing with pleadings. In my view, there are sufficient materials in the petition with enough particulars and details as are necessary and required in the facts and circumstances of the case at this stage. I have already dealt with the principles of pleading in the facts and circumstances of this particular case and I have referred to the decisions laying down such principles. And the last decision by Mr. Sen in Re: Bellador Silk Company Ltd. (Supra) is clearly distinguishable from the facts of this case as that was a case of a private company having three Directors and share-holders and application u/s 210 of the English Act, 1948, was made after friction started between the Directors and the real object of presenting the petition appeared to the Court to get repayment of loan owed by the company to the Petitioner''s group of companies. Therefore, it was held in that case that the presentation of the petition in order to bring pressure to bear to achieve a collateral purpose was an abuse of the process of the Court. That was also a case of oppression. Here at this stage, as I have indicated, it is only Section 398 aspect of the matter that is being agitated and pressed and as such, the decision has no application in this case. There is also the fact that the company since May 3, 1973, was shifting its registered office from one place to another, that is, originally it was at No. 2 Fairlie Place when the Macneill and Barry group used to manage the company; thereafter it was shifted to 42/1 Strand Road and finally at the place of Mahabir Prosad Poddar at No. 4 Fairlie Place, Calcutta. Such shifting of the registered office of the company cannot be ignored altogether as I do not find anywhere that the company has complied with the provisions of Section 146 of the Companies Act, 1956 and notice of the same was given to the Registrar for his record within 30 days after the date of change of the registered office. Further, it is very strange for a company to have a registered office at an address which was not known to the postal authorities and the registered letters '' addressed to the said registered office comes back with the remarks ''not known'' and the Petitioner has, prima facie, produced sufficient materials to that effect. It is true that the Respondents have denied and insinuated that the Petitioner has created such evidence, but the letters which were returned with the postal remarks ''not known'' were produced before me and prima, facie I am satisfied at this stage that the postal authorities could not locate the registered office and it may be, as the Petitioner alleged, that there was no sign-board and there were large number of offices at the said office being at No. 42/1 Strand Road and the postal authorities could not locate the same and it is quite clear that the said registered office at No. 42/1. Strand Road was an address used by the company as a temporary measure during the transition stage only to avoid detection that Mahabir Prosad Poddar was the real person behind the said purchase of controlling block of shares in the company and it was a mere temporary measure for diverting the attention of unwary public or the authorities whose duties are to detect such transactions. Therefore, I cannot simply ignore this frequent changes of registered office which is a very unusual and strange occurrence in the case of an old tea company unless for very good reasons and objects behind it and in the background of the benami purchase by Mahabir Prosad Poddar of the controlling block of shares from Macneill and Barry group, it prima facie fits in with the motive and object of Mahabir Prosad Paddar to divert and mislead attention to the real fact of the benami purchase by him. I am also taking into account the motive and intention of the Petitioner which is quite clear that he being disappointed not being able to purchase the controlling block of shares in the company from Macneill and Barry group in which deal Mahabir Prosad Poddar became successful and both facts are brought to the notice of the Court as acts of oppression and prejudice to the interest of the company and public. But that will not make such unusual and frequent change of registered office of a company beneficial to the interest of the company or for the public. It also appears that as the Petitioner knew the said acquisition of the controlling block of shares by Mahabir Prosad Poddar in the said company, he tried to interfere with the management and control of the said company by Mahabir Prosad Poddar and entered into the series of lengthy correspondence either himself or through his Solicitor, the Respondents'' anticipating trouble started to resist the Petitioner both in personal behaviour with him dealing curtly and discourteously, refusing access to the books, papers and documents and threatening him with dire consequences and also sending replies on the same line trying to delay and avoid his enquiry about the management of the affairs of the company which the Petitioner was collecting for the purpose of making this application. Here, the Respondents seem to me have adopted a policy that the ''offence is the best defence'' knowing that litigation would be a long-drawn process on technicalities of pleading, lack of adequate materials and various other legal pleas can be set up and avoid the consequence of detection and interference by the Court for bringing the matter complained of to an end would take a long time and thereby the Respondents could arrange their matters either by removing the assets of the company or secrete the materials necessary for the Court to come to a definite conclusion. But, I am not concerned with Section 397 aspect of the matter at this stage, but Section 398 is the only provision which is to be considered in this application at this Stage. The conduct of the Respondents particularly their attempt to get a resolution passed in the said Extra-ordinary General Meeting dated September 18, 1973, in such a wide and all-pervading manner authorising the Respondents to sell, lease or otherwise dispose of the whole of all or any undertaking of the company is rather very significant and must be held to be dangerous and highly prejudicial to the interest of the company and also to the interest of public at this stage. It is true that Mr. Prabir Sen appearing for the Respondents submitted that the Court can impose restriction as to sell or lease or otherwise dispose of the properties of the company except in the usual course of business or for creating charge for the overdraft and loan from its bankers. I do not think that that will take away the effect of proposing such a resolution being passed in the Extra-ordinary General Meeting in the background of the benami purchase and the conduct of the parties as have prima facie found in this case at this stage. All the above facts taken together the benami purchase, shifting of registered office of the company, treating the Petitioner who is admittedly a Director of the said company for last 10 years and has taken fairly active interest in the affairs of the company, as and when required., in the manner as disclosed in the correspondence and pleadings and also the sudden change of the Board of Directors, Auditors, appointment of Directors who are relatives of Mahabir Prosad Poddar and appointment of Hemraj Mahabir Prosad Pvt. Ltd. for carrying out the secretarial work of the company at the office of Mahabir Prosad Poddar and suppression of materials, information and documents from the Petitioner as Director and share-holder of the company leaves no doubt in my mind, at this stage, that prima facie grounds have been made out by the Petitioner for interim relief pending the disposal of the main application with a view to bring to an end or prevent the matters complained of or apprehended. For the above reasons, I am prima facie satisfied on the materials before me at this stage that the affairs of the company are being conducted in a manner prejudicial to the interest of the company and prejudicial to public interest and by reason of the material change both in the management and control of the company and the share-holdings it is likely that the affairs of the company will be conducted in a manner prejudicial to the interest of the company or in a manner prejudicial to public interest.

In the result, I am making the following order:

The Board of Directors of the company be superseded and Mr. B.P. Roy, Advocate, is appointed Administrator to run the said company with all the powers of the Board. He will be assisted by an Advisory Board constituted of the Petitioner Balmukund Bajoria and Mahabir Prosad Poddar.

Mr. Roy is appointed Administrator at an initial remuneration of 60 Gms. per month.

Cost of this application will be cost in the main application under Sections 397 and 398 of the Companies Act.

The Special Officer is discharged.

Interim injunction is confirmed and made absolute.

Operation of the order is stayed for a period of one week from date, but in the meantime the Respondents are restrained by an injunction from dealing with or disposing of the assets of the company except in the usual course of business.

The Administrator and all parties to act on a signed copy of the minutes on the undertaking of the Petitioner to complete and file the order.