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V.K. Jhanji, J.—This shall dispose of Civil Revision No. 1109 of 1994 and also application under Order 39 Rules 1 and 2 read with Section 151 of the Code of Civil Procedure, praying for ad-interim injunction against the Defendants in civil suit No. 460 of 1994 titled as M/s Bhankerpur Simbhaoli Beverages Private Limited v. Utpal Kumar Ganguly and others, pending in the Court of Addl. Senior Sub Judge, Rajpura. Civil Revision No. 1109 of 1994 has been directed against ad-interim order dated 18.3.1994 passed by Sh. G.S. Khurana, Additional District Judge, Patiala, in pending appeal arising out of civil suit No. 33 of 1994 pending in the court of Senior Sub Judge, Patiala.
Initially, Civil Revision No. 1109 of 1994 directed against the order of Additional District Judge, Patiala, was filed in tins Court, but before the matter could be finally decided, Civil Suit No. 460 of 1994 was filed in the court of Additional Senior Sub Judge, Rajpura. Since the matter involved was common in both the suits, i.e. Civil suit out of which Civil Revision No. 1109 of 1994 has arisen and Civil Suit No. 460 of 1994, learned Counsel for the parties, on 17.10.1994, stated at the Bar that this Court should finally decide the application under Order 39 Rules 1 and 2 of the Code of Civil Procedure, filed by the Plaintiff in civil suit No. 460 of 1994 and also the matter which was pending in appeal before the Additional District Judge, Patiala, arising out of application under Order 39 rules 1 and 2 of the Code of Civil Procedure, in civil suit No. 33 of 1994. They further stated that on decision by this Court, appeal pending before/the Additional District Judge would become infructuous. Not only the counsel made statement at the Bar, but also filed joint application, Civil Misc. No. 6474 CII of 1994 in which a prayer had been made for transfer of application under Order 39 rules 1 and 2 of the Code of CPC in civil suit No. 460 of 1994 pending before Sh. Balbir Singh, Sub Judge 1st Class. Rajpura, to this Court for decision along with Civil Revision No. 1109 of 1994. It may be mentioned at this stage that although this Court while sitting on revisional side was reluctant to decide application under Order 39, rules 1 and 2 of the Code of CPC in Civil suit No. 460 of 1994 at Rajpura and also the subject matter of appeal arising out of application under Order 39 rules 1 and 2 of Code of CPC at Patiala, but since the parties had made joint prayer and also stated at the Bar before this Court that both the matters be taken up and disposed of by a common order, this Court vide order dated 5.7.1994 allowed the prayer and, therefore, both the matters are being disposed of finally In this revision petition.
The facts are taken from Civil Suit No. 460 of 1994 at Rajpura, titled as M/s Bhankerpur Simbhaoli Beverages Private Limited v. Utpal Kumar Ganguly and others.
The suit at Rajpura has been filed by M/s Bhankerpur Simbhaoli Beverages Private Limited (B.S.B. in short) through Sh. Sarabju(sic) Singh, stated to be Managing Director and Ex-factory manager of B.S.B. The suit is for declaration with the prayer that Extra-ordinary General Meeting (E.G.M. in short) of B.S.B. pursuant to alleged notice dated 3.1.1994 or 27.1.1994 was not held at 4, Community Centre, Lawrence Road, Industrial Area, New Delhi, or at any other place, that resolutions alleged to have been passed at the said E.G.M. on 22.2.1994 as claimed by Defendants No. 1 to 9 are non-existent, fictitious and are of no effect; that resolution purported to be passed at the E.G.M. of B.S.B. allegedly held on 22.2.1994, even if actually held,are illegal and void and are of no effect. Perpetual injunction is being sought to restrain Defendants No. 1 to 10 or any of them or servants and agents from giving effect to on relying upon or touching within furtherance of alleged resolution dated 22.2.1994 allegedly passed at the said impugned E.G.M. of B.S.B. allegedly held on 22.2.1994 and further restraining Defendants No. 1 to 9 from acting or holding themselves out as Directors of B.S.B. in reliance upon the resolutions purported to be passed in the alleged E.G.M. and further restraining Defendants No. 1 to 10 from interfering with or obstructing or disputing the acting of Defendants No. 10 and 16 to 25 as Directors of B.S.B. It has been averred in the plaint that B.S.B. is a company incorporated under the provisions of Indian Companies Act, 1956 (in short, the Companies Act) and has its registered office at Bhankerpur Simbhaoli Beverages Private Limited, Bhankerpur, Dera Bassi, District Patiala, Punjab. The main objects of the company, i.e. B.S.B. are to carry on the business of brewers, distillers, bottlers, wine manufacturers and to prepare, buy, store, sell, distill, manufactur, redistill and deal in all kinds of beers, wine liquors etc. B.S.B. was earner owned by M/s Simbhaofi Industries Private Limited (S.I.L. in short). The share-holding position of the B.S.B. immediately before the take over of the same by S.I.L. was as under:
Mr. S. Sandhu
:
10 equity shares of Rs. 10/- each.
Mr. Gurpal Singh
:
10 equity shares of Rs. 10/- each;
Mr. G.S. Mann
:
10 equity shares, of Rs. 10/- each.
Mr. J.S. Maon
:
10 equity shares of Rs. 10/- each.
Simbhaoli/lnd. Pvt. Ltd.
:
5,50,000 - do -
Total
:
5,50,040
The management of Shaw Wallace Group of Companies entered into negotiation with S.I.L. and it was agreed that the entire issued equity shares amounting to 5,50,000 as held by S.I.L. would be taken over by a subsidiary company of Shaw Wallace and Company (in short, the SWC)under the control of Shaw Wallace Group at the face value aggregating to Rs. 55 lacs. The management of Shaw Wallace Group selected one M/s Budgam Finance and Investment Co. Pvt. Limited (in short, Budgam) for the said take over of the shares. The said Budgam had no funds to pay the price of the said shares as the paid up issued share capital of the Budgam was only Rs. 100/- and the said company was having only a nominal amount in its bank account. One SICA Breweries Private Limited advanced an amount totalling Rs. 60,50,000/- as inter-corporate deposit to Budgam. It was from this amount that Budgam acquired its 5,50,000 shares from S.I.L. After the acquisition of shares by Budgam. from S.I.L., following was the share-holding position of B.S.B.:
Mr. P.S. Sandhu
:
10 equity shares of Rs. 10/- each.
Mr. Gurpal Singh
:
10 equity shares of Rs. 10/- each.
Mr. G.S. Mann
:
10 equity shares of Rs. 10/- each.
Mr. J.S. Mann
:
10 equity shares of Rs. 10/- each.
Mr. P.R. Pandya
:
10 equity shares of Rs. 10/- each.
Budgam Financed Investment Co.
:
5,50,050 - do -
Total
:
5,50,050
Ten equity shares of Rs. 10/- each were allotted to one P.R. Pandya after take-over of shares of Budgam. It has further been stated that Mr. P.S. Sandhu has since expired and is not a share-holder any more. It is further averred that as per Articles of Association of B.S.B., there has to be minimum two Director and the maximum limit of Directors has been fixed at 11 which can be changed. The first Directors of the company were S/Sh. Pritam Singh Sandhu, Gurmeet Singh Mann, Jasraj Singh Mann and Gurpal Singh. However, after acquiring B.S.B. the S.W.C. nominated its employees to the Board of Directors of B.S.B. Seven Additional Directors namely S/Sh. Y.P. Sud, T.K. Ramaswamy, M.G. Ramachand, Madan Mohan Suri, R. Ganesan, A. Roy Chowdhury and S.N. Pandey were appointed on 8.7.1989. The original four Directors of the B.S.B. namely S/Sh. Pritam Singh Sandhu, Gurmeet Singh Mann, Jasraj Singh Mann and Gurpal Singh ceased to be the Directors with effect from 27.6.1990. It is further averred that presently, the lawfully constituted Board of Directors of B.S.B. are S/Sh. Sarbjit Singh Mann, Director P.R. Pandhya, Director (Secretary, SKOL Breweries Ltd., -a subsidiary of SWC), A.S. Chatte Director (Manager, SWC), V. Jayaraman, Director (Gen. Manager, Cruickshank & Co. -A subsidiary of S.W.C. Srijit Mullick, Director (Manager, SWC), M.M. Gupta Director (General Manager, SWC), T.K. Ravishanker, Director (General Manager, SWC), A. Sabharwal, Director (General Manager, SWC), Rajiv K. Viz, Director (Dy. General Manager, SWC) and Harsh Wardhan Sen, Director (Vice President, SWC). It has been alleged that B.S.B. is/has been under the supervision and controversy of S.W.C. as the whole Board of Directors constitute of employees of S.W.C. Para 6 of the plaint then describes the name of the share-holders and also the Board of Directors of Budgam. In para 6 of the plaint, it has been averred that one Arun Kumar Ja i.e. Defendant No. 8 had been taken as Director of B.S.B. oh 26.9.1991 by the Board of Directors to fill a casual vacancy caused by the resignation of one of Directors of the Board. The same was, however, subject to the ratification of Annual General Meeting (in short, AGM) which was to be done in the third A.G.M. to be held on 29.9.1992. However, the said Arun Kumar Jain ceased to be Director w.e.f. 29.9.1992. i.e/the date when the A.G.M. was held and his name was not ratified/confirmed by said A.G.M. B.S.B. also filed a civil suit in the court of Sh. J.S. Bhatia, Sub Judge 1st Class, Rajpura, for declaration that the appointment of Arun Kumar Jain as Director of B.S.B. was invalid illegal and void and that he has ceased to be a Director. It has further been averred that one K.R. Chhabria was once the Managing Director of S.W.C. The said K.R. Chhabria was removed as such due to his diverse acts pre-judicial to the company. On being stripped of his powers, due to abuse of his powers and for acts detrimental to the interest of S.W.C. and due to acts for his personal gains, the said K.R. Chhabria started har- bouring grudge against S.W.C. Certain other employees who were his associates were also removed from S.W.C. on discovery of their illegal acts prejudicial to the interest of S.W.C. All of them are acting in connivance with each other to destabilize the S.W.C. and its other associate companies. The said Arun Kumar Jain after his cessation, has also become hostile to the company and has joined hands with several people who were at certain point of time engaged at different executive positions with S.W.C. On 22.2.1994, the said Arun Kumar Jain filed a complaint u/s 145 Code of Criminal Procedure before Sub Divisional Magistrate, Rajpura, claiming himself to be a Director of B.S.B. The said complaint was dismissed by Sub Divisional Magistrate on 2.3.1994, with the observation that the complaint filed by Arun Kumar Jain is an abuse of process of the Court. Arun Kumar Jain also filed civil suit on 21.2.1994 in the court of Sh. J.S. Bhatia, Sub Judge 1st Class, Rajpura, and tried to obtain an ex-parte stay order against all the Directors of B.S.B. by misleading the Court. However, he failed to do so. Hence, exparte stay order was declined on 21.2.1994. The said suit is titled as Arun Kumar Jain v. T.K. Ramaswamy and others. It has been averred that the said suit has been filed by Arun Kumar Jain to thwart the earlier suit filed by B.S.B. against him. Upon such failure, on the very next day, i.e. on 22.2.1994 Arun Kumar Jain got another suit filed, purported to be on behalf of B.S.B., Plaintiff in the present suit through one of his associates, J.C. Vohra, which was also fixed before Sh. J.S. Bhatia, Sub Judge 1st Class. The said suit came up for hearing on 23.2.1994 and a prayer for an ex-parte stay order, restraining the Defendants therein from interfering in the affairs and management of B.S.B. was made, which too was declined. Thereafter, on 2.3.1994. Arun Kumar Jain filed another suit before Senior Sub Judge, Patiala, purported to be on behalf of Budgam along with one Ashok Jain who purported himself to be a Director of B.S.B.
In that suit, an ex-parte stay order dated 2.3.1994 was passed against the Defendants therein. An appeal was filed by Sarbjit Singh against the said order and the learned Additional District Judge vide his order dated 18.3.1994 modified the order of the trial Court. Against the order passed by Additional District Judge, Arun Kumar Jain has filed revision petition, C.R. No. 1109 of 1994. In the suit filed before the Senior Sub Judge, Patiala Arun Kumar Jain claims to have convened an E.G.M. of B.S.B. on 22.2.1994. Pursuant to the said E.G.M. he claims to have removed all the earlier lawfully constituted Directors of B.S.B. and further claims to have appointed Defendants No. 1 to 9 as Directors of B.S.B. on the basis of resolution alleged to have been passed in the said E.G.M. It is thus, averred that Defendants No. 1 to 9 are wrongly claiming to be Directors of B.S.B. on the basis of resolution alleged to have been passed in E.G.M. alleged to have been held at New Delhi on 22.2.1994. The purported claim of Defendants No. 1 to 9 is absolutely illegal and void on the grounds that Defendants No. 1 to 10 in collusion and conspiracy with each other have fabricated the records to create a claim that on 22.2.1994, a E.G.M. was held, while in fact, no such meeting was at all held and also that even if the E.G.M. was held on 22.2.1994, the holding of any such meeting and any resolution passed there-at it illegal and void; that notice dated 3.1.1994 issued in the name of Budgam signed by Utpal Kumar Ganguly calling upon the B.S.B. to hold E.G.M. for removal and appointment of Directors, was not in compliance with Section 169 of the Companies Act; that one member of B.S.B. alone could not call an E.G.M.; that alleged notice dated 3.1.1994 was never circulated to the lawful Board of Directors of B.S.B., who were controlling the affairs of B.S.B.; that notice dated 3.1.1994 was not issued by any valid Board resolution from the Board of Directors of Budgam. Utpal Kumar Ganguly was not a Director of Budgam; that decision to remove the existing Directors and appoint new Directors was for drastic reconstitution of the Board of Directors of B.S.B. and amounted to a policy decision of Budgam. Under the orders of Jammu and Kashmir High Court dated 22.2.1993, the Budgam has been specifically directed not to take or execute any policy decision. The said notice dated 3.1.1994 having been issued in the name of Budgam in violation of the order of Jammu and Kashmir High Court dated 22.2.1993 is illegal and Void; that alleged notice dated 27.1.1994 issued in the name of Budgam by Utpal Kumar Ganguly as a purported Director is again in violation of order of Jammu Kashmir High Court dated 22.2.1993. The said notice dated January 3/January 27,1994, contained a decision of Budgam to drastically reconstitute the Board of Directors of B.S.B. which was a matter of policy decision and which Budgam was expressly restrained from taking by order of Jammu and Kashmir High Court, that there being no valid notice for convening the E.G.M. of share-holders of B.S.B., the purported meeting alleged to have been held on 22.2.1994 is consequently illegal and void; that alleged notice dated 27.1.1994 was not served to S/Sh. P.S. Sandhu, Gurpal Singh, J.S. Mann, Gurmeet Singh Mann and P.R. Pandya, i.e. five undisputed share-holders of B.S.B. and as such, the said E.G.M. is illegal and void; that the venue of the E.G.M. is alleged to be; 4, Community Centre, Lawrence Road Industrial Area, New Delhi, where the B.S.B. never had nor has registered office or even a Branch office. The holding of E.G.M. at New Delhi is not in compliance with the provisions of the Section 169 of the Companies Act; that no notice far from special notice or resolution to remove the Directors of B.S.B. was ever given/sent to any of the existing Directors sought to be removed, nor were they heard on the resolution for removal at the E.G.M.; that none of the Directors sought to be removed, was present at the alleged E.G.M. and they were not given opportunity to be heard at the alleged meeting, if at all held. I has also been averred that K.R. Chhabria is the Ex-Managing Director of S.W.C. and he has ceased to be Managing Director of S.W.C. on and from 19.4.1992. K.R. Chhabria is only interested in hijacking the companies belonging to S.W.C. group for his personal benefits and to the detriment of S.W.C. group, Budgam and B.SJ3. both belong to S.W.C. group. Plaintiff has alleged in para 18 of the plaint that validity of alleged E.G.M. and resolutions passed there at on 22.2.1994 became subject, matter of contempt proceedings initiated before the Jammu and Kashmir High court. In the said contempt proceedings, the Jammu and Kashmir High court passed order on 18.4.1994. Against the said order, K.R. Chhabria group through Arun Kumar Jain in the name of Budgam fled SLP in the Supreme Court. The Supreme Court vide order dated 163.1994 observed that validity of the said E.G.M. was to be decided in a substantive proceedings to be filed before an appropriate Court and not in contempt proceedings. The Supreme Court while setting aside the contempt proceedings, did not disturb the order for stay of resolution passed in E.G.M. dated 22.2.1994 passed by Jammu and Kashmir High Court and continued the order for stay for a period of two weeks from the said date to enable the appropriate substantive legal proceedings for challenging the said E.G.M. and the resolution ppssed thereat to be taken in the appropriate Court. Plaintiff has, thus, stated that pursuant to the stay order of the Supreme Court, Plaintiff is fifing this suit for challenging the alleged E.G.M. and the resolutions passed there-at.
Written statement has been filed on behalf of Defendant No. 8 namely Arun Kumar Jain and by Defendant No. 15 purported to be on behalf of M/s Budgam. Arun Kumar Jain in his written statement has taken exception to the filing of suit by Sarbjit Singh, alleging to be Managing Director of B.S.B. It has been alleged in the Written Statement that he has no right, title, interest, authority or competency to institute the suit, and the name of the said company shown as Plaintiff is illegal, unauthorised, wholly without jurisdiction and without authority. It has further been stated that company, i.e. B.S.B. is wholly owned and controlled by Budgam having its registered office in Jammu which holds and owns 99.9% of equity shares of B.S.B. In turn, one M.D. Chhabria and R.D. Chhabria hold and own respectively 39.87% and 60.08% shares of Budgam, 99.95% share-holding of Budgam and consequently the said company is wholly owned and controlled by M.D. Chhabria and R.D. Chhabria through the said Budgam. The said company in its meeting of 22nd February, 1994 reconstituted its Board of Directors. The said company has already filed a suit for injunction in the court of Senior Sub Judge, Patiala, for restraining the persons removed from directorship in meeting dated 22.2.1994, from interfering in the affairs and management of the said company and from representing themselves as Directors of the said company. In this suit, the said company was granted interim relief in the application under Order 39, rules 1 and 2 of the Code of Civil Procedure, and the removed Directors were restrained as prayed by the said company. Against this order, Sarbjit Singh filed an appeal in his individual capacity in which the said company is one of the Respondents and thereafter, the matter is pending in this Court and the stay application is also pending disposal with this Court. In the appeal filed by Sarbjit Singh, as also the contempt proceedings and civil revision, the said company is represented by S/Sh. Ashok Jain and Arun Jain and not by Sarbjit Singh. It has also been stated in the suit that the same is liable to be stayed u/s 10, C.P.C., inasmuch as in the suit, the challenge is to the Board meeting held by the said company on 22.2.1994 and actions and/or decision taken at the said meeting, whereas the meeting held by said company on 22.2.1994 is the subject matter of the suit for injunction legally and validly filed by and on behalf of the said company in the court of Senior Sub Judge, Patiala, which is till date pending and is a previously instituted suit and the same is liable to be stayed. Arun Kumar Jain in his written statement has admitted that the issued, subscribed and paid up capital of the said company is Rs. 55,00,500 divided into 5,50,050 equity shares of Rs. 10/- each out of which 5,50,050 shares are owned by Budgam which constitutes over 99.99% of the equity capital in the said company. These shares were acquired by Budgam on 27.9.1989 and till date, the same are owned by Budgam. The original four Directors and P.R. Pandya own 10 shares each and no-body else has any share in the said company. It has also been stated that the said company has reconstituted its Board of Directors in the meeting of Board of Directors on 22.2.1994 and since the removed Directors were threatening interference in the affairs and management of the said company, the said company filed an injunction suit before the Senior Sub Judge, Patiala, which is till date pending. Arun Kumar Jain has denied that the management of S.W.C. negotiated the purchase of the said company, as alleged in the plaint. He has also denied that Budgam had no funds to pay the price, though he has admitted that money advanced by Sica Breweries Pvt. Ltd. was a mere inter corporate deposit to Budgam. In para 5 of the written statement, Mr. Jain has given the names of nine persons alleged to be only Directors of B.S.B. namely S/Sh. Arun Kumar Jain, T.K. Ramaswamy, M.D. Chhabria, U.K. Ganguly, N.D. Chhabria, Ashok Jain, Shyam Luthria, S.K. Basu and Shiv Shankar Sanyal. He has also denied that he has ceased to be Director as alleged by B.S.B. As regards the order of Sub Divisional Magistrate dropping the proceedings on 2.3.1994, he has stated that the same are arbitrary, nonest and violative of principles of natural justice. He has also stated that cause of action and the matter in issue are different in both the suits and the proceedings are not liable to be stayed. According to him, the relief sought for in the Rajpura suit was for injunction as the Defendants therein were trying to dispossess the lawful owners in violation of status-quo order dated 21.2.1994 passed by the Sub Divisional Magistrate u/s 145 Code of Criminal Procedure whereas the case in the Patiala suit is that Budgam being 99.99% owner of B.S.B. had exercised legitimate rights under the provisions of the Companies Act and have validly upon requisition being made in this regard had changes effected in the Board of Directors of B.S.B. It was to restrain the other persons who were acting as Directors and representing and/or holding themselves to be Directors, that suit for injunction was filed wherein certain interim orders were passed. He has denied the averment in the plaint that no E.G.M. was held on 22.2.1994. Notices issued in this regard have been stated to be valid. Mr. Jain has further stated that Gurpal Singh is now seeking to retract from his presence at the said meeting because of threat and pressure which have been imposed on said Gurpal Singh. In order to show that E.G.M. was held, he has submitted that Form - 32 dated 22.2.1994 was filed with the Registrar of Companies on 2.3.1994. However, he has denied that the said return is fictitious as alleged by B.S.B. In regard to resignation of P.R. Pandya, Mr. Jain has averred that Mr. Pandya infact had resigned and this he admitted in his affidavit filed before the Company Law Board, Principal Bench New Delhi, in Company Petition No. 29 of 1993 and not wholly contrary to his said stand of resignation, P.R. Pandya turns around and in the present suit, takes an entirely new stand that he had not resigned from the Plaintiff companies and continues to be Director/share-holder. Hence, the affidavit filed by P.R. Pandya is concocted and fabricated document, wholly contrary to the truth. With reference to the order of Jammu and Kashmir High Court, Arun Kumar has submitted that no order from the Jammu and Kashmir High Court was necessary to have been obtained before exercise of voting right of Budgam, since liberty to exercise voting right had been reserved to Budgam by the said order. He has, thus, prayed that suit filed by B.S.B. be dismissed being misconceived, arbitrary and fraudulent.
One S.S. Sanyal, purporting to be Director of Budgam, has filed written statement on behalf of the Defendant No. 15 which contains almost the identical averments as in the written statement filed by Arun Kumar Jain.
Plaintiff B.S.B. has filed replication to the written statements filed by Arun Kumar Jain, Defendant No. 3 and Defendant No. 15 wherein the Plaintiff has denied the averments made in the written statements and has reiterated the stand taken by it in the plaint. The pleadings in civil suit No. 33 of 1994 out of which civil revision No. 1109 of 1994 has arisen are not necessary to be mentioned because the plaint and the written statements filed in civil suit No. 460 of 1994 cover the controversy raised in civil suit No. 33 of 1994.
From the perusal of pleadings of the parties, it is evident that S/Sh. P.S. Sandhu, Gurpal Singh, G.S. Mann, J.S. Mann and P.R. Pandya hold 10 shares of Rs. 10/- each, whereas Budgam holds 5,50,000 equity shares of Rs. 10/- each. The total share-holding of the company is 5,50,050.shares of Rs. 10/- each. P.S. Sandhu has since expired and on the date when E.G.M. is alleged to have been held only five share-holders were in existence which includes Budgam. It may also be noticed at this stage that as to who owns Budgam, is a matter pending before the Additional District Judge, Jammu in a suit filed on behalf of Budgam through its alleged Directors, Arun Kumar Jain, R.D. Chhabria M.D. Chhabria. The Additional District Judge, Jammu vide his order dated 20.1.1993 restrained the Defendants therein from acting or representing themselves as Directors of the company, alienating selling or altering, transfer or in any other manner with the assets of the Plaintiff-company and interfere or inter-meddle with the smooth functioning of the Plaintiff-company. Having felt aggrieved against this order, the Defendants therein filed a petition before Jammu and Kashmir High Court in C.I.M.Y. No. 14/1993, and Hon''ble Mr. Justice V.K. Gupta disposed of the appeal by an agreed order, which reads as under:
1) The Appellants shall file written statement in the suit before the trial Court before 5th March, 1993. The suit shall be taken up by the trial Court, along with application for temporary injunction on 5th March, 1993, irrespective of any date earlier fixed by him. Objections to the application for temporary injunction shall also be filed by the Appellants before March 5, 1993.
2) Uninfluenced by the order dated Jan. 20, 1993, in any manner whatsoever and totally uninfluenced by any observations or comments, made by this Court in this order, the trial Court shall reconsider the question of grant or otherwise of temporary injunction in its entirety after perusing the pleadings on the file the documents and after hearing the party in all respects. The trial Court shall not postpone the proceedings in the matter of consideration of temporary injunction by more than day till the order is ultimately passed. The order dated Jan. 20, 1993 impugned in this appeal is modified and altered to the following extent:
i) The Plaintiffs in the suit, like the Defendants in the impugned order are also restrained from alienating, selling, altering, transferring or encumbering in any manner, any assets, investment or property of the Plaintiffs company.
ii) The Plaintiffs shall not take or execute any policy decision and if the Plaintiff company has to exercise any voting right in other company, this right shall be exercised provisionally only and shall remain subject to the orders to be passed ultimately.
iii) The operative part of the impugned order as also the arrangements made hereinabove shall immediately come to an end on the passing of fresh order by the trial Court.
The issue as to who is the true owner of Budgam, is pending and hotly disputed before the Jammu and Kashmir Courts and does not call for consideration in the present proceedings. During the course of arguments of Dr. A.M. Singhvi, Sr. Advocate, who argued on behalf of Plaintiffs in civil suit No. 460 of 1994 and contesting Respondents in Civil Revision No. 1109 of 1994, and Mr. G. Ramaswami Sr. Advocate who argued on behalf of contesting Defendants in civil suit No. 460 of 1994 and on behalf of Petitioners in Civil Revision No. 1104 of 1994, it was repeatedly clarified that no enquiry could be contemplated or conducted in the present proceedings to enquire as to who is the true owner of Budgam. In these proceedings, it was also fairly admitted by Mr. G. Ramaswami, Sr. Advocate, that at no time prior to 22.2.1994, did the contesting Defendants in Rajpura suit came to control, run or manage the B.S.B. Mr. Ramaswami has accepted that management, control and operation of B.S.B. at all times prior to 22.2.1994 was in the hands of Plaintiffs, i.e. S.W.C. employees. The sole issue raised in this case is prima-facie the holding of meeting on 22.2.1994 or its legal validity. It was also agreed that in case this Court finds that infact the valid E.G.M. was held on 22.2.1994, then the Plaintiffs in civil suit No. 460 of 1994 would not be entitled to any injunction, but in turn the contesting Respondents i.e. Plaintiffs in civil suit No. 33 of 1994 pending before Senior Sub Judge, Patiala shall be entitled to injunction.
It may also be mentioned at this stage that on 18.4.1992, Defendants in civil suit No. 33 of 1994 approached the Jammu and Kashmir High Court in contempt petition, alleging that convening of E.G.M. on 22.2.1994 was a violation of order of Hon''ble Mr. Justice V.K. Gupta dated 22.2.1993. The Jammu and Kashmir High Court issued notice for contempt and stayed the giving of effect to the E.G.M. The matter was assailed by the Plaintiff by way of S.L.P.(C) No. 7925 of 1994 in the Supreme Court. The Supreme Court vide order dated 16.5.1994, dismissed the contempt petition, but gave liberty to the Respondents therein to file a suit. The operative part of the judgment of the Supreme Court is reproduced hereunder:
On a consideration of the matter, it appears to us that if the Respondent were aggrieved by the convening of the extraordinary general meeting of M/s Bhankerpur and the subsequent resolution dated 22nd February, 1994, they ought to have had recourse to appropriately constituted, substantive proceedings to assail their validity and not invoke the contempt jurisdiction. It is a moot question whether that part in para 2(ii) of the earlier order, whose violation complained of in contempt, merely constituted terms of agreement between the parties or whether there was, in addition, the imprimatur of the court placed on it and, whether it was a "direction" or only an "observation" of the Court. In view of the latter part of Para 2(ii) of the earlier order dated 22nd February, 1993, the subsequent convening and holding of the extra-ordinary General Meeting of M/s Bhankerpur and the resolution dated 22nd February, 1994, cannot be said to be a wilful disobediently of the said earlier order.
We, accordingly, set aside the order dated 18th April, 1994 of the High Court Jammu & Kashmir in CMP (COA) No. 139 of 1994. We also dismiss that contempt proceeding."
Pursuant to the order of the Supreme Court, Civil Suit No. 460 of 1994 has been filed.
Dr. A.M. Singhvi, Sr. Advocate, has contend that no E.G.M. of B.S.B. was held on 22.2.1994 and the minutes, if any, and notices alleged to have been sent under Certificate of Posting (UPC) have been manipulated by the Defendants. In the alternative he has contended that meeting, if any, held was illegal and was in violation of Jammu and Kashmir High Court order dated 22.2.1993 whereby two varying factions of Budgam were prohibited to take any step of policy nature. He has also referred to certain provisions of the Companies Act, to submit that alleged removal of Directors was not valid and the meeting could not be held at a place other than the one where registered office of the company is situate. He has also contended that the Defendants are not entitled to relief of injunction in the suit at Patiala because of suppression of material facts and also that the Court at Patiala lacked territorial jurisdiction.
Plaintiffs as well as the Defendants have filed on record numerous documents in order to prove or disprove the factual existence of the E.G.M. alleged to have been held on 22.2.1994. Thus, the first question which arises for consideration is with regard to factual existence of holding of E.G.M. on 22.2.1994 at New Delhi. In order to support that the meeting was held, the Defendants have placed on record notice dated 3.1.1994 alleged to have been served by Budgam to B.S.B. and to all those Directors sought to be removed by notice. The certificates on posting (UPC) in proof of posting of letters/notices dated 3.1.1994 have been placed on record. They have also placed on record notice dated 27:1.1994 alleged to have been served by Budgam on other share-holders of B.S.B. and also certificates of posting (UPC) as proof of posting of notice dated 27.1.1994; copy of Form No. 32 dated 22.2.1994 filed with the Registrar of Companies, Jalandhar, intimating about the reconstitution of the Board of Directors of B.S.B. in the E.G.M.; the alleged minutes of E.G.M. of B.S.B. held on 22.2.1994; affidavit of T.K. Ramaswamy, Directors of B.S.B.; affidavit of Shalendra Sharma, who was allegedly authorised by Budgam to vote and represent on behalf of Budgam at the E.G.M. It may be noticed that apart from Budgam who held 5,50,000 equity shares of Rs. 10/- each on the date when the meeting is alleged to have been held, there were only four other share-holders in existence, namely Gurpal Singh, G.S. Mann, J.S. Mann and P.R. Pandya, who held 10 equity shares of Rs. 10/- each. In order to give a finding as to whether E.G.M. was held, it is necessary to first find out as to whether atleast two share-holders were present in the meeting because a single person cannot constitute a meeting. This proposition is not being disputed by Mr. G. Ramaswami, Sr. Advocate, and rightly so, because in Stroud''s Judicial Dictionary 1973 edition, ''Meeting'' has been described thus: (1) One swallow does not make a summer, nor does the presence of one share-holder constitute a "meeting" (Re Sanitary Carbon Co. (1877) W.N. 223). The word "meeting" implies a concurrence, or coming face to face of at least two persons" (per Coleridge C. J., Sharpe V. Dawes, 2 Q.B.D. 26). There is accordingly and speaking generally, no "meeting" of share holders or other bodies, if only one attends; though "no doubt in a particular statute the word might be used in a special sense, so that the attendance of one might satisfy it (per Coleridge C.J., Sharpe v. Dawes, Supra) See East v. Bennett (1911) 1 Ch. 163". In Oxford Companion to Law, 1980 edition, "meeting" has been described thus; "A gathering of two or more persons called to receive a report, take a decision or otherwise take some lawful action. According to Jowitt''s Dictionary of English Law, 1977 edition, a single person cannot constitute a meeting (Sharpe v. Dawes) (1877) 2 Q.B.D. 26). In Venkataramaiya''s Law Lexicon with Legal Maxims, 1983 (2nd) ediction, for a meeting, there must be at least two persons, and that this is the ordinary and natural meaning of the word.
One man could not hold a meeting within the meaning of the Companies Act. According to the Law Lexicon, 1989 edition "in the second case,East v. Bannett Brother Ltd., (1911) 1 Ch. 163), Warrington, J. follwing Sharpe v. Dawes, ( (1876) 2 Q.B.D. 26) and also the decision of Jessel, M.R. in In re, Sanitary Carbon Co., ((1877 W.N. 223), observed that in an ordinary case it was quite clear that a meeting must consist of more than one person, Awadhoot and Others Vs. State of Maharashtra and Others, ." In C.A Lyon v. S.W. Oppenheim (Chancery Division) of Company Law Journal, (1970)1 Comp. L.J. edition appointment of himself as Liquidator of only one share-holder present was declared as nullity because when he proposed himself as Liquidator, the other share-holders had left the meeting and from that moment, only one share-holder was present. In State of Kerala Vs. West Coast Planters'' Agencies Ltd., Cochin and Another, , the meaning of ''meeting'' has been described thus; "Thus common sense view is that for a meeting there must be at least two persons." This common sense view is also the true view in law. According to the ordinary use of the English language a meeting can no more be held by one person than it can be by none: (1876) 2 Q.B.D. 26 and (1911) 1 Ch. 163, Rel. on".
The minutes of the E.G.M. of the share holders of B.S.B. alleged to have been held on Tuesday, the 22nd February, 1094 at 10 A.M. at No. 4, Community Centre, Lawrence Road, Industrial Area, New Delhi, have been placed on record. A reading of the said Minutes reveals that only three persons were present in the meeting, namely T.K. Ramaswamy who has been described as Director, B.S.B. Mr. Shalendra Sharma who has been described as authorised representative of Budgam, and Gurpal Singh, as member. Minutes of the meeting further show that T.K. Ramaswamy was elected Chairman of the meeting and thereafter, the Chairman declared the meeting open. Notice dated 27.1.1994 alleged to have been served by Budgam, convening of the E.G.M. of the share-holders of B.S.B. was tabled and read. Notice dated 3.1.1994 was also tabled and read. Thereafter in the meeting, special business of removal of Directors and appointment of Directors was allegedly taken up and resolutions to that effect were passed. The minutes of the meeting appear to have been signed by T.K. Ramaswamy, Chairman.
A reading of the minutes shows that out of the share holders who hold 10 shares of Rs. 10/- each, only one share holder namely Gurpal Singh was present and Shalendra Sharma, alleged authorised representative of Budgam, second share holder, was present. On the record, there is letter of Gurpal Singh dated 7.4.1994 whereby he had informed the Board of Directors of B.S.B. that he neither received notice regarding convening of E.G.M. of B.S.B. nor did he attend any such meeting purported to have been held on 22.2.1994 at New Delhi, either in person or by proxy. He has also mentioned that question of his father, P.S. Sandhu, attending the meeting does not arise as he had expired last year. Gurpal Singh has also filed an affidavit dated 27.7.1994 in civil suit No. 460 of 1994 in which he has affirmed and sworn that he never attended any meeting, nor he received notice of convening of E.G.M. alleged to have been held on 22.2.1994 at New Delhi. In his affidavit, he has stated that he contacted other share holders who too have confirmed that they never received any notice, nor they attended any such meeting. He has made mention of letter dated 7.4.1994 which he had written to the Board of Directors of B.S.B. in this regard.
The contents of letter dated 7.4.1994 and affidavit dated 27.7.1994, if are accepted, the E.G.M. allegedly held on 22.2.1994 has to be declared as invalid for the reason that only one share-holder namely Shalender Sharma representing Budgam, was present. Mr. G. Ramaswami, counsel for the Defendants, has submitted that at the relevant time, Gurpal Singh not only attended the meeting, but was supporting the Defendants. He is now seeking to get out of the same under the pressure of the Plaintiffs. Mr. Ramaswami on the basis of presumption- to be drawn u/s 195 of the Companies Act, as also on the basis of notice dated 3.1.1994 served by Budgam on B.S.B. and to all those Directors sought to be removed, certificate of posting of letters dated 3.1.1994, notice dated 27.1.1994 served by Budgam on the other share holders of B.S.B., certificate of proof of posting of letter dated 27.1.1994, copy of Form No. 32 dated 22.2.1994 filed with the Registrar of Companies, Jalandhar, minutes of E.G.M. of B.S.B. affidavit of T.K. Ramaswamy and affidavit of Shalendra Sharma authorised by Budgam to vote and represent at the said E.G.M. has contended that this Court shall hold that valid E.G.M. was held and the Board of Directors were reconstituted. The course suggested by Mr. Ramaswami cannot be accepted for the reason that suspicious circumstances as pointed out by Dr. A.M. Singhvi, Sr. Advocate, are so many and their consideration gives rise to an inference that meeting was not held. Following are the suspicious circumstances:
(i) Apart from certificates of posting, no evidence has been brought on record to show that notice of E.G.M. was served on Gurpal Singh or any other share holder.
(ii) No signatures of Gurpal Singh are claimed to have obtained in any attendance register or any attendance slip or even by Way of initials or in the so-called minutes book;
(iii) Defendants in para 7 of their replication in civil suit No. 33 of 1994 have stated to the following:
The Plaintiffs reaffirm and reiterate that an extra-ordinary General Meeting of the first Plaintiff was held after compliance of all the provisions of the Companies Act, and the Defendants who have no interest and/or can possibly claim no interest in the first Plaintiff are making feeble attempts to attack the validity of the said meeting. The Plaintiffs crave reference to the minutes book, attendance register and the other statutory records of the firm(sic) Plaintiff to unequivocally demonstrate the veracity of the stand of the Plaintiffs." (Emphasis supplied).
Having averred that the attendance register was maintained, no(sic) attendance register has been placed on record; rather during the course of hearing of the matter, it was fairly conceded by counsel for the Defendants that infact there exists no attendance register.
(iv) Budgam had allegedly issued notice dated 3.1.1994 to the Directors sought to be removed and notice dated 27.1.1994 to other share holders for convening of E.G.M. but no mention of these notices of calling of the E.G.M. was made by Arun Kumar Jain in his application dated 21.2.1994 which he had filed before the Sub Divisional Magistrate, Rajpura, u/s 145 Code of Criminal Procedure In his application u/s 145 Cr .P.C, he has given history of the litigation between the parties, but has conveniently not mentioned in regard to the meeting which had already been convened for 22.2.1994.
(v) Arun Kumar Jain filed civil suit No. 154 of 1994, on 212.1994, at Rajpura, praying for declaration that he is Director and shall not be removed from the Board of Directors except in due course of law. If the E.G.M. has already been convened for 22.2.1994 then where was the apprehension. In this suit, he had also prayed for ad-interim injunction, but the same was not granted.
(vi) Again on 22.2.1994 itself, another suit namely civil suit No. 158 was filed at Rajpura, seeking permanent injunction, restraining the Defendants therein (Plaintiffs in civil suit No. 460 of 1994) from interfering in any manner in the affairs and management of the company. A reading of the plaint, civil suit No. 154 of 1994, reveals that no mention with regard to E.G.M. has been made. In this suit, relief of temporary injunction was sought for, but was not allowed. Later on, suit was withdrawn after filing of civil suit No. 33 of 1994 at Patiala.
It be noticed that in Company Petition No. 29 of 1993 before the Company Law Board, apart from other reliefs, Defendants had sought relief for convening of E.G.M. and to restrain Respondents therein to act as Directors and also from interfering in the affairs and management of the company. In this petition, they had prayed for interim relief, but the interim relief was not granted. One of the interim reliefs sought in the company petition was convening of E.G.M. It appears that having failed to obtain that relief from the Company Law Board, the records have been manipulated by the Defendants to show that E.G.M. was held on 22.2.1994. It may also be noticed at this stage that company Petition No. 29 of 1993 was filed with the specific averment that "the remaining 5 share holders who hold 10 shares each in the first Respondent company have started acting according to the whims and fancies of SWC and MRC and consequently prejudicial to the interest of the Petitioners where undisputedly holds 99.99% paid up equity capital of the First Respondent Company". The stand of the Respondents thus clearly was that ail the share holders of BSB except Budgam were colluding with SWC group. The stand now taken that Gurpal Singh had come to attend the meeting, seems to be improbable. More so having made the averment that remaining five share holders including Gurpal Singh were colluding with SWC group, the simplest thing for the Defendants to be done would have been to take the signatures of Gurpal Singh on the requisition notice or on the attenance register. The contention of Mr. Ramaswami that modes provided u/s 53 of the Companies Act for service of notice of documents by the company are either by way of certificate of posting (UPC) or by registered post, with or without acknowledgment due and in this case, the requisitionists having the notice under certificates of posting, presumption in law is required to be drawn. According to him once certificate of posting has been placed on record, the Court has to presume valid service of notice. It is true that u/s 53 of the Companies Act, the only modes for the service of documents/notices are the one as suggested by Mr. Ramaswami, but presumption to be drawn u/s 53 of the Companies Act is not absolute, but rebuttable. The Court, on the facts and circumstances of a case, may refuse to draw presumption. In Mst. L.M.S. Ummu Saleema Vs. Shri B.B. Gujaral and Anr, , in context of certificate of posting and drawing of presumption Sections 16 and 114 of the Evidence Act, the Supreme Court opined that "the certificate of posting might lead to a presumption that a letter addressed to the Assistant Collector of Customs was posted on 14.8.1980 and in due course reached the addressee. But, that is only a permissible and not an inevitable presumption. Neither Section 16 nor Section 114 of the Evidence Act compel the Court to draw a presumption. The presumption may or may not be drawn. On the facts and circumstances of a case, the Court may refuse to draw the presumption. On the other hand, the presumption may be drawn initially, but on a consideration of the evidence the Court may hold the presumption rebutted and may arrive at the conclusion that no letter was received by the addressee or that no letter was ever despatched as claimed. After all, there have been cases, though rare, when postal certificates and even postal seals have been manufactured.
Again in Shiv Kumar and Others Vs. State of Haryana and Others, , the Apex Court held that "we have not felt safe to decide the controversy at hand, about the service of notice on employees, on the basis of the postal certificates produced before us, as it is not difficult to get such postal seals at any point of time". In Halleswara Finance and Investments Company Limited, Bangalore v. The Company Law Board, New Delhi and others, Writ Appeal No. 806 of 1994, a Division Bench of Madras High Court in some dispute between some parties to these proceedings had also an occasion to deal with presumption required to be raised in regard to service of notice/documents sent under certificate of posting. Before the Division Bench, was argued that reading of the Section amounts to deemed fiction and once certificate of posting is produced with the address of addressee, there is a deemed fiction that the cover is received by the addressee. The learned Judges of the Division Bench repelled the argument by saying that "presumption can be drawn only if there is no other evidence available. In this case, the primary evidence regarding the posting of the letter is not produced. The best evidence can be produced in this case is the Despatch Register of the Company and the books of account showing the expenses incurred by the Company for posting the letters etc. None of these documents is produced. When the primary evidence is not produced, a presumption on the basis of Section 53(1) of the Companies Act cannot be made use of since the posting of the letter is in dispute. Only if a document is sent by post, the presumption u/s 53 of the Companies Act can arise. When there is no evidence regarding the posting of letter, the document relied on by the Appellant cannot be made use of. In the circumstances of that case, service of documents/letter sent under alleged certificates of posting was not accepted. In this case, what has been produced are the plain papers on which addresses are typed, containing seals of one post office situate at New Delhi, and the postal stamps are also of one type, though there is a gap of 24 days in sending of first notice and second notice. The despatch register or books of accounts showing the expenses incurred by the requisitionists towards the posting of letters have not been produced. These circumstances read with other circumstances as detailed in the earlier part of the judgment, lead to an inference that these notices were not sent. No reliance whatsoever can be placed on the certificates of posting under which notices were allegedly sent to Directors and the shareholders. In this view of the matter, the contents of letter of Gurpal Singh, shareholder, dated 7.4.1994, his affidavit dated 27.7.1994 deserve to be accepted preference to the affidavits of T.K. Ramaswami and Shalendra Sharma. Gurpal Singh has 10 shares of Rs. 10/- each and has no interest as such in the affairs of the company, but T.K. Ramaswami and Shalendra Sharma are certainly interested persons and have reasons to support the cause of their masters. So far as presumption u/s 195 read with Section 193 of the Companies Act regard to minutes of alleged E.G.M. is concerned, the same is neither applicable nor available to the requisitioned E.G.M. u/s 169 of the Companies Act. In V.G. Balasundaram v. New Theatres Camatic Talkies, 1993 (77) CC, 324, it has been held by the Madras High Court that "no presumption of the minutes would arise with reference to the minutes of the requisitioned meeting. Sections 193 and 195 of the Companies Act will not be applicable to the minutes of the requisitioned meeting and the minutes have to be proved as a matter of fact". Mr. G. Ramaswamy then referred to internal FAX message of one Gurpal Singh to one S.C. Majumdar of S.W.C., to contend that Plaintiffs in civil suit No. 460 of 1994 had the knowledge of convening and holding of E.G.M. FAX message referred to by Mr. Ramaswami, is dated 43.1994, by which date civil suit at Patiala had been filed wherein reference was made to the alleged E.G.M. Contempt petition too had been filed on 3.3.1994, again in which, reference had been made to the convening and holding of E.G.M. Counsel for the Plaintiffs in civil suit. No. 460 of 1994 had appeared on behalf of caveator on 3.3.1994, when the matter was taken up in contempt proceedings. FAX message merely raised query as to the convening and holding of E.G.M. and is neither of any consequence nor in any way establish that Plaintiffs knew the factum of convening and holding of E.G.M. before 22.2.1994.
In order to determine as to whether proceedings of the meeting and resolution passed therein are valid, it is necessary to notice the provisions of Section 169 of the Companies Act. Under the Section, the Board of Directors of the company on requisition of such number of members of the company as is specified in Sub-section (4), has the duty to call forthwith the E.G.M. of the company. If the Board does not, within 21 days from the date of valid requisition, proceeds to call the meeting for consideration of the matter set out in the requisition the requisitionists themselves are empowered to call meeting of the company. Under Sub-section (7), the meeting of the requisitionists is to be called in the same manner as nearly as possible, in which meetings are to be called by the Board. The meeting held in pursuance of valid requisition is an extraordinary general meeting of the company. In the present case record reveals that Budgam vide notice dated 3.1.1994 addressed to M/s B.S.B. and to the Directors, called upon the company to convene E.G.M. The operative part of it reads "pursuant to Section 169 of the Companies Act, 1956, we, M/s Budgam Finance and Investment Co. Pvt. Ltd., amounting to 99.9% of the paid up Equity Capital of (and voting rights in) M/s Bhankerpur Simbhaoli Beverages Pvt. Ltd., require you to convene an Extraordinary General Meeting and if thought fit, passing an Ordinary Resolutions, the Resolutions set forth of which we give you special notice in accordance with Section 190 and 284(2) of the said Act". The notice appears to have been sent by one Utpal Kumar Ganguly Director. Along with notice, explanatory statement have been annexed, giving the purpose for calling of E.G.M. In the explanatory statement, it has been mentioned that Directors who are employees/associates of S.W.C. namely S. Roy, A.S. Chatterji, A. Sadasivam, Deepak Dass Gupta, Srijit Mullik, R.S. Ahluwalia, V. Jayaraman and P.R. Pandya (who is alleged to have signed w.e.f. 29.5.1992), are acting against the interest of the company and their removal and acceptance of resignation of P.R. Pandya from the Board is sought by the requisitionists. It has further been mentioned therein that persons proposed to be appointed as Directors of the company are -Sh/Sh. M.D. Chhabria, Utpal Kumar Ganguly, Ashok Jain, Shyam Luthria, C.K. Wasu, Shiv Shankar Sanyal and Nandu S. Chhabria. It is the case of the Defendants that after they had served notice dated 3.1.1994 along with the explanatory statement on the Company and the Directors sought to be removed, the Board of Directors failed to convene E.G.M. as sought for by the requisitionists within 21 days of the sending of notices and, therefore, as provided under Sub-section (7) of Section 169 of the Companies Act, requisitionists convened E.G.M. and notice dated 27.1.1994 in this regard was sent to the other share-holders namely P.S. Sandhu, Gurpal Singh, G.S. Mann, J.S. Mann and P.R. Pandya, who hold 10 share of Rs. 10/- each. Notice dated 27.1.1994 has not been addressed to any other person except the share holder and on the U.P.C. receipts, the names of these very persons are mentioned, meaning thereby that notice dated 27.1.1994 had not gone to anybody else except the share holders. The business to be transacted in the E.G.M. was for the removal of Directors and appointment of new Directors. The manner in which Directors may be removed, is laid down in Section 284 of the Companies Act. As per Sub-section (1), Director may be removed by ordinary resolution, but under Sub-section (2), special notice is required to be given to the company of any resolution to remove a Director or to appoint some-body instead of Director so removed at the meeting at which he is removed. Under Sub-section (3), on receipt of notice of resolution to remove a Director, the company has to forthwith send thereof to the Director concerned and the Director, whether or not he is a member of the company, is entitled to be heard at the resolution of the -meeting. Thus, to remove a Director u/s 284 of the Companies Act, certain essential requirements are to be fulfilled. The Director concerned must be given a reasonable opportunity to make representation against the proposal for his removal and the share-holders should have also adequate opportunities of being acquainted with such representation(s) before they subscribed to such resolution for removal. u/s 190 of the Companies Act, special notice of the resolution to remove Directors as required by Section 284 of the Companies Act, has to be given to the Company not less than 14 days before the date of meeting at which he is to be removed. On receipt of notice of intention to move any such resolution, the company has to give its members notice of the resolution in the same manner as it gives notice of the meeting and if that is not practicable, then notice is required to be given either by advertisement in a newspaper having appropriate circulation or in any other mode alleged by the requisitionists, not less than seven days before the meeting. Admittedly, no special notice of the resolution was given to the company.
It has been held by the Kerala High Court in Queens Kuries and Loans (P) Ltd. v. Sheena Jose and others, (1993) 76 CC. 821, that "omission to send special notice is serious error in the conduct of the proceedings. The Directors have been denied the statutory right to the notice of making representation and to persuade the members to reject the resolution. Resolution removing the Directors is violated by failure to fulfil the requirement of law. Resolution in removing the Directors is, therefore, invalid". Respectfully agreeing and following the view taken in Queens Kuries and Loans (P) Ltd.''s case (Supra), I hold that resolution, removing the Directors, alleged to have been passed in E.G.M. held on 22.2.1994, is invalid. Yet there is another aspect of the matter with regard to removal of the Directors. Form No. 32 filed with the Registrar of Companies, pursuant to Section 303(2) of the Companies Act, placed on record shows that as on 12.3.1992, the Directors namely S. Roy and R.S. Ahluwalia had resigned and on 30.7.1993 in their place, T.K. Ravishankar and M.M. Gupta had been appointed as such. On 16.9.1993, D. Dasgupta had resigned. However, in notices dated 3.1.1994 and 27.1.1994 served u/s 169 of the Companies Act, S. Roy R.S. Ahluwalia and D. Dasgupta were sought to be removed and were allegedly removed in E.G.M. stated to have been held on 22.2.1994. But as is apparent from Form No. 32 filed with the Registrar of Companies, on 12.3.1992 S. Roy and R.S. Ahluwalia and on 16.9.1993 D. Dasgupta had already resigned. This fallacy in the resolution alleged to have been passed in E.G.M. dated 22.2.1994 was brought to the notice of the Defendants by the Registrar of Companies when Form No. 32 regarding reconstitution of Board of Director in E.G.M. dated 22.2.1994 was sought to be registered with the Registrar of Companies. Minutes of the meeting of E.G.M. show that T.K. Ramaswamy attended the alleged E.G.M. and indeed presided over it. However, he was not even sent U.P.C. notice. T.K. Ramaswamy is admittedly not a share holder of the B.S.B. It is not understood as to in what capacity he had attended the E.G.M. and had presided over the meeting, whereas Section 175 of the Companies Act provides that shareholders may elect a Chairman from amongst among themselves. I have my doubts that the minutes alleged to have been signed by T.K. Ramaswamy who presided over the meeting, can be said to be valid minutes of the meeting or any presumption u/s 195 of the Act can be raised on these minutes.
Dr. A.M. Singhvi, Sr. Advocate, as well as Mr. G. Ramaswami, Sr. Advocate, counsel for the Defendants had cited various judgments for and against the proposition that under Sub-section (2) of Section 166 of the Act, meeting could be held only at the registered office of the company or at some other place of the city, town or village in which the registered office of the company is situate. In view of my finding that meeting was not held and that resolution, if any, passed was in valid, it is not necessary to go into the merits of contentions of the respective counsel and also the judgments cited by them.
The question of suppression of material facts is not academic as has been contended by Mr. G. Ramaswami learned Counsel. Civil suit No. 33 of 1994 was filed on 2.3.1994, purporting to be on behalf of B.S.B. and Budgam through Arun Kumar Jain, Director. The relief sought in the suit was for injunction against the Defendants the rein restraining them from holding out as Directors/representatives of B.S.B. and from interfering in any manner in the management and affairs of the company. It was in this case for the first time that it was revealed that E.G.M. was held on 22.2.1994 in pursuance of notice dated 3.1.1994 and 27.1.1994 and the Board was reconstituted on 22.2.1994. Suit was filed before the Sr. Sub Judge, Patiala, but in the plaint, no mention has been made about civil suit No. 154 of 1994 dated 21.2.1994 which Arun Kumar Jain had filed at Rajpura, and relief of interim injunction was not given. A mention has also not been made of civil suit No. 158 of 1994 dated 22.2.1994 filed at Rajpura, seeking injunction restraining the Defendants therein from interfering in any manner in the affairs and management of the company. In this suit too, interim relief was not given. It was to the knowledge of Arun Kumar Jain that B.S.B. through Sarbjit Singh had filed suit at Rajpura against Budgam and others, i.e. suit No. 831 of 1993, and also civil suit No. 261 of 1993 against Arun Kumar Jain, seeking declaration of his appointment as Director as void and illegal and also injunction against the Defendants for restraining them from interfering in the affairs and management of the company, but no mention of these suits too was made. Filing of Company Petition No. 29 of 1993 before the Company Law Board and declining of prayer of interim relief of convening the E.G.M. too was within the knowledge of Arun Kumar Jain, but this fact has been omitted. The Senior Sub Judge, Patiala, registered the suit on 2.3.1994 and on the application, pending notice to other side, granted interim injunction restraining the Defendants therein from holding out as Director/representative of B.S.B. and from interfering in any manner in the affairs and management of the company. Aggrieved of the aforementioned order of interim injunction, an appeal was filed on behalf of Sarbjit Singh and others. The learned Additional District Judge, Patiala, vide his order dated 183.1994 vacated the order of the trial Court by an interim order pending appeal. Aggrieved against the order of Additional District Judge, Civil Revision No. 1109 of 1994 has been filed in this Court wherein with the consent of the parties, revision petition is being disposed of along with application under Order 39 rules 1 and 2 of the Code of Civil Procedure, filed in the Court at Patiala. The contention of Mr. Ramaswami that suits filed earlier at Rajpura were on different cause of action, whereas suit at Patiala is based on another cause of action and as such, filing of earlier suits was not a material fact requiring disclosure, and that being so, there is no suppression of material facts, cannot be accepted. In the earlier suits filed at Rajpura, the relief sought was similar to the one claimed in Patiala suit, i.e. for restraining of Defendants from interfering in the management and control of the company. It is well recognised principle for the grant of equity relief that the Plaintiff must come to the Court with clean hands and he must disclose all facts for and against him in order to claim the discretionary relief of injunction. A reference may be made to decision in the King v. The General Commissioners for the Purposes of the Income Tax Act for the District of Kensington, 1917(1) KBD, 486 wherein the Court held that "if on the argument showing cause against a rule nisi the Court comes to the conclusion that the rule was granted on an affidavit which was not candid and did not fairy state the facts, but stated them in such a way as to mislead and deceive the Court, there is power inherent in the Court, in order to protect itself and prevent an abuse of its process, to discharge the rule nisi and refuse to proceed further with the examination of the merits.
The Kerala High Court in V. Tamil-selvan v. The State of Jamil Nadu represented by its Secretary, Industries Department Madras and others, 1993(1) M.L.J.R. 26, refused the relief in writ petition by saying that the Court would be fully justified in refusing to exercise its discretion in favour of a person who has abused the process of a Court and suppressed the relevant facts and obtained orders. It also held that Court should not be a party and extended help to a party who is playing fraud on Court. In Udai Chand Vs. Shankar Lal and Others, , special leave was obtained by making fake and misleading assertions in the petition. The Supreme Court relying upon Hari Narain Vs. Badri Das, and Rajabhai Abdul Rehman Munshi Vs. Vasudev Dhanjibhai Mody, , revoked the leave and held that "a party who approaches this Court invoking the exercise of this overriding discretion of the Court must come with clean hands. If there appears on his part an attempt to overreach or mislead the Court by false or untrue statements or by withholding true information which would have a bearing on the question of exercise of the discretion, the Court would be justified in refusing to exercise the discretion or if the discretion has been exercised in revoking the leave to appeal granted even at the time of hearing of the appeal". In All India State Bank Officers Federation and Others Vs. Union of India (UOI) and Others, , and G. Narayanaswamy Reddy (dead) by L.Rs. and another Vs. Government of Karnataka and another, , the Supreme Court not only disapproved the conduct of Petitioner therein in making statements in the petitions and affidavits recklessly and without proper verification, but also refused to grant relief, when found that the Petitioner therein seeking relief had not come to the Court with frank and full disclosure of facts. In this context, a Full Bench of this Court in Charanji Lal and Others Vs. Financial Commissioner Haryana, Chandigarh and Others, , held thus:
Malafide and calculated suppression of material facts which, if disclosed, would have disentitled the Petitioners to the extraordinary remedy under the writ jurisdiction or in any case would have materially affected the merits of both the interim and ultimate relief claimed. Failure to mention all these material facts was neither inadvertent nor was occasioned by any bona fide omission - Held that the writ Petitioners, in the present case, had by their own conduct disentitled themselves to the relief which they sought to claim.
Although some of the judgments, referred to earlier, are in regard to SLP and writ petition but there is no reason as to why the principle as laid down in the said judgments cannot be applied to the suits and applications for injunction filed under Order 39 rules 1 and 2 of Code of Civil Procedure. For this case M/s Seemax Construction (P) Ltd v. State Bank of India, (1992) 102 P.L.R. 58. As already noticed, in the Patiala suit the Plaintiffs therein have not chosen to mention about the proceedings pending in various suits at Rajpura and that they were unsuccessful in getting interim relief from the Court at Rajpura and also from the Company Law Board in Company Petition No. 29 of 1993. Reason for not mentioning the above facts is obvious. If they had disclosed about the earlier proceedings, in all probability the Senior Sub Judge, Patiala would not have granted the interim relief. Although in the light of afore-mentioned judgments, I would be justified in not embarking on the merits of the case, but having considered the case on merits too, I am of the view that Plaintiff in civil suit No. 33 of 1994 has failed to make out any ground for grant of interim relief as prayed for in civil suit.
Last, but not the least, "Forum-shopping" by the Plaintiffs in civil suit No. 33 of 1994 deserves to be taken note of. In para 20 of the plaint, Plaintiffs have mentioned "that the cause of action to file the present suit has arisen to the Plaintiffs when the Defendants hatched conspiracy at Patiala...". "Moreover, the branch offices of two of the Defendants, i.e. Nos. 13 and 14, who are interfering in the management, are at Patiala, whereas all other Defendants are the agents/employees of Defendants No. 13 and 14". Again in para 21, it has been stated that the registered office and the factory unit of the first Plaintiff is situated in District Patiala and the cause of action has arisen to the Plaintiffs within the local limits of the jurisdiction of the Court and thus, the Court has ample jurisdiction to entertain and try the suit. Description of Defendants No. 13 and 14 as given in the plaint is, "13. M/s Shaw Wallace Company Ltd., 4, Bankshall Street, Calcutta - 700001, with Branch Office at Patiala, and, 14. M/s Cruicksha & Company Ltd., 40, Bankshall Lok Community, Vasant Vihar, New Delhi - 110057, with Branch Office at Patiala. It has not been disclosed as to at what place, the branch office at Patiala of Defendants No. 13 and 14 is situate. Admittedly, the industrial unit and the registered office of B.S.B. is at Dera Bassi which falls within the jurisdiction of Civil Courts at Rajpura. Sections 15 to 20 of the Code of CPC regulate the forum for institution of the suit. Section 15 of the code states that every suit shall be instituted in the Court of the lowest grade competent to try it. Section 16 states that suit shall be instituted where the subject-matter is situate. Section 20 inter-alia provides that subject to the limitations prescribed in Sections 16 to 19 of the Code of Civil Procedure, a suit shall be instituted in a Court within the local limits of whose jurisdiction the Defendants or each of the Defendants, where there are more than one, at the time of commencement of the suit, actually and voluntarily resides or carries on business, or personally works for gain; or any of the Defendants where there are more than one, at the time of commencement of the suit, actually and voluntarily resides, or carries on business, or personally 683 works for gain; provided that in such case either the leave of the Court is given or the Defendants who do not reside or carry on business or personally work for gain, acquiesce in such institution. Explanation to Section 20 of the Code provides that a corporation shall be deemed to carry on business at its sole or principal office in (India) or in respect of any cause of action at any place where it has also a subordinate office at such place. On perusal of the averments made in the plaint and in the light of afore-mentioned provisions of the Code of Civil Procedure, I am of the view that Plaintiff has failed to show that cause of action had accrued to the Plaintiff within the territorial jurisdiction of the Court at Patiala. What has been stated in paras 20 and 21 of the plaint is that the Defendants had hatched a conspiracy at Patiala. The averment is not only vague but also gives no particulars of kind and nature of conspiracy. The registered office and factory unit of the B.S.B., no doubt, is situated within the jurisdiction of Patiala district, but registered office and factory unit falls within the territorial jurisdiction of Rajpura Court, and the Rajpura Court alone has the jurisdiction to entertain and try the suits were the subject-matter is situate. In Shrikant Gupta and Others Vs. Subodh Kumar Gupta and Another, , suit was entertained by the Senior Sub Judge, Chandigarh, on the mere allegation that branch office of the firm is situate within the territorial jurisdiction of Chandigarh Court. The order entertaing the suit was set aside in revision by this Court. The Supreme Court in Subodh Kumar Gupta v. Shrikant Gupta and others,(16) (1993)104 P.L.R. 728 (S.C.), while affirming the judgments of this Court in Shrikant Gupta''s case (Supra), held that mere bald allegation that firm was having a branch office at Chandigarh, will not confer jurisdiction unless it is shown that a part of the cause of action arose within the territorial jurisdiction of that Court. In this case too, the only allegation is that branch offices of two of the Defendants, i.e. Nos. 13 and 14, who were interfering in the management, are at Patiala and the other Defendants are the agents/employees of Defendants No. 13 and 14. This bald allegation cannot confer jurisdiction in the Court at Patiala when no cause of action had accrued within the territorial jurisdiction of Patiala Court. No doubt, the District Judge, Patiala, has the administrative control over the Courts at Rajpura, but for the matters relating to the subject-matter falling within the territory of Rajpura, powers have been given to the Civil Courts at Rajpura to entertain and try the civil suits. It was for this reason that earlier suits were filed by the parties at Rajpura. Since the Plaintiffs had failed to obtain any interim relief from the Court at Rajpura, suit at Patiala was filed. Thus, I am prima-facie of the view that Court at Patiala has no territorial jurisdiction to entertain and try the suit.
During the course of arguments, some controversy was raised as to who was in possession as on the date when suit at Patiala was filed, but it was fairly conceded by Mr. G. Ramaswami that Plaintiffs in Patiala suit, at no time prior to 22.2.1994, came to control, run or manage the B.S.B. The reason for this concession is apparent from the proceedings before the Sub Divisional Magistrate, Rajpura. Arun Kumar Jain filed a complaint on 21.2.1994 u/s 145 Code of Criminal Procedure in the court of Sub Divisional Magistrate, Rajpura, and the prayer made in this complaint was for restraining the Respondents therein from interfering in the peaceful possession of the property in dispute, besides a prayer for police protection. On this complaint, the Sub Divisional Magistrate vide his order of even date, having found a prima-facie case for taking action u/s 145 Cr.P.C, ordered the summoning of Respondents therein for 17.3.1994 and meanwhile, Respondents were restrained from interfering in the possession of rightful claimants including Arun Kumar Jain who described himself as Director of B.S.B. The order also mentions that a copy of the order be sent to S.H.O. of P.S. Dera Bassi for compliance. It was on the strength of this order that the Plaintiffs in Patiala suit tried to take control of the industrial unit. It further appears from the record of proceedings before the Sub Divisional Magistrate, Rajpura, that on 2.3.1994 the Sub Divisional Magistrate on fresh consideration of the matter, as also on perusal of report of S.H.O. P.S. Dera Bassi, felt satisfied that proceedings initiated at the behest of Arun Kumar Jain are vitiated and an intended abuse of process of the Court. In his order dated 2.3.1994, the Sub Divisional Magistrate recorded that "as a matter of fact there is no such dispute with regard to possession of the subject matter referred to above which may likely cause breach of peace or disturb the public tranquility. Even as per the latest report of the S.H.O. P.S. Dera Bassi dated 9.2.1994 as also report as recent as 28.2.1994, Shri Sarbjit Singh representing the party No. 2 is in peaceful possession along with his work force and no imminent danger to peace is apprehended. Being satisfied that it is unnecessary to carry on these proceedings u/s 145 Cr.P.C, I hereby drop all the proceedings in respect of above said distillery". It was only on 2.3.1994 when the Sub Divisional Magistrate decided to drop the proceedings, that suit at Patiala was filed and on that very date the Plaintiffs were successful in obtaining interim injunction. After having obtained interim injunction from the Senior Sub Judge, Patiala, C.O.C.P. No. 199 of 1994 was filed in this Court on 3.3.1994. On 4.3.1994, G.R. Majithia, J. on finding that the parties were at issue as to which of the parties is in actual physical possession of the company, on agreement of counsel for the parties directed the Chief Judicial Magistrate, Patiala, to supervise the working of the company till 9th of March, 1994, and that order is continuing till date. In view of the order in contempt petition, none of the parties is in control of the company. As a matter of fact, no manufacturing activity took place between 22.2.1994 and presently too, no manufacturing is being done in the industrial unit and, therefore, as to who was in possession at time of filing of Patiala suit is not very important for the decision of the revision petition and application under Order 39 rules 1 and 2 of the Code of Civil Procedure.
Mr. G. Ramaswami, Sr. Advocate, has also contended that civil suit at Rajpura is liable to be stayed because the same was filed subsequent to the filing of suit at Patiala. Both the suits are at the initial stage and it would cause no prejudice to any of the parties if both the suits are ordered to be consolidated for the purposes of evidence and decision. Accordingly, it is ordered that civil suit No. 33 of 1994 pending in the court of Senior Sub Judge, Patiala, shall stand transferred to the court of Additional Senior Sub Judge, Rajpura, thereafter it shall be tried and decided along with civil suit No. 460 of 1994.
In view of what has been discussed above, I am of the considered view that Plaintiffs in civil suit No. 33 of 1994 have miserably failed to satisfy this Court that they have in their favour a prima-facie case or Court''s interference is necessary before their rights can be established on trial. On the other hand, I am also of the considered view that Plaintiffs in civil suit No. 460 of 1994 have a prima facie case and the balance of convenience is also in their favour and they would suffer an irreparable loss and injury in case the Defendants in that suit are not restrained from interfering with the working/affairs of the company on the basis of alleged resolutions passed in E.G.M. purportedly held on 22.2.1994. Thus, during the pendency of the suit, ad-interim injunction is granted in favour of Plaintiffs in civil suit No. 460 of 1994 restraining the Defendants from interfering in the affairs of the company and acting on the basis of alleged resolutions passed in E.G.M. purportedly held on 22.2.1994. The Chief Judicial Magistrate, Patiala, who is in possession of the industrial unit under the orders of this Court in contempt petition is directed to give physical possession of industrial unit to the Plaintiffs in civil suit No. 460 of 1994.
In consequence of afore-mentioned order, revision petition and also the application for injunction filed in civil suit No. 33 of 1994 shall stand dismissed. As a result of dismissal of the revision petition and application under Order 39 rules 1 and 2 of the Code of Civil Procedure, appeal pending before the Additional District Judge, Patiala having become infructuous too shall stand dismissed. There shall, however, be no order as to costs.
It is made clear that decision given in this revision petition is only for the purpose of deciding the revision petition as also the application under Order 39 rules 1 and 2 of the Code of CPC filed in civil suit No. 460 of 1994, as have been agreed by the learned Counsel for the parties. Therefore, any observation made herein shall not be construed to be an expression on the merits of the cases.
Records of the civil suits and also the documents which have been filed in this Court be sent to the court of Additional Senior Sub Judge, Rajpura, who has been ordered to decide both the suits on merits.