Anand Kumar Saigal Vs. Manu Properties (P.) Ltd. - Court Judgment

Excerpt:
1. banerji, chairman - the petitioner claiming himself to be a 50 per cent shareholder of manu properties (p.) ltd. (respondent company) has filed this petition under section 397/398 of the companies act, 1956 ('the act') alleging various acts of oppression, mismanagement and fraud by the respondents 2, 3, 5 and 6 in respect of the affairs of the respondent company, and praying for appropriate reliefs.2. briefly stated the petitioners case is that the first respondent company was incorporated as a private limited company on 18-7-1982, the main object to purchase, construct, acquire and invest in real estate and for other property related business. the promoters and the subscribers to the memorandum and articles of association of the company were the petitioner and 4th respondent both of whom were related to each other by marriage. the authorised share capital of the company was rs. 5 lakhs while the issued and the subscribed capital was rs. 200 only made up of two equity shares of rs. 100 each allotted one each to the petitioner and the 4th respondent and therefore, each represented 50 per cent of the total paid up share capital of the company. though the company was incorporated as a private limited company but it was in the nature of a partnership business with a clear understanding that both the shareholders will have equal share in the rights, liabilities and profits of the business. the petitioner and the 4th respondents were appointed as directors of the company and the petitioner was granted a general power of attorney by the company as he was the working director and conducting the entire business of the company. the accounts of the company were under the charge of 4th respondent. in may 1986 the first respondent acquired about 25 acres of land in village bhondsi. the finance for its development was provided as loan to the company by the petitioner and the 4th respondent. after segregating the land of the company from the other land extensive eucalyptus plantation was got done for business purposes and by 1993 the said trees had matured and it was decided to sell the same and to reinvest the sale proceeds. consequently the trees were sold in two lots during the period 1993-94 and 1994-95 for a total value of rs. 13 lakhs. as during this time the share market appeared to promise a very good return, the 4th respondent introduced respondents 2 and 3 who were share brokers known to the said respondent for the purpose of investing the funds of the company so as to get the best return. with this end in view and on the request of the respondents 2 and 3 they were appointed as additional directors on the board of directors of the first respondent company and as the main business of the company was to be the business of investment in securities when the land and the trees were sold it was agreed that the registered office of the company be shifted to the premises of the respondents 2 and 3 so as to enable them to maintain the books of the company to reflect the securities transactions. between march and july 1995 approx. 13.4 acres of agricultural land of the company was sold for a total consideration of rs. 25.30 lakhs and an amount of rs. 13 lakhs as already noted above was obtained by the selling of eucalyptus tree. out of the said amount a sum of approximately rs. 6 lakhs was withdrawn by the 4th respondent as he was in urgent need of the same and the balance amount with the company was entrusted to respondents 2 and 3 for investment on behalf of the company. however, despite various requests made by the petitioner the respondent nos. 2, 3 and 4 did not make available the accounts of the investment and the profits. suddenly on 12-9-1996 the petitioner was informed over the phone by the 4th respondent that the premises of the respondents 2 and 3 were about to be raided by the revenue authorities and it was necessary that all the books and records of the company be immediately completed and updated failing which there was a danger that the revenue department may treat the investments made by the company as investment on behalf of the brokers. on this misrepresentation at the behest of respondents 2, 3 and 4, the petitioner signed certain previous readymade formal minutes of the board and some notices of the board meetings and also signed copies of notices pertaining to the board meetings purported to have been held between the period 7-5-1996 to 4-9-1996 and the proposed meetings to be held on 17-9-1996. the petitioner was not happy with the state of affairs and wanted to get out of the company and was told by the respondent nos. 2 and 3 that there could be no objection to the petitioner withdrawing his share and if he could find a purchaser for the balance land lying with the company he could expect at least rs. 30 lakhs in settlement of his half share in the company. acting on the said advise the petitioner sold 8.2 acres out of the balance 12.5 acres of land remaining with the company, at a price of rs. 16.20 lakhs.however, the sale proceeds could not be deposited by the petitioner as he was surprised to find that the companies account had been closed under the authority of respondent no. 5. the petitioner immediately wrote to the respondent nos. 2 to 4 expressing his surprise regarding the closure of the account and asking where the sale proceeds could be deposited. since there was no response from the respondents 2, 3 and 4, the petitioner called a meeting of the board of directors for 16-5-1997. however, the respondents did not appear on the said date for the meeting. on or above 22-5-1997 the petitioner received a letter from the respondent no. 6 intimating that the petitioner had no right to sell the land as he was no longer a director having ceased to be a director of the company with effect from 19-9-1996 and the company has already filed a suit in the court of civil judge jr. div. gurgaon challenging the sale of land made by the petitioner. from the documents filed along with the suits and on an inspection of record of the office of registrar of companies the petitioner came to know that form no. 32 has been filed by the company indicating resignation of the 4th respondent with effect from 1-7-1996 and further the petitioner has ceased to be as director with effect from 19-9-1996 under section 283(l){g) for failing to attend six consecutive meetings. it also appeared that the board of directors of the company had issued further shares to themselves and their nominees in may and september 1996 so as to reduce the petitioner and the 4th respondent to minority and to enable the respondent nos. 2, 3, 5 and 6 to take over the company.3. the petitioner had alleged that he had been made a victim of elaborate fraud conceived and designed by respondents 2, 3, 5 and 6 to grab and lake over the company by removing the petitioner from directorship and by making self-serving allotment of shares in their own favour thereby reducing the petitioner from 50 per cent shareholding in the company to a minuscule and irrelevant minority. the said acts exhibit grave oppressive conduct of the respondents towards the petitioner and also indicative of the facts that the affairs of the company are being conducted in a manner prejudicial to the interest of the company and to defraud the company and its legitimate shareholders.it has also been alleged that the company has not called any annual general meeting since april 1993 neither any meetings of the board of directors has been held since april 1993 when the respondent nos. 2 and 3 became directors and took charge of the minute books. minutes if any which are in existence are only fictitious and fabricated and some of them had been got signed by the petitioners by fraudulent mis-representation as already stated above. no balance sheet and accounts of the company have been prepared and none have been disclosed to the shareholders. the funds of the company of over 54 lakhs have been diverted by some device to the coffers of the respondents 2,3, 5 and 6 and their associates. in short, the allegations are that the affairs of the company and its assets have been fraudulently grabbed by a group of outsiders with a view to defraud the company and its legitimate shareholders. the petitioner has, therefore, inter alia prayed that the allotment of shares made by the respondents 2 to 6 over and above the two shares belonging to the petitioner and the 4th respondent be set aside and the respondents 2, 3, 5 and 6 be removed from the directorship of the company and be made personally liable to pay the company all the funds, money and assets misappropriated, lost or diverted. further to reinstate the petitioner and the 4th respondent as directors of the company.4. a reply to the petition was filed on behalf of the 1st respondent denying the allegations made in the petition. it was inter alia stated in the reply that the petition has been filed on vague and incorrect averments and no case of oppression and mismanagement has been made out. it was further stated that the petitioner has not come with clean hands and has concealed material particulars. the case of the respondents as set out in the reply is that though the respondent company may have been incorporated as a quasi partnership but after the respondents 2 and 3 had joined the company as directors and later after they were allotted shares, the question of the company being run on partnership principles does not arise. it has been alleged that the respondent company though incorporated in the year 1982 was running at a loss and when the financial position of the respondent company was bad and no assets i.e., agricultural land worth mentioning was held by the company, the petitioner and the 4th respondent approached respondents 2 and 3 to bait them out from their problems and to help them with their expertise including financial support and contacts. on the persuasion of the petitioner and the 4th respondent, the respondents 2 and 3 agreed to become directors of the respondent company on the understanding that; (1) the control of the company shall be given to them (2) the registered office shall be shifted to the premises of the said respondents (3) the agricultural land transferred to esquire agro farms which was the partnership business of the petitioner and the respondent no. 4 shall be taken back by the respondent company at the market price and the consideration would be passed on to the 4th respondent and the petitioner (4) the respondents 2 and 3 shall be allotted shares to get the control of the respondent company (5) respondents 2 and 3 will be the controlling shareholders of the company and the 4th respondent and the petitioner will not have any say in the management. it was also agreed that the respondent company continue the business of the sale and purchase of agricultural land and the investment in share business shall be an incidental part of the main business. on this understanding the respondent nos. 2 and 3 were appointed as directors of the respondent company on 1-3-1993 when the total liability of the company was about rs. 12.7 lakhs in all including the accumulated losses of rs. 4,21,981. it was also understood at that point of time that even though the 4th respondent and the petitioner were to remain directors of the respondent company, they would not take any active role in the management and the conduct of its affairs. in other words the case of the respondents was that it was a case of a negotiated take over of the company by the respondents 2 and 3.5. according to the respondent company as per the aforesaid agreement 20.92 acres of the agricultural land along with eucalyptus tree was revalued at rs. 11.5 lakhs against the actual value of rs. 2,98,680 of the land as on 2-5-1986. pursuant to the above on 21-3-1994 the respondent company paid an amount of rs. 5,20,000 to esquire agro farms towards part payment of the liability of the eucalyptus trees. after respondents 2 and 3 became directors, the company began making profits and achieved a net profit of rs. 5,27,990 for the year 1994-95 because of the efforts of respondents 2 and 3. the respondent company also earned an amount of rs. 1,40,000 towards profit on settlement of contracts in the share market. for the year 1995-96 the respondent company earned an amount of rs. 7,65,000 towards sale of eucalyptus trees and also sold 11.55 acres of land on different dates for a total consideration of rs. 21,60,000. the net profit for the year ending 31-3-1996 was rs. 19,70, 219 and out of the said amount, the respondent company made a payment of rs. 5,47,500 to the 4th respondent on different dates and also made a payment of rs. 5,20,000 to esquire agro farms as already stated above. thus by the year 1995-96 the respondent company paid a sum of rs. 10,67,500 to the 4th respondent and esquire agro farms against a total liability of rs. 11,05,000 towards them. in the board meeting held on 7-5-1996 in which both the petitioner and the 4th respondent were present, 100 shares each at the face value was allotted to respondent nos. 2 and 3. according to the respondents, it is evident from the same that the petitioner and the 4th respondent had agreed that the majority control of the shares would be in the hands of respondents 2 and 3. as 4th respondent was not interested in continuing as a director he sent his resignation which was accepted by the board at its meeting held on 1-7-1996. thereafter the 4th respondent sold his shares to respondent no. 3 as no other shareholders were willing to purchase the said shares. form no. 32 giving intimation of the resignation of 4th respondent as a director was filed before the registrar of companies on 15-7-1996. the petitioner was also not interested in the affairs of the respondent company and he ceased to attend the meeting of the board from 15-6-1996 onwards. in the board meeting held on 19-9-1996, the board passed a resolution recording that the petitioner had ceased to be a director as he failed to attend six consecutive meetings without leave of absence in pursuance to provision of section 283(1)(g) of the act, thereafter on or about 11-4-1997 the respondent received a registered letter from the petitioner stating that he had sold 8.25 acres of land belonging to the respondent company for a consideration of rs. 16.20 lakhs. as this was done surreptitiously and fraudulently without any direction, the board was taken by surprise and called an emergent meeting on 12-4-1997 wherein it was decided to take all necessary steps to protect and safeguard the company's property. consequently five suits were filed by the respondent for declaration and permanent injunction against the alleged sale and purchase of land in the court of civil judge, gurgaon impleading the petitioner, 4th respondent and the purchasers as defendants in the said suits. another suit was filed in the high court of delhi for permanent and mandatory injunction and for rendition of accounts against the petitioner. the present petition has been filed by the petitioner as a counter blast and only to put pressure on the respondent to withdraw the suit in gurgaon.6. in their said reply the respondents have also denied the allegations made in paragraph 19 of the petition that the minutes of the meeting of the board or the notices of the meetings were got signed by the petitioner on 12-9-1996 by misrepresentation that the premises of the respondent nos. 2 and 3 were going to be raided by the revenue authorities. it has been stated that there is no truth in the said allegations and further the minute books were all complete and the petitioner had duly attended the meetings wherein 100 shares each were allotted to respondent nos. 2 and 3 and also on the date when further 1,500 shares each were allotted to the said respondents. the allegations made in paragraph 19 of the petition was an afterthought and made only to cook up a defence for the suits filed against the petitioner. the allegations made regarding the misappropriation of the funds of the respondent company by the respondents 2 and 3 were denied and it was asserted that all moneys realized by sale of agricultural land was ploughed back into the respondent company and was also utilized to pay 4th respondent and esquire agro farms and also to adjust the over draft sums taken by the respondent company from catholic syrian bank ltd. so far as the investment of the petitioner was concerned it was only to the extent of rs. 1.5 lakhs which amount has already been withdrawn to an extent of more than three times by the petitioner in the form of salary and house rent allowance. the respondent denied ihe allegation that ihe balance sheets and the accounts of the respondent company had not been prepared and filed before the registrar of companies. according to them the same were duly filed. the petition was filed mala fide to protect the petitioner against the suit filed by the respondents and no case of oppression or mismanagement has been made out against the respondents and the shareholders.7. the petitioner has filed a rejoinder to the reply filed by the respondents 1, 2, 3 and 6, wherein the allegations made against the petitioner were denied. jt was asserted that the only shareholders of the respondent company were the petitioner and the 4th respondent and no shares were allotted to the respondents 2 and 3 as alleged. the minutes of the board meetings of the respondent company alleged to have been held on 7-5-1996 and 17-9-1996 are only forged and fabricated documents devoid of any legal authority and even assuming that the allotments have been purported to have been made is in breach of the basic fiduciary duties and obligations of the respondents 2 and 3 who wanted to aggrandize their own position in the company. it was denied that no case of mismanagement or oppression has been made out on the contrary it was asserted that it was a clear case of fraudulent usurpation by a group of outsiders of the respondent company, its monies and assets and to enrich the respondents 2 and 3 at the cost of the company and the petitioner. the allegation that the company had done no business from the year 1986 to 1993 or that the financial position of the respondent company was very bad and the respondents 2 and 3 were inducted as directors and shareholders to bail out the company was denied and it was asserted that the eucalyptus plantation matures in 6 to 8 years and only thereafter they can be sold. the trees were sold in the year 1993-94 for rs. 13 lakhs and the agricultural land of 25.53 acres were shown as an asset of the company in the balance sheet for the year 1992-93. a company having such valuable trees and land could not be said to be running at a loss or in a bad financial position. in fact the company earned good profits and the services of respondents 2 and 3 were utilized only for the purpose of investments to be made in shares. the allegations made to the contrary in the reply filed by the respondents were denied. contents of paragraph 19 of the petition were reiterated and those of paragraph 19 of the reply were denied. it was asserted that the minutes and the notices showing the allotment of shares in favour of the respondents 2 and 3 and the resignation of the 4th respondent and other entries in volume ii of the minute book are all fabricated besides certain pages have been removed and some blank pages have been numbered. in paragraph 19 of the rejoinder various reasons have been given indicating that the minute books have been tampered with and the minutes have been fabricated. the allegation that the petition was filed as a counter blast to the suits filed before the civil judge, gurgaon were denied.further the allegation that payment has been made to esquire agro farms and the 4lh respondent as alleged in the reply were denied.8. sur-rejoinder was filed by the respondent company to the rejoinder filed by the petitioner, wherein copies of certain documents including copy of an agreement dated 5-4-1993, were annexed in support of the case of the said respondents.9. we have heard the learned counsel for the parties and have perused the pleadings. one of the main contentious issue in this case is whether the respondents 2 and 3 took over the company in march 1993 as a part of an agreed and negotiated take over agreement as alleged by the contesting respondents or the company and its assets were taken over fraudulently and in a clandestine manner in may 1996 by allotment of 200 shares in favour of the respondents 2 and 3.10. appearing on behalf of the petitioner shri kaura, the learned counsel has contended that the case set up by the respondents of a negotiated take over of the company and its assets in march 1993 is concocted for the purpose of making out a defence and is wholly untenable. it has been urged that no such takeover agreement has been pleaded or produced. besides, no shares were transferred or allotted to respondents 2 and 3 in march 1993 neither had the existing directors resigned. no consideration was paid to the shareholders neither their loans to the company were returned. on the contrary the records speak that the petitioner and the 4th respondent continued to remain as directors and to take active part in the management of the company. the learned counsel has further urged that the respondent company was grabbed by the respondents 2 and 3 fraudulently and clandestinely in july, 1996 in clear breach of their fiduciary duties as directors.adverting to the documents copies of which were filed along wifh the sur-rejoinder by the contesting respondents, it was contended that the same are all fabricated documents and at any rate the sur-rejoinder which has been filed without obtaining leave of the court cannot be looked into as it is not in accordance with regulations 22 and 24 of the clb regulations.11. shri u.k. chaudhry, the learned senior counsel appearing for the respondents has on the other hand contended that the 4th respondent negotiated with the respondents 2 and 3 for the take over of the company to which the petitioner acquiesced as the respondent company was running at a loss, and the same is evident from an agreement dated 5-4-1993 entered into by the parties. in support of the take over theory, the counsel contended that respondents 2 and 3 were taken as directors and the registered office of the company was transferred to the residential premises of the said respondents and the statutory records and other original documents were also handed over to the said respondents. these facts are corroborated from the contemporaneous documents filed before the registrar of companies. all the board meetings thereafter were chaired either by the respondent 2 or 3. a separate bank account was opened in standard chartered bank of which only the said respondents 2 and 3 were signatories. the agricultural land and eucalyptus tree which were transferred to the partnership firm of the petitioner and 4th respondent namely esquire agro farms were transferred back to the company as per its market value vide agreement dated 5-4-1993 on consideration paid to the said partnership and the 4th respondent. the learned counsel contended that it would be evident from the documents on the record that the control of the company was taken over by the respondents 2 and 3 in march 1993 itself and the petitioner and the 4th respondent continued as directors only for such time as their dues were not cleared. thereafter as discussed and resolved in the board meeting, 100 shares each were allotted to the respondents 2 and 3 by the board of directors in its meeting dated 7-5-1996 in which both the petitioner and the 4th respondent were present. that is the reason why the 4th respondent has not appeared to support the petitioner, who has filed this petition by concealing and misrepresenting facts.12. we have carefully considered the respective submissions made by the learned counsel for the parties. it is evident from the record that there is no written takeover agreement between the parties. the tripartite agreement which was entered on 5-4-1993 between the respondent company the partnership firm esquire agro farms, and the then shareholders was not a take over agreement as such. the respondents have annexed as annexure a1 to their sur-rejoinder, a copy of the agreement dated 5-4-1993. it appears therefrom that the parties had agreed that land measuring 20.99 acres possession of which was with esquire agro farms in pursuance to an agreement of sale dated 1-12-1986 was to be transferred back along with the eucalyptus trees to respondent company on payment of rs. 8,25,000 being the charges for the implantation of saplings, nurturings etc. of the eucalyptus trees and the development of the land and a sum of rs. 2,80,000 to be paid back to the esquire agro farms being the advance money paid by the said party to the respondent company at the time of the execution of the agreement dated 1-12-1986. significantly the last clause of this agreement mentions that the agreement dated 1-12-1986 between the parties is not cancelled as a whole and shall remain valid as regards to the lands owned by the shareholders in their personal capacity.consequently, we are of the view that this agreement cannot be said to be a take over agreement as submitted by the respondents.13. the learned counsel for the petitioner has also submitted that had the parlies agreed for a negotiated take over of the company and its assets in march 1993 the same could only done on payment of adequate consideration. according to the petitioner nothing was paid. the counsel for the respondent has, however, submitted that the amount of rs. 11,05,000 which was agreed to be paid to esquire agro farms of which the petitioner and the 4th respondent were the partners is actually the consideration paid for the take over of the respondent company and its assets. so far as this aspect is concerned as already noticed above the agreement dated 5-3-1993 very clearly states that the amount of rs. 8,25,000 was being paid to esquire agro being the charges for implantation of the saplings its nurturing etc. and the development of the land and an amount of rs. 2,80,000 was being paid back to the partnership firm being the advance money paid by them for the land vide agreement dated 1-12-1986. this also finds support from the copy of the bill dated 10-4-1993 and the receipt dated 19-3-1994 (filed along with sur-rejoinder) submitted by esquire agro to the respondent company which shows that the amount of rs. 8,25,000 was being shown as the cost of 43,500 eucalyptus trees and the service and maintaining charges thereof till 31-3-1993, out of which part payment of rs. 5,20,000 was received. it is evident from the agreement as well as the above mentioned documents that the consideration of rs. 11,05,000 which was to be paid to esquire agro could not treated to be the consideration for take over of the company and its assets namely the land and trees but was meant only to be the reimbursement of expenses incurred for planting, nurturing and maintaining the trees and the return of advance given by the firm to the company towards the agricultural land. further it is noteworthy that admittedly out of the amount of rs. 11,05,000 which was agreed to be paid to esquire agro only a part payment of rs. 5,20,000 was made that too after about a year. the respondents have claimed that an amount of rs. 5,47,000 was paid to the 4th respondent on different dates during the year 1995-96. however, this amount could not be taken to have been paid to esquire agro as the same allegedly were paid to the 4th respondent who was an unsecured creditor of the respondent company, and it is not the case of the respondents that it was accepted on behalf of the firm. that apart, no consideration was paid to the petitioner though admittedly he was a 50 per cent shareholder of the company as on 1-3-1993 and continued to be so as per records till 7-5-1996. his unsecured loans to the respondent company as per the balance sheet for the period ending 31-3-1993 was over rs. 1,89,257. it cannot be accepted as contended by the contesting respondents that the salary of rs. 3,500 and house allowance of rs. 2,500 per month paid to the petitioner covered his share of consideration for the take over, especially when the petitioner was the working director and continued to be so even after march 1993 as evident from the material on record. further it is noteworthy that even the unsecured loan given by the petitioner to the company was not paid back to him till date. it is difficult to believe that the petitioner would have agreed to a take over of the company by the respondents 2 and 3 without payment of any consideration and return of the loan advanced by him to the respondent company.14. there is another aspect of the matter which deserves attention here. according to the petitioner, assuming that any payment was made to esquire agro and the 4th respondent the same was not made out of the pocket of respondents 2 and 3 but out the sale of the eucalyptus trees which were sold during 1993-94 for rs. 13.5 lacs. this would not be the case had there been a negotiated take over where the two shareholders would be paid up front. the respondents have contended that the trees were sold during 1994-95 and the payment to esquire agro was made out of the profits of settlement of contract which is also reflected in the balance sheet for the year ending 31-3-1994. even assuming that the said contention is accepted this would signify that the respondents 2 and 3 are supposed to have taken over the respondent company along with its assets in the shape of 20.99 acres of developed land and 43,500 eucalyptus trees without paying anything out of their pocket and making part payment subsequently after a year out of the profits of the alleged settlement of contract. unfortunately both the parties have not filed the statement from their respective banks which would disclose when the trees were sold and sale proceeds deposited. taking into consideration all the aspects we find force in the submission of the petitioner that no consideration was paid to the shareholders for the take over of the company.15. it is evident from the material on record that the petitioner and the 4th respondent continued to be the shareholders and directors of the respondent company till september 1996 and, were also taking active part in the management of the company. along with the rejoinder the petitioner has filed as annexure 'c' collectively copies of the sale deeds showing that on behalf of the respondent company he had executed as many as 10 sale deeds during the year 1995 alone. this supports the contention of the petitioner that he continued to be working director of the respondent company even after march 1993. the assertion of the petitioner is also supported from the minutes of the meeting of the board of directors copies of which have been annexed to the rejoinder affidavit. in particular, reference may be made to the meeting of the board of directors dated 16-8-1995, which has also been annexed as annexure r-10 to the reply filed by the respondents attended by the petitioner as well as respondents 2, 3 and 4 which discloses that the petitioner had informed the board that he has sold 11.55 acres of agricultural land for a total consideration of rs. 21,60,000 on an average price of about rs. 1,85,000 per acre under the authority of the board. the minutes contained the particulars of the sale deeds, the amount and the different dates on which the lands were sold, and also the resolution passed by the board to this effect.16. apart from the above the record also discloses that the petitioner and the 4th respondent continued to maintain and operate the bank account of the company in the catholic syrian bank even in march 1995 as also evident from the statement of the accounts for the period 1-3-1995 to 31-3-1995 from the said bank filed by the respondent along with their surrejoinder, and this bank account was only closed in july, 1996, by the contesting respondents.17. we are unable to agree with the contention of the learned counsel for the respondents that the very fact that the respondent nos. 2 and 3 were made directors, the registered office was transferred to their premises along with the original records and they started chairing the board meetings, and thereafter all the balance sheets for the said year and subsequent years were being signed by them besides a new bank account was opened and operated only by the respondents 2 and 3 are conclusive of the fact that the said respondents had taken over the company inmarch 1993. we arc however of the considered view that merely because of the said reasons it cannot be inferred that a take over of the company took place. we have already noticed that the petitioner and the 4th respondent continued to be active directors and the 4th respondent also signed the balance sheet of march 1993 as a director and attended the board meetings along with respondents 2 and 3 as corroborated from balance sheets for the years 1994, 1995 and from board minutes dated 16-8-1995 annexed as r-10 to the reply of the respondents.18. that part the contenlion of the petitioner that respondents 2 and 3 were inducted as directors for investment of surplus sums in shares cannot be said to be without basis as the balance sheet for the year 1995-96 will show that a sum of rs. 14,50,000 was invested in shares.in the affidavit dated 19-11-1997 filed under our orders to show the investment made, the respondents have given the details of the investments made by the company in shares. to sum up, we arc unable to accept the submissions made by the learned counsel for the respondents that the respondents 2 and 3 had taken over the company and its assets in march 1993 after negotiating the deal with the 4th respondent. on the contrary we agree with the submissions of the petitioner that if there was a negotiated takeover, then there ought to have been some sort of an agreement showing the transfer of shares, resignation of the directors, payment of the loan on or about march 1993 or even in reasonable proximity of that date and some consideration for the shares held by the original shareholders. we have already found that no consideration had been paid at least to the petitioner who was a 50 per cent shareholder of the company which had valuable assets of at least 20.99 acres of land and 43,500 eucalyptus trees. we are unable to accept the case of the respondent that the consideration paid to the petitioner was his salary and house allowance. as already noticed the petitioner was the working director of the respondent company and had been acting as such as apparent from the record even much after the alleged take over in march 1993, consequently he was entitled to his remuneration and house rent allowance which had been fixed earlier by the board of directors. the payment made to the petitioner, therefore, cannot be taken to be consideration paid to him for take over of the company. it may be emphasized that even according to the respondents the petitioner was being paid salary up to the year 1994-95 and this would also find support from the profit and loss account filed by the respondent along with the sur-rejoinder. the balance sheet as on 31-3-1997 also shows an amount of rs. 73,500 as unclaimed cheques which according to the petitioner were salary cheques not taken by him.therefore, the respondents have not established that there was a negotiated take over in 1993 and that the control and management of the company had been handed over to the respondents by the petitioners voluntarily. this finding will have a bearing on the other allegation relating to issue of further shares of 200 and 3,000 to the respondents.19. it takes us to the next question whether the company and its assets were fraudulently and in clandestine manner taken over by the respondents 2 and 3 in july 1996 by allotment of 200 shares in their favour by which the petitioner and the 4th respondent were relegated to a minority and that the respondents became absolute majority and whether such allotment of shares to the respondents could be considered to be an act of oppression against the petitioners.20. the learned counsel for the petitioner has contended that in the year 1996 the respondents 2 and 3 became greedy and decided to usurp the company. they accordingly arrived at some clandestine arrangement and purported to allot themselves 200 shares in may 1996 and again 3,000 shares in september 1996. this was done clandestinely without giving any notice to the petitioner and the 4th respondent and by manipulation in the minute books. this would be evident from the fact that between may 1996 to september 1996 as many as 9 board meetings have been shown and recorded and the presence of the petitioner and the 4th respondent has also been shown as present in most meetings till june 1996. it was also fraudulently shown that the 4th respondent has resigned as director and transferred his share to the respondent no. 3 and that the petitioner has ceased to attend six consecutive meetings of the board of directors despite having received the notices and consequently ceased to be a director in view of the provisions of the section 283(l)(g). the alleged self-serving minutes has been concocted by the respondents 2 and 3 and have no evidential value. referring to the pleadings, the learned counsel has elaborated his submissions regarding the forging of the records, minute books and the alleged manipulation by submitting as follows :-- i. after march 1993 not a single minute has been signed by the petitioner or 4th respondent; ii. after march 1995 suddenly the attendance has been shown to have been signed in a separate attendance register instead of the signature of attendance in the minute books itself; iii. the minute do not specify the number of shares allotted to which of the respondents; iv. the shares could not be allotted at par when the net assets of the company were more than rs. 60 lakhs; v. there was absolutely no necessity to allot shares when the company did not require any funds and was cash rich.21. referring to the averments in paragraph 19 of the rejoinder learned counsel has contended that the minutes book has been tampered with as clear from the following :-- i. pages of vol. ii of the directors minute book which contain the relevant minutes have not been consecutively numbered. ii. at some places the minutes are recorded after keeping a blank page and at other places blank pages between minutes have been cancelled. iii all the three volumes of the minute books have been purchased from jain book company whereas in the other two volumes the pages are 96 in number in the relevant vol. ii there are a total of 90 pages therefore obviously some recorded minutes have been taken out. from the perusal of the minute book it would be apparent that some double pages which are slightly shorter in length have been stitched into the volume no. 2.22. it has been further contended that the minutes recorded on 15-5-1995 and 16-8-1995 shows certain discrepancies in the area of land and consideration received therefor apparently the minutes were fabricated it has been further contended that notices summoning the alleged board meetings between 7-5*1996 to 17-9-1996 have been signed by the respondent no. 5 as an authorized signatory when allegedly the respondent no. 5 had been appointed as director vide a fabricated resolution dated 15-6-1996. besides the meeting of the board of directors would only be summoned by a director and not by any authorized signatory. further the alleged meeting was summoned to be held on 16-6-1996 as evident from the copy of the alleged notice while the recorded minutes of the meeting is dated 15-6-1996.23. in paragraph 19 of the petition the petitioner has taken a stand that by misrepresentation made by the respondents 2, 3 and 4, he was made to sign certain notices and some minutes of the board meetings which were brought to him by the respondent no. 5. according to the petitioner the signed notices and minutes have been utilized by the respondents 2 and 3 for fabricating the alleged board meetings which are under challenge and to show that the meetings were duly held and the shares were validly allotted to the respondents 2 and 3 by the board of directors which were attended by the petitioner and the 4th respondent. the learned counsel for the petitioner has contended that these minutes have been fabricated and the signature on the attendance register has been manipulated. along with the sur-rejoinder the respondents have filed the copies of the form no. 2 showing the allotment of the shares on 7-5-1996 and the copy of the receipt showing the filing fees. the learned counsel submitted that as the documents were filed along with the sur-rejoinder or during the hearing and not with the reply and further as the sur-rejoinder was filed without obtaining leave from us as required under the regulation the same could not be looked into and were fabricated documents. it has also been submitted by the petitioners that as the minutes filed along with the surrejoinder have not been initialled on each page as required under section 193(1)(a) therefore, it has no evidential value under section 194 or presumptive value under section 195 of the act.24. the next contention of the petitioner is that the records and the minutes books have been forged and manipulated as after march 1993, as none of the minutes have been signed by the petitioner or the 4th respondent. he pointed out that the reliance of the respondents on the attendance register has no validity as, right from the beginning, the directors attending the meetings used to sign only on the minutes book itself. in the rejoinder as well as in the submissions before us learned counsel for the petitioner has strongly contended that the volume 2 of the minute book has been tampered with and some pages have been taken out as the minutes recorded on the same would have damaged the case of the respondents and certain pages have been inserted. it has further been contended that some minutes are recorded after keeping a blank page and there is some discrepancy in paging also.25. it has been contended that no caution notice as alleged in the minutes of 4-9-1996 was served on the petitioner as alleged. moreover the copy of the notice which has been filed along with the sur-rejoinder shows that the meeting was scheduled to be held at 12.30 arn on 17-9-1996. on this basis, it is contended that the slip in mentioning the time has occurred due to haste in forging the documents.besides no proof of service of notice has been produced. what has been produced is illegible and the receipt is of a post office in zone 6 whereas the office of the company is zone 2.26. the learned counsel for the petitioner has strongly urged that there was no necessity of any further allotment of shares of the respondent company in 1996-97 as the company at that time was flush with funds and it was absolutely unnecessary to raise the capital just for the payment to be made to the 4th respondent as alleged. it has been contended that the allotment of 100 shares each to in favour of respondents 2 and 3 was mala fide and made only for the purpose of getting control over the company and to hijack the same from the petitioner and the 4th respondent who were the promoters and in charge of the company. it has been contended that this was a classic case of oppression where section 397 of the act was clearly attracted. the company which was in substance a partnership wherein there was an understanding that the parties would participate in management of the company and where the petitioner was company and to hijack the same from the petitioner and the 4th respondent who were the promoters and in charge of the company. it has been contended that this was a classic case of oppression where section 397 was clearly attracted. the company which was in substance a partnership wherein there was an understanding that the parties would participate in management of the company and where the petitioner was excluded and removed from the board in clear breach of gooc! faith it would amount to oppression. reliance was placed on the principles laid down in the case of ebrahimi v. west bourne gallaries ltd [1972] ii all er page 492 and also on the decision of the delhi high court in the case of bhaskar stoneware pipes (p.) ltd. v. rajinder nath bhaskar [1988] 63 com p. cases page 184. reliance has also been placed on a recent decision of the clb in the case of pushpa vora v. vora's exclusive tools (t) ltd. [2000] 3 comp. lj. 271 (clb).27. it was next contended that the respondents 2 and 3 were inducted as directors and consequently they were holding a fiduciary position vis-avis the company and they were required to exercise their powers for the benefit of the company. however, they have misused their power by issuing further shares not for the benefit of the company which did not require any funds but solely for their personal aggrandizement with the view to take over the company and to reduce the petitioner and the 4lh respondent to a minuscule minority with mala fide motive.consequently, it is a fit case where the allotment of the shares in their favour should be set aside and other appropriate reliefs be given to the petitioner as prayed for in the petition. in support of this submission reliance had been placed on the decision of the supreme court in the case of nanalal zaver v. the bombay life assurance company (air) 1950sc l72;piercyv.s. mills and company (1980) 19 all er page 313; r.n. jalan v. dcccan enterprises (p.) ltd. 1992 vol. 78 company cases page 417, c.n. settiv. hillock hotels (p.) ltd. (2000) (1) comp.lj. 181 (ap). binod kumar aggarwal v. ringtong tea co. (p.) ltd. (1995) 1 comp. lj. 138.28. the learned counsel for the respondents rebutted all the submissions made by the counsel for the petitioner. according to him, the petitioner and the 4th respondent attended all the meetings wherein they have signed the attendance portion of the minutes book and also the meetings for which they have signed the attendance register which was kept separately in pursuance to the decision taken in the board meeting on 13-5-1995 in which the petitioner was present. he referred to the reply wherein the respondents have filed copies of the minutes of the relevant meeting dated 30-3-1996, 7-5-1996 and 17-9-1996 and also those filed during the course of hearing, photocopies of the attendance register dated 30-3-1996 and 7-5-1996 also the minutes dated 30-3-1996 to show that the same was attended by the petitioner as well as the respondents 2, 3 and 4 and the question of allotment of 200 shares to the respondents 2 and 3 was discussed in the said meeting and it was resolved that their application for allotment may be accepted.the photocopy of the attendance dated 30-3-1996 from the register was also produced to corroborate the presence of the petitioner and 4th respondent in the said meeting. he contended that the photocopies of the minutes dated 7-5-1996 by which 100 shares each were allotted to respondents 2 and 3 would show thai this meeting was attended by the petitioner and 4th respondent which is also evident from the attendance register of the said date. he also produced the original minutes books and the attendance register. in regard to the allegation that the minutes book should have been signed by the 4th respondent being the chairman of the company, it was pointed out that the minutes book is to be signed by the chairman of the meeting and since the 2nd respondent used to chair the meeting after 1993 he has signed the same. he refuted all other allegations relating to fabrication of the minutes book and submitted that it is absolutely wrong that the 5th respondent got all the minutes books and the notices for the meetings prepared in the presence of the petitioner by making representation about the income-tax raids as alleged by the petitioner. he contended that this plea has been taken only to disown his signatures on the minutes books and the attendance register. in so far as the time noted in one of the notices as 12.30 a.m., he pointed out that it is just a slip and the meeting was actually held at 12.30 pm. he also pointed out that when the petitioner did not attend consecutive meetings, he was given a caution notice which was sent by registered post, as per the evidence produced by the respondents and, therefore, it is for the petitioner to rebut the presumption of service. he submitted that the very fact the caution notice was given to enable the petitioner to attend subsequent meetings, it would establish the bond fides of the respondents.29. he pointed out that the petitioner and the 4th respondent voluntarily agreed for the take over of the company by the other respondents and therefore gave their consent for issue of 200 shares to the respondents whereafter the 4th respondent not only transferred his one share but also resigned from the board and the petitioner for the same reason, did not attend any board meeting after the issue of 200 shares. having consented to the taking over the company by the respondents, he has filed this petition only on account of the respondents having filed a civil suit for cancellation of the sale of lands made by the petitioner without authority. therefore, he contended that this petition is a mala fide one and as such deserves to be dismissed.30. we have carefully considered the various documents placed before us and also the arguments by the counsel relating to the allegation on fabrication of minutes of the board meetings. unfortunately, the 4th respondent who was one of the other 50 per cent shareholder and a promoter of the company, even though is a party to the proceedings, did not file any reply nor was represented by any counsel. the petitioner has averred in the petition that it was the 4th respondent who had spoken to him about the impending income-tax raid and asked the petitioner to assist the respondents in completing the minutes books etc. this averment is denied by the other respondents while the petitioner asserts the same. since there is no denial by the 4th respondent, if we accept this version of the petitioner, then there is no need to go into other points raised by the petitioner in regard to the minutes. it is an admitted position that the directors used to sign on the minutes book itself against their names recorded in the minutes book. however, this practice was stopped from the meeting held on 13-5-1995 in which the decision to maintain a separate attendance register was taken. the petitioner disclaims knowledge of this meeting nor his attendance. therefore we feel, that the genuineness of the minutes has to be examined, by taking into consideration the facts and circumstances of the case, since, many times, circumstances speak louder than documents. the foundation of the arguments of the respondents is that there was a negotiated takeover in 1993 which we have held as not established for various reasons, one of the main reason being that no consideration for the take over was found to have been made in 1993. the respondents have not either averred or established that, after 1993 any consideration was paid to the original promoters to take over the company. it is to be noted that out of the assets of the company in the form of agricultural lands and eucalyptus trees, the revenue earned by the company up to 31-3-1996, as per the accounts of the company was of the order of rs. 35,05,000 and this amount has wiped out the loss of the company and resulted in accumulated profit of rs. 18.74 lakhs and as on that date the company had a bank balance of rs. 8.31 lakhs. the 3rd respondent had brought in only rs. 2.65 lakhs. as against this, the company had invested rs. 29.25 lakhs in the share business in the year 1995-96 of which rs. 14.75 lakhs remained unsold and the loss in the share trading was of rs. 1.15 lakhs. thus the entire share trading was done out of the amount realized out of the sale of lands and the eucalyptus trees and if it so then, we find full justification in the stand of the petitioner that the respondents 2 and 3 were brought into the company only to assist in the investment of surplus funds arising out of the sale of land and trees. further, as on 31-3-1996, the company had a cash balance of rs. 8.31 lakhs, shares worth rs. 14.75 lakhs with the liability towards the respondents of only rs. 2.65 lakhs. this is besides the value of unsold land available with the company, the market value of which should have been substantial. therefore, even assuming that the minutes furnished by the respondents are genuine, we are unable to come to the conclusion that the petitioner would have agreed for issue of 200 shares to the respondents when he could have legitimately, as a 50 per cent shareholder, got 50 per cent of the accumulated profit as on 31-3-1996 since the entire profit arose out of the sale of assets of the company in existence before the respondents made any investment in the company. as far as the 4th respondent, who has chosen not to be represented in the proceedings, is concerned, he got the benefit of the refund of his unsecured loans of about rs. 6 lakhs and an investment by the respondents of rs. 40 lakhs in one of his own company, besides the receipt of a part of the amount which was due to the partnership firm. but the petitioner did not even get his unsecured loan of about rs. 1.86 lakhs refunded and he got no other return on his association with the company for over 10 years other than the salary for being a full time director. considering the totality of the circumstances as far as the petitioner is concerned, we are of the firm view that by allotting 200 shares to themselves by which the respondents contributed only rs. 20,000, when the company had substantial funds at its disposal, the respondents had acted in a manner oppressive to the petitioner. conversion of a 50 per cent shareholder to a negligible status by issue of further shares is a grave act of oppression, meriting appropriate relief. we also note that, in case the petitioner had really given his consent to the allotment of 200 shares, by which he would have been fully aware that, he had become a non-entity, he would have resigned from the post of director and even the company need not have taken the trouble of cautioning him about his absence. if the petitioner had really consented to the handing over of the company by agreeing to the allotment of 200 shares, the respondent directors could have given him leave of absence and continued him as a director. in a 397/ 398 petition, the conduct of the parties is an important aspect to be taken into consideration, and if we do so, then no man of ordinary prudence would hand over a company with assets/reserves/cash balance worth lakhs of rupees, without any consideration to those who had not made any contribution for over three years but utilizing the funds of the company. may be the respondents had entered into some arrangement with the 4th respondent, which is evident from the transfer of his share and his voluntary resignation, but they should not have acted prejudicially against the petitioner, being a 50 per cent shareholder. the learned counsel for the petitioners cited a number of cases in support of his arguments that allotment of shares which converts a majority into minority is an act of oppression and we fully concur with those judgments.31. having held that the respondents have acted in a manner oppressive to the interests of the petitioner by allotment of shares, the normal order should be to cancel the allotments so made and restore the position of the petitioner. but in this case, after allotment of 200 shares, the company had allotted further 3,000 shares to the respondents and that the 4th respondent who was holding one share being 50 per cent of the original two shares allotted has already sold his share to the respondents and that they have been in the exclusive management of the company now for over 4 years. therefore, we are of the view that the most equitable remedy that could be moulded in this case is that the petitioner should completely go out of the company by selling his one share of rs. 100 to the company/ respondents for an appropriate value. since the petition was filed in 1997, and as we find that the proceeds out of the sale of eucalyptus trees and a part of the land have already been incorporated in the accounts of the company, the petitioner should get 50 per cent of the net worth of the company as exhibited in the balance sheet as on 31-3-1997 together with 50 per cent of the value of the unsold land in the company as consideration for his one share. the value of the unsold land shall be determined on the basis of the price at which a part of the land was last sold in july, 1995. in case the petitioner is willing to abide by this order, then he must notify the company/respondents 2 & 3 in writing, offering his share. once he thus notifies, then the same will be binding on the company/respondents. the statutory auditor of the company shall determine the value of the share in accordance with our above directions within a month from the date of the notice of the petitioner and the consideration for the share will be paid within one month thereafter in exchange for the share held by the petitioner. since the petitioner will no longer be associated with the company after the transfer of his one share, along with the consideration for the share, the company will also refund the unsecured loans standing in the credit of the petitioner. in case the company purchases the share, it is authorized to reduce the share capital of the company to that extent.otherwise, either respondents 2 and 3 will be jointly and severally bound to purchase the share of the petitioner at the value determined as above. in view of this decision, we have not examined the issue relating to the vacation of the office of director by the petitioner.32. with the above directions the petition is disposed of with no order as to cost.

Judgment:
1. Banerji, Chairman - The petitioner claiming himself to be a 50 per cent shareholder of Manu Properties (P.) Ltd. (respondent company) has filed this petition under section 397/398 of the Companies Act, 1956 ('the Act') alleging various acts of oppression, mismanagement and fraud by the respondents 2, 3, 5 and 6 in respect of the affairs of the respondent company, and praying for appropriate reliefs.

2. Briefly stated the petitioners case is that the first respondent company was incorporated as a private limited company on 18-7-1982, the main object to purchase, construct, acquire and invest in real estate and for other property related business. The promoters and the subscribers to the memorandum and articles of association of the company were the Petitioner and 4th Respondent both of whom were related to each other by marriage. The authorised share capital of the company was Rs. 5 lakhs while the issued and the subscribed capital was Rs. 200 only made up of two equity shares of Rs. 100 each allotted one each to the petitioner and the 4th respondent and therefore, each represented 50 per cent of the total paid up share capital of the company. Though the company was incorporated as a private limited company but it was in the nature of a partnership business with a clear understanding that both the shareholders will have equal share in the rights, liabilities and profits of the business. The petitioner and the 4th respondents were appointed as directors of the company and the petitioner was granted a general power of attorney by the company as he was the working director and conducting the entire business of the company. The accounts of the company were under the charge of 4th respondent. In May 1986 the first respondent acquired about 25 acres of land in village Bhondsi. The finance for its development was provided as loan to the company by the petitioner and the 4th respondent. After segregating the land of the company from the other land extensive eucalyptus plantation was got done for business purposes and by 1993 the said trees had matured and it was decided to sell the same and to reinvest the sale proceeds. Consequently the trees were sold in two lots during the period 1993-94 and 1994-95 for a total value of Rs. 13 lakhs. As during this time the share market appeared to promise a very good return, the 4th respondent introduced respondents 2 and 3 who were share brokers known to the said respondent for the purpose of investing the funds of the company so as to get the best return. With this end in view and on the request of the respondents 2 and 3 they were appointed as additional directors on the board of directors of the first respondent company and as the main business of the company was to be the business of investment in securities when the land and the trees were sold it was agreed that the registered office of the company be shifted to the premises of the respondents 2 and 3 so as to enable them to maintain the books of the company to reflect the securities transactions. Between March and July 1995 approx. 13.4 acres of agricultural land of the company was sold for a total consideration of Rs. 25.30 lakhs and an amount of Rs. 13 lakhs as already noted above was obtained by the selling of eucalyptus tree. Out of the said amount a sum of approximately Rs. 6 lakhs was withdrawn by the 4th respondent as he was in urgent need of the same and the balance amount with the company was entrusted to Respondents 2 and 3 for investment on behalf of the company. However, despite various requests made by the petitioner the respondent Nos. 2, 3 and 4 did not make available the accounts of the investment and the profits. Suddenly on 12-9-1996 the petitioner was informed over the phone by the 4th respondent that the premises of the respondents 2 and 3 were about to be raided by the revenue authorities and it was necessary that all the books and records of the company be immediately completed and updated failing which there was a danger that the revenue department may treat the investments made by the company as investment on behalf of the brokers. On this misrepresentation at the behest of respondents 2, 3 and 4, the petitioner signed certain previous readymade formal minutes of the board and some notices of the board meetings and also signed copies of notices pertaining to the board meetings purported to have been held between the period 7-5-1996 to 4-9-1996 and the proposed meetings to be held on 17-9-1996. The petitioner was not happy with the state of affairs and wanted to get out of the company and was told by the respondent Nos. 2 and 3 that there could be no objection to the petitioner withdrawing his share and if he could find a purchaser for the balance land lying with the company he could expect at least Rs. 30 lakhs in settlement of his half share in the company. Acting on the said advise the petitioner sold 8.2 acres out of the balance 12.5 acres of land remaining with the company, at a price of Rs. 16.20 lakhs.

However, the sale proceeds could not be deposited by the petitioner as he was surprised to find that the companies account had been closed under the authority of respondent No. 5. The petitioner immediately wrote to the respondent Nos. 2 to 4 expressing his surprise regarding the closure of the account and asking where the sale proceeds could be deposited. Since there was no response from the respondents 2, 3 and 4, the petitioner called a meeting of the board of directors for 16-5-1997. However, the respondents did not appear on the said date for the meeting. On or above 22-5-1997 the petitioner received a letter from the respondent No. 6 intimating that the petitioner had no right to sell the land as he was no longer a director having ceased to be a director of the company with effect from 19-9-1996 and the company has already filed a suit in the court of Civil judge Jr. Div. Gurgaon challenging the sale of land made by the petitioner. From the documents filed along with the suits and on an inspection of record of the office of registrar of companies the petitioner came to know that Form No. 32 has been filed by the company indicating resignation of the 4th Respondent with effect from 1-7-1996 and further the petitioner has ceased to be as director with effect from 19-9-1996 under section 283(l){g) for failing to attend six consecutive meetings. It also appeared that the Board of Directors of the company had issued further shares to themselves and their nominees in May and September 1996 so as to reduce the petitioner and the 4th respondent to minority and to enable the respondent Nos. 2, 3, 5 and 6 to take over the company.

3. The petitioner had alleged that he had been made a victim of elaborate fraud conceived and designed by respondents 2, 3, 5 and 6 to grab and lake over the company by removing the petitioner from directorship and by making self-serving allotment of shares in their own favour thereby reducing the petitioner from 50 per cent shareholding in the company to a minuscule and irrelevant minority. The said acts exhibit grave oppressive conduct of the respondents towards the petitioner and also indicative of the facts that the affairs of the company are being conducted in a manner prejudicial to the interest of the company and to defraud the company and its legitimate shareholders.

It has also been alleged that the company has not called any annual general meeting since April 1993 neither any meetings of the Board of Directors has been held since April 1993 when the respondent Nos. 2 and 3 became directors and took charge of the minute books. Minutes if any which are in existence are only fictitious and fabricated and some of them had been got signed by the petitioners by fraudulent mis-representation as already stated above. No balance sheet and accounts of the company have been prepared and none have been disclosed to the shareholders. The funds of the company of over 54 lakhs have been diverted by some device to the coffers of the respondents 2,3, 5 and 6 and their associates. In short, the allegations are that the affairs of the company and its assets have been fraudulently grabbed by a group of outsiders with a view to defraud the company and its legitimate shareholders. The petitioner has, therefore, inter alia prayed that the allotment of shares made by the respondents 2 to 6 over and above the two shares belonging to the petitioner and the 4th respondent be set aside and the respondents 2, 3, 5 and 6 be removed from the directorship of the company and be made personally liable to pay the company all the funds, money and assets misappropriated, lost or diverted. Further to reinstate the petitioner and the 4th respondent as directors of the company.

4. A reply to the petition was filed on behalf of the 1st respondent denying the allegations made in the petition. It was inter alia stated in the reply that the petition has been filed on vague and incorrect averments and no case of oppression and mismanagement has been made out. It was further stated that the petitioner has not come with clean hands and has concealed material particulars. The case of the respondents as set out in the reply is that though the respondent company may have been incorporated as a quasi partnership but after the respondents 2 and 3 had joined the company as directors and later after they were allotted shares, the question of the company being run on partnership principles does not arise. It has been alleged that the respondent company though incorporated in the year 1982 was running at a loss and when the financial position of the respondent company was bad and no assets i.e., agricultural land worth mentioning was held by the company, the petitioner and the 4th respondent approached respondents 2 and 3 to bait them out from their problems and to help them with their expertise including financial support and contacts. On the persuasion of the petitioner and the 4th respondent, the respondents 2 and 3 agreed to become directors of the respondent company on the understanding that; (1) the control of the company shall be given to them (2) the registered office shall be shifted to the premises of the said respondents (3) the agricultural land transferred to Esquire Agro Farms which was the partnership business of the petitioner and the respondent No. 4 shall be taken back by the respondent company at the market price and the consideration would be passed on to the 4th respondent and the petitioner (4) The respondents 2 and 3 shall be allotted shares to get the control of the respondent company (5) respondents 2 and 3 will be the controlling shareholders of the company and the 4th respondent and the petitioner will not have any say in the management. It was also agreed that the respondent company continue the business of the sale and purchase of agricultural land and the investment in share business shall be an incidental part of the main business. On this understanding the respondent Nos. 2 and 3 were appointed as directors of the respondent company on 1-3-1993 when the total liability of the company was about Rs. 12.7 lakhs in all including the accumulated losses of Rs. 4,21,981. It was also understood at that point of time that even though the 4th respondent and the petitioner were to remain directors of the respondent company, they would not take any active role in the management and the conduct of its affairs. In other words the case of the respondents was that it was a case of a negotiated take over of the company by the respondents 2 and 3.

5. According to the respondent company as per the aforesaid agreement 20.92 acres of the agricultural land along with eucalyptus tree was revalued at Rs. 11.5 lakhs against the actual value of Rs. 2,98,680 of the land as on 2-5-1986. Pursuant to the above on 21-3-1994 the respondent company paid an amount of Rs. 5,20,000 to Esquire Agro Farms towards part payment of the liability of the eucalyptus trees. After respondents 2 and 3 became directors, the company began making profits and achieved a net profit of Rs. 5,27,990 for the year 1994-95 because of the efforts of respondents 2 and 3. The respondent company also earned an amount of Rs. 1,40,000 towards profit on settlement of contracts in the share market. For the year 1995-96 the respondent company earned an amount of Rs. 7,65,000 towards sale of eucalyptus trees and also sold 11.55 acres of land on different dates for a total consideration of Rs. 21,60,000. The net profit for the year ending 31-3-1996 was Rs. 19,70, 219 and out of the said amount, the respondent company made a payment of Rs. 5,47,500 to the 4th respondent on different dates and also made a payment of Rs. 5,20,000 to Esquire Agro Farms as already stated above. Thus by the year 1995-96 the respondent company paid a sum of Rs. 10,67,500 to the 4th respondent and Esquire Agro Farms against a total liability of Rs. 11,05,000 towards them. In the board meeting held on 7-5-1996 in which both the petitioner and the 4th respondent were present, 100 shares each at the face value was allotted to respondent Nos. 2 and 3. According to the respondents, it is evident from the same that the petitioner and the 4th respondent had agreed that the majority control of the shares would be in the hands of respondents 2 and 3. As 4th respondent was not interested in continuing as a director he sent his resignation which was accepted by the board at its meeting held on 1-7-1996. Thereafter the 4th respondent sold his shares to respondent No. 3 as no other shareholders were willing to purchase the said shares. Form No. 32 giving intimation of the resignation of 4th respondent as a director was filed before the registrar of companies on 15-7-1996. The petitioner was also not interested in the affairs of the respondent company and he ceased to attend the meeting of the board from 15-6-1996 onwards. In the board meeting held on 19-9-1996, the board passed a resolution recording that the petitioner had ceased to be a director as he failed to attend six consecutive meetings without leave of absence in pursuance to provision of section 283(1)(g) of the Act, Thereafter on or about 11-4-1997 the respondent received a registered letter from the petitioner stating that he had sold 8.25 acres of land belonging to the respondent company for a consideration of Rs. 16.20 lakhs. As this was done surreptitiously and fraudulently without any direction, the board was taken by surprise and called an emergent meeting on 12-4-1997 wherein it was decided to take all necessary steps to protect and safeguard the company's property. Consequently five suits were filed by the respondent for declaration and permanent injunction against the alleged sale and purchase of land in the court of Civil Judge, Gurgaon impleading the petitioner, 4th respondent and the purchasers as defendants in the said suits. Another suit was filed in the High Court of Delhi for permanent and mandatory injunction and for rendition of accounts against the petitioner. The present petition has been filed by the petitioner as a counter blast and only to put pressure on the respondent to withdraw the suit in Gurgaon.

6. In their said reply the respondents have also denied the allegations made in paragraph 19 of the petition that the minutes of the meeting of the board or the notices of the meetings were got signed by the petitioner on 12-9-1996 by misrepresentation that the premises of the respondent Nos. 2 and 3 were going to be raided by the revenue authorities. It has been stated that there is no truth in the said allegations and further the minute books were all complete and the petitioner had duly attended the meetings wherein 100 shares each were allotted to respondent Nos. 2 and 3 and also on the date when further 1,500 shares each were allotted to the said respondents. The allegations made in paragraph 19 of the petition was an afterthought and made only to cook up a defence for the suits filed against the petitioner. The allegations made regarding the misappropriation of the funds of the respondent company by the respondents 2 and 3 were denied and it was asserted that all moneys realized by sale of agricultural land was ploughed back into the respondent company and was also utilized to pay 4th respondent and Esquire Agro Farms and also to adjust the over draft sums taken by the respondent company from Catholic Syrian Bank Ltd. So far as the investment of the petitioner was concerned it was only to the extent of Rs. 1.5 lakhs which amount has already been withdrawn to an extent of more than three times by the petitioner in the form of salary and house rent allowance. The respondent denied ihe allegation that ihe balance sheets and the accounts of the respondent company had not been prepared and filed before the registrar of companies. According to them the same were duly filed. The petition was filed mala fide to protect the petitioner against the suit filed by the respondents and no case of oppression or mismanagement has been made out against the respondents and the shareholders.

7. The petitioner has filed a rejoinder to the reply filed by the respondents 1, 2, 3 and 6, wherein the allegations made against the petitioner were denied. Jt was asserted that the only shareholders of the respondent company were the petitioner and the 4th respondent and no shares were allotted to the respondents 2 and 3 as alleged. The minutes of the board meetings of the respondent company alleged to have been held on 7-5-1996 and 17-9-1996 are only forged and fabricated documents devoid of any legal authority and even assuming that the allotments have been purported to have been made is in breach of the basic fiduciary duties and obligations of the respondents 2 and 3 who wanted to aggrandize their own position in the company. It was denied that no case of mismanagement or oppression has been made out on the contrary it was asserted that it was a clear case of fraudulent usurpation by a group of outsiders of the respondent company, its monies and assets and to enrich the respondents 2 and 3 at the cost of the company and the petitioner. The allegation that the company had done no business from the year 1986 to 1993 or that the financial position of the respondent company was very bad and the respondents 2 and 3 were inducted as directors and shareholders to bail out the company was denied and it was asserted that the eucalyptus plantation matures in 6 to 8 years and only thereafter they can be sold. The trees were sold in the year 1993-94 for Rs. 13 lakhs and the agricultural land of 25.53 acres were shown as an asset of the company in the balance sheet for the year 1992-93. A company having such valuable trees and land could not be said to be running at a loss or in a bad financial position. In fact the company earned good profits and the services of respondents 2 and 3 were utilized only for the purpose of investments to be made in shares. The allegations made to the contrary in the reply filed by the respondents were denied. Contents of paragraph 19 of the petition were reiterated and those of paragraph 19 of the reply were denied. It was asserted that the minutes and the notices showing the allotment of shares in favour of the respondents 2 and 3 and the resignation of the 4th respondent and other entries in volume II of the minute book are all fabricated besides certain pages have been removed and some blank pages have been numbered. In paragraph 19 of the rejoinder various reasons have been given indicating that the minute books have been tampered with and the minutes have been fabricated. The allegation that the petition was filed as a counter blast to the suits filed before the Civil Judge, Gurgaon were denied.

Further the allegation that payment has been made to Esquire Agro Farms and the 4lh respondent as alleged in the reply were denied.

8. Sur-rejoinder was filed by the respondent company to the rejoinder filed by the petitioner, wherein copies of certain documents including copy of an agreement dated 5-4-1993, were annexed in support of the case of the said respondents.

9. We have heard the learned counsel for the parties and have perused the pleadings. One of the main contentious issue in this case is whether the respondents 2 and 3 took over the company in March 1993 as a part of an agreed and negotiated take over agreement as alleged by the contesting respondents or the company and its assets were taken over fraudulently and in a clandestine manner in May 1996 by allotment of 200 shares in favour of the respondents 2 and 3.

10. Appearing on behalf of the petitioner Shri Kaura, the learned counsel has contended that the case set up by the respondents of a negotiated take over of the company and its assets in March 1993 is concocted for the purpose of making out a defence and is wholly untenable. It has been urged that no such takeover agreement has been pleaded or produced. Besides, no shares were transferred or allotted to respondents 2 and 3 in March 1993 neither had the existing directors resigned. No consideration was paid to the shareholders neither their loans to the company were returned. On the contrary the records speak that the petitioner and the 4th respondent continued to remain as directors and to take active part in the management of the company. The learned counsel has further urged that the respondent company was grabbed by the respondents 2 and 3 fraudulently and clandestinely in July, 1996 in clear breach of their fiduciary duties as directors.

Adverting to the documents copies of which were filed along wifh the sur-rejoinder by the contesting respondents, it was contended that the same are all fabricated documents and at any rate the sur-rejoinder which has been filed without obtaining leave of the court cannot be looked into as it is not in accordance with regulations 22 and 24 of the CLB Regulations.

11. Shri U.K. Chaudhry, the learned senior counsel appearing for the respondents has on the other hand contended that the 4th respondent negotiated with the respondents 2 and 3 for the take over of the company to which the petitioner acquiesced as the respondent company was running at a loss, and the same is evident from an agreement dated 5-4-1993 entered into by the parties. In support of the take over theory, the counsel contended that respondents 2 and 3 were taken as directors and the registered office of the company was transferred to the residential premises of the said respondents and the statutory records and other original documents were also handed over to the said respondents. These facts are corroborated from the contemporaneous documents filed before the Registrar of Companies. All the board meetings thereafter were chaired either by the respondent 2 or 3. A separate bank account was opened in Standard Chartered Bank of which only the said respondents 2 and 3 were signatories. The agricultural land and eucalyptus tree which were transferred to the partnership firm of the petitioner and 4th respondent namely Esquire Agro Farms were transferred back to the company as per its market value vide agreement dated 5-4-1993 on consideration paid to the said partnership and the 4th respondent. The learned counsel contended that it would be evident from the documents on the record that the control of the company was taken over by the respondents 2 and 3 in March 1993 itself and the petitioner and the 4th respondent continued as directors only for such time as their dues were not cleared. Thereafter as discussed and resolved in the Board meeting, 100 shares each were allotted to the respondents 2 and 3 by the Board of Directors in its meeting dated 7-5-1996 in which both the petitioner and the 4th respondent were present. That is the reason why the 4th respondent has not appeared to support the petitioner, who has filed this petition by concealing and misrepresenting facts.

12. We have carefully considered the respective submissions made by the learned counsel for the parties. It is evident from the record that there is no written takeover agreement between the parties. The tripartite agreement which was entered on 5-4-1993 between the respondent company the partnership firm Esquire Agro Farms, and the then shareholders was not a take over agreement as such. The respondents have annexed as annexure A1 to their sur-rejoinder, a copy of the agreement dated 5-4-1993. It appears therefrom that the parties had agreed that land measuring 20.99 acres possession of which was with Esquire Agro Farms in pursuance to an agreement of sale dated 1-12-1986 was to be transferred back along with the eucalyptus trees to respondent company on payment of Rs. 8,25,000 being the charges for the implantation of saplings, nurturings etc. of the eucalyptus trees and the development of the land and a sum of Rs. 2,80,000 to be paid back to the Esquire Agro Farms being the advance money paid by the said party to the respondent company at the time of the execution of the agreement dated 1-12-1986. Significantly the last clause of this agreement mentions that the agreement dated 1-12-1986 between the parties is not cancelled as a whole and shall remain valid as regards to the lands owned by the shareholders in their personal capacity.

Consequently, we are of the view that this agreement cannot be said to be a take over agreement as submitted by the respondents.

13. The learned counsel for the petitioner has also submitted that had the parlies agreed for a negotiated take over of the company and its assets in March 1993 the same could only done on payment of adequate consideration. According to the petitioner nothing was paid. The counsel for the respondent has, however, submitted that the amount of Rs. 11,05,000 which was agreed to be paid to Esquire Agro Farms of which the petitioner and the 4th respondent were the partners is actually the consideration paid for the take over of the respondent company and its assets. So far as this aspect is concerned as already noticed above the agreement dated 5-3-1993 very clearly states that the amount of Rs. 8,25,000 was being paid to Esquire Agro being the charges for implantation of the saplings its nurturing etc. and the development of the land and an amount of Rs. 2,80,000 was being paid back to the partnership firm being the advance money paid by them for the land vide agreement dated 1-12-1986. This also finds support from the copy of the bill dated 10-4-1993 and the receipt dated 19-3-1994 (filed along with sur-rejoinder) submitted by Esquire Agro to the respondent company which shows that the amount of Rs. 8,25,000 was being shown as the cost of 43,500 eucalyptus trees and the service and maintaining charges thereof till 31-3-1993, out of which part payment of Rs. 5,20,000 was received. It is evident from the agreement as well as the above mentioned documents that the consideration of Rs. 11,05,000 which was to be paid to Esquire Agro could not treated to be the consideration for take over of the company and its assets namely the land and trees but was meant only to be the reimbursement of expenses incurred for planting, nurturing and maintaining the trees and the return of advance given by the firm to the company towards the agricultural land. Further it is noteworthy that admittedly out of the amount of Rs. 11,05,000 which was agreed to be paid to Esquire Agro only a part payment of Rs. 5,20,000 was made that too after about a year. The respondents have claimed that an amount of Rs. 5,47,000 was paid to the 4th respondent on different dates during the year 1995-96. However, this amount could not be taken to have been paid to Esquire Agro as the same allegedly were paid to the 4th respondent who was an unsecured creditor of the respondent company, and it is not the case of the respondents that it was accepted on behalf of the firm. That apart, no consideration was paid to the petitioner though admittedly he was a 50 per cent shareholder of the company as on 1-3-1993 and continued to be so as per records till 7-5-1996. His unsecured loans to the respondent company as per the balance sheet for the period ending 31-3-1993 was over Rs. 1,89,257. It cannot be accepted as contended by the contesting respondents that the salary of Rs. 3,500 and House allowance of Rs. 2,500 per month paid to the petitioner covered his share of consideration for the take over, especially when the petitioner was the working director and continued to be so even after March 1993 as evident from the material on record. Further it is noteworthy that even the unsecured loan given by the petitioner to the company was not paid back to him till date. It is difficult to believe that the petitioner would have agreed to a take over of the company by the respondents 2 and 3 without payment of any consideration and return of the loan advanced by him to the respondent company.

14. There is another aspect of the matter which deserves attention here. According to the petitioner, assuming that any payment was made to Esquire Agro and the 4th respondent the same was not made out of the pocket of respondents 2 and 3 but out the sale of the eucalyptus trees which were sold during 1993-94 for Rs. 13.5 lacs. This would not be the case had there been a negotiated take over where the two shareholders would be paid up front. The respondents have contended that the trees were sold during 1994-95 and the payment to Esquire Agro was made out of the profits of settlement of contract which is also reflected in the balance sheet for the year ending 31-3-1994. Even assuming that the said contention is accepted this would signify that the respondents 2 and 3 are supposed to have taken over the respondent company along with its assets in the shape of 20.99 acres of developed land and 43,500 eucalyptus trees without paying anything out of their pocket and making part payment subsequently after a year out of the profits of the alleged settlement of contract. Unfortunately both the parties have not filed the statement from their respective banks which would disclose when the trees were sold and sale proceeds deposited. Taking into consideration all the aspects we find force in the submission of the petitioner that no consideration was paid to the shareholders for the take over of the company.

15. It is evident from the material on record that the petitioner and the 4th respondent continued to be the shareholders and directors of the respondent company till September 1996 and, were also taking active part in the management of the company. Along with the rejoinder the petitioner has filed as annexure 'C' collectively copies of the sale deeds showing that on behalf of the respondent company he had executed as many as 10 sale deeds during the year 1995 alone. This supports the contention of the petitioner that he continued to be working director of the respondent company even after March 1993. The assertion of the petitioner is also supported from the minutes of the meeting of the board of directors copies of which have been annexed to the rejoinder affidavit. In particular, reference may be made to the meeting of the board of directors dated 16-8-1995, which has also been annexed as annexure R-10 to the reply filed by the respondents attended by the petitioner as well as respondents 2, 3 and 4 which discloses that the petitioner had informed the board that he has sold 11.55 acres of agricultural land for a total consideration of Rs. 21,60,000 on an average price of about Rs. 1,85,000 per acre under the authority of the board. The minutes contained the particulars of the sale deeds, the amount and the different dates on which the lands were sold, and also the resolution passed by the Board to this effect.

16. Apart from the above the record also discloses that the petitioner and the 4th respondent continued to maintain and operate the bank account of the company in the Catholic Syrian Bank even in March 1995 as also evident from the statement of the accounts for the period 1-3-1995 to 31-3-1995 from the said bank filed by the respondent along with their surrejoinder, and this bank account was only closed in July, 1996, by the contesting respondents.

17. We are unable to agree with the contention of the learned counsel for the respondents that the very fact that the respondent Nos. 2 and 3 were made directors, the registered office was transferred to their premises along with the original records and they started chairing the Board meetings, and thereafter all the balance sheets for the said year and subsequent years were being signed by them besides a new bank account was opened and operated only by the respondents 2 and 3 are conclusive of the fact that the said respondents had taken over the company inMarch 1993. We arc however of the considered view that merely because of the said reasons it cannot be inferred that a take over of the company took place. We have already noticed that the petitioner and the 4th respondent continued to be active directors and the 4th respondent also signed the balance sheet of March 1993 as a director and attended the Board meetings along with respondents 2 and 3 as corroborated from balance sheets for the years 1994, 1995 and from Board minutes dated 16-8-1995 annexed as R-10 to the reply of the respondents.

18. That part the contenlion of the petitioner that respondents 2 and 3 were inducted as directors for investment of surplus sums in shares cannot be said to be without basis as the balance sheet for the year 1995-96 will show that a sum of Rs. 14,50,000 was invested in shares.

In the affidavit dated 19-11-1997 filed under our orders to show the investment made, the respondents have given the details of the investments made by the company in shares. To sum up, we arc unable to accept the submissions made by the learned counsel for the respondents that the respondents 2 and 3 had taken over the company and its assets in March 1993 after negotiating the deal with the 4th respondent. On the contrary we agree with the submissions of the petitioner that if there was a negotiated takeover, then there ought to have been some sort of an agreement showing the transfer of shares, resignation of the directors, payment of the loan on or about March 1993 or even in reasonable proximity of that date and some consideration for the shares held by the original shareholders. We have already found that no consideration had been paid at least to the petitioner who was a 50 per cent shareholder of the company which had valuable assets of at least 20.99 acres of land and 43,500 eucalyptus trees. We are unable to accept the case of the respondent that the consideration paid to the petitioner was his salary and house allowance. As already noticed the petitioner was the working director of the respondent company and had been acting as such as apparent from the record even much after the alleged take over in March 1993, consequently he was entitled to his remuneration and house rent allowance which had been fixed earlier by the board of directors. The payment made to the petitioner, therefore, cannot be taken to be consideration paid to him for take over of the company. It may be emphasized that even according to the respondents the petitioner was being paid salary up to the year 1994-95 and this would also find support from the profit and loss account filed by the respondent along with the sur-rejoinder. The balance sheet as on 31-3-1997 also shows an amount of Rs. 73,500 as unclaimed cheques which according to the petitioner were salary cheques not taken by him.

Therefore, the respondents have not established that there was a negotiated take over in 1993 and that the control and management of the company had been handed over to the respondents by the petitioners voluntarily. This finding will have a bearing on the other allegation relating to issue of further shares of 200 and 3,000 to the respondents.

19. It takes us to the next question whether the company and its assets were fraudulently and in clandestine manner taken over by the respondents 2 and 3 in July 1996 by allotment of 200 shares in their favour by which the petitioner and the 4th respondent were relegated to a minority and that the respondents became absolute majority and whether such allotment of shares to the respondents could be considered to be an act of oppression against the petitioners.

20. The learned counsel for the petitioner has contended that in the year 1996 the respondents 2 and 3 became greedy and decided to usurp the company. They accordingly arrived at some clandestine arrangement and purported to allot themselves 200 shares in May 1996 and again 3,000 shares in September 1996. This was done clandestinely without giving any notice to the petitioner and the 4th respondent and by manipulation in the minute books. This would be evident from the fact that between May 1996 to September 1996 as many as 9 board meetings have been shown and recorded and the presence of the petitioner and the 4th respondent has also been shown as present in most meetings till June 1996. It was also fraudulently shown that the 4th respondent has resigned as director and transferred his share to the respondent no. 3 and that the petitioner has ceased to attend six consecutive meetings of the board of directors despite having received the notices and consequently ceased to be a director in view of the provisions of the section 283(l)(g). The alleged self-serving minutes has been concocted by the respondents 2 and 3 and have no evidential value. Referring to the pleadings, the learned counsel has elaborated his submissions regarding the forging of the records, minute books and the alleged manipulation by submitting as follows :-- i. After March 1993 not a single minute has been signed by the petitioner or 4th respondent; ii. After March 1995 suddenly the attendance has been shown to have been signed in a separate attendance register instead of the signature of attendance in the minute books itself; iii. The minute do not specify the number of shares allotted to which of the respondents; iv. The shares could not be allotted at par when the net assets of the company were more than Rs. 60 lakhs; v. There was absolutely no necessity to allot shares when the company did not require any funds and was cash rich.

21. Referring to the averments in paragraph 19 of the rejoinder learned counsel has contended that the minutes book has been tampered with as clear from the following :-- i. pages of Vol. II of the directors minute book which contain the relevant minutes have not been consecutively numbered.

ii. At some places the minutes are recorded after keeping a blank page and at other places blank pages between minutes have been cancelled.

iii All the three volumes of the minute books have been purchased from Jain book company whereas in the other two volumes the pages are 96 in number in the relevant Vol. II there are a total of 90 pages therefore obviously some recorded minutes have been taken out.

From the perusal of the minute book it would be apparent that some double pages which are slightly shorter in length have been stitched into the volume no. 2.

22. It has been further contended that the minutes recorded on 15-5-1995 and 16-8-1995 shows certain discrepancies in the area of land and consideration received therefor apparently the minutes were fabricated it has been further contended that notices summoning the alleged board meetings between 7-5*1996 to 17-9-1996 have been signed by the respondent no. 5 as an authorized signatory when allegedly the respondent no. 5 had been appointed as director vide a fabricated resolution dated 15-6-1996. Besides the meeting of the board of directors would only be summoned by a director and not by any authorized signatory. Further the alleged meeting was summoned to be held on 16-6-1996 as evident from the copy of the alleged notice while the recorded minutes of the meeting is dated 15-6-1996.

23. In paragraph 19 of the petition the petitioner has taken a stand that by misrepresentation made by the respondents 2, 3 and 4, he was made to sign certain notices and some minutes of the board meetings which were brought to him by the respondent no. 5. According to the petitioner the signed notices and minutes have been utilized by the respondents 2 and 3 for fabricating the alleged board meetings which are under challenge and to show that the meetings were duly held and the shares were validly allotted to the respondents 2 and 3 by the board of directors which were attended by the petitioner and the 4th respondent. The learned counsel for the petitioner has contended that these minutes have been fabricated and the signature on the attendance register has been manipulated. Along with the sur-rejoinder the respondents have filed the copies of the form no. 2 showing the allotment of the shares on 7-5-1996 and the copy of the receipt showing the filing fees. The learned counsel submitted that as the documents were filed along with the sur-rejoinder or during the hearing and not with the reply and further as the sur-rejoinder was filed without obtaining leave from us as required under the Regulation the same could not be looked into and were fabricated documents. It has also been submitted by the petitioners that as the minutes filed along with the surrejoinder have not been initialled on each page as required under section 193(1)(a) therefore, it has no evidential value under section 194 or presumptive value under section 195 of the Act.

24. The next contention of the petitioner is that the records and the minutes books have been forged and manipulated as after March 1993, as none of the minutes have been signed by the petitioner or the 4th respondent. He pointed out that the reliance of the respondents on the attendance register has no validity as, right from the beginning, the directors attending the meetings used to sign only on the minutes book itself. In the rejoinder as well as in the submissions before us learned counsel for the petitioner has strongly contended that the volume 2 of the minute book has been tampered with and some pages have been taken out as the minutes recorded on the same would have damaged the case of the respondents and certain pages have been inserted. It has further been contended that some minutes are recorded after keeping a blank page and there is some discrepancy in paging also.

25. It has been contended that no caution notice as alleged in the minutes of 4-9-1996 was served on the petitioner as alleged. Moreover the copy of the notice which has been filed along with the sur-rejoinder shows that the meeting was scheduled to be held at 12.30 arn on 17-9-1996. On this basis, it is contended that the slip in mentioning the time has occurred due to haste in forging the documents.

Besides no proof of service of notice has been produced. What has been produced is illegible and the receipt is of a post office in zone 6 whereas the office of the company is zone 2.

26. The learned counsel for the petitioner has strongly urged that there was no necessity of any further allotment of shares of the respondent company in 1996-97 as the company at that time was flush with funds and it was absolutely unnecessary to raise the capital just for the payment to be made to the 4th respondent as alleged. It has been contended that the allotment of 100 shares each to in favour of respondents 2 and 3 was mala fide and made only for the purpose of getting control over the company and to hijack the same from the petitioner and the 4th respondent who were the promoters and in charge of the company. It has been contended that this was a classic case of oppression where section 397 of the Act was clearly attracted. The company which was in substance a partnership wherein there was an understanding that the parties would participate in management of the company and where the petitioner was company and to hijack the same from the petitioner and the 4th respondent who were the promoters and in charge of the company. It has been contended that this was a classic case of oppression where section 397 was clearly attracted. The company which was in substance a partnership wherein there was an understanding that the parties would participate in management of the company and where the petitioner was excluded and removed from the board in clear breach of gooc! faith it would amount to oppression. Reliance was placed on the principles laid down in the case of Ebrahimi v. West Bourne Gallaries Ltd [1972] II All ER page 492 and also on the decision of the Delhi High Court in the case of Bhaskar Stoneware Pipes (P.) Ltd. v. Rajinder Nath Bhaskar [1988] 63 Com p. Cases page 184. Reliance has also been placed on a recent decision of the CLB in the case of Pushpa Vora v. Vora's Exclusive Tools (T) Ltd. [2000] 3 Comp. LJ. 271 (CLB).

27. It was next contended that the respondents 2 and 3 were inducted as directors and consequently they were holding a fiduciary position vis-avis the company and they were required to exercise their powers for the benefit of the company. However, they have misused their power by issuing further shares not for the benefit of the company which did not require any funds but solely for their personal aggrandizement with the view to take over the company and to reduce the petitioner and the 4lh respondent to a minuscule minority with mala fide motive.

Consequently, it is a fit case where the allotment of the shares in their favour should be set aside and other appropriate reliefs be given to the petitioner as prayed for in the petition. In support of this submission reliance had been placed on the decision of the Supreme Court in the case of Nanalal Zaver v. The Bombay Life Assurance Company (AIR) 1950SC l72;Piercyv.S. Mills and Company (1980) 19 All ER page 313; R.N. Jalan v. Dcccan Enterprises (P.) Ltd. 1992 Vol. 78 Company Cases page 417, C.N. Settiv. Hillock Hotels (P.) Ltd. (2000) (1) Comp.

LJ. 181 (AP). Binod Kumar Aggarwal v. Ringtong Tea Co. (P.) Ltd. (1995) 1 Comp. LJ. 138.

28. The learned counsel for the respondents rebutted all the submissions made by the counsel for the petitioner. According to him, the petitioner and the 4th respondent attended all the meetings wherein they have signed the attendance portion of the minutes book and also the meetings for which they have signed the attendance register which was kept separately in pursuance to the decision taken in the Board meeting on 13-5-1995 in which the petitioner was present. He referred to the reply wherein the respondents have filed copies of the minutes of the relevant meeting dated 30-3-1996, 7-5-1996 and 17-9-1996 and also those filed during the course of hearing, photocopies of the attendance register dated 30-3-1996 and 7-5-1996 also the minutes dated 30-3-1996 to show that the same was attended by the petitioner as well as the respondents 2, 3 and 4 and the question of allotment of 200 shares to the respondents 2 and 3 was discussed in the said meeting and it was resolved that their application for allotment may be accepted.

The photocopy of the attendance dated 30-3-1996 from the register was also produced to corroborate the presence of the petitioner and 4th respondent in the said meeting. He contended that the photocopies of the minutes dated 7-5-1996 by which 100 shares each were allotted to respondents 2 and 3 would show thai this meeting was attended by the petitioner and 4th respondent which is also evident from the attendance register of the said date. He also produced the original minutes books and the attendance register. In regard to the allegation that the minutes book should have been signed by the 4th respondent being the chairman of the company, it was pointed out that the minutes book is to be signed by the chairman of the meeting and since the 2nd respondent used to chair the meeting after 1993 he has signed the same. He refuted all other allegations relating to fabrication of the minutes book and submitted that it is absolutely wrong that the 5th respondent got all the minutes books and the notices for the meetings prepared in the presence of the petitioner by making representation about the income-tax raids as alleged by the petitioner. He contended that this plea has been taken only to disown his signatures on the minutes books and the attendance register. In so far as the time noted in one of the notices as 12.30 a.m., he pointed out that it is just a slip and the meeting was actually held at 12.30 pm. He also pointed out that when the petitioner did not attend consecutive meetings, he was given a caution notice which was sent by registered post, as per the evidence produced by the respondents and, therefore, it is for the petitioner to rebut the presumption of service. He submitted that the very fact the caution notice was given to enable the petitioner to attend subsequent meetings, it would establish the bond fides of the respondents.

29. He pointed out that the petitioner and the 4th respondent voluntarily agreed for the take over of the company by the other respondents and therefore gave their consent for issue of 200 shares to the respondents whereafter the 4th respondent not only transferred his one share but also resigned from the Board and the petitioner for the same reason, did not attend any Board meeting after the issue of 200 shares. Having consented to the taking over the company by the respondents, he has filed this petition only on account of the respondents having filed a civil suit for cancellation of the sale of lands made by the petitioner without authority. Therefore, he contended that this petition is a mala fide one and as such deserves to be dismissed.

30. We have carefully considered the various documents placed before us and also the arguments by the counsel relating to the allegation on fabrication of minutes of the Board meetings. Unfortunately, the 4th respondent who was one of the other 50 per cent shareholder and a promoter of the company, even though is a party to the proceedings, did not file any reply nor was represented by any counsel. The petitioner has averred in the petition that it was the 4th respondent who had spoken to him about the impending income-tax raid and asked the petitioner to assist the respondents in completing the minutes books etc. This averment is denied by the other respondents while the petitioner asserts the same. Since there is no denial by the 4th respondent, if we accept this version of the petitioner, then there is no need to go into other points raised by the petitioner in regard to the minutes. It is an admitted position that the directors used to sign on the minutes book itself against their names recorded in the minutes book. However, this practice was stopped from the meeting held on 13-5-1995 in which the decision to maintain a separate attendance register was taken. The petitioner disclaims knowledge of this meeting nor his attendance. Therefore we feel, that the genuineness of the minutes has to be examined, by taking into consideration the facts and circumstances of the case, since, many times, circumstances speak louder than documents. The foundation of the arguments of the respondents is that there was a negotiated takeover in 1993 which we have held as not established for various reasons, one of the main reason being that no consideration for the take over was found to have been made in 1993. The respondents have not either averred or established that, after 1993 any consideration was paid to the original promoters to take over the company. It is to be noted that out of the assets of the company in the form of agricultural lands and eucalyptus trees, the revenue earned by the company up to 31-3-1996, as per the accounts of the company was of the order of Rs. 35,05,000 and this amount has wiped out the loss of the company and resulted in accumulated profit of Rs. 18.74 lakhs and as on that date the company had a bank balance of Rs. 8.31 lakhs. The 3rd respondent had brought in only Rs. 2.65 lakhs. As against this, the company had invested Rs. 29.25 lakhs in the share business in the year 1995-96 of which Rs. 14.75 lakhs remained unsold and the loss in the share trading was of Rs. 1.15 lakhs. Thus the entire share trading was done out of the amount realized out of the sale of lands and the eucalyptus trees and if it so then, we find full justification in the stand of the petitioner that the respondents 2 and 3 were brought into the company only to assist in the investment of surplus funds arising out of the sale of land and trees. Further, as on 31-3-1996, the company had a cash balance of Rs. 8.31 lakhs, shares worth Rs. 14.75 lakhs with the liability towards the respondents of only Rs. 2.65 lakhs. This is besides the value of unsold land available with the company, the market value of which should have been substantial. Therefore, even assuming that the minutes furnished by the respondents are genuine, we are unable to come to the conclusion that the petitioner would have agreed for issue of 200 shares to the respondents when he could have legitimately, as a 50 per cent shareholder, got 50 per cent of the accumulated profit as on 31-3-1996 since the entire profit arose out of the sale of assets of the company in existence before the respondents made any investment in the company. As far as the 4th respondent, who has chosen not to be represented in the proceedings, is concerned, he got the benefit of the refund of his unsecured loans of about Rs. 6 lakhs and an investment by the respondents of Rs. 40 lakhs in one of his own company, besides the receipt of a part of the amount which was due to the partnership firm. But the petitioner did not even get his unsecured loan of about Rs. 1.86 lakhs refunded and he got no other return on his association with the company for over 10 years other than the salary for being a full time director. Considering the totality of the circumstances as far as the petitioner is concerned, we are of the firm view that by allotting 200 shares to themselves by which the respondents contributed only Rs. 20,000, when the company had substantial funds at its disposal, the respondents had acted in a manner oppressive to the petitioner. Conversion of a 50 per cent shareholder to a negligible status by issue of further shares is a grave act of oppression, meriting appropriate relief. We also note that, in case the petitioner had really given his consent to the allotment of 200 shares, by which he would have been fully aware that, he had become a non-entity, he would have resigned from the post of director and even the company need not have taken the trouble of cautioning him about his absence. If the petitioner had really consented to the handing over of the company by agreeing to the allotment of 200 shares, the respondent directors could have given him leave of absence and continued him as a director. In a 397/ 398 petition, the conduct of the parties is an important aspect to be taken into consideration, and if we do so, then no man of ordinary prudence would hand over a company with assets/reserves/cash balance worth lakhs of rupees, without any consideration to those who had not made any contribution for over three years but utilizing the funds of the company. May be the respondents had entered into some arrangement with the 4th respondent, which is evident from the transfer of his share and his voluntary resignation, but they should not have acted prejudicially against the petitioner, being a 50 per cent shareholder. The learned counsel for the petitioners cited a number of cases in support of his arguments that allotment of shares which converts a majority into minority is an act of oppression and we fully concur with those judgments.

31. Having held that the respondents have acted in a manner oppressive to the interests of the petitioner by allotment of shares, the normal order should be to cancel the allotments so made and restore the position of the petitioner. But in this case, after allotment of 200 shares, the company had allotted further 3,000 shares to the respondents and that the 4th respondent who was holding one share being 50 per cent of the original two shares allotted has already sold his share to the respondents and that they have been in the exclusive management of the company now for over 4 years. Therefore, we are of the view that the most equitable remedy that could be moulded in this case is that the petitioner should completely go out of the company by selling his one share of Rs. 100 to the company/ respondents for an appropriate value. Since the petition was filed in 1997, and as we find that the proceeds out of the sale of eucalyptus trees and a part of the land have already been incorporated in the accounts of the company, the petitioner should get 50 per cent of the net worth of the company as exhibited in the Balance Sheet as on 31-3-1997 together with 50 per cent of the value of the unsold land in the company as consideration for his one share. The value of the unsold land shall be determined on the basis of the price at which a part of the land was last sold in July, 1995. In case the petitioner is willing to abide by this order, then he must notify the company/respondents 2 & 3 in writing, offering his share. Once he thus notifies, then the same will be binding on the company/respondents. The statutory auditor of the company shall determine the value of the share in accordance with our above directions within a month from the date of the notice of the petitioner and the consideration for the share will be paid within one month thereafter in exchange for the share held by the petitioner. Since the petitioner will no longer be associated with the company after the transfer of his one share, along with the consideration for the share, the company will also refund the unsecured loans standing in the credit of the petitioner. In case the company purchases the share, it is authorized to reduce the share capital of the company to that extent.

Otherwise, either respondents 2 and 3 will be jointly and severally bound to purchase the share of the petitioner at the value determined as above. In view of this decision, we have not examined the issue relating to the vacation of the office of director by the petitioner.

32. With the above directions the petition is disposed of with no order as to cost.