Mayank Kocher Vs. Transport and Handling - Court Judgment

Excerpt:
1. in the order i am considering company petition no. 20 of 2003 filed under section 237 of the companies act, 1956, wherein the petitioner namely shri mayank kocher has prayed for appointment of an administrator/special officer to take over charge of the management and affairs and assets and properties of the company and to order investigation into the delays and transactions of the company under section 237 of the act including an order for rectification of its register of members alleging that the respondents have refused to rectify the register to undo the fraud by transferring his 100 shares and 200 shares of his late father shri mohan lai kocher to third parties, besides illegally removing him from directorship ; increasing paid-up share capital without justification ; and removing the auditors and ousting kochers mala fidely.2. the undisputed facts are : respondent no. 1, i.e., m/s. transport and handling equipments manufacturing co. p. ltd. (hereinafter referred to as "the respondent-company") is a private limited company incorporated on january 15, 1962, under the companies act, 1956. it has its registered office at tower house, 2a, chowringhee square, calcutta, west bengal. the authorised and the paid-up share capital of the respondent-company was rs. 5,00,000 (50,000 equity shares of rs. 10 each) and rs. 10,000 respectively. as per the annual return for 1999 the paid-up capital is rs. 3,70,000. the company was incorporated for the objects of general trading agencies and certain manufacturing activities such as containers and trailers. on receipt of the petition containing allegations as mentioned in paragraph 1 above, on the request of the petitioner the company law board by its order dated august 20, 2004, directed the respondents to file documents to substantiate the petitioner's arguments returnable on november 3, 2004.the petitioner tried and invaded into the company's record despite not being a shareholder of the company to procure share transfer deeds and original index register, account books and proof of service of extraordinary general meeting held on march 20, 1986. as the respondent-company was not bound to disclose and/or give copies of the aforesaid documents, the company on the next date of hearing represented to the company law board which passed the following order on november 3, 2004: learned counsel for the respondents says that petition under section 237 is not maintainable as the petitioner is not a shareholder. the petitioner seeks time to answer this point. list case for hearing on december 10, 2004, at 2.30 p.m.3. the petitioner being aggrieved by the said order, challenged the same by way of petition being w.p.c. no. 18801 of 2004 under article 226 of the constitution of india before the hon'ble high court of delhi at new delhi and the learned single judge of the hon'ble delhi high court, by an order dated december 8, 2004 (ex-parte) held that the petition was premature and left it to the hon'ble board to decide the matter. the board, therefore, on december 10, 2004, after perusing the order of the hon'ble delhi high court passed the following order: learned counsel for the petitioner produced an order of the hon'ble high court dated december 8, 2004, passed on interim order of november 3, 2004, of this bench.4. accordingly, list the case for final hearing on march 24, 2005, at 2.30 p.m. both parties would be free to take up this issue of maintainability during their arguments. thereafter, the company law board after hearing the matter on the maintainability passed the following order: section 237 should not be given an interpretation which would make it possible for persons to start litigation in respect of what does not concern them. the section should be so interpreted as to enable relief to be obtained only by some persons whose rights have been affected by the manner in which the affairs of the company have been conducted or accounts maintained and has, therefore, a grievance in the eyes of the law for which he seeks relief from the court. i have considered the pleadings of the parties. the maintainability of the petition is still to be decided which is very vital in this case. once it is established that the petitioner is a shareholder or had some stakes in the company, the inspection of statutory records for the shareholder may be allowed till then, the petitioner has no locus standi to inspect any documents of the respondent-company. the application c.a. no. 50 of 2005 in c.p. no. 20 of 2003 is accordingly dismissed.5. the petitioner again being aggrieved by the aforesaid order of the board, filed yet another w.p. (c) no. 7070 of 2005 under article 226 of the constitution of india before the hon'ble high court of delhi at new delhi and the learned single judge of the hon'ble delhi high court, by an order dated april 25, 2005 (ex-parte) was pleased to dismiss the petition with the following observations: i have carefully perused the order dated march 4, 2005. in my view, the only observations made by the company law board appear in paragraph 4 of the order dated march 4, 2005. paragraph 3 of the order merely records the submissions and contentions made on behalf of the respondents. therefore, there are no findings whatsoever with regard to the locus standi of the petitioner to bring or maintain the petition before the company law board. this issue is yet to be decided and shall be heard by the company law board when it proceeds to hear the matter on may 19, 2005, or any date thereafter. i may also notice that the position so far as the proceedings before the company law board are concerned, remains the same as was considered by this court at the time of hearing the earlier writ petition on december 8, 2004. law provides the consequences which shall follow in the event of non-compliance of specific directions for filing of the documents. it is open to the company law board to draw an adverse inference against the respondents in accordance with the settled provisions of law. in this view of the matter, i find no merit in the petition which is accordingly dismissed.6. shri sanjay karol, counsel for the petitioner argued : that the respondent-company in collusion with its alleged directors, namely, mr.rajeev maheshwari, mr. rahul maheshwari, mr. ranjan maheshwari, mr.sanjay agarwal and mr. mahesh karmani, fraudulently took over the management of the respondent-company to the exclusion of the petitioner and transferred the shares allotted and held in the name of mr. mohan lai kocher (the petitioner's father) and the petitioner, i.e., mr.mayank kocher in favour of mr. mahesh karmani and mr. sanjay agarwal and thereafter refused to rectify its register ; to undo the fraud committed by the respondent-company in collusion with its alleged directors, despite various written and oral requests to the respondent-company by the petitioner thereby causing great injustice and wrongful loss to the beneficial and the legitimate interests of both mr. m.l. kocher and the petitioner. further, the unilateral and secretive exercise of power of allotment of shares with an intention of increasing the shareholding in the respondent-company to the interest of the alleged directors and their friends is a blatantly unfairly prejudicial act. the allotment has been for improper purpose and for improper motive and therefore invalid. a partnership firm in the name and style of bharat industries and commercial corporation (hereinafter referred to as "bicc") was created in the year 1958, having mr. ganga bishan periwal, mr. m. l. maheshwari, mr. m. l kocher and mr. sugan chand chitlangia, as its partners. the partnership firm after the death of mr. ganga periwal on october 6, 1972 and upon the retirement of the mr. sugan chand chitlangia was reconstituted in the year 1972. during the continuance of the business under the aegis of the partnership firm, the partners of the firm incorporated a private limited company in the name and style of m/s. transport and handling equipments manufacturing co. p. ltd., at calcutta. the respondent company was incorporated out of the funds of the partnership funds and with a clear and complete agreement and understanding between the partners that the same is a quasi-partnership company and further the partnership firm carried out its business from the office premises located at tower house no. 2a, chowringhee square, calcutta. the company being a defunct company did not have any employees and also did not carry on any business, till it was forcefully, illegally taken over by the legal heirs of mr. m. l. maheshwari in the year 1986. upon the death of mr.m. l. maheshwari bona fide steps were taken by mr. m. l. kocher for beneficial winding up of the business of the partnership firm and for preservation of its funds, assets and properties. there were inter se disputes besides disputes with other creditors. shri p. n. dutta, and mr. ranjit mitra, were appointed as joint receivers over the assets and properties of the said firm and receivers were directed to take possession of the rooms at tower house, chowringhee square, calcutta, where the respondent-company was alleged to carry on its business and was allowed to do so as a licensee until further orders. by the said order the respondent-company was restrained from inducting any other license or encumbering or parting with any premises without the leave of the court. mr. m. l. kocher entered into an agreement dated december 26, 1990, with one mr. o. p. chaudhary to convey/transfer his 50 per cent, share in the firm. constrained by such adverse circumstances mr.m. l. kocher renewed his efforts to find a solution to the situation and negotiation for winding up the affairs of the firm were initiated by mr. m. l. kocher with the heirs of mr. m. l. maheshwari and the same reached an advanced stage of settlement.9. however, before any effective steps could be taken, on or about march 6, 1992, mr. m. l. kocher expired. since the death of the mr. m.l. kocher, the heirs of mr. m. l. maheshwari put impediments in arriving at the settlement and thereafter no settlement till date could be arrived at. the directors of the respondent-company to the exclusion of the petitioner and his family from the management of the respondent-company and secretive allotment of equity shares to mr.sanjay agarwal, mr. mahesh karmani and others and further wrongfully and illegally took over the possession of the assets and properties of the respondent-company and the partnership firm. the change of management was effected by the said alleged directors of the respondent-company, by calling an alleged extraordinary general meeting on march 20, 1986. the alleged extraordinary general meeting was called upon without due compliance of the provisions of the companies act, 1956, relating to the service of notice, etc. mr. m. l. kocher nor mr.mayank kocher, did ever receive the notice issued for the same, changed the management of the respondent-company to the exclusion of mr. m. l.kocher and mr. mayank kocher and others vide the same meeting, by terminating the tenure of the petitioner and others as directors of the respondent-company with effect from march 20, 1986 and appointing in their place mr. rahul maheshwari, mr. ranjan maheshwari and mr. mahesh karmani as the new directors. during the proceedings being conducted by the receivers appointed by the hon'ble calcutta high court that for the first time mr. mayank kocher became aware of the fact of his removal from the directorship of the respondent-company. mr. mayank kocher's appointment as director was terminated with effect from march 20, 1986.however, a notice was sent by it dated june 4,1987. thus, it is further important to note that the respondent-company had till the serving of the notice not effected the change in the management of the respondent and shareholding with the registrar of companies. the annual return/balance-sheet/ form no. 2/form no. 32 for the year 1986 were filed with the registrar of companies after a time lag of almost two years, all this indicates that there had been a deliberate delay on the part of the respondent-company. it is pertinent to mention here that as per the form no. 32 filed with the registrar of companies reflects that mr. sanjay agrawal was appointed as an additional director of the respondent-company, in the year 1987 and the form no. 32 in this respect has been filed in the year 1988, this fact of appointment of mr. sanjay agrawal as an additional director of the respondent-company has not been reflected in the annual return of the same year. the same was an afterthought and mischievous to the exclusion of kocher group from the management and the ownership of the respondent-company. as on date kocher group has zero shareholding in the respondent-company. as per the requirements of the provisions of section 111 of the companies act, 1956 ("the act") it is submitted that the respondent-company is mandated to cause the rectification of the register of the company. the respondent-company has failed to do the same. there has been transfer of shares both by mr. m. l. kocher and mr. mayank kocher on their own volition then there could have been no hindrance on their part to freely resign. the alleged directors of the respondent-company have indulged in the acts amounting to commission of fraud. the same calls for institution of a criminal action against the maheshwari family and the alleged directors of the company. respondents nos. 2 to 5 be called upon to furnish the evidence of payments made, if any, either to mr.m.l. kocher and/or mr. mayank kocher and the valuation at which the shares were sold, if ever, as alleged by the respondents through their conduct, by the kochers. the respondent-company has made misrepresentation and wrongful entries in the books of member and has led to concealment of the truth and the real vicious conduct of the respondent-company. the true and the rightful members of the respondent-company have been misrepresented and their names have been wrongfully deleted from the register.10. the respondent-company has indulged into the acts of empbezzlement and other misconduct on the part of persons in management, requiring that along with an order of an investigation of affairs of the respondent-company, a police complaint of the offences need to be also filed. the respondent-company has indulged into the acts of fraudulent allocation of shares and falsification of minute books and also the directors/promoters of the respondent-company have made secret profits and siphoned off the funds, requiring comprehensive enquiry into the affairs of the respondent-company and rectification of the register of the respondent-company. hence, counsel for the petitioner reiterated the prayers that the board of directors of the company be superseded and an administrator and/or a special officer be appointed to take charge over the management and affairs and books, papers, records and documents of the company as well as its assets and properties ; a scheme be framed for the management and control of the affairs of the company and the running of the operations thereof; an investigation be made with regard to the dealings and transactions of respondents nos. 2 to 5 in connection with the management and affairs of the respondent-company and its assets and properties ; an independent auditor be appointed to re-audit the accounts of the company since 1986; the respondent-company be directed to rectify its register of members thereby entering the names of the petitioner and mr. shashank kocher, legal heirs of the petitioner's deceased father, i.e., late mr.m.l. kocher, upon transmission of the shares in his name, as the rightful shareholders of the respondent-company ; reverse the wrongful entries made in the register of members of the respondent-company thereby inserting the names of mr. mayank kocher and mr. shashank kocher.11. shri rana mukherjee, counsel for the respondents argued. that the instant company petition under section 237 of the companies act, 1956, inter alia, seeking an investigation into the affairs of respondent no.1 company (hereinafter referred to as "the company") and for other reliefs is not maintainable because (a) the instant company petition has been filed admittedly by a person, who on the date of filing of the petition does not hold any shares in the company having no locus standi ; (b) the instant petition is hopelessly barred by limitation ; and (c) in any event the reliefs claimed are beyond the scope of section 237 of the companies act, 1956, besides because of other relevant facts of the case. the petition itself discloses that the petitioner is not a shareholder of the respondent-company as on the date of filing of the instant company petition and prayers (vi) and (vii) of the company petition (which prayers in any event fall outside the scope and ambit of section 237 of the act 1956) read as under: (vi) the respondent-company be directed to rectify its register of members thereby entering the names of the petitioner and mr. shashank kocher, the legal heir of the petitioner's deceased father, i.e., late mr. m.l. kocher, upon transmission of the shares in his name, as the rightful shareholders of the respondent-company. (vii) reverse the wrongful entries made in the register of members of the respondent-company thereby inserting the names of mr. mayank kocher and mr. shashank kocher.12. the said prayers apart from being prayers, which could be prayed for only in a petition under section 111 of the act of 1956 clearly reveal along with other averments made in the petition that the petitioner is not a shareholder and is, therefore, not entitled to maintain the petition. since as on date (or as on date of filing of the company petition), he is not a member of the respondent-company, he, therefore, has no locus standi to inspect and take copies of the documents of the respondent-company. reliance is placed on the judgment of the hon'ble delhi high court in the case of v.v. purie v. e.m.c.steel ltd. [1980] 50 co. cas 127, wherein it is held that a person having no manner of interest or concern in the company as a shareholder, creditor or otherwise, has no locus standi to prefer an application to the court for an order under section 237(a)(ii) of the companies act, 1956, declaring that the affairs of a company ought to be investigated by an inspector appointed by the central government.the judgment further lays down that (headnote): though section 237 is couched in very wide language, the basic limitation that the courts will not entertain action on behalf of private persons to enforce the observance of public rights and duties unless they have a personal interest in the matter and unless their rights and interests are in some way affected, is implicit in the interpretation of the section.13. hence, shri rana mukherjee, counsel for the respondent emphasised that the petitioner: (a) cannot maintain the petition as he has no locus standi to invoke section 237 of the companies act being a rank outsider; (b) even otherwise from the averments made in the petition itself assuming though not admitting that the petitioner could have maintained the petition either under sections 111, 397 and 398 of the companies act, 1956, the petitioner on his own showing has ceased to be a shareholder as far back as in 1987 (paragraphs 10, 12, 14, 16, 17, 19, 22 to 24 and 29 refer) and that, therefore, in any event the reliefs as sought for cannot be granted, the petition being hopelessly barred by limitation, the cause of action having arisen if at all then.14. the said petition is not maintainable in law. it is grossly belated. it is barred by limitation. the petitioner is guilty of laches in having filed the said petition after an inordinate delay thereby disentitling himself to any alleged relief claimed in the petition. it was further argued that the prayers as sought for by the petitioner in the instant petition under section 237, clearly reveal that the petitioner is, in fact, trying to disguisedly invoke the provisions of sections 111, 397 and 398 of the act, 1956 to overcome the provisions of section 399 of the 1956 act which the petitioner cannot satisfy, by his own admission, that of not being a shareholder of the respondent-company. shri rana mukherjee, further reiterated that the instant company petition is liable to be dismissed on the grounds of maintainability alone. it was further pointed out that the orders dated december 8, 2004 and april 25, 2005, both passed by the learned single judge of the hon'ble delhi high court, in any event, do not take the case of the petitioner any further than leaving the matter to this hon'ble board to decide on the maintainability of the petition. in any event, as held by the hon'ble supreme court in government (nct of delhi) v. nitika garg , that the observation made by the hon'ble delhi high court cannot have any binding effect since it is well-settled position in law that if a court or tribunal rejects an application, it would not be proper for the said court or tribunal to make an observation therein creating rights pursuant to such observations. furthermore, it was argued that in any event, as can be noticed from the two orders of the hon'ble delhi high court that the hon'ble high court in the said two writ petitions filed by the petitioner, did not interfere in any manner whatsoever with the orders of this hon'ble board dated november 3, 2004 and march 4, 2005. the hon'ble high court in both the orders significantly left the matter to be decided by this hon'ble board, more particularly on the question of maintainability which in the respondents humble submissions goes to the very root of the matter.15. shri rana mukherjee further argued : the directors in a private limited company have wide discretion in the matter of registration of transfer of shares and unless it is proved that they acted mala fidely and illegally the court will not interfere. by section 82 of the act shares are expressed to be transferable in the manner provided by the article of the company. that where something is done by operation of law there is no question of any wrong or defect which requires rectification. since in the instant case there were proper execution of transfer forms, attestation of signature, surrender/delivery of share certificates, payment of consideration and registration of transfer, rectification cannot be allowed without first proving that the facts on record were wrong. it was denied that there was any unilateral and/or secretive exercise of power of allotment of shares. it was denied that there was an intention of increasing the shareholding in the respondent-company in the interest of the directors and their friends.it was denied that the allotment has been for the purpose and/or for improper motive. it was denied that the allotment has been invalid. it was denied particularly that during the continuance of the business under the aegis of the partnership firm, the partners of the firm incorporated a private limited company in the name and style of m/s.transport and handling equipments manufacturing co. p. ltd. that the majority shareholding of the respondent-company was acquired by mr.m.l. maheshwari and mr. m.l. kocher after a period of about 10 years since its incorporation. it was emphatically denied that the respondent-company was incorporated out of the funds of the partnership firm. it was vehemently denied that the said incorporation was with a clear and complete agreement and understanding between the partners that the same is a quasi-partnership company as alleged. it was denied that the company was fraudulently taken over by the legal heirs of mr.m.l. maheshwari to the exclusion of mr. m.l. kocher and his family members. it was denied that by the alleged wrongful and illegal acts and conduct of mr. rahul maheshwari, mr. ranjan maheshwari, smt. sharad maheshwari, mr. mahesh karnani and mr. sanjay agarwal of the company had demonstrated that they will not allow the alleged matters to be effectively resolved in the domestic forum.16. it was denied that the true and rightful members of the respondent-company have been misrepresented and their names have been wrongfully deleted from the register. on the contrary, the petitioner mr. mayank kocher and his late father had embezzled and swindled the assets of the partnership firm by the clandestine sale of its assets and had also surreptitiously opened a bank account in the name of the partnership firm after its dissolution as the sole proprietor thereof and encashed a cheque of the firm without the knowledge of the heirs of the other partner. the petitioner was arrested and was put into jail custody in course thereof. a charge sheet dated march 3, 1988, was filed by the police authorities, inter alia, under sections 120b and 420 of the indian penal code, 1860. it was denied that the respondent-company has indulged in the acts of fraudulent allocation of shares and falsification of minutes books. it was denied that the directors/promoters of the respondent-company have made secret profits and siphoned off the funds.17. i have considered the pleadings and documents filed therewith as well as the arguments of counsel for the petitioners and the respondents. i find that the respondents' preliminary objection to this petition on the ground that the reliefs claimed are beyond the scope of section 237 of the act is tenable. through this petition the petitioner has sought rectification of register of members to undo the alleged fraud on him and the legal heirs of his father and to seek investigation into the illegal ousting of him from directorship mala fidely besides looking into the other allegations of removing the auditors and increasing the share capital without justification. the mere fact that a so-called shareholder is feeling dissatisfied about the way in which the affairs of the company are being conducted is not enough to get an order of investigation. neither side can seek an order of investigation against the other after they have fallen out against each other, when the purpose is only to make a score against the other.seeking an administrative order to investigate into the affairs of the respondent-company for such aggrieve-ment of the petitioner is beyond the scope of section 237 of the act. other remedies are available against such aggrievement. proper remedies could have been availed of under section 111/397/398 of the act. where the matter under complaint can be taken care of under sections 111, 397/398 of the act, the petition goes beyond the scope of section 237 of the act. though it is settled law that to approach the company law board for an administrative order under section 237 of the act, the petitioner need not necessarily be a shareholder for being eligible to file the petition. only to this extent the respondents' contention that the petitioner does not hold any shares in the company and has no locus standi for seeking investigation under section 237 of the act is not tenable. this particular power of the company law board is not of judicial or quasi-judicial nature. it is a power of administrative nature and the company law board may even take the initiative suo motu or on the application of or information supplied by any shareholder or other person. furthermore, on a consideration of the facts of the case, i find that the respondents are right in raising the preliminary objection that the petition is hopelessly barred by limitation. the alleged cause of action, if any, arose in 1987 and the petition has been filed in the year 2003 after such inordinate delay. the respondents have rightly raised the preliminary objections on the maintainability of the petition. this petition is not maintainable under section 237 of the act.18. further, on consideration of this petition on merits, i find that this petition is not maintainable even on merits. the allegations made in the petition have not been substantiated to enable this board to be able to form a prima facie opinion to satisfy itself that the circumstances of the case fall under one or the other of the sub-clauses (i), (ii) or (iii) of section 237(b) of the act given as under: 237. (b) may do so if (in its opinion or in the opinion of the tribunal), there are circumstances suggesting- (i) that the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members or that the company was formed for any fraudulent or unlawful purpose ; (ii) that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members ; or (iii) that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, or the manager, of the company.19. unless the company law board forms an opinion that such circum stances exist, it cannot order an investigation under section 237 of the act. for an order under section 237 of the act there must exist circumstances which in the opinion of the company law board suggest what has been set out in sub-clauses (i), (ii) or (iii). the petitioners have failed to make out a case under sub-clauses (i), (ii) or (iii) of section 237(b) of the act. the material placed before the company law board must be such as to justify an order for deeper probe into the affairs of the company. the allegations made in the petition are not such a matter as to require an investigation. the proper remedies could have been availed of under sections 111, 397 and 398 of the act.20. if furthermore, the petitioner's prayer at page 23 of the petition seeking that the board of directors of the company be superseded and an administrator and/or special officer be appointed to take charge over the management and affairs and books, papers, records and documents of the company as well as its assets and properties is beyond the scope of section 237 of the act. under section 237 no orders granting such relief can be given. under this section directing an investigation is only analogous to the issue of a fact finding commission by a civil court for looking into the accounts or making an investigation and does not amount to a judgment within clause 15 of the letters patent, 1865, so as to enable an aggrieved party to appeal. an order of investigation is not an end by itself, it is only a means to find out the full facts of the acts complained of. it is nothing but an exploratory measure to be proved or disproved with reference to the facts later on ascertained. this discretionary power of the company law board has to be exercised in good faith. an investigation may be ordered when public interest is involved or detriment to the interest of the shareholders had been caused surreptitiously. such investigation should not be taken lightly. unless proper grounds exist for investigation into the affairs of the company investigation cannot be ordered. hence, this petition fails.in view of the foregoing, the petition is hereby dismissed. no order as to costs.

Judgment:
1. In the order I am considering Company Petition No. 20 of 2003 filed under Section 237 of the Companies Act, 1956, wherein the petitioner namely Shri Mayank Kocher has prayed for appointment of an administrator/special officer to take over charge of the management and affairs and assets and properties of the company and to order investigation into the delays and transactions of the company under Section 237 of the Act including an order for rectification of its register of members alleging that the respondents have refused to rectify the register to undo the fraud by transferring his 100 shares and 200 shares of his late father Shri Mohan Lai Kocher to third parties, besides illegally removing him from directorship ; increasing paid-up share capital without justification ; and removing the auditors and ousting Kochers mala fidely.

2. The undisputed facts are : Respondent No. 1, i.e., M/s. Transport and Handling Equipments Manufacturing Co. P. Ltd. (hereinafter referred to as "the respondent-company") is a private limited company incorporated on January 15, 1962, under the Companies Act, 1956. It has its registered office at Tower House, 2A, Chowringhee Square, Calcutta, West Bengal. The authorised and the paid-up share capital of the respondent-company was Rs. 5,00,000 (50,000 equity shares of Rs. 10 each) and Rs. 10,000 respectively. As per the annual return for 1999 the paid-up capital is Rs. 3,70,000. The company was incorporated for the objects of general trading agencies and certain manufacturing activities such as containers and trailers. On receipt of the petition containing allegations as mentioned in paragraph 1 above, on the request of the petitioner the Company Law Board by its order dated August 20, 2004, directed the respondents to file documents to substantiate the petitioner's arguments returnable on November 3, 2004.

The petitioner tried and invaded into the company's record despite not being a shareholder of the company to procure share transfer deeds and original index register, account books and proof of service of extraordinary general meeting held on March 20, 1986. As the respondent-company was not bound to disclose and/or give copies of the aforesaid documents, the company on the next date of hearing represented to the Company Law Board which passed the following order on November 3, 2004: Learned Counsel for the respondents says that petition under Section 237 is not maintainable as the petitioner is not a shareholder. The petitioner seeks time to answer this point. List case for hearing on December 10, 2004, at 2.30 p.m.

3. The petitioner being aggrieved by the said order, challenged the same by way of petition being W.P.C. No. 18801 of 2004 under Article 226 of the Constitution of India before the hon'ble High Court of Delhi at New Delhi and the learned single judge of the hon'ble Delhi High Court, by an order dated December 8, 2004 (ex-parte) held that the petition was premature and left it to the hon'ble Board to decide the matter. The Board, therefore, on December 10, 2004, after perusing the order of the hon'ble Delhi High Court passed the following order: Learned Counsel for the petitioner produced an order of the hon'ble High Court dated December 8, 2004, passed on interim order of November 3, 2004, of this Bench.

4. Accordingly, list the case for final hearing on March 24, 2005, at 2.30 p.m. Both parties would be free to take up this issue of maintainability during their arguments. Thereafter, the Company Law Board after hearing the matter on the maintainability passed the following order: Section 237 should not be given an interpretation which would make it possible for persons to start litigation in respect of what does not concern them. The section should be so interpreted as to enable relief to be obtained only by some persons whose rights have been affected by the manner in which the affairs of the company have been conducted or accounts maintained and has, therefore, a grievance in the eyes of the law for which he seeks relief from the court. I have considered the pleadings of the parties. The maintainability of the petition is still to be decided which is very vital in this case.

Once it is established that the petitioner is a shareholder or had some stakes in the company, the inspection of statutory records for the shareholder may be allowed till then, the petitioner has no locus standi to inspect any documents of the respondent-company. The application C.A. No. 50 of 2005 in C.P. No. 20 of 2003 is accordingly dismissed.

5. The petitioner again being aggrieved by the aforesaid order of the Board, filed yet another W.P. (C) No. 7070 of 2005 under Article 226 of the Constitution of India before the hon'ble High Court of Delhi at New Delhi and the learned single judge of the hon'ble Delhi High Court, by an order dated April 25, 2005 (ex-parte) was pleased to dismiss the petition with the following observations: I have carefully perused the order dated March 4, 2005. In my view, the only observations made by the Company Law Board appear in paragraph 4 of the order dated March 4, 2005. Paragraph 3 of the order merely records the submissions and contentions made on behalf of the respondents. Therefore, there are no findings whatsoever with regard to the locus standi of the petitioner to bring or maintain the petition before the Company Law Board. This issue is yet to be decided and shall be heard by the Company Law Board when it proceeds to hear the matter on May 19, 2005, or any date thereafter.

I may also notice that the position so far as the proceedings before the Company Law Board are concerned, remains the same as was considered by this Court at the time of hearing the earlier writ petition on December 8, 2004. Law provides the consequences which shall follow in the event of non-compliance of specific directions for filing of the documents. It is open to the Company Law Board to draw an adverse inference against the respondents in accordance with the settled provisions of law.

In this view of the matter, I find no merit in the petition which is accordingly dismissed.

6. Shri Sanjay Karol, counsel for the petitioner argued : That the respondent-company in collusion with its alleged directors, namely, Mr.

Rajeev Maheshwari, Mr. Rahul Maheshwari, Mr. Ranjan Maheshwari, Mr.

Sanjay Agarwal and Mr. Mahesh Karmani, fraudulently took over the management of the respondent-company to the exclusion of the petitioner and transferred the shares allotted and held in the name of Mr. Mohan Lai Kocher (the petitioner's father) and the petitioner, i.e., Mr.

Mayank Kocher in favour of Mr. Mahesh Karmani and Mr. Sanjay Agarwal and thereafter refused to rectify its register ; to undo the fraud committed by the respondent-company in collusion with its alleged directors, despite various written and oral requests to the respondent-company by the petitioner thereby causing great injustice and wrongful loss to the beneficial and the legitimate interests of both Mr. M.L. Kocher and the petitioner. Further, the unilateral and secretive exercise of power of allotment of shares with an intention of increasing the shareholding in the respondent-company to the interest of the alleged directors and their friends is a blatantly unfairly prejudicial act. The allotment has been for improper purpose and for improper motive and therefore invalid. A partnership firm in the name and style of Bharat Industries and Commercial Corporation (hereinafter referred to as "BICC") was created in the year 1958, having Mr. Ganga Bishan Periwal, Mr. M. L. Maheshwari, Mr. M. L Kocher and Mr. Sugan Chand Chitlangia, as its partners. The partnership firm after the death of Mr. Ganga Periwal on October 6, 1972 and upon the retirement of the Mr. Sugan Chand Chitlangia was reconstituted in the year 1972. During the continuance of the business under the aegis of the partnership firm, the partners of the firm incorporated a private limited company in the name and style of M/s. Transport and Handling Equipments Manufacturing Co. P. Ltd., at Calcutta. The respondent company was incorporated out of the funds of the partnership funds and with a clear and complete agreement and understanding between the partners that the same is a quasi-partnership company and further the partnership firm carried out its business from the office premises located at Tower House No. 2A, Chowringhee Square, Calcutta. The company being a defunct company did not have any employees and also did not carry on any business, till it was forcefully, illegally taken over by the legal heirs of Mr. M. L. Maheshwari in the year 1986. Upon the death of Mr.

M. L. Maheshwari bona fide steps were taken by Mr. M. L. Kocher for beneficial winding up of the business of the partnership firm and for preservation of its funds, assets and properties. There were inter se disputes besides disputes with other creditors. Shri P. N. Dutta, and Mr. Ranjit Mitra, were appointed as joint receivers over the assets and properties of the said firm and receivers were directed to take possession of the rooms at Tower House, Chowringhee Square, Calcutta, where the respondent-company was alleged to carry on its business and was allowed to do so as a licensee until further orders. By the said order the respondent-company was restrained from inducting any other license or encumbering or parting with any premises without the leave of the court. Mr. M. L. Kocher entered into an agreement dated December 26, 1990, with one Mr. O. P. Chaudhary to convey/transfer his 50 per cent, share in the firm. Constrained by such adverse circumstances Mr.

M. L. Kocher renewed his efforts to find a solution to the situation and negotiation for winding up the affairs of the firm were initiated by Mr. M. L. Kocher with the heirs of Mr. M. L. Maheshwari and the same reached an advanced stage of settlement.

9. However, before any effective steps could be taken, on or about March 6, 1992, Mr. M. L. Kocher expired. Since the death of the Mr. M.L. Kocher, the heirs of Mr. M. L. Maheshwari put impediments in arriving at the settlement and thereafter no settlement till date could be arrived at. The directors of the respondent-company to the exclusion of the petitioner and his family from the management of the respondent-company and secretive allotment of equity shares to Mr.

Sanjay Agarwal, Mr. Mahesh Karmani and others and further wrongfully and illegally took over the possession of the assets and properties of the respondent-company and the partnership firm. The change of management was effected by the said alleged directors of the respondent-company, by calling an alleged extraordinary general meeting on March 20, 1986. The alleged extraordinary general meeting was called upon without due compliance of the provisions of the Companies Act, 1956, relating to the service of notice, etc. Mr. M. L. Kocher nor Mr.

Mayank Kocher, did ever receive the notice issued for the same, changed the management of the respondent-company to the exclusion of Mr. M. L.

Kocher and Mr. Mayank Kocher and others vide the same meeting, by terminating the tenure of the petitioner and others as directors of the respondent-company with effect from March 20, 1986 and appointing in their place Mr. Rahul Maheshwari, Mr. Ranjan Maheshwari and Mr. Mahesh Karmani as the new directors. During the proceedings being conducted by the receivers appointed by the hon'ble Calcutta High Court that for the first time Mr. Mayank Kocher became aware of the fact of his removal from the directorship of the respondent-company. Mr. Mayank Kocher's appointment as director was terminated with effect from March 20, 1986.

However, a notice was sent by it dated June 4,1987. Thus, it is further important to note that the respondent-company had till the serving of the notice not effected the change in the management of the respondent and shareholding with the Registrar of Companies. The annual return/balance-sheet/ Form No. 2/Form No. 32 for the year 1986 were filed with the Registrar of Companies after a time lag of almost two years, all this indicates that there had been a deliberate delay on the part of the respondent-company. It is pertinent to mention here that as per the Form No. 32 filed with the Registrar of Companies reflects that Mr. Sanjay Agrawal was appointed as an additional director of the respondent-company, in the year 1987 and the Form No. 32 in this respect has been filed in the year 1988, this fact of appointment of Mr. Sanjay Agrawal as an additional director of the respondent-company has not been reflected in the annual return of the same year. The same was an afterthought and mischievous to the exclusion of Kocher group from the management and the ownership of the respondent-company. As on date Kocher group has zero shareholding in the respondent-company. As per the requirements of the provisions of Section 111 of the Companies Act, 1956 ("the Act") it is submitted that the respondent-company is mandated to cause the rectification of the register of the company. The respondent-company has failed to do the same. There has been transfer of shares both by Mr. M. L. Kocher and Mr. Mayank Kocher on their own volition then there could have been no hindrance on their part to freely resign. The alleged directors of the respondent-company have indulged in the acts amounting to commission of fraud. The same calls for institution of a criminal action against the Maheshwari family and the alleged directors of the company. Respondents Nos. 2 to 5 be called upon to furnish the evidence of payments made, if any, either to Mr.

M.L. Kocher and/or Mr. Mayank Kocher and the valuation at which the shares were sold, if ever, as alleged by the respondents through their conduct, by the Kochers. The respondent-company has made misrepresentation and wrongful entries in the books of member and has led to concealment of the truth and the real vicious conduct of the respondent-company. The true and the rightful members of the respondent-company have been misrepresented and their names have been wrongfully deleted from the register.

10. The respondent-company has indulged into the acts of empbezzlement and other misconduct on the part of persons in management, requiring that along with an order of an investigation of affairs of the respondent-company, a police complaint of the offences need to be also filed. The respondent-company has indulged into the acts of fraudulent allocation of shares and falsification of minute books and also the directors/promoters of the respondent-company have made secret profits and siphoned off the funds, requiring comprehensive enquiry into the affairs of the respondent-company and rectification of the register of the respondent-company. Hence, counsel for the petitioner reiterated the prayers that the board of directors of the company be superseded and an administrator and/or a special officer be appointed to take charge over the management and affairs and books, papers, records and documents of the company as well as its assets and properties ; a scheme be framed for the management and control of the affairs of the company and the running of the operations thereof; an investigation be made with regard to the dealings and transactions of respondents Nos. 2 to 5 in connection with the management and affairs of the respondent-company and its assets and properties ; an independent auditor be appointed to re-audit the accounts of the company since 1986; the respondent-company be directed to rectify its register of members thereby entering the names of the petitioner and Mr. Shashank Kocher, legal heirs of the petitioner's deceased father, i.e., late Mr.

M.L. Kocher, upon transmission of the shares in his name, as the rightful shareholders of the respondent-company ; reverse the wrongful entries made in the register of members of the respondent-company thereby inserting the names of Mr. Mayank Kocher and Mr. Shashank Kocher.

11. Shri Rana Mukherjee, counsel for the respondents argued. That the instant company petition under Section 237 of the Companies Act, 1956, inter alia, seeking an investigation into the affairs of respondent No.1 company (hereinafter referred to as "the company") and for other reliefs is not maintainable because (a) the instant company petition has been filed admittedly by a person, who on the date of filing of the petition does not hold any shares in the company having no locus standi ; (b) the instant petition is hopelessly barred by limitation ; and (c) in any event the reliefs claimed are beyond the scope of Section 237 of the Companies Act, 1956, besides because of other relevant facts of the case. The petition itself discloses that the petitioner is not a shareholder of the respondent-company as on the date of filing of the instant company petition and prayers (vi) and (vii) of the company petition (which prayers in any event fall outside the scope and ambit of Section 237 of the Act 1956) read as under: (vi) The respondent-company be directed to rectify its register of members thereby entering the names of the petitioner and Mr.

Shashank Kocher, the legal heir of the petitioner's deceased father, i.e., late Mr. M.L. Kocher, upon transmission of the shares in his name, as the rightful shareholders of the respondent-company.

(vii) Reverse the wrongful entries made in the register of members of the respondent-company thereby inserting the names of Mr. Mayank Kocher and Mr. Shashank Kocher.

12. The said prayers apart from being prayers, which could be prayed for only in a petition under Section 111 of the Act of 1956 clearly reveal along with other averments made in the petition that the petitioner is not a shareholder and is, therefore, not entitled to maintain the petition. Since as on date (or as on date of filing of the company petition), he is not a member of the respondent-company, he, therefore, has no locus standi to inspect and take copies of the documents of the respondent-company. Reliance is placed on the judgment of the hon'ble Delhi High Court in the case of V.V. Purie v. E.M.C.Steel Ltd. [1980] 50 Co. Cas 127, wherein it is held that a person having no manner of interest or concern in the company as a shareholder, creditor or otherwise, has no locus standi to prefer an application to the court for an order under Section 237(a)(ii) of the Companies Act, 1956, declaring that the affairs of a company ought to be investigated by an inspector appointed by the Central Government.

The judgment further lays down that (headnote): Though Section 237 is couched in very wide language, the basic limitation that the courts will not entertain action on behalf of private persons to enforce the observance of public rights and duties unless they have a personal interest in the matter and unless their rights and interests are in some way affected, is implicit in the interpretation of the section.

13. Hence, Shri Rana Mukherjee, counsel for the respondent emphasised that the petitioner: (a) cannot maintain the petition as he has no locus standi to invoke Section 237 of the Companies Act being a rank outsider; (b) even otherwise from the averments made in the petition itself assuming though not admitting that the petitioner could have maintained the petition either under Sections 111, 397 and 398 of the Companies Act, 1956, the petitioner on his own showing has ceased to be a shareholder as far back as in 1987 (paragraphs 10, 12, 14, 16, 17, 19, 22 to 24 and 29 refer) and that, therefore, in any event the reliefs as sought for cannot be granted, the petition being hopelessly barred by limitation, the cause of action having arisen if at all then.

14. The said petition is not maintainable in law. It is grossly belated. It is barred by limitation. The petitioner is guilty of laches in having filed the said petition after an inordinate delay thereby disentitling himself to any alleged relief claimed in the petition. It was further argued that the prayers as sought for by the petitioner in the instant petition under Section 237, clearly reveal that the petitioner is, in fact, trying to disguisedly invoke the provisions of Sections 111, 397 and 398 of the Act, 1956 to overcome the provisions of Section 399 of the 1956 Act which the petitioner cannot satisfy, by his own admission, that of not being a shareholder of the respondent-company. Shri Rana Mukherjee, further reiterated that the instant company petition is liable to be dismissed on the grounds of maintainability alone. It was further pointed out that the orders dated December 8, 2004 and April 25, 2005, both passed by the learned single judge of the hon'ble Delhi High Court, in any event, do not take the case of the petitioner any further than leaving the matter to this hon'ble Board to decide on the maintainability of the petition. In any event, as held by the hon'ble Supreme Court in Government (NCT of Delhi) v. Nitika Garg , that the observation made by the Hon'ble Delhi High Court cannot have any binding effect since it is well-settled position in law that if a court or Tribunal rejects an application, it would not be proper for the said court or Tribunal to make an observation therein creating rights pursuant to such observations. Furthermore, it was argued that in any event, as can be noticed from the two orders of the hon'ble Delhi High Court that the hon'ble High Court in the said two writ petitions filed by the petitioner, did not interfere in any manner whatsoever with the orders of this hon'ble Board dated November 3, 2004 and March 4, 2005. The hon'ble High Court in both the orders significantly left the matter to be decided by this hon'ble Board, more particularly on the question of maintainability which in the respondents humble submissions goes to the very root of the matter.

15. Shri Rana Mukherjee further argued : The directors in a private limited company have wide discretion in the matter of registration of transfer of shares and unless it is proved that they acted mala fidely and illegally the court will not interfere. By Section 82 of the Act shares are expressed to be transferable in the manner provided by the article of the company. That where something is done by operation of law there is no question of any wrong or defect which requires rectification. Since in the instant case there were proper execution of transfer forms, attestation of signature, surrender/delivery of share certificates, payment of consideration and registration of transfer, rectification cannot be allowed without first proving that the facts on record were wrong. It was denied that there was any unilateral and/or secretive exercise of power of allotment of shares. It was denied that there was an intention of increasing the shareholding in the respondent-company in the interest of the directors and their friends.

It was denied that the allotment has been for the purpose and/or for improper motive. It was denied that the allotment has been invalid. It was denied particularly that during the continuance of the business under the aegis of the partnership firm, the partners of the firm incorporated a private limited company in the name and style of M/s.

Transport and Handling Equipments Manufacturing Co. P. Ltd. That the majority shareholding of the respondent-company was acquired by Mr.

M.L. Maheshwari and Mr. M.L. Kocher after a period of about 10 years since its incorporation. It was emphatically denied that the respondent-company was incorporated out of the funds of the partnership firm. It was vehemently denied that the said incorporation was with a clear and complete agreement and understanding between the partners that the same is a quasi-partnership company as alleged. It was denied that the company was fraudulently taken over by the legal heirs of Mr.

M.L. Maheshwari to the exclusion of Mr. M.L. Kocher and his family members. It was denied that by the alleged wrongful and illegal acts and conduct of Mr. Rahul Maheshwari, Mr. Ranjan Maheshwari, Smt. Sharad Maheshwari, Mr. Mahesh Karnani and Mr. Sanjay Agarwal of the company had demonstrated that they will not allow the alleged matters to be effectively resolved in the domestic forum.

16. It was denied that the true and rightful members of the respondent-company have been misrepresented and their names have been wrongfully deleted from the register. On the contrary, the petitioner Mr. Mayank Kocher and his late father had embezzled and swindled the assets of the partnership firm by the clandestine sale of its assets and had also surreptitiously opened a bank account in the name of the partnership firm after its dissolution as the sole proprietor thereof and encashed a cheque of the firm without the knowledge of the heirs of the other partner. The petitioner was arrested and was put into jail custody in course thereof. A charge sheet dated March 3, 1988, was filed by the police authorities, inter alia, under Sections 120B and 420 of the Indian Penal Code, 1860. It was denied that the respondent-company has indulged in the acts of fraudulent allocation of shares and falsification of minutes books. It was denied that the directors/promoters of the respondent-company have made secret profits and siphoned off the funds.

17. I have considered the pleadings and documents filed therewith as well as the arguments of counsel for the petitioners and the respondents. I find that the respondents' preliminary objection to this petition on the ground that the reliefs claimed are beyond the scope of Section 237 of the Act is tenable. Through this petition the petitioner has sought rectification of register of members to undo the alleged fraud on him and the legal heirs of his father and to seek investigation into the illegal ousting of him from directorship mala fidely besides looking into the other allegations of removing the auditors and increasing the share capital without justification. The mere fact that a so-called shareholder is feeling dissatisfied about the way in which the affairs of the company are being conducted is not enough to get an order of investigation. Neither side can seek an order of investigation against the other after they have fallen out against each other, when the purpose is only to make a score against the other.

Seeking an administrative order to investigate into the affairs of the respondent-company for such aggrieve-ment of the petitioner is beyond the scope of Section 237 of the Act. Other remedies are available against such aggrievement. Proper remedies could have been availed of under Section 111/397/398 of the Act. Where the matter under complaint can be taken care of under Sections 111, 397/398 of the Act, the petition goes beyond the scope of Section 237 of the Act. Though it is settled law that to approach the Company Law Board for an administrative order under Section 237 of the Act, the petitioner need not necessarily be a shareholder for being eligible to file the petition. Only to this extent the respondents' contention that the petitioner does not hold any shares in the company and has no locus standi for seeking investigation under Section 237 of the Act is not tenable. This particular power of the Company Law Board is not of judicial or quasi-judicial nature. It is a power of administrative nature and the Company Law Board may even take the initiative suo motu or on the application of or information supplied by any shareholder or other person. Furthermore, on a consideration of the facts of the case, I find that the respondents are right in raising the preliminary objection that the petition is hopelessly barred by limitation. The alleged cause of action, if any, arose in 1987 and the petition has been filed in the year 2003 after such inordinate delay. The respondents have rightly raised the preliminary objections on the maintainability of the petition. This petition is not maintainable under Section 237 of the Act.

18. Further, on consideration of this petition on merits, I find that this petition is not maintainable even on merits. The allegations made in the petition have not been substantiated to enable this Board to be able to form a prima facie opinion to satisfy itself that the circumstances of the case fall under one or the other of the Sub-clauses (i), (ii) or (iii) of Section 237(b) of the Act given as under: 237. (b) may do so if (in its opinion or in the opinion of the Tribunal), there are circumstances suggesting- (i) that the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members or that the company was formed for any fraudulent or unlawful purpose ; (ii) that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members ; or (iii) that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, or the manager, of the company.

19. Unless the Company Law Board forms an opinion that such circum stances exist, it cannot order an investigation under Section 237 of the Act. For an order under Section 237 of the Act there must exist circumstances which in the opinion of the Company Law Board suggest what has been set out in Sub-clauses (i), (ii) or (iii). The petitioners have failed to make out a case under Sub-clauses (i), (ii) or (iii) of Section 237(b) of the Act. The material placed before the Company Law Board must be such as to justify an order for deeper probe into the affairs of the company. The allegations made in the petition are not such a matter as to require an investigation. The proper remedies could have been availed of under Sections 111, 397 and 398 of the Act.

20. If Furthermore, the petitioner's prayer at page 23 of the petition seeking that the board of directors of the company be superseded and an administrator and/or special officer be appointed to take charge over the management and affairs and books, papers, records and documents of the company as well as its assets and properties is beyond the scope of Section 237 of the Act. Under Section 237 no orders granting such relief can be given. Under this section directing an investigation is only analogous to the issue of a fact finding commission by a civil court for looking into the accounts or making an investigation and does not amount to a judgment within Clause 15 of the Letters Patent, 1865, so as to enable an aggrieved party to appeal. An order of investigation is not an end by itself, it is only a means to find out the full facts of the acts complained of. It is nothing but an exploratory measure to be proved or disproved with reference to the facts later on ascertained. This discretionary power of the Company Law Board has to be exercised in good faith. An investigation may be ordered when public interest is involved or detriment to the interest of the shareholders had been caused surreptitiously. Such investigation should not be taken lightly. Unless proper grounds exist for investigation into the affairs of the company investigation cannot be ordered. Hence, this petition fails.

In view of the foregoing, the petition is hereby dismissed. No order as to costs.