1 nms42-07.sxw pps IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Notice of Motion No. 42 of 2007 . in Suit No. 3606 of 2006 M/s. Rainbow Prints Pvt. Ltd. .. Plaintiffs v/s. M/s. Dharamchand Polyfab Pvt. Ltd. & Others ..Defendants Mr.P.K.Dhakephalkar i/b. Yasmin Bhansali & Co.for the Plaintiffs. Mr.Peswi Modi a/w. Najma Sahikh i/b. Vigil Juris for Defendant No.2 Mr.F.E.Devitre i/b. Ramchandra Yadav for the Defendant No.5 Mr.Mustafa Doctor i/b. Ramchandra Yadav for Defendant Nos.3, 4,6 to 10 Mr.O.D.Goswami for the Defendant No.11 CORAM : R.Y.GANOO, J. DATED : 17th September , 2010 P.C. : 1. Plaintiffs, a private limited company claims that defendant no.1 is also private limited company having substantial landed properties described in Exhibit B to the plaint. The record shows that the present defendant no.5 have taken over defendant no.1 and defendant no.1 no longer remains a private limited company. 2. According to the plaintiffs, at the relevant time i.e. sometime in the year 2005-2006 defendant nos.3 to 10 were holding shares with 2 nms42-07.sxw specific numbers and total holding of the said shares were 18,810, each of Rs.100/-. It is admitted by the plaintiffs that defendant no.2 did not own any share in defendant no.1 at the relevant time. 3. According to the plaintiffs, efforts were made to arrive at agreement between the plaintiffs and defendant nos.3 to10 so that plaintiffs would purchase all the shares of defendant no.1 and eventually have control over the entire share holding of the defendant no.1.and according to plaintiffs the real intention to acquire all shares from defendant nos.3 to 10 was ultimately to secure rights in respect of the property more particularly described in Exhibit B to the plaint. 4. The plaint narrates various facts and circumstances to submit that by 8th March/ 16th March, 2006 oral agreement was arrived at by and between the plaintiffs and defendant nos.3 to 10 through defendant no.2 for sale of all the shares of the company for total consideration of Rs.13,51,00,000/- in a stage wise manner. Learned Counsel for the plaintiffs indicated that uptill now the consideration of Rs.1100/- has been paid in cash. Ofcourse, this stand of the plaintiffs is disputed by the defendant nos.1 onwards. The defendant nos.3 to 10 3 nms42-07.sxw dispute that the shares were to be sold by defendant nos.3 to 10 through defendant no.2. Plaintiff’s case proceeds on the footing that the defendant no.2 represented to them that he had authority to deal with the shares then held by the defendant nos.3 to 10 and he has complete authority to enter into agreement with plaintiffs for sale of shares then held by the defendant nos.3 to 10. Plaint is silent as to how the plaintiffs satisfied themselves about the said authority and to that extent, on consideration of record it is difficult to accept the case of the plaintiffs that defendant no.2 had authority to deal with the shares then held by defendant nos.3 to 10. 5. The plaintiffs have, by the present Notice of Motion sought an order of appointment of Receiver in respect of suit shares as prayed for in prayer clause (a) together with the immovable property mentioned in the said prayer. By prayer clause (b) plaintiffs have sought injunction against defendant nos.1 to 5 from disposing off, alienating, encumbering and parting with possession or creating third party and or handing over possession. Injunction is sought in terms of prayer clause (c) against defendant no.1 and defendant nos.3 to 10 from transferring shares of defendant no.1 and defendant no.1 is sought to 4 nms42-07.sxw be restrained from entering into any scheme of compromise or arrangement under the Companies Act. By prayer clause (d) an order of injunction is sought restraining defendant no.1 from issuing further equity shares to the Defendant Nos. 2 to 10 to third parties. By prayer clause (e) an order of injunction is sought restraining defendant no.1 from renewing the business centre agreement with their clients in respect of property mentioned in prayer clause (e). 6. It is noticed that defendant no.11 have entered into development agreement with defendant no.5 and plaintiffs want that said development agreement dated 31.3.2008 should not be taken ahead. Injunction is sought against defendant no.12 i.e. Bombay Municipal Corporation restraining them from sanctioning the plans for the development of the properties by defendant no.11. 7. Defendant nos.1 to 10 have objected to the reliefs by contending that no agreement was entered into as alleged by the plaintiffs and defendant no.2 had no authority to deal on behalf of defendant nos.3 to 11 and in any event the terms and conditions of the oral agreement have not been materially fulfilled and therefore there is no question 5 nms42-07.sxw of granting any injunction in favour of the plaintiff. It was also contended that the plaintiffs have not been able to make out a case that the contract to sell the suit shares was crystalised by and between the parties. 8. With the assistance of learned Counsel on both sides, I have perused the entire record. At the outset, after going through the entire correspondence and all letters it is certain that plaintiffs have not been able to make out a prima facie case that there was concluded contract between the plaintiffs and defendants. The case of the plaintiffs rests on the footing that the oral agreement was arrived at on 8/16th March, 2008. Correspondence entered into by and between the parties shows that the transaction was at the stage of negotiation even in July 2006. If this is the position, the plaintiffs have failed to make out prima facie case that contract was arrived at between the plaintiffs and defendants so far as the suit shares. The stand of the plaintiffs that defendant no.2 had an authority to deal on behalf of the defendant nos.3 to 10 is also not made out because there is nothing on record to show that defendant no.2 had an authority to deal with the plaintiffs on behalf of defendant nos.3 to 10. The correspondence 6 nms42-07.sxw clearly indicates that no such authority was ever envisaged by defendant nos.3 to 10. In the normal course, when the plaintiffs were informed by defendant no.2 that he had authority to deal with defendant nos.3 to 10 plaintiffs as a prudent organization ought to have verified on the basis of enquiry with defendant nos.3 to 10 as to whether defendant no.2 had any authority. Nothing is pointed out to show that such cautious steps were taken by plaintiffs. Hence I hold that even if defendant no.2 may have entered into negotiations with plaintiffs those negotiations would not bind defendant nos.3 to defendant no.11. If this be so, plaintiffs first demand that Receiver should be appointed in respect of the suit shares cannot be accepted. Once this finding is recorded, subsequent prayers in regard to the suit shares and other aspects relating to the holding of shares and dealing with them cannot be granted. 9. The plaintiffs looked to the transaction of purchase of shares primarily with a view to have property of defendant no.1 under their control and deal with it. One will have to make a distinction between purchase of shares of a company and purchase of property of a company. If at all the plaintiffs really wanted to acquire property 7 nms42-07.sxw of defendant no.1 nothing prevented plaintiffs from negotiating with the defendant no.2 for purchasing the property directly. The attempt made by the plaintiffs to acquire entire share holding which was then controlled by the defendant nos.3 to 10, even if is accepted, they would not be able to lay their hands on the property of the defendant no.1 because shares held by a person and a property of the company are two different aspects. If an oral agreement would have been materialised it would have made the plaintiffs owner of all shares of the company, that would not have conferred the ownership of immovable property on plaintiffs. This distinction between the ownership of the shares and ownership of the property of the company has to be maintained. Once it is held that plaintiffs failed to make out prima facie case for purchase of shares, there is no question of plaintiffs claiming interest in the property of the company for the reasons mentioned aforesaid. 10.Apart from the aforesaid discussion, the record clearly shows that the defendant no.1 no more exists as a private limited company and the shares in respect of which suit transaction is attempted to have been entered into no more exist and present defendant no.5 who then held 8 nms42-07.sxw some of the shares of defendant no.1 has now acquired those shares which were otherwise held by defendant nos.3, 4, 6 to 10. The stand of the defendants that the share capital of the erstwhile defendant no. 1 has come to an end and the entirely new defendant no.5 has come into existence is required to be accepted. If this is so, plaintiffs are not entitled to any interim relief as sought. In view of the above, the plaintiffs Notice of Motion will have to be dismissed. 11.In view of the above, following order is passed to dispose of the Notice of Motion. ORDER Notice of Motion is dismissed. In the facts and circumstances of the case, there shall be no order as to costs. [R.Y.GANOO, J.]