_____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 1 of 31 * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 14.10.2009 % Date of decision: 06.11.2009 + FAO (OS) No.337 of 2009 CAPITAL LAND BUILDING & ORS. …APPELLANTS Through: Mr. Rajive Sawhney, Sr. Adv. with Mr. Viraj R. Datar & Mr. Vineet Jhanji, Advocates. Versus M/S. SHAHEED MEMORIAL SOCIETY (REGD.) & ORS. ...RESPONDENTS Through: Mr. Subodh K. Pathak & Mr. S.P.M. Tripathi, Advocates for R-1 to 8. Mr. K.P.S. Kohli, Proxy counsel for Ms. Maneesha Dhir, Advocate for R-9 & 10. AND + FAO (OS) No.423 of 2009 SHAHEED MEMORIAL SOCIETY (REGD.) & ORS. …APPELLANTS Through: Mr. Subodh K. Pathak & Mr. S.P.M. Tripathi, Advocates. Versus CAPITAL LAND BUILDERS PVT. LTD. & ORS. …RESPONDENTS Through: Mr. Rajive Sawhney, Sr. Adv. with Mr. Viraj R. Datar & Mr. Vineet Jhanji, Advocates for R-1 to 4. Mr. K.P.S. Kohli, Proxy counsel for Ms. Maneesha Dhir, Advocate for R-6 & 7. _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 2 of 31 CORAM: HON'BLE MR. JUSTICE SANJAY KISHAN KAUL HON‟BLE MR. JUSTICE AJIT BHARIHOKE 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes SANJAY KISHAN KAUL, J. 1. A dispute between two family groups to control M/s. Capital Land Builders Private Limited, appellant No.1 in FAO (OS) No.337/2009 (for short „the said Company‟), and consequently deal with valuable land owned by the said Company has given rise to a spate of litigation. The present appeals arise from one branch of that litigation. The said Company is stated to have been incorporated in the year 1959 with the object of acquisition of properties, promotion and development of land & building, and other objectives as specified in the Articles & Memorandum of Association. The original authorized capital of the said Company is stated to have been Rs.1.00 lakh divided into one thousand equity shares of Rs.100.00 each and a paid up capital of Rs.56,000.00. There were only two original subscribers – Shrimati Satya Chowdhry, wife of late Chowdhry Brahm Prakash, the first Chief Minister of Delhi holding ten shares of Rs.100.00 each and Mr. Kishor Lal Sachdeva holding five shares. Chowdhry Brahm Prakash is stated to have acquired 500 shares of the Company out of the total share capital of 560 shares in the year 1962 for which three share _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 3 of 31 certificates were issued. In the year 1963 he formed a Society by the name of M/s. Shaheed Memorial Society (Regd.), respondent No.1 herein, of which he became the President. The 500 shares held by him in the said Company were transferred to the Society of which he continued to be the President till his death. It is the claim of appellants 1 to 4 that in the year 1983 the Society was allotted 150 additional shares by the said Company but during the period 1968-1989 these shares were transferred to different parties leaving the Society with no share holding in the Company by the end of the year 1989 and the name of the Society was removed from the register of shareholder of the said Company. In a nutshell the claim of the appellants is that the family of appellants 2 to 4 got the control of the Company and the Company was managed by Shri Kishor Lal Sachdeva and his family members. Plaintiffs 3 & 4 claim to have acquired 20 shares each of the Company from the Society in the year 1974 vide share certificate No.3A (1) (A) & 3A (1) (B) of the Company. 2. It is post the demise of Chowdhry Brahm Prakash in the year 1989 that disputes are stated to have arisen between two family groups and representations were made by the representatives of Chowdhry Brahm Prakash to Registrar of Company claiming interest in the said Company through the Society. 3. It is in the year 1997 that a Company Petition was filed by respondent No.1 Society under Section 100 & 111 of the _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 4 of 31 Companies Act, 1956 (hereinafter referred to as the said Act), being Company Petition No.15/111/1997. The Society filed this petition through one Shri Sidharth Chowdhry, respondent No.7, claiming to be the Secretary of the Society. In that Company petition it was averred that the Society had been formed amongst other objectives for promoting social welfare of the community in the field of health, education, sciences, etc. as also for promoting national integration, socialism, democracry and diffusion of political knowledge. The said Company (respondent No.1 in those proceedings) was stated to be a private limited Company whose registered office earlier was at Pataudi House, Darya Ganj, Delhi, which was shifted to B-49, Connaught Circus, New Delhi and Society had learnt that the said Company had shifted its registered office at No.5- A, Doctors Lane, Gole Market, New Delhi. Shri Janardhan Rai, respondent No.2 in those proceedings, was stated to be the Director of the said Company. In para 11 of the petition, the Society averred that a copy of the share certificate in favour of the Society issued by the Company was being annexed as Annexure „C‟ and that “the original will be shown to the court at the time of hearing”. We may note at this stage itself that this original share certificate has not seen the light of the day till the conclusion of the hearing of the present appeal. The application goes on to state that the Society wanted to be better informed about the affairs of the Company and on an inquiry found that no _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 5 of 31 annual returns had been filed for a number of years nor any notice or information had been sent about the holding of a general or special meeting. The Society alleged that it had learnt that the Company had without any cause omitted the name of the Society from the register of members of the Company and the Directors of the Company had transferred the shares belonging to the Society to themselves or their nominees or friends. No proper instrument of transfer duly stamped and executed by or on behalf of the Society is stated to have been delivered to the Company along with the certificate relating to the shares. This transfer is alleged to be irregular surprisingly on the ground that as per Rule 6 of the Articles & Memorandum of Association vested in the governing body of the Society though it is really a matter of running of the Society and not of the Company. No Board resolution is stated to have been passed by the Society for transfer of its shares. The claim was made that the name of the Society should be recorded in the register of the members of the Company for 61 to 560 shares. 4. This petition filed before the Company Law Board by the Society was resisted on behalf of appellant No.1 herein by filing a reply alleging that the Society was no more a shareholder of the said Company. The share scrip was stated to have been split into lesser denomination and fresh share certificate is stated to have been issued to make transfer of shares more convenient and practicable. A _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 6 of 31 subsequent affidavit filed by the said Company has given a history of the transfer of the shares. It was averred in the affidavit that in the year 1975 there was a fire accident at the registered office of the Company in which the minutes books and other record maintained by the Company had been destroyed and this fact forms a part of the record in a civil case pending in the High Court of Delhi. The information was compiled from other records including of annual returns filed with the Registrar of Companies, New Delhi as mandated by Section 159 of the said Act. The 500 shares bearing No.61-560 are stated to have been originally allotted to late Chowdhry Brahm Prakash on 20.5.1962 and his name continued to appear in the annual returns filed up to 31.12.1962. The 500 shares were transferred on 24.7.1963 to the Society and the name of the Society continued in the annual returns filed up to 31.12.1963. In the year 1968 the three share certificates with distinctive numbers 61-560 was split into 100 scrips of 5 shares each. A number of transactions are stated to have been done in respect of shares including re-transfer of shares to Chowdhry Brahm Prakash and transfer of shares by him. It would be useful to reproduce the relevant portion in this behalf, which is as under: S.No. Share Scrip Nos. No. of Shares Date of Transfer Name of the Transferee along with Address 1. 061-210 150 26.2.68 Sh. Chowdhry Brahm Prakash, 15, Curzon Lane New Delhi 2. 211-310 100 26.2.68 Sh. G.D. Sehgal Vidhya Mandir Dharmshala, Himachal Pradesh 3. 311-315 005 10.7.72 Smt. Satya Chowdhry 15, Curzon Lane _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 7 of 31 New Delhi 4. 316-320 005 10.7.72 Shri Ajai Chowdhry 15, Curzon Lane New Delhi 5. 321-325 005 10.7.72 Shri Sidharth Chowdhry 15, Curzon Lane New Delhi 6. 326-335 010 29.1.74 Sh. Madan Singh Village Chattarpur New Delhi 7. 336-365 030 29.1.74 Ms. Usha Kiran Outram Lines Kingsway Camp Delhi-110009 8. 366-395 030 29.1.74 Sh. Susheel Khera G/68, Bali Nagar New Delhi 9. 396-425 030 29.1.74 Sh. Rakesh Kumar G/68, Bali Nagar New Delhi 10. 426-455 030 29.1.74 Sh. H.S. Gulat 23, Mohan Park Delhi-110009. 11. 456-475 020 29.1.74 Sh. Om Prakash 313-F, Outram Lines Kingsway Camp Delhi-110009 12. 476-505 030 29.1.74 Smt. Sharda Devi C-2, Bali Nagar New Delhi. 13. 506-535 030 29.1.74 Smt. Vidya Khera G/68, Bali Nagar New Delhi 14. 536-555 020 29.1.74 Smt. Promila Kishore 309-F, Outram Lines Kingsway Camp Delhi 15. 556-560 005 1989 Sh. Chowdhry Brahm Prakash New Delhi 5. A perusal of the aforesaid shows that these transfers have occurred from 1968 to 1974 except five shares in 1989. 6. It is important to note that in the affidavit it has been alleged that in the year 1986 the Society had filed a case in the city civil court alleging that the land sold by the Company does not actually belong to it and the land in question actually belonged to the Society which suit had been dismissed. The relevance of this averment will be discussed later as in the course of hearing of the appeal the details were made available and the record of that suit was _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 8 of 31 summoned and put to the respondents including the Society. 7. The Company has also alleged in the affidavit that the Society was, thus, fully aware of the three share scrips representing 500 shares split into 100 scrips of 5 shares each as late Chowdhry Brahm Prakash himself purchased 150 shares in his own name on 26.2.1968 by making payment to the Society of which he was the President, which was also included in the income tax returns of the Society. 8. The aforesaid petition remained pending when a new development arose in the year 2006. On a letterhead of the Company, Mr. Ajay Yadav, respondent No.4, addressed a letter to Ajay Chowdhry, respondent No.2, in the capacity of the President of the Society with regard to the 500 equity shares. The letter refers to a meeting of the Board of Directors of the Company and a Board Resolution being passed on 25.5.2006 where the failure of the past management about transfer of shares not being supplied was noted and the decision was taken to take on record shares of the Society in the register of members of the Company after adhering to the provisions and procedure of the said Act along with applicable rules and regulations. Mr. Ajay Yadav is the brother-in-law of Mr. Ajay Chowdhry. Mr. Ajay Yadav was not originally a Director. The petition under Section 111 of the said Act was pending. The letter has been issued from the address of Mr. Ajay Yadav being _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 9 of 31 shown as that of the Company. This letter was placed before the Company Law Board on 29.5.2006 and the Society sought to withdraw the petition which permission was granted and the petition was dismissed accordingly. 9. It appears that inter se the Society there were also some disputes for an application came to be filed on behalf of the Society by Mr. Sidharth Chowdhry, who had filed the original petition, seeking recall of the order dated 29.5.2006 permitting the petition to be withdrawn. It was averred in the application that Shri Ajay Chowdhry had fraudulently changed the constitution of the Society and has shown himself as President of the governing body for the year 2004-2005. Some persons were inducted as shareholders of the Company and Mr. Ajay Chowdhry had an ulterior motive of disposing of the assets of the Society. The petition having been filed originally by the applicant, it was alleged that Mr. Ajay Chowdhry had no right to extinguish the cause of action of Company petition. There was no opposition to the restoration of the petition by the Company and on 29.6.2006 the Company Law Board passed an order restoring the petition and directed it to be listed for final arguments on 23.8.2006. 10. The Society and Mr. Ajay Chowdhry thereafter filed a writ petition under Articles 226 & 227 of the Constitution of India on 27.4.2007 seeking to challenge the order of the Company Law Board dated 29.6.2006 restoring the Company Petition to its original number. In the mean time _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 10 of 31 subsequent orders had also been passed by the Company Law Board numbering six on the later dates which were also sought to be challenged in this writ petition. The writ petition, however, was directed to be registered as a Company Appeal and assigned a Company Appeal number, being Co.A. (SB) No.9/2007. In the Company appeal Co. Appl. No.723/2008 was filed. The said application in the appeal came up for consideration before the learned Company Judge on 30.4.2009. In the said proceedings it is recorded that on the previous date of hearing the counsel for the Society urged that it was not concerned with inter se disputes between the Directors of the Company and that irrespective of the status of Shri Ajay Yadav as to whether or not he was or is a Director of the Company and whether the letter dated 26.5.2006 was issued under the authority of the Company or not, the Society was not interested in prosecution of the case filed before the Company Law Board and it cannot be compelled to do so. The counsel representing the Company submitted that Mr. Ajay Yadav was never a Director of the Company nor he had any lawful authority to represent the Company at any point of time which position was disputed by Mr. Ajay Yadav. However, in view of the stand of the counsel for the Society that it did not want to prosecute the petition before the Company Law Board filed under Section 111 of the said Act for rectification of register irrespective of the authority of Shri Ajay Yadav to have issued the letter dated 26.5.2006, _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 11 of 31 learned counsel for the Company gave no objection to withdrawal of the appeal. The result was that the learned Company Judge taking note of the statement made by the counsel for the Society that the Society cannot be compelled to prosecute the petition before the Company Law Board directed that Company Petition No.15/111/97 would stand dismissed as withdrawn and as a consequence thereof nothing survived for adjudication in the appeal. The upshot of this was that the Society withdrew the proceedings before the Company Law Board in which it could have got adjudicated the right of the Society to get its name recorded in the register of members of the Company. 11. The matter, however, did not rest at this since the learned Company Judge took a serious view of the conduct of Mr. Ajay Yadav. This conduct was a consequence of an order passed on 6.10.2006 in an interlocutory application filed in CS (OS) No.1906/2006 by the Company in terms whereof the Society, Mr. Ajay Chowdhry and other members of that group who were defendants in the suit (respondents herein) had been restrained from representing themselves as shareholders/representatives of the Company till further orders. This order is stated to have been breached and applications under Section 39 Rule 2A of the Code of Civil Procedure, 1908 (hereinafter referred to as the said Code) were filed in the suit proceedings which culminated in an order dated 20.4.2009 being passed holding that respondent Nos.3 to 6 herein had violated the injunction _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 12 of 31 order and their act amounted to civil contempt. The learned Company Judge came to the conclusion that in the light of the prohibition it was not open to Shri Ajay Yadav to represent the Company and this fact had not been informed to the court by the counsel representing Mr. Ajay Yadav. The vakalatnama filed by the counsel on behalf of Shri Ajay Yadav as if he was representing the Company was found to be in teeth of the order of injunction and the action of Shri Ajay Yadav in signing the vakalatnama was observed to be a blatant attempt to lower the authority of the court in violation of the order dated 6.10.2006 passed in CS (OS) No.1906/2006. The conduct of Shri Ajay Yadav was held to be an effort to prejudice due course of judicial proceedings and would fall within the definition of criminal contempt and the matter was thereafter directed to be placed before the appropriate Bench after registering the petition as such. 12. The aforesaid detailed history was necessary to appreciate the circumstances in which CS (OS) No.1906/2006 came to be filed in the present court, the present appeals arising from the decision on the interlocutory applications in that suit. The suit has been filed for injunction and damages. The plaint alleges that the present authorized capital of the Company is Rs.25.00 lakh divided into 25,000 equity shares of Rs.100.00 each while the issued and paid up capital is Rs.24,92,000.00 divided into 24,920 equity shares of Rs.100.00 each. The initial share capital of the Company is stated to be Rs.1,500.00 comprising of 15 equity shares of _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 13 of 31 Rs.100 each but this capital continued to increase from time to time. As on 1985 the share capital was 1,550 shares while in 1998 it was increased to 22,405 shares for which Form-2 dated 1.2.1998 was duly filed with the Registrar of Companies on 22.12.1998 incorporating all the information. The share certificates earlier issued to shareholders on incorporation of the Company are stated to have been cancelled, withdrawn and replaced with the new share certificates pursuant to the decision taken by the Board of Directors of the Company at its meeting dated 28.9.1983 and again on 20.1.1998. The Company is stated to have been maintaining its statutory record and filing annual returns with the Registrar of Companies. The balance sheets and annual returns for the various years filed from time to time were placed on record. The registered office is stated to have been shifted to Doctors Lane and Form-18 filed with the Registrar of Companies on 7.1.2000. The present share holders of the Company were stated to be as under: a. Janardhan Rai 135 shares No transfer records b. H.C. Sachdeva 55 shares c. M/s. Runwell India Pvt. Ltd. 430 shares d. Smt. Promila Kishor 2480 shares e. S.S. Sobti 20 f. O.P. Sachdeva 3800 g. Smt. Annu Sabharwal 2500 h. Smt. Alka Sahni 2500 i. Sh. Ankur Sachdeva 2500 j. Sh. Ashish Kishor 4500 k. Sh. Kishor Lal 3000 l. Smt. Prema Sachdeva 2000 m. Smt. Ashima Arora 1000 _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 14 of 31 13. The list of Directors as per Form-32 filed is stated to be as under: Director Appt. On Mrs. Promila Kishor 21.7.1995 Mr. Ankur Sachdeva 2.9.1996 Mr. Om Prakash Sachdeva 8.8.1982 Mr. Harichand Sachdeva 31.12.1968 Mr. Ashish Kishor 30.9.1999 Mr. Gaurav Sachdeva 23.2.2005 14. The plaint thereafter sets out the setting up of the Society and how the shares came to be transferred and from whom the present shareholders purchased share holding the details are as under: Year No. of Shares Seller Buyer 1968 150 Shaheed Mem. Society Ch. Brahm Prakash 1968 100 -Do- Sh. G.D. Sehgal 1972 5 -Do- Smt. Satya Ch 1972 5 -Do- Sh. Ajay Ch 1972 5 -Do- Sh Sidharth Ch 1974 10 -Do- Sh. Madan Singh 1974 30 -Do- Smt. Usha Kiran 1974 30 -Do- Sh. Sushil Kh. 1974 30 -Do- Sh. Rakesh Sach. 1974 20 -Do- Smt. Promila Kish. 1974 20 -Do- Sh. Om Prakash 1974 30 -Do- Sh. H.S. Gulati 1974 30 -Do- Smt. Sharda Rai 1974 30 -Do- Smt. Vidya Kh. 1983 150 New Allotment Shaeed Mem. 1989 55 Shaheed Mem. Sh. J. Rai 1989 100 -Do- Sh. G.D. Sehgal The aforesaid, thus, shows that all the share transfers are stated to have occurred from 1968 to 1989. The Society was stated to have been defunct without any activity for 20 years and no returns had been filed till 2005. Thereafter the filing of the Company Petition under Sections 108 & 111 (4) of the said Act have been referred to and the factum of the Company contesting the same as also the proceedings which transpired thereafter. The letter dated 26.5.2006 is _____________________________________________________________________________________________ FAO (OS) No.337 of 2009 & FAO (OS) No.423 of 2009 Page 15 of 31 naturally stated to have been forged and fabricated. The Company goes on to state that it received a letter dated 3.2.2006 from the Office of the Assistant Registrar of Companies about complaints from one of the shareholders, i.e. the Society. There were subsequent exchanges and correspondence in this behalf. 15. The plaint states that in April 2006 the Company received information from the market that some persons are holding out themselves as Directors of the Company and negotiating for sale of the properties of the Company. The Company, thus, issued public notices on 11.4.2006. The Company also came to know that a Form-32 had been filed with the Registrar of Companies on 18.3.2006 showing change of Directorship. This Form-32 gave the registered office of Doctors Lane and the date of appointment of Mr. Arjun Chowdhry, Mr. Ajay Yadav and others as 10.3.2006. Further a Form-18 was filed for change of registered office w.e.f. 18.3.2006 from Doctors Lane to A-3, Indian Express Apartments, Mayur Vihar, Delhi, the address of Mr. Ajay Yadav. A Form-2 about return of allotment was also filed in respect of issue of additional shares in pursuance to a Resolution of the Board on 18.3.2006 and the Form-5 for notice of consolidation, division, etc. or increase in share capital or increase in members was filed purportedly and in pursuance to a meeting held on 6.6.2006 increasing the share capital from Rs.25.00 lakh to Rs.75.00 lakh as per