*1* nms.466.09 kps IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.466 OF 2009 IN SUIT NO.260 OF 2009 Habibullah Ebrahim Akudi. ..Plaintiff -Versus- Parsoli Corporation Limited and others. ..Defendants .......... Chirag Balsara a/w Komal Patil and Usha Gadagkar i/b Divya Shah Associates for the Plaintiff. J.B.Chinai a/w Sonal i/b Iyers Chambers, for the Defendant No.1. Sanjay Jain a/w P.P.Kulkarni, for the Defendant Nos.3 to 5. Pradeep Bakhru a/w Kunal Mehta i/b Wadia Ghandy & Company, for the Defendant Nos.7, 8 and 11. .......... CORAM : S.C.DHARMADHIKARI, J. DATE : 16th November, 2010. P.C. 1 This is a Notice of Motion praying for interim reliefs and particularly appointment of the Court Receiver, High Court, Bombay or some other fit and proper person as Receiver in respect of 50 lacs equity shares of the Defendant No.1 Company held in the names of Defendant Nos.2 to 5 with appropriate directions to recover the dividends and entitlements which may have accrued and which may accrue in future in respect of the said shares. An interim injunction restraining the Defendants from selling, transferring, creating any pledge or any third party rights or charge in respect of the said 50 lacs equity shares, is also *2* nms.466.09 claimed. 2 The suit is filed by the Plaintiff for declaration that he is holder of 50 lacs equity shares of the Defendant No.1 and that the Defendants are not entitled to these 50 lacs equity shares and that the alleged transfer of these shares in favour of the Defendant Nos.2 to 5 is illegal, fraudulent, null and void and not binding on the Plaintiff. 3 In furtherance of the final reliefs the Plaintiff has prayed for the aforementioned interim reliefs. 4 At the ad-interim stage, this Court passed an order and directed that the Defendant Nos.3 to 5 shall not transfer the shares purchased by them under the sale-deeds dated 21.08.2006 relied upon by them. 5 It is the case of the Plaintiff that he and Defendant No.2 formed a company namely Parsoli (UK) Limited as a corporate vehicle through which marking and services of NRI clients used to be coordinated. The Plaintiff and Defendant No.2 approached high net worth NRIs in UK and impressed upon them to invest in shares and securities in India. It is stated that the Defendant No.1 used to invest the monies collected by the said Parsoli (UK) Limited. The Plaintiff being a resident of UK, was involved in day to day affairs of the said UK based company. In addition to the administrative expenses, the Plaintiff was entitled to salary in the sum of 3,000 UK pounds per month. It is stated that subsequently in order to facilitate operation and to ensure the easy flow of funds, the said Parsoli (UK) Limited was merged into the Defendant No.1 Company. On merger, the Plaintiff and the Defendant No.2 held 50 lacs equity shares each aggregating to 1 crore equity shares in Parsoli (UK) Limited. It was stated that in view of the merger, the Plaintiff and Defendant No.1 were allotted 1 crore shares. Thus, the Plaintiff had independently 50 lacs equity shares *3* nms.466.09 of the Defendant No.1. 6 It is stated that the Bombay Stock Exchange ( in short “BSE”) issued a corporate announcement setting out that the Defendant No.1 has fully acquired the said UK based company, therefore, it is subsidiary of the Defendant No.1. The shareholding pattern was published by the BSE wherein the Plaintiff was shown as the holder of 50 lacs equity shares of the Defendant No.1 constituting 37% of the shareholding of the Defendant No.1. It is stated that 1 crore shares of the Plaintiff and the Defendant No.2 were under lock-in period upto 23.01.2009 and were non-transferable. Further there was announcement that the shareholding of the Plaintiff and the Defendant No.2 is exceeding the limit prescribed under the takeover code. It is stated that the record of BSE shows that the Plaintiff was shareholder for the period 01.10.2004 to 31.12.2004. There were never denials of the fact that the Plaintiff was shareholder of the Defendant No.1. The shareholding pattern appearing in the BSE is more or less confirmed by the parties. 7 However, it is alleged that in response to some emails wherein the status of the Plaintiff in the Defendant No.1 was enquired, nothing was stated about the alleged transfer of shares held by the Plaintiff. It is stated that there was a response from the Defendant No.1’s Advocate dated 14.09.2007 wherein it was stated that the Plaintiff has sold the said 50 lacs shares. This was in response to the Plaintiff’s Advocate’s letter dated 11.09.2007 objecting that the Plaintiff’s name is not appearing in the list of shareholders of the Defendant No.1. Thereafter, a complaint was filed in the Court of the Additional Chief Metropolitan Magistrate, Bandra. It is stated that the shares of the Plaintiff were demated in the alleged Demat D.P. ID No.12043500 opened on the basis of the alleged PAN card of the Plaintiff but none of the forms *4* nms.466.09 or documents including the agreements have been signed by the Plaintiff. The allegation in the criminal complaint and the suit is that the signatures of Plaintiff were forged and that he has never executed any agreement for sale of shares and that he had never appended his signatures on any form and application. 8 On such allegations the suit is filed and this Court on 23.01.2009 granted ad-interim order restraining the Defendant Nos.3 to 5 from transferring the shares purchased by them under the sale-deeds dated 21.08.2006, that order has been continuing till date. 9 At the hearing of this Notice of Motion, Mr.Balsara, in addition to seeking confirmation of ad-interim order, submits that this Court should appoint the Court Receiver because it is just and convenient to do so. Mr.Balsara has taken me through the plaint and particularly the amendments and affidavits. In his submission, the affidavits would disclose that the activities of Defendant Nos.2 to 5 have resulted in depriving the Plaintiff of his legitimate shareholding in the Defendant No. 1. Mr.Balsara submits that the version placed on record is that the Defendant Nos.3 to 5 from their personal account remitted a sum of Rs.50 lacs by way of Demand Drafts which sum has been received by the Plaintiff. Mr.Balsara submits that this version cannot be accepted because the amount is received by the Plaintiff not as consideration for transfer of shares but towards remuneration for the services rendered by the Plaintiff. The Plaintiff has been associated with the UK based company as also with the Defendant No.1. In such circumstances, when there was no occasion for the Plaintiff to divest himself of the shareholding so also the Plaintiff is challenging all the documents purportedly executed by him and the Defendant Nos.3 to 5, then, merely because the Demand Drafts have been encashed it would not mean that the Plaintiff is dis-entitled from claiming *5* nms.466.09 appointment of the Court Receiver. Mr.Balsara invited my attention to the order of the SEBI on the complaints made by some of the investors and has contended that there are gross illegalities and irregularities committed by the Defendant Nos.2 to 5. In such circumstances, the Defendant Nos.2 to 5 and the Company be not allowed to reap and retain the benefits accruing from the shareholding and if the Court Receiver is appointed all benefits pertaining to the shares would be collected and retained by the Court Receiver for the benefit of the Plaintiff. In such circumstances and when there is violation of the takeover code so also BSE regulations, it is just and convenient to appoint the Court Receiver as prayed by the Plaintiff. 10 On the other hand, Mr.Chinai, learned Senior Counsel appearing on behalf of the Defendant No.1, submits that there is no order passed by this Court against the Defendant No.1. Ad-interim order restrains transfer and sale of the shares by the Defendant Nos.3 to 5. The amounts have been paid from the personal account of the Defendant Nos. 3 to 5 and it is not the case of the Plaintiff that the Defendant No.1 has in any event communicated to the Plaintiff of transfer or the actions of the Defendant Nos.3 to 5 have been endorsed in any way by the Defendant No.1, therefore, no orders be made against the Defendant No.1. 11 Mr.Jain, learned counsel appearing for the contesting Defendant Nos.3 to 5, submitted that much water has flown after the ad- interim order because that order came to be passed as the Court was not satisfied, at that stage, that the amounts were paid by the Defendant Nos. 3 to 5 and no proof of such payment from their bank account was produced. Now not only such proof is produced but in addition to that the affidavit shows as to how the Plaintiff has been suppressing from this Court the material and relevant facts. Mr.Jain submits that this gross *6* nms.466.09 suppression dis-entitles the Plaintiff from any equitable and discretionary reliefs. 12 Mr.Jain submits that the deed of sale of shares has been disclosed by the Defendant No.1 in an affidavit in reply of Zafar Sareshwala. He is Managing Director of the Defendant No.1. He has stated that in or around August/September, 2006 the Defendant Nos.3 to 5, who were promoters of the Defendant No.1, approached the Defendant No.1 to approve the purchase of 50 lacs shares of the Plaintiff who is also promoter of the Defendant No.1. It was pointed out that the agreements dated 21.08.2006 were executed by and between the Plaintiff and the Defendant Nos.3 to 5 whereby the shares have been sold and the distinctive numbers of shares are set out in the agreements, copies of which are annexed at Annexures 1 to 3 to this affidavit in reply. Thereafter, the resolution is passed in the meeting of the shareholders/ investor grievance cum share transfer committee of the Defendant No.1 held on 02.09.2006 and the transfer was approved. There is also a resolution of the Board of Directors of the Defendant No.1. It is in such circumstances, Mr.Jain submits that email which has been sent by the Plaintiff was not replied because the transfer was to the knowledge of the Plaintiff. The Plaintiff was director of the UK based company and the shareholder of the Defendant No.1. The Plaintiff has suppressed that he is also Director of the Defendant No.1. The Plaintiff requested that he should continue as Director of the Defendant No.1. It is about that status that inquiry by email, copy of which is annexed at page 39 of the plaint, has been made and in response thereto, it has been stated by the Defendant Nos.3 to 5 that his status is that of Director. The Plaintiff was aware that after the transfer of shares even his status as Director is likely to be affected. In fact he was removed as such in the meeting held on *7* nms.466.09 14.10.2006. That meeting was also to the knowledge of the Plaintiff and sensing that meeting, email dated 13.10.2006 was sent by the Plaintiff. This act cannot be said to be bonafide at all. Merely because the Plaintiff did not get invitation or agenda of the meeting which was to be held on 08.01.2007 this Court should not pass any interim order and should dismiss the Notice of Motion. Mr.Jain invites my attention to the letter dated 25.01.2007 addressed by the Plaintiff to the Chairman and shareholders of the Defendant No.1 wherein he has conveyed that EGM is not convened legally but in contravention of the Companies Act and the Articles of Association of the Defendant No.1. This letter is eloquent enough because this was sent under the legal advise and the name of legal advisor was mentioned therein. The Plaintiff was aware as to how he was not given any agenda or papers relating to the EGM, that this Court should dismiss the Notice of Motion and particularly in the light of the affidavits filed by the Defendants. 13 Mr.Jain, relied upon the affidavit dated 17.03.2009 which has been filed by Uves Yunus Sareshwala on behalf of the Defendant Nos.3 to 5. 14 Mr.Jain submits that in rejoinder affidavit the Plaintiff has sought to depart from his version and point out that three Demand Drafts were sent without any covering letter aggregating to Rs.50 lacs which were partly towards his remuneration and partly towards repayments to the investors as the investors were repeatedly demanding repayments. Mr.Jain submits that once the documents are disclosed the plaint is amended but there is no explanation about the fact that the amount of Rs. 50 lacs was received and duly retained by the Plaintiff. 15 Mr.Jain submits that EGM of 03.03.2007 was not allowed to be attended by the Plaintiff for obvious reason because he was neither the *8* nms.466.09 director nor the shareholder of the Defendant No.1 and he ceased to be both. Therefore, his presence was objected and he was asked to leave the meeting hall. The rejoinder affidavit does not explain these facts and in fact accepts that the Plaintiff left the meeting hall. 16 For all these reasons and relying on the judgment of the Honourable Supreme Court reported in AIR 1994 SC 853 (S.P.Chengalvaraya Naidu (dead) by L.Rs. vs. Jagannath (dead) by L.Rs.) and (2010) 2 SCC 114 (Dalip Singh vs. State of U.P.), Mr.Jain submits that the Notice of Motion be dismissed. 17 With the assistance of the learned counsel appearing for the parties, I have perused the plaint and annexures thereto including the affidavits placed on record. I have also perused some of the relevant documents relied upon by the parties. 18 To my mind, this Court had adequately protected the Plaintiff by granting interim injunction. I am not in agreement with Mr.Balsara that the Plaintiff has made out a case for appointment of Court Receiver. The relief of appointment of the Court Receiver can be granted when it appears to the Court that it is just and convenient to do so. In this case the protection granted by interim injunction is adequate. Apprehension of the Plaintiff that the Defendant Nos.3 to 5 although restrained from transferring and selling the shares, may continue to derive the benefits of shares from the dividends and entitlements which may have accrued and which may accrue in future on these shares, therefore, the Court Receiver be appointed; is not enough because even if the shares are retained and the transfer, sale and alienation thereof is restrained, it is not as if the Plaintiff is remedy less. The Plaintiff can point out at appropriate stage to this Court that the Defendant Nos.3 to 5 although restrained from alienating and transferring the shares, have received all benefits in the *9* nms.466.09 form of bonus and dividends. I have no doubt if the Plaintiff ultimately succeeds, the Court is not power-less to give direction to compute the benefits in the form of money and direct the payment thereof to the Plaintiff. Merely because there is apprehension of the Plaintiff that the Defendant Nos.3 to 5 would continue to derive the benefits of the shares, is no ground to appoint the Court Receiver. More so, when beyond oral submissions nothing has been pointed out as to how the dividend has been accruing and paid on the shares in question and as to whether, the Defendant No.1 has declared any bonus issue and whether, there are any other benefits obtained therefrom. For all these reasons, request of Mr.Balsara to appoint the Court Receiver cannot be accepted and the motion to that extent is dismissed. 19 Equally, it is not possible to agree with Mr.Jain and vacate the ad-interim order. This is a case where the Plaintiff has prayed for declaration that he is owner of 50 lacs equity shares of the Defendant No. 1 and continues to be so, despite the alleged transfer of shares in favour of the Defendant Nos.3 to 5. The Plaintiff has outlined his role as promoter/shareholder. The Plaintiff is part of the Defendant No.1 as also the Defendant No.1’s UK based partner/sister concern. The association between the parties has been set out in details. The Plaintiff has set out the details of the efforts undertaken by him jointly along with other Defendants in setting up the company in UK. The Plaintiff has also set out the fact that being known to each other the dealings were presumed to be in the interest of both sides. However, the Plaintiff has stated that he has been defrauded and felt cheated when he was being excluded from the operations of the Defendant No.1 post merger. Although it is acknowledged that the Plaintiff was shareholder ultimately it is stated that the shares have been transferred. These transfers, consideration and the *10* nms.466.09 manner in which they have been dealt with, have been challenged by the Plaintiff. A criminal case is also pending. Merely because the explanation is given about the amount of Rs.50 lacs paid as consideration for the transfer from the personal account of the Defendant Nos.3 to 5 by itself is no reason to vacate ad-interim injunction. More so, when the Court is yet to decide whether the transfer is genuine and whether this amount was the agreed consideration for the same. The Plaintiff is yet to prove the allegations made by him. They are indeed serious. The Court has granted ad-interim injunction on being satisfied that prima facie case has been made out and the balance of convenience is also in favour of the Plaintiff. The reasons have been assigned by the learned Single Judge in orders dated 22.01.2009 and 23.01.2009. 20 After perusing all material including further affidavits on record, I am of the view that the matter requires in depth investigation and probe. The parties will have to be given opportunity to prove the rival cases. If the Plaintiff has now amended the plaint and has challenged the transfer deeds/sale deeds and has also brought on record the material to show that he has not appended any signature on the transfer forms, applications and agreements and the matter being pending in the Criminal Court as well; in my view, serious issues have been raised which will have to be decided at the trial. 21 It is not possible to agree with Mr.Jain that the Plaintiff has suppressed the material facts from this Court. This is a case where the disclosures have been made by the Defendants in answer to the Plaintiff’s claim of ownership of shares. They have tried to place their versions on the emails, letters and documents; which of the version is truthful and deserves to be accepted, cannot be decided at this stage. In such circumstances, I am of the view that merely because the affidavits have *11* nms.466.09 been filed and documents and deeds are brought on record, that by itself is no reason to vacate the ad-interim injunction. More so, when the Court is yet to hold that the transfers by Plaintiff is voluntary and all acts and deeds in pursuance thereof comply with the relevant procedural requirement as well. 22 In these circumstances, the Notice of Motion partly succeeds. It is made absolute in terms of prayer clause (b). There shall be no order as to costs. (S.C. Dharmadhikari, J)