Case: Sangramsinh P. Gaekwad  Vs. Shantadevi P.Gaekwad(Dead)Thr.Lrs.

2. Sir Pratapsinghrao Gaekwad was the Ruler of Baroda, Maharani Shantadevi Gaekwad was his wife. They had eight children. For certain reasons with which we are not concerned, the estate of Gaekwad came into the hands of their elder son, Fatesinghrao P Gaekwad (FRG) even during the life time of Sir Pratap Singh. FRG floated several companies three of which are Baroda Rayon Corporation Ltd (BRC), Gaekwad Investment Corporation Company Ltd. (GIC) and Alaukik Trading & Investment Corporation Pvt. Ltd. (Alaukik) BRC came into existence in 1958. At the outset, it was being run under Managing Agency System which was abolished in or about 1968 and later on the same was being managed by the Board of Directors with the assistance of professional executives Appellant No.1 herein, the youngest son of Pratapsinghrao Gaekwad joined the said company in 1968. He was the Director of Managing Agents till 31.12.1969 whereafter he became the Additional Director with effect from 1st January, 1970. He in the same year became Joint Managing Director. In April 1976 he became the Managing Director of BRC. He was reappointed as Managing Director for two periods of five years each with effect from 19th February, 1980 and 19th February, 1985. FRG passed away on 1st September, 1988, whereafter he was appointed as Chairman and Managing Director on 23.9.19883. GIC was a small investment company. Its equity capital consisted of 425 shares of Rs.100/- each. The said shares were mainly held by the family members. A large chunk of shares was held by Jaisingh Ghorpade Trust of which FRG was a trustee. The beneficiaries of this Trust are said to be outsiders. Some share of GIC were held by outsiders also. The share holding pattern of the Company was as under:-10.H.H. Padmavatidevi Gaekwad and H.H. Maharani Shantadevi Gaekwad411.Shrimant Pramila Raje of Jasdan414.Shrimant Vasundhara Raje Murarrao Ghorpade119.Shri Jaysinghrao M. Ghorpade and H.H. Maharani Padmavatidevi Gaekwad520.Shrimant Dilipsinh G. Desai and Smt. Kusumben D. Desai521.Smt. Kusumban D. Desai and Shri Dilipsinh G. Desai54. Alaukik was a subsidiary of GIC, Respondent No.12 Mrs. Mrunalini Devi Paur was its Managing Director5. Allegedly, GIC suffered a lose during the financial years ending 31st March, 1987 and 31st March, 1988 as a result whereof substantial parts of the equity and reserves were wiped out. IT could not even pay off the loans and credits. It had no funds to subscribe for the rights issue made on 1989 by BRC. Its share holding in BRC was likely to fall with which its forged fortunes were closely linked as the dividend from the shares of BRC was the major source of income of the company. GIC came into financial trouble when BRC did not declare dividend in 1986-87. The value of BRC shares also declined and, thus, it became difficult to avail of an overdraft facility from the Banks. It was then decided to raise funds from the existing members. The Board of Directors of GIC in a meeting held on 10.11.1987 decided to broad-base the company, whereafter an extraordinary general meeting was convened on 17.12.1987. In the said FGM a decision was taken to increase the capital by issuing 25000 equity shares of Rs.100/- each. The matter was again placed in a Board Meeting of GIC on 8th January, 1988. In the said Board Meeting presided over by Appellant No.1 and attended by Mr. P.U. Rana and Mr. P.H. Chinoy, a resolution was passed that 15000 equity shares of Rs.100/- each be issued at par to the members of the company. The said resolution reads as under:Resolved that out of 25000 equity shares of Rs.100/- each, 15000 equity, shares of Rs.100/- covering Rs.15,00,000/- be issued at par to the members of the Company at present and the balance as and when requiredFurther Resolved that the Management Committee of the Company by and is hereby authorized to issue equity shares to members in such proportion as it deems fitFurther Resolved that the Management Committee be and is hereby authorized to do all such acts, deeds and things necessary for the purpose6. Pursuant to or in furtherance of the said resolution the Company Secretary Mr.M.N. Khade issued a circular letter and dated 12.2.1988 to all the existing shareholders requesting them to subscribe for the equity shares at par wherefor a time limit of three weeks was fixed. It was stated that if no reply is received by 10th March, 1988 it would be presumed that the concerned shareholder was not interest in the offer. The said circular letters reads as under:It has been decided to increase the equity capital of the Company by the issue of 15000 equity shares of Rs.100/- each at par, to the members of the CompanyYou are hereby requested to convey your acceptance for the number of shares for which you would like to subscribe, along with a cheque covering the full amount at the rate of Rs.100/- per share, within three weeks from the date of receipt of this letter. If no reply is received by 10th March, 1988 it will be presumed that you are not interested in the offer and the shares will be offered to the other membersFor Gaekwad Investment Corporation Pvt. Ltd7. On or about 13th February, 1988, another meeting was convened which was chaired by FRG wherein the resolution passed in the meeting dated 8th January, 1988 was confirmed. The Managing Committee, having regard to the fact that no offer was received from the existing shareholders, in its meeting dated 21st March, 1988 extended the time for the aforesaid offer. It was further decided that out of 15000 shares, 8000 shares be kept apart for the time being for FRG and the balance 7000 shares be kept apart for other existing members. Allegedly, on instructions of Appellant No.1 herein, the Company Secretary gave first option to the other family members to subscribe for shares according to their request and the remaining were put in the name of Appellant No.1 and his family pursuant whereto only two persons. Mrs. Paur asked for allotment of 500 shares and Mrs. Shubhanginidevi Gaekwad for 25 shares respondent and thus the remaining 6475 shares were allotted to Appellant No.1 and family8. It is further alleged that FRG became disinterested in the 8000 shares allotted to him. The contention of the Appellants herein is that the balance 7500 shares renunciated by FRG in his favour and in favour of his children in June, 1988 as the same remained un-allotted as other members specifically refused to take up any share. His sons and daughters applied for further 3000 shares through Appellant No.1 as guardian and the same was allowed. The remaining 4500 shares, however, remained unallotted. The issue is said to have been closed on 10.12.19889. Respondent No.12, Mrs. Paur who was the Managing Director of Alaukik in a meeting held on 12.10.1989 which was chaired by her issued to herself 1500 shares without allegedly issuing any notice to the existing shareholders and wherefor allegedly no payment was even made. It is contended that by reason of such overt act, the Respondent No.12 herein came in majority of Alaukik as a result thereof it would cease to be a subsidiary company of GIC. GIC had 84% shares in Alaukik but by reason of the said allotment in favour of Respondent No.12, its share holding therein was diluted to 32%. The account of the Company was also said to have been transferred to a current account10. On 1.9.1990, a Civil Suit being No.675/90 was filed by GIC against Alaukik questioning inter alia the allotment of 1500 equity shares of Rs.100/- each to the defendant No.2 therein11. In the said suit, Mrs. Puar filed her written statement on 29.11.1990 wherein inter alia a stand was taken that 8000 shares kept apart for FRG devolved on Shantadevi as a Class I heir of FRG. She incidentally applied for allotment of the said shares also on 29.11.1990. A contention was also raised in the said written statement that if the said shares are allotted Respondent Nos.1 and 12 would be holding the majority shares in GIC and Alaukik even if allotment of 1500 shares in Alaukik is held to be had in law12. It was also not in dispute that Indreni Holding Pvt. Ltd. (Indreni) was a wholly owned company of the Appellants herein. Allegely, by way of tax planning the Appellants herein decided to transfer 9415 shares in favour of the said company wherefor allegedly a letter was prepared by the Company Secretary on or about 15.11.1989 which reads as under:The Company has received intimation from existing shareholders about their intention to sale some of their shares of Gaekwad Investment Corporation the details of which are attached herewithPursuant to the provision of the Articles, it is hereby brought to your notice about the sale of the shares by the existing shareholders. You are therefore requested to intimate to the Company about your interest in purchasing the share before 20th December, 1989Please note that in case if the company does not hear from you within stipulated period it with be construed that you are not interested in purchasing...................of the same as board deem fitFor Gaekwad Investment Corporation Pvt. Ltd13. It, however, stands admitted that the said letter was not circulated14. The Appellants herein were allegedly under a belief that the said notice had been circulated and as no response thereto was received, they transferred 9415 shares out of 9481 shares to Indreni Questioning the said transfer, three suits came to be filed by different shareholders marked as Suit No.305/90, 867/90 and 872 of 90. Suit No.305/90 was filed by Pramilaraje Khacchar on 28.11.1990 in the Rajkot Civil Court wherein inter alia following reliefs were sought for:A. it be declared that the purported sales and transfers by the defendants Nos.3 to 7 of the 9415 equity shares owned by them in the first defendant company in favour of the second defendant company are ultra vires their powers, illegal, null and void ab initio and that the said shares continue to be of the ownership of the respective defendants Nos.3 to 7 as if no such sale or transfer was ever madeB. a decree for permanent mandatory injunction be passed in favour of the plaintiff and against the first defendant directing it to offer and transfer the said 9415 equity shares in the first defendant company to the plaintiff and other remaining membersC. a decree for permanent mandatory injunction be passed in favour of the plaintiff and against the defendant No.2 restraining the second defendant from exercising or enjoying any voting or other rights in respect of the said 9415 equity shares in the first defendant companyD. that a decree for permanent mandatory injunction be passed in favour of the plaintiff and against the second defendant directing the second defendant to repay the first defendant company dividend, if any, paid to the second defendant with interest at 24 per cent annumE. any other relief that the Honble Court deems fit in the circumstances of the case be granted15. Suit No.867/90 was filed by Shubhangini Gaekwad in Baroda Civil Court on 12.12.1990 praying for identical reliefs16. Suit No. 872 of 1990 was filed on 19.11.1990 by Ajit Singh Gaekwad the Respondent No.8 herein, wherein one additional relief was claimed which is the following terms:it be, decreed and first defendant be directed to offer and transfer 9415 equity shares with distinctive numbers mentioned in para 18(a) to the plaintiff and other remaining members of the first defendant company in pursuance of the Articles of Association17. In Suit No.867 of 1990, concededly an order of injunction was passed on 28.11.1990, as prayed for by the plaintiffs, restraining Indreni from exercising or enjoying any voting or other rights in respect of the said 9415 equity shares in GIC18. A similar order of injunction was passed by Civil Judge, S.D. Vadodara in Suit No.867 of 1990 in the suit filed by Mrs. Shubhanginidevi Gaekwad on 12.12.199019. In their replies tiled in the suits, the Appellants herein inter alia contended that a Board Meeting was convened on 13.7.1990 for reconsidering the transfer of shares to Indreni. They also sought for legal opinion in view of the fact that the notice dated 15.11.1989 was not circulated to the members. The purported resolution passed in the said meeting reads as under:Resolved that the transfer of 9415 equity shares in favour in Indreni Holdings Pvt. Ltd. approved by the Board on 30.3.90 be reconsidered and that the matter be referred to Transferors and TransfereesResolved further that the legal opinion be sought in the matter of captioned transfer of 9415 equity shares of the company in favour of Indreni Holdings Pvt. Ltd20. The Respondent herein, however, contend that the said resolution was a fabricated one as to Board Meeting was held on the said dated. On or about 20th July, 1990, the Appellant No.1 issued a letter to the Board of Directions that if the transfer of shares was found to be irregular, he should be permitted to remove transfer notice as per articles. On 9.8.1990, allegedly, a Board meeting was held and the shares transferred to Indreni were rescinded. The Respondent contend that the said plea is by way of an afterthought inasmuch as dividend had been paid to Indreni and TDS on the amount of dividend was deposited the State Bank of India after 9.8.199021. The said suits are still pending22. Indisputably, Respondent Nos.1 and 12 herein took inspection of the Registers of Members and other documents on 10.12.1996 and the relevant extracts were taken and notarised23. An Annual General Meeting was allegedly held on 20.12.1990 wherein except for appointment of auditors all other resolutions e.g. seeking appointment of Directors in favour of Appellant No.1, his wife (Appellant No.2) and his group were rejected. In the said meeting the share holdings said to have been acquired by Indreni i.e. 9415 shares was not taken into account and the voting rights of the Appellants were kept confined to 66 shares. It is also not in dispute that prior to the said meeting, Appellant No.1 lodged a First Information Report apprehending trouble in the said meeting24. Respondent No.1 filed an application under Sections 397 and 398 before the Gujarat High Court on or about 4th March 1991 wherein she initially prayed for the following reliefs:(A-i) Declaration that she is allottee of 8000 equity shares of respondent No.6 company(A-ii) Direction to issue share certificates immediately to her of these 8000 shares(B) Declaration that issue and allotment of 3000 shares in excess of 6475 shares to respondent No.1 (present Appellant No.1) or nominees of respondent No.1 to 5 (present Appellant No.1 to 5) is null and void ab-initio(C) Declare that she is sole heir of Late F.P.G and as such she is entitled to be in majority and control of respondent No.6 company(D) Declare respondent No.1, 2 (present Appellant No.1 & 2) 9, 10 and 11 (present Respondent No.9, 10, 11) have ceased to be directors in respondent No.6 company(E) Restrain by injunction respondent No.1, 2 (present Appellant No.1 & 2) 9, 10 & 11 (present Respondent No.9, 10, 11) from acting as director, officer of respondent No.6 company(F) Declare any act deed or thing done after A.G.M. of 20-12-1990 by respondent No.1, 2 (present Appellant No.1 & 2) 9, 10 & 11 (present Respondent No.9, 10, 11) as null and void(G) Declarations in regard to resolutions passed at the F.G.M. dated 14-1-1991(I) Pending Admission respondent No.1 & 2 (present Appellant No. 1 & 2) be directed to produce before this Honble Court or receiver all documents, papers, etc(J) Pending admission interim injunction against respondent No.1, 2 (present Appellant No.1 & 2) 9, 10 & 11 (present Respondent No.9, 10, 11) from acting as directors or officers of the company(K) Ad-interim reliefs in terms of para H, I & J above25. However, the said reliefs were subsequently amended and the following additional reliefs were also prayed forA-1. That this Honble Court be pleased to declare that all allotments of shares in Respondent No.6 company made beyond the original paid up capital consisting of 425 equity shares as existing on 23rd March 1988 are null and void and illegal and of no legal effect whatsoever and be pleased to set them aside;A-2 In the alternative to prayer- A-1 and in any event, this Honble Court be pleased to declare that the allotment of 6475 equity shares to Respondent Nos.1 to 5 and/or their nominees or to the members of their nominee or to the members of their family is subject to the simultaneous allotment of 8000 equity shares to petitioner no.1 500 equity shares to Smt. Mrunalinidevi Paur, 25 equity shares to Smt. Shubhangini Devi Gaekwad and that the allotment of any further shares including the said 3000 shares to Respondent No.4 and 5 is null and void and illegal and be pleased to set them asideA-3. In the event that this Honble Court holds that the allotment of 6475 shares to Respondent Nos.1 to 5 and of 3000 shares to Respondent Nos.4 and 5 is valid, this Honble Court be pleased to declare that the said 9475 shares were transferred to M/s Indrani Holdings Pvt. Ltd. and shall be offered and transferred by Respondent No.6 to the shareholders holding pro rata on the basis of the original shareholding of 425 equity sharesA-4 That this Honble Court be pleased to direct Respondent No.6 by an order of mandatory injunction to forthwith transmit 300 equity share registered in the name of the Fatehsinhrao Gaekwad as the then trustee of the Jaysinhrao Ghorpada Trust in favour of the present trustees. Petitioner No.1 and Smt. Mrunalidevi Paur;A-5. That this Honble Court be pleased to transfer (1) Special Civil Suit No.675 of 1990 pending before the Court of the Civil Judge (Senior Division) at Baroda (ii) Special Civil Suit No.305 of 1990 pending before the Court of the Civil Judge, Senior Division, at Rajkot (iii) Special Civil Suit No. 867 of 1990 pending - before the Court of the Civil Judge (Senior Division) Baroda, at Baroda (iv) Special Civil Suit No.872 of 1990 pending before the Court of the Civil Judge (Senior Division) at Baroda and (v) Special Civil Suit No.63 of 1991 pending before the Court of the Civil Judge Senior Division (Surat) at Surat, to the file of this Honble Court for hearing and disposal along with the present company petition;A-6. In the alternative to prayer A-5, this Honble Court be pleased to stay all interim or ad interim orders passed in the suits mentioned in prayer A-5 above;26. Sections 397-398 of the Companies Act were amended in 1990 in terms whereof the jurisdiction of the High Court in that behalf vested in the Company Law Board pursuant whereto the Respondent No.12 herein filed a purported application under the said provisions before the Company Law Board, Special Bench, New Delhi which was marked as Company Petition No.7 of 1992 on the ground of alleged continued mis-management of the Company and oppression. Allegedly, with a view to avoid simultaneous proceeding before two forums Respondent No.1 herein sought permission before the Gujarat High Court to withdraw the proceedings being C.P. No.50 of 1991 but the said request was opposed by the Appellants herein and was ultimately rejected by the High Court by an order dated 21.4.1992. An appeal there against was preferred before the Division Bench which was marked as 22 of 1992. The Appellants, on the other hand, sought stay of the proceedings before the Company Law Board whereupon an order was passed appointing Mr. Justice C.T. Dighe as an independent Chairman Mr. Ranjitsinh Gaekwad, Respondent No.4 herein was also appointed as a Director of GIC and the proceedings were stayed. Against the said order an appeal was preferred by Respondent No.12 herein before a Division Bench of the Gujarat High Court which was marked as Appeal No.20 of 1992 wherein the following interim order was passedRule Returnable on 19.1.1993 Ad-interim injunction restraining the company from raising its share capital, confirmed or undertake sale or purchase and/or mortgage fixed assets/investments of the Company by way of its shares in its holding or subsidiary company, start new business and decide the matters relating to policy decisions of material hearing without placing the agenda to that effect before the Board of Directors and without holding a meeting presided over by an independent Chairman appointed by the Company Law Board by its order dated 28th September, 199227. A question as regard the efficacy of simultaneous proceedings one before the High Court and another before the Company Law Board arose for consideration and by an order 9.3.1993 the Division Bench directed that in view of the nature of controversy it would be in the interest of the parties if the matter was finally heard and disposed of. The Appellants herein allegedly took a stand that if the said petition under Section 397 was heard on merits and disposed of expeditiously they would have no objection to the matter being heard either before the Company Law Board or before the learned Company Judge. Upon obtaining liberty from the Division Bench, the matter was mentioned before the learned Company Judge enquiring as to whether it can be disposed of expeditiously whereupon a schedule of hearing was worked out. Respondent Nos.12 and 13 herein were also added as parties in the said proceedings. The affidavits filed by the parties in all the proceedings were permitted to be brought on records and they were further permitted to file replies and/or rejoinders thereto28. The learned Company Judge disposed of the matters on the basis of said affidavitsJUDGMENT OF THE SINGLE JUDGE:29. N.J. Pandya, J by reason of his judgment dated 17.12.1994 dismissed the said Company Petition opining:(i) Allotment of 6475 shares having been admitted, no dispute could be raised as regard thereto. Further allotment of 3000 shares was in terms of the resolution adopted by the Board Meeting which was preceded by the offer of shares to others. Such allotment was made in terms of the decision of the Managing Committee which was authorized therefor by the Board of Directors. No time was specified for the Managing Committee to take appropriate decision in that regard. FRG renounced his shares and 3000 shares out of 8000 shares which were to be allotted to the appellants was also valid(ii) As regard the transfer of 9415 shares by the Appellants in favour of Indreni lifting the corporate veil thereof, the learned Judge held that the shareholders of Indreni being the Appellants only; any transfer made in its favour did not affect the company. Assuming such transfer was bad in law, the voting rights in relation thereto continued to remain vested with the transferors(iii) In a petition under Sections 397 and 398 of the Companies Act, the Court is concerned with the question as to whether the control of the company slipped from one party to the other and as the Appellants, in any event, continued to form majority and, thus, any transfer made in favour of Indreni did not amount to oppression(iv) Shifting of registered office from Baroda to Bombay although was questionable, no relief was granted on the ground that the same would amount to putting the clock back and would invalidate the entire AGM and subsequent events which would not be in public interest and furthermore would result in unnecessary expenditure to the parties(v) Shantadevi did not have a right to 8000 shares by inheritance. An adhoc allotment of shares was merely an invitation which did not culminate in a right and, thus, no case could have been built thereupon(vi) On the question of mismanagement, it was opined there was hardly any mismanagement and only an apprehension that the change in control may amount to mismanagement would not be acts of mismanagement30. Three appeals were filed against the said judgment before the Division Bench of the said High Court which came to be allowed by reason of the impugned judgmentJUDGMENT OF THE DIVISION BENCH31. The Division Bench, on the other hand, held that the allotment of both 6475 and 3000 shares was invalid. As far as 6475 shares are concerned, it was held that the allotment was solely motivated by self-interest and the minutes confirming such allotment were not acceptable. As far as 3000 shares are concerned, the Division Bench did not accept the authenticity of the letter by the Company Secretary of FRG renouncing the shares. Transfer of 9415 shares to Indreni was held to be invalid as no transfer notice was given to the company as required in terms of Article 8 of the Articles of Association. As the transfer was duly recorded, to undo any such transfer, a resolution by the Board of Directors of Indreni would be required. In the absence of any such resolution the transfer being complete, only Indreni could have transferred the shares back to the Appellants33. The reliefs granted to the Respondents by the Division Bench are as under:1. It is hereby declared and ordered that all the allotments of shares from the additional share capital increased pursuant to the resolution of the Extra-ordinary General Meeting held on 17.12.1987 and the resolution of the Board of Directors dated 8.1.1988 and the decisions for such allotments, of the Managing Committee be treated as invalid and ineffective for all purposes and the shareholdings of all the members of the respondent No.6 company hereby stand restored to the original 425 shares held by the members ignoring such subsequent allotments. The Register of members and other records of the company will stand rectified accordingly2. The Registered Office of the respondent No.6 company is hereby declared to be continuing at the same place i.e. Indumati Mahal at Baroda, irrespective of the resolution to shift it to Surat and the respondent Nos.1 and 2 are directed to forthwith restore the entire record of the company to its Registered Office at Baroda3. All the Directors or purported Directors of the respondent No.6 company stand removed forthwith. They will from today, not deal with the affairs of the company in any manner4. An Extra-ordinary General Meeting of the shareholders of the company will be convened on 14th October, 2000 at 11.00 A.M. at the Registered Office of the Company at Baroda, for appointing Directors of the Company on the basis of the existing share-holding of 425 shares of the members of the company, in accordance with the Article of Association5. The aforesaid meeting scheduled to be held on 14th October, 2000 will be conducted under the Chairmanship of the Additional Registrar of the High Court Shri V.B. Gandhi. All the shareholders of 425 shares including the petitioner No.1 as the sole hair of the deceased Shrimant Fathesinhrao P. Gaekwad in respect of the shares which stood in his name in the register of the members of the company at the time of his demise out of the said 425 shares in respect of which he had voting rights, will be entitled to vote by themselves or through their proxies at the said meeting for appointing the Directors of the Company. No outsider will be allowed to remain present at the meeting except the Additional Registrar who will Chair and conduct the meeting with his official assistants. The Additional Registrar will be assisted by a Section Officer of the High Court of his choice in the said work6. All the share-holders who are parties to the present proceedings are hereby put to notice about the date of the said Extra-ordinary General Meeting to be held on 14.10.2000 at 11.00 AM at the Registered Office of the respondent No.6 company at Indumati Mahal, Baroda. The Additional Registrar will, however, get published the notice of the meeting in one English daily and one Gujarati daily having circulation in the area. The Additional Registrar will also immediately issue individual notices of the said meeting to the share-holders. The Additional Registrar is authorized to seek assistance for conducting the meeting from all or any of the parties to these proceedings and/or the officials of the company who shall be bound to assist him in that regard. No adjournment motion will be entertained at the said meeting7. The Additional Registrar will on completion of the said meeting prepare and sign the minutes of the meeting recording its outcome and declare in writing the names of persons who are appointed by the share-holders as the Directors of the respondent No.6 company at the said meeting, and thereupon such directors shall assume the management of the company on such declaration being made8. The remuneration of the Additional Registrar is fixed at Rs.10,000/- and the remuneration of the Section Officer will be Rs.3,000/- for the said purpose. The respondent No.6 permitted to withdraw the said amount and also a further amount towards the expenses for publishing notice etc. totaling Rs.30,000/- from its Banks for the purpose of depositing it in the registry. The learned Counsel for the respondent No.6 company states that the respondent No.6 will deposit the amount of Rs.30,000/- in the Registry of this Court within 15 days9. The learned Counsel for the respondent No.6 Company has agreed has agreed to supply the names and present addresses of all the share-holders of the 425 shares of the Company, to the Additional Registrar on or before 19th August, 2000.

Reasoning: 41. By reason of Section 88 of the Indian Trusts Act, a person bound in fiduciary character is required to protect the interests of other persons but the heart and soul thereof is that as between two persons one is bound to protect the interest of the other and if the former availing of that relationship makes a pecuniary gain for himself; Section 88 would be attracted. What is sought to be prevented by a person holding such fiduciary benefit is unjust enrichment or unjust benefit derived from another which is against conscience that he should keep. When a person makes a pecuniary gain by reason of a transaction, the cestui qui trust created thereunder must be restored back51. A distinction, thus, has been carved out as regards the fiduciary duty of the directors with regard to the property and funds of the company as contra-distinguished from the duty of directors to current shareholders as sellers of their shares. In case of conflict between two interests, the companys interest must be protected. The directors, however, will have a fiduciary relation if they have taken unto themselves the burden of giving advice to current shareholders51. A distinction, thus, has been carved out as regards the fiduciary duty of the directors with regard to the property and funds of the company as contra-distinguished from the duty of directors to current shareholders as sellers of their shares. In case of conflict between two interests, the companys interest must be protected. The directors, however, will have a fiduciary relation if they have taken unto themselves the burden of giving advice to current shareholders80. The law which emerges from the discussions made hereinbefore is that the directors do not have any fiduciary duty to advice shareholders as to when and in what manner they should enter with the transactions with the company including acceptance of offer of additional shares. Such a fiduciary duty would arise inter alia in exceptional situations when the directors take upon themselves the task of advising the shareholders who may be his family members or when a transaction of purchase or sale is entered into by and between the director and the shareholders wherein the former taking undue benefit or having ill or improper or ulterior motive or malafide act solely to make pecuniary benefit and gain for himself and to the detriment of such shareholders. If a general fiduciary duty of a director vis-a-vis shareholders is laid down the same would lead the directors to the risk of multiple legal actions by dissenting minority shareholders83. In this case no transaction took place between the parties, and thus, the ratio of Krishna Mohan (supra) is not applicable to the fact of the present case. In view of our findings that having regard to the nature of transactions as the Appellant No.1 did not have any fiduciary duty towards the contesting Respondents, the question of invoking the provisions of Section 111 of the Evidence Act does not arise in the instant case99. Furthermore, taking a view of the admitted unequivocal stand taken by Respondent No.1 as also by Respondent No.12 in Company Petition No. 7 of 1992, the High Court was not correct in holding that the party should be relegated back to the same position as if no additional shares other than 425 shares were issued and in that view of the matter the reliefs granted by the Division Bench appear to be self-contradictory and inconsistent with each other. If the only relief to which the Respondent Nos. 1, 12 and 13 became entitled to that all additional shares over and above 425 original shares should be directed to be cancelled, the question of Respondent No. 1s entitlement to further 8000 shares from the additional 15000 shares would not arise. Her claim in this behalf is not only wholly inconsistent but also self-destructive100. It is difficult to believe that the contesting respondents herein were not aware of the decision of the Board of Directors to broad-base the company and allotment of 8000 shares in favour of FRG out of the same117. It is, therefore, clear that the dispute was raised despite full knowledge about allotment of shares by different persons only after the Respondent No. 12 got 1500 shares of Alukik allotted in her name as a result whereof the suit No. 675 of 1990 was instituted125. No sufficient material has been brought on records to satisfy us that the minutes of the said Board meeting dated 13.2.1988 was a forged and fabricated one. However, it is not disputed that no offer was received upto 10th March, 1988. The stand of the Appellants herein is that the said date was later on extended. However, on 21.3.1988 6475 shares were allotted in terms of the said Resolution to Appellant No.1 herein, 8000 shares were allotted to FRG, 500 shares to Mrs. Mrunalini Devi Puar and 25 shares to Mrs. Shubhangini Raje. Furthermore, it was an adhoc allotment and not a confirmed one139. In view of the fact that the presence of FRG in the decision making process to broad-base the company, the authority of FRG as regards control of the company had never been disputed and his presence in one of the Board meetings, the plea of issuance of additional shares has sufficiently been established. A decision to which FRG is a party can only give rise to a question of oppression on his part and no one else. In any event, such a case has never been made out that FRG was guilty of commission of any acts of oppression or mismanagement had been committed while he was the chairman of the company140. We are, therefore, of the opinion that the Respondent No.1 failed to substantiate the charge of oppression on the ground of issuance of 6475 shares in favour the Appellants152. The Division Bench of the High Court treated the allotment to be a confirmed one purported to be relating to Regulation 28 of the Table A of the Companies Act. The said provision has no application in the facts and circumstances of this case158. The Appellants herein have utterly failed to prove that there has been any renunciation of 8000 shares by Fatehsinh Gaekwad or any resolution was taken in this behalf of the Board. We have grave doubt about the authenticity of the letter of the Company Secretary of FRG renouncing his shares. Even allotment of 500 shares in favour of Respondent No. 12 out of aid 8000 shares is invalid. In that view of the matter, the contentions of the Appellant No. 1 to the effect that his children, Pratapsinh S. Gaekwad and Priyadarshiniraje S. Gaekwad applied for further 3000 shares through him and in view of the availability of shares, the Board of the Company decided to issue and allotted the said 3000 shares to them cannot be accepted. It also does not appear that the Board of Directors or the Management Committee took any resolution to allot shares to allot shares to the other members out of the said 8000 shares159. It is also difficult to accept the efforts had been made by the Appellant No.1 to find out if any other member would like to offer subscription of shares of the company as alleged by him and that efforts had also been made to find out subscribers for those shares160. We, therefore, are of the opinion that the transactions relating to issue of 3000 additional shares in the names of the Appellant Nos. 3 to 5 and 500 shares to the Respondent No. 12 out of the 8000 shares originally allotted to FRG are bad in law172. It is now well-settled that only one pre-emptive offer is to be made which is otherwise to be accepted or not at all. The existing shareholders are not entitled to be given further pre-emptive rights in respect of those unaccepted shares. Even such a right can be waived or modified174. It has further to be borne in mind that a pre-emptive right is granted in favour of a member of a private company so that his right of control is not taken away. Exercise of such pre-emptive rights is particularly needed in relation to those private companies which are essentially incorporated partnerships. (See Grower and Daviss Principles of Modern Company Law Seventh Edition page 635)175. As the notice of transfer itself was rescinded, we are of the view that Indrani was not required to transfer the said shares back to the Appellants. In any event, the title in relation to the aforementioned shares is a matter between the Appellants and the Indreni and the Respondents herein cannot have any say therein176. For the foregoing reasons, we are of the opinion that the Division Bench of the High Court committed a serious error in holding that the transfer by the Appellants in favour of the said Indreni being bad in law, the member of the company were entitled to allotment thereof on pro-rata basis181. Oppression complained of, thus, must relate to the manner in which the affairs of the company are being conducted and the conduct complained of must be such as to oppress the minority members. By reason of such acts of oppression, it must be shown that the majority members obtained a predominant voting power in the conduct of the companys affairs182. The jurisdiction of the Court to grant appropriate relief under Section 397 of the Companies Act indisputably is of wide amplitude. It is also beyond any controversy that the court while exercising its discretion is not bound by the terms contained in Section 402 of the Companies Act if in a particular fact situation a further relief or reliefs, as the court may seem fit and proper, is warranted (See Bennet Coleman & Co. Vs. Union of India and others (1977) 47 Comp. Cases 92) and Syed Mahomed Ali vs. R. Sundramurthy and others (AIR 1958 Madras 587)183. But the same would not mean that Section 397 provides for a remedy for every act of omission or commission on the part of the Board of Directors. Reliefs must be granted having regard to the exigencies of the situation and the court must arrive at a conclusion upon analyzing the materials brought on records that the affairs of the company were such that it would be just and equitable to order winding up thereof and that the majority acting through the Board of Directors by reason of abusing their dominant position had oppressed the minority shareholders. The conduct, thus, complained of must be such so as to oppress minority of the members including the petitioners vis-a-vis the shareholders which a fortiorari must be an act of the majority. Furthermore, the fact situation obtaining in the case must enable the court to invoke just and equitable rules even if a case has been made out for winding up for passing an order of winding of the company but such winding up order would be unfair to the minority members184. The interest of the company vis-a-vis the shareholders must be uppermost in the mind of the court while granting a relief under the aforementioned provisions of the Companies Act, 1956185. Mala fide, improper motive and similar other allegations, it is trite, must be pleaded and proved as envisaged in the Code of Civil Procedure. Acts of mala fide are required to be pleaded with full particulars so as to obtain an appropriate relief186. The remedy under Section 397 of the Companies Act is not an ordinary one. The acts of oppression must be harsh and wrongful. An isolated incident may not be enough for grant of relief and continuous course of oppressive conduct on the part of the majority shareholders is, thus, necessary to be proved. The acts complained of may either be designed to secure pecuniary advantage to the detriment of the oppressors or wrongful usurpation of authority188. It has to be borne in mind that when a complaint is made as regard violation of statutory or contractual right, the shareholder may initiate a proceeding in a civil court but a proceeding under Section 397 of the Act would maintainable only when an extraordinary situation is brought to the notice of the court keeping in view of the wide and far-reaching power of the court in relation to the affairs of the company. In this situation, it is necessary that the alleged illegality in the conduct of the majority shareholders is pleaded and proved with sufficient clarity and precision. If the pleadings and/ or the evidence adduced in the proceedings remains unsatisfactory to arrive at a definite conclusion of oppression or mis-management, the petition must be rejected198. The Court in an application under Sections 397 and 398 may also look to the conduct of the parties. While enunciating the doctrine of prejudice and unfairness borne in Section 459 of the English Companies Act, the Court stressed the existence of prejudice to the minority which is unfair and not just prejudice per se199. The Court may also refuse to grant relief where the petitioner does not come to court with clean hands which may lead to a conclusion that the harm inflicted upon him was not unfair and that the relief granted should be restricted. (See200. Furthermore, when the petitioners have consented to and even benefited from the company being run in a way which would normally be regarded as unfairly prejudicial to their interests or they might have shown no interest in pursuing their legitimate interest in being involved in the company. (See201. In a given case the Court despite, holding that no case of oppression has been made out may grant such relief-so as to do substantial justice between the parties202. It is now well-settled that a case for grant of relief under Sections 397 and 398 of the Company Act must be made out in the petition itself and the defects contained therein cannot be cured nor the lacuna filled up by other evidence oral or documentary. (See In Re Bengal Luxmi Cotton Mills Ltd. (1965 (35) CC 187)206. When a decision is taken on a business consideration, it is trite, the court should not ordinarily interfere. (See Maharashtra Power Development Corporation Ltd. vs. Dabhol Power Co. and others (2004) 3 Comp LJ 58 (Bom.)226. In view of the our findings aforementioned, it must be held that having regard to the admission made by the Respondent No.1 in her pleadings as regard broad-basing of the company and issuance of 6475 shares in favour of the Appellants herein and further in absence of any pleading of commission of fraud on the part of the Appellant No.1 herein, the High Court committed a manifest error in issuing the impugned directions227. Once the aforementioned facts are not in question, the company petitioner cannot take a stand different from that raised in her petition simply on the ground that other and further reliefs were claimed by amending the reliefs portion. Reliefs could be granted by the court had the material facts necessary to prove her case been pleaded and proved. In absence of any pleading, no evidence would be admissible and the court as is well-known ordinarily would not grant any relief which has not been pleaded229. The Court, however, has made a clear distinction between a family company, a private company and public limited company. The true character of the company, the business realities of the situation should not be confined to a narrow legalistic view. (See Needle Industries (supra)230. It is now well-known that principles of quasi-partnership is not foreign to the concept of Companies Act. For the purpose of grant of relief the principles of partnership had been applied even in a public limited company. (SeeLoch and another vs. John Blackwood Ltd., 1924 AC235. The upshot of our aforementioned discussions is:(i) The Appellant No. 1 had no fiduciary duty to inform the Respondent Nos. 1, 12 and 13 herein as regard the benefit or otherwise of opting for allotment of shares(ii) The Respondent No. 1 herein in her company petition having admitted the factum of broad-basing of the company by issuance of 15000 additional equity shares and allotment of 6475 shares in favour of the Appellants herein cannot now be permitted to turn around and raise the correctness or validity thereof. However, allotment of 3000 shares in favour of the Appellants and 500 shares in favour of the Respondent No. 12 purported to be out of 8000 shares allotted to FRG are bad in law(iii) The Respondent No. 1 herein had not been able to prove any act of oppression as against the Appellant No. 1(iv) The claim of the Respondent No. 1 as regards declaration of her title and/or allotment of 8000 shares is not tenable in law. The alleged right of the Respondent No. 1 to claim title over the said shares as a class 1 heir of Fatehsinh Gaekwad cannot be determined in an application filed under Sections 397 and 398 of the Companies Act and in particular having regard to the fact that the said question is pending adjudication in a duly instituted civil suit