Case: J.P. Srivastava &amp; Sons Pvt. Ltd.  Vs. M/S. Gwalior Sugar Co. Ltd.

3. The shares of the Company are basically held by two branches of the family of J.P. Srivastava J.K. Srivastava, who was originally the petitioner No.4, and H.K. Srivastava who was originally the respondent No.2, were the two sons of J.P. Srivastava. During the pendency of the proceedings before us, both J.K. Srivastava and H.K. Srivastava have died and are now represented by their respective heirs. In the case of J.K. Srivastava, his interest is now represented by his widow Mrs. Raj Mohini Srivastava and his only son Vijay Kumar Srivastava. As far as H.K. Srivastava is concerned, he is represented by is four children, Vikram, Hemlata, Vir and Radhika. The corporate shareholders in the Company are in turn also held by members of the Srivastava family. Mrs. Nini Srivastava, appellant No.3, the wife of Vijay Srivastava, was the third petitioner in the proceedings as originally filed. She was described as a petitioner for herself and as trustee for J.K. Srivastava Family Trust (referred hereafter as the Trust).4. The proceedings were initiated before the Company Law Board (CLB) on 1st July 1995. The pleadings were completed and the matter heard from time to time. On 22nd January 1996, CLB issued an order, the relevant extract of which readsview of the close relationship between the parties, we suggested to the counsel for both the sides that they should try to work out an amicable settlement between the parties. The counsel have undertaken to do so. The result of their efforts will be intimated to us on 20th February, 1996 at 2.30 p.m.Hearings were adjourned on 22.2.1996,, 4.3.96 and 15.3.96 when the CLB was informed that compromise talks were in progress. Ultimately on 7.5.96, the CLB passed thiswas agreed by the parties that the petitioners will sell their shares to the respondents for a value per share to be determined by a valuer appointed by us and the value will be binding on all the parties. The parties will approach jointly reputed valuers and suggest an acceptable name for our approval on 30/5/96 at 4.15 p.m.On 10.6.1996, with the consent of the parties, the CLB appointed M/s. Thakur Vaidyanathan Iyer as company chartered accountants, New Delhi to value the shares of the company. On 22.11.1996, the chartered accountants valued the shares. As the respondents had reservations about the value, the matter was re-heard by the valuer who reconsidered the submissions of the parties. Ultimately, the value of the equity shares was given by the valuer as Rs. 6340 per share. The valuation for a preference share of Rs. 100/- was fixed at per. The respondents objected to this valuation also. The contention of the respondents was that the other disputes relating to family properties in possession of the petitioners should be settled also. After various hearings the matter was fixed for hearing on 6.11.1998.7. On 3.11.1998, the respondent No.8, the Mrs. Radhika Srivastava, moved an application challenging the order dated 10.6.1996. In the application it was alleged that the respondent No. 8 had no knowledge of the compromise and that she had been kept in the dark about the settlement arrived at. She prayed for recall of the order dated 10.6.1996. It was also said that the calculation of 10% of the petitioners shareholding in the Company was made only with regard to the equity share capital of the company, whereas Section 399 sub-section (1) requires the petitioner to have 10% of the total issued share capital which would include preference shares and that the shareholding claimed by the petitioners did not amount to 10% of such total. It was contended that the appellants therefore did not hold the requisite 10 per cent of the issued share capital of the respondent No.1 company and therefore the petition under Section 397 and 398 was not maintainable and should be dismissed.8. The appellants filed a pre-notice reply on 5.11.1998 in which they stated that the petitioner No.3 (the appellant No.3 before us) had filed the petition on behalf of herself and as a trustee of the J.K. Srivastava Family Trust (referred to as the Trust) and that the Trust held 1029 preference shares. It was also alleged that the respondent No. 8 was fully aware of and had participated in, the proceedings, in which there had been 25 hearings over three and a half years.9. On 6th November, 1998, the matter was listed for orders to be passed by CLB, when, according to the appellants, the CLB directed the appellants to file the consent / authority if any given by the Trust to Mrs. Nini Srivastava to file the petition under Sections 397 and 398. On 9th November, 1998 the appellants brought on record an affidavit dated 9th June, 1995 executed by the trustees to the effect that they had granted consent to the appellant No.3 to file the petition, a resolution of the Trust dated 10th June, 1995 and an affidavit of Mr. V.K. Srivastava dated 12th June, 1995. The appellants also filed a detailed reply in which it was inter alia stated that the Trust held 1029 preference shares in the company, that Mrs. Nini Srivastava had been appointed as a trustee of the Trust on 24th August, 1994, that authority / consent to file the petition under Sections 397, 398 had been given by the trustees on 9.2.1995 and by Mr. V.K. Srivastava a co-trustee by his affidavit dated 12th June, 1995.10. The other respondents supported the respondent No. 8s application. In the counter affidavit filed on behalf of the Company, it was saidper the records of the Company as on date i.e. the shareholders register, 1029 Preference Shares stand registered in the name of Mr. V.K. Srivastava Trustee, J.K. Srivastava (Family) Trust and not in the name of Mrs. Nini Srivastava. The endorsement in the cause title against the name of Mrs. Nini Srivastava who is not all a Trustee is no compliance at all and the petition is liable to be dismissed as being not maintainable on the ground that it has been filed by the petitioners holding less than 1/10th of the issued share capital of the company i.e. 27.68 lakhs.The hearing in the matter was concluded by the CLB and judgment reserved two days after the last affidavit was filed. On 18th January,1989 the CLB passed an order rejecting the challenge by the respondent No. 8 to the consent order dated 10.6.1996. It revised the valuation and considered that a sum of 6000 per equity share would be an appropriate value and Rs. 100/- would be the appropriate value for the preference shares. However, the CLB upheld the contention of the respondent No. 8 that the application under Sections 397 and 398 was not maintainable on the ground that the petitioner did not hold the requisite 10 per cent shares. The CLB proceeded on the basis that the Trust held 1029 shares in the company but that it had not consented to the filing of the petition under Sections 397, 398 by Nini Srivastava. According to the CLB".. The only issue for examination is whether the Trust is a party to the proceedings or whether the Trustees have given their consent to file the petition and if so whether the same is legally valid". It answered this issue against the petitionersNo authority of the J.K. Srivastava Family Trust authorizing the 3rd Petitioner to represent the Trust nor any affidavit by her representing the Trust had been annexed to the petition;(2) since there was no averment to the effect that the petitioner had the consent of the Trustees to file the petition and since the consents documents were not enclosed with the petition, the requirement under Regulation 18 had not been complied with and that non-enclosing the consent document with the petition was fatal to the petition.(3) If the preference shares held by the Trust is not taken into consideration, then the total number of shares held by the petitioners would work out to about 7% of the subscribed capital and if the shares are included, then the percentage would go to 10.85%.(4) 515 preference shares of the trust had already vested in the one of the beneficiaries thus reducing the percentage of the petitioners share holding to less than 10% and;(5) relying upon Duli Chand vs. M/s. Mahabir Pershad Trilok Chand Charitable Trust, Delhi AIR 1984 Delhi 145 that Trustees cannot authorize one of them to initiate proceedings in the name of the trust.It therefore reached the conclusion that the shares held by the Trust cannot be taken into account for the purposes of the provisions of Section 399. Therefore, without passing any directions pursuant to its finding on the effect of the consent order, it dismissed the petition.13. Several appeals were preferred from this order under Section 10-F of the Act both by the appellants and the respondents. The learned Single Judge dismissed all the appeals holding that the petition was not maintainable because no consent of the trustees had been pleaded, that there was no compliance with Regulation 18, that the shares of the Trust had vested in the beneficiaries and that the trustees could not delegate their powers or authorize one of them to represent the Trust.14. During the pendency of the appeals, the respondents, according to the appellants, committed further acts of oppression in respect and mismanagement of the company. Consequently, a second petition was filed under Sections 397 and 398 of the Act by the appellants.15. A Letters Patent appeal was filed from the decision of the Single Judge before the Division Bench by the appellants. The Division Bench held that the filing of the consent along with application under Section 399(3) of the other share holders was a sine qua non to the initiation of proceedings under Sections 397 and 398 and that on the failure on the part of the appellants to file the alleged consents the application had been rightly dismissed. It was held that it was not necessary to determine the nature of the trust and whether the shares held by the Trust had devolved on any of the beneficiaries before the petitions under Sections 397 and 398 of the Companies Act had been filed. It was saidthe trust contained some other properties there is likelihood that the shares may not be divided.The Division Bench was also of the view that since the second application had been filed, the CLB should consider whether the shares of the trust should be reduced and the implications of Section 153 of the Act. The CLB was directed to decide the subsequent application on its merits ignoring the observations made by the CLB in its order dated 18.1.1999 as well as of the Single Judge and to decide the case on merits on the basis of the persons whose names were recorded in the register of share holders.

Reasoning:
29. Therefore although as a rule, trustees must execute their duties of their office jointly, this general principle is subject to the following exceptions when one trustee may act for all (1) where the Trust Deed allows the trusts to be executed by one or more or by majority of trustees (2) where there is express sanction or approval of the act by the co-trustees; (3) where the delegation of power is necessary; (4) where the beneficiaries competent to contract consent to the delegation; (5) where the delegation to a co-trustee is in the regular course of the business; (6) where the co-trustee merely gives effect to a decision taken by the trustees jointly.The conclusion is inescapable that the Trustees had expressly authorized Nini Srivastava to file the petition. Additionally, the affidavit of Vijay Srivastava, who is alleged to be the registered owner of the 1029 preference shares, clearly shows that he had expressly consented and authorized Nini Srivastava in his capacity as such trustee to file the proceedings. If the respondents had fairly and squarely raised the issue as to the petition not being consented by by Vijay Srivastava as the registered shareholder of the 1029 shares, it would have been open to the appellants to have relied on this affidavit and if necessary amended the petition. The power to allow such amendments has been expressly granted to the CLB under RegulationIt is true that criminal proceedings have been instituted by the respondents on the allegation that the stamp paper on which the affidavits have been affirmed were purchased subsequently. But we are not prepared to reject the documents as forged ones not only because the executants have hotly contested the allegations but also because there is no finding to that effect by any of the three courts below or by the criminal court. Indeed as matters now stand the criminal proceedings have been stayed by the High Court. Furthermore, Vijay Srivastava and Raj Mohinis continuous support is also apparent from the fact that both of them are parties to the appeal before us albeit in the capacity of heirs of Late J.K. Srivastava.The reasoning in this decision would no longer be apposite having regard to the change in the language in Section 399(3) and the shifting of the requirement from the Act to Regulation 18 of the Company Law Board Regulations 1991 (hereinafter refer to as the Regulation 18 also does not itself contain the requirement for filing the consent letters [(18) Documents to accompany the petition - (1) A petition shall be accompanied by documents as prescribed in Annexure III and shall be accompanied by an Index of Documents.] The requirement has been prescribed in Annexure III, which is referred to in Regulation 18. Serial No. 27 of Annexure III contains a list of several documents required to be annexed to petitions relating to the exercise of powers in connection with prevention of oppression or mismanagement under Sections 397, 398, 399(4), 400, 401, 402, 403, 404 and 405. The documents required to be annexed to such petition include where the petition is prescribed on behalf of members, the letter of consent given by them". Other documents required to be filed include documents or other evidence in support of the statement made in the petition, as are reasonably open to the petitioner (s)", as also "three spare copies of the petition". These requirements can hardly be said to be mandatory in the sense that non-compliance with any of them would ipso facto result in the dismissal of the petition. Apart from this, Regulation 18 itself is subject to the powers of CLB under Regulations 44 and 48.The finding of the CLB and the High Court to the effect that the petition of the appellant deserved to be rejected only because the letters of consent had not been annexed to the petition was therefore, incorrect. What the CLB and the High Court should have done was to have satisfied themselves that the consent had in fact been given prior to the filing of the petition. There is nothing either in the orders of CLB or the High Court which could even remotely be construed as a rejection of the affidavits, resolution, etc. filed by Nini Srivastava to show that prior consent had in fact been obtained. We may also note the unrebutted specific averment by the petitioners to the effect that V.K. Srivastava was personally present throughout the litigation.