Dankha Devi Agarwal (Dead) Through Lrs vs Tara Properties Pvt. Limited & Ors

Since the two appeals arise out of the same set of facts between the same parties, they have been taken up together for hearing and disposal and are being disposed of by this common judgment.

Tara Properties Private Limited (hereinafter referred to as 'the Company') was incorporated on 28th December, 1962, as a family company with Tara Chand Agarwal (since deceased), Dankha Devi Agarwal, his wife (since deceased), their elder son, Bhagirath Agarwal and younger son Chandra Prakash Agarwal. Each of them was allotted 10 shares each in the newly-formed company. On 2nd March, 1963 Dankha Devi Agarwal granted a lease of the land at 13, Camac Street, Calcutta, to the Company and in lieu of premium of Rs.3 lakhs, 3000 shares of the Company were allotted in favour of Dankha Devi Agarwal. By virtue of such allotment, Dankha Devi Agarwal came to hold 3010 shares and the rest continued to hold 10 shares each. All the share holders were indicated as the first Directors of the Company. On account of transfer of shares by Dankha Devi Agarwal during her life time, the share holding pattern as on 28th June, 1977, was as follows:-

As will appear from the materials on record, Tara Chand Agarwal moved to New Delhi in 1978 along with his wife and younger son leaving the family company in the sole charge of his elder son Bhagirath Agarwal. Subsequently, the family returned to Calcutta and from a public notice issued by the Calcutta Municipal Corporation on 25th September, 1989, in the Calcutta Edition of the Daily Statesman, it came to light that the tax liability of the company in so far as the property leased to the company was concerned was to the tune of Rs.23,06,748/- which was outstanding. On coming to learn of the said outstanding dues, a meeting of the Directors of the company was convened by Tara Chand Agarwal where the agenda was for production of relevant records by Bhagirath Agarwal for the inspection of the other Directors. However, as the records were not produced by Bhagirath Agarwal on the plea that the same had been misplaced, Tara Chand Agarwal caused an investigation to be made by a Chartered Accountant from whose report it transpired that on or about 17th May, 1983 out of the share holding of 1660 shares held by Dankha Devi Agarwal, 1150 shares were purported to have been transferred by her to Bhagirath Agarwal and a further 500 shares were purported to have been transferred in favour of his wife. By the said process, Bhagirath Agarwal and his wife increased their share holding from 10 to 1410 and from 200 to 700 respectively while reducing the share holding of late Dankha Devi Agarwal from 1660 shares to only 10 shares. On discovery of the aforesaid facts and other irregularities alleged to have been committed by Bhagirath Agarwal, the Board of Directors decided to issue a balance of 1960 equity shares out of the authorized share capital which had remained unsubscribed at the meeting of the Board of Directors held on 20th October, 1989. The Company decided to allot 1500 shares out of the said 1960 equity shares to Tara Chand Agarwal and to allot the remaining 450 shares to his younger son, Chandra Prakash Agarwal.

On 24th October, 1989, a special notice was given for calling an extra-ordinary general meeting. A copy of the said notice was duly served on Bhagirath Agarwal, and a copy was also sent to the Registrar of Companies. Despite receipt of notice, Bhagirath Agarwal did not attend the meeting and the Board of Directors took a Resolution to remove both Bhagirath Agarwal and Smt. Leela Agarwal from the Directorship of the company. The decision of the Board of Directors was conveyed to the Registrar of Companies and the requisite forms were also deposited with him.

Bhagirath Agarwal filed a Company Petition No.290/1990 on 18th June, 1990, before the Calcutta High Court against the company, Tara Chand Agarwal, Smt. Dankha Devi Agarwal, Chandra Prakash Agarwal and others inter alia under Sections 397 and 399 of the Companies Act. The same was admitted and an order of status quo was passed by the learned Single Judge on 18th June, 1990 and an additional interim order was also passed to the effect that no Board meeting or any General Meeting were to be held. The matter was duly contested and ultimately on 20th March, 1992 the Company Application was disposed of by the learned Single Judge with a direction for settlement of all the family assets in three equal shares of Tara Chand Agarwal and Dankha Devi Agarwal, Bhagirath Agarwal and Chandra Prakash Agarwal. The said order was, however, stayed by the Division Bench on 15th July, 1993 in an appeal filed by Bhagirath Agarwal. Subsequently, in March 1995, Tara Chand Agarwal died. Subsequent to his death, on or about 28th July, 1995, the suit filed by Dankha Devi Agarwal was sought to be withdrawn,purportedly without the knowledge of Smt. Dankha Devi Agarwal.

On 2nd September, 1998 upon discovering that her suit had been dismissed as withdrawn, Smt. Dankha Devi Agarwal made an application for recalling of the orders dated 20th June, 1995 and 28th July, 1995 on the ground that she had not withdrawn her suit and that the application for withdrawal was based on her forged signatures obtained by Shri Bhagirath Agarwal. The said application was contested by Shri Bhaghirath Agarwal and was ultimately dismissed by the learned Single Judge on 4th August, 1999. An appeal preferred from the said order dated 4th August, 1999, was dismissed by the Division Bench on 13th September, 1999. In the first of the two appeals being heard by us, this Court granted leave to appeal to Smt Dankha Devi Agarwal against the aforesaid order of the Division Bench of the High Court dated 13th September, 1999. While the said appeal was pending in this Court, Smt. Dankha Devi Agarwal died in January, 2001.

Mr. Hansaria submitted that despite the unusual facts brought to notice of the learned Single Judge and the fraud perpetuated in withdrawal of the application for restoration of the suit, the learned Single Judge dismissed the application for revival of the suit and even the appeal filed by Smt. Dankha Devi Agarwal against the said order of the learned Single Judge was dismissed by the Division Bench at the ad- interim stage leaving her deprived of her assets. Mr. Hansasria submitted that the second of the two appeals before us, is an off-shoot of the facts relating to the first appeal and a decision therein will be dependent on the out-come of the first of the said two appeals. Mr. Hansaria submitted that under unavoidable circumstances Shri Tara Chand Agarwal had moved to Delhi along with his wife, Smt. Dankha Devi Agarwal and second son, Shri Chandra Prakash Agarwal, leaving the family business in the care of their elder son, Shri Bhagirath Agarwal but on coming to learn of the manner in which the affairs of the company were being managed by Shri Bhagirath Agarwal, Smt. Dankha Devi Agarwal, his own mother, was compelled to file a suit to undo the fraudulent activities of Shri Bhagirath Agarwal. Mr. Hansaria submitted further that the learned Single Judge of the Calcutta High Court decided Smt. Dankha Devi Agarwal's application for restoration of her suit in a completely injudicious manner and based his decision on a comparison of Smt. Dankha Devi Agarwal's signatures on the different documents in the case without taking into consideration the passage of time and the age of Smt. Dankha Devi Agarwal.

The defence set up by Shri Bhagirath Agarwal is one of denial of all the allegations made on behalf of the appellant. In fact, it is his specific case that Dankha Devi had no role to play in the events subsequent to the transfer of 1650 shares by her in his and his wife's favour. It was contended that the transfers had been effected by Dankha Devi Agarwal in favour of her elder son on her own volition as far back as in 1983-84 and returns were filed before the Registrar of Companies on 15th June, 1984 where such transfer of shares was recorded. Nothing was done in respect of the transfer of the said shares till 6th November, 1989, when Smt. Dankha Devi Agarwal allegedly filed the suit for cancellation of the transfer documents relating to the said 1650 shares. An interim order was passed in the suit restraining Shri Bhagirath Agarwal and the group represented by him from disposing of the said shares or exercising their right to vote on the basis thereof. It was urged that the subsequent steps taken for withdrawal of the suit after the death of her husband was also at the instance of Smt. Dankha Devi Agarwal who obviously did not wish to pursue the matter further. It was submitted that only upon being satisfied that Smt. Dankha Devi Agarwal did not wish to proceed with the suit was an order passed therein permitting her to withdraw the suit. Appearing for Shri Bhagirath Agarwal, Mr.R.F. Nariman, learned senior counsel, pointed out that an extra-ordinary general meeting had been convened on 5th September, 1998, as per the orders passed by the Calcutta High Court in which Smt. Dankha Devi Agarwal was brought in a wheel-chair. According to the report of the Chairman of the meeting appointed by the High Court, she had been completely reduced to a vegetable existence and did not respond to any question or realize what was happening around her. The Chairman expressed the opinion that although Dankha Devi Agarwal was in the meeting room, she did not have the slightest notion of what was going on there and she did not cast her vote in the meeting.

Aggrieved by the said Judgment and Order of the learned Single Judge, the appellant filed an appeal, being APOT No. 594 of 2001, and filed an application therein for appointment of Receiver and other reliefs, On 6th August, 2003, the Division Bench dismissed the appeal leaving the interim application, being ACO No. 19 of 2002, undecided. Civil Appeal No. 6535 of 2004 is directed against the said judgment and order of the Division Bench of the Calcutta High Court.

In such circumstances, we allow the appeal and set aside the order passed by the Division Bench of the High Court dated 13th September, 1999, dismissing the appeal against the order dated 4th August, 1999, passed by the learned Single Judge dismissing the application filed by Smt. Dankha Devi Agarwal for recalling the orders passed by the learned Single Judge dated 20th June, 1995 and 28th July, 1995. We also set aside the said order of the learned Single Judge dated 4th August, 1999 and direct the aforesaid application to be re- heard and decided afresh after taking into consideration the manner in which the change was obtained by Smt. Anjali Agarwal and the mentioning of the matter ex-parte for non- prosecution of the suit on a date when the matter was not listed for such purpose.

The aforesaid appeal, therefore, fails and is dismissed. Consequently, we are not convinced that any order is required to be passed as prayed for in the application filed on behalf of Shri Bhagirath Agarwal under Section 340, Code of Criminal Procedure being I.A.No. 10/2006 and the same is also dismissed.