"To remand the suit to the trial court would necessarily have the effect of keeping alive the strife between the parties and prolonging this long-drawn litigation by another round of legal battle in the trial court and thereafter in appeal. It is time, in our opinion, that we draw the final curtain and put an end to this long meandering course of litigation between the parties. If the passage of time and the laws of nature bring to an end the lives of men and women, it would perhaps be the demand of reason and dictate of prudence not to keep alive after so many years the strife and conflict started by the dead. To do so would in effect be defying the laws of nature and offering a futile resistance to the revages of time. If human life has a short span, it would be irrational to entertain a taller claim for disputes and conflicts which are a manifestation of human frailty. The courts should be loath to entertain a plea in a case like the present which would have the effect of condemning succeeding generations of families to spend major part of their lives in protracted litigation".
 150. In Ashwinkumar K. Patel v. Upendra ). Patel, , their Lordships of the Supreme Court held as follows (page 165) ;


Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001

"that the High Court should not ordinarily remand a case under Order 41, Rule 23 of the Civil Procedure Code to the lower court merely because it considered that the reasoning of the lower court in some respects was wrong. Such remand orders lead to unnecessary delays and cause prejudice to the parties to the case. When the material was available before the High Court, it should have itself decided the appeal one way or other. It could have considered the various aspects of the case mentioned in the order of the trial court and considered whether the order of trial court ought to be confirmed or reversed or modified. It could have easily considered the documents and affidavits and decided about the prima facie case on the material available."
 151. In Shri Bhagwan Sharma's case, , their Lordships of the Supreme Court held as follows (headnote) :


"The High Court is certainly entitled to go into the question as to whether the findings of fact recorded by the first appellate court which was the final court of fact were vitiated in the eye of law on account of non-consideration of admissible evidence of vital nature. But, after setting aside the findings of fact on that ground the court had either to remand the matter to the first appellate court for a rehearing of the first appeal and decision in accordance with law after taking into consideration the entire relevant evidence on the records, or in the alternative to decide the case finally in accordance with the provisions of Section 103(b). If in an appropriate case the High Court decides to follow the second course, it must hear the parties fully with reference to the entire evidence on the records relevant to the issue in question and this is possible if only a proper paper book is prepared for hearing of facts and notice is given to the parties. The grounds which may be available in support of a plea that the rinding of fact by the court below is vitiated in law does not by itself lead to the further conclusion that a contrary finding has to be finally arrived at on the disputed issue. On a reappraisal of the entire evidence the ultimate conclusion may go in favour of either party and it cannot be prejudged."
 152. In Sundra Naicka Vadiyar's case, , their Lordships of the Supreme Court held that (headnote) : "concurrent findings of fact--Reappre-ciation--Findings on possession by ignoring documents evidencing the compromise documents containing recitals of surrender of possession and other material evidence, such as dismissal of eviction proceedings between same parties in terms of compromise before the Revenue Court--Interference in second appeal justified".


153. In Dilbagrai Punjabi's case, , their Lordships of the Supreme Court observed that (headnote) : "the court is under a duty to examine the entire relevant evidence on record and if it refuses to consider important evidence having direct bearing on the disputed issue and the error which arises is of a magnitude that it gives birth to a substantial question of law, the High Court is fully authorised to set aside the finding".
 154. In Bhairab Chandra Nandan v. Ranadhir Chandra Datta , their Lordships of the Supreme Court held that even though formally an issue not framed but if parties went to trial and adduced evidence keeping that issue in mind and drew attention of the court in that regard, appeal need not be remanded for a finding on that question.
 155. In Thamma Ramachandra Rao v. Madras State [1956] ALT 24 (NRC), it is held that an appellate court is not bound to remand the case for trial of an issue on which no finding was recorded but is entitled to give its own decision, if the evidence on record is sufficient.
 156. I am satisfied that even with the scant evidence that is available on record in this case, whether admissible or inadmissible, the dispute can be adjudicated without remanding the matter for fresh disposal by the Board by verifying the xerox copies of the records by summoning the originals, more so in the light of the submission of the ninth petitioner that their group is satisfied with the direction given by the Board.


157. But, counsel for the respondents contended that if the court feels that the order of the Board is cryptic, it has to remand the matter. In support of his plea, he placed reliance on Shree Consultants and Services Pvt. Ltd. v. K. N. Sankaranarayanan [1995] 84 Comp Cas 473, wherein their Lordships of the Madras High Court held as follows (page 485) :


"We have carefully considered the submissions of learned counsel appearing on either side. A perusal of the memorandum of grounds of appeal filed in this court against the order of the Company Law Board also shows that the appellants before the learned single judge (respondents Nos. 1 and 2 before us) were equally aggrieved against the manner of disposal of the preliminary objection and contended that the Company Law Board ought not to have decided the issue in such a summary fashion and the laconic order passed without objective consideration or assigning any reasons therefor cannot be sustained. That apart, several factual issues such an discrepancies in the signatures found in the consenting letter, the varying numbers of such persons who subscribed their signature to the letter of consent are very serious as also vital questions of fact which deserve a proper and effective enquiry or trial at the hands of the Company Law Board. That apart, the locus standi or authority of Mr. C. P. Sodhani, to present the application in the absence of a resolution of the board of directors authorizing him to do so was also raised. We also find from the order of the Company Law Board challenged on appeal before the learned single judge that the Company Law Board has passed a cryptic order holding that after carefully considering the views of both counsel and the facts of the case they came to the conclusion that the consent given in annexure 2 meets the requirement of Section 399 and, therefore, the petition was maintainable. No reasons or judicious discussion or consideration of any of the contentions or the facts and circumstances of the case have been assigned or made in the order which involve serious consequences. In the background of such contentions and serious lapse arid omission on the part of the Company Law Board the learned single judge ought to have in our opinion, set aside the order of the Company Law Board and remitted the matter for fresh consideration of the Company Law Board instead of undertaking an adjudication of some of the legal issues which depend


consideration of the Company Law Board instead of undertaking an adjudication of some of the legal issues which depend very much on vital issue of facts."


158. I have already recorded the reasons for reappreciating the evidence on record. Hence, this contention is also rejected.
 Subsequent events :
 159. Counsel for the respondents nextly contended that the court must confine itself to the case as made out in the petition and the subsequent events, if any, brought to the notice of the court cannot be looked into. In support of his plea, he relied on a judgment of the Supreme Court in Sri Venkataramana Devaru v. State of Mysore, . In that case counsel for the appellants raised a new plea stating that the subject temple was originally founded for the benefit of five families of Gowd Saraswath Brahmins and it cannot be treated as a public institution by contending that it is purely a question of law. Rejecting the contention of counsel their Lordships of the Supreme Court held that we are unable to agree with the submission. (Page 263) : "The object of requiring a party to put forward his pleas in the pleadings is to enable the opposite party to controvert them and to adduce evidence in support of his case. And it would be neither legal nor just to refer to evidence adduced with reference to a matter, which was actually in issue and on the basis of that evidence, come to a finding on a matter which was not in issue and decide the rights of parties on the basis of that finding".
 160. I have no manner of doubt that the above judgment cannot be pressed into service by counsel for the simple reason that the issue was sought to be raised at the level of the apex court without there being any foundation in the pleadings and without adducing any evidence on that aspect. The facts of this case are altogether different. The subsequent events were brought to the notice of' the Board, before it has taken up the company petition for hearing.


161. He also relied on a judgment of the Calcutta High Court in Mohta Bros (P.) Ltd. v. Calcutta Landing and Shipping Company Ltd. [1970] 40 Comp Cas 119, wherein the Division Bench of the Calcutta High Court held that (headnote) : "when dealing with a petition for relief from oppression or mismanagement made under Sections 397 and 398 of the Companies Act, 1956, the court must confine itself to the case as made out in the petition and to the allegations made therein and the supporting affidavits and not to look at the other evidence with regard to events that might have happened subsequent to the petition".
 162. I am not inclined to agree with the reasoning given by the Calcutta High Court for the reason that the apex court in many a case held that the court is bound to take subsequent events into consideration even at the appellate stage as the proceedings being a continuous one and should mould the relief.
 163. In Pasupuleti Venkateswarlu v. Motor and General Traders, , Justice V. R. Krishna lyer speaking for the Full Bench, while rejecting the argument of counsel for the appellant that the High Court committed illegality in taking cognizance of subsequent events, disastrous as they proved to be, summarized the legal position as hereunder (p. 1410) :


"We feel the submissions devoid of substance. First about the jurisdiction and propriety vis-a-vis circumstances which come into being subsequent to the commencement of the proceedings. It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceedings. Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process. If a fact, arising after the lis has come to court and has a fundamental impact oh the right to relief or the manner of moulding it, is brought diligently to the notice of the Tribunal, it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. Equity justifies bending the rules of procedure, where no specific provision or fairplay is violated, with a view to promote substantial justice--subject, of course, to the absence of other disentitling factors or just circumstances. Nor can we contemplate any limitation on this power to take note of updated facts to confine it to the trial court. If the litigation pends, the power exists, absent other special circumstances repelling resort to that course in law or justice. Rulings on this point are legion, even as situations or applications of this equitable rule are myriad. We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the court can, and in many cases must, take cautious cognisance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed. On both occasions the High Court, in revision, correctly took this view. The later recovery of another accommodation by the landlord, during the pendency of the case, has as the High Court twice pointed out a material bearing on the right to evict, in view of the inhibition written into Section


pointed out a material bearing on the right to evict, in view of the inhibition written into Section 10(3)(iii) itself. We are not disposed to disturb this approach in law or finding of fact."


164. In fact, the Board itself in its order dated December 18, 1997, held that since now the matters relating to Section 397 or 398 of the Act are solely within the jurisdiction of the Company Law Board, we would like to settle this issue once for all in the following terms :
 "(a) Section 397 or 398 of the Act has to stand on its own on the basis of the allegations contained in the petition. Subsequent events brought on record alone, in case the main petition fails on merits, cannot entail a person to any relief. In case the allegations in the main petition are placed, then subsequent events may be taken into consideration by the board in moulding the suitable relief."
 165. From this it is seen that the Board did not close the doors for the ninth petitioner to raise subsequent events also during the course of the arguments in the main case. In fact the Board considered these two new issues that were brought to the notice of the Board in C. A. No, 65 of 1996 in the impugned orders. Hence, it is too late in the day to contend that subsequent events that have taken place after the filing of the petition cannot be taken into consideration, more so, when the subsequent events were brought to the notice of the Board even before the case was taken up for hearing i.e., when the petitioner is still at the preliminary stage of completing the formalities before taking up the petition for trial. Hence, the contention of counsel that subsequent events brought to the notice of the Board in C. A. No. 65 of 1997 cannot be looked into for moulding the relief has no legs to stand.
 Vague allegations :


Vague allegations :
 166. Learned counsel for the respondents strenuously contended that the allegations of oppression and mismanagement are very vague and the petitioners have not given full particulars of the acts alleged by them. Hence the company appeal is liable to be dismissed. In support of his contention, he placed reliance on a judgment of the Calcutta High Court in Mohta Bros. (P.) Ltd. 's case [1970] 40 Comp Cas 119, wherein it was held that (p. 128) : "vague and uncertain allegations of oppression and mismanagement although they may constitute grounds for suspicion, do not entitle a petitioner to ask the court to embark upon an investigation into the affairs of the company in the hope that, in consequence of such investigation, something will turn up which will enable the court to grant relief to the petitioner ..... and the petitioner must prove prima facie, at any rate, that on those facts, an investigation is called for".


167. In R. Khemka v. Deccan Enterprises (P.) Ltd.'s case [1998] 16 SCL 1 (AP) at para. 93 after considering the case law, a learned judge of this court observed that "it is now beyond controversy that in a petition under Sections 397 and 398, it is to be specifically pleaded and established by the party not only the existence of circumstances, warranting winding up of the company under the 'just and equitable' clause, but also it should be further established that winding up order if passed would act adverse to the interest of the shareholders. Further, when this clause is invoked, there must be material to show that it is just and equitable not only for the persons applying for winding up but also to the company and all its shareholders. Even in certain cases, violation of statutory provisions was held to be not oppressive act warranting interference under Section 402 of the Companies Act".
 168. In Sri Venkataramana Devaru's case, , the Supreme Court held that "the object of requiring a party to put forward his pleas in the pleading is to enable the opposite party to controvert them and to adduce evidence in support of his case and it would be neither legal nor just to refer to evidence adduced with reference to a matter which was actually in issue and on the basis of that evidence .....".


169. In S. Seetharaman v. Stick Fast Chemicals (P.) Ltd. [1998] 93 Comp Cas 507, the Madras High Court held that in a petition filed under Section 397 of the Companies Act, 1956, the petition should contain all material facts. In the case of fraud, mismanagement, oppression, etc., full and complete particulars must be alleged in the petition. Subsequent affidavits are not enough. The petitioner must plead all material facts necessary for granting the relief as prayed for.
 170. Countering the arguments of counsel for the respondents, counsel for the petitioners placed reliance on M. Harichandra Prasad v. Chitturi Krishna-murthy , wherein this court held as follows :
 "Pleading should receive a liberal construction. There may be many instances wherein the pleadings are incomplete, but during trial the parties place many materials before the court either directly touching the actual controversies between them or incidentally touching upon such questions, where the court could draw inferences and render justice. If a plea is not specifically made and yet it is covered by an issue by implication and the parties knew that the said plea was involved in the trial then the mere fact that the plea was not expressly taken in the pleadings would not necessarily disentitle a party from relying upon it if it is satisfactorily proved by evidence. That is how even by invoking its powers under Order VI, Rule 2 of the Civil Procedure Code the court will mould the relief taking the subsequent events as judicial notice."
 171. In Hari Singh v. Kanhaiya Lal, , the Supreme Court reversed the concurrent findings of the courts below on the ground of lack of details in pleadings. Their Lordships of the Supreme Court observed (p. 3330) : "it is not in dispute that there is pleading that the disputed premises was sublet.


Details if any can be supplemented through evidence. Mere lack of details.in the pleadings cannot be reason to set aside concurrent finding of facts".
 172. In Mir Niyamath All Khan v. Commercial and Industrial Bank Ltd., , a Division Bench of this court held that "normally the court will not grant the relief to the plaintiff on a case for which there was no foundation laid in the pleadings and which the defendant was not called upon to meet. But when the alternative case which the plaintiff could have made was admitted by the defendant either in his written statement or in his evidence and the parties adduced evidence relating to such an alternative claim, there would be nothing improper in giving the plaintiff a decree upon such alternative claim."
 173. In Kalka Prasad Ram Charan v. Harish Chandra, , the Allahabad High Court held that (headnote) : "even though no issue was framed on certain point by the court below when both parties adduced evidence relating to it, each party knows what its case is and avails of the opportunity of producing evidence on the point, the High Court can, in an appeal from the decision, record a finding on the point under Order 41, Rule 24 of the Civil Procedure Code".


174. I have seen the order of the Board, the evidence and the written arguments submitted by both the parties. I have no hesitation to hold that sufficient details of the allegations of oppression and mismanagement were given in the petition. The ninth petitioner not only deposed on those allegations but he was also subjected to cross-examination by counsel for the respondents. From the written arguments submitted by counsel for the respondents and the order of the Board it is seen that both counsel addressed arguments very elaborately and the Board recorded findings on some of the issues and reference was made to some other issues without giving a finding and certain other issues were not at all considered for reasons best known to it. Hence I hold that there is no vagueness in the allegations in the petition, at any rate, parties addressed arguments on all the issues knowing fully well the issues in controversy and in fact the Board recorded findings adverting to their arguments. To my mind the respondents are blowing hot and cold in the judicial proceedings. With regard to the findings of the Board that are in their favour they are trying to take advantage of it knowing fully well that the Board conducted the proceedings in a very shabby manner unknown to law and on the findings that are inconvenient to them they are raising all sorts of pleas. In the result, I do not find any substance in this contention.
 If the action of the board is illegal the same has to be questioned in a court of law and petition under Sections 397 and 398 of the Act is not an appropriate remedy :


175. Nextly, counsel for the respondents contended that if any of the actions of the board of directors is illegal or invalid, the appropriate remedy for the shareholders would be to question the validity of such action in a court of law, but a petition under Sections 397 and 398 of the Act is not an appropriate action for the purpose. In support of his contention learned counsel relied on a decision of the Delhi High Court reported in Suresh Kumar Sanghi's case [1983] 54 Comp Cas 235. His Lordship Justice Kripal as he then was, observed that (headnote) : "the powers of the court while deciding a petition under Section 397 or 398 of the Act, are very wide and in exercise of the powers under these sections, the court has further been given powers to pass orders in terms of Section 402 of the Act. However, no orders under Section 402 of the Act can be issued or relief granted under Section 397 or 398 of the Act unless the case can be brought by the petitioner within the ambit of Section 397 or 398 of the Act. His Lordships further held that relief under Section 398 of the Act can be obtained only if (1) the affairs of the company are being conducted in a manner prejudicial to public interest or the interests of the company, or (2) if there is a material change which has taken place in the management or control of the company in the manner set out in the said section, and that by reason of such change it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company. Section 397 of the Act would be applicable only in the case of oppression by the majority shareholders on the minority shareholders. Section 397 of the Act does not come into play in the case of wrongful acts being done by the management. That may be a


not come into play in the case of wrongful acts being done by the management. That may be a ground for winding up. One of the prerequisites of the applicability of Section 397 of the Act is that the complaint of oppression has to be by the minority shareholders. If an action of the directors is illegal or invalid then the company or the shareholders may take appropriate action in a court of law by challenging the validity of such an action, but a petition under Section 397 or Section 398 of the Act is not an appropriate remedy for the purpose. In order to constitute oppression within the meaning of Section 397 of the Act there must be continuous acts on the part of the majority shareholders, continuing up to the date of the petition showing that the affairs of the company were being conducted in a manner oppressive to some part of the members.


176. The conducting of affairs prejudicial to the interests of the company by the persons who are in the control or the management gives the court jurisdiction to pass appropriate orders to bring to an end the matter complained of. Neither Section 398 of the Act nor Section 402 of the Act provides that only such orders can be passed which will result in handing over the management of the company to the aggrieved persons. In granting relief under Section 398 and Section 402 of the Act not only is the interest of the company to be kept in view, but also other equitable considerations have to be taken into account". From the above, it is seen that while certain actions of the directors are illegal or invalid, the shareholders can question the validity of such an action in a court of law. But Section 397 of the Act comes into play when minority share-holders allege oppression by the majority shareholders and Section 398 of the Act comes into play when the affairs of the company are being conducted in a manner prejudicial to public interest and not in the interest of the company. To constitute oppression within the meaning of Section 397 of the Act, the acts must be continuous on the part of the majority shareholders and continuing up to the date of the petition. From the pleadings, it is seen that a series of instances, not only continuous acts of oppression, but also the acts of mismanagement were alleged. I have absolutely no quarrel with the proposition laid down in this case. But, I would like to see whether my investigation into the facts of the case satisfy the tests laid down in various cases referred to supra on acts of suppression.


177. To the same effect counsel cited another judgment of the Gujarat High Court in Sheth Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd. [1964] 34 Comp Cas 777. In that case a textile mill run by the company having entered into an adat agreement with a firm for supply of working capital for running the mill and to purchase yarn for the company on commission basis. The mill run by the company started incurring losses and the majority of the shareholders sold the mill both on the ground of losses incurred by the company and also on the ground that machinery of the mill became old and obsolete. After the sale was concluded, a minority of shareholders of the company applied to the court under Sections 397 and 398 of the Act alleging that the termination of the adat agreement and sale of the mill were oppressive acts, prejudicial to the interests of the company and claimed that the sale should be set aside. His Lordship Justice Bhagawati, as he then was, ruled "neither the termination of adat agreement nor sale of assets of the mill are prejudicial to the interests of the company and it could not be said to be a continuing wrong. Hence, a petition to set aside the sale under Sections 397 and 398 of the Act is not maintainable".
 178. In this case the minority shareholders complained against a solitary act of mismanagement, that too selling the mill as it is continuously incurring losses.


179. But in this case not only a series of acts of mismanagement but also acts of oppression were alleged and if the petitioners are able to prove them, this case will definitely attract the provisions of Sections 397, 398 and 402 of the Act. Hence any of the cases cited by him will not come in aid of his contention. Accordingly, this contention also has no legs to stand and is accordingly rejected.
 All the directors were not made party respondents :
 180. The next contention of counsel was that out of nine board of directors, only the managing director and joint managing director were impleaded and as the board has to be treated as an independent one and as all the decisions were taken by the board, apart from respondents Nos. 2 and 3 a petition under Sections 397 and 398 of the Act is not maintainable without impleading them as party respondents to the proceedings.
 181. This contention is answered by their Lordships of the Madras High Court in Shoe Specialities Ltd.'s case [1997] 90 Comp Cas 1 ; [1997] 1 Comp LJ 243, wherein they held as follows (page 22) :


"We are not hampered by such rigid technicalities of procedure and if the minority in a company complains of an oppression and discloses certain grounds of complaint in the petition which are made the basis for the relief, we would hold that the court should ordinarily investigate the charges. Such investigations may in certain cases, be necessary even to regulate the future conduct of the company for providing against recurrence of such abuses of power by the majority. We are, therefore, of opinion that notwithstanding the omission in the petition to pray for relief against the delinquent directors, an enquiry into the charges against them was proper within the scope of the petition. Sections 402 and 406 of the (Indian) Companies Act give ample jurisdiction to the court to dispose of the matter in the larger interests of the company."
 182. In Nalam Satya Prasada Rao v. Vinupamula Lakshmi Narasimha Sastry [1991] 70 Comp Cas 303, this court adverting to the preliminary objection of respondents Nos. 1 to 4 as to the maintainability of the company petition in view of the death of the first respondent during the pendency of the company petition having held that respondents Nos. 2 to 4 who are already on record represented the first respondent, observed as follows (page 310) :


"At any rate, the relief prayed for under Sections 397 and 398 of the Act is against the company as such and there can be no variation in the number of shares. Even assuming that the unmarried daughter in the first respondent is entitled to any shares, the estate of the deceased first respondent is amply represented by respondents Nos. 2 to 4 who are already on record, and hence I hold that the interests of the first respondent are amply safeguarded. As such, the decision of the Allahabad High Court in J. K. Investment Trust Ltd. v. Muir Mills Company Ltd. [1962] 32 Comp Cas 893, has no application because, the alleged acts of oppression and mismanagement are directed not merely against the first respondent but against respondents Nos. 2 to 4 also. Inasmuch as respondents Nos. 2 to 4 were already on record in the company petition, I hold that there can be no objection in continuing the proceedings against them. I, therefore, hold that this objection cannot be sustained."
 183. In Malleswara Finance and Investments Company (P.) Ltd.'s case [1995] 82 Comp Cas 836 ; [1995] 1 CLJ 1 (Mad), the question that fell for consideration before the Madras High Court was whether the order of the Company Law Board passed on an application filed by respondents Nos. 4 to 7, under Sections 397 and 398 of the Companies Act was violative of the principles of natural justice as the petitioner was not given an opportunity to present its case. Answering the said contention, a Division Bench of the Madras High Court held as follows (page 855) :


"In a proceeding under Sections 397 and 398 of the Companies Act, the only question to be decided is, whether the affairs of the company are being conducted in a manner prejudicial to the interest of the company, or in any manner prejudicial to its member, or whether there is any material change that has taken place in the management and control of the company, and whether such constitution has affected or (is) likely to affect the affairs of the company. When we read these two sections, it is clear that the Company Law Board has taken into consideration how the company has been managed. It is not the individual's right or the right of the individual/shareholder or creditor that is the subject matter of the litigation. The proceedings under Sections 397 and 398 are like a declaratory suit. It is for that reason, the Companies Act provides that any person who is not a party can get himself impleaded in the proceedings. Section 405 of the Companies Act says :
 'If the managing director or any other director, the managing agents, secretaries and treasurers or the manager, of a company, or any other person, who has not been impleaded as a respondent to any application, under Section 397 or 398 applies to be added as a respondent thereto, the Company Law Board shall, if it is satisfied that there is sufficient cause for doing so, direct that he may be added as a respondent accordingly.' A reading of the said section will make it clear that if sufficient cause is shown, any person who has not been impleaded as a respondent to any application under Section 397 or 398 can get himself impleaded, if he desires."


184. Further under Order 29, Rule 1 of the Civil Procedure Code, a company being a juristic entity it can sue and be sued in its own name. In United Bank of India v. Naresh Kumar [1997] 90 Comp Cas 329 ; AIR 1997 SC 3, the Supreme Court held as follows (page 333) :
 "It cannot be disputed that a company like the bank can sue and be sued in its own name. Under Order 6, Rule 14 of the Civil Procedure Code, a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company, Order 29, Rule 1 of the Civil Procedure Code, therefore, provides that in a suit by or against a corporation the secretary or any director or other principal officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6, Rule 14, together with Order 29, Rule 1 of the Code of Civil Procedure would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and de hors Order 29, Rule 1 as a company is a juristic entity, it can duly authorize any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6, Rule 14."


185. From the above it is seen that the first respondent-company having been incorporated under the provisions of the Companies Act and being the cor-porate body it can sue and be sued in its name and it can duly authorize any person to sign the plaint or written statement on its behalf and it should be regarded as sufficient compliance with the provisions of Order 6, Rule 14 of the Civil Procedure Code. Secondly, in any application filed under Sections 397 and 398 of the Act, the only question that falls for consideration is whether the affairs of the company are being conducted in a manner prejudicial to the public or the interests of the company itself or in a manner oppressive to the minority shareholders.
 186. Admittedly, in this case, the company, the juristic person having been incorporated under the provisions of the Act, is a juristic person and the same is represented by its secretary. In fact the managing director and the joint managing director who are responsible in conducting the affairs of the company, according to the petitioners, in bad faith were also impleaded as an abundant precaution. Hence the contention of learned counsel for the respondents that the company petition is not maintainable on the ground that all the board directors were not made parties to the proceedings has no legs to stand. Accordingly, this contention was also rejected.
 The procedure followed by the Board was not questioned in the appeal :


The procedure followed by the Board was not questioned in the appeal :
 187. Nextly, Mr. Raghavan contended that the petitioners did not raise any objection for the procedure followed by the Board even in the grounds of appeal and, therefore, this court is not justified in interfering with the order of the Board on the ground of procedural lapses ; at any rate the same cannot be a ground for interference by the appellate court. It is true that the petitioners did not question the procedure followed by the Board specifically. But at the same time, when it has come to the notice of the court that the orders suffer from serious infirmities, and the Board committed a manifest error which vitiated the entire proceedings before the Board and that being a pure question of law, the court is expected to take judicial notice and rectify the same to prevent miscarriage of justice. Even on the merits, I have no hesitation to hold that the findings recorded by the Board are perverse and contrary to the record. Hence, the order suffers from serious infirmities in not following the well established procedure in adjudicating the disputes apart from the fact that the findings recorded by the Board cannot be sustained in law. In fact, the respondents did not raise the objection with regard to maintainability of C. C. on the ground that all the directors were not made party respondents either before the Board or in the appeal filed by them in this court. Even then I permitted counsel to raise the issue and answered the same.
 188. I am fortified in my view by a judgment of the honourable Supreme Court in Kondiba Dagadu Kadam v. Savitribai Sopan Gujar , wherein their Lordships of the Supreme Court in para. 3 held as follows (p. 724) :


"3. After the amendment a second appeal can be filed only if a substantial question of law is involved in the case. The memorandum of appeal must precisely state the substantial question of law involved and the High Court is obliged to satisfy itself regarding the existence of such a question. If satisfied, the High Court has to formulate the substantial question of law involved in the case. The appeal is required to be heard on the question so formulated. However, the respondent at the time of the hearing of the appeal has a right to argue that the case in the court did not involve any substantial question of law. The proviso to the section acknowledges the powers of the High Court to hear the appeal on a substantial point of law, though not formulated by it with the object of ensuring that no injustice is done to the litigant where such a question was not formulated at the time of admission either by mistake or by inadvertence."
 189. Hence, this contention is also rejected.
 Whether one tenth of the shareholders should be there to continue the proceedings :
 190. Nextly, counsel tried to make a feeble attempt by contending that unless one tenth of the shareholders join the appeal, the same is not maintainable by pointing out that some of the petitioners withdrew from the petition. While counsel admits the fact that on the day when the application was filed, the petitioners in the petition were holding more than 11 per cent. shares, he contends that after withdrawal of the legal representatives of the first petitioner and the other two petitioners, the shares held by the petitioners fell short of 10 per cent. of the shares. But counsel himself conceded that there would not be any impediment for continuing the proceedings even if the shareholding of the petitioners is less than 10 per cent. of the shareholding of the company.


191. Be that as it may, this issue is covered by a judgment of the Supreme Court in Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao . In the above case, while considering the objections of the chairman of the company that, though the petitioner stated that he obtained consent of 80 shareholders for filing an application under Section 162(vi) of the old Act for winding up of the company, only 52 persons consented for filing of the applications and therefore the condition laid down in Section 153C(3)(a)(i) of the old Act is not complied with. Repelling the said contention their Lordships of the Supreme Court held (p. 95) : "that the validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to that effect in the statute, cease to be maintainable by reason of events subsequent to its presentation. Thus, where the applicant under Section 153C of the Act has obtained the consent of not less than one tenth of the members of the company and has presented the application, the withdrawal of consent by some of those members subsequent to the presentation of the application cannot affect either the right of the applicant to proceed with the application or the jurisdiction of the court to dispose of it on its . own merits."
 192. This contention was not pressed by counsel, though he raised the same initially. Accordingly this contention is also rejected.
 Issues in controversy :


Issues in controversy :
 193. Now coming to the controversy apart from seeking the relief of winding up of the company for its mismanagement, under Chapter VI, the minority shareholders are given the right to complain to the Board that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members provided they hold not less than one tenth of the total number of the shares and if the board is of the opinion that the affairs of the company are being conducted, as aforesaid. Under Section 402 without prejudice to the generality of the powers of the Board, the order to be passed under Section 397 or 398 of the Act may grant one or more reliefs mentioned in this section including the purchase of the shares or interests of any members of the company by other members thereof or by the company itself with a view to bringing to an end or prevent the matters complained of or apprehended. The other reliefs that can be granted under Section 402 of the Act are not being referred to, as the ninth petitioner is satisfied with the relief given by the Board, which is being opposed by the respondents.
 194. In the light of serious contest put forth by the respondents, it has to be seen whether the directions given by the Board can be sustained in law or not.
 195. Now I would proceed to examine whether the findings recorded by the Board on the alleged acts of oppression and mismanagement can be sustained in law. Even if the findings of the Board cannot be sustained whether the acts alleged by the minority shareholders against the majority shareholders can constitute an apprehension in the mind of a prudent person so as to enable the Board to exercise the powers vested in it. The issues in controversy are referred to seriatim.
 Merits of the case :
 Mismanagement :
 1. Closure of parcel offices :


Mismanagement :
 1. Closure of parcel offices :
 (a) Fabrication of the minutes of the board meeting dated August 7, 1992 :
 The case of the petitioners is that during the year 1992, respondents Nos. 2 and 3 closed as many as sixty parcel offices without the knowledge or sanction of the board of directors. The motive behind such closure is to release the lorries connected to these parcel offices and to dispose of them and pocket the sale proceeds by showing nominal price i.e., around the book value in the books of account. When the issue was raised by petitioner No. 9 at the board meeting held on March 3, 1993, the respondents not only fabricated the resolutions of the meeting of the board of directors dated August 7, 1992, to show that the closure of parcel offices was effected as per the resolution under item 12.2 i.e., under any other item with the permission of the chair and also replaced the minutes of the board of directors held on March 3, 1993, as if the board meeting was held on February 27, 1993.


196. The case of the company is that it is having about 300 parcel offices all over the country and that the board at its meeting held on August 7, 1992, under Item 12.2 i.e., under any other subject with the permission of the chairman the board has taken a decision to close down the uneconomic parcel offices as per the details furnished by the chairman with immediate effect for efficient running of the company and to reduce further losses from the branches in future. The board further resolved to authorise the chairman to effect the closure of uneconomic branches. Unfortunately though the issue was very much raised in the pleadings and the ninth petitioner spoke about the fabrication of the minutes of the meeting dated August 7, 1992, for reasons best known to the Board, it has given a clean chit by stating that "we are not in a position to doubt the genuineness of the resolution inasmuch as in the next board meeting held on September 29, 1992, which the petitioner attended, the minutes of the meeting held on August 7, 1992, were reportedly confirmed" without taking into consideration the explanation offered by the petitioner that generally such a resolution will be adopted without reading out the details of the resolutions adopted in the previous meeting, in his oral evidence. The fallacy of the reasoning is exploded from the replies given by the company to the letters of the petitioners stating that it was a managerial act, during day-to-day business. If the parcel offices were closed under a resolution of the board nothing prevented them from stating so while giving reply to the first petitioner, for the first time the respondents came up with this plea in the counter filed before the board.


197. Firstly from the agenda for the board meeting it is seen that closure of parcel offices was not included in the agenda for discussion. The minutes of this meeting were recorded from page 248 onwards to 262 in the minutes book from June 24, 1986, to August 7, 1992, and pages 263 to 272 were left blank. For the next board meeting a new book was opened. While the first page of the minutes i.e., 248 to 250 were written with one pen, the minutes from page 251 from where the new form of 16 pages started in the book, the minutes were written with a separate pen and the same is visible to the naked eye. Further this form is restitched with the support of a piece of a cloth. While it is the case of the ninth petitioner that this form was introduced by removing the original form, the company says that as the binding has become loose in the ordinary course of business this form was restitched by using the cloth for strength. In the normal course this version of the respondents was to be proved by adducing oral evidence. As the record is speaking for itself, I am proceeding to test the veracity of the statement. From the resolution of the board dated August 7, 1992, it is seen not only a decision was taken to close down the unremunerative parcel offices with immediate effect as per the. statement given by the chairman, but also authorized him to take decision with regard to closure of uneconomic branches. But it is not known for what purpose this subject was again included in the agenda for discussion in the notices for the meetings dated December 19, 1992, and March 3, 1993/February 27, 1993, nearly seven months after the board passed the resolution. Nextly, it is the case of the respondents that at the meeting of the board dated February 27, 1993, eighteen


of the respondents that at the meeting of the board dated February 27, 1993, eighteen parcel offices including the offices at Mandya and Gobi-chettipalayam in the State of Karnataka were closed. While going through the original minutes book I found that these two parcel offices were closed under item No. 5(e) in the board meeting held on December 19, 1992. When these offices were closed under an earlier resolution, how these two offices again figured in the meeting dated February 27, 1993, and they were closed again. Nextly, it is seen that in the minutes of the board held on December 29,-1992, and February 27, 1993, the names of the offices that were closed were specified. But in the resolution dated August 7, 1992, the list of offices closed was not mentioned. Further it is seen such an important issue was taken up for discussion under any other subject with the permission of the chair. Nextly the note said to have been submitted by the chairman to the board has not seen the light either before the Board or this court. Likewise, no information was placed before the Board when each of the parcel office was opened, the extent of losses the company suffered, more so, when 20 per cent. of the parcel offices relating to one of the main activities of the company are sought to be closed.


198. As per the version of the ninth petitioner in the annual general body meeting held on November 25, 1993, himself and the late K. Suryanarayana raised the issue and sought for the list of parcel offices that were closed. Further, it is not in dispute that the late K. Suryanarayana as well as the ninth petitioner in their letters dated November 2, 1993, and November 10, 1993, specifically addressed letters to the company as well as the other board of directors to furnish the list of places where the offices were closed with full reasons for closing the parcel offices and from which date they were closed. The reply of the company secretary dated December 3, 1993, sent to K. Suryanarayana is interesting and it will be useful to extract the same.
 199. "Dear Sir, we have received your letter dated November 2, 1993, and the contents have been noted. The matters referred to by you are matters to be dealt with by the management during the day-to-day business. Hence, we are unable to accede to your request." If closure of offices relates to day-to-day business of the company, why was the same placed in the board meeting dated August 7, 1992, more so under any other item and in other meetings as discussed above having taken blanket authority to close down the offices.


Nextly, when the board passed a resolution way back on August 7, 1992, how the company failed to inform the shareholder that under a resolution of the board, the parcel offices were closed. Yet at the same time no reply was sent to the ninth petitioner to his letter. As he happened to be the director of the company on that day, and they cannot refuse to give information to him, before the Board a photostat copy of the acknowledgment which is said to have been signed by the ninth petitioner on December 27, 1993, is filed as annexure 6-B by stating that a reply was sent to him on December 3, 1993, asking him to come to the office and inspect the same during 2.00 p.m. to 4.30 p.m. on any working day with prior intimation to them. The ninth petitioner in the above letter not only asked for the information, but also requested respondent No. 2 to convene the board meeting or put those issues on the agenda at the ensuing board meeting for discussions and proper considerations thereon and the reply of respondent No. 1 does not throw any light on this aspect. It is his specific case that he has not received any reply from the respondent-company to his letter (ans. to Q. 131 in cross). The falsity of the case of respondent No. 2 is exposed from the fact that the registered letter sent on December 4, 1993, remained undelivered till December 27, 1993, in the same town. As per postal rules, if a registered letter remained undelivered for seven days, it has to be redirected to the sender. It is not known how this letter remained undelivered in the same town for about 23 days. Further, the respondent-company did not file the original acknowledgment before the Board to prove that this acknowledgment relates to the registered letter emanating from the company on


acknowledgment before the Board to prove that this acknowledgment relates to the registered letter emanating from the company on December 4, 1993, and addressed to the ninth petitioner. A photostat copy of one side of the acknowledgment containing the signature of the ninth petitioner was filed but not the reverse side of the acknowledgment, wherein the addressee's name is shown but not the sender's name.


200. From the above discussion, I have no manner of doubt in holding that the minutes of the board meeting dated August 7, 1992, are fabricated with a view to take shelter under the board resolution and to see that the Board may not hold against the respondents by rejecting their contention that closure of parcel offices cannot be termed as managerial function in the day-to-day business of the company as contended by the respondents.
 (B) Whether the board meeting was held on March 3, 1993 or February 27, 1993 ?
 201. While the case of the petitioners is that the meeting of the board of directors was held on March 3, 1993, and the minutes of the board meeting held on March 3, 1993, were replaced with new minutes and the case of respondents is that the meeting slated for March 3, 1993, was advanced and it was held on February 27, 1993, and no meeting took place on March 3, 1993, as contemplated by the petitioners. The Board held that the meeting was held on February 27, 1993, and the ninth petitioner applied for leave.
 202. Under Section 286 of the Act notice of every meeting of the board shall be given in writing to every director at his usual address.


203. The company seemed to be not in the practice of sending notices by registered post or maintaining notice register to prove that the notices were served on the board of directors in a manner known to law. The specific case of the ninth petitioner is that he received the notice on February 20, 1993, saying that the board meeting will be held on March 3, 1993, and he attended the meeting and signed in the minutes book. It is his case that he raised the issue of closure of parcel offices and sale of lorries, which lead to misunderstanding between him and respondent No. 2. On the other hand, the case of respondent No. 2 is that on the same day, i.e., February 20, 1993, another meeting notice was sent advancing the board meeting to February 27, 1993, and the ninth petitioner applied leave from attending the meeting. At the same time, the ninth petitioner denied the receipt of the notice advancing the meeting to February 27, 1993, and the leave letter pressed into service by the respondents is a fabricated one. It is his specific case that while he was functioning as Member of Parliament he left blank signed papers with the manager at Hyderabad for railway reservation purpose and on one such paper the leave letter was brought into existence. A xerox copy of the letter seemed to have been produced before the Board and the Board without summoning the original came to the conclusion that the ninth petitioner applied for leave.
 204. To know the truth or otherwise of the rival contentions, I directed the respondents to produce the original leave letter. It is not original but only a carbon copy. The respondents did not offer any explanation for not producing the original leave letter.
 205. Be that as it may, for better appreciation of the contentions of the parties, the letter in dispute was scanned below.


From

 Ch. Srihari Rao,

Kakinada.        BM 27-2-93

 To

The Board of Directors,

 Ms. S. R. M. T. Ltd.,

 P. B. No. 42, Subhash Road,

 Kakinada 533 001.

 Dear Sirs,

 Due to preoccupation I will not be able to attend the board meeting of the company to be held on 27.2.93 at 10 a.m.

 I, therefore, request you to kindly grant me leave of absence for the said board meeting.

 Thanking you,

Yours faithfully,

 (Sd.)..............

Station : Kakinada.      Leave of absence granted.
Date : 23-2-1993.      (Sd.)....................


206. From the above it is seen while the body was typed on one typewriter, "Mr. Sri Hari Rao" and "station" was typed on a different typewriter. Further, it is seen that the name, station and signature are found in original and the body of the letter is copied by carbon. Nextly, it is seen that the size of the leave letter and letterhead after tearing away the printed portion are of the same size. The ninth petitioner in his evidence categorically stated that the leave letter was fabricated. In the absence of any rebuttal, the Board ought to have held that the leave letter is a fabricated one.
 207. Having entertained a doubt whether the minutes of the meeting dated March 3, 1993, were replaced with the minutes of the meeting said to have been held on February 27, 1993, wherein the ninth petitioner has not participated in the meeting, I have verified the minutes book maintained by the company from September 29, 1992, to February 23, 1994, and it does not infuse much confidence and the authenticity of the proceedings could have been tested with oral evidence. The notices for both the meetings, i.e., March 3, 1993, and February 27, 1993, emanated from respondent No. 1 office on the same day and there seems to be not much difference in the agenda. Further the notice for February 27, 1993, meeting did not say that in supersession of earlier notice convening the board meeting on March 3, 1993, that notice was issued. At the same time the notice dated December 22, 1993, for the board meeting held on December 27, 1993, to consider the requisition resolution for removal of the ninth petitioner as director, a note is seen as hereunder :


"Note : The meeting to consider these items was originally fixed on November 18, 1993, but due to the order of the Principal Sub-court, Kakinada in I. A. Nos. 5351 of 1993 and 5352 on November 17, 1993, the same could not be considered and have been deferred till the disposal of the said petitions. These petitions are disposed of on December 21, 1993, and the order dated November 17, 1993, has been vacated. Hence these items are being considered now."


208. But such a note is not there in the notice for the advanced meeting. The only suggestion made by counsel for the respondents for convening the meeting on February 27, 1993, in cross-examination of the ninth petitioner in questions Nos. 28 and 29 is that the company has to furnish board resolution to the banks for deferred payment guarantee before the end of February, 1993. But the same was denied by the ninth petitioner and stated that all the documents and agenda were forged. The next suggestion made to the ninth petitioner is that the minutes of this meeting were confirmed in the meeting held on June 9, 1993. The answer given by the ninth petitioner to question No. 31 is that the practice is that the agenda used to be discussed and the minutes were never discussed. The minutes used to be noted on a small paper and subsequently they used to be carried out in the minutes book and he acted in good faith. In the cross-examination counsel suggested to the ninth petitioner that since no meeting took place on March 3, no sitting fee was paid to him. The ninth petitioner said that now and then he used to be paid the sitting fees and he did not remember for which meeting he received the sitting fee. While going through the minutes book, I noticed that the board at its meeting held on July 29, 1993, in resolution No. 6 resolved to amend Article 13 of the articles of association enabling the company to pay sitting fee after the Amending Act 1988 came into force. The said resolution is extracted hereunder :
"Resolved that the existing Article 13 of the articles of association of the company be and is hereby substituted by the following article :


13. The directors of the company may be paid a sitting fee not exceeding Rs. 500 per sitting with a daily allowance and travelling allowance at such rates as the board may decide in that behalf. If any director shall be appointed to advise the board as an expert or be called upon to perform extra service or make special exertions for any of the purposes of the company, the board may reimburse all his expenses and may, subject to the provisions of Section 314 of the Act, pay to such director such special remuneration as they may think fit, which remuneration may be in the form of either salary, commission or profits and may be either in addition to or in substitution of the remuneration specified in the articles."
209. In the light of the above resolution the question of payment of sitting fee to the directors prior to that date does not arise.


210. Further, it is the case of the ninth petitioner throughout that he attended the meeting on March 3, 1993, along with some other directors. In the answer to Q. No. 38 in the cross-examination he stated that five directors including himself, respondents Nos. 2 and 3, Ananda Rao and another director whose name he could not remember attended the meeting. Neither the managing director nor any of the directors came to the witness box to disprove the statement of the ninth petitioner. In the absence of any proof to show that the notice for the board meeting dated February 27, 1993, was served on the ninth petitioner and the notice is not in cancellation of the earlier notice convening the board meeting on March 3, 1993, and the fabricated letter of leave of absence alleged to have been given by the ninth petitioner throws any amount of suspicion on the version spoken by the respondents that the board meeting has taken place on February 27, 1993. Likewise in the absence of any evidence that the minutes of the board meeting dated February 27, 1993, were specifically read over and then only the minutes were confirmed, the explanation offered by the ninth petitioner in his evidence stands unrebutted and it has to be accepted.

211. In Mrs. Rashmi Seth v. Chemon (India) (P.) Ltd. [1992] 3 Comp LJ 89 ; [1995] 82 Comp Cas 563 (CLB), the Principal Bench of CLB held "that the action of the company in passing a resolution that the petitioner consented for transfer of her holding of 50 per cent. shares by fabricating minutes showing her presence, though she did not attend the meeting and other resolutions passed in such a meeting are null and void and non-operative."


212. In the case on hand also I hold that the alleged leave letter and meeting notice were brought into existence to cover up the illegal action of respondent No. 2 in closing the parcel offices unilaterally without the approval of the board and they are fabricated. Likewise, I have no hesitation in holding that the resolutions of the board meeting dated March 3, 1993, were replaced with new minutes as if the board meeting was held on February 27, 1993. As the resolutions said to have been adopted at the meeting of the board held on February 27, 1993, are proved to be fabricated they have to be declared as null and void.


213. Sale of lorries :


It is an admitted fact that the company sold 22 and 15 vehicles during the financial years 1992-93 and 1993-94 respectively. The case of the ninth petitioner is that the company from its inception never sold so many lorries in a span of one or two years and respondents Nos. 2 and 3 pitched upon the plan to swindle the monies of the company. Further no auction of lorries even took place to his knowledge and the auction slips were brought into existence by the respondents to justify their illegal action in selling the lorries for a throw away price to meet the case of the petitioners. It is also his case that these vehicles were sold even before the lifetime of the vehicles as fixed in the Motor Vehicles Act is over and these vehicles were sold for a song i.e., from Rs, 18,000 to Rs. 30,000 practically at the book value of the vehicles and as per the auction slips filed before the Board, mostly ten people participated in the auctions held on different dates. In support of his case he filed affidavits of some of the purchasers of the vehicles and also hire-purchase agreements entered into by them with Lakshmi Devi Finance Company to show that the vehicles fetched much higher amounts than the price shown in the auction slips. It is also his case that if the auction slips are carefully analysed, the same party signed differently at different points of time apart from the fact that only one person had written all the auction slips. The auction slips do not contain any serial number, though the word "Sri. No." is shown therein. All these facts will prove that no auctions of lorries have taken place. The respondents admit that the lorries sold were of ten to eleven years old and the company was in the habit of selling old and unserviceable vehicles in order to maintain a good fleet. The company is to make additions and deletions to its fleet and the same is in the normal


The company is to make additions and deletions to its fleet and the same is in the normal course of business. Hence it is not correct to contend that large scale misappropriation in sale of lorries has taken place. The Board accepted the plea of the respondents by placing reliance on the retracted affidavits of the purchasers of the vehicles filed by the respondents and rejected the contention of the petitioners. At the same time the Board in its order observed as follows (p. 530 of 98 Comp Cas) :


"The average price of lorries sold in the later years was found to be higher by 15 to 20 per cent. Perhaps the higher price was taken on account of the direction that we gave that there should be more transparency in sale of lorries. Any way we do not find the gap to be such a huge amount of Rs. 1 lakh as alleged by the petitioner ... Since we ourselves felt that the present system was not a fool proof system we advised the company that a more transparent system should be evolved in disposal of lorries by fixing a reserve price and getting approval of the board and giving wide publicity before conducting the auction. We feel that as far as this allegation is concerned it is sufficient that we reiterate the above advice for future adherence and accordingly to do so."
214. The order neither referred to the directions given nor verified whether the procedure followed by the company in disposing of the vehicles is in accordance with the directions given by the Board. Even before this court, the respondents did not choose to place the directions as well as the procedure followed by them to show that the disposal of lorries is in accordance with the directions given by the Board. The Board expressed satisfaction by observing that the vehicles fetched 15 to 20 per cent. higher price in the subsequent years.


215. Nextly, the Board did not advert to any of the contentions of the petitioners, more so the contention that the company never sold so many vehicles in a year, that the company never auctioned the vehicles and the auction slips were brought into existence for the purpose of this case. The Board did not even look into the auction slips.

216. I have gone through the xerox copies of the auction slips available on record and the facts emerging on analysis, are given in a tabular form for better understanding of the case.

 A Grade Officers B Grade Asst. Managers (Junior Mgmt.) C Grade Dy. Managers D Grade Managers E Grade Senior Manager (Middle Mgmt.) F Grade Chief Managers G Grade Dy. General Managers H Grade General Manager (Senior Mgmt.) I Grade Executive Directors J Grade Directors.

 SHAIK AHAMMED Sl. No. Vehicle Number Model Rank How he signed Value in Rs.

 Comments

 1. ATP 1212 7th Rank 26,000

 2. MEK 8343 6th Rank English (S.K.Ahamed) 29,000 Second Highest Bidder Rs. 28,500

 3. ABP 1202 4th Rank 30,000

 4. AEP 6746 3rd Rank Telugu 25,000 First Highest Bidder ANNEXURE III M. D. gouse Sl. No. Vehicle Number Model Rank How he signed Value in Rs.

 Comments


Comments

 1. ATP 1455 3rd Rank 25,000

 2. ATP 1554 1st Rank 25,000

 3. ATP 1445 7th Rank 27,000

 4. ATP 6979 5th Rank 29,000

 5. AP 5T 6th Rank 60,000

 6. ATP 1221 4th Rank 22,000

 7. ATP 7566 6th Rank 27,500

 8. ADI 9969 3rd Rank 22,000

 9. AP 5T 1st Rank English (Md. Gouse) 28,000 First Highest Bidder

 10. ABP 6286 8th Rank English 25,000 Second Highest Bidder Rs.


24,900

 11. ABP 1220 4th Rank 26,000

 12. ATB 5234 5th Rank 29,000

 13. AP5T 2612' 4th Rank 22,000

 14. Ap5T2620 6th Rank 29,000

 15. APST 2230 5th Rank 30,000 Last year Year before last year 2 years before last year Total Outstanding Very good Satisfactory ANNEXURE V MD. AYUB KHAN Sl. No. Vehicle Number Model Rank How he signed Value in Rs.

 Comments

 1. ATP 969 3rd Rank 25,000

 2. MEK8343 3rd Rank 29,000

 3. ABP 1202 7th Rank 30,000

 4. ABP 1194 3rd Rank 25,000

 5. ADI 9969 6th Rank Telugu 22,000 First Highest Bidder

 6. ABP 6286 5th Rank 25,000

 7. AP5T2802 4th Rank 24,000 ANNEXURE VI D. SEETHARAMAIAH Sl. No. Vehicle Number Model Rank How he signed Value in Rs.

 Comments


Comments

 1. ATP 1554 2nd Rank 25,000

 2. ATP1445 8th Rank 27,000

 3. A8P 5424 3rd Rank 30,000

 4. ATP1122 1st Rank 26,000

 5. ADP 6693 5th Rank 25,000

 6. ATP 6979 4th Rank 29,000

 7. AP5T 2226 1st Rank Telugu 25,500 Second Highest Bidder Rs.

 25,450

 8. AEP6746 9th Rank Telugu 25,000 Second Highest Bidder Rs.

 24,899

 9. ABP 6286 3rd Rank 25,000

 10. ABP 1256 5th Rank 30,000

 17. AP5T 2612 7th Rank Telugu 22,000 Second Highest Bidder Rs.

 21,900

 12. Ap5T 2220 3rd Rank 29,000

 13. AIQ 5524 1st Rank Telugu 18,000 Second Highest Bidder Rs.

 17,900

 14. AP5T 2801 7th Rank 29,500 ANNEXURE VII K. ANANDA PRASAD Sl. No. Vehicle Number Model Rank How he signed value in Rs.

 Comments


Comments

 1. ATP 1455 7th Rank English (K. Anand Prasad) 25,000 Second Highest Bidder Rs.

 24,950

 2. ATP 1554 4th Rank 25,000

 3. ATP 1445 9th Rank English 27,000 Second Highest Bidder Rs.

 26,900

 4. ATP 3245 7th Rank English 39,000 Second Highest Bidder Rs.

 38,950

 5. ABP 1202 3rd Rank 30,000

 6. ABP 6286 7th Rank 25,000

 7. ABP 1220 6th Rank 26,000

 8. AP5T 2220 5th Rank 29,000

 9. AP5T 2360 1st Rank English 25,000 Second Highest Bidder Rs.


24,900

 10. AP 5T 2620 7th Rank 29,000

 11. AP5T 2230 6th Rank English 30,000 Second Highest Bidder Rs.29,500 ANNEXURE VIII B.RAMA RAO Sl No Vehicle Model Model Rank How he signed Value in Rs Comments ATP 1445 5th Rank 27,000 ABP 5424 5th Rank 30,000 ATP 6979 1st Rank 29,000 AP5T 2226 2nd Rank 25,000 ATP 7566 1st Rank 27,500 ADI 9969 5th Rank 22,000 AP5T 2928 3rd Rank 28,000 ATB 5234 2nd Rank 29,000 AP5T 2612 1st Rank 22,000 AP5T 2802 6th Rank 24,000 AP5H 2552 2nd Rank 2,70,000 ANNEXURE IX S. K. ANWAR Sl.No.

 Vehicle No.

 Model Rank How he signed Value in Rs.

 Comments


1. ATP 3245 6th Rank 39,000

 2. AP5T 2683 2nd Rank 30,000

 3. ADP 6693 6th Rank 25,000

 4. AP5T 3354 3rd Rank 60,000

 5. AP5T 2226 4th Rank 25,500

 6. AEP 6746 5th Rank 25,000

 7. ATP 7566 2nd Rank 27,500

 8. AP 5T 2928 2nd Rank 28,000

 9. ATE 5234 4th Rank 29,000

 10. AP5T 26I2 6th Rank 22,000

 11. AP5T 2802 5th Rank 24,000

 12. AP5T 2620 4th Rank 29,000


13. AIQ 5524 5th Rank 18,000

 14. AP5T 2230 4th Rank 30,000

 15. AP5T 2801 4th Rank 29,500

 16. AP 5H 2552 3rd Rank 2,70,000 ANNEXURE X K. SATYANARAYANA RAJU Sl. No. Vehicle Number Model Rank How he signed Value in Rs.


Comments

 1. ATP 1554 5th Rank English (K. Satya-narayana Raju) 25,000 Second Highest Bidder Rs.


24,950

 2. ABP 2318 2nd Rank 30,000

 3. ATP 1122 6th Rank 26,000

 4. ATP 3245 1st Rank 39,000

 5. MEK 8343 2nd Rank 29,000

 6. ABP 1202 8th Rank 30,000

 7. AP5T 3354 4th Rank 60,000

 8. AEP 6746 4th Rank 25,000

 9. AP5T 2360 7th Rank 25,000

 10. ADI 9969 2nd Rank 22,000

 11. AP5T 2928 6th Rank 28,000

 12. ABP 6286 2nd Rank 25,000

 13. ABP 1256 3rd Rank 30,000


14. AP 5T 2802 2nd Rank 24,000

 15. AP5T2620 2nd Rank 29,000

 16. AIQ 5524 3rd Rank 18,000

 17. AP5T2230 1st Rank 30,000

 18. AP5T2801 5th Rank 29,500

 19. AP5H2552 4th Rank 2,70,000

 20. ATP 969 4th Rank English 25,000 Second Highest Bidder Rs.24,975

 21. ATP 1212 6th Rank English 26,000 First Highest Bidder


217. From the above tables it is seen that (1) several individuals not only participated in the auction alleged to have been held on different dates as per the information furnished by the respondents but also signed differently. (2) From the auction slips it is seen that only the first two highest bids were given but neither the upset price nor the offers given by the others were shown in the auction slips--apart from not showing the progress in the bids in the process of auction and the difference between the first and the second bidder is marginal and they do not exceed Rs. 100 generally. (3) From the information furnished by the first respondent-company the date of auction of three lorries bearing Nos. ATP 1455, ATP 1212 and ABP 1220 are not tallying with the dates on which auction slips were prepared. (4) In the case of certain lorries originally they were shown as condemned lorries but later on corrected as old lorries. (5) In the auction slips for lorry No. ATP 6979 the highest bid amount was corrected. (6) No serial numbers are found on the auction slips though a column is there.

218. It is not known how all these people could know of the auction dates though the company never notified the auctions in any manner. Secondly from the dates of auction, it is seen that the company was auctioning one lorry at a time in selling about forty lorries in a span of two years as per the version of the respondents, a procedure unknown to corporate sales.


219. From the above it is seen that there is some truth in the contention of the petitioners that the auction slips were brought into existence to meet the case of the petitioners. After differences arose, both the late Suryanarayana and the ninth petitioner in their letters dated November 2, 1993, and November 10, 1993, in respect of sale of lorries sought full particulars of the vehicles sold like make of the vehicle, model and year of purchase, to whom they were sold and at what price they were sold, the nature of sale whether it is by public auction or private sale. While a reply was sent to Suryanarayana stating that the matters referred to by him are the matters to be dealt with, by the management during day-to-day business, the company produced xerox copy of an acknowledgment dated December 27, 1993, for the alleged registered letter sent on December 4, 1993. This aspect d already adverted to while considering the closure of parcel offices. The specific case of the petitioner is that the issue of sale of lorries came up for discussion in the meeting held on March 3, 1993, under any other item and when he asked for the information, the same was not furnished, and he requested that his objection should be noted in the minutes of the meeting. On that the chairman informed that the details would be sent later. It is also his case that in the board's meeting held on March 23, 1993, also, this issue was raised. It is his further case that this issue was raised in the annual general body meeting held on November 25, 1993. The case of the respondents is that the sale of lorries is a managerial function while carrying on day-to-day affairs of the company. The further case of the company is that on September 23, 1993, the ninth petitioner participated in the board meeting and


is that on September 23, 1993, the ninth petitioner participated in the board meeting and approved the profit and loss account as on March 31, 1993, to be placed before the annual general body meeting. The petitioner categorically stated that no issues were discussed in the board meeting held on September 23, 1993, (answer to question No. 29 in chief). With regard to the approval of profit and loss account by the general body, the case of the petitioners is that when the chairman refused to give information he walked out of the meeting (answer to questions 25 to 27 in chief). Be that as it may it is not known why the company refused to furnish the required information sought for by petitioner No. 9 as well as the late Suryanarayana in their letters. When a suggestion (question No. 136 in cross-examination) was made to him that he is having every right to inspect the books and records of the company, the answer given was that since the information asked for was not given, it is not possible to go through the records of the company and find out the misappropriation. But at the same time the court should not miss the fact that the ill feelings have reached to a point of no return by that time and petitioner No. 9 was also manhandled by the employees of the company (answer to question No. 86 in chief). The respondents elicited from the witness that after July 29, 1993, he was given further powers to operate the bank accounts and the answer given by him is that such a thing was done by the second respondent to see that he should not oppose him in any manner. From the record it is seen that some of the shareholders gave notice to convene annual general body meeting to remove the ninth petitioner as director of the company. In fact he was not only removed as director at the annual general body meeting dated January 21,


In fact he was not only removed as director at the annual general body meeting dated January 21, 1994, but also from all the positions held by him in subsidiary companies. It is also elicited that he signed one transfer form relating to one of the vehicles that were sold.


220. Coming to the affidavits, initially the petitioners filed the affidavit of Adi-garla Raghava, Desetti Narayana Rao and J. V. Raghavulu, to prove that they purchased the vehicles at much higher price and also the hire-purchase agreements entered into by them with the third parties. But later they gave affidavits stating that they purchased the vehicles for the value shown in the auction slips and they have raised these loans for effecting massive repairs to the vehicles. Firstly, the Board having rejected the prayer of the petitioners to lead evidence by affidavits, it is not known how it can rely on these retracted affidavits filed by the respondents. Secondly the Board committed grave illegality in giving credence to the affidavits filed by the respondents when there are two affidavits of one and the same individual contradicting each other without examining him. Thirdly, the affidavits are not verified which is a must as held by the Supreme Court in A. K. K. Nambiar's case, . Fourthly, as the amount spent for repairs on the vehicles is too high they neither stated what type of repairs they got done to the vehicles in their affidavits nor at least filed semblance of evidence in support of their claim. Fifthly, they have neither stated in their affidavits in which work shop they got their vehicles repaired nor filed letters given by the workshops to that effect where they got the vehicles repaired. The specific case of the petitioners is that by threatening the purchasers and by involving them in criminal cases the company obtained these affidavits and they filed documents to that effect. Without going into these aspects when a person gives two affidavits contradicting each other, in the normal course the respondents having filed the later affidavits would have produced them before the Board to test which of their statements are true and would have provided an opportunity to the petitioner to cross-examine


test which of their statements are true and would have provided an opportunity to the petitioner to cross-examine them on the retracted affidavits. If the Board wanted to rely on these affidavits the Board should have directed the respondents to produce these individuals for examination. That was also not done.


221. Though no material was placed before the Board that the parties have taken loans for attending to major repairs, the Board simply jumped at the retracted affidavit and held that they have borrowed the amounts for attending to major repairs of the vehicles more so in the absence of any evidence that these vehicles have become so unserviceable.


222. Nextly, it is seen that though these parties went back on their earlier statement in the affidavits filed by the respondent-company, the fact remains that they have borrowed the amounts from the financial company, i.e., Laxmi Devi Finance Corporation. In the hire-purchase agreement they entered with that corporation they never stated that they are borrowing these monies for effecting repairs. The ninth petitioner in his evidence categorically stated that he obtained hire-purchase documents from Laxmi Devi Finance Corporation apart from the affidavits given by the purchasers and the Board in its order did not refer to the hire-purchase agreements at all. Further, it is to be seen that generally companies will be certifying about the roadworthiness of the vehicles and then a paper advertisement will be given to secure a higher price.


Both the things were not done in this case. Nextly, it is to be seen that the company is having automobile workshop and involved in manufacturing spare parts for over a number of years apart from being a dealer in spares for Tata vehicles. In this background have we to presume that the vehicles became so unroadworthy even before their life span as fixed under the M. V. Act expired though no iota of evidence on the condition of the vehicles is produced by the respondent-company ? Further if the Board takes judicial note of market trends, even second-hand two-wheelers are fetching a much higher price than the lorries sold by the company. I am sure that even if the lorries were sold as scrap, they would have fetched a much higher price. Can it be said that the company maintained the vehicles in such a worse condition and they are not able to fetch reasonable price when they were sold in an auction ? If we keep the market trend in mind though the book value of the vehicles comes down year after year on account of depreciation, in reality their value in the market will be much higher. In fact, the Board also felt that the procedure followed by the company is not transparent. Further the case of the petitioners is that all the auction slips were written by one P. Krishna Murthy, the sales manager in Tata show room, and those slips were not even numbered though a column is provided to that effect. This Krishna Murthy is none other than the father-in-law of the managing director of Hastina Auto Dealers Pvt. Ltd., Delhi, which was appointed as sole selling agents for North India for marketing the spare parts of the company. But neither Narayana Murthy who seemed to have conducted the auction nor Krishna Murthy who prepared the auction slips were examined to prove that auctions in fact did take place. Nextly, if there is any truth in the contention of the respondents that to maintain a good fleet the vehicles were sold, why have they not added even a


the respondents that to maintain a good fleet the vehicles were sold, why have they not added even a single lorry during those years though the company was paying hire charges for private lorries to a tune of rupees three crores.


223. From this the inevitable conclusion to be drawn is that the sale proceeds of the vehicles shown in the books of account by the company are in and around the book value of those vehicles, but not the real price fetched by these vehicles and the inevitable presumption to be drawn is, the excess amount realized by the company over and above the amounts shown in the books of account were embezzled by respondents Nos. 2 and 3.


224. Payment of hire charges to private lorries :


The case of the petitioner is that, while he was the managing partner of the Padmalaya Finance Corporation, it used to give its lorries on hire to SRMT and the average hire charges used to be Rs. 6,000 to Rs. 7,000 per month. But during 1993-94 and 1994-95 an amount of Rs. 2,90,83,525 and Rs. 3,19,37,496 were paid to private lorry owners towards hire charges as seen from Schedule 'S' to the 50th annual report for the year 1994-95. The case of the petitioners is that all the payments to the lorry owners were paid in cash, but not by way of cheques. In that process, respondents Nos. 2 and 3 obtained receipts from the owners for much higher amounts and the same were misappropriated and in the year 1994-95 there was a shortfall of Rs. 1.55 crores in the cash flow. The contention of the respondents is that it is a common trade practice to engage outside vehicles as and when the situation demands. The Board adverted to these contentions of both the parties on this issue under "other acts of mismanagement". But without giving a finding on the issue expressed its satisfaction over the payment of increased dividends and recorded the following finding : "An analysis of the allegations would show, as rightly pointed out by Sri Raghavan, that other than the allegation relating to issue of rights shares, no other acts of oppression qua shareholders has been agitated in this petition." This finding runs counter to the record and the oral evidence of the ninth petitioner who spoke on this issue. More so, when the respondent contended that it is a common trade practice in transport business to engage outside vehicles as and when required in addition to own vehicles without producing the original records and also without reference to the letter of the company secretary dated March


own vehicles without producing the original records and also without reference to the letter of the company secretary dated March 5, 1999, that the contracts register to be maintained statutorily under Section 301 of the Act for the years 1989 to 1992-93 are not traceable. Here we should keep in mind that the company is engaged in parcel lorry service for transportation of goods in and closed lorries. Closed lorries will not be owned by private persons, unless they enter into a contract on permanent or semi-permanent basis with parcel lorry service companies. The company did not place any material with regard to engagement of a number of closed lorries and open lorries. We should also keep in mind that the vehicles sold are less than ten years, i.e., before the expiry of the life of the vehicles as fixed under the M. V. Act and no evidence whatsoever was placed before the Board to show that they have become so unroadworthy and they were damaged to such an extent, that they cannot be made roadworthy by a company having dealership for spare parts of Tata vehicles apart from having an automobile workshop and involved in the manufacturing of automobile spare parts. From the retracted affidavits of the purchasers of the vehicles, filed by the respondents they stated that they have taken loans for repairs of the vehicles. According to them, they spent about a lakh of rupees for repairs on each of the vehicles. If the respondent-company repaired the vehicles on their own, they would have saved a lot of money not only in effecting the repairs to the vehicles but also in payment of hire charges to others. Further, the case of the respondents that the contracts register, containing the particulars of the vehicles hired, to be maintained statutorily is not traceable. To my mind the self-same vehicles sold might have been hired and the contract register was purposely withheld by the company. Instead of drawing an adverse inference against the respondents, the Board observed that this


withheld by the company. Instead of drawing an adverse inference against the respondents, the Board observed that this issue was not raised. Further the Board did not consider the aspect, whether the respondent-company was subjected to audit and payment of income-tax, can pay hire charges in crores of rupees in cash though the evidence of the ninth petitioner on this aspect stood unrebutted (see answers to questions Nos. 55, 62, 82, 83 in chief and questions Nos. 160 to 165 in cross).


225. The issue can be looked at from another angle also. One of the main activities of the company being a parcel lorry service and in the absence of denial, of the evidence of the ninth petitioner that previously one or two vehicles used to be sold, the company did not offer any explanation for not purchasing new vehicles having sold a considerable number of alleged old vehicles in those two years, when the case of the respondents is that addition and deletion of the vehicles is intended to a maintain good fleet. The reason is obvious. Engaging private vehicles and paying hire charges in cash, serves the interests of the second respondent. Hence the finding recorded by the Board that no other issue except rights issues was raised by the petitioners having extracted the contentions of both the parties is nothing but arbitrary exercise of powers.


226. In the light of the foregoing discussion, I find sufficient justification in the complaint of the petitioners that the respondents were obtaining receipts for higher amounts from the owners of the vehicles and the income derived therefrom is being misappropriated by respondents Nos. 2 and 3.


227. Diversion of funds :
 The specific case of the petitioners is that the second respondent is in the habit of diverting the funds by way payment of exorbitant commissions with kickback arrangements and in a raid conducted in the year 1988 by the Income-tax Department it was noticed that certain firms in the benami names of these respondents have been paid substantial commission and as such all this expenditure was disallowed. Subsequently those firms were dissolved and the company appointed Hastina Auto Dealers Pvt. Ltd., New Delhi, for the northern region in the year 1989 and V. K. Automotive Pvt. Ltd., Madras, for the southern region as sole selling agents for the sale of about 400 automobile products manufactured by the company by a make believe process of selection by a private consultancy agencies and huge commissions are being paid to these companies whose share capital is in the thousands. He has also questioned the genuineness of the reports filed by the consultant companies.


228. In answer to these allegations, learned counsel for the respondents contends that the Income-tax Tribunal and the High Court upheld the payment of the commission to those firms. The fact remains that in the written arguments the company admitted dissolution of those three partnership firms against whom the income-tax authorities made adverse comments and that necessitated the company to appoint new agents. The respondents contend that the above two agents were appointed validly as per the recommendations of the consultants and the ninth petitioner was on the board of directors at the time of appointment and he never raised any objection. Finally the company contended that it can appoint only those in whom it has confidence. Except making vague allegations, the petitioners have not furnished any evidence to show that respondents Nos. 2 and 3 have received kickbacks from the commission paid to those companies. The Board held against the petitioners on the ground that "he was a director of the company for nearly three years after appointment of these firms as their sole selling agents for North and South India and the fact that he has not raised this issue in any of the board meetings during this period, giving us an impression that he has no grievance in this regard till the same was raised in this petition".


229. To my mind, the Board cannot reject the plea of the petitioners solely on the ground that the ninth petitioner was on the board when the agents were appointed without examining whether there is any truth or not in the allegations. Even assuming that the ninth petitioner is a party to the decision of the board, if the decision is ultimately found to be illegal and the alleged silence on the part of the ninth petitioner is of no avail and as held by the Supreme Court in B.R. Kapoor v. State of Tamil Nadu, AIR 2001 SCW 3720. Further he might not have visualized at that point of time that huge amounts will be paid as commission to the companies whose share capital is only in a few lakhs of rupees. The real issue before the Board is whether the two agencies are benami agencies of respondents Nos. 2 and 3 and whether there is transparency required in selecting the agencies and whether such an action would be prejudicial to public interest. From that angle I would like to examine the issue in controversy.


230. Agency for South India :
 V. K. Automotive Pvt. Ltd., was appointed as the sole selling agent of the company for southern region on March 28, 1989. The case of the respondents is that an advertisement was given in The Hindu on December 21, 1998, inviting applications for dealership and Ram Associates was appointed as a consultant to select the agent.
231. It is not in dispute that the managing director of V. K. Automotive Pvt. Ltd., Madras, Vijaya Kumar was earlier an employee of the company. From the record it is seen that while the authorised share capital of V. K. Automotive is Rs. 1,30,200 it was paid a commission of Rs. 38,23,000 for the financial year 1992-93. I have gone through the report of Ram Associates filed in the court. In their report they did not say how many applications they have received and with how many people they held discussions. The report of the consultant dealing with Vijay Kumar was only filed in the court. The reasons given for selecting him were that : (1) he is having inherent strengths, (2) he is having exposure to automobile spares for over a decade ; (3) he is going to form a private limited company with an authorised capital of Rs. 5,00,000 to give the business adequate capital base ; (4) the serious and methodical way he seems to be going about establishing a marketing organization lends fur ther credibility. It is useful to extract preliminary evaluation of this firm.

 Client : S R M T Limited Assignment/Dealership : Evaluation of applications for stockists Name and address of applicant :
Mr. C. Vijaykumar, C-39 LIG Flats, 7th Avenue, Ashok Nagar, Madras 600 083.
Present business and other relevant data.


232. Appears to be serious about the business. Has stated that he is augmenting his resources and streamlining the organisation. May be able to devolve full time for a major product line like SRMT and market its products. To meet for further discussion A B C D

 1. Location

 2. Present business

 3. Intensity of interest

 4. Overall (including presentation) Preliminary decision Shortlist for further discussions.

Certified true copy.


233. The columns relating to corporation, present business, intensity of interest, overall presentation are shown as 'nil'. As per the balance-sheet of that company that its capital is Rs. 1,30,000 but he was able to earn Rs. 38,23,000 as commission. It is not known how the consultant felt that the amount which he is going to invest, i.e., Rs. 5,00,000 would be sufficient to market about 400 spare parts of the company in the whole of South India. Be that as it may 3 years after its establishment, the share capital of the company is only Rs. 1,30,200. It is not known whether he established any shops of his own or appointed dealers all over the South for marketing the spare parts. To my mind the capital invested by him is not sufficient even to establish one wholesale shop at Madras leave about other places. In the light of the above factual position, the question that falls for consideration of the court would be, whether the company with the meagre money at its disposal can earn such a huge commission to a tune of Rs. 38,23,000, i.e., practically 36 times the capital invested by it. He did not even mobilize Rs. 5 lakhs as undertaken by him before the consultant. In response to the letter of the fourth petitioner dated September 19, 1996, the second respondent in his letter dated September 24, 1996, informed him that the sales commission includes target commission to the dealers who directly deal with the company. Target commission varies between 2 and 10 per cent. depending upon the turnover achieved by each dealer. During the year of account the realization out of the business done through various dealers has gone up and similarly the dealers who directly deal with the company achieved the targets in the higher rate of commission group. Hence the target commission paid to them was more than that of the last


higher rate of commission group. Hence the target commission paid to them was more than that of the last year. The company did not place any material with regard to sale of spare parts to this company and the details of the commission paid to it. The Board completely missed these aspects. Further it is not known when he resigned his job in the company. The fact remains that he registered the company after he was selected and the company was incorporated on the same day under the provisions of the Act and entered into an agreement with the respondent-company on the same day, i.e., March 28, 1989.


234. Agency for North India :


Likewise the company appointed Hastina Automobile Dealer for North India. The managing director of Hastina Automobile Dealers, New Delhi, Mr. P. Venkata Siva Anjaneya Prasad, is none other than the son-in-law of P. Krishna Murthy, sales manager in the company and who prepared the auction slips for the sale of lorries. A notification seemed to have been issued in The Hindustan Times dated July 16, 1990, and as per the report of Techma Engineers dated October 16, 1990, they have received thirty-one applications and three applicants could meet the evaluation criteria and rankwise details are given. While Hastina Automobile Pvt. Ltd., stands at Serial No. 1 the other experienced companies like Manik Motor Works established in 1932 at Calcutta having branch at Kasmiri Gate, New Delhi and C. S. Arban Singh Sabar-wal and sons with its head office at Bombay and having a branch officer at Kasmiri Gate, New Delhi, partnership concerns having vast experience in the field with abundant money flow and with show room facility at Delhi were shown at serials Nos. 2 and 3 respectively. The list of the other applicants was not filed before the court. The consultant recommended the name of this company with a paid up share capital of Rs. 4,55,000 though newly incorporated on the ground that the promoters are well experienced in auto parts technically as well as marketingwise ignoring the well experienced firms and this company earned a commission of Rs. 45,56,000 in the financial year 1992-93 as seen from its balance-sheet. While the petitioners filed some letters from the dealers, who according to the respondents, have responded to the notifications inviting applications both for South India and North India stating that they never applied for the agency, the respondents got letters from those dealers saying that they have not given such letters to the petitioners. I need not


letters from those dealers saying that they have not given such letters to the petitioners. I need not go into that controversy.