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ed3b2bcc1e02-134 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-135 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-136 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-137 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-138 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-139 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-140 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-141 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | Comments
1. ATP 1554 5th Rank English (K. Satya-narayana Raju) 25,000 Second Highest Bidder Rs. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-142 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-143 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-144 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-145 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-146 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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, | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-147 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-148 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-149 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-150 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-151 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-152 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-153 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-154 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-155 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 224. Payment of hire charges to private lorries : | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-156 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-157 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-158 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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). | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-159 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-160 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-161 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-162 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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". | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-163 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-164 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-165 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-166 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-167 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-168 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 234. Agency for North India : | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-169 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 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 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-170 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | letters from those dealers saying that they have not given such letters to the petitioners. I need not go into that controversy. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-171 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 235. Now it is evident that this company appointed as the sole selling agent for North India with a paid-up capital of Rs. 4,55,000 received a commission of Rs. 45,56,000 i.e., ten times its share capital while the V. K. Automative (Pvt) Ltd., sole selling agent for South India earned commission 36 times its share capital investment, i.e., Rs. 38,23,000. In all the commission paid to these two companies is Rs. 85,00,000 during 1992-93. To my mind unless the turnover of these companies is in crores of rupees, such a huge commission cannot be earned by these companies. Nextly it is seen that appointment of consultants and selection of candidates is intended to select a person having knowledge and experience in dealing with automobile spare parts with sufficient financial resources to meet the magnitude of the agency for substantial areas of the country and should have a wide network for supply of spare parts throughout the area for which they are appointed as agents and their marketing skills. While the managing director of V. K. Automotive Pvt. Ltd., was at least an employee of the respondent-company for some time, the managing director of Hastina Automobiles Pvt. Ltd., is only the son-in-law of one Krishna Murthy, sales manager in the first respondent-company, without any knowledge in marketing automobile spare parts. Although the report of the consultant with regard to Hastina Automobiles Pvt. Ltd., says that they are experienced entrepreneurs nowhere it is stated what type of experience the entrepreneurs had. On the other hand the company was initially incorporated with two directors, namely P. A. A. Prasad and another Smt. Y. Rajeswari, w/o Y. V. Subba Rao on September 25, 1990. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-172 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 236. Admittedly though no evidence was produced to show that these directors had any experience in the marketing field or manufacturing automobile spare parts, for reasons best known to the consultants they recommended to the company for their appointment as sole agents. Without discussing all these aspects the Board brushed aside the complaint of petitioner No. 9 on the ground that he was on the board for nearly three years after they were appointed as dealers. The court should not miss the point that petitioner No. 9 is none other than the son-in-law of the managing director of the company and he himself was heading several subsidiary companies and more or less the whole family including petitioner No. 9 was holding about 60 per cent of the shares and other shareholders being individual shareholders they cannot raise their voice in the company as it may be difficult for them to muster necessary strength to oppose the second respondent and perhaps they might be satisfied with the dividends that are being paid to them for the investment they made. Now because of the differences between the family members, these underhand dealings came to light. If they are together things would not have gone in this manner to the detriment of the interest of the other shareholders apart from causing loss to the exchequer by avoiding payment of sales tax, excise duty, income-tax, etc. When the acts of mismanagement brought to the notice of the court are ignored, it amounts to giving a seal of approval for the mismanagement of the affairs that are being conducted by the company which are prejudicial to public interest. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-173 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 237. Persons of confidence :
Coming to the other contention of the respondents that they can appoint only those in whom they have confidence, I can only observe that if the respondents want to appoint people of their confidence without undertaking any such process they would have straightaway appointed these companies as their sole agents. I have no manner of doubt in holding that the respondents introduced this make believe process of selection by inviting applications and appointing consulting agencies to justify their action in paying huge amounts, before the income-tax authorities by taking a stand that they are independent agencies and they have nothing to do with the company and to save themselves from any criticism from the Income-tax Department as happened in the case of three firms which were closed after income-tax raids which necessitated the company in opening these companies as their sole selling agents. The ninth petitioner brought to the notice of the public that the managing directors of these two companies are none other than the blue-eyed people that are close and dear to the second respondent in his underhand dealings.
238. Donation to a non-existing trust : | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-174 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | In C. A. No. 65 of 1996 the petitioner brought to the notice of the Board that during the financial year 1995-96 the company gave a donation of Rs. 10 lakhs to Srinivasa Charity Trust in which the second respondent and his family members were trustees which was wound up on May 30, 1992, and in the guise of giving this amount as a donation the second and third respondents used this amount for their personal benefits. This contention was refuted by the respondent company stating that it is a subsequent event and the Board haying dealt with it in C. A. No. 65 of 1996 rejected the said contention, which has become final. Therefore, according to the respondent-company, the matter cannot be opened now. The said contention of the respondent found favour with the Board. The law is well settled on this aspect that any orders passed by a judicial forum at the intelocutory stage is only intended to make interim arrangements during the pendency of the main case and any such order is subject to the orders to be passed in the main case. I have already taken a view that though it is an event that has taken place after the filing of the application the issue can be canvassed as the main petition is still pending. I have seen the interim order passed by the Board on November 28, 1997. The Board refused to grant interim relief by holding that it is an existing trust on the ground/ basis of (1) the resolution produced by the respondents wherein the second respondent was authorised to take steps and transfer the assets to Srinivasa Educational Society ; (2) the exemption certificate issued by the income-tax authorities and (3) the assessment order for the financial year ending with March 31, 1996, on the basis of a nil return without giving a finding on the contention of the petitioners, that the later para, of the resolution dated May 30, | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-175 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | the contention of the petitioners, that the later para, of the resolution dated May 30, 1992, (annexure A) filed along with the counter of the respondents is a fabricated one. Be that as it may after considering the events the Board recorded a finding that the application filed under Sections 397 and 398 of the Act has to stand on the allegations contained in the petition and subsequent events brought on record alone cannot entitle any person to a relief in case the main petition fails. In other words in case the allegations in the main petition are held proved then the subsequent events may be taken into consideration by the Board in moulding relief suitably. In the normal course as the second respondent being the managing trustee of the trust, the Board would have directed him to produce the original records of the trust to see which of the resolutions produced by the parties are true and genuine. From the material available on record and as per the version of the petitioners that the trustees passed a resolution on May 30, 1992, to wind up the trust and he also filed copy of the resolution. On the other hand, the case of the respondent is that the trust resolved to transfer the assets of the trust to Srinivasa Educational Society but not to wind up the trust. It is useful to extract the resolutions filed by the parties. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-176 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 239. Copy of the resolution filed by the petitioners :
"true copy of the resolution passed at the meeting of the board of trustees of Sri Srinivasa Charity Trust, Kakinada, held on May 30, 1992, at 20-6-2, Sitapatirao Street, Kakinada 533 -1. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-177 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | The chairman placed before the meeting a photostat copy of the registered deed of memorandum and articles of association of Sri Srinivasa Educational Society, Kakinada. The said society was registered with the Registrar E. G. District, Kakinada, on April 24, 1992.
The chairman suggested that in view of our trust being not able to achieve the desired objects on its own in spite of best efforts and also on being satisfied that the said desired objects of our trust can be attained through Sri Srinivasa Educational Society, Kakinada, which was registered with the similar and identical objects as that of ours, it is desirable to wind up our trust and pass over the moveable and immovable properties to Sri Srinivasa Educational Society. In this regard he brought to the notice of members the resolution passed on April 20, 1992, a copy of which is also placed before the meeting. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-178 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | After thorough discussion the following resolution is unanimously passed :
'Resolved that our trust Sri Srinivasa Charity Trust be and is hereby wound up today i.e. May 30, 1992, and all the assets and liabilities as on today (list enclosed) be and are hereby transferred/handed over to Sri Srinivasa Educational Society--Regd. Kakinada. Further Sri K. V. R. Choudary, Managing Trustee be and is hereby authorised to complete the necessary formalities in this regard'."
240. Copy of the resolution filed by the respondents :
"Meeting of the board of trustees of Sri Srinivasa Charity Trust, Kakinada, held on May 30, 1992, at Ram Nivas, Sitapatirao Street, Kakinada, at 10 a.m. The chairman placed before the meeting a photostat copy of the registered deed of memorandum and articles of association of Sri Srinivasa Educational Society, Kakinada. The said society was registered with the Registrar E, G. District, Kakinada, on April 24, 1992.
The chairman suggested that in view of our trust being not able to achieve the desired objects on its own in spite of best efforts and also on being satisfied that the said desired objects of our trust can be attained through Sri Srinivasa Educational Society, Kakinada, which was registered with the similar and identical objects as that of ours, it is desirable to wind up our trust and pass over the moveable and immoveable properties to Sri Srinivasa Educational Society. In this regard he brought to the notice of members the resolution passed on April 20, 1992, a copy of which is also placed before the meeting. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-179 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | After discussion the following resolution is unanimously passed :
'Resolved that Sri K. V. R. Choudary, managing trustee be and is hereby authorised to take all steps to become a sponsor patron in Sri Srinivasa Educational Society and for which purpose, do all such things that" are necessary such as advancing/transferring moveable and immovable properties to Sri Srinivasa Educational Society.
Resolved that Sri K. V. R. Choudary, managing trustee be and is hereby authorised to take necessary permission from the income-tax authorities and do all acts that.are necessary for finally transferring the properties of our trust to Sri Srinivasa Educational Society.' The meeting terminated with a vote of thanks to chairman."
241. From these resolutions, it is seen that while the preamble to both the resolutions is one and the same the resolutions said to have been adopted are different as per the version of the parties. The Board did not feel the necessity of summoning the minutes book of the trust to find out which of the resolutions is true. Even as per the version of the respondents themselves, the managing trustee opined that the trust was not able to achieve the desired objects on its own in spite of best efforts ... and it is desirable to wind up the trust and pass over the movable and immovable property to Srinivasa Educational Society. While acceding to the request of the managing trustee, the trustees resolved to take necessary permission from the income-tax authority and do all acts that are necessary for finally transferring the property of the trust to Srinivasa Educational Society. It is not known why the trustees, who are none other than the family members of respondent No. 2 passed such a resolution, when the managing trustee himself suggested winding up of the trust. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-180 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 242. Be that as it may, on April 27, 1992, the secretary of Srinivasa Educational Society applied for permission for establishment of Sri K. V. R. College of Engineering in Kakinada in an extent of Ac. 31.96 cents of land situated in the backward area of Ponnamanda village of Kothapally Mandal, East Godavari District. This land was shown in the name of the trust in the list of properties of the trust as on May 30, 1992, with the signature of the second respondent. The Board without examining the need and purpose in donating Rs. 10 lakhs to this trust owned by the second respondents family out of a total donation of Rs. 11,01,382 given by the company during that year, simply upheld the donation on the basis of exemption certificate granted by the Commissioner of Income-tax on March 6, 1995, for a period of five years and on the basis of the assessment order for the assessment year 1995-96 passed on the basis of nil return. When once a decision was taken to transfer the assets of the trust to the society way back in 1992 on the ground that the trust failed to achieve the desired results and the society to which the trust thought of transferring its assets, started functioning, it is not known why the second respondent got income-tax exemption in 1994 for a period of five years for a defunct trust in contravention of the alleged resolution passed by the board, whereunder he was authorized to take necessary permission from the income-tax authorities for effecting transfer of properties of the trust to the society. Be that as it may it is not the case of the respondent that this amount was in any way required for carrying on the activities of the trust. In fact they have not shown utilization of this amount in the income-tax return. Nextly, it is to be seen that normally the donee will | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-181 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | in the income-tax return. Nextly, it is to be seen that normally the donee will be approaching the donor for donation by specifying the purpose. There is absolute silence on the part of the respondents, as to - who approached the company for donation or at least how this donation was utilised by the trust belonging to the family of the second respondent. By diverting the funds in this manner to a non-functioning trust if not non-existent trust belonging to the second respondent family, the company avoided payment of income-tax and claimed exemption. The Board has not applied its mind to the crux of the matter and simply washed its hands by saying that the contribution is to an existing trust. Hence it cannot be said that the affairs of the company are being run not in a manner prejudicial to public interest. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-182 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 243. Discrepancies in the stock of finished products :
This issue was not raised in the company petition. But it was raised by filing C. A. No. 65 of 1996 and C. A. No. 115 of 1997 seeking amendment to the main petition. The allegation of the petitioners is that respondents Nos. 2 and 3 are misappropriating huge funds of the company by not bringing major quantities of automobile parts manufactured by the company to the books of account by filing annual reports of the company for the years 1989-90, to 1995-96. He also filed a statement pointing out the discrepancies in respect of automobile parts at an estimated value of Rs. 86.49 crores in a span of seven years.
244. Unfortunately the Board not only rejected the plea but also gave a certificate to the company for the increase in the turnover during the subsequent years and the Board says that the petitioners themselves agreed that in the subsequent years the closing stocks and opening stocks are shown properly. Likewise, the Board simply believed the version of the respondent-company that this procedure is being followed for a number of years as gospel truth having observed as follows :
"The company has unhesitantly admitted that the discrepancy in closing stock which was being followed for over a number of years would have been made more comprehensive than what was shown in the balance-sheet."
245. The Board further held :
"The discrepancies have occurred due to incomplete narration of closing stock in the balance-sheet and it is due to non-supply of full description of closing stock and it cannot be assumed that there is diversion of spare parts by the company."
246. In other words the petitioners have not been able to establish that the respondent-company is diverting the products of the company without accounting for the same. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-183 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 247. In arriving at this conclusion, the Board relied upon the compilation of entries in the RJI register said to have been maintained under the provisions of the Central Excise Act which contains the day-to-day particulars of opening stock production, sales and closing stock together with statement of reconciliation for the year 1994-95 and it is also the case of the respondent-company that the entries in the RJI register are being periodically verified and signed by the authorities.
248. Now it is to be seen whether the procedure followed by the Board can be sustained in law.
249. Mr. Raghavan tries to impress upon the court that the Board comprises a member well acquainted with the accounts and other experts have approved the explanation given by the respondent-company. I can only observe that as this country is having such type of accounts officers the black money that is being generated in the industrial circles of this country is 3 to 4 fold than the real currency, which is expected to be in circulation as per the version of the Reserve Bank of India. If the members of the Board properly analysed this issue in a manner known to law and not carried away by extraneous reasons, the result of the company petition would have been otherwise. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-184 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 250. The book that was produced before the Board was produced before this court also. To my surprise it is nothing but a compilation prepared by the company. But the original RJI register was not produced before the Board to prove that the Central excise authorities have verified and signed in the register. Further the Board did not summon the original RJI register to find out whether the entries in the compilation book tally with the original register or not. In fact no Central excise officer was examined to prove that the entries in the RJI register are being periodically checked and signed by the Department officials. As stated supra none of the entries in the compilation was proved by the respondent in a manner known to law by examining themselves or their representatives or the excise officials. Further the members of the Board were carried away with the increased turnover of the company year after year by completely brushing aside the allegations made by the petitioners.
251. Now the next question is whether the finding recorded by the Board is sus-tainable, even if the perfunctory enquiry conducted by the Board is given any credence in the light of the documentary evidence. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-185 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 252. From the annual reports, it is seen that the company divided the automobile spare parts that are being manufactured by it into four groups, namely (1) king pins, king pin units, shackle pins, shackle pin bolts, C & BP tubes, (2) tie-rod ends, kits and draglinks, (3) UJ crosses and (4) piston pins and the production as well as sales were shown groupwise in the annual reports. From the information culled out from the balance-sheet, the discrepancies in the stock were shown yearwise as follows :
Statement showing the difference of manufacturing items and its costs as per the price of SRMT (1) King pins (2) Tierod ends (3) U. J. Cross (4) Piston Total value 1989-90 Opening stock 1,90,707 11,946 Production 16,93,546 1,19,502 94,629 2,60,254 Sales 3,43,485 ...
1,26,660 Closing stock 2,33,978 22,020 Discrepancy 13,06,790 1,19,502 94,629 1,23,520 (Amount Rs.) 13,06,79,000 2,39,00,400 2,83,88,700 61,76,000 1,891 1990-91 Opening stock 2,33,978 22,020 Production 18,19,083 1,58,315 1,00,666 3,77,958 Sales 4,02,824 1,71,588 Closing stock 3,76,565 ... | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-186 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 36,336 Discrepancy 12,73,672 1,58,315 1,00,666 1,92,054 (Amount Rs.) 12,73,67,200 3,16,63,000 3,01,99,800 96,02,700 1,988 1991-92 Opening stock 3,76,565 36,336 Production 19,17,917 1,76,116 1,28,738 2,03,529 Sales 4,19,260 1,44,354 Closing stock 3,27,631 24,462 Discrepancy 15,47,591 1,76,116 1,28,738 71,049 (Amount Rs.) 15,47,59,100 3,52,23,200 3,86,21,400 36,52,450 2,321 1992-93 Opening stock 3,27,631 24,462 Production 21,93,374 1,36,833 1,19,927 2,01,883 Sales 4,56,203 1,26,948 Closing stock 1,90,404 5,472 Discrepancy 18,74,394 1,36,833 1,19,927 93,925 (Amount Rs.) 1,87,43,400 2,73,66,600 3,59,78,100 46,96,250 2,554 1993-94 Opening stock 1,90,404 5,472 Production 24,89,080 1,44,537 1,55,651 2,75,534 Sales 5,43,636 1,45,434 Closing stock 72,048 3,942 | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-187 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 1,45,434 Closing stock 72,048 3,942 Discrepancy 20,63,800 1,44337 1,55,651 1,31,650 (Amount Rs.) 20,63,80,000 2,89,07,400 4,66,95,300 65,82,500 2,885 1994-95 Opening stock 72,048 3,942 Production 24,90,943 1,83,966 1,44,055 2,42,725 Sales 4,88,413 1,49,166 Closing stock 1,24,385 5,394 Discrepancy 19,50,193 1,83,996 1,44,055 92,107 (Amount Rs.) 19,50,19,300 3,67,99,200 4,32,16,500 46,05,350 2,796 1995-96 Opening stock 1,24,385 5,394 Production 39,22,383 1,67,955 1,72,197 1,76,316 Sales 5,72,499 1,69,062 Closing stock 1,10,969 15,672 Discrepancy 33,63,576 1,67,955 1,72,197 + 3,024 (Amount Rs.) 33,63,57,600 3,35,91,000 5,16,59,100 1,51,200 4,212 Total value of discrepancy since 1989-90 to 1995-96 = Rs. 186.49 crores. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-188 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 253. The estimated value of the unaccounted spare parts as per the price list of the company was arrived at. The total value of the discrepancies of the stocks from 1989-90 to 1995-96 worked out to Rs. 186.49 crores :
Though this is a very serious allegation, the Board neither looked into original annual reports filed by the petitioners to find any discrepancies in the stocks nor assessed the value of the missing stocks and expressed their satisfaction on the explanation given by the respondents without verifying the truth or otherwise of their plea.
254. The ninth petitioner to prove his case pointedly has taken one item, i.e., piston pins for the year 1994-95. These pins are sold in sets consisting of 6 pieces. The opening stock of piston pins for the year 1994-95 is 657 sets (3,942 pins) and the production during the year is 40,454 sets (Nos. 2, 42, 725 pins). The total number of sets available for sale are 41,111 and the sets sold are 24,861. The closing stock of the sets should be 16,250. But the closing balance was shown as 899 and the missing sets are 15,357 whose value works out to Rs. 70,76,811 at the rate of Rs. 461 per set as per the price list of the respondent-company. To prove the falsity of the case of the respondents, the petitioners furnished the account of piston pins for the years 1980, 1994-95 and 1996-97. The table is extracted hereunder :
Stock position of piston pins in the balance-sheets of S. R. M. T. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-189 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | Piston Pins 1994-95 1996-97 Sets Production in Nos.
Sets Production in Nos.
Sets Production in Nos.
Opening stock 1,20,204 2,42,725 2,612 1,43,424 Production 20,034 40,454 23,904 Sales 20,327 41,111 26,516 Closing stock 18,363 24,861 24,223 1,964 16,250 2,293 1,964 2,293 15,351 Stock Difference value Nil 15351 X 461 Rs. per set -Rs. 70,76,811 Nil Before filing the petition in the Law Board At the time of filing the petition in the Law Board After filing the petition in the Law Board | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-190 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 255. When these discrepancies were shown at the time of considering the plea of . the petitioner for appointment of interim administrator in C. A. No. 65 of 1996 the members of the Board observed that "we made a pointed question to Sri Raghavan whether the company will be in a position to produce a statement reconciling the figures of production, sales and dosing stock to compare the same with the monetary value of shares shown in the annual accounts, he readily agreed to do so". Thereafter at the time of final hearing, learned counsel for the respondents filed a statement said to be a reconciliation statement and the same is extracted herein :
Reconciliation statement of opening stock, production, sales and dosing stock for the year 1994-95 Group Opening Stock As per balance-sheet Production Sale Closing Stock As per balance-sheet Piston pins 25,103 24,861 King pins 32,052 4,11,862 3,77,374 66,540 King pin units 2,392 1,10,751 1,11,039 2,105 Other 32,555 72,048 19,68,329 21,71,780 46,726 1,24,385 M.V. Parts and Engine parts 2,17,622 21,85,951 U. J. Crosses 2,876 1,44,055 1,46,390 Tie rod ends.
2,173 1,83,996 1,77,696 8.473 kits, Drag Links Grand total 72,705 72,705 30,61,719 30,09,140 1,25,284 1,25,284 Note : 1. The narration in respect of "piston pins" under the head "Production" in balance-sheet is incomplete. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-191 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 2. Balance-sheet production figure shown against narration "piston pins" Nos. 2,42,725 includes other engine parts Nos. 2,17,622.
3. In this statement they have been included under "Other M. V. parts and engine parts". | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-192 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 256. On the basis of the above statement, counsel for the respondents contended that the petitioners arrived at the conclusion on the basis of incomplete narration in the annual reports and the production of piston pins includes other engine parts whose number is 2,17,622 and they are shown in this reconciliation statement. This contention found favour with the members of the Board. To my mind the explanation is utterly false and far from the truth. For the first time I came across with a contention that the figures shown in the balance-sheet are incomplete and they include some other engine parts whose identity was not established. If there is any truth in this reconciliation statement, the respondents would have stated what are the other engine parts that they are manufacturing, how their production and sales were shown in the balance-sheets of all those years, and how for the first time in the reconciliation statement they came up with this story that piston pins include other engine parts. The case of the petitioners is that the automobile spare parts that are being manufactured by the company are reflected in the balance-sheet and to their knowledge there are no other engine parts that are being manufactured by the company. Under the caption "sales" after sale of Tata vehicles for which the company is dealer, sales of SRMT parts were shown and the sale of other engine parts was not shown in any of the annual reports. The respondents have not given any explanation how the sale proceeds on other engine parts are being shown in the balance-sheets. Nextly the production of piston pins for the year 1994-95 was shown as 2,42,225 (40,454 sets) in the annual report. But in the reconciliation statement the production was shown as 25,103 sets. It is not known from where he got this figure. From the figures given in the balance-sheet the difference is 15,351 sets as explained in the Table. This difference is sought to be explained by stating that the production includes other engine parts Nos. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-193 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | Table. This difference is sought to be explained by stating that the production includes other engine parts Nos. 2,17,622, this figure is shown separately along with other parts whose production, sale and closing stocks were shown groupwise and though the so called other engine parts have nothing to do with either the piston pins account or other parts shown groupwise in the annual reports. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-194 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 257. Assuming for a moment that the reconciliation is true, the respondents have shown other M. V. parts and engine parts under different head and how they can add these parts to piston pins accounts. The fallacy of this argument can be exposed from another angle also. The mischief played by the respondents which missed the eye of the Board, is as follows. The piston pins produced in that year was 2,42,725, As they are being sold in sets of 6 Nos. the number of sets will be 40,454. But the respondents mischievously deducted the so-called other engine parts from the total number of pins, i.e., 2,42,725--2,17,622 and shown that 25,103 Nos. pistons pins were produced. If this figure is divided by six, the number of sets will be only 4,184. For this, if the opening stock of 657 sets are added total number of sets available for sale would be 4,841 sets. But the piston pins sold during that years are 24,861 sets while the other figures relating to piston pins were shown in sets--production was shown in numbers as explained above. The Board did not apply its mind to these grave discrepancies that are evident on the face of the reconciliation statement. The falsity in the plea of the respondent-company can be exposed in another manner also. From the annual reports for the years 1980 and 1996-97 (after Board order in C. A. No. 65 of 1996) it is seen that there are no discrepancies in the stocks of the piston pins. If other engine parts are included in the piston pins, why were the discrepancies that occurred in the financial year 1994-95 not there in those years and where have the other engine parts gone ? I understand in 1980 the company was following the calendar year but the company seemed to have opted financial year for accounts | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-195 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | the company was following the calendar year but the company seemed to have opted financial year for accounts purpose subsequently. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-196 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 258. If the statement of the respondent counsel that the production of piston pins includes other engine parts is true, how they disappeared in the years 1980 and 1996-97 when the respondent-company is following the same pattern of accounts consistently for the last 25 to 30 years as per their version before the Board and their own letter dated September 24, 1996, addressed to petitioner No. 4 wherein he stated "that the itemwise tally of each and every part manufactured in the formula given by you is impracticable because of the large number of items manufactured and also on account of combination sale and the company has been consistently following the same pattern of disclosing the quantitative particulars of production, sales and stock for the last 25 to 30 years."
259. From the above it can be safely presumed that either the details of the spare parts shown for the years 1980 and 1996-97 should be false or the figures shown in the year 1994-95 should be false.
260. The above discussion exposes the falsity of the plea of the respondents that the production figure of piston pins includes other engine parts. The Board did not even advert to the discrepancies in the stock position from 1989-90 to 1995-96 with regard to (1) king pins, (2) tie-rod ends, (3) U. J. crosses and (4) piston pins whose value seems to be Rs. 186.49 crores as per the price list of the respondent-company. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-197 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 261. Learned counsel for the petitioners strenuously contended that as the company is involved in manufacture of spare parts, the accounts of the company have to be audited under the Cost Audit (Report) Rules, 1968. On the other hand, counsel for the respondents contended that these rules are not applicable to this company. I am not going into that controversy. From the statement of discrepancies extracted supra, it is seen that a large number of spare parts that were produced by the company were not brought to the books of account. In fact the respondents did not dispute seriously the discrepancies. They simply tried to get over by saying "incomplete information". At least there is a prima facie evidence to show that there is large scale embezzlement of funds of the company and there is large scale evasion of excise duty, sales tax, income-tax etc., and required thorough investigation.
262. In the light of the foregoing discussion, I have no hesitation to hold that the Board in its anxiety to give a clean chit to the respondent-company has not even looked into the annual report of the company as approved in the annual general body meeting of the company to find out whether there is any truth in the allegation about the large scale misappropriation of the company funds by not bringing the automobile spare parts that are being manufactured by the company to the books of account as is evident from the statement extracted supra and satisfied itself with the statement of the petitioners that in the subsequent years opening stocks and closing stocks are being shown properly without reference to large scale evasion of both direct and indirect taxes apart from excise duty payable to the State as well as Central Governments.
Other acts of mismanagement | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-198 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | Other acts of mismanagement
263. I am not adverting to the plea of the petitioner with regard to the diversion of material for construction of a community hall in the name of the mother of the second respondent, Hotel Jaya International, sale of scrap, used oil etc. as no serious arguments were addressed on these matters before me, though the petitioners filed some material and deposed on these issues in his evidence before the Board. I would not like to express any opinion on these aspects.
264. From the findings recorded by me on the acts complained of by the petitioners with regard to mismanagement, I have no hesitation to hold that the affairs of the company are being conducted by respondents Nos. 2 and 3 (father and son) as joint managing directors of the company in a manner not only prejudicial to public interest but also prejudicial to the interest of the shareholders of the company as well.
Acts of oppression :
The word "oppression" used in Section 397 of the Act was not defined in the Act.
265. In Universal Dictionary the word "oppression" is defined as (1) harsh ; tyrannical (2) causing a state of physical or mental discomfort or weariness.
266. As Section 397 of the Act being a corresponding Section to Section 210 of the old English Act, counsel for the petitioner placed reliance both on English decisions as well as Indian decisions. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-199 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 267. In Elder v. Elder and Watson ltd. [1952] Scottish Cases 49, Lord Keith while considering the word "oppression" observed that "it is not lack of confidence between shareholders per se that brings Section 210 into play, but lack of confidence springing from oppression of a minority by a majority in the management of the company's affairs, and oppression involves, I think, at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder." In Scottish Co-operative Wholesale Society Ltd. v. Meyer [1958] 3 All ER 66; [1959] 29 Comp Cas 1 (HL) Lord Viscount Simonds speaking for the majority of the House of Lords observed, (page 28): "Oppression under Section 210 may take various forms. It suggests, to my mind, as I said in Elder's case, a lack of probity and fair dealing in the affairs of a company to the prejudice of some portion of its members. The Section introduces a wide power to the court to deal with such a situation in an equitable manner which it did not have in the case of a company prior to the passing of the Act of 1948." Lord Denning in a separate judgment held that the object of the remedy is to bring "... to an end the matters complained of, that is, the oppression, and this can be done even though the business of the company has been brought to a standstill." (page 33)
268.In Five Minute Car Wash Service Ltd., In re [1966] 36 Comp Cas 566; [1966] 1 All ER 242 (Ch D), it was held that an act or omission may also amount to oppressive conduct if it is designed to achieve an unfair advantage. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-200 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 269. In Shanti Prasad Jain v. Kalinga Tubes Ltd. , their Lordships of the Supreme Court observed that (p. 364) :
"the law, however, has not defined what is oppression for purposes of this section, and it is left to courts to decide on the facts of each case whether there is such oppression as calls for action under this section.
(Page 366) : . . . the question in each case is whether the conduct of the affairs of a company by the majority shareholders was oppressive to the minority shareholders and that depends upon the facts proved in a particular case . . . It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. . . . Section 397 unless it be shown that this lack of confidence sprang from a desire to oppress the minority in the management of the company's affairs and that there was at least an element of lack of probity and fair dealing to a member in the matter of his proprietary right as a shareholder." | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-201 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 270. In Gajarabai Patny v. Patny Transport (Pvt.) Ltd. [1966] 36 Comp Cas 745 (AP), this court considered the effect of Sections 397 and 398 of the Act of 1956. Justice Jaganmohan Reddy, as he then was, observed that (headnote): "where there is discrimination by the majority of shareholders or by the majority of the directors to the detriment of the minority amounting to oppression, and the affairs of the company are managed in a manner derogatory to the company's interest, Sections 397 and 398 of the Companies Act can be invoked and the court has unfettered discretion in such a case to impose upon the parties whatever settlement it considers just and equitable to remove the oppression."
271. On facts of the case, his Lordship held (headnote) : "that the action of the directors in withholding transfer of shares in favour of the petitioners, in accordance with the terms of the will, while at the same time transferring some other shares in the managing agency firm, under the same will, was vindictive and harsh and unreasonable and amounted to oppression.
272. In Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd. , their Lordships of the Supreme Court in para. 52 of the judgment held that (page 782) "the person complaining of oppression must show that he has been constrained to submit to a conduct which lacks in probity, conduct which is unfair to him and which causes prejudice to him in the exercise of his legal and proprietary rights as shareholder". If this act is proved, the power of the Company Law Board to invoke Section 397 of the Companies Act will be justified. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-202 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 273. While going through the minutes book I found two/three important resolutions adopted by the board which throw sufficient light on the acts complained of by the petitioners against respondents Nos. 2 and 3 and which were not placed before the Board. While dealing with the merits of the case, I have taken note of the resolutions.
274. In Malleswara Finance and Investments Co. v. Company Law Board [1995] 82 Comp Cas 836; [1995] 1 Comp LJ 1 (Mad), the main matter in dispute was the decision to increase the share capital of the company so as to reduce the majority shareholders into minority shareholders. Learned counsel for the appellant in that case contended that the allotment of the shares is a matter of internal management of the company and the same is outside the scope of Section 397 or 398 of the Act. After reviewing the case law on the subject, the Madras High Court held that (page 886): "it is well established that directors of a company are in a fiduciary position vis-a-vis the company and must exercise their power for the benefit of the company. If the power to issue further shares is exercised by the directors not for the benefit of the company but simply and solely for their personal aggrandisement and to the detriment of the company, the court will interfere and prevent the directors from doing so. The very basis of the court's interference in such a case is the existence of the relationship of a trustee and cestui que trust as between the directors and the company." On the facts of the case, the court having observed that there was no necessity to increase the capital since there was no plant or machinery, why the share capital was increased is not explained. Accordingly, the court held that the directors of the fifth respondent-company did not act in good faith and amounted to act of oppression. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-203 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 275. In Mrs. Rashmi Seth's case [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. As the petitioner continued to hold 50 per cent. shares in the company and as such she was held to have fulfilled the criteria prescribed under Section 399 of the Companies Act, 1956, for filing a petition under Sections 397 and 398 of that Act.
276. In the aboye judgment it was further held that the action of the directors in not offering shares to all the shareholders, but to one shareholder, such allotment had the effect of converting the majority shareholding of the petitioner into a minority shareholding and the same amounts to acts of oppression and mismanagement. The Company Law Board further held that the directors cannot utilise the fiduciary powers over the shares purely for the purpose of destroying an existing majority or creating a new majority and exercise of power to issue further shares for the purpose of consolidating and improving voting power to the exclusion of the existing majority shareholder cannot be allowed.
277. In R. Khemka's case [1998] 16 SCL 1 (AP) this court observed that the word "oppression" is a chameleonic word and it changes its colour and content from time to time, place to place, and event to event, depending on circumstances of the case. His Lordship also observed while Section 397 of the Act is intended to protect the interest of minority shareholders, Section 398 of the Act is intended for maintaining public interest and interest of the company. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-204 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 278. From the above it is seen that if the company with the support of the majority shareholders creates a state of physical or mental discomfort to the minority members and tries to alter shareholdings of the members by fabricating the resolutions as held supra it has to be construed as an act of "oppression" of the minority by majority. Further, in a case of mismanagement, the minority shareholders need not prove the allegations to be true. Mere apprehension is sufficient for making an order by the Company Law Board with a view to bringing to an end the disputes, as seen from Section 398(2) of the Act.
279. But Sri Raghavan appearing for the respondents strenuously contended that the Company Law Board, not being a court and being creature of a statute, whose powers are enumerated cannot exercise powers in equity as is being done by the High Courts as well as the Supreme Court.
280. While this court considered the series of objections raised by counsel, this contention was rejected by holding that the Company Law Board is empowered to exercise inherent powers under Rule 44 of the Company Law Board Regulations, 1991, akin to the inherent powers that are being exercised by the civil courts under Section 151 of the Civil Procedure Code.
281. Nextly, from the language of Section 398, mere apprehension in the minds of minority shareholders is sufficient and the allegations levelled against the majority shareholders need not be proved in the strict sense for exercise of the powers vested in it under Section 402 of the Act by the Board.
282. Keeping the dicta laid down in the cases referred supra, I proceed to examine whether the acts complained of by the petitioners constitute acts of oppression. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-205 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | Rights issue :
The case of the petitioner is that in January, 1994, the company made rights issue all of a sudden without any discussion in any board meeting or the general body meeting, on September 25, 1993, with a view to bringing the shareholding of the petitioners below 10 per cent. in order to see that the petitioners would not approach the Board for reliefs against oppression and mismanagement and the issue was not for any bona fide business purpose. The petitioner in his chief examination categorically stated that in the board meeting held on July 29, 1993, the issue regarding expansion or modernization of the company was not in the agenda. It is also his case that in the annual general body meeting held on September 25, 1993, no discussion about expansion or modernisation of the company took place. Be that as it may, the petitioners having received the offer of rights on April 31, 1994, applied for shares on March 8, 1994, but the shares were not allotted to the petitioner for a long time on the ground that the form was not signed by one Aruna Devi who was holding shares jointly along with the petitioner and who died in the year 1980, though the death certificate of Aruna Devi was sent to the company on May 25, 1994. The case of the respondents is that the additional share capital was sought to be raised for purposes of expansion and modernisation and replacement through the rights issue as per the resolution of the board in its meeting held on July 29, 1993. The company has not allotted the shares to the petitioner, as the petitioner did not attach the death certificate of the joint shareholder along with the application. It is only in 1997 the shares were allotted to the ninth petitioner. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-206 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 283. Rejecting the contention of the petitioners, the Board held that it is beyond their comprehension as to how the rights issue as long as the offer is accepted would reduce one's shareholding forgetting the fact that the shares were not allotted to the ninth petitioner till 1997, i.e., three years after the company petition was filed. On the second contention that the company is not in need of funds, the Board observed that it was not the first time that the company made such an issue. Earlier in 1991 also such an issue was made even without verifying the minutes of the board dated July 29, 1993. Ultimately the Board held as follows (page 538 of 98 Comp Cas) :
"Therefore, we cannot subscribe to the view of the petitioners that the rights issue was made with an oblique motive especially when it will have effect on nearly 90 per cent. of the shareholders other than the petitioners who hold only around 10.6 per cent. shares."
284. Having taken such a view the Board surprisingly held (page 539) : | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-207 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 284. Having taken such a view the Board surprisingly held (page 539) :
"However, we find that the grievance of the petitioner relating to delayed allotment of the shares has substance. We are not in a position to appreciate the stand of the company that the death of a family member was not known to the persons in management, viz., second respondent for over three years to allot shares applied for in 1994, in 1997. Personal differences should not come in the way of discharging statutory responsibilities. The delayed allotment has denied the petitioner the benefit of dividend declared. Therefore, we are of the view that the petitioner should be compensated at least to the extent of the dividend that he would have been otherwise entitled to if the shares had been allotted in time. Accordingly, we direct the company to compensate him by payment of interest at the same rate at which dividends were declared and paid in respect of the delayed period within a period of one month from the date of receipt of this order." | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-208 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 285. Now let me see to what extent the findings recorded by the Board can be sustained. The case of the respondent is that the Board has taken a decision at its meeting held on July 29, 1993, admittedly after the disputes started. The agenda notice for that meeting was filed before the Board as annexure R-15 by the respondents themselves. None of the agenda items relate to expansion or modernisation or replacement of the old machinery. Perhaps they want to take advantage under the last item "any other matter with the permission of the chair". But at the same time the resolution adopted at the meeting was not filed before the Board. I summoned the original minutes book to have a look at the resolutions adopted by the board. The subject replacement/modernisation of machinery was taken up under Item No. 8 (D) in the board meeting held on July 29, 1993, and the resolution adopted under this item is extracted hereunder :
"Resolved that approval of the company be and is hereby given in prin-' ciple to take up replacement-cum-modernisation of machinery and expansion of the plant. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-209 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | Resolved further that the scheme of funding and other details be considered at the next board meeting which shall be made available by the managing director."
286. From the above resolution it is seen that the board did not decide to raise additional amounts through rights issue-Secondly, if the rights issue was made for the purpose of expansion, etc., the respondents did not state how the additional share capital raised was utilised even at the time when the case was heard at the fag end of 1998. Further the case of the respondent is that about Rs. 1.5 crores was raised through rights issue and it is not known whether the company is not in a position to raise that amount if it is really needed from other sources. On the other hand, the specific case of the petitioner is that the company made rights issue only to see that his shareholding is reduced to less than 10 per cent. thereby preempting him from approaching the Board under Section 397 of the Act. The ninth petitioner spoke about this issue in detail while giving evidence. From the resolution of the board it is seen that the company is having surplus funds and with regard to raising of additional share capital, the board having agreed in principle to the suggestion of the second respondent that about Rs. 7.5 crores may be raised for the purpose, resolved to consider the scheme of the funding and other details at the next board meeting which shall be made available by the managing director. From the above it is seen that the board did not resolve to raise additional share capital by rights issues. Further while the estimated amount for the purpose is Rs. 7.5 crores the amount raised through rights issue is only Rs. 1.5 crores. How the remaining amount was raised, the company did not explain. On the other hand, the respondents did not file the copy of these resolutions before the Board purposely as they will be caught on the wrong side. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-210 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 287. In the light of the foregoing discussion the conclusion arrived at by the Board that the company decided to raise Rs. 1.50 crores by making rights issue is not based on any material and it is the result of non-application of mind. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-211 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 288. Nextly, the Board brushed aside the contention of the petitioner that the company made a rights issue only to see that his shareholding is reduced to less than 10 per cent. to prevent him from approaching the Board under Section 397 of the Act, by holding that it is beyond their comprehension as to how the rights issue as long as the offer is accepted would reduce one's shareholding. The case of the petitioner is that both in the petition as well as in his evidence that having accepted the rights issue, he submitted an application dated March 8, 1994, to the Assistant Secretary, when the company did not allot the shares to the petitioner on the ground that the ioint shareholder, i.e. Aruna Devi has not signed the application, he submitted the death certificate of Aruna Devi on May 25, 1994. The copy of the letter along with death certificate were filed before the court. Though counsel for the respondent-company contended that the company did not receive the death certificate till 1997, he neither produced any evidence to show that the death certificate was not received by the company in 1997 nor he elicited anything contra in the cross-examination of the petitioner that he has not furnished the death certificate on May 25, 1994. If there is no mala fide intention on the part of respondents Nos. 2 and 3 it is not known how the shares remained unallotted to the petitioner for three long years, more so in the light of the observation of the Board that "we are not in a position to appreciate the stand of the company that the death of the family member was not known to the persons in management". | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-212 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 289. Mr. Raghavan in his marathon arguments did not attack this finding of the Board. Be that as it may, the very finding of the Board that "personal differences should not come in the way of discharging the statutory responsibilities and awarding of payment of interest at the rate at which the dividends were declared to compensate the petitioner", is sufficient to hold that respondents Nos. 2 and 3 pitched upon the rights issue and withheld the allotment of shares to the ninth petitioner with a view to see that the shareholding of the petitioner will be less than 10 per cent. Had the other shareholders not joined him, he would not have on his own approached the Board under Section 397 of the Act.
290. In Malleswara Finance and Investments Company (P.) Ltd.'s case [1995] 82 Comp Cas 836; [1995] 1 CLJ 1 the Madras High Court held that in the absence of any evidence that the increase in the share capital was necessary, the issue and allotment of shares is not in good faith and is intended to defeat the rights of shareholders.
291. In Gajarabai Patny's case [1966] 36 Comp Cas 745 (AP), his Lordship Justice Jaganmohan Reddy as he then was in this court held that the action of the directors in withholding transfer of shares in favour of the petitioners, in accordance with the terms of the will, while at the same time transferring some other shares in the managing firm, under the same will, was vindictive, harsh, unreasonable and amounted to oppression. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-213 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 292. In Standard Industries Ltd.'s case [1994] 80 Comp Cas 764 again the Principal Bench of the Company Law Board held that the action, as evidenced by resolute endeavour, to go with the rights issue in spite of opposition from 48 per cent. shareholders in effect, intended to reduce the petitioners and others to insignificant minority and suffers from lack of probity and fair play.
293. Following the dicta laid down in the above judgments, I hold that withholding of allotment of shares of the ninth petitioner even after producing the death certificate of the joint shareholders, the late Aruna Devi, along with her letter dated May 25, 1994, for more than four years is only with a view to preempt the ninth petitioner and his group from approaching the Company Law Board complaining of acts of oppression and mismanagement in the affairs of the company and such an action is vindictive, harsh and unreasonable and amounts to oppression.
Removal of petitioner No. 9 as director :
The case of petitioner No. 9 is that he was removed as director in the extraordinary general body meeting of the company held on January 21, 1994, without following the procedure prescribed in the Act. It is also his case that the petitioners and other shareholders supporting him were not allowed to participate in the said meeting and he was not accorded any opportunity to explain his position as envisaged under Section 284 of the Act. His further case is that once the board decided to convene the meeting as per the requisition, a special notice under Section 190 of the Act must have been issued by the requisitionist. Likewise, the provisions of Section 168 of the Act were not followed and the notice for the meeting did not contain any explanatory statement as envisaged under Section 173 of the Act and as such the proceedings of the meeting have to be declared as null and void. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-214 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 294. The case of the respondents is that the company received a requisition notice for removal of the petitioner as director of the company. After the court litigation initiated by the petitioner on the requisition notice came to an end, in the extraordinary general body meeting held on January 21, 1994, it was unanimously decided to remove the petitioner as director. Their case is that the telegraphic representation sent by the petitioner for the board meeting held on December 27, 1993, was circulated to the members, as the petitioner did not choose to attend the meeting to make oral representation. The general body decided to remove him after considering the telegraphic representation and as such the provisions of Section 284 of the Act were complied with.
295. With regard to issuance of special notice under Section 190 of the Act, the case of the respondent is that the requisition notice received by the company was a composite one both under Section 169 of the Act as well as under Section 190 of the Act. Hence, the removal of the petitioner was in consonance with the above provisions of law and had the support of all the shareholders who attended the meeting and as such it cannot be impugned. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-215 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 296. The Board, having observed that in a petition under Section 397 of the Act directorial complaints cannot be generally agitated, examined the same and held:
"As per record, nine shareholders requisitioned for convening an extraordinary general body meeting for passing a resolution to remove the petitioner as a director. Having taken recourse to the legal forum, the petitioner is complaining that the provisions of Sections 284 and 190 of the Act were not followed in this process". The Board accepted the plea of the respondents that "the circulation of telegraphic representation is sufficient compliance with the provisions of Section 284 of the Act". The other contention of the petitioner that the requisitionist has not issued special notice of fourteen days before the date of meeting did not find favour with the Board and they observed that Section 169 of the Act has to be read independently from Section 284 of the Act. Since a notice under Section 169 of the Act is received by the company and the notice indicates the business to be transacted in the meeting which is to be held within a stipulated time framed as provided under that section, the question of issuing separate special notice under Section 190 of the Act does not arise and the notice of the requisitionist was treated as special notice under Section 190 of the Act. The Board also held that "the provisions of Section 190 of the Act are applicable only in connection with the annual general body meeting and not in respect of a requisitioned extraordinary general body meeting". The Board also held that "in case of meetings convened on requisition under Section 169 of the Act, no explanatory statement need be enclosed. In that view of the matter, the Board held that the removal of the petitioner as director does not suffer from any legal infirmity". | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-216 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 297. Before considering the correctness or otherwise of the order of the Board, it should be kept in mind that petitioner No. 9 was given in marriage to respondent No. 2's daughter in 1969 and he became a director of the company in 1970. He was not only a director of this company, but also actively involved in the management of the affairs of the various subsidiary companies. He was the (1) managing partner of Padmalaya Finance Company, (2) managing director of Vijaya Engine Valves Limited, (3) managing director of K. V. R. Forgings and (4) chairman of Bhavani Castings. From this it is clear that the petitioner was holding important positions at least in four subsidiary companies apart from the post of director in the respondent-company. After the disputes have arisen between the father-in-law and son-in-law, i.e., respondent No. 2 and the ninth petitioner, he was stripped of the positions held by him one after the other except the post of managing director for K. V. R. Forgings which he seemed to have resigned after he became Member of Parliament in 1984. No explanation whatsoever is forthcoming as to why he was removed from various positions held by him for nearly 2 1/2 decades. From the events that have taken place, it is obvious that he was stripped of all his positions as he has fallen from the grace of his father-in-law and he started raising his voice against the mismanagement of the affairs of the company by respondent No. 2. Nextly, as a director of the company he will be having access to all the records and account books of the company and as director he is entitled to have the information as a matter of right unlike a shareholder who has no right to have the information with regard to the day-to-day affairs of the company. This is evident from the alleged letter of the company dated December 3, | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-217 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | affairs of the company. This is evident from the alleged letter of the company dated December 3, 1993, addressed to the ninth petitioner, which did not reach him as per the answer given by the ninth petitioner to Q. No. 131 in cross-examination. The question (Q. No. 136) put to the ninth petitioner and the answer given by him in his cross-examination are extracted below : | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-218 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | "Q. 136. You have every right to inspect the books and records of the company ? | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-219 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | A. Since the information asked for was not given and it is not possible to go through the records of the company and find out the mis-appropriation."
298. From questions Nos. 6 to 10 in the cross-examination, it is seen that counsel suggested to the ninth petitioner that as a director he is having access to all the books, records and accounts.
299. From this it is evident that petitioner No. 9 is stripped of his directorship, so that he will not have access to the records and to pre-empt him from approaching the Board seeking relief against acts of oppression. This answer of the ninth petitioner is further fortified from the reply given by the company to the letters addressed by him seeking information before and after losing the directorship as well as the replies of the company to the other petitioners as shareholders.
300. From this angle, if we look at the notice, nine shareholders belonging to respondent No, 2's family gave notice after the disputes have arisen between respondent No, 2 and the ninth petitioner, the irresistible conclusion that can be arrived at is that respondent No. 2 with the power at his command wants to oppress the voice of the petitioners by not allowing him to have access to the records, accounts, etc., more so, when he tried to find pitfalls in the administration and tried to expose the misdeeds of respondent No. 2 prejudicial to public interest as well as the interest of the company. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-220 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 301. Coming to the resolution removing petitioner No. 9 as director, the specific case is that in the annul general body meeting held in September, 1993, he raised the issue of misappropriation of Rs. 1.25 crores and as a retaliation respondent No. 2 got requisition notice issued by his family members on November 4, 1993. The requisition notice is said to have been given under Section 169 of the Act requesting the managing director to convene an extraordinary general body meeting to consider and pass a resolution, "resolved that Mr. Chundru Srihari Rao be and is hereby removed as director of the company". They also stated that "it may be treated as special notice under Section 190 of the Act". | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-221 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 302. Section 284 of the Act deals with removal of directors. Under Sub-section (1), a company may, by ordinary resolution, remove a director before the expiry of his period of office. Under Sub-section (2), a special notice has to be given for passing a resolution for removal of a director or appoint some one in his place. Under Sub-section (3), on receipt of such a notice, the company shall forthwith send a copy thereof to the director concerned, and the director shall be entitled to be heard on the resolution at the meeting. Under Sub-section (4), the director concerned after receipt of the meeting notice may make a representation in writing to the company and request its notification to members of the company. While giving notice for a general body meeting, the company has to send a copy of the representation to every member of the company, and if a copy of the representation is not sent for the reasons stated therein, the director may without prejudice to his right to be heard orally, require that the representation shall be read out at the meeting. From the language employed in Sub-sections (3) and (4), I feel that there is some ambiguity with regard to the time at which notice to be given to the director, i.e., prior to giving notice for the general body meeting or after the notice for general body is given. I need not go into the controversy, as both counsel did not address arguments on this aspect.
303. Under Section 190 of the Act, notice of intention to move the resolution shall be given to the company not less than fourteen days before the date of meeting at which the resolution to be moved, excluding the day on which the notice is served or deemed to be served on the member concerned. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-222 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 304. Under Section 169 of the Act, on receipt of requisition meeting notice received from the members of the company, the board of directors shall proceed to call for an extraordinary general body meeting of the company. Though the board at its meeting held on December 27, 1993, decided to call for the extraordinary meeting, on January 21, 1994, neither the notice calling for the meeting nor the explanation of the ninth petitioner appended to the notice, or the resolution passed in the general body meeting were produced either before the Board or this court to find out whether the statutory requirement is satisfied in convening the meeting or the contents of the telegram, to know whether it can be treated as an explanation and whether the resolution adopted by the general body reflects the application of mind by the members to the telegram in removing petitioner No. 9 as director. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-223 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 305. Be that as it may, even assuming that the company complied with statutory requirements in convening the meeting, under Section 294(3) of the Act, the director is entitled to be heard on the resolution at the meeting. In the evidence, the petitioner categorically stated that having received the notice for extraordinary general body meeting slated on April 21, 1994, he along with his wife went to attend the meeting at 3.30 p.m., which is scheduled to be held at 4.00 p.m., to explain to the shareholders of the company the reasons why a resolution is being moved to remove him as a director and to explain to them the stand taken by him for exposing corruption and misappropriation of funds by respondent No. 2, but he was not allowed to enter the meeting hall as the gates were closed at 3.30 p.m. and the security told him that they were doing so under instructions. Immediately, he gave a press release, but the same was published on January 27, 1994, vide answer to question No. 65 in chief-examination. This statement of the petitioner stood unrebutted. But the Board accepted the version of the company and held that the removal of the petitioner as director does not suffer from any legal infirmity. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-224 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 306.Firstly, I have gone through the order as well as the material papers filed by the respondents in this regard. From Sub-section (4) of Section 284 it is seen that even if the representation is not circulated to the members of the company, the director may, without prejudice to his right to be heard, orally require that the representation shall be read out at the meeting. From this, it is evident that even if the representation is circulated with the notice, the right of the director sought to be removed, of being heard is preserved. As the deposition of the petitioner that he was not allowed to enter the meeting hall to explain his stand and he gave a press statement to that effect which was published on December 27, 1993, stood unrebutted, I have no option except to hold that the resolution adopted by the general body at its meeting held on April 21, 1994, is in contravention of Section 284 of the Act. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-225 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 307. Counsel for the respondent strenuously contended that the shareholders cannot be restrained from calling a meeting and they are not bound to disclose the reasons while calling for an extraordinary general body meeting to move a resolution for removal of some directors and appoint others in their place, nor the reasons for the resolutions are subject to judicial review by placing reliance on Life Insurance Corporation of India's case . Their Lordships of the Supreme Court in para. 100 held as follows (page 636) :
"100. Thus, we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review .. . .. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting." | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-226 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 308. It is true that the Honourable Judges of the Supreme Court have taken such a view in upholding the action of the Life Insurance Corporation in seeking removal of non-executive directors in Escorts Limited who resisted transfer of shares held by the financial institutions in favour of non-resident Indians with a view to avoid confrontation with the Government and the Reserve Bank and to adopt more conciliatory approach as per the policy of the Government, to earn foreign exchange by attracting non-resident individuals of Indian nationality or origin to invest in the shares of Indian companies, by providing incentives to facilitate investment by non-residents of Indian nationality or origin in shares of Indian companies and by liberalising the existing facilities and procedural formalities, and who dragged the issue to the court. In arriving at this conclusion, they placed reliance on Company Law by Gower who compared the shareholders and board of directors as legislative and executive organs. Their Lordships opined that the only effective way the members in general meeting can exercise their control over the directorate in a democratic manner is to alter the Articles so as to restrict the powers of the directors for the future or to dismiss the directorate and appoint others in their place. I have no quarrel with the general proposition laid down by the Honourable Supreme Court. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-227 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 309. But the facts and circumstances of that case are altogether different from the facts and circumstances of this case. Here, the Board is considering whether the action of the shareholders in calling for an extraordinary general body meeting to move a resolution for removal of petitioner No. 9 is bona fide one or tainted with bad faith at the instance of respondent No. 2. Though the resolutions are not subject to judicial review, the court should not close its eyes to the time and the manner in which the resolution is sought to be moved by the shareholders, more so, when the shareholders who have given the notice for convening of the extraordinary general body meeting are no other than the kith and kin of respondent No. 2, apart from the fact that the ninth petitioner was stripped of all his positions in the subsidiary companies which he was holding for more than 2 1/2 decades at the same time. In fact, in Standard Industries Ltd.'s case [1994] 80 Comp Cas 764, 771 (CLB) while considering the action of the majority shareholders fully subscribing to the rights issue to the detriment of the petitioners observed that "it was not the legality of the rights issue but the modus pperandi adopted by the respondents that was the real issue". From the above it is seen that it is not the legality of the resolution passed by the general body removing the ninth petitioner as director, but the time, the intention, modus operandi adopted by respondents Nos. 2 and 3 in getting the resolution passed, so that he will not have access to the original records and account books, etc., to see that the ninth petitioner is placed in a disadvantageous position to expose their misdeeds and also to gain time to fabricate the documents, which are in their possession, in the event of his approaching the Company Law Board under Chapter VI of the Companies Act. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-228 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 310. In Life Insurance Corporation of India's case their Lordships of the Supreme Court held that (page 628) : "Generally and broadly speaking, we may say that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of public interest, the effect on parties who may be affected, etc".
311. From this judgment it is crystal clear when fraud or improper conduct is alleged against the majority shareholders, the Board is expected to lift the corporate veil to see whether the majority shareholders acted in violation of the statutory provisions, whether any element of public interest is involved and whether any of the parties are affected by their actions and whether the resolution is moved in good faith. But the Board without seeing whether the removal of the petitioner by the general body is in good faith or at the dictates of respondents Nos. 2 and 3, who are controlling the majority shareholders and even without looking into statutory provisions whether the resolution passed by the general body satisfied the test laid down in Section 284 of the Act, simply held that the removal of the ninth petitioner as director does not suffer from any legal infirmity. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-229 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 312. Hence, it is rather difficult to hold that the procedure prescribed for removal of petitioner No. 9 as a director under Section 284 of the Act is followed. As such the finding of the Board that Section 169 of the Act has to be read independently from Section 284 of the Act and no explanatory statement need be enclosed in the case of meetings convened on requisition and that the provisions of Section 190 of the Act are applicable only in connection with the annual general body meeting and not in respect of a requisition for the extraordinary general body meeting, runs counter to the provisions of the Act and I have no manner of doubt to hold that the findings of the Board are not in consonance with the provisions of the Act. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-230 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 313. Other acts of oppression not adverted to by the Board, by not considering the voluminous record :
1. Assault by Krishna Mohan :
While giving answer to questions Nos. 77 and 78 in chief, categorically stated that respondent No. 2 sent one Krishna Mohan working as manager in S. R. M. T. to his cabin to assault him and in the assault he received bleeding injuries. With the result he was treated in the Government Hospital at Kakinada and he also filed a criminal case against the said Krishna Mohan. It seems the case is still pending. On the other hand, the case of the respondent-company is that on a complaint given by Krishna Mohan, petitioner No. 9 was convicted and a fine was imposed on him. Rebutting this argument, petitioner No. 9 brought to the notice of this court that on appeal the order of the learned magistrate was reversed. It is not known how the magistrate kept the criminal case filed by the ninth petitioner pending and disposed of the criminal case filed by Krishna Mohan though both the complaints arose out of the same incident and they being case and counter case.
2. Assault by Mr. M. V. V. Satyanarayana Rao : | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-231 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | 2. Assault by Mr. M. V. V. Satyanarayana Rao :
Mr. M. V. V. Stayanarayana Rao, joint managing director of Padmalaya Finance Corporation and co-son-in-law of petitioner No. 9 seemed to have caused bodily injuries to petitioner No. 9 and he lodged a complaint before the III Town Police Station, Kakinada, on April 9, 1997. Though a case was registered in Cr. No. 82 of 1997 under Section 324 read with Section 34 of the Indian Penal Code no action seemed to have been taken by the police. In those circumstances, petitioner No. 9 filed Writ Petition No. 27324 of 1997 questioning the inaction on the part of the police. In the counter, the Sub-Inspector of Police while admitting that the investigation has not been completed went to the extent of saying that the incident has nothing to do with the disputes between the co-sons-in-law. The learned judge in his judgment dated November 7, 1997, recorded a finding as follows :
"It is rather difficult to appreciate as to how the Investigating Officer could have expressed any opinion whatsoever about the non-involvement of certain persons whose names are mentioned by the petitioner."
In fact this court directed the Superintendent of Police to entrust the investigation of the case to another Inspector of Police by divesting the Sub-Inspector of Police, III Town Police Station, Kakinada. Even after the judgment, the result of the investigation has not seen the light of the day till this date. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-232 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | (3) Criminal cases filed by Satyanarayana Rao, son-in-law of respondent No. 2 :
It is also his case that the said Satyanarayana Rao filed as many as eight criminal cases against him, i.e., C. C. Nos. 434 of 1998, 453 of 1998, 82 of 1999, 93 of 1999, 607 of 1999, 46 of 1999, 56 of 1999 and 94 of 1999. Though these cases were filed after the company petition, the fact remains that the persecution of the ninth petitioner is continuing and the court has to take judicial notice of these cases, as counsel for the respondents did not deny the fact of filing so many criminal cases against the ninth petitioner.
(4) Criminal cases filed by K. V. V. Prasada Rao another son-in-law of respondent No. 2 :
Another co-son-in-law Mr. K. V. V. Prasada Rao filed three criminal cases against him, viz., C. C. Nos. 705 of 1999, 706 of 1999 and 707 of 1999.
Again though these cases are subsequent to the filing of company petitions, I have taken judicial notice for the reasons given below.
These cases filed by both the co-brothers of the ninth petitioner against him are all pending in the criminal courts, Kakinada. | https://indiankanoon.org/doc/720379/ |
ed3b2bcc1e02-233 | Sri Ramdas Motor Transport Ltd. ... vs Karedla Suryanarayana And Ors. on 18 October, 2001 | (5) Criminal case against E. Satyanarayana Murthy--List witness under Section 3(1)(e) of the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 :
It is his further case that (a) at the instance of respondent No. 2 a criminal complaint was given by one Peter Bala against one E. Satyanarayana Murthy, who worked in various capacities in the respondent-company, on a suspicion that he is giving information to petitioner No. 9, stating that he scolded him by his caste name on August 8, 1995, and the same was registered as Crime No. 55 of 1995 under Section 3(1)(e) of the Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989. He was detained in the prison for more than ten days. Ultimately, he was granted bail by this court in Crl. Petition No. 3912 of 1995, dated August 17, 1995. | https://indiankanoon.org/doc/720379/ |