JUDGMENT

S.B. Sinha, J.

These appeals are directed against a judgment and order dated 9.8.2000 passed by a Division Bench of the High Court of Gujarat at Ahmedabad in O.J. Appeal Nos. 6, 7 and 8 of 1995 whereby and whereunder the judgment and order dated 17.12.1994 passed by a learned Single Judge of the said Court dismissing Company Petition No. 51 of 1991 filed by the First Respondent herein, was set aside.

BACKGROUND FACTS :

2. Sir Pratapsinghrao Gaekwad was the Ruler of Baroda. Maharani Shantadevi Gaekwad was his wife. They had eight children. For certain reasons with which we are not concerned, the estate of Gaekwad came into the hands of their elder son, Fatesinghrao P. Gaekwad (FRG) even during the life time of Sir Pratap Singh. FRG floated several companies, three of which are Baroda Rayon Corporation Ltd. (BRC), Gaekwad Investment Corporation Company Ltd. (GIC) and Alaukik Trading & Investment Corporation Pvt. Ltd. (Alaukik). BRC came into existence in 1958. At the outset, it was being run under Managing Agency System which was abolished in or about 1968 and later on the same was being managed by the Board of Directors with the assistance of professional executives. Appellant No. 1 herein, the youngest son of Pratapsinghrao Gaekwad, joined the said company in 1968. He was the Director of Managing Agents till 31.12.1969 whereafter he became the Additional Director with effect from 1st January, 1970. He in the same year became Joint Managing Director. In April 1976, he became the Managing Director of BRC. He was reappointed as Managing Director for two periods of five years each with effect from 19th February, 1980 and 19th February, 1985. FRG passed away on 1st September, 1988, whereafter he was appointed as Chairman and Managing Director on 23.9.1988.

3. GIC was a small investment company. Its equity capital consisted of 425 shares of Rs. 100/- each. The said shares were mainly held by the family members. A large chunk of shares was held by Jaisingh Ghorpade Trust of which FRG was a trustee. The beneficiaries of this Trust are said to be outsiders. Some shares of GIC were held by outsiders also. The share holding pattern of the Company was as under:

Sr. No.NameNo. of Shares

1.Shrimant Fatesinghrao Gaekwad301

2.H.H. Maharani Shantadevi Gaekwad7

3.H.H. Maharani Padmavatidevi Gaekwad20

4.Prince Ranjitsingh P. Gaekwad10

5.Shrimant Sangramsinh P. Gaekwad1

6.Princess Shubhanginidevi Gaekwad5

7.H.H. Mrunalinidevi Puar10

8.Shrimant Lalitadevi Kirdatt5

9.Shrimant Shivrajkumar1

10.H.H. Padmavatidevi Gaekwar & H.H. Maharani Shantadevi Gaekwar4

11.Shrimant Pramila Raje of Jasdan4

12.Shrimant Asharaje Gaekwad5

13.Shrimant Ajaysinh Murarrao Ghorpade1

14.Shrimant Vasundhara Raje Murarrao Ghorpade1

15.Shrimant Ashokraje Gaekwad1

16.Shrimant Vimala Raje Gaekwad1

17.Shrimant Devayanidevi Gaekwad1

18.Shrimant Ajitsinh Gaekwad1

19.Shri Jaysinghrao M. Ghorpade & H.H. Maharani Padmavatidevi Gaekwad5

20.Shrimant Dilipsinh G. Desai & Smt. Kusumben D. Desai5

21.Smt. Kusumban D. Desai & Shri Dilipsinh G.Desai5

22.Capt. V.S.Hazare10

23.Smt. Pramilabai Hazare10

24.Shri Malhari N. Khade1

25.Shri Rameshchandra V. Dhaibar10

Total equity shares425

4. Alaukik was a subsidiary of GIC. Respondent No. 12, Mrs. Mrunalini Devi Puar was its Managing Director.

5. Allegedly, GIC suffered a loss during the financial years ending 31st March, 1987 and 31st March, 1988 as a result whereof substantial parts of the equity and reserves were wiped out. It could not even pay off the loans and credits. It had no funds to subscribe for the rights issue made in 1989 by BRC. Its share holding in BRC was likely to fall with which its forged fortunes were closely linked as the dividend from the shares of BRC was the major source of income of the company. GIC came into financial trouble when BRC did not declare dividend in 1986-87. The value of BRC shares also declined and, thus, it became difficult to avail of an overdraft facility from the Banks. It was then decided to raise funds from the existing memb