2006 Supreme(SC) 730

2006(8) Supreme 359
SUPREME COURT OF INDIA
(From Calcutta High Court)
B.P. Singh and Altamas Kabir, JJ.
Dankha Devi Agarwal (Dead) through LRs.—Appellants
versus
Tara Properties Pvt. Ltd. & Ors.—Respondents
Civil Appeal No. 1015 of 2000
With
Civil Appeal No. 6535 of 2004
Decided on 17-8-2006
Counsel for the Parties :
For the Appellants : Vijay Hansaria, Sr. Advocate, Rana Mukherjee, Siddharth Gautam, Goodwill Indeevar and D. Mahesh Babu, Advocates.
For the Respondents : R.F. Nariman, Ranjit Kumar, Sr. Advocates, Bijan Kumar Ghosh, R.D. Upadhyay and Mrs. Sumita Ray, Advocates.

Headnote:Companies Act, 1956—Sections 397 & 399—Family company—Differences within the family—Company was incorporated as a family company with ‘T’, his wife, appellant, their elder son and younger son—Each of them was allotted 10 shares each in the newly formed company—As mother granted a lease of land to the company, 3000 shares of the company were allotted in favour of her—All the shareholders were indicated as the first Directors of the Company—‘T’ moved to Delhi alongwith his wife and younger son—Public notice regarding outstanding tax liability of the company to the tune of Rs.23,06,748/—On investigation, it transpired that out of the share holding of 1660 shares held by appellant mother, 1150 shares were purported to have been transferred by her to her elder son and a further 500 shares were transferred in favour of his wife—Notice for holding extra ordinary meeting—Board of Directors took a Resolution to remove both elder son and his wife from the Directorship of the company—Suit filed by appellant mother for a declaration that purported transfer of 1650 shares in the name of mother to elder son and his wife was null and void—Elder son filed a Company petition u/s 397 & 399 of the Companies Act—On death of ‘T’, suit filed by appellant was sought to be withdrawn—Allegations of forgery of her signatures—Mother filed an application for recalling of orders on ground that she had not withdrawn her suit—Application dismissed—Order passed for removing elder son and his wife from Directorship of company dismissed—Whether High Court was justified in holding that removal of elder son and his wife from Board of Directors of the Company was illegal—(Yes)—Whether High Court was justified in dismissing application filed by appellant for recalling the orders passed regarding withdrawal of suit—(No).

       Held : As has been revealed from the materials on record, the transfer of the 1650 shares of Smt. Dankha Devi Agarwal in favour of Shri Bhagirath Agarwal and his wife was effected some time in 1983-84 at a time when Shri Tara Chand Agarwal and Smt. Dankha Devi Agarwal along with the family of Chandra Prakash Agarwal had shifted to Delhi. It was after Shri Tara Chand Agarwal and others returned to Calcutta in 1985 that a Board Meeting of the Company was convened by Tara Chand Agarwal on 26th May, 1989, when Shri Bhagirath Agarwal was requested to produce the minute book of the Boards meetings. It was thereafter that CS No.874/1989 was filed by Smt. Dankha Devi Agarwal against the respondents in the Calcutta High Court inter alia praying for a declaration that she was the sole and absolute owner of 1660 shares and that the transfer of 1650 shares in favour of respondents Nos. 2 and 3 be declared null and void. Be that as it may, there are certain unusual circumstances in which the aforesaid suit filed by Smt. Dankha Devi Agarwal was withdrawn as also the manner in which the application filed by her for recalling the order of dismissal of the suit was dismissed by the learned Single Judge. The manner in which Smt. Anjali Agarwal, who was Shri Bhagirath Agarwals Advocate, assumed charge of the proceedings on behalf of Smt. Dankha Devi Agarwal in the suit filed by her against Bhagirath Agarwal, generates an impression that all was not above board.(Paras 23 and 24)

       The developments after the filing of the application by Smt. Dankha Devi Agarwal for a declaration that the purported transfer of 1650 shares in favour of Bhagirath Agarwal and his wife was null and void, leading to the withdrawal of the suit, has not been properly dealt with either by the learned Single Judge or the Division Bench which merely followed the order of the learned Single Judge. Both the Single Judge and the Division Bench appear to have been influenced by the affidavit said to have been sworn by Shri Chandra Prakash Agarwal on 24th July, 1995, wherein it had been stated that Smt. Dankha Devi Agarwal was unable to hear, speak, read or write and that she was leading a vegetable existence and her mind had gone completely blank. The events, as disclosed leave a lingering doubt as to whether Smt. Dankha Devi Agarwal had really instructed her Advocate on Record to give a change in favour of Smt. Anjali Agarwal, who, as indicated hereinabove, was the advocate of Shri Bhagirath Agarwal against whom the suit had been filed, particularly when it was to his interest that the suit stood withdrawn.(Para 25)

       As far as Civil Appeal No.6535/2004 is concerned, it has not been seriously argued on behalf of the appellant that the learned Single Judge had erred in holding that the removal of Shri Bhagirath Agarwal and his wife from the Board of Directors of the company was illegal, on the ground that the meetings of the company held on 26th October, 1989 and 21st November, 1989 were without due compliance with the provisions of Section 286 of the Companies Act. Similar is the case as far as the issuance and allotment of 1960 shares in favour of Shri Tara Chand Agarwal and Shri Chandra Prakash Agarwal is concerned. The Division Bench has affirmed the view of the learned Single Judge that the story of notice having been given to Shri Bhagirath Agarwal of the meeting where his directorship was in question, and his staying away from such meeting, was difficult to accept. The decision of the Single Bench or the Division Bench has not been seriously contested on behalf of the appellant. In the facts of the case, it is difficult to take a view which is different from that taken both by the Single Judge and the Division Bench of the High Court.(Para 27)