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2021 SCC OnLine NCLT 129

†
In the National Company Law Tribunal
(BEFORE MADAN B. GOSAVI, MEMBER (JUDICIAL) AND VIRENDRA KUMAR GUPTA,
MEMBER (TECHNICAL))

Ramesh B. Desai and Others … Petitioners;

Versus
Secretary, Sayaji Industries Ltd. and Others …
Respondents.
TP 02 of 2018 (CP No. 35 of 1988 Transfer from Hon'ble Gujarat High
‡
Court)
Decided on January 27, 2021, [Order reserved on : 06.01.2021]
Advocates who appeared in this case:
Learned Senior Counsel Mr. Shalin Mehta appeared for the Petitioners on
behalf of Wadiya & Gandhi Co;
Learned Senior Counsel Mr. Mihir Thakore appeared for the Respondents;
Learned Counsel Mr. Hemang Shah appeared for the Respondent No.
12&13;
Learned Senior Counsel Mr. Devang Nanavati along with Learned Counsel
Ms. Prachiti Shah appeared for Respondent No. 1
Learned Counsel Mr. Sandeep Singhi appeared for Respondents;
Learned Counsel Mr. Saurab Mehta appeared;
Learned Counsel Mr. Jay Kansar appeared;
Learned Counsel Mr. Zainab Bharmal appeared;
Learned Counsel Mr. Trisha Baxi appeared.
The Order of the Court was delivered by
VIRENDRA KUMAR GUPTA, MEMBER (TECHNICAL):— This petition has been
filed under Section 155 of the Companies Act, 1956 for rectification of Register
of Members.
2. This case is pending for adjudication for almost thirty three years. Firstly,
this petition was filed before the Hon'ble High Court of Gujarat which was
dismissed in-limine on the ground as being barred by limitation. As this was
dismissed in summary manner on this preliminary issue, an appeal was filed
before the Hon'ble Supreme Court. The Hon'ble Supreme Court set aside the
decision of Hon'ble High Court of Gujarat and remanded the matter back to
the High Court for decision on all issues raised in this case afresh in
accordance with the law. It was also made absolutely clear by the Hon'ble
Supreme Courtthat their observations/findings given in the appeal disposd of
by Hon'ble Supreme Court will not have any impact while such matter being
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considered and decided by the Hon'ble Court of Gujarat afresh. The Hon'ble
High Court of Gujaratvideits order dated 27.08.2009 framed the issues which
are reproduced as under:
1. Heard the learned Counsel appearing for both the sides on the aspects of
framing of issues-
2. Considering the pleading and the controversy raised, following issues are
framed:—
(a) Whether the petition is bad in mis-joinder or nonjoinder of the
necessary parties or not?
(b) Whether the petitioners prove that there was any fraud played in
routing the monies of the company i.e. M/s. Sayaji Industries Limited
for acquiring the shares or for getting the control over the
management of the company as alleged or not?
(c) Whether there is any breach of the provisions of Section 77 of the
Companies Act committed by any of the respondents or not?
(d) Whether there is any breach of provisions of Article 20 of the Articles
of Association read with Section 36 of the Companies Act or not?
(e) Whether the petition is barred by limitation or not?
(f) Whether any direction deserves to be issued under Section 155 of the
Companies Act for ratification of the register of shareholders or not?
(g) Whether status-quo ante deserves to be ordered or not?
(h) Whether reliefs as prayed by the petitioners deserves to be granted
or not?
(i) The final operative order?
3. The parties shall produce the documents in support of the evidence,
which they may propose to lead on the basis of the aforesaid issues by
separate list of documentary evidence within a period of three weeks
from today.
4. SO to 24.9.2009.
3. Thereafter, an application was filed before Hon'ble High Court of Gujarat
wherein requests were made to reframe the issues and the Hon'ble High Court
of Gujarat after considering the arguments made therein in a detailed manner
held as under:
In light of the foregoing discussion of facts and law, framing of following
additional issues would be said to be proper. Therefore the following
additional issues are framed.
(i) Whether the petition is maintainable against newly added respondent
Nos. 11 to 14 in view of deletion of Section 155, by virtue of Companies
(Amendment) Act, 1988? Whethertherefore, the petition would lie before
the Company Law Board under Section 111(4) of the Companies Act,
1956?
(ii) Whether the petition is liable to bedismissed having regard to the family
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settlement arrived at by means of Memorandum of Understanding

between two branches of family, namely B.V. Mehta's Branch and S.V.
Mehta'sbranch since more than 30 years?
(iii) Whether rectification of Registerunder Section 155 of the Companies
Act can begranted when transactions are not connected to the issues of
entries in the Register?
(iv) Whether petition is barred againstnewly added parties, by law of
limitationand/or by principles of latches, waiver, acquiescence or
estople?
(v) Whether the petition is entertainableat the instance of present
petitioner who holda small fraction of share?
(vi) Whether the petitioner is entitled toseek rectification of Register of
members of the company in favour of those newly addedrespondents
who have never objected to and/orfiled any application for rectification of
entries at any stage? This Application is allowed in aforesaidterms and to
the above extent.
4. Thereafter, the case remained pending for disposal. After, Companies
Act, 2013 came into operation pending proceedings before the High Court
were to be transferred to NCLT as per Section 434(l)(c) of Companies Act,
2013. Hon'ble High Court, taking note of this provision, passed an order on
25.08.2018 and transferred this petition for disposal by the Tribunal.
5. This case was heard at length. The Parties were asked to give written
submissions which have been given. The written submissions so given are
reproduced as under:
1. WRITTEN SUBMISSIONS ON BEHALF OF PETITIONER
1. The captioned Company Petition has been preferred by the Petitioners
against the Respondents under Section 155 of the Companies Act,
1956 (“1956 Act”) inter alia seeking reliefs as more particularly
prayed therein. It is submitted that Respondent No. 2 and his family
members (Respondents No. 2/1 to 2/3) acquired the shares of
Respondent No. 1 company in violation of Section 77 of 1956 Act as
well as Article 20 of Articles of Association of Respondent No. 1 (Page
87 of Company Petition) read with Section 36 of 1956 Act inter alia by
purchasing shares of Respondent No. 1 from the funds of Respondent
No. 1 itself. Thus, the names of Respondent No. 2 and his family
members having been entered in the register of members of the
Respondent No. 1 without sufficient cause, it is imperative that the
said register of members of Respondent No. 1 be rectified by an Order
of this Hon'ble Tribunal by exercising its powers under Section 155 of
the 1956 Act.
2. It is submitted that the captioned Company Petition was heard at
length by this Hon'ble Tribunal and pursuant thereto, the Petitioners
are filing the present Written Submissions in support of their
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arguments in the captioned matter.

Ø BRIEF FACTS OF THE CASE
1. It is submitted that it is an admitted fact that the Petitionersare
shareholders of Respondent No. 1 company - Sayaji Industries
Limited. It is submitted that the captioned Company Petition was
initially preferred by 9 (nine) Petitioners, however, owing to the
demise of Petitioners No. 2 to 5 and 7 to 9, the said Petitioners were
deleted as parties from the captioned Company Petition vide Order
dated 12th April, 2019 passed by this Hon'ble Tribunal in IA No. 74 of
2019 filed by Petitioner No. 1 in the captioned Company Petition. It is
submitted that thereafter, the captioned Company Petition is being
contested and continued by the Petitioners No. 1 and 6.
2. It is submitted that Respondent No. 1 is a public limited company
incorporated under the provisions of the 1956 Act. It is submitted that
the Respondents No. 2 to 11 were the then Directors of Respondent
No. 1 Company, at the time a filing of captioned Company Petition. It
is submitted that the Respondents No. 4 to 11 have been
subsequently deleted as parties from the captioned Company Petition
vide separate Orders passed by the Hon'ble Gujarat High Court and
this Hon'ble Tribunal.
3. It is submitted that Respondent No. 2 and 12 are sons of Vadilal
Lallubhai Mehta. Respondent No. 2/1 is the widow of Respondent No.
2. Respondent No. 3 (also impleaded as party Respondent No. 2/2) is
the son of Respondent No. 2 and Respondent No. 2/3 is the daughter
of Respondent No. 2. It is submitted that Respondent No. 13 is the
wife of Respondent No. 12. It is submitted that for the sake of
convenience, the Respondents No. 2, 2/1 (also joined as Respondent
No. 14), 2/2 (also joined as Respondent No. 3) and 2/3 (also joined as
Respondent No. 15) are hereinafter collectively referred as
“Respondent No. 2 and his family”. For ease of understanding, the
aforesaid family relations of legal heirs of Vadilal Lallubhai Mehta
concerning the present Petition are provided in the form of a chart
hereunder:

4. It is submitted that on 30th January, 1982, a Memorandum of

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Understanding (“MOU”) (Page to 45 of Company Petition) came to be

executed between Respondent No. 2, Respondent No. 2/1 and
Respondent No. 3 on one hand, and Respondent No. 12 and
Respondent No. 13 on behalf of themselves and their minor son,
Saurabh Suhas Mehta, on the other hand. It is submitted that the
MOU was confined to and between Respondent No. 2 and Respondent
No. 12, as more particularly stated in Clause 3 of the MOU (Page 24 of
Company Petition). For ready reference, Clause 3 of the MOU is
reproduced hereunder:
“3. This understanding does not concern in any manner the
property owned and held by Shri Vadilal Lallubhai Mehta and Smt
Vimlaben Vadilal Mehta and each of the four daughters. This
understanding is confined only to and between Shri Bipinbhai
Vadilal Mehta and Shri Suhasbhai Vadilal Mehta and concerning
some of the properties held by each of them”
5. It is submitted that Clause 6 of the MOU (Page 25 of Company
Petition) provides that the main object of the MOU was to entrust the
management of some companies to Respondent No. 2 and others to
Respondent No. 12 in the manner as detailed in the MOU. It is
submitted that Clause 1 of Details of Understanding of the MOU (Page
25 of Company Petition) provides that the management of
Respondent No. 1 and one C.V. Mehta Pvt. Ltd. (“CVMPL”) were to be
entrusted to Respondent No. 2. It is submitted that for the said
purpose, the transfer of about 13,000 (thirteen thousand) shares was
to be undertaken as per Clause 4 of Details of Understanding of the
MOU (Page 26 of Company Petition) read with Annexure II of the MOU
(Page 44 of Company Petition) pursuant to fulfilment of obligations by
Respondent No. 2 as provided in Clause 5 of MOU (Page 27 of
Company Petition) including the other Clauses referred to therein. For
ease of reference, Clauses 5 and 6 of the MOU and Clauses 1 and 4(a)
of the Details of Understanding stated in the MOU are reproduced
hereunder:
“5. There is a Public Limited Company known as Sayaji Mills Ltd.
and there are following private companies:—
i) Industrial Machinery Manufacturers Pr. Ltd.,
ii) C. Doctor & Co. Pr. Ltd.,
iii) Mehta Machinery Manufacturers Pr. Ltd.,
iv) Oriental Corporation Pr. Ltd., and
v) C.V. Mehta Pr. Ltd.
At present all these companies are managed by Shri Vadilal Lallubhai
Mehta and Shri Suhasbhai Vadilal Mehta. Bipinbhai Vadilal Mehta and
Suhasbhai Vadilal Mehta and their Trusts and H.U.Fs. and Vimlaben
Vadilal Trust and Vadilal Lallubhai Mehta H.U.F. held shares in these six
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companies. Shri Vadilal Lallubhai Mehta and Smt. Vimlaben Vadilal

Mehta also hold shares in these companies but they are not the subject
matter of this understanding.
6. The main object of this understanding is to entrust the
management of some of the Companies to Bipinbhai Vadilal Mehta
and of others to Suhasbhai Vadilal Mehta by mutual transfer of shares
and other procedures and by transfer of some properties from one to
the other.
………
DETAILS OF UNDERSTANDING
1. The management of Sayaji Mills Limited and C.V. Mehta Pr. Ltd.,
will be entrusted to Bipinbhai Vadilal Mehta.
4.(a) The Shares of Sayaji Mills Ltd., and C.V. Mehta Pr. Ltd., held by
Suhasbhai Vadilal Mehta and the members of his branch or the companies
going to his share or Trusts or by Vadilal Lallubhai H.U.F. or by Vimlaben
Vadilal Trust shall be sold or transferred to Bipinbhai Vadilal Mehta or as he
may desire;…..”
6. It is submitted that since CVMPL had various liabilities towards Vadilal
Lallubhai Mehta and Respondent No. 12, among others, it was agreed
in Clauses 10 to 12 of the MOU that such amounts were to be paid
immediately and it was the responsibility of Respondent No. 2 to
ensure that the liabilities of CVMPL were paid and discharged
immediately (Pages 29 and 30 of the Company Petition). It is
submitted that since Respondent No. 2 was to acquire large number
of shares of Respondent No. 1 (approximately 13,000 shares)
pursuant to the MOU, Respondent No. 2 was in de facto management
of Respondent No. 1 since January, 1982 itself. For ease of reference,
Clauses 10, 11 and 12 of the MOU are reproduced hereunder:
“10. C.V. Mehta Pr. Ltd. which is being allotted to Bipinbhai
Vadilal Mehta has certain amounts to pay to the members of the
family of Vadilal Lallubhai Mehta, Suhasbhai Vadilal Mehta,
Suhasbhai Vadilal Trusts, Vadilal Lallubhai H.U.F., Vimlaben Vadilal
Trust, Bhuriben Lallubhai Estate and the daughters and grand-
children of Shri Vadilal Lallubhai Mehta and Smt. Vimlaben Vadilal
Mehta. C.V. Mehta Pr. Ltd., has also to pay substantial amount to C.
Doctor & Co. Pr. Ltd. All such payments shall be made immediately
and according to the entries in the books of account made upto
date.
11. Similarly, C.V. Mehta Pr. Ltd., has to recover considerable
amounts from Mehta Machinery Manufacturers Pr. Ltd., Oriental
Corporation Pr. Ltd. and from others. All such payments shall be
made immediately and according to the entries made in the books
of account made upto date.
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12. The outstanding dues and liabilities of C.V. Mehta Pr. Ltd.
shall be adjusted as may be directed by Vadilal Lallubhai Mehta and
in any event it shall remain the responsibility of Bipinbhai Vadilal
Mehta to see that all the liabilities of C.V. Mehta Pr. Ltd. as
mentioned above are fully paid and discharged immediately.”
7. It is submitted that since Respondent No. 2 felt difficulties in
execution and compliance of the MOU, at his request, a Memorandum
of Modification (“MOM”) (Page 46 of Company Petition) came to be
entered into between the parties to the MOUon 13th November, 1982
inter alia for the purpose of modifying several clauses of MOU as per
the request of Respondent No. 2. It is submitted that by way of the
said MOM, Clauses 1, 2, 4, 7, 10, 11, 12, 19 and 24 of the MOU came
to be altered and modified. It is submitted that the remaining Clauses
of the MOU continued to be binding on the parties to the MOU.
8. It is submitted that Clause 3 of the MOM provides that the amount
payable by CVMPL to Vadilal Lallubhai Mehta and Respondent No. 12,
among others, was agreed and fixed between the parties at INR
39,24,154.88/- (Rupees Thirty Nine Lakhs Twenty Four Thousand One
Hundred Fifty Four and Eighty Eight Paise). It is submitted that out of
the above amount, a sum of INR 20,00,000/- (Rupees Twenty Lakhs
only) was to be paid immediately by Respondent No. 2 to CVMPL on
the same day or a day after share transfer forms of Respondent No. 1
were handed over by Respondent No. 12 and his family and the same
was to be treated as a loan. It is noteworthy to mention here that as
stated in Clause 3 of MOM, the transfer of management of Respondent
No. 1 and appointment of Respondents No. 2 and 3 on Board of
Directors of Respondent No. 1 was to take place only after the entire
payment of INR 20,00,000/- (Rupees Twenty Lakhs only) was made
by Respondent No. 2. It is imperative to mention here that Clause 3 of
the MOM further provides that the Board of Directors of Respondent
No. 1 were to give actual effect to transfer of shares in favour of
Respondent No. 2 only after the payment of the aforesaid amount of
INR 20 Lakhs was made by him. For ready reference, Clause 3 of the
MOM is reproduced below:
“3. It has been agreed and the parties hereto confirm that the
amount to be brought in by Shri Bipinbhai Vadilal Mehta towards
the amounts payable by C.V. Mehta Pvt. Ltd. to the members of the
family of Shri Vadilal Lallubhai Mehta and of Shri Suhasbhai Vadilal
Mehta, Suhasbhai Vadilal Trusts, Vadilal Lallubhai H.U.F., Vimlaben
Vadilal Trusts, Bhuriben Lallubhai Estate and the daughters and
grand children of Shri Vadilal Lallubhai Mehta and Smt Vimlaben
Vadilal Mehta and to C. Doctor & Co. Pvt. Ltd. has been fixed by the
parties at Rs. 39,24,154.88/- (Rupees Thirty Nine Lakhs Twenty
Four Thousand One Hundred Fifty Four and Paise Eighty Eight
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only). Shri Bipinbhai Vadilal Mehta has agreed to pay and bring in
immediately (and in any event latest on the day next after the day
on which the Share Transfer Forms in respect of Sayaji Mills Ltd.
are handed over by Shri Suhasbhai Vadilal Mehta and members of
his family as mentioned hereafter) in C.V. Mehta Pvt. Ltd. a sum of
Rs. 20,00,000/- (Rupees Twenty lacs only) towards the amount
required to be paid by C.V. Mehta Pvt. Ltd. The said amount shall
be treated as a loan and Shri Bipinbhai Vadilal Mehta is not to claim
or demand any repayment of the said loan from C.V. Mehta Pvt.
Ltd. as long as the management thereof does not pass into the
hands of Shri Bipinbhai Vadilal Mehta as provided herein.
It is further agreed and understood that transfer of the
management of Sayaji Mills Ltd., and the appointment of Shri
Bipinbhai Vadilal Mehta and Shri Priyambhai Bipinbhai Mehta
on the Board of Directors thereof are only to be made after
Shri Bipinbhai Vadilal Mehta has paid and brought in C.V.
Mehta Put. Ltd. the aforesaid sum of Rs. 20,00,000/- (Rupees
Twenty lacs only) and it is further agreed that this amount is to
is brought and paid by Shri Bipinbhai Vadilal Mehta latest on the
day next after the transfer forms in respect of the shares of Sayaji
Mills Ltd. held by Shri Suhasbhai Vadilal Mehta and members of his
family are handed over to Shri Vadilal Lallubhai Mehta on
behalf of Shri Bipinbhai Vadilal Mehta and the members of
his family. It is also further agreed that the actual effect is to
be given to such share transfer of Sayaji Mills Ltd, by the
Board of Directors of Sayaji Mills Ltd. only after the payment
of the aforesaid amount of Rs. 20,00,000/- (Rupees Twenty
lacs only) by Shri Bipinbhai Vadilal Mehta to C.V. Mehta Pvt.
Ltd. and it is also clarified that these changes are made at
the instance and request of Shri Bipinbhai Vadilal Mehta and
are agreed to by Shri Suhasbhai Vadilal Mehta, in order to
accommodate Shri Bipinbhai Vadilal Mehta.”
9. It is submitted that a perusal of the above-mentioned Clause 3 of
MOM makes it abundantly clear that payment of INR 20 Lakhs by
Respondent No. 2 to CVMPL for the purpose of discharging the
liabilities of CVMPL was a pre-requisite for transfer of shares of
Respondent No. 1 in favour of Respondent No. 2. In other words, it is
submitted that the payment of INR 20 Lakhs by Respondent No. 2 to
CVMPL for the purpose of discharging the liabilities of CVMPL was the
agreed consideration for transfer of shares of Respondent No. 1 in
favour of Respondent No. 2.
10. It is submitted that the fraudulent transactions pertaining to the
funds of Respondent No. 1 that followed the aforementioned
understanding between the parties are the subject matter of the
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captioned Petition. The said transactions, detailed at Page 56 of

Company Petition, in unequivocal terms indicate that Respondent No.
2 and his family fraudulently utilized the funds of Respondent No. 1 to
transfer the INR 20 Lakhs to CVMPL through one of the vendors of
Respondent No. 1 - San tosh Starch Products, It is submitted that the
very same funds were thereafter utilized to discharge the liabilities of
CVMPL as per the MOU read with MOM inter alia resulting into transfer
of shares of Respondent No. 1 in favour of Respondent No. 2 and his
family. Thus, it is submitted that eventually, the consideration for
transfer of shares of Respondent No. 1 in favour of Respondent No. 2
and family was fraudulently paid from the funds of Respondent No. 1
i.e. the company itself, which is ex facie in violation of Section 77 of
1956 Act as well as Article 20 of Articles of Association of Respondent
No. 1 (Page 87 of Company Petition). For ease of reference, the
transactions detailed at Page 56 of Company Petition are reproduced
hereunder:
1. Details of ADVANCES by M/s. Sayaji Industries Ltd., to a supplier,
M/s. Santosh Starch Products, 71, New Cloth Market, Ahmedabad
Amount Rs. Date Cheque No. Bank's
Name
10,00,000 12/13.11.82 853901 Punjab
National
Bank, Maskati
Market Brach,
Ahmedabad.
5,00,000 13.11.82 953902 -do-
5,00,000 25.11.82 853934 -do-

2. Details of LOANS by the above supplier, i.e. M/s Santosh Starch

Products to Shri Bipinbhai Mehta and his family
Amount Rs. Date Cheque No. Bank's Name of the
Name Party
7,00,000 13.11.82 887275 Punjab Bipinbhai V.
National Mehta (HUF)
Bank,
Ahmedabad
6,00,000 13.11.82 887276 -do- Bipinbhai V.
Mehta
7,00,000 13.11.82 887277 -do- Priyambhai B.
Mehta

3. Details of DEPOSITS made in Ms. C.V. Mehta Pvt. Ltd. by Shri

Bipinbhai Vadilal Mehta
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Amount Rs. Date Cheque No. Bank's Name of the

Name Party
6,00,000 13.11.82 185663 Punjab Bipinbhai V.
National Mehta
Bank, Maskati
Market
Branch,
Ahmedabad
7,00,000 13.11.82 188975 -do- Bipinbhai V.
Mehta (HUF)
7,00,000 13.11.82 185672 -do- Priyambhai
Bipinbhai
11. The aforesaid fraudulent transaction concerning the funds of
Respondent No. 1 can be briefly stated as under:
(i) A sum of INR 20 Lakhs came to be advanced/transferred by
Respondent No. 1 in favour of Santosh Starch Products;
(ii) Thereafter, an amount of INR 20 Lakhs came to be transferred by
Santosh Starch Products to Respondent No. 2 and his family;
(iii) Respondent No. 2 and his family transferred the said amount of
INR 20 Lakhs to CVMPL, which was utilized to discharge the
liabilities as per Clauses of MOU read with MOM.
It is submitted that as a result of the above transactions, the
shares of Respondent No. 1 held by Respondent No. 12, were
transferred in favour of Respondent No. 2 and his family. It is
pertinent to note that as stated hereinabove, to effect the transfer of
shares of Respondent No. 1, the funds utilized by Respondent No. 2
and his family were fraudulently availed from/originated from
Respondent No. 1 itself and hence, there is no iota of doubt that the
aforesaid transaction amounts to utilization of funds of Respondent
No. 1 company for purchase of its own shares.
12. It is submitted that similar modus was adopted by Respondent No. 2
and his family in August - September, 1983 involving some other
merchants of Respondent No. 1 inter alia for payment of the balance
amount of money to be paid by him under the MOU read with MOM. It
is submitted that the details of the such transactions involving
merchant named Tirupati Traders along with other individual
merchants have been detailed at Pages 57 and 58 of the Company
Petition. It is submitted that by entering into the said transactions,
the Respondent No. 2 and his family once again fraudulently utilized
the funds of Respondent No. 1 to purchase its shares, in utter
violation of Section 77 of 1956 Act as well as Article 20 of Articles of
Association of Respondent No. 1 (Page 87 of Company Petition).
13. It is submitted that the entire modus operandi adopted by
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Respondent No. 2 and his family for fraudulently utilizing the funds of
Respondent No. 1 to purchase/acquire the shares of Respondent No. 1
itself, came to the knowledge of Petitioners only in May, 1987 through
a criminal complaint preferred by a member of the Union of the
company (Page 88 to 95 of Company Petition). It is submitted that
thereafter, the Petitioners made independent inquiries into the matter
and attempted to collect the necessary material in relation to the
aforementioned transactions. It is submitted that after gaining
knowledge of the specific nature of the transactions, the Petitioners, in
their capacity as shareholders of Respondent No. 1, addressed a Legal
th th
Notice dated 17 June, 1987 (issued on 19 June, 1987) (Page 59 of
Company Petition) to the Respondents inter alia narrating the
aforesaid facts and calling upon them to take necessary actions to
rectify the share register of Respondent No. 1 to delete the names of
members (Respondent No. 2 and his family) which were entered by
fraud without any sufficient cause.
14. It is submitted that the Respondents (except Respondents No. 12
rd
and 13) addressed an evasive reply letter dated 3 August, 1987
(Page 74 of Company Petition), which was responded to by the
Petitioners vide their rejoinder letter dated 9th September, 1987. It is
submitted that since to satisfactory and/or affirmative response was
forthcoming from the said Respondents, the Petitioners were
constrained to prefer the present Company Petition before the Hon'ble
High Court of Gujarat, at Ahmedabad.
15. It is submitted that in the first round of litigation, the captioned
Company Petition came to be dismissed by the Hon'ble Gujarat High
Court solely on the ground of limitation. It is submitted that the said
Orders of the Hon'ble Gujarat High Court came to be challenged by
the Petitioners before the Hon'ble Supreme Court of India by filing
Civil Appeal No. 4766 of 2011. It is submitted that by its judgment
th
dated 11 July, 2006 [(2006) 5 SCC 638] (Page 645 of Company
Petition), the Hon'ble Supreme Court of India was pleased to allow the
said Civil Appeal, quash and set aside the Orders of the Hon'ble
Gujarat High Court and further, remand the captioned Company
Petition to the Hon'ble Gujarat High Court to decide the same afresh
in accordance with law.
16. It is submitted that during the pendency of the captioned Company
Petition before the Hon'ble Gujarat High Court, this Hon'ble Tribunal
came to be established and all the matters pertaining to the
Companies Act were transferred to this Hon'ble Tribunal in accordance
with various Rules and Orders notified by the Legislature. It is
th
submitted that in view thereof, by an Order dated 25 January, 2018,
the captioned matter came to be transferred from the Hon'ble High
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Court to this Hon'ble Tribunal and pursuant thereto, the captioned

Company Petition is being adjudicated by this Hon'ble Tribunal.
Ø WRITTEN SUBMISSIONS ON BEHALF OF PETITIONERS
17. It is submitted that the following are the issue-wise Written
Submissions on behalf of the Petitioner in relation to the oral
arguments advanced by the parties before this Hon'ble Tribunal:
I. PETITIONERS, BEING SHAREHOLDERS OF RESPONDENT NO. 1,
ARE ENTITLED TO FILE THE PRESENT COMPANY PETITION UNDER
SECTION 155 OF COMPANIES ACT, 1956:
18. It is submitted that it is an admitted fact that at the time of filing
the captioned Company Petition, the Petitioners were shareholders of
Respondent No. 1 and they (existing Petitioners) continue to be
shareholders of Respondent No. 1 even as on date. It is indisputable
that the quantum of shares of Respondent No. 1 held by the
Petitioners is irrelevant and non - consequential to the captioned
proceedings initiated under the provisions of Section 155 of 1956 Act.
For ready reference, sub sections (1) to (3) of Section 155 of 1956 Act
are reproduced hereunder:
“155. Power of Court to rectify register of members - (1) If-
(a) the name of any person-
(i) is without sufficient cause, entered in the register of members of
a company, or
(ii) after having been entered in the register, is, without sufficient
cause, omitted therefrom; or
(b) default is made, or unnecessary delay takes place, in entering on
the register the fact of any person having become, or ceased to be,
a member;
the person aggrieved, or any member of the company, or the
company, may apply to the Court for rectification of the register.
(2) The Court may either reject the application or order rectification of
the register; and in the latter case, may direct the company to pay the
damages, if any, sustained by any party aggrieved.
In either case, the Court in its discretion may make such order as to
costs as it thinks fit.
(3) On an application under this section, the Court—
(a) may decide any question relating to the title of any person who is
a party to the application to have his name entered in or omitted
from the register, whether the question arises between members or
alleged members, or between members or alleged members on the
one hand and the company on the other hand; and
(b) generally, may decide any question which it is necessary or
expedient to decide in connection with the application for
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rectification.
……..”
19. It is submitted that as stated hereinabove, sub section (1) of Section
155 of 1956 Act recognises the following (3) three categories of
persons who are entitled to file a Petition for rectification of register
under the said provision:
(i) the person aggrieved; or
(ii) any member of the company; or
(iii) the company itself.
20. It is reiterated that admittedly, the Petitioners were shareholders of
Respondent No. 1 at the time of filing the captioned Petition and
hence, they are covered under the abovementioned category (ii) i.e.
‘any member of the company’. It is submitted that in contrast to the
provisions of oppression and mismanagement, Section 155 of 1956
Act does not envisage any threshold limit of shareholding of a
Petitioner for filing a Petition for rectification of register. It is
submitted that the only requirement for entitling a Petitioner to
maintain a Petition under Section 155 of the 1956 Act is that such
person should fall under one of the 3 (three) categories mentioned
hereinabove. Thus, as provided in Section 155 itself, the mere fact
that the Petitioners were shareholders of Respondent No. 1 at the time
of filing the captioned Petition sufficiently entitles the Petitioners to
file the captioned Company Petition, irrespective of whether such
shareholding was significant or not.
II. PETITION UNDER SECTION 155 OF COMPANIES ACT, 1956 IS
MAINTAINABLE WHEN THE NAME OF ANY PERSON IS ENTERED IN THE
REGISTER WITHOUT SUFFICIENT CAUSE, I.E., IN CONTRADICTION TO
THE PROVISIONS OF SAID ACT:
21. As stated hereinabove, it is the case of the Petitioners that the
Respondent No. 2 and his family utilized the funds of the Respondent
No. 1 to acquire the shares of Respondent No. 1 itself. Thus, since the
funds of Respondent No. 1 company were used to acquire its own
shares, the same is ex facie in contradiction of Section 77 of the 1956
Act. In addition to the above, the use of funds of Respondent No. 1
company to acquire its own shares is also violative of Article 20 of the
Articles of Association of Respondent No. 1 (Page 87 of Company
Petition), thereby in contradiction of Section 36 of 1956 Act.
22. It is submitted that Section 155 of 1956 Act mandates rectification
of register of members of a company when the names of any member
(s) are shown to be entered in the register of members without
sufficient cause. It is submitted that the meaning of the term
‘sufficient cause’ occurring in Section 155 of 1956 Act is no more res
Integra. It is submitted that the Hon'ble Supreme Court of India has
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held the following in Ammonia Supplies Corporation (P) Ltd. v. Modern

Plastic Containers Pvt. Ltd., (1998) 7 SCC 105] (Paragraph 31):
“31. Sub-section (1)(a) of Section 155 refers to a case where the
name of any person is without sufficient cause entered or omitted
in the Register of Members of a company. The word ‘sufficient
cause’ is to be tested in relation to the Act and the Rules. Without
sufficient cause entered or omitted to be entered means
done or omitted to do in contradiction of the Act and the
Rules or what ought to have been done under the Act and the
Rules but not done………”
23. It is submitted that thus, it is a settled position of law that the term
entered without ‘sufficient cause’ would mean that the same is done
in contradiction of the 1956 Act or Rules. It is submitted that as
stated hereinabove, the names of Respondents No. 2 and his family
(Respondents No. 2/1 to 2/3) have been entered in the Register of
Members of Respondent No. 1 company in violation of Section 77 and
Section 36 of the 1956 Act and hence, without sufficient cause. It is
submitted that thus, there is no iota of doubt that the captioned
Company Petition preferred by the Petitioners for rectification of
register of members of Respondent No. 1 under Section 155 of 1956
Act is maintainable.
III. THIS HON'BLE TRIBUNAL HAS JURISDICTION TO ENTERTAIN THE
CAPTIONED COMPANY PETITION FILED UNDER SECTION 155 OF
COMPANIES ACT, 1956:
24. At the outset, it is submitted that it is an admitted legal position that
this Hon'ble Tribunal has the requisite jurisdiction to entertain,
adjudicate and dispose of the captioned Company Petition filed under
Section 155 of the 1956 Act. It is pertinent to note here that the
captioned Company Petition was initially preferred by the Petitioners
under the provisions of 1956 Act before the Hon'ble Gujarat High
Court in view of the express jurisdiction vested with the Hon'ble
Gujarat High Court under Section 10 read with Section 2(11) of the
1956 Act. It is reiterated that in view of the establishment of this
Hon'ble Tribunal during the pendency of the captioned Company
Petition before the Hon'ble Gujarat High Court and considering the
amendments notified by the Legislature from time to time inter alia
for transfer of proceedings under the 1956 Act to this Hon'ble
Tribunal, the captioned Company Petition came to be transferred to
th
this Hon'ble Tribunal vide Order dated 25 January, 2018 passed by
the Hon'ble Gujarat High Court.
25. It is submitted that the scope of jurisdiction of a court defined under
the provisions of 1956 Act (now this Hon'ble Tribunal) in relation to
Section 155 of 1956 Act has been dealt with in detail by the Hon'ble
Supreme Court of India in Ammonia Supplies Corporation (P) Ltd. v.
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Modern Plastic Containers Pvt. Ltd., (1998) 7 SCC 105] (Paragraphs

24 to 31), the conclusion of which is provided in Paragraph 31 of the
said Judgment, which is reproduced hereinafter for immediate
reference:
“31……….So we conclude that the principle of law as decided by
the High Court that the jurisdiction of the court under Section 155
is summary in nature cannot be faulted. Reverting to the second
limb of submission by learned counsel for the appellant that the
Court should not have directed for seeking permission to file suit
only because a party for dispute's sake states that the dispute
raised is a complicated question of facts including fraud to be
adjudicated. The Court should have examined itself to see whether
even prima facie what is said is complicated question or not. Even
dispute of fraud, if by a bare perusal of the document or what is
apparent on the face of it on comparison of any disputed signature
with that of the admitted signature the Court is able to conclude no
fraud, then it should proceed to decide the matter and not reject it
only because fraud is stated.”
26. In addition to the above, it is submitted that in the case of Mrs. E.V.
Swaminathan v. K.M.M.A. Industries and Roadways Pvt. Ltd., [1992
SCC OnLine Mad 401] (Paragraph 16), the wide scope of powers of
company court under Section 155 of 1956 Act are narrated by the
Hon'ble Madras High Court as under:
“11. Therefore, section 155(3)(a) of the Act confers jurisdiction
on the company court to decide any question relating to the title of
any person who is a party to the application to have his name
entered in or omitted from the register, whether the question arises
between members or alleged members, or between members or
alleged members on the one hand and the company on the other
hand. Section 155(3)(b) of the Act confers further powers on the
court generally to decide any question which is necessary or
expedient to decide in connection with the application for
rectification. Thus, Section 155(3)(a) and (b) confers powers of
great amplitude on the company court to decide all questions which
the court considers necessary or even expedient to decide in an
application for rectification of share register. There is nothing in the
section which debars the court from deciding any question relating
to the title of any person who is a party to the application to have
his name entered in or omitted from the register. If the contention
that, when complicated questions of fact and law arise, the court
should decline to consider any application filed under section 155 of
the Act on its merits has to be upheld, the jurisdiction of the court
can be ousted by conduct of parties by setting up unnecessary
pleas and stating that the matter involved complicated questions of
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law and fact The result of such a situation will be that the wide
powers that have been conferred on the company court under
section 155of the Act will be rendered purposeless and nugatory
and the very object of introducing a section like 155 will be
defeated.”
27. It is submitted that thus, as settled by the Hon'ble Supreme Court,
for deciding any question pertaining to rectification of register
including questions raised within the peripheral field of rectification, it
is the court under Section 155 alone which would have jurisdiction. It
is submitted that as stated hereinabove, wide powers are conferred on
the company court under Section 155 and this Hon'ble Tribunal can
also decide complicated questions of fact and law under section 155
pertaining to the title of shares and there is no mandate to relegate
the parties to a Suit unless forgery has been alleged by the parties. It
is submitted that Section 59 of the Companies Act, 2013 (“2013
Act”) also provides for rectification of register and this Hon'ble
Tribunal has ample jurisdiction under the said provision as well to
adjudicate upon the issue of violation of Section 77 and Section 36 of
the 1956 Act requiring rectification of register of members of
Respondent No. 1. It is submitted that in the present case,
admittedly, there is no allegation of forgery of any document and
hence, this Hon'ble Tribunal has the requisite jurisdiction to
adjudicate and dispose of the captioned Company Petition.
IV. RESPONDENTS NO. 2 AND HIS FAMILY (RESPONDENTS NO. 2/1 TO
2/3) HAVE CONTRADICTED/VIOLATED THE PROVISIONS OF SECTION
77 AS WELL AS ARTICLE 20 OF ARTICLES OF ASSOCIATION READ WITH
SECTION 36 OF 1956 ACT:
28. It is submitted that the crux of the captioned Company Petition is
that the Respondent No. 2 and his family utilized the funds of
Respondent No. 2 to acquire the shares of Respondent No. 1 pursuant
to the MOU read with MOM. It is submitted that the transactions
evidencing the blatant contradiction of provisions of 1956 Act,
especially Section 77, are detailed at Pages 56 to 58 of the Company
Petition. It is pertinent to mention here that the said transactions
have not been denied by the Respondent No. 2 and his family at any
point of time in the captioned proceedings. For ease of understanding
and ready reference, the said transactions involving M/s Santosh
Starch Products are briefly depicted as under:
Date Particulars Ref. Pg. No.

13
th
November, 1982 A sum of INR 56
15,00,000/- (Rupees
Fifteen Lakhs only) was
advanced by
Respondent No. 1 to a
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supplier namely, M/s

Santosh Starch
Products.

13
th
November, 1982 On the same day, M/s 56
Santosh Starch
Products advanced a
sum of INR 20,00,000/-
(Rupees Twenty Lakhs
only) to Respondent No.
2 and his family.

13
th
November, 1982 On the very same day, 56
to fulfil his obligations
under the MOU read
with MOM, Respondent
No. 2 and his family
paid an equivalent
amount of INR
20,00,000/- (Rupees
Twenty Lakhs only) to
CVMPL, which was
admittedly utilized by
CVMPL to pay and
discharge its liabilities,
which was a pre-
condition for transfer of
shares of Respondent
No. 1 in favour of
Respondent No. 2 and
his family.
25
th
November, 1982 The balance amount of 56
INR 5,00,000/-(Rupees
Five Lakhs only) in
addition to the earlier
sum of INR 15,00,000/-
(Rupees Fifteen Lakhs
only) came to be
transferred by
Respondent No. 1 to
M/s Santosh Starch
Products inter alia to
cover/reimburse the
entire payment of INR
20,00,000/- (Rupees
Twenty Lakhs only)
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advanced by M/s
Santosh Starch
Products to Respondent
No. 2 and his family.
29. It is submitted that as stated hereinabove, Clause 3 of the MOM
(Page 47 of Company Petition) cast an obligation on Respondent No. 2
to immediately pay a sum of INR 20,00,000/- (Rupees Twenty Lakhs
only) to CVMPL, which was to be treated as a loan and was to be
utilized towards payment of liabilities owed by CVMPL to members of
the family of Vadilal Lallubhai Mehta and Respondent No. 12, as more
particularly provided therein. It is submitted that the said Clause 3
further provided that the actual effect was to be given to transfer of
shares of Respondent No. 1 in favour of Respondent No. 2 and his
family only after the payment of aforesaid INR 20,00,000/- (Rupees
th
Twenty Lakhs only) to CVMPL, which effect was given on 17
November, 1982 (Page 413 to 426 of Company Petition). Stated
simpliciter, under the MOU read with MOM, the payment of INR 20
Lakhs by Respondent No. 2 to CVMPL for discharging its liabilities was
fixed as the consideration for transfer of shares of Respondent No. 1 in
favour of Respondent No. 2 and his family. It is also pertinent to note
that as per the said Clause, it was after the payment of aforesaid sum
to CVMPL by Respondent No. 2 that the transfer of management of
Respondent NO. 1 was to be made in favour of Respondent No. 2 and
Respondent No. 3. Hence, what was envisaged under the MOU read
with MOM was that the aforesaid amount of consideration for acquiring
the shares of Respondent No. 1 was to be paid by Respondent No. 2
from his own funds and not from the funds of Respondent No. 1.
30. It is submitted that there was no illegality and/or contradiction of
provisions of 1956 Act by mere advancing of money by Respondent
th
No. 1 to M/s Santosh Starch Products on 13 November, 1982.
However, the violation and contradiction of provisions of 1956 Act,
particularly Section 77 of 1956 Act, occurred when M/s Santosh
Stareh Products transferred the said amount to the personal accounts
of Respondent No. 2 and his family, which was utilized to pay CVMPL
as obligated under the MOU read with MOM inter alia for discharging
the liabilities of CVMPL, resulting into transfer of shares of Respondent
No. 1 in favour of Respondent No. 2 and family. Thus, the substance
of the present matter is that Respondent No. 2 and his family
fraudulently acquired the shares of Respondent No. 1 out of funds of
Respondent No. 1 itself.
31. It is submitted that similar modus operandi was adopted by the
Respondent No. 2 and his family once again, when the funds of
Respondent No. 1 were routed through M/s Tirupati Traders and other
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individual vendors of Respondent No. 1, which was eventually

transferred to Respondent No. 2 and his family who again utilized it
for payment to CVMPL for discharging its liabilities as required under
the MOU read with MOM inter alia to acquire the shares of Respondent
No. 1. In short, Respondent No. 2 and his family fraudulently used the
funds of Respondent No. 1 to acquire its shares by routing its monies
through traders and by getting fictitious loans from such traders to
pay requisite monies into CVMPL which was the consideration for
acquiring management and control of Respondent No. 1 and CVMPL,
thereby expressly violating the provisions of 1956, more particularly
Section 77 of the said Act.
32. At this juncture, it is imperative to refer to the Counter Affidavit filed
by Respondent No. 2 (Page 497 of Company Petition) before the
Hon'ble Supreme Court of India in Special Leave Petition (Civil) No.
9835 of 2000 filed by the Petitioners of the captioned Company
Petition. It is submitted that in paragraphs 4 and 6 of the said
Counter Affidavit (Page 501 and 503 of Company Petition), the
Respondent No. 2 has categorically admitted to the entire scheme of
transaction narrated hereinabove and detailed at Page 56 of Company
Petition, which unequivocally proves blatant violation and
contradiction of Section 77 of the 1956 Act by Respondent No. 2. It is
submitted that the relevant portions of paragraphs 4 and 6 of the
Counter Affidavit of Respondent No. 2 is reproduced hereunder for
ready reference:
“4……At the time of execution of the said Memorandum of
Understanding the members of the family of Vadilal Mehta, Suhas
Vadilal Mehta, Suhas Vadilal Trust and other Trust and relatives of
late Shri V.L. Mehta and my brother Mr. Suhas had a credit balance
of approximately Rs. 40 lacs in M/s. C.V. Mehta Pvt. Ltd. It was a
condition precedent that all these payments were to be made
immediately by M/s C.V. Mehta Pvt. Ltd. so that the payment could
be made to Respondent No. 9 and 10 hereto.”
“6. Late Shri V.L. Mehta utilised his position as Chairman and
Managing Director of the Respondent No. 3 Company. He planned
out a design with the help of the Petitioner No. 1, who was the
Administrative Manager of the Respondent No. 3 Company and a
close confidant of late Shri V.L. Mehta. He therefore managed to
advance a sum of Rs. 23 lacs to M/s. Santosh Starch Products from
the funds of the Company. It may be stated that when these funds
were advanced by the Company, I was not a Director when the
th
initial two instalments were paid on 13 November, 1982. Third
th
instalment was paid on 25 November, 1982 and the cheque in
respect whereof was signed by the Petitioner No. 1 who was fully in
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know of the arrangement. I was not having cheque signing

authority till April, 1983. It is significant to note that when
M/s. Santosh Starch Products paid a total loan of Rs. 20 lacs
to me and my family members, the same were deposited by
me in Punjab National Bank to the account of C.V. Mehta Pvt.
Ltd. and the same were withdrawn by Respondent No. 9 and
his family members as stated hereinabove……”
33. It is submitted that a perusal of the above statements made on oath
by Respondent No. 2 in his Affidavit filed before the Hon'ble Supreme
Court of India made it evident that it is an admitted fact that the
monies advanced by Respondent No. 1 to M/s Santosh Starch
Products was in turn transferred to Respondent No. 2 and his family.
Further, the same monies were transferred by Respondent No. 2 and
his family to CVMPL as a pre-condition of the MOU and MOM, which
was utilized to pay and discharge the liabilities of CVMPL. It is
reiterated that as agreed in the MOU and MOM, the infusion of a sum
of INR 20 Lakhs into CVMPL to pay and discharge its liabilities was
nothing but the consideration for transfer of shares of Respondent No.
1 in favour of Respondent No. 2 and family (Clause 3 of MOM at Page
47 of MOM). It is submitted that thus, the above unequivocal
admission on part of Respondent No. 2 leaves no iota of doubt that
the funds of Respondent No. 1 were used by Respondent No. 2 to
purchase the shares of Respondent No. 1 itself.
34. It is submitted that by orchestrating the aforesaid transactions,
whereby, the funds of Respondent No. 1 were utilized by Respondent
No. 2 and his family members to buy the shares of Respondent No. 1
itself, the Respondent No. 2 played an egregious fraud on the
Respondent No. 1 company, its shareholders as well as on the statute
i.e. 1956 Act. It is submitted that such fraudulent actions on part of
Respondent No. 2 and his family came to the knowledge of Petitioners
only through a criminal complaint filed by a Trade Unionist
highlighting the above transactions (Page 88 of Company Petition).
35. Before adverting to the provisions of the 1956 Act, it is noteworthy to
mention here that the Petitioners neither had any knowledge of the
subject transactions prior to May, 1987 and nor was the Petitioner No.
1 involved in the said transactions as alleged by the Respondent No.
2. It is submitted that there is an inherent fallacy in the said
argument for the mere fact that the entire transaction, which
perpetrated the illegality and contravened the provisions of 1956 Act,
occurred by transfer of funds from the personal bank accounts of
Respondent No. 2 and his family, which could never have been known
to the Petitioners nor could the Petitioners have had access to such
personal bank accounts of said Respondents at any point in time. It is
reiterated that there was no illegality in advancing of monies to M/s
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Santosh Starch Products by Respondent No. 1, but the illegality

occurred only when the very same funds were used by Respondent
No. 2 and his family as consideration for purchase of shares of
Respondent No. 1.
36. It is submitted that Section 77 of the 1956 Act reads as under:
“77. Restrictions on purchase by company, or loans by
company for purchase, of its own or its holding company's
shares.- (1) No company limited by shares, and no company
limited by guarantee and having a share capital, shall have the
power to buy its own shares, unless the consequent reduction of
capital is effected and sanctioned in pursuance of sections 100 to
104 or of section 402.
(2) No public company, and no private company which is a
subsidiary of a public company, shall give, whether directly or
indirectly, and whether by means of a loan,, guarantee, the
provision of security or otherwise, any financial assistance for
the purpose of or in connection with a purchase or
subscription made or to be made by any person of or for any
shares in the company or in its holding company……”
37. It is submitted that thus, Section 77 of the 1956 Act expressly bars
a company from purchasing its own shares by providing any financial
assistance, whether directly and/or indirectly, for the purpose of
and/or in connection with the purchase of its own shares. It is
submitted that a perusal of the subject transactions at Page 56 to 58
of Company Petition unequivocally shows that the advances given
from Respondent No. 1 were nothing but a financial assistance which
was utilized by Respondent No. 2 and his family to acquire the shares
of Respondent No. 1 company itself by payment of monies to CVMPL
in the nature of a loan. It is submitted that such financial assistance
was provided directly as well as indirectly in as much as a part of the
financial assistance was transferred from Respondent No. 1 prior to
payment of monies by Respondent No. 2 to CVMPL and balance
amount of consideration was reimbursed by Respondent No. 1 after
transfer of monies by Respondent No. 2 to CVMPL. It is submitted that
thus, eventually, it was Respondent No. 1 from whose account the
consideration amount provided under the MOU read with MOM was
paid, against which the shares of Respondent No. 1 came to be
acquired by Respondent No. 2 and his family members. It is
submitted that thus, there is no escaping the conclusion that the
entire scheme of transaction designed by Respondent No. 2 and his
family to purchase the shares of Respondent No. 1 was in the teeth of
Section 77 of 1956 Act.
38. It is pertinent to reiterate here that the main object of the MOU read
with MOM was mutual transfer of shares of certain companies between
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Respondent No. 2 and Respondent No. 12 inter alia to entrust the

management of such companies to the said Respondents. It is
submitted that in pursuance of such understanding, the shares of
Respondent No. 1 were to be transferred in favour of Respondent No.
2 subject to an amount of INR 20,00,000/- (Rupees Twenty Lakhs
only) being brought in and paid by Respondent No. 2 to CVMPL for
discharging its liabilities. Thus, it is submitted that the actual effect of
the transfer of shares of Respondent No. 1 in favour of Respondent
No. 2 was to take place only when the aforesaid amount was paid by
Respondent No. 2 to CVMPL rendering it as the consideration for the
said shares. Therefore, the said amount of INR 20 Lakhs was to be
brought in from the personal funds of Respondent No. 2 only. It is
submitted that the use of funds of Respondent No. 1 for infusing the
aforesaid amount of INR 20 Lakhs clearly evidences violation of
Section 77 of the 1956 Act.
39. In addition to the above, the same was also in gross violation of
Article 20 of the Articles of Association of Respondent No. 1 (Page 87
of Company Petition), which expressly states that none of the funds of
Respondent No. 1 should be employed in the purchase of or lent on
the shares of Respondent No. 1. It is submitted that Section 36 of the
1956 Act provides that the Articles of Association of a company would
be binding on the company and its members, as more particularly
stated therein. It is submitted that thus, by acting in violation of
Article 20 of the Articles of Association, the Respondent No. 2 and his
family have blatantly contradicted Section 36 of the 1956 Act as well,
requiring this Hon'ble Tribunal to exercise its powers under Section
155 of 1956 Act. For immediate reference, relevant extract of Article
20 of the Articles of Association of Respondent No. 1 is reproduced
below:
“20(i) None of the funds of the Company shall be employed in
the purchase of or lent on shares of the Company…”
40. It is submitted that the only defence argued by the Respondents No.
2 and his family members to wriggle out of the contours of Section 77
is that the monies paid by them to CVMPL were utilized for
discharging the liabilities of CVMPL only and that they allegedly paid
separate consideration for acquiring the shares of Respondent No. 1
under the MOU and MOM. At the outset, it is submitted that the
Respondents No. 2 and his family have miserably failed to place on
record any evidence whatsoever to even remotely suggest that any
separate consideration was paid by them to acquire the shares of
Respondent No. 1. Moreover, there is no pleading and/or evidence
whatsoever placed on record by the Respondents No. 2 and his family
to even remotely show that the said Respondents had a financial
capacity equivalent to or more than the amount that was mandated to
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be paid under the MOU read with MOM as a pre-condition for acquiring
the shares of Respondent No. 1. In fact, it is submitted that as stated
hereinabove, the payment of monies by Respondent No. 2 and his
family to CVMPL for discharging its liabilities was itself the
consideration agreed for transfer of shares of Respondent No. 1 to
Respondent No. 2 and his family. Thus, the admission that the monies
transferred by Respondent No. 2 and his family to CVMPL for
discharging its liabilities originated from Respondent No. 1 itself
proves the contradiction and violation of Section 77 as well as Article
20 of Articles of Association by the said Respondents.
41. Assuming whilst denying that any separate consideration was paid
by Respondent No. 2 for acquiring the shares of Respondent No. 1, it
is submitted that even then the infusion of INR 20 Lakhs into CVMPL
by Respondent No. 2 from the funds of Respondent No. 1 would be in
violation of Section 77 as well as Article 20 read with Section 36 of
1956 Act. It is submitted that as stated hereinabove, the payment of
INR 20,00,000/- (Rupees Twenty Lakhs only) by Respondent No. 2 to
CVMPL was a mandate for effecting the transfer of shares of
Respondent No. 1 in favour of Respondent No. 2 irrespective of any
separate amount being paid by for such shares. It is reiterated that
thus, the payment of said INR 20,00,000/- (Rupees Twenty Lakhs
only) to CVMPL for discharge of its liabilities was also the
consideration for purchase of shares of Respondent No. 1 by
Respondent No. 2. It is submitted that Section 77(2) attracts any
indirect financial assistance rendered by a company by way of a loan
in connection with purchase of shares. It is submitted that in the
present case, Respondent No. 1 itself gave, by means of a loan,
financial assistance to Respondent No. 2 to the extent of INR 40 Lakhs
and his family to pay off the liabilities of CVMPL which was condition
precedent for purchase of shares of Respondent No. 1 by Respondent
No. 2. Thus, the said transaction runs smack into Section 77(2), as
well as Article 20 read with Section 36 of 1956 Act, rendering the said
purchase of shares a nullity.
42. It is submitted that the consequence of entering the name of any
member in the register of members of a company in violation and/or
contradiction to the 1956 Act i.e. entering such name without
sufficient cause is already dealt with by the Hon'ble Supreme Court of
India in paragraph 31 of Ammonia Supplies Corporation (P) Ltd. v.
Modern Plastic Containers Pvt. Ltd., [(1998) 7 SCC 105], which has
been detailed hereinabove. Admittedly, the names of Respondent No.
2 and his family members have been entered in the register of
members of Respondent No. 1 in violation of Section 77 of 1956 Act
and Article 20 of Articles of Association read with Section 36 of 1956
Act and hence, without sufficient cause. In view of the above, it is
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submitted that this is a fit case for this Hon'ble Tribunal to exercise its
powers under Section 155 of the 1956 Act and rectify the register of
members of Respondent No. 1 as prayed for by the Petitioners in the
captioned Company Petition.
43. It is submitted that the law pertaining to the legality of purchase of
its own shares by a limited company has already been laid down by
the Hon'ble Supreme Court of India in Ramesh B. Desai v. Bipin
Vadilal Mehta, [(2006) 5 SCC 638] (Paragraph 11), wherein it has
been categorically held by the Hon'ble Apex Court any valuable
consideration paid out of the assets of a company would make the
transaction amounting to a purchase and therefore, invalid. It is
pertinent to note that the aforementioned proposition of law was not
an observation on the facts of this case, but a position of law settled
by the Hon'ble Supreme Court and hence, a binding precedent. It is
submitted that thus, in view of the law settled by the Hon'ble
Supreme Court, the subject transactions are required to be rendered
invalid and necessary rectifications are required to be carried out in
the register of Respondent No. 1.
44. It is also profitable to refer to the decision of the Hon'ble Supreme
Court of India in Mannalal Khetan v. Kedar Nath Khetan, [(1977) 2
SCC 424] (Paragraphs 20 and 21), wherein the Hon'ble Supreme
Court has categorically propounded that if anything is against the law
though it may not be prohibited in a statute but only a penalty is
annexed, even then such agreement is void. It has been further held
that in every case where a penalty is provided in a statue for doing an
act which may not be prohibited, such act would even then be
rendered unlawful. The simple reason for this is that a statute would
not inflict a penalty for a lawful act. It is submitted that by applying
the said proposition of law, the conclusion arrived at is that even if
sub-section (4) of Section 77 of 1956 Act provides for inflicting
penalty for violation of the said Section, such penalty would not
legalize the unlawful and illegal transactions and the same would be
rendered unlawful and void. Thus, in other words, it is submitted that
a penal provision in sub-section (4) of Section 77 of the 1956 Act
would not impede the power of this Hon'ble Tribunal to declare the
illegal and contradictory transactions as null and void and order
rectification of register under the provisions of Section 155 of the
1956 Act.
45. It is further submitted that Hon'ble High Court of Madras in the case
of Sabaratnam Chettiar v. Official Liquidators, Travancore National and
Quilon Bank Ltd. reported in (1943) 13 Comp Cas 61 (Mad), has held
the following at internal Page 67:
“If a company therefore purchases its own shares no matter
where, a member who has sold the shares to the company cannot
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be removed from the register because the purchase must be

deemed to have been not validly made as it is ultra vires of the
company. In Bellerby v. Rolland and Marwood's Steamship Co.,
Ltd., where a shareholder surrendered shares in consideration of
the company releasing the shareholder from further liability in
respect thereof it was held to be a purchase of the shares by the
company and therefore illegal and null and void. On this principle
it was held that a shareholder who sold the shares and
whose name was removed from the register was entitled to
be restored to the register 7 years after the transaction….”
46. It is submitted that even in view of the above proposition of law, the
subject transactions being in violation of Section 77 and Section 36 of
1956 Act, are required to be set at naught and all the benefits accrued
to the Respondents No. 2 and his family in furtherance of such illegal
transactions are required to be reversed by granting status quo ante
as prayed for by the Petitioners in the captioned Company Petition.
V. THE CAPTIONED COMPANY PETITION IS WITHIN FILED WITHIN
LIMITATION:
47. It is submitted that from a perusal of Section 155 of the 1956 Act, it
is clear that no specific time period of limitation is provided in the said
provision inter alia for preferring a Company Petition under Section
155 of the 1956 Act. It is submitted that thus, a Petition under
Section 155 of the 1956 Act may be entertained by this Hon'ble
Tribunal within a reasonable time period from the date of knowledge
of the wrongdoing. It is submitted that the reasonable time period
would have to be adjudicated by this Hon'ble Tribunal on the facts of
each case. It is submitted that in the present case, the Petitioners
have categorically stated that they acquired the knowledge of the
fraudulent transactions undertaken by the Respondent No. 2 and his
family only in May, 1987. It is submitted that thereafter, the
Petitioners got issued a Legal Notice dated 17th June, 1987 (Page 59
of Company Petition). However, since no satisfactory response was
forthcoming from the said Respondents, the Petitioners immediately
filed the captioned Company Petition under Section 155 of the 1956
Act in October - November, 1987 inter alia seeking reliefs as more
particularly prayed therein. It is submitted that thus, there is no delay
and/or latches on part of the Petitioners in preferring the captioned
Company Petition. Thus, it is submitted that the captioned Company
Petition being filed within a reasonable period, the same is not liable
to be dismissed on the ground of limitation.
48. Without prejudice to the above, it is submitted that even if it is held
that a Petition under Section 155 of the 1956 Act attracts limitation
period of 3 (three) years under the residuary Article 137 of Limitation
Act, 1963 (“Limitation Act”), even then the time period for filing the
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captioned Company Petition begins to run only from the date of

knowledge of the fraudulent transactions entered into by the
Respondent No. 2 and his family i.e. from May, 1987. It is submitted
that a perusal of the captioned Company Petition (Paragraph 21 at
Page 19) evidently shows that the Petitioners have specifically
pleaded that they acquired knowledge of the entire fraudulent
transactions in detail only when a specific criminal complaint (Page 88
of Company Petition) was filed by a Trade Unionist of the Respondent
No. 1 in respect thereof. It is submitted that it has been further
pleaded by the Petitioners that they came to know about such
fraudulent transactions only in May, 1987, where after, they enquired
into the matter and collected available additional material. For
immediate reference, paragraph 21 of the Company Petition (Page 19)
is reproduced below:
“21. The petitioners further say that though the share transfers
were effected in the year 1982, the petitioners could not have
detected the fraud earlier, but they came to know about the fraud
in detail when the specific criminal complaint was filed by some
interest persons, the office bearers of the Union of the Company
before the Criminal Court at Narol and they came to know by or
about in the month of May, 1987. Hereto annexed and marked as
Annexure ‘I’ is the copy of the said complaint Thereafter enquired
into the matter and collected whatever additional material
available. Petitioner No. 1 gave notice dated 14-6-87. However,
respondents 2 to 11 wasted too much time in correspondence and
thereafter this petition is filed immediately”
49. It is further submitted that in response to the untenable grounds of
limitation raised by the Respondents, the Petitioners have
categorically stated that the Petitioner No. 1, who was also named as
a witness in the criminal complaint, did not know of the filing of the
said criminal complaint. It is submitted that the specific knowledge of
the fraudulent transactions was acquired by the Petitioners only
through the criminal complaint filed against Respondents No. 2 and 3
by a Trade Unionist of Respondent No. 1. It is submitted that it has
also been clarified by the Petitioners that it is thereafter that the
Petitioners undertook independent inquiries and gathered available
material before issuing the notice (Pages 135 to 138 and Pages 481 to
484 of Company Petition). It is pertinent to note here that no
evidence whatsoever has been placed on record by any Respondent
whatsoever to dislodge the date of knowledge of the Plaintiffs of the
fraudulent transactions perpetrated by Respondent No. 2 and his
family. Even otherwise, no allegations whatsoever have been raised by
the Respondents inter alia to even remotely indicate that the then
Petitioners No. 2 to 9 had knowledge of the fraudulent transactions in
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the year 1982. Thus, it is submitted that there is no iota of doubt that
the Plaintiffs having acquired knowledge in May, 1987, the captioned
Company Petition is well within limitation. It is submitted that for
immediate reference, the explanation provided by the Petitioner No. 1
at Pages 135 to 138 is reproduced below:
“9. I say that the deponent has mixed up two aspects regarding
issuance of notice regarding filing of the complaint. I say that I
deny that notice was got issued on 17.6.87. it has been issued on
19.6.87 though it may be dated 17.6.87. I say that even otherwise,
there is no contradiction which is pointed out which would detract
from the fact that the petitioners came to know about the said
transactions only in May 1987. I do not know about the date of
filing of the complaint. I say that deponent has twisted facts stated
in para -21 of the petition. It is clearly stated in the petition that
the detailed facts came in light only when criminal complaint was
filed. However, petitioners came to know about the transactions in
May 1987. There is nothing inconsistent about the same and there
is nothing false about the same also. I deny that we were knowing
about the said transaction from November 1982 as alleged. I have
clearly stated that I came to know about the modus operandi of
respondent no. 2 and 3 and the fact that they had conspired and
thought out device to use the company's funds only when the said
transactions came in light. It may be that I was Administrative
Manager, but I would not know and I could not have known the
criminal intentions behind the said transaction. In fact, I never
knew the original intention harboured by respondents nos. 2 and 3
behind the said transaction except when as stated in the petition
when I came to know about the same in or about May 1987, and
when detailed criminal complaint was filed. I say that the factum of
the transaction is different from the criminal intention harboured
behind the said transaction and no such knowledge can be imputed
to me. I say that it was too much to suggest that Administrative
Officer would pierce the veil and know the working of the minds of
respondents no. 2 and 4. I say that fact that the other family
members of the respondent nos. 2 and 4 may be working as
Directors along with respondent nos. 2 and 3 is hardly relevant. As
a shareholder I am not concerned with the internal family
arrangements of respondent nos. 2 and 3 and his family members
and I have always made it clear that I am exercising my rights as a
shareholder. I say that notice was served on 19.6.87 though it is
dated 17.6.87 and the said fact is not correct. I, therefore, say that
there is no estoppel against me or any of the petitioners, I say that
nothing is alleged against the petitioner nos. 2 to 9 and therefore,
in any view of the matter, fact that 9 shareholders have come out
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with the petition is very relevant and they all could not be estopped
by law or equity on such flimsy preliminary objections.”
50. It is submitted that in the judgment passed by the Hon'ble Supreme
Court pertaining to the captioned matter [(2006) 5 SCC 638]
(Paragraphs 18, 20 and 23), the Hon'ble Supreme Court has
provided various prima facie observations inter alia accepting that the
Petitioners could not have gained knowledge of the fraudulent
transactions before May, 1987. It is submitted that the Hon'ble
Supreme Court has further observed that even if it was assumed that
Petitioner No. 1 could have gained knowledge of the subject
transactions as alleged by the Respondents No. 2 and his family, no
knowledge has been imputed with respect to the other Petitioners i.e.
Petitioners No. 2 to 9, who had filed the captioned Company Petition
in 1987. It is submitted that thus, it was observed by the Hon'ble
Supreme Court that the allegations that the Petitioners always had
knowledge of the subject transactions, since 1982 could not be
accepted unless evidence to that effect was led by the parties. It is
submitted that however, even after 2006 till date i.e. after the remand
of the captioned matter by the Hon'ble Supreme Court for deciding
the same afresh, no new evidence has been led by any party to even
remotely suggest that the Petitioners had knowledge of the subject
transactions since 1982. Thus, in view thereof, it is submitted that the
captioned Company Petition cannot be rejected on the ground of
limitation and the same is required to be adjudicated on the merits of
the case.
51. It is submitted that the only case of the Respondents (except
Respondent No. 12 and 13), sans any evidence much less cogent
evidence, is that the Petitioner No. 1 ought to have known of the
fraudulent transactions since 1982 and hence, limitation for filing the
captioned Company Petition ended in 1985. It is submitted that to
buttress the above untenable argument, the said Respondents
submitted that Petitioner No. 1 was the Administrative Manager of
Respondent No. 1 in the year 1982 and was a close confidant of
Vadilal Mehta and Respondent No. 12. The said Respondents further
submitted that being in such a position he could neither have been
blind to the transfer of large number of shares to Respondent No. 2
and his family on 17th November, 1982 nor could he have been blind
to transfer of control and management of Respondent No. 1 to
Respondent No. 2 and his family. The Respondent No. 1 also
submitted that in fact, the cheque for last tranche of advances of INR
5 Lakhs made by Respondent No. 1 to M/s Santosh Starch Products on
th
25 November, 1982 was signed by Respondent No. 1, which was
knowingly not paid towards purchase of any goods or as advances
(Page 483 of Company Petition). The Respondent No. 1 submitted
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that since the Petitioner No. 1 was knowing the above, he ought to
have shown reasonable diligence and enquired the reason for such
payment. The said Respondents further submitted that the Petitioners
claim to have acquired knowledge of fraudulent transactions from the
criminal complaint, however, there are no averments concerning
Tirupati Traders in the said complaint and no averments have been
provided for the same in the captioned Petition. Further, in the
Affidavit signed along with the Petition (Page 22 of Company Petition)
the Petitioner No. 1 has claimed that whatever is stated in the Petition
is true to his knowledge, and hence, on the basis thereof, the said
Respondents claim that Petitioner No. 1 had knowledge of the
fraudulent transactions since 1982, rendering the captioned Company
Petition barred by limitation.
52. At the outset, it is reiterated that there is not even an inkling of
assertion that the then Petitioners No. 2 to 9 had any knowledge of
the fraudulent transactions in the year 1982 and hence, on this
ground alone, the issue of Petition being barred by limitation is
required to be rejected and the captioned Petition is to be adjudicated
on its own merits. It is submitted that it was argued by the
Respondents that none of the Petitioners except Petitioner No. 1 had
filed Affidavit in the captioned matter inter alia confirming the
captioned Company Petition. At the outset, it is stated that the same
is completely false, which is evident from the record itself. It is
submitted that the Petitioners No. 6 and 8 have also filed separate
Affidavits (Pages 547A to 547E of Company Petition) in the captioned
matter inter alia reiterating that they did not have any knowledge of
the fraudulent transactions undertaken by Respondent No. 2 and his
family. It is submitted that for immediate reference, the averments
made on oath by the said Petitioners in their Affidavits are reproduced
below:
“2. I say that I am filing this affidavit since certain allegations
are made against me as a shareholder by saying that I was
knowing about the transactions and that I had the knowledge about
the offending transactions, which have taken place in the year
1982.
3. I, along with my late husband Harshadbhai Desai had joined
in the petition to mitigate our rights u/s 155 of the Companies Act.
It is not correct to say that we were acting at the behest of Ramesh
B. Desai-petitioner no. 1 herein. We were acting independently to
mitigate our rights as shareholders.
4. I categorically state that neither myself nor my late husband
ever knew about the said transactions. By the very nature of things
as shareholders, I could neverhave known about the said
transactions and the said transactions were not even disclosed by
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way of statement u/s 173 of the Companies Act and the

information was withheld from the shareholders. I, therefore, say
that even though my husband has expired, I have decided to
continue with the petition in my own right as well as the
transferred shares of my husband and I maintain that we are
entitled to the reliefs as prayed for in the petition.”
53. Without prejudice, it is submitted that the submissions of
aforementioned Respondents is wholly based on surmises and
conjectures and there is no evidence whatsoever to even remotely
suggest much less prove that Petitioner No. 1 had knowledge of the
fraudulent transactions since the year 1982. It is submitted that as
stated on oath in the pleadings filed in the captioned Petition, the
Petitioner No. 1 acquired knowledge of the fraudulent transactions
only in May, 1987 and anything to the contrary is required to be
rejected in its entirety.
54. It is submitted that even otherwise, the insinuation that merely
because Petitioner No. 1 was an administrative manager of
Respondent No. 1 and/or that he was signatory to the cheque of INR 5
Lakhs, he ought to have had knowledge of the fraudulent transactions
is completely absurd and misconceived. It is submitted that as stated
hereinabove, there was no illegality in advancing any moneys from
Respondent No. 1 to M/s Santosh Starch Products. However, the
illegality and contradiction of provisions of 1956 Act occurred when
the said monies transferred by M/s Santosh Starch Products to the
personal accounts of Respondent No. 2 and his family, were utilized
by them for payment to CVMPL as mandated under the MOU read with
MOM, resulting into transfer of shares of Respondent No. 1 in favour of
Respondent No. 2 and his family. It is submitted that the Petitioner
No. 1 could never have acquired knowledge of the fraudulent
transactions that occurred from the personal accounts of Respondent
No. 2 and his family, which is when the illegality was committed by
them. It is submitted that thus, even change of management and/or
transfer of shares on 17th November, 1982 could not have imparted
any knowledge as to the fraudulent transactions which were
perpetrated from the personal accounts of Respondents No. 2 and his
family.
55. It is reiterated that the Petitioners acquired knowledge of the
fraudulent transactions through the criminal complaint only in May,
1987, pursuant to which, the Petitioners undertook independent
inquiries and gathered available material. It is submitted that during
such inquiries, the Petitioners realised the modus operandi that was
repeated with Tirupati Traders and other merchants, which was
narrated by the Petitioners in their legal notice (Page 59 of Company
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Petition) and the same was incorporated in the captioned Petition by

reference in the form of a chart at Annexure - C (Page 56 of Company
Petition). It is submitted that thus, in view of the above, it is once
again submitted that the Petitioners having acquired knowledge of the
fraudulent transactions in May, 1987, the captioned Petition is well
within limitation.
56. In addition to the above, it is submitted that the case of the
Petitioners in the captioned Company Petition squarely falls under
Section 17(1) of the Limitation Act which provides that in when a suit
or an application is based upon the fraud of the defendant or
respondent or his agent, then the limitation for the same shall not
begin to run until the plaintiff or applicant has discovered such fraud.
It is submitted that as stated hereinabove, the Petitioners discovered
the fraudulent transactions entered into by the Respondents No. 2 and
his family only in May, 1987 and in the absence of any evidence to the
contrary, there is no iota of doubt that limitation as provided under
Section 17 would begin to run only from May, 1987. Thus, in view of
the above, the captioned Company Petition is well within limitation as
provided under the Limitation Act.
57. It is submitted that even otherwise, the names of Respondents No. 2
and his family which were fraudulently entered in the register of
members of Respondent No. 1, continued to be reflected in the said
register even at the time of filing of the captioned Company Petition in
the year 1987. It is submitted that thus, even otherwise, the
illegalities committed by the Respondent No. 2 and his family
constitute a continuing wrong, for which a fresh period of limitation
begins to run at every moment of the time during such wrong i.e.
there is a continuing cause of action in favour of the Petitioners under
Section 22 of the Limitation Act. Thus, it is submitted that hence, on
this ground also, the captioned Petition is well within limitation and
there is no delay and/or latches as alleged or otherwise.
58. It is submitted that the judgment of the Hon'ble Supreme Court in
The Kerala State Electricity Board, Trivandrum v. T.P. Kunhaliumma,
[(1976) 4 SCC 634], reliedupon by the Respondents inter alia to
suggest applicability of Article 137 of Limitation Act is of no avail and
cannot help them in the captioned Petition. It is submitted that a
perusal of the said judgment clearly shows that the same pertains to
applications or petitions filed before a civil court (Paragraph 22),
whereas the captioned Petition was filed under the 1956 Act not
before any civil court, but before the Hon'ble Gujarat High Court.
Thus, the said judgment is not applicable to the present case.
59. Similarly, the judgment of Hon'ble Punjab and Haryana High Court in
Jagjit Rai Maini v. Punjab Machinery Works (P) Ltd., [1995 SCC OnLine
P&H 317] relied upon by the Respondents also does not further their
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case. It is submitted that in the said judgment (Paragraph 12), it is

clearly stated that since there was no averment in the petition as to
when petitioner acquired knowledge of the transfer of shares, it was
presumed that he had knowledge from date of allotment basis which
it was declared to be barred by limitation. It is submitted that on the
contrary, in the captioned Petition (Paragraph 21 at Page 19), the
Petitioners have, in no uncertain terms, made averments as to when
they acquired knowledge of the fraudulent transactions i.e. in May,
1987, which has not been countered by any cogent evidence till date.
Thus, it is submitted that even the said judgment of the Hon'ble
Punjab and Haryana High Court is not applicable to the facts of the
present case. Accordingly, the captioned Petition having been filed
immediately after gaining knowledge of the fraudulent transactions is
well within limitation.
VI. THE CAPTIONED COMPANY PETITION IS NOT A PROXY/SPONSORED
LITIGATION:
60. It is submitted that lastly, a miserable attempt has been made by
the Respondents (except Respondents No. 12 and 13) inter alia to
contend that the captioned Company Petition is sponsored by the
Respondent No. 12 and the same has been filed by Petitioner No. 1 at
the behest of Respondent No. 12 as a proxy litigant. At the outset, it
is required to be noted that the entire argument of the said
Respondents is based on assumptions, surmises and conjectures only.
It is submitted that no evidence much less any cogent evidence has
been placed on record by the said Respondents to even remotely
support the above argument.
61. It is submitted that the entire argument of the said Respondents as
far as sponsored/proxy litigations is concerned, revolves on the
following aspects:
(i) That the father of Petitioner No. 1 was working in the Respondent
No. 1 company since 1948, after which the Petitioner No. 1 joined
the said company in 1965;
(ii) That the longevity of service by the father of Petitioner No. 1 and
Petitioner No. 1 himself in Respondent No. 1 when Vadilal Mehta
and Respondent No. 12 were in management of Respondent No. 1
made them close confidante of Vadilal Mehta and Respondent No.
12; (iii) That Petitioner No. 1 was an administrative manager with
Respondent No. 1, which was a very high position and even
enjoyed higher pay than the Directors at the relevant time (Page
411 of Company Petition);
(iv) That Petitioner No. 1 resigned from Respondent No. 1 after
resignations of Vadilal Mehta and Respondent No. 12;
(v) That Petitioner No. 1 was authorized signatory of Respondent No.
1 by way of Power of Attorney executed in his favour in the year
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1971 (Page 465 of Company Petition);

(vi) That Petitioner No. 1/Respondent No. 12 had previously filed
various litigations against Respondent No. 2:
• Ramesh B. Desai v. Union of India, [AIR 1988 Del 288];
• Claim filed by Respondent No. 12 and 13 against Respondent No.
2 and his family before Vadilal Mehta in or around 1985;
• Criminal complaint filed by Trade Unionist wherein Petitioner No.
1 was named as a witness.
(vii) That Petitioner No. 1 was a witness to the Will of Vadilal Mehta
(Page 469 of Company Petition);
(viii) That the Annexures in the captioned Petition are claimed to be
true copy of originals, which could have been provided purportedly
only by Respondent No. 12.
62. It is submitted that a perusal of the above clearly shows that all the
allegations raised by the Respondents are nothing but a figment of
their own imagination without any proof that Respondent No. 12 has
either sponsored the present Company Petition or that the Company
Petition is filed by Petitioners as proxy of Respondent No. 12. Before
dealing with the above allegations, is noteworthy to mention here that
no allegations whatsoever have been raised by the said Respondents
against the then Petitioners No. 2 to 9. It is submitted that there is no
submission whatsoever to even remotely suggest that Petitioners No.
2 to 9 are proxy Petitioners and/or they have also been sponsored by
Respondent No. 12. It is submitted that in view of absence of any
such insinuation against the remaining Petitioners, the present issue
is required to be rejected on this ground alone, without even
venturing further into the same.
63. Even otherwise, it is submitted that mere longevity of service by
Petitioner No. 1 cannot ipso facto mean that all actions taken by him
would be at the behest of Respondent No. 12 and the said fact is not
enough to come to any conclusion in respect of the above issue. It is
submitted that a perusal of Page 465 of captioned Petition shows that
apart from Petitioner No. 1, there were 5 (five) other personnel who
were holding authority through the Power of Attorney, which was
executed at the instance of entire Board of Respondent No. 1 and not
Respondent No. 12 alone. Further, it is incomprehensible as to how
the Petitioner No. 1 could have been rendered as proxy litigant merely
by being a witness to the Will of Vadilal Mehta (Page 469 of Company
Petition), who was the father of Respondent No. 2 and Respondent No.
12. It is pertinent to note that there is no allegation and/or evidence
that Petitioner No. 1 is a witness to the Will of Respondent No. 12.
Moreover, a perusal of Page 469 of Company Petition would show that
Petitioner No. 1 was not the only witness to the Will of Vadilal Mehta.,
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but there were 2 (two) witnesses as is stated therein.

64. It is pertinent to note that the claim made by Respondents No. 12
and 13 before Vadilal Mehta under the provisions of MOU has no
relation and/or connection to Petitioner No. 1 and the Respondents
have miserably failed to establish the same. It is submitted that even
in the proceedings before the Hon'ble Delhi High Court [AIR 1988 Del
288], it is submitted that the Hon'ble Court had clearly held that the
it was not appropriate to decide the said matter solely on the
argument of proxy litigation and in fact, the said matter was disposed
of after adjudication on all aspects in the matter. It is submitted that
in the quashing petition filed before the Hon'ble Gujarat High Court
(ref. List of dates regarding proxy litigation filed by Respondents -
item no. 26), Petitioner No. 1 was not even a party to the said petition
or to the criminal complaint (Page 88 of Company Petition) and hence,
there is no substance in the argument that the said matters were filed
by Petitioner No. 1 at the instance of Respondent No. 12. It is
submitted that as stated hereinabove, Petitioners had made
independent inquiries after gaining knowledge of the fraudulent
transactions in May, 1987 and had gathered available material
including documents placed as Annexures to the captioned Company
Petition. It is submitted that once again, irrelevant arguments have
been put forth by the Respondents to wriggle out of the merits of the
matter and to shy away from the fraudulent actions committed by
them.
65. Even otherwise, it is submitted that it is a trite principle of law that
decisions of criminal courts/in criminal matters are not binding on civil
courts in civil disputes. It is also well settled that findings recorded by
a criminal court do not have any bearing on matters before civil courts
even it be between the same parties involving the same subject
matter and both the cases are required to be decided independently
on the basis of evidence adduced therein. [Kishan Singh v. Gurpal
Singh, (2010) 8 SCC 775, (Paragraphs 11, 18]. Thus, it is submitted
that nothing recorded and/or held in the criminal complaint or the
quashing proceedings pertaining to the criminal complaint have any
bearing on the captioned Company Petition, which is required to be
decided on its own merits.
66. It is submitted that the captioned Petition has been filed by the
Petitioners as shareholders, which is permitted under Section 155 of
the 1956 Act. It is submitted that there is no evidence whatsoever
that the present proceedings are either sponsored and/or proxy at the
behest of any person including Respondent No. 12. It is submitted
that the Respondents have attempted to digress from the merits of
the matter by raising trivial issues, which neither have any support in
fact or evidence. It is submitted that thus, it is required that such
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assumptions and conjectures of Respondents be rejected and the

captioned Company Petition be allowed in its merits.
VII. PRESENT COMPANY PETITION DOES NOT SEEK TO CHALLENGE THE
MOU AND/OR MOM IN ANY MANNER WHATSOEVER:
67. It is reiterated that the captioned Company Petition has been
preferred by the Petitioners under Section 155 of the 1956 Act as
shareholders of Respondent No. 1 inter alia seeking rectification of
register of members of Respondent No. 1 to remove the names of
members which have been added without sufficient cause. It is
submitted that the captioned Company Petition in no manner seeks to
challenge the MOU and/or MOM executed inter se between the families
of Respondent No. 2 and Respondent No. 12. It is submitted that the
MOU and MOM executed between the said families provide the
consideration for which the shares of Respondent No. 1 were to be
transferred in favour of Respondent No. 2 and his family i.e. payment
of monies to CVMPL for discharging of its liabilities. It is submitted
that it is only for the said reason that the MOU and MOM have been
relied upon in the captioned Company Petition, to unequivocally show
the use of funds of Respondent No. 1 company by Respondent No. 2
and his family to purchase the shares of Respondent No. 1 itself.
68. It is submitted that thus, the judgments pertaining to challenging
family arrangement, which have sought to be relied upon by the
Respondents [K.K. Modi v. K.N. Modi, (1998) 3 SCC 573 and Hari
Shankar Singhania v. Gaur Hari Singhania, (2006) 4 SCC 658] have
no application to the captioned Company Petition, which is solely for
seeking reliefs under Section 155 of the 1956 Act.
Ø RELIEFS:
69. It is submitted that in view of what has been submitted hereinabove,
the captioned Company Petition is required to be allowed in its
entirety and the prayers as prayed for in the captioned Company
Petition are required to be granted with costs. Accordingly, it is
submitted that:
A. The Register of Members of Respondent No. 1 is required to be
rectified by deleting the names of Respondent No. 2 and his family
which have been entered without sufficient cause;
B. Direction to maintain status quo ante in respect of the shareholding
of Respondent No. 1 as well as all the benefits arising out of such
shares, as it existed prior to acquisition of shares of Respondent
No. 1 fraudulently by Respondent No. 2 and his family including
the additional acquisition of shares undertaken by Respondent No.
2 and family as detailed by Petitioner No. 1 in its Additional
th
Affidavit dated 4 October, 2015 (Pages 635 to 706 of Company
Petition).
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C. Damages be awarded to the Petitioners as provided under

subsection (2) of Section 155 of 1956 Act;
D. Declaration that the fraudulent transactions perpetrated by
Respondents No. 2 and his family were in violation of and
contradiction to Section 77 and Section 36 of 1956 Act and
accordingly, appropriate declaration and direction regarding the
title of disputed shares.
2. Written submissionon behalf of Respondents No. 12 and 13.
The present written submissions are submitted on behalf of respondent
no. 12 - Suhas Vadilal Mehta and respondent no. 13 - Mrs. Chhayaben
Suhasbhai Mehta.
Sayaji Industries Chairman was Vadilal Lallubhai Mehta. Sometime in
1967, the group owned the following units:
a. Maize Products, Kathwada
b. Topiaco Products, Chalakudy, kerala
c. Sayaji Mills at Baroda
d. Sayaji Mills no. 2 at Mumbai
e. Shubhalaxmi Mills at Cambay
f. Over and above host of trading companies which were Pvt. Ltd.
Companies
Bipin V. Mehta was the elder son of Vadilal L. Mehta. He was living in
Mumbai and he was in exclusive charge of the three textile mills as
mentioned at (c) to (e) hereinabove. In 1972, due to heavy losses, Sayaji
Mills at Baroda and Shubhalaxmi Mills at Cambay were sold. Thereafter,
Bipin V. Mehta continued to be in exclusive charge of Sayaji Mills No. 2 at
Bombay.
Before dealing with the issue raised in the present mater it would be
pertinent to bring to the notice of the Hon'ble Tribunal the conduct of
respondent no. 2 - Bipin Vadilal Mehta.
1. Shri Vadilal Lallubhai Mehta was the father of respondent no. 2 -
Bipinbhai and respondent no. 12 - Suhasbhai. Shri Vadilal Lallubhai
Mehta was the Chairman of Sayaji Mills Limited. Whereas respondent
no. 2 - Bipinbhai and respondent no. 12 -Suhasbhai were the
Managing Directors and on the Board of Directors. During the year
1975, a Board of Directors meeting was to be convened on
23.12.1975.The same was convened on 26.12.1975. At the said
meeting the Chairman pointed out that incorrect stock statements
were filed before the Banks in regard the stocks of Sayaji Mills No. 2
as existing on 30.09.1975. The Chairman as well as the Board of
Directors were taken back and they looked towards Bipin V. Mehta
who was in exclusive charge as a Managing Director of Sayaji Mills No.
2 until 12.11.1975. Two letters were produced, one written by Shri
N.C. Gajarawala-General Manager and one of the constituted attorneys
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and Shri S.N. Bavdekar - Management Accountant and one of the

constituted attorneys of Sayaji Mills No. 2. It was alleged vide the said
letters that the Chairman had instructed them to file the said incorrect
statements with the Banks. Shri S.N. Bavdekar was cross examined
by the Board of Directors and he revealed that the said statement was
filed at the behest of Shri N.C. Gajarawala. The Chairman pointed out
to the Board of Directors that Bipin V. Mehta was the Managing
Director and was in control of day-today running of Sayaji Mills no. 2.
The Board of Directors came to the conclusion that Bipin V. Mehta who
was in exclusive charge of Sayaji Mills Ltd. No. 2 and Shri Gajarawala
are responsible for filing incorrect stock reports with the Banks and
that Shri Bavdekar had appended his signature at the instance of the
Managing Director (i.e. present respondent no. 2 - Bipin V. Mehta)
and the General Manager. The Board of Directors resolved that “Bipin
V. Mehta shall abstain from exercising any powers or
performing any duties of Managing Director of the Company”.
The Board of Directors also resolved to authorise the Chairman to
negotiate for sale of the block of Sayaji Mills no. 2 as well as to look
into the Bank affairs and set right the irregularities with the Banks.
(Kindly refer to page no. 710 onwards)
2. On 02.03.1976, the Board of Directors meeting was convened wherein
respondent no. 2 - Bipin V. Mehta had addressed a letter to the
Chairman on 25.02.1976. The said letter was circulated to the Board
of directors. The entire Board except respondent no. 12 - Bipin V.
Mehta were surprised at the false allegations that had been made
therein. Mr. Bipin V. Mehta had left the meeting halfway as he had a
flight to catch. The Secretary informed the Board of Directors that all
the papers pertaining to acceptance of public deposits, revised
advertisement, guarantee confirmation letters and balance
confirmation certificates of Dena Bank and Punjab National Bank were
in the possession of Mr. Bipin V. Mehta. The Board of Directors
viewed this seriously and requested the Secretary to inform Mr.
Bipin V. Mehta that the Board had considered such action as
dereliction of duty not only as a Managing Director but also as a
Director. The Board of Directors therefore resolved to remove
Bipin V. Mehta as a Managing Director of the Company and
bring in Shri Vadilal L. Mehta as the Managing Director. Thus on
15.08.1976 onwards for a period of five years, Bipin V. Mehta was not
re-appointed as Managing Director of Sayaji Mills no. 2. (Kindly refer
to page no. 717 onwards)
A query had been put forth by this Hon'ble Tribunal to Mr. Mihir
Thakore, Senior Advocate for respondent no. 1 - Company as to why
Vadilal L. Mehta and Suhas V. Mehta were desperate to see the ouster
of Bipin V. Mehta. Since Mr. Thakore, Senior Advocate did not have an
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answer to the same, Mr. Devang Nanavati, Senior Advocate appearing

for respondent no. 2 - Bipin V. Mehta informed the Hon'ble Tribunal
that Bipin V. Mehta had opted/walked out of the Company as he had a
different style of working (i.e. forward style of working). The truth is
that respondent no. 2 - Bipin V. Mehta had been removed from his
post despite the minutes of meetings being available with the
company. Respondent no. 1 and 2 had hidden this part from the
Tribunal.
3. Memorandum of Understanding (i.e. MOU):
The Memorandum of Understanding was executed on 30.01.1982
for dividing the assets betweenrespondent no. 2 - Bipin V. Mehta and
his family branch and respondent no. 12 - Suhas V. Mehta and his
family branch. The whole purpose for executing the MOU was to
ensure that peace and harmony prevails in the family and there is no
dispute in the absence of Shri Vadilal L. Mehta. I rely upon para no. 4
(a) which reads as under:
“4. (a) The Shares of Sayaji Mills Ltd., and C.V. Mehta Pr. Ltd.,
held by Suhasbhai Vadilal Mehta and the members of his branch or
the companies going to his share or Trusts or by Vadilal Lallubhai
H.U.F. or by Vimlaben Vadilal Trust shall be sold or transferred to
Bipinbhai Vadilal Mehta or as he may desire;…..”
At this juncture, it would be pertinent to refer to clause no. 10 of
the MOU and which reads as under:
“10. C.V. Mehta Pr. Ltd. which is being allotted to Bipinbhai
Vadilal Mehta has certain amounts to pay to the members of the
family of Vadilal Lallubhai Mehta, Suhasbhai Vadilal Mehta,
Suhasbhai Vadilal Trusts, Vadilal Lallubhai H.U.F., Vimlaben Vadilal
Trust, Bhuriben Lallubhai Estate and the daughters and grand-
children of Shri Vadilal Lallubhai Mehta and Smt. Vimlaben Vadilal
Mehta. C.V. Mehta Pr. Ltd., has also to pay substantial amount to C.
Doctor & Co. Pr. Ltd. All such payments shall be made
immediately and according to the entries in the books of
account made upto date.”
(Emphasis Supplied)
At the time of execution of the MOU, it was agreed by respondent
no. 2 - Bipin V. Mehta and respondent no. 12 - Suhas V. Mehta that
the amount of Rs. 40 lakhs that Bipin V. Mehta had to deposit would
be brought in immediately. Thus, Bipin V. Mehta had accepted the
said condition without any demur and thereby signed the MOU. Bipin
V. Mehta had to bring Rs. 20 lakhs and only then would the shares be
transferred. It is not the case of either parties that the MOM as well as
MOU had been executed without reading and understanding it or that
there was force, threat or coercion.
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4. Memorandum of Modification (i.e. MOM):

This Memorandum of Modification was executed on 13.11.1982
between respondent no. 2 - Bipin V. Mehta and respondent no. 12 -
Suhas V. Mehta in view of difficulties faced by respondent no. 2 -Bipin
V. Mehta and which is reflected in the foregoing para:
“WHEREAS, the parties hereto had arrived at an understanding
and recorded the same by a Memorandum of Understanding dated
30th January, 1982 hereinafter called, “the said Memorandum of
Understanding” and WHEREAS in the execution and compliance of
the said memorandum of Understanding, Shri Bipinbhai Vadilal
Mehta felt certain difficulties and requested Shri Suhasbhai
Vadilal Mehta to make some modifications in the said
Memorandum of Understanding and WHEREAS Shri
Suhasbhai Vadilal Mehta has agreed to and accepted to make
certain modification. AND WHEREAS the parties hereto are
desirous of recording the said modifications in the said
Memorandum of Understanding between them.”
(Emphasis supplied)
Clause no. 3 of the said MOM reads as under:
“3. It has been agreed and the parties hereto confirm that the
amount to he brought in by Shri Bipinbhai Vadilal Mehta towards
the amounts payable by C.V. Mehta Pvt. Ltd. to the members of the
family of Shri Vadilal Lallubhai Mehta and of Shri Suhasbhai Vadilal
Mehta, Suhasbhai Vadilal Trusts, Vadilal Lallubhai H.U.F., Vimlaben
Vadilal Trusts, Bhuriben Lallubhai Estate and the daughters and
grand children of Shri Vadilal Lallubhai Mehta and Smt Vimlaben
Vadilal Mehta and to C. Doctor & Co. Pvt. Ltd. has been fixed by the
parties at Rs. 39,24,154.88/- (Rupees Thirty Nine Lakhs Twenty
Four Thousand One Hundred Fifty Four and Paise Eighty Eight
only). Shri Bipinbhai Vadilal Mehta has agreed to pay and
bring in immediately (and in any event latest on the day next
after the day on which the Share Transfer Forms in respect of
Sauali Mills Ltd. are handed over by Shri Suhasbhai Vadilal
Mehta and members of his family as mentioned hereafter) in
C.V. Mehta Pvt. Ltd. a sum of Rs. 20,00.000/- (Rupees
Twenty lacs only) towards the amount required to be paid by
C.V. Mehta Pvt. Ltd. The said amount shall be treated as a loan
and Shri Bipinbhai Vadilal Mehta is not to claim or demand any
repayment of the said loan from C.V. Mehta Pvt Ltd. as long as the
management thereof does not pass into the hands of Shri Bipinbhai
Vadilal Mehta as provided herein.
It is further agreed and understood that transfer of the
management of Sayaji Mills Ltd., and the appointment of Shri
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Bipinbhai Vadilal Mehta and Shri Priyambhai Bipinbhai Mehta

on the Board of Directors thereof are only to be made after
Shri Bipinbhai Vadilal Mehta has paid and brought in C.V.
Mehta Put. Ltd. the aforesaid sum of Rs. 20,00,000/-(Rupees
Twenty lacs only) and it is further agreed that this amount is to
is brought and paid by Shri Bipinbhai Vadilal Mehta latest on the
day next after the transfer forms in respect of the shares of Sayaji
Mills Ltd. held by Shri Suhasbhai Vadilal Mehta and members of his
family are handed over to Shri Vadilal Lallubhai Mehta on behalf of
Shri Bipinbhai Vadilal Mehta and the members of his family. It is
also further agreed that the actual effect is to be given to
such share transfer of Sayaji Mills Ltd. by the Board of
Directors of Sayaji Mills Ltd. only after the payment of the
aforesaid amount of Rs. 20,00,000/- (Rupees Twenty lacs
only) by Shri Bipinbhai Vadilal Mehta to C.V. Mehta Pvt. Ltd.
and it is also clarified that these changes are made at the
instance and request of Shri Bipinbhai Vadilal Mehta and are
agreed to by Shri Suhasbhai Vadilal Mehta, in order to
accommodate Shri Bipinbhai Vadilal Mehta.”
Since, M/s. C.V. Mehta Pvt. Ltd. had to pay an amount of Rs.
39,24,154/- to respondent no. 12 - Suhas V. Mehta and his branches,
it was agreed that the said amount be broken up into 2 parts
comprising of Rs. 20 lakhs and Rs. 19,24,154/-. These amounts were
required to be paid by respondent no. 2 - Bipin V. Mehta from his own
personal funds/sources and not by utilising the funds of respondent
no. 1 - company
Therefore, as per the MOM Bipin V. Mehta had to first deposit an
amount of Rs. 20 lakhs with M/s. C.V. Mehta Pvt. Ltd. and
immediately respondent no. 12 shall sign the share transfer form for
transferring 8626 shares of Sayaji Mills Ltd. in favour of respondent
no. 2. Upon receipt of the balance amount (i.e. Rs. 19,24,157/-), the
management of M/s. C.V. Mehta would then pass on to respondent no.
2 - Bipin V. Mehta and until then respondent no. 12 - Suhas V. Mehta
shall remain in control of M/s. C.V. Mehta Pvt. Ltd. including the 9000
shares of respondent no. 1 - company which were allotted to M/s. C.V.
Mehta Pvt. Ltd.
As respondent no. 2 - Bipin V. Mehta did not have the requisite
financial assistance, he adopted a novel method. He was in de-facto
management of respondent no. 1, an amount of Rs. 20 lakhs from
transferred from the account of respondent no. 1 into the account of
M/s. Santosh Starch Products vide three separate transactions as
under:
Transaction No. Amount Date Cheque no.
1 10,00,000 12/13.11.1982 853901
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2 5,00,000 13.11.1982 853902

3 5,00,000 25.11.1982 853934
All the three cheques were drawn upon Punjab National Bank,
Maskati Branch, Ahmedabad.
M/s. Santosh Starch Products was an old supplier of maize raw
material to respondent no. 1. No delivery challan for delivery of raw
material is placed on record to show that raw material had been
delivered to respondent no. 1 - company.
On 13.11.1982, M/s Santosh Starch Products vide three
transactions transferred an amount of Rs. 20 lakhs into the accounts
of respondent no. 2 and respondent no. 3 as under:
Transaction Amount Date Cheque no. Deposit in
No. account
1 7,00,000 13.11.1982 887275 Bipin V.
Mehta (HUF)
2 6,00,000 13.11.1982 887276 Bipin V.
Mehta
3 7,00,000 13.11.1982 887277 Priyam B.
Mehta
All three cheques were drawn on Punjab National Bank,
Ahmedabad. Nothing is placed on record to show as to why and what
was the need for M/s. Santosh Starch Products to transfer an amount
of Rs. 20 lakhs into the accounts as specified in the aforesaid table?
The entire pleadings by respondent no. 1 to 3 are silent on this aspect
and which was conveniently scuttled by respondent's no. 1 to 3.
At this juncture, it would be pertinent to state that while executing
the MOU on 30,01.1982, respondent no. 2 - Bipin V. Mehta had
stepped in as a de-facto Managing Director of respondent no. 1.
Thus, Rs. 20 lakhs as specified in clause no. 3 was the pre-
cursor/prerequisite/pre-condition to set the ball rolling towards
implementation of the share transfer of respondent no. 1 company to
respondent no. 2 - Bipin V. Mehta and his family members. Had this
amount of Rs. 20 lakhs not been brought in by respondent no. 2 then
not a single share of respondent no. 1 - company would be transferred
to him and his family members. Followed by Rs. 19,24,154/- as
mentioned in clause no. 4 of the MOM. These amounts were to be paid
by respondent no. 2 from his own funds and not by utilizing the
money from the account of respondent no. 1 transferred to M/s.
Santosh Starch Products to respondent's no. 2 and 3 and ultimately to
M/s. C.V. Mehta Pvt. Ltd..
5. Whether respondents no. 12 and 13 had knowledge of transaction
of money:
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Respondent's no. 12 and 13 did not have any knowledge as to how

the amount of Rs. 20 lakhs was deposited into the personal accounts
of respondent no. 2 by M/s Santosh Starch Products. Upon execution
of MOM on 13.11.1982 and the transfer of Rs. 20 lakhs, respondent's
no. 12 and 13 who in good faith and belief had signed the share
transfer forms of Sayaji Mills Ltd. in favour of respondent no. 2 - Bipin
V. Mehta. The respondent's no. 12 and 13 came to know about the
manner and mode of the transactions only when they received the
legal notice dated 17.06.1987 (page no. 59) on 20.06.1987. (Kindly
refer to affidavit filed on page no. 163 and para no. 4). Respondent's
no. 1 to 3 have not denied the same in their subsequent affidavits.
6. Allegation of sponsored litigation or proxy litigation:
A contention was put forth on behalf of respondent's no. 1 to 3 that
the present petition is a sponsored petition or proxy litigation as
respondent no. 12 wanted to wrest back control of respondent no. 1 -
company. A lot had been submitted on the said contention as well as
long notes were submitted but no cogent evidence was produced. The
contention of sponsored litigation or proxy litigation is false, frivolous
and whimsical and is made without an iota of evidence being placed
on record of present proceedings. Law mandates that strong cogent
evidence is placed on record to enable this Hon'ble Tribunal or even a
prudent man to arrive at a conclusion that the present matter is a
sponsored litigation or proxy litigation. On perusal of the entire
pleadings, only averments are made by respondent's no. 1 to 3 and
no evidence is produced to substantiate the same.
The reliance placed upon a selected sentence from the judgment
rendered by the Hon'ble Delhi High Court in the case that had been
filed by petitioner no. 1 does not in any manner convey that
respondent's no. 12 and 13 had sponsored the petitioners for filing of
present petition or the matter before the Hon'ble High Court of Delhi.
While rendering its judgment, the Hon'ble High Court of Delhi had
specifically used the expression “it seems”. Thus, it was only an
assumption and nothing more beyond that as the Hon'ble High Court
at Delhi was also not surewhether it was a proxy litigation or
sponsored litigation. Law does not follow/rely upon presumptions or
assumptions; law needs cogent evidence and which respondents no.
1 to 3 have failed to produce before this Hon'ble Tribunal or any
Hon'ble Court.
Assuming for a moment and without accepting that the contention
as put forth by respondent's no. 1 to 3 is true, then there was no need
for respondent's no. 12 and 13 to wait for over 4 years. The litigation
could very well have been initiated within few days or few months or
even within one year from the date of signing of MOM. Hence, the
contention of sponsored litigation or proxy litigation to wrest back
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control of respondent no. 1 - company as raised by respondent's no. 1

to 3 is false, frivolous, and whimsical. The said contention is raised by
respondent's no. 1 to 3 only for the sake of argument and nothing
more.
7. Acceptance of transaction of Rs. 20 lakhs by Respondents no. 1
and 2:
It is quite surprising that respondent no. 1 and respondent no. 2
make different claims about the three transactions from Sayaji Mills
Ltd. to M/s. Santosh Starch Products and which is as under:
(a) Stand of respondent no. 1 - Company (affidavit page no. 96
onwards. Para no. 7 page no. 104):
It is the stand of respondent no. 1 - company that “the amount of
Rs. 20 lakhs was given by it to M/s. Santosh Starch Products during
day-to-day functioning of the company and no irregularity had been
committed by the company nor had the company suffered any loss at
the hands of its management. The respondent no. 1 -company had
also denied that respondent no. 2 had devised any scheme to use the
funds of the company for the purpose of giving effect to the MOU and
the MOM and company's fund had not been used for any personal gain
of respondent no. 2 or his family members”.
(b) Stand of respondent no. 2 - Bipin V. Mehta (affidavit page
no. 112 onwards. Para no. v. page no. 119 and para no. 7
page no. 124):
Respondent no. 2 - Bipin V. Mehta had filed an affidavit on 22.03.1988
when the matter was pending for consideration before the Hon'ble High
Court and at para no. “v” it was stated as under:
“v…..He and his branch had purchased the shares of respondent no. 1
company from their own resources and not out of the funds of the
respondent no. 1 company, whether directly or indirectly.”
Whereas, at para no. 7 on page no. 124 it was stated as under:
“7. ……..It is denied that the company advanced a sum of Rs. 20
lacs to M/s. Santosh Starch Products, the supplier of maize to the
company as alleged or that these amounts were paid in personal
account of myself and the members of my family as alleged. It is
further denied that the same amount was transferred in M/s C.V.
Mehta Pvt Ltd. in order to complete a pre-planned way of
transaction to get and control of M/s Sayaji Industries Ltd. as
alleged or at all…….”
(c) Stand of respondent no. 2 - Bipin V. Mehta (affidavit page
no. 467 onwards. Para no. 6 page no. 503):
Respondent no. 2 - Bipin V. Mehta had filed an affidavit before the
Hon'ble Supreme Court where he had stated as under:
“4……At the time of execution of the said Memorandum of
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Understanding the members of the family of Vadilal Mehta, Suhas

Vadilal Mehta, Suhas Vadilal Trust and other Trust and relatives of
late Shri V.L. Mehta and my brother Mr. Suhas had a credit balance
of approximately Rs. 40 lacs in M/s. C.V. Mehta Pvt. Ltd. It was a
condition precedent that all these payments were to be made
immediately by M/s C.V. Mehta Pvt, Ltd. so that the payment
could be made to Respondent No. 9 and 10 hereto.”
“6. Late Shri V.L. Mehta utilised his position as Chairman and
Managing Director of the Respondent No. 3 Company. He planned
out a design with the help of the Petitioner No. 1, who was the
Administrative Manager of the Respondent No. 3 Company and a
close confidant of late Shri V.L. Mehta. He therefore managed to
advance a sum of Rs. 23 lacs to M/s. Santosh Starch Products from
the funds of the Company. It may be stated that when these funds
were advanced by the Company, I was not a Director when the
initial two instalments were paid on 13th November, 1982. Third
th
instalment was paid on 25 November, 1982 and the cheque in
respect whereof was signed by the Petitioner No. 1 who was fully in
know of the arrangement. I was not having cheque signing
authority till April, 1983. It is significant to note that when
M/s. Santosh Starch Products paid a total loan of Rs. 20 lacs
to me and my family members, the same were deposited by
me in Punjab National Bank, to the account of C.V. Mehta
Put. Ltd. and the same were withdrawn by Respondent No. 9
and his family members as stated hereinabove……”
On perusal of the stand taken by respondent no. 1 and respondent
no. 2 the same are contradictory to each other. Respondent no. 1 -
company admits that an amount of Rs. 20 lakhs was transferred into
the account of M/s. Santosh Starch Products as it was a day-to-day
transaction for the company. Whereas respondent no. 2 while filing an
affidavit before the Hon'ble High Court had stated that he and his
branch had purchased the shares from their own resources and not
out of the funds of company and no amount from company fund had
been transferred to M/s. Santosh Starch Products.
When the matter was pending for consideration before the Hon'ble
Supreme Court and realizing the discrepancies between the said two
affidavits, respondent no. 2 - Bipin V. Mehta took shelter by claiming
that his father - Vadilal L. Mehta alongwith petitioner no. 1 had
devised a plan to advance Rs. 20 lakhs to M/s. Santosh Starch
Products and thereafter the said amount was transferred into his and
his family accounts and which were then withdrawn by him and his
family members and deposited into the account of M/s C.V. Mehta Pvt.
Ltd.
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The stand of the company as well as the stand taken by

respondent no. 2 stands corroborated by the transaction
wherein an amount of Rs. 20 lakhs were transferred from the
account of respondent no. 1 - company to M/s Santosh Starch
Products then into the accounts of respondent's no. 2 and 3
and into the account of M/s. C.V. Mehta Pvt. Ltd..
Respondent no. 2 - Bipin V. Mehta had addressed three (3)
communications to M/s C.V. Mehta Pvt. Ltd.. Vide three letters (page
no. 538, 540 and 542) respondent no. 2 had categorically stated that
the said amount is to be treated as a loan from him and he would not
claim it back so long as the management is not passed over to him as
decided between him and respondent no. 12 - Suhas V. Mehta. Thus,
it was portrayed that there was compliance of clause no. 3 of MOM
whereas vide communication dated 13.11.1982, respondent no. 12
informed respondent no. 2 that the shares of M/s C.V. Mehta Pvt. Ltd.
as well as its management shall remain with him until and unless the
balance amount of Rs. 19,24,154.88/- is not paid by respondent no. 2
-Bipin V. Mehta. This amount was paid by respondent no. 2 after
collecting the same from M/s Tirupati Traders.
At this juncture, it would be pertinent to refer to the MOM dated
13.11.1982 wherein, respondent no. 2 had expressed that he was
facing difficulties. While executing the said MOM it was agreed that an
amount of Rs. 20 lakhs being the first tranche would be brought in by
respondent no. 2 and thereafter the shares of Sayaji Mills Ltd. would
be transferred into his name. If respondent no. 2 was facing
difficulties then how is it that he had secured Rs. 20 lakhs within a
span of less than 24 hours of signing of the MOM. The fact that
respondent no. 2 had procured the amount of Rs. 20 lakhs from M/s.
Santosh Starch stands corroborated by the transaction carried out by
M/s Santosh Starch by depositing Rs. 20 lakhs into the accounts of
respondent's no. 2 and 3 which M/s Santosh Starch Products had
received from respondent no. 1 -company.
The respondent's no. 1 to 3 has also relied upon page no. 559 in
support of their contention that the amount had been transferred on
instructions of the Chairman (i.e. Vadilal L. Mehta). No reliance can be
placed upon the same as the same is produced by respondent no. 1
when respondent no. 2 was in control. The authenticity of such
document is questionable. At this juncture it would be necessary to
reiterate that in 1975 on the basis of two letters, allegations had been
levelled against Vadilal L. Mehta who was the Chairman and that
incorrect stock statement were filed with the Banks on his
instructions. After cross examination it transpired that Bipin V. Mehta
who was in exclusive charge of Sayaji Mills Ltd. No. 2 and Shri
Gajarawala were responsible for filing incorrect stock reports with the
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Banks and that Shri Bavdekar had appended his signature at the
instance of the Managing Director and the General Manager. A similar
pattern is sought to be found in the present instance too. Hence, no
reliance can be placed upon the document placed at page no. 559.
8. An allegation is levelled by respondents no. 1 to 3 that Vadilal
L. Mehta and Suhas V. Mehta had orchestrated the whole thing by
which an amount of Rs. 20 lakhs was transferred into the account
of M/s Santosh Starch Products and then to Bipin V. Mehta and his
branches and then the same was deposited into M/s C.V. Mehta
Pvt. Ltd.. The respondents no. 1 to 3 fail to appreciate the fact that
if such was the case, then there was no need to transfer the
amount of Rs. 20 lakhs into the account of M/s. Santosh Starch
Products and then ultimately to M/s C.V. Mehta Pvt. Ltd.. The same
could have very well been withdrawn/transferred directly by
respondent no. 12 - Bipin V. Mehta from respondent no. 1 -
company to respondent no. 12 and his branches prior to execution
of MOU or MOM, as the case may be. There was no need for the
roundabout transfer of the said Rs. 40 lakhs. The fact that this
amount was to come from Bipinbhai's personal kitty also goes to
show that this was the consideration towards the transfer of shares
and management.
9. To sum up, it is submitted that in order to get control of
Sayaji Mills Ltd and M/s. C.V. Mehta Pvt. Ltd. in view of the terms
and conditions of the MOU and MOM, it was necessary for Bipin V.
Mehta and members of his family to bring in Rs. 20 lakhs into M/s.
C.V. Mehta Pvt. Ltd. immediately so that the amount could be
utilised by M/s. C.V. Mehta Pvt. Ltd. for re-paying part of the
deposits of Suhas V. Mehta and his branches. It is also clear that
unless and until this amount of Rs. 20 lakhs was paid into M/s. C.V.
Mehta Pvt. Ltd., the shares of Sayaji Mills Limited were not to be
transferred to Bipin V. Mehta. Thus through intermediation or
getting M/s. C.V. Mehta Pvt. Ltd. as an intermediary, the funds of
Sayaji Mills were utilised for advancing the amount to M/s. Santosh
Starch Products who in turn advanced the 20 lakhs to Bipin V.
Mehta and members of his family and they in turn brought this
amount by way of deposits into M/s. C.V. Mehta Pvt. Ltd.. The
funds of Sayaji Mills were thus utilised in an indirect manner by
Bipin V. Mehta and members of his family to acquire shares of
Sayaji Mills Limited under the overall arrangement recorded in MOU
and MOM. It is clear that the transfer of shares of Sayaji Mils to
Bipin V. Mehta was to take place only if the amount of Rs. 20 lakhs
was brought into M/s. C.V. Mehta Pvt. Ltd. by Bipin V. Mehta. Thus,
the amount of Rs. 20 lakhs which originally was given by
respondent no. 1 - Sayaji Mills Ltd. to M/s. Santosh Starch Products
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and which was utilised by Bipin V. Mehta to enable them to

purchase the shares of Sayaji Mlls Ltd.. Without these amounts
aggregating to Rs. 20 lakhs, being paid into M/s. C.V. Mehta Pvt.
Ltd., Bipin V. Mehta could not have purchased shares of Sayaji Mills
Ltd. and therefore, there is clear breach of provision of Sec. 77(2)
of Companies Act, 1956. Bringing in the amount of Rs. 20 lakhs
into M/s. C.V. Mehta Pvt. Ltd. was a condition precedent to transfer
of shares of Sayaji Mills Ltd. and therefore, the condition precedent
was one of the items of consideration apart from the actual price of
the shares that Bipin V. Mehta had to pay to Suhas V. Mehta and
members of his family to acquire the shares of Sayaji Mills and
thereby acquire control of Sayaji Mills Limited. This consideration of
Rs. 20 lakhs could not have come from the account of respondent
no. 1 - company.
10. Article 20(i) of Memorandum of Association (page no. 87)
restricts the usage of company funds for purchase or lent on shares
of the company. In the present instance, respondent no. 2 in a
novel method ensured that an amount of Rs. 15 lakhs is transferred
into the account of M/s Santosh Starch Products on 13.11.1982,
upon receipt of the said amount an amount of Rs. 20 lakhs were
transferred on 13.11.1982 into the accounts of respondent's no. 2
and 3. Thus, company funds had been utilized by respondent's no.
2 and 3. Assuming for a moment that the company funds had not
been utilised at all, then where was the need to return the amount
of Rs. 20 lakhs back to respondent no. 1 -Company by Santosh
Starch on 30.03.1984. Moreover, no raw materials nor any finished
goods/products were returned to M/s. Santosh Starch Products. The
fact that the amount had been returned to the company was the
sole reason which had prompted the Hon'ble High Court of Gujarat
to quash and set aside the criminal complaint filed by Mr. Ashim
Roy. Thus, usage of company funds stands proved beyond
reasonable doubt.
11. In so far as legal submissions are concerned, I adopt the
same as put forth by Mr. Shalin N. Mehta, Senior Advocate who had
appeared for the petitioners.
12. The MOM must be enforced in letter and spirit. That is what
our father wanted and as sons we owe it to our families.
13. The MOM cannot be undone by fraud. If there is fraud, then
all transactions must be reversed.
14. If this Hon'ble Tribunal finds that there is violation of Art 20
of MOA, then I am willing to payback Rs. 40 lakhs which is infact
company fund and the shares be transferred into my name by
removing the name of Bipin V. Mehta and his family from the
Register of Company.
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3. Written Submissions on behalf of the Respondents (other than

Respondent Nos. 12 and 13)
A. Mehta family and their business
1. Late Bipinbhai Mehta (Respondent No. 2) and Shri Suhasbhai Mehta
(Respondent No. 12) are sons of late Shri Vadilal Lallubhai Mehta and
late Smt. Vimla Vadilal Mehta.
2. Niramayiben Mehta (Respondent No. 14) is the widow of the
Respondent No. 2. Priyambhai Mehta (Respondent No. 3) is the son of
the Respondent No. 2. Priya (Respondent No. 15) is the daughter of
the Respondent No. 2.
3. Chhayaben Mehta (Respondent No. 13) is the wife of the Respondent
No. 12.
4. The companies, viz, Sayaji Industries Limited (Respondent No. 1);
Industrial Machineries Manufacturers Pvt. Ltd.; C. Doctor & Co. Pvt.
Ltd.; Mehta Machinery Manufacturers Pvt. Ltd.; Oriental Corporation
Pvt. Ltd.; and C.V. Mehta Pvt. Ltd. were managed by late Vadilal
Mehta and the Respondent No. 12.
5. Late Vadilal Mehta was the Chairman and Managing Director of the
Respondent No. 1 and resigned from the Respondent No. 1 only on
7.9.1983 (Page 431 of the paperbook).
6. The Respondent No. 12 was the Managing Director of the Respondent
No. 1 and resigned as the Managing Director of the Respondent No. 1
on 18.11.1982 (Para 8, Page 403 of the paperbook) but continued
as a Director of the Respondent No. 1. The Respondent No. 12
resigned as a Director of the Respondent No. 1 only on 7.9.1983
(Page 431 of the paperbook).
7. The Respondent No. 2, the Respondent No. 3 and the Respondent No.
14 were residing in Mumbai since 1967 and only in 1982 that the
family had shifted to Ahmedabad (Para 13.3, Page 593-594 of the
paperbooh).
8. The Respondent No. 2 was appointed as Additional Director and the
Managing Director of the Respondent No. 1 only on 18.11.1982 (Para
13, Pg. 438-439 and Page 470 of the paperbook)
B. Petitioners and their background
1. Petitioner No. 1 was employed with the Respondent No. 1 since 1965
and was an authorized signatory and power of attorney holder since
1970 along with others including his father who was the
Administrative Manager and the General Managerof the Respondent
No. 1 (Para 5, Page 402 and Page 465-468 of the paperbook).
2. Petitioner No. 1 was the Administrative Manager and Officer of the
Respondent No. 1 upto the year 1982-1983 (Para 5, Page 402 of
the paperbook).
3. Petitioner No. 1 and his father, as on 31.3.1981, were drawing
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remuneration more than the Chairman and Managing Director of the

Respondent No. 1 (Page 411 of the paperbook).
4. The cheque dated 25.11.1982 (the same would be elaborated
subsequently in the present written submissions) issued by the
Respondent No. 1 to M/s. Santosh Starch is signed by the Petitioner
No. 1 (Page 498 of the paperbook).
5. Petitioner No. 1 was a close confidant of late Vadilal Mehta [Para 5,
Page 402 and Para 10, Page 508 of the paperbook).
6. The will of late Vadilal Mehta was attested by the Petitioner No. 1
(Page 469 of the paperbook).
7. Petitioner No. 1 was the complainant's witness to the criminal
complaint filed by one Ashim K. Roy under Sections 120-B and 409 of
the Indian Penal Code, 1860 read with Section 77 of the Companies
Act, 1956. The allegations made in the said complaint were similar to
the allegations made in the present petition by the Petitioners (Page
456-462 of the paperbook).
8. The Petitioner No. 1 resigned from the Respondent No. 1 with effect
from 7.11.1983, immediately after the resignation of late Vadilal
Mehta and the Respondent No. 12 (Page 99 of the paperbook).
9. The present Petitioners are insignificant minority shareholders of the
Respondent No. 1. A chart showing the shareholding of the Petitioners
(total 9 in numbers) at the time of filing of the aforesaid Company
Petition and as on 20.11.2020 (presently only 2 in numbers i.e.
Petitioner No. 1 and Petitioner No. 6) is annexed hereto and marked
as Annexure ‘A’.
10. Petitioner Nos. 2 and 3 (now deleted) were the senior officers of the
Respondent No. 1. Both the aforesaid Petitioners resigned soon after
the resignation of late Vadilal Mehta and the Respondent No. 12from
the Respondent No. 1. Petitioner No. 4 (now deleted) was the wife of
the Petitioner No. 3. Petitioner No. 5 (now deleted) was the brother of
the Petitioner No. 1. Petitioner No. 6 is the wife of the Petitioner No. 5.
Petitioner Nos. 7 to 9 (now deleted) were the family friends of the
Petitioner Nos. 1 and 5 (Page 432 of the paperbook).
Consolidated List of Dates and Events
Sr. No. Date Particulars
1. Since 1965/1966 The Petitioner No. 1 was
employed with the
Respondent No. 1
[Para 5, Page 402 of
the paperbook)
2. Since 1970 The Petitioner No. 1 was
an authorized signatory
and power of attorney
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holder of the
Respondent No. 1 along
with others including
his father who was the
Administrative Manager
and the General
Manager of the
Respondent No. 1
(Page 465-468 of the
paperbook)
3. As on 31.3.1981 Petitioner No. 1 along
with his father were
drawing remuneration
more than the
Chairman and Managing
Director of the
Respondent No. 1
(Page 411 of the
paperbook).
4. 30.1.1982 Memorandum of
Understanding (MoU)
was executed between
the Respondent No.
2along with his family
members and the
Respondent No. 12
along with his family
members as a part of
family arrangement.
(Page 23-45 of the
paperbook)
Note:
Under the
MoU/Memorandum of
Modification (‘MoM’),
the management of
Sayaji Industries
Limited (Respondent
No. 1) and that of C.V.
Mehta Put. Ltd. were to
be handed over to the
Respondent No. 2 and
his family members.
A chart in respect of the
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companies managed by
late Vadilal Mehta and
the Respondent No. 12
before the MoU and
MoM and those
managed after the MoU
and MoM is annexed
hereto and marked as
Annexure ‘B’.
It is pertinent to
mention that separate
consideration has been
paid by the Respondent
No. 2 and his family for
the purchase of the
shares of the
Respondent No. 1 and
C.V. Mehta Put. Ltd.
from the Respondent
No. 12 and his family
members. The
necessary details in
respect of the same are
collectiuely annexed
hereto and marked as
Annexure ‘C’ (Colly).
As per the MoU, C.V.
Mehta Put. Ltd. had
certain liabilities which
were required to be
discharged by it. The
amount was to be
brought in by the
Respondent No. 2 in
C.V. Mehta Put. Ltd. so
as to enable C.V. Mehta
Put. Ltd. to discharge
its liabilities. Bringing
of the said money by
the Respondent No. 2
was the condition
precedent before the
transfer of the control
and management of the
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Respondent No. 1 and

C.V. Mehta Put. Ltd. to
the Respondent No. 2.
The amount brought in
by the Respondent No.
2 in C.V. Mehta Pvt.
Ltd. is not for purchase
of shares of the
Respondent No. 1. For
the purchase of shares
of the Respondent No. 1
from the Respondent
No. 12 and his family
separate consideration
has been paid by the
Respondent No. 2 and
his family members to
the Respondent No. 12
and his family members
and that the same is
not in dispute. The
same would even
otherwise be evident
from Annexure
‘C’ (Colly) to the
present written
submissions.
Attention of the Hon'ble
Tribunal is invited to
the following clauses of
the MoU:
Recital 5 (Pages 24
and 25 of the
paperbook);
Recital 6 (Page 25 of
the paperbook);
Clause 1(Page 25 of
the paperbook);
Clause 2 (Page 26 of
the paperbook);
Clause 4 (Page 26 of
the paperbook);
Clause 5 (Page 27 of
the paperbook);
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Clause 6 (Page 27 of
the paperbook);
Clause 7 (Page 27 of
the paperbook);
Clause 8 (Page 28 of
the paperbook);
Clause 10 (Page 29 of
the paperbook);
Clause 12 (Pages 29
and 30 of the
paperbook);
Clause 16 (Page 31 of
the paperbook);
Clause 21 (Pages 33-
35 of the paperbook);
Annexure - II (Page
44 of the paperbook);
and
Annexure - III (Page
45 of the paperbook).
5. 12.11.1982 Instructions were
issued by the then
Chairman, late Vadilal
Mehta for issuing a
cheque of Rs. 15 lacs in
favour of M/s. Santosh
Starch (Page 559 of
the paperbook).
During the time when
such instructions were
issued by late Vadilal
Mehta, the Respondent
Nos. 2 and 3 were
neither the Directors
nor in the management
of the Respondent No.
1.
It is pertinent to
mention that M/s.
Santosh Starch had
extensive business
dealings with the
Respondent No. 1 from
the year 1972/1975
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(Para 16, at Page 444

of the paperbook).
6. 13.11.1982 Memorandum of
Modification (‘MoM’)
was executed to make
certain modifications in
the MoU dated
30.1.1982 at the
request of the
Respondent No. 2.
(Page 46-55 of the
paperbook)
Note:
As per the said MoM,
the amount to be
brought in by the
Respondent No. 2
towards the discharge
of liabilities by C.V.
Mehta Pvt. Ltd. was
fixed at Rs.
39,24,154.88/-.
Rs. 20 lacs was to be
paid by the Respondent
No. 2 and his family to
C.V. Mehta Pvt. Ltd.
immediately and that
the said amount was to
be treated as a loan to
C.V. Mehta Pvt. Ltd. The
transfer of the
management of the
Respondent No. 1 was
to take place on making
of the loan amount of
Rs. 20 lacs.
The remaining amount
of Rs. 19,24,154.88/-
was to be brought in by
the Respondent No. 2
and his family as loan
to C.V. Mehta Pvt. Ltd.
within a period of 24
months. On payment of
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the aforesaid amount of

Rs. 19 lacs and odd, the
management of C.V.
Mehta Pvt. Ltd. was
proposed to be handed
over to the Respondent
No. 2.
Attention of the Hon'ble
Tribunal is invited to
the following clauses of
the MoM:
Clause 3 (Pages 47-48
of the paperbook);
Clause 4 (Pages 49-50
of the paperbook);
Clause 6 (Page 51 of
the paperbook);
Clause 8 (Page 52 of
the paperbook);
Clause 10 (Page 53 of
the paperbook); and
Clause 11 (Page 53 of
the paperbook);
7. 13.11.1982 Pursuant to the
aforesaid instructions
given by late Vadilal
Mehta, the Respondent
No. 1 paid an amount of
Rs. 15 lacs by way of
advance to M/s. San
tosh Starch as under:
(a) Cheque dated
12/13.11.1982 for Rs.
10 lacs.
(b) Cheque dated
13.11.1982 for Rs. 5
lacs.
Even on the said date,
the Respondent Nos. 2
and 3 were neither the
Directors nor in the
management of the
Respondent No. 1. The
affairs of the
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Respondent No. 1 were

under the management
and control of late
Vadilal Mehta and the
Respondent No. 12.
(Para 7, Page 8 and
Page 56 of the
paperbook)
8. 13.11.1982 M/s. Santosh Starch
paid an amount
aggregating to Rs. 20
lacs by 3 cheques all
dated 13.11.1982 to
the Respondent No. 2
and his family (Para 7,
Page 8 and Page 56
of the paperbook)
9. 13.11.1982 The Respondent No. 3
by his letter addressed
to C.V. Mehta Pvt. Ltd.
enclosed a cheque of
Rs. 7 lacs and informed
that the said amount is
to be kept as and by
way of loan from the
Respondent No. 3
(Page 538 of the
paperbook).
10. 13.11.1982 The Respondent No. 2
as karta of HUF by his
letter addressed to C.V.
Mehta Pvt. Ltd.
enclosed a cheque of
Rs. 7 lacs and informed
that the said amount is
to be kept as and by
way of loan, till the
time the control of C.V.
Mehta Pvt. Ltd. is with
the Respondent No. 12
and his group (Page
540 of the
paperbook).
11. 13.11.1982 The Respondent No. 2
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by his letter addressed

to C.V. Mehta Pvt. Ltd.
enclosed a cheque of
Rs. 6 lacs and informed
that the said amount is
to be kept as and by
way of loan from the
Respondent No. 2
(Page 542 of the
paperbook).
12. After 13.11.1982 C.V. Mehta Pvt. Ltd. on
receipt of the aforesaid
amount from the
Respondent No. 2 and
his family, discharged
its liabilities and that
C.V. Mehta Pvt. Ltd.
paid the said amount to
the entities which were
and are in control of the
Respondent No. 12. The
said amount was not
the consideration
towards shares for
which separate
amounts were paid to
the Respondent No. 12
and his family members
(Page 471-472 of the
paperbook).
13. 17.11.1982 A meeting of the
committee of share
transfer of the
Respondent No. 1 was
held. In the said
meeting, the said
committee approved
the transfer of shares in
favour of the
Respondent No. 2 and
his family members. It
is pertinent to note
that, in the said
meeting, the
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Respondent No. 12 was

also present as a part of
the committee and has
signed the minutes of
the meeting. The same
would be evident from
the signature of the
Respondent No. 12 who
attended the meeting of
the committee (Page
427 read with Page
413-426 of the
paperbook).
14. Upto 18.11.1982 The Respondent No. 12
was the Managing
Director of the
Respondent No. 1 and
resigned as the
Managing Director of
the Respondent No. 1
on 18.11.1982 and
continued as a Director
of the Respondent No. 1
till 7.9.1983 (Para 8,
Page 403 of the
paperbook).
15. 18.11.1982 The Respondent No. 2
was appointed as an
Additional Director and
was appointed as a
Managing Director of
the Respondent No. 1.
However, the
Respondent No. 2 had
no signing authority
(Para 13, Page 438-
439 and Page 470 of
the paperbook).
16. 25.11.1982 The Respondent No. 1
advanced a sum of Rs.
5 lacs to M/s. Santosh
Starch.
It is pertinent to
mention that the said
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cheque of Rs. 5 lacs

issued by the
Respondent No. 1 was
signed by the Petitioner
No. 1 (Page 498 of
the paperbook).
The Petitioner No. 1
never raised any
objections in respect of
the said advance made
to M/s. Santosh Starch
or refused to sign the
said cheque or raised
any objections either
before late Vadilal
Mehta or before the
Respondent No. 12 or
sought any explanation
from the Respondent
No. 1 as to why the said
amount is being paid to
M/s. Santosh Starch.
17. March/April 1983 The Respondent No. 2
was given the cheque
signing authority on
behalf of the
Respondent No. 1 only
in March/April 1983
(Para 23, Page 566 of
the paperbook).
18. August/September Though there is no
1983 averment in Company
Petition No. 35 of 1988
filed by the Petitioners
in respect of Tirupati
Traders, the Petitioners
have made reference of
the same at Annexure C
to the petition (Page
57 of the paperbook)
to suggest that the
funds of the
Respondent No. 1 were
being utilized towards
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purchase of shares of
the Respondent No. 1.
Even on perusal of page
57 of the paperbook, no
co-relation is being
reflected as sought to
be alleged by the
Petitioners.
19. Upto 7.9.1983 Late Vadilal Mehta, who
was the Chairman and
Managing Director of
the Respondent No. 1
resigned from the
Respondent No. 1 on
7.9.1983 (Page 431 of
the paperbook)
20. 7.9.1983 The Respondent No. 12
resigned as a Director
of the Respondent No. 1
(Page 431 of the
paperbook)
21. 7.11.1983 Immediately on
resignation of late
Vadilal Mehta and the
Respondent No. 12
from the Respondent
No. 1, the Petitioner No.
1 resigned from the
Respondent No. 1
(Page 99 of the
paperbook)
22. 30.3.1984 The aforementioned
advances made by the
Respondent No. 1 to
M/s. Santosh Starch
were repaid by M/s.
Santosh Starch to the
Respondent No. 1.
(Para 12, internal
page 14 of the
Judgment of the
Hon'ble Gujarat High
Court dated
2.12.1994 passed in
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Criminal Revision
Application No. 247
of 1989) (the said
judgment was tendered
before the Hon'ble
Tribunal at the time of
hearing of the aforesaid
matter)
23. 1984 Earlier, C. Doctor & Co.
Pvt. Ltd. was the Sole
Selling Agent of the
Respondent No. 1.
Under the MoU, C.
Doctor 8b Co. Pvt. Ltd.
was continued to be
managed by the
Respondent No. 12. As
per the terms of the
MoU, the Respondent
No. 2 had the option to
continue or to
discontinue with the
said Sole Selling Agent
once the Respondent
No. 2 comes in control
and management of the
Respondent No. 1.
In light of the aforesaid,
the Respondent No. 1
filed an application
before the Company
Law Board for the
appointment of L.G &
Doctor Associates Pvt.
Ltd. (LG Doctor) as
the Sole Selling Agent
in place of C. Doctor
&Co. Pvt. Ltd. under the
provisions of Section
294AA of the
Companies Act, 1956.
It appears that the
companies which came
to the share of the
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Respondent No. 12 had

not performed well. The
Respondent No. 12
along with late Vadilal
Mehta made repeated
attempts (as would be
explained hereinafter)
to get back into the
management of the
Respondent No. 1 (Para
K and L, Page 115 of
the paperbook).
In this regard the
Respondent No. 12 and
late Vadilal Mehta chose
their long time
confidant, namely, the
Petitioner No. 1 for their
oblique motives.
In order to achieve such
oblique motives, the
Petitioner filed his
objections before the
Company Law
Boardobjecting to the
appointment of LG
Doctor as Sole Selling
Agent (Para 4(b),
Page 430-432 of the
paperbook). It is
pertinent to mention
that the appointment of
LG Doctor as Sole
Selling Agent was on
the same terms and
conditions on which C.
Doctor & Co. Pvt. Ltd.
was appointed earlier
by the Respondent No.
1. Petitioner never
challenged or raised
any grievance in
respect of the
appointment of C.
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Doctor & Co. Pvt. Ltd.

by the Respondent No.
1 during the tenure of
the management and
control by late Vadilal
Mehta and the
Respondent No. 12.
Note:
In January 1985, the
Company Law Board
accorded its approval to
the appointment of LG
Doctor as Sole Selling
Agent Not resting there
and as a part of pre-
planned strategy, the
Petitioner No. 1 and
others filed Civil Writ
Petition No. 841 of
1985 before the Hon'ble
Delhi High Court
challenging the order of
the Company Law
Board. The said Writ
Petition was rejected by
the Hon'ble Delhi High
Court on 4.8.1987
(Page 430-431 of the
paperbook). It is
pertinent to highlight
that the said order also
mentions about the
MoU and the family
arrangement (Para 1
and Para 32 of AIR
1988 Del 288)- the said
judgment was tendered
before the Hon'ble
Tribunal at the time of
hearing of aforesaid
matter).
Petitioner No. 1
thereafter filed LPA No.
124 of 1987 before the
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Hon'ble Delhi High

Court against the
aforesaid order dated
4.8.1987. The said LPA
was dismissed on
10.12.2001.
24. 31.10.1985 The attack on the
Respondent No. 2 and
his family members
were continued by the
Respondent No. 12 and
by late Vadilal Mehta.
In this regard, the
Respondent Nos. 12
and 13 filed a claim of
about Rs. 17.81 crores
against the Respondent
No. 2 and his family
members before late
Vadilal Mehta seeking
his decision under the
MoU(Page 381-399 of
the paperbook).
Note:
The Respondent No. 2
filed an application
before the City Civil
Court at Ahmedabad for
declaration that there is
no dispute between the
parties under the MoU.
The City Civil Court at
Ahmedabad by its order
dated 14.8.1986
continued the interim
injunction till final
disposal of the
application (Page 172-
380 of the
paperbook).
Not resting there, the
Respondent No. 12 filed
an appeal before the
Hon'ble High Court of
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Gujarat against the

aforesaid order passed
by the City Civil Court
at Ahmedabad (Page
118-119 of the
paperbook). The said
appeal was rejected by
the Hon'ble Gujarat
High Court on
17.2.1988. Even the
Hon'ble Supreme Court
dismissed the SLP on
9.9.1988.
25. 1.11.1986 The fact that the
Petitioner No. 1 was a
close confidant of late
Vadilal Mehta and the
Respondent No. 12 is
further evident from the
will of late Vadilal
Mehta which is attested
by the Petitioner No. 1
(Page 469 of the
paperbook).
26. 17.6.1987 Having failed in their
earlier attempts, late
Vadilal Mehta and the
Respondent No. 12
once again took the
service of their long
term confidant, namely,
the Petitioner No. 1.
The Petitioner No. 1
issued a notice to the
Respondent Nos. 2, 3
and others by calling
upon them to rectify
the share register and
to ensure that the
status quo-ante is
maintained (Page 59-
70 of the paperbook).
In the said notice, it is
the specific case of the
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Petitioner No. 1 that he

came to know about the
specific nature of the
transaction on account
of the criminal
complaint filed by a
member of the Union of
the Respondent No. 1
(Para 7, at Page 65 of
the paperbook).
Further, it is the
specific case of the
Petitioners in Company
Petition No. 35 of 1988
(Para 21 at Page 19
of the paperbook)
that they came to know
about the transaction
when the criminal
complaint was filed and
that the Petitioners
came to know “by or
about in the month of
May, 1987”. Not only
that the said
statements are false to
the knowledge of the
Petitioner No. 1 as
would be evident from
the next date and event
hereinafter, but the
same clearly shows that
there clearly existed a
pre-planned strategy
between late Vadilal
Mehta, the Respondent
No. 12 and the
Petitioner No. 1.
27. 18.6.1987 As a part of pre-
planned strategy and
being hand in gloves,
late Vadilal Mehta, the
Respondent No. 12 and
the Petitioner No. 1 got
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a criminal complaint
(being Criminal Case
No. 11 of 1987) filed
before the Judicial
Magistrate First Class
under Sections 120-B
and 409 of Indian Penal
Code, 1860 read with
Section 77 of the
Companies Act, 1956
against the Respondent
Nos. 2 and 3, through
one Trade Unionist,
Ashim K. Roy (Page
456-462 of the
paperbook).
It is pertinent to
highlight that the
Petitioner No. 1 was
cited as the
complainant's witness
in the said criminal
complaint.
From the aforesaid
narration of facts, it is
evident that Ashim K.
Roy, the Petitioner No.
1, late Vadilal Mehta
and the Respondent No.
12 were hand in gloves
and it is for the said
reason that the
Petitioner No. 1, who
was aware of all the
facts since inception,
gave his helping hand
by becoming the
witness to the aforesaid
criminal complaint.
28. Between 14.7.1987 and The Petitioner No. 1
9.9.1987 sent an amended notice
to the Respondent Nos.
2, 3 and others (Page
71-72 of the
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paperbook); the
Respondent Nos. 2 and
3 sent their reply to the
aforesaid notices (Page
74-80 of the
paperbook); and the
Petitioner No. 1 gave
his reply to the reply
sent by the Respondent
Nos. 2 and 3 (Page 81-
86 of the paperbook).
29. 9.10.1987 The Petitioner No. 1
filed the aforesaid
Company Petition No.
35 of 1988 (Transfer
Petition No. 02 of 2018)
before the Hon'ble
Gujarat High Court
under Section 155 of
the Companies Act,
1956 alleging violation
of Section 77 of the
Companies Act, 1956.
The said petition is
pending before this
Hon'ble Tribunal.
30. 24.2.1988 Immediately upon the
rejection of the appeal
by the Hon'ble Gujarat
High Court by its order
dated 17.2.1988 (which
was filed by the
Respondent No. 12
against the order dated
14.8.1986 passed by
the City Civil Court), as
stated earlier, the
Petitioners filed a
motion (Company
Application No. 36 of
1988) (Para 14, Page
511 of the
paperbook) in the
aforesaid Company
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Petition for interim

relief.
It appears that the
Petitioners after filing
the Company Petition
No. 35 of 1988 on
9.10.1987 for about
more than 4 months
took no steps to list the
matter before the
Hon'ble High Court of
Gujarat.
31. 25.5.1988 The Petitioner No. 1
made a deposition in
Criminal Case No. 11 of
1987.
From the contents of
the deposition, it
becomes clear that the
Petitioner was well
aware of the family
arrangement since
inception (Page 463-
464 of the
paperbook).
The English translation
of the same was
tendered before this
Hon'ble Tribunal and
the same is annexed
hereto and marked as
Annexure ‘D’, for
ready reference.
32. 21.7.1988 Vadilal Mehta passed
away.
33. 2.12.1994 Against the criminal
complaint filed by
Ashim K. Roy, the
Respondent Nos. 2 and
3 filed Criminal Misc.
Application before the
Hon'ble High Court of
Gujarat for, inter alia,
quashing the said
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criminal complaint.
The said criminal
complaint was quashed
by the Hon'ble High
Court of Gujarat by its
judgment dated
2.12.1994.
By the said judgment,
the Hon'ble High Court
has, inter alia, observed
the following:
“12. There is one more
around which, in my
opinion, will go to show
that the complaint is
filed with a malicious
intention and at the
behest of somebody
else may be a family
member. It is to be
noted that even as per
the say of the
complainant, he is a
trade unionist and
therefore he is an
outsider and he has not
at all concerned with
the direct or indirect
affairs of the company.
It is an undisputed fact
that the entire amount
is repaid by Santosh
Starch Company i.e. on
30 March 1984 and the
present complaint is
filed on 20th July 1987
for the alleaed offence
for the period of
13.11.1982.the day on
which the petitioner no.
1 and petitioner no. 2
were not even simple
directors much less
manaaing directors as
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the management of the

company was controlled
by the father of the
petitioner no. 1 as
Chairman and Manaaing
Director…”
“…It is also an
undisputed fact that
one of the witnesses,
Mr. R.B. Desai who has
deposed against the
petitioners in the
inquiry u/s 202 has
filed a Company
Petition for the breach
of section 77 of the
Companies Act against
the Petitioners and has
not disclosed the said
fact in his deposition.
He is the man who has
also filed the complaint
before the Company
Law Board for the sole
selling agency of the
company under the
Companies Act, 1956.
Considering these facts,
it is a clear case of
deliberate attempt on
the part of the
complainant and he is a
man to utilize the
court's machinery for an
obligue purpose…”
In the said judgment it
is further observed, as a
matter undisputed fact,
that the entire amount
is repaid by M/s.
Santosh Starch to the
Respondent No. 1 on
30.3.1984.
34. 12.3.1996 In the aforesaid
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Company Petition No.

35 of 1988, the
Respondent Nos. 2 and
3 filed Company
Application No. 113 of
1995 before the Hon'ble
High Court of Gujarat
seeking dismissal of the
said Company Petition
on the ground that the
Petition is barred by
limitation.
The Hon'ble High Court
of Gujarat by its order
dated 12.3.1996
dismissed Company
Petition No. 35 of 1988.
35. 14.10.1997 Against the aforesaid
judgment of the
Hon'ble High Court of
Gujarat dated
2.12.1994, Ashim K.
Roy filed Special Leave
Petition before the
Hon'ble Supreme Court
of India.
The Hon'ble Supreme
Court of India rejected
the said Special Leave
Petition and upheld the
judgment dated
2.12.1994 of the
Hon'ble Gujarat High
Court. The Hon'ble
Supreme Court of India,
inter alia, observed as
under:
“14. A cursory reading
of the complaint, in
particular the extracts
especially the
underlined portion as
given above, will clearly
show that the
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contesting respondents
(accused) will come
into picture only after
the liability
contemplated under the
modified memorandum
of understanding was
discharged. In other
words, the accused
Respondents 1 and 2
could have come into
picture only after the
transactions complained
of had taken place and
as noticed above it was
the father of the first
respondent, who was
the Managing Director
of Sayaji Industries Ltd.
when the transactions
in question took place.
Respondents 1 and 2
could have played no
part in that transaction
as then were not even
ordinary Directors at
that time in M/s Savaii
Industries Ltd.
Therefore, the
allegations made in the
complaint even if they
are taken in their
entirety still they do not
constitute an offence
either under Sections
120-B and 409 IPC. In
the circumstances, it
would be manifestly
unjust to allow the
proceedings in the
criminal complaint to be
proceeded with against
Respondents 1 and 2.”
[(1998) 1 SCC 133- the
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said judgment was

tendered before the
Hon'ble Tribunal at the
time of the hearing of
the aforesaid matter]
36. 10.3.2000 Against the dismissal of
the Company Petition
No. 35 of 1988 by the
Ld. Single Judge of the
Hon'ble High Court of
Gujarat by its Order
dated 12.3.1996, the
Petitioner No. 1 filed
O.J. Appeal No. 9 of
1996 before the
Division Bench of the
Hon'ble High Court of
Gujarat.
The Division Bench of
the Hon'ble High Court
of Gujarat by its
Judgment dated
10.3.2000 dismissed
the appeal of the
Petitioner No. 1 with
costs.
37. 11.7.2006 The Petitioner No. 1,
against the aforesaid
Judgment dated
10.3.2000 passed by
the Division Bench of
the Hon'ble High Court
of Gujarat, filed Special
Leave Petition before
the Hon'ble Supreme
Court of India.
The Hon'ble Supreme
Court of India by its
Judgment dated
11.7.2006 directed the
Hon'ble High Court to
decide the Company
Petition No. 35 of 1988
afresh in accordance
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with law.
[(2006) 5 SCC 638 -
Para 32 and 33 - the
said judgment was
tendered before the
Hon'ble Tribunal at the
time of the hearing of
the aforesaid matter]
38. 22.1.2008 The Hon'ble High Court
of Gujarat passed an
order to the effect that
the aforesaid Company
Petition will have to be
now treated like a suit
and hence, issues are
required to be framed.
39. 27.8.2009 The Hon'ble High Court
of Gujarat by the said
order framed the issues
in Company Petition No.
35 of 1988. A copy of
the said order is
annexed hereto and
marked as Annexure
‘E’.
40. 19.10.2011 The Hon'ble High Court
of Gujarat by the said
order joined, inter alios,
Niramayiben Mehta,
widow of the
Respondent No. 2 and
Priya, daughter of the
Respondent No. 2 as
Respondent Nos. 14
and 15 to the aforesaid
Company Petition No.
35 of 1988. A copy of
the said order is
annexed hereto and
marked as Annexure
‘F’.
41. 23.3.2015 The Hon'ble High Court
of Gujarat framed
additional issues. A
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copy of the said order is

annexed hereto and
marked as Annexure
‘G’.
42. 25.1.2018 The Hon'ble High Court
of Gujarat transferred
the proceedings of
Company Petition No.
35 of 1988 before this
Hon'ble Tribunal.
The present petition is a proxy litigation which is filed at the
behest of late Shri VadilalLallubhai Mehta and the Respondent Nos.
12 and 13. The said petition filed by the Petitioners is an abuse of
process of law and that the Petitioners are not entitled to any reliefs
much less any discretionary relief from this Hon'ble Tribunal
1. At the time of hearing, a separate list of dates and events in respect of
the aforesaid issue was tendered before the Hon'ble Tribunal. The same
is annexed hereto and marked as Annexure ‘H’. for ready reference.
2. From the aforesaid, it is evident that the present petition filed by the
Petitioners is nothing but a proxy litigation at the behest of late Vadilal
Mehta and the Respondent No. 12. The present petition is an abuse of
process of law and is liable to be rejected on this ground alone.
3. It is humbly submitted that this Hon'ble Tribunal should take note of the
litigations initiated by the Petitioner No. 1 (Page 431-432 of the
paperbook). First before the Company Law Board, thereafter by way of
a Writ Petition and Letters Patent Appeal before the Hon'ble Delhi High
Court. The proxy litigation by way of criminal complaint, defending the
quashing petition before the Hon'ble High Court of Gujarat and
subsequently before the Hon'ble Supreme Court of India. The advocate
who was appearing for the Petitioners in the present Company Petition
No. 35 of 1988 was also appearing as the advocate for Ashim K. Roy. The
present Company Petition, which is filed since the year 1987 and
thereafter taken upto the Hon'ble Supreme Court of India on the issue of
limitation. Filing and defending several interim applications in the
present Company Petition before the Hon'ble High Court of Gujarat. The
Petitioners hold a miniscule shareholding in the Respondent No. 1. It is
beyond comprehension as to the amount of the fees being paid by the
Petitioner No. 1 to its advocates, including senior advocates, who
were/are appearing in the matters since last 35 years. From the
aforesaid, it is clear that the Petitioner No. 1 is acting on behest of the
Respondent No. 12.
4. Even otherwise, there is no case made out by the Petitioners for the
rectification of the register of members and that the Petitioners have not
shown any cause much less sufficient cause. The Petitioners have no
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direct or indirect grievance for themselves and that the petition, in the
form and style of public interest litigation, is not maintainable.
5. In light of the aforesaid, it is submitted that that Petitioners are not
entitled to any equitable relief from this Hon'ble Tribunal. The Petitioners
have not come with clean hands and that the Company Petition has been
filed with oblique motives.
C. The present petition is barred by limitation. Even otherwise the
petition suffers from gross delay and laches and that the
Petitioners are not entitled for any equitable relief from this
Hon'ble Tribunal
1. At the time of hearing, a separate list of dates and events in respect of
the aforesaid issue was tendered before the Hon'ble Tribunal. The
same is annexed hereto and marked as Annexure ‘I’, for ready
reference.
2. As stated earlier, the Petitioner No. 1 was employed with the
Respondent No. 1 since 1965 and was an authorized signatory and a
power of attorney holder since 1970. He was the Administrative
Manager and Officer of the Respondent No. 1 upto the year 1982-
1983. Petitioner No. 1 attested the will of late Vadilal Mehta. The
cheque dated 25.11.1982 issued by the Respondent No. 1 to M/s.
Santosh Starch is signed by the Petitioner No. 1. The Petitioner No. 1
filed the objections before the Company Law Board against the
appointment of the Sole Selling Agent. The Petitioner No. 1 was also a
witness to the criminal complaint filed by Ashim K. Roy. The Petitioner
No. 1 resigned from the Respondent No. 1 only on 7.11.1983 i.e.
immediately after the resignation of late Vadilal Mehta and the
Respondent No. 12 from the Respondent No. 1. Thus, the Petitioner
was a close confidant of late Vadilal Mehta and also of the Respondent
No. 12. The Petitioner No. 1 continued to be the Administrative
Manager of the Respondent No. 1 even after the change in the
management. It is impossible to fathom that the Petitioner No. 1 was
not aware of the family arrangement or of the transactions involved.
The said fact proves beyond doubt that the Petitioner No. 1 was aware
of the family arrangement and the transactions which took place in
the year 1982. In the circumstances, filing of the Company Petition
No. 35 of 1988 on 9.10.1987 is clearly barred by limitation.
3. Without prejudice to the aforesaid, it is stated that the Affidavit to the
Company Petition No. 35 of 1988 reads as under:
“AFFIDAVIT
I, R.B. Desai, Petitioner No. 1 hereinabove do hereby solemnly
affirm and state on oath that what is stated hereinabove is true to my
knowledge and submission of law are believed by me to be true.”
On perusal of the aforesaid Affidavit it becomes evident that the
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contents of the Company Petition No. 35 of 1988 are within the

knowledge of the Petitioner No. 1 which is claimed to be true. None of
the contents of the aforesaid Company Petition No. 35 of 1988 are
based on information or records. The aforesaid clearly shows that the
Petitioners were aware of all the facts as and when they occurred.
Therefore, the Petitioners were aware of the alleged transactions since
1982. In such circumstances, the Company Petition is barred by
limitation and thus required to be dismissed with costs.
4. Below the Affidavit to the said Company Petition it is mentioned as
under:
“Annexures are true copies of their originals of which they purport to be
copies.”
The aforesaid statement proves beyond doubt that the Petitioners
were aware of the execution of the MoU and MoM since 1982 and that
the Petitioners have the originals of all the Annexures which includes
the MoU and MoM or that the Petitioner No. 1 was in a position to
obtain the same from the persons on whose behalf the present
petition is filed. Thus, filing of the Company Petition on 9.10.1987 is
clearly barred by limitation.
5. In the deposition made by the Petitioner No. 1, in the criminal
complaint filed by Ashim K. Roy, it is the case of the Petitioner No. 1
that he was handling all business transactions of the Respondent No.
1. It is his further case that he used to manage the affairs of the
Respondent No. 1 as per the direction from the Managing Director of
the Respondent No. 1 and sometimes whenever the Managing Director
was not present, the Petitioner No. 1 used to take the decision and
manage the affairs and that there was no necessity for the Petitioner
No. 1 to inform the Managing Director. It is his further case that there
was no practice of advance payment in the Respondent No. 1. In the
said deposition it is further mentioned that the cheque dated
25.11.1982 was signed by him and all the 3 cheques were neither
towards purchase of goods nor an advance payments against goods. It
is his further case that all the 3 cheques were given under the
instructions of the Respondent No. 2.
It is a matter of fact that the instructions were issued by the then
Chairman, late Vadilal Mehta on 12.11.1982 for issuing a cheque of
Rs. 15 lacs in favour of M/s. Santosh Starch. It is also a matter of fact
that on the said date the Respondent Nos. 2 and 3 were neither the
Directors nor in the management of the Respondent No. 1. The
cheque dated 25.11.1982 is also signed by the Petitioner No. 1 and
that late Vadilal Mehta and the Respondent No. 12 were the Chairman
and the Managing Director. From the deposition it is evident that the
Petitioner No. 1 was aware of the transactions including the cheques.
Even if such deposition is to be believed to be factually true, the
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Petitioner No. 1 was aware in the year 1982 that the alleged
transactions according to him were incorrect/wrong/illegal. No steps
had been taken by the Petitioner No. 1 from the year 1982 till
8.10.1987.In the circumstances, the present Company Petition is
barred by limitation and liable to be dismissed.
6. In the Company Petition it is the case of the Petitioners that they
came to know of the transactions from the criminal complaint which
was filed in the month of May 1987 (Para 21, Page 19 of the
paperbook). The said averment in the Company Petition is false to
the knowledge of the Petitioners. The said criminal complaint was filed
only on 18.6.1987 (Page 456-462 of the paperbook). This clearly
proves that the Petitioners were aware of the transactions not from
the criminal complaint but were aware since inception. The fact that
the Petitioners have not learnt about the transactions from the
criminal complaint would be further evident from Annexure C to the
Company Petition (Page 57 of the paperbook). In the criminal
complaint there is no mention about the details of the transaction with
Tirupati Traders. However, the Petitioners have provided the details of
the transaction with Tirupati Traders. Though the said details in
respect of Tirupati Traders has no bearing to the issues involved in the
present case, however, it clearly shows that the Petitioners were
aware of the transactions since inception. Thus, the Company Petition
is barred by limitation.
7. Without prejudice to the aforesaid, it is submitted that Respondent
Nos. 14, 15 and 16 were only joined as parties to the aforesaid
Company Petition No. 35 of 1988 pursuant to order dated 19.10.2011
(Annexure ‘F’ to the present written submissions) passed by the
Hon'ble High Court of Gujarat. Assuming while denying that the
Petitioners learnt about the transactions in May 1987, it is submitted
that the aforesaid Company Petition No. 35 of 1988 is barred by
limitation against the Respondent Nos. 14, 15 and 16. It is further
submitted that joining of the Respondent Nos. 14, 15 and 16 by order
dated 19.10.2011 would not relate back to the date ofthe filing of the
aforesaid Company Petition No. 35 of 1988.
8. Judgments:
1. The Kerala State Electricity Board, Trivandrum v. T.P. Kunhaliumma,
(1976) 4 SCC 634 - [Paras 6 to 22];
The relevant portion of which reads as under:
“6. The provision contained in Article 137 of the Limitation Act,
1963 is as follows:
“Description of Period of limitation Time from which period
application begins to run
Any other application for Three years When the right to apply
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which no period of accrues

limitation is provided
elsewhere in this
Division”
7. The view of the Kerala High Court is that Article 137 of the
Limitation Act, 1963 has the same meaning as Article 181 of the
Indian Limitation Act, 1908.
8. Article 181 of the Indian Limitation Act, 1908 was as follows:
“Description of Period of limitation Time from which period
application begins to run
Applications for which no Three years When the right to apply
period of limitation is accrues
provided elsewhere in
this schedule or by
Section 48 of the Code
of Civil Procedure”
9. In the Kerala State Electricity Board case the High Court held that
in view of the decision of this Court in Town Municipal Council,
Athani v. Presiding Officer, Labour Court, Hubli [(1969) 1 SCC
873 : (1970) 1 SCR 51] the same construction should be put upon
Article 137 as had been put upon Article 181. In the Athani
Municipal Council case [(1969) 1 SCC 873 : (1970) 1 SCR 51] the
workmen applied to the Labour Court under Section 33C(2) of the
Industrial Disputes Act for computation of benefit in respect of
overtime. The Labour Court accepted the application of the
workmen. The Athani Municipal Council challenged the decision of
the Labour Court in a writ petition. On appeal to this Court it was
contended that the jurisdiction of the Labour Court was barred by
the provisions of Minimum Wages Act, 1948 and second the
applications to the Labour Court were timebarred under Article 137
of the Limitation Act 1963. This Court held as follows : The
alteration in the 1963 Limitation Act in Article 137, namely, the
inclusion of the words “other proceedings” in the long title to the
1963 Limitation Act, the omission of the preamble and the change
in the definition so as to include petition in the word “application”
do not show any intention to make Article 137 applicable to
proceedings before bodies other than courts such as quasi-judicial
tribunals and executive bodies. The word “other” in the first column
of the article giving the description of the application “any other
application for which no period of limitation is provided elsewhere
in this division” indicates that the interpretation of Article 181 in
the 1908 Limitation Act on the basis of ejusdem generis should be
applied to Article 137. The application was presented to the Labour
Court, a tribunal which was not a court governed by the Civil or
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Criminal Procedure Codes, and, therefore, the applications are not

governed by Article 137 of the Limitation Act, 1963.
10. In Nityananda M. Joshi v. Life Insurance Corporation of India
[(1969) 2 SCC 199 : (1970) 1 SCR 396] the appellants filed
applications against the respondent under Section 33-C(2) of the
Industrial Disputes Act for computing in terms of money, the
benefit of holidays and for recovering the amount The Labour Court
dismissed the applications insofar as the claim was for a period
beyond three years on the ground that the applications were barred
under Article 137 of the Limitation Act. In Nityananda Joshi case
[(1969) 2 SCC 199 : (1970) 1 SCR 396] this Court held as
follows : Article 137 contemplates applications to ordinary courts.
Section 4 of the Limitation Act provides for the contingency when
the prescribed period for any application expires on a holiday and
the only contingency contemplated is “when the court is closed”.
Further under Section 5 of the Limitation Act only a court is
enabled to admit an application after the prescribed period has
expired if the court is satisfied that the applicant had sufficient
cause for not preferring the application. The Labour Court is not a
court within the meaning of the Limitation Act.
11. This Court in Nityananda Joshi case [(1969) 2 SCC 199 : (1970) 1
SCR 396] said that it was not necessary to express views on the
first ground given by this Court in Athani Municipal Council case
[(1969) 1 SCC 873 : (1970) 1 SCR 51]. The first ground given in
the Athani Municipal Council case [(1969) 1 SCC 873 : (1970) 1
SCR 51] was that in spite of change the interpretation of Article
181 would apply to Article 137 of the Limitation Act. This Court in
Nityananda Joshi case [(1969) 2 SCC 199 : (1970) 1 SCR 396]
said that it would require serious consideration whether
applications to courts under other provisions, apart from Civil
Procedure Code, are included within Article 137 of the Limitation
Act, 1963 or not. The Athani Municipal Council case [(1969) 1 SCC
873 : (1970) 1 SCR 51] is a two fudge bench decision. Nityananda
Joshi case [(1969) 2 SCC 199 : (1970) 1 SCR 396] is a three-judge
bench decision.
12. The schedule to the Limitation Act is with reference to Sections 2
(j) and 3 of the Act. Section 2(j) of the Act speaks of the period of
limitation prescribed for any suit, appeal or application by the
schedule and “prescribed period” is the period of limitation
computed in accordance with the provisions of this Act.
13. Section 3 of the Act states that subject to the provisions contained
in Sections 4 to 24 (inclusive) of the Act every suit instituted,
appeal preferred and application made after the prescribed period
shall be dismissed although limitation has not been set up as a
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defence.
14. “Application” is defined in Section 2(b) of the Act to include a
petition.
15. The schedule is divided in three divisions. The first division relates
to suits. The first division consists of 10 parts and consists of 113
articles. The first 10 parts speak of 10 categories of suits. The
second division speaks of appeals. The second division consists of
Articles 114 to 117. The third division speaks of applications. The
third division is in two parts. Part I speaks of applications in
specified cases. Part II speaks of other applications.
16. The main contention on behalf of the appellant is that the petition
before the District Judge for compensation would be an application
for which no period of limitation is provided elsewhere in this
division and would fall within Article 137.
17. This Court in Sha Mulchand & Co. Ltd. (In Liquidation) v. Jawahar
Mills Ltd. [(1952) 2 SCC 674 : AIR 1953 SC 98 : 1953 SCR 351]
held that the construction put upon Article 181 of the Limitation
Act, 1908 is that the long catena of decisions under Article 181
may well be said to have, as it were, added the words “under the
Code” in the first column of that article.
18. The alteration of the division as well as the change in the
collocation of words in Article 137 of the Limitation Act, 1963
compared with Article 181 of the 1908 Limitation Act shows that
applications contemplated under Article 137 are not applications
confined to the Code of Civil Procedure. In the 1908 Limitation Act
there was no division between applications in specified cases and
other applications as in the 1963 Limitation Act. The words “any
other application” under Article 137 cannot be said on the principle
of ejusdem generis to be applications under the Civil Procedure
Code other than those mentioned in Part I of the third division. Any
other application under Article 137 would be petition or any
application under any Act. But it has to be an application to a court
for the reason that Sections 4 and 5 of the 1963 Limitation Act
speak of expiry of prescribed period when court is closed and
extension of prescribed period if applicant or the appellant satisfies
the court that he had sufficient cause for not preferring the appeal
or making the application during such period.
19. In the present case, the applications contemplated under Section
16(3) of the Telegraph Act are applications to the District Judge
within whose jurisdiction the property is situate. Applications are
contemplated if any dispute arises concerning the sufficiency of the
compensation to be paid under Section 10 of the Telegraph Act.
Section 10 of the Telegraph Act states that the telegraph authority
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shall pay compensation to all persons interested for any damages

sustained by them by reason of exercise of powers mentioned in
Section 10 of the Telegraph Act, 1885. Reference may also be
made to Section 16(1) which states that if the exercise of powers
mentioned in Section 10 in respect of property referred to in clause
(d) is resisted or obstructed the District Magistrate may order that
the telegraph authority shall be permitted to exercise them.
20. The provisions in the Telegraph Act which contemplate
determination by the District Judge of payment of compensation
payable under Section 10 of the Act indicate that the District Judge
acts judicially as a court. Where by statutes matters are referred for
determination by a court of record with no further provision the
necessary implication is that the court will determine the matters
as a court. (See National Telephone Co. Ltd. v. Postmaster-General
[[1913] A.C. 546 : 82 LJKB 1197 : 29 TLR 637]. In the present
case the statute makes the reference to the District Judge as the
Presiding Judge of the District Court. In many statutes reference is
made to the District Judge under this particular title while the
intention is to refer to the court of the District Judge. The Telegraph
Act in Section 16 contains intrinsic evidence that the District Judge
is mentioned there as the court of the District Judge. Section 16(4)
of the Telegraph Act requires payment into the court of the District
Judge such amount as the telegraph authority deems sufficient if
any dispute arises as to the persons entitled to receive
compensation. Again, in Section 34 of the Telegraph Act reference
is made to payment of court fees and issue of processes both of
which suggest that the ordinary machinery of a court of civil
jurisdiction is being made available for the settlement of these
disputes. Section 3(17) of the General Clauses Act states that the
District Judge in any Act of the Central Legislature means the judge
of a principal civil court of original jurisdiction other than the High
Court in the exercise of its original civil jurisdiction, unless there is
anything repugnant in the context. In the Telegraph Act there is
nothing in the context to suggest that the reference to the District
Judge is not intended as a reference to the District Court which
seems to be the meaning implied by the definition applicable
thereto. The District Judge under the Telegraph Act acts as a civil
court in dealing with applications under Section 16 of the Telegraph
Act.
21. The changed definition of the words “applicant” and “application”
contained in Sections 2(a) and 2(b) of the 1963 Limitation Act
indicates the object of the Limitation Act to include petitions,
original or otherwise, under special laws. The interpretation which
was given to Article 181 of the 1908 Limitation Act on the principle
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of ejusdem generis is not applicable with regard to Article 137 of

the 1963 Limitation Act. Article 137 stands in isolation from all
other articles in Part I of the third division. This Court in Nityananda
Joshi case has rightly thrown doubt on the two-Judge Bench
decision of this Court in Athani Municipal Council case where this
Court construed Article 137 to be referable to applications under
the Civil Procedure Code. Article 137 includes petitions within the
word “applications”, These petitions and applications can be under
any special Act as in the present case.
22. The conclusion we reach is that Article 137 of the 1963 Limitation
Act will apply to any petition or application filed under any Act to a
civil court. With respect we differ from the view taken by the two-
judge bench of this Court in Athani Municipal Council case [(1969)
1 SCC 873 : (1970) 1 SCR 51] and hold that Article 137 of the
1963 Limitation Act is not confined to applications contemplated by
or under the Code of Civil Procedure. The petition in the present
case was to the District Judge as a court. The petition was one
contemplated by the Telegraph Act for judicial decision. The
petition is an application falling within the scope of Article 137 of
the 1963 Limitation Act.”
2. Jagjit Rai Maini v. Punjab Machinery Works (P) Ltd., (2001) 103 Comp
Cas 979 - [Paras 10 to 12]
The relevant portion of which reads as under:
“10. By way of preliminary objection, it was argued that the shares
were allotted in the years 1972 and 1974 and the present petition was
filed in September, 1981 i.e. after a delay of 8 years and the same is
barred by limitation. No period of limitation has been prescribed under
the Act for filing a petition for rectification of the shares Register.
Counsel for the respondents relied upon The Kerala State Electricity
Board, Trivandrum v. T.P. Kunhaliumma, (1976) 4 SCC 634 : AIR
1977 SC 282, to contend that the limitation under these
circumstances would be three years. The Apex Court in T.P.
Kaunhaliumma's case (supra) held that the Article 137 of the
Limitation Act applies to any petition or application filed under arm
Act. Petition in that case under consideration was under Section 16(3)
of the Telegraph Act, 1885 claiming enhanced compensation and it
was held that the said petition fell within the scope of Article 137 of
the Limitation Act and was barred by time.
11. Counsel for the respondents further placed strong reliance upon
a judgment of Delhi High Court in Anil Gupta v. Delhi Cloth and
General Mills Company Limited, (1983) 54 Comp Cas 301, where a
learned Single Judge of Delhi High Court held that Article 137 of the
Limitation Act would apply to any petition or application under any Act
and the same shall not be confined to applications contemplated by or
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under the Code of Civil Procedure. 1908. This was a petition under
section 155 of the Act for ordering rectification of the Register of
Members. In that case, the petition had been filed after five years of
the allotment of shares. The same was held to be barred by time and
it was held as under:—
“Previously there was some doubt as to whether Art. 137 applies
to applications under the Special Acts. This controversy has been
set at rest by the decision of the Supreme Court in the case
reported as Kerala State Electricity Board v. T.P. Kunhaliumma,
(supra). That was a case where a petition had been filed under
Section 16(5) of the Indian Telegraph Act, 1885. A question arose
whether the said petition had been filed within time. The
contention of the petitioner was that Art. 137 did not apply. Taking
note of the changes brought about by the Limitation Act or 1963,
the Supreme Court held as follows (at P.2860):
“The conclusion we reach is that Article 137 of the 1963
Limitation Act will apply to any petition or application filed under
any Act to a civil court. With respect we differ from the view taken
by the Two-Judge Bench of this Court in Athani Municipal Council's
case (1969) 36 FJR 177 : AIR 1969 SC 1335 and hold that Article
137 of the 1963 Limitation Act is not confined to applications
contemplated by or under the Code of Civil Procedure. The petition
in the present case was to the District Judge as a court. The
petition was one contemplated by the Telegraph Act for judicial
decision. The petition is an application falling within the scope of
Article 137 of the 1963 Limitation Act.”
th
In the present case the transfers were effected on 11 August
th
1973, in respect of 1,000 shares, and on 27 September, 1974, in
respect 1,500 shares. An application under Section 155 of the
Companies Act could be filed within three years of the said
transfers. Prima facie it appears that the present petition which was
rd
filed on 23 November, 1978, is barred by time.”
12. In the present case as well, the shares were transferred in the years
1972 and 1974. There is no averment in the petition as to when the
petitioner acquired the knowledge of transfer of the shares. Under the
circumstances, it would be presumedthat he had the knowledge from the
date of the allotment of shares. The present petition, under the
circumstances, would be barred by limitation.”
9. Contentions raised by the Petitioners:
(a) It is contended that there is no prescribed period of limitation under
Section 155 of the Companies Act, 1956 and to buttress the said
argument it is further contended that in view of paragraph 22 of
Kerala State Electricity Board (supra) judgment, Article 137 applies
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only to Civil Court and that High Court is not a Civil Court. Therefore,
there is no prescribed period of limitation and that Article 137 of the
Limitation Act, 1963 would not be applicable to the facts of the
present case.
The said contention is devoid of any merits. There is no provision
under the Companies Act, 1956 which states that the provisions of the
Limitation Act, 1963 would not be applicable to any proceedings or to
certain proceedings under the Companies Act, 1956. In such
circumstances the provisions of the Limitation Act, 1963 would be
applicable to the proceedings under the Companies Act, 1956.
Therefore, Article 137 of the Schedule to the Limitation Act, 1963
would apply to the proceedings under Section 155 of the Companies
Act, 1956. In fact, the Hon'ble Delhi High Court in the case of Anil
Gupta v. Delhi Cloth and General Mills Co. Ltd., [(1983) 54 Comp Cas
301], as relied upon in Jagjit Rai Maini (supra) (Para 11), reiterates
that Article 137 of the Limitation Act, 1963 is applicable to petition for
rectification of register under Section 155 of the Companies Act, 1956.
The contention that High Court for the purpose of Section 155 of
the Companies Act, 1956 is not a Civil Court is without any merit.
Under Section 10 of the Companies Act, 1956, the High Court has the
jurisdiction to try and decide the issues raised under the Companies
Act, 1956 unless and until the jurisdiction under the Companies Act,
1956 is conferred on the District Court. It is not even the case of the
Petitioners that the proceedings initiated by them under Section 155
of the Companies Act, 1956 falls within the jurisdiction of the District
Court. The High Court in respect of the proceedings under Companies
Act, 1956 exercises original jurisdiction and thus the High Court is the
Civil Court for the purposes of Section 155 of the Companies Act,
1956. In such circumstances, Article 137 of the Limitation Act, 1963
would apply to the proceedings under the Companies Act, 1956
initiated/pending before the High Court.
In addition to the aforesaid, it is submitted that Section 465(2)(c)
of the Companies Act, 2013 provides that notwithstanding the repeal
of the Companies Act, 1956, any principle or rule of law or established
jurisdiction or practice or procedure shall not be affected. In catena of
judgments it has been held that the Limitation Act, 1963 would be
applicable even to proceedings pending before the High Court under
the provisions of the Companies Act, 1956.
In light of the aforesaid, it is submitted that Article 137 of the
Limitation Act, 1963 would apply to the aforesaid Company Petition
No. 35 of 1988 and that the said Company Petition is hopelessly
barred by limitation in light of what is stated in earlier paragraphs.
(b) It is further contended that under Article 137 of the Limitation Act,
1963, the period of limitation would start “when the right to apply
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accrues”. It is further contended that the Petitioners learnt about the

alleged fraud only in May 1987 when the criminal complaint was filed
by Ashim K. Roy.
In the earlier paragraphs to the present written submissions, it is clearly
demonstrated that the Petitioners were aware of the MoU/MoM and the
transactions involved thereunder since inception and that the contention of
the Petitioners that they learnt about the transaction only from the criminal
complaint is false to the knowledge of the Petitioners. In the circumstances,
it is submitted that the Company Petition No. 35 of 1988 is barred by
limitation.
(c) Based on paragraphs 20, 23 and 27 of the judgment reported in
(2006) 5 SCC 638 (Ramesh B. Desai v. Bipin Vadilal Mehta) it is
contended by the Petitioners that after the said judgment of the
Hon'ble Supreme Court of India, the Respondents have not laid down
any new facts or evidence and thus, in view of the judgment of the
Hon'ble Supreme Court of India, the issue of limitation pales to
insignificance.
The said contention is again devoid of any merits. The Hon'ble
Supreme Court of India has only held that the Code of Civil Procedure
confers no jurisdiction upon the court to try a suit on mix issues of law
and fact as a preliminary issue and where the decision on issue of law
depends upon decision of fact, it cannot be tried as a preliminary
issue. The Hon'ble Supreme Court in para 23 of the aforesaid
judgment as under:
“…In our opinion the approach adopted by the High Court is
clearly illegal as no finding on the point of knowledge could have
been recorded until the parties had been given opportunity to lead
evidence and in such circumstances dismissal of the company
petition at a preliminary stage on the finding that it was barred by
limitation is clearly erroneous in law.”
The Hon'ble Supreme Court in para 31 had further observed as under:
“…. Since we have held above that the company petition could not
be dismissed on a preliminary issue, namely, as being time barred by
limitation as the petitioners had not been given opportunity to lead
evidence…”
Therefore in any case the Hon'ble Court had left it to the discretion
of the parties more particularly the Petitioners to lead evidence on the
issue of limitation if they chose to. Further, the Hon'ble Supreme
Court of India while setting aside the judgment of the single judge
and the division bench of the Hon'ble Gujarat High Court has directed
the Hon'ble Gujarat High Court to decide the Company Petition afresh
in accordance with law and it is further made clear that any
observation made in the order of the Hon'ble Supreme Court is only
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for the limited purpose of deciding the appeal and the same shall not
be construed as an expression of opinion on the merits of the case. In
the circumstances, it is submitted that all the issues are kept open by
the Hon'ble Supreme Court including the issue of limitation. The
Respondents would have all the rights to contend before this Hon'ble
Tribunal that the aforesaid Company Petition is barred by limitation
based on the facts and evidence mentioned in the pleadings by the
Respondents. If that was not so, the Hon'ble Gujarat High Court would
not have framed the issue of limitation in its orders dated 27.8.2009
(Annexure ‘E’ to the present written submissions) and 23.3.2015
(Annexure ‘G’ to the present written submissions). The aforesaid
contention of the Petitioners is more of desperation then that of
substance.
(d) It was next contended by the Petitioners that the names of the
family members are wrongly included in the Register of Members. So
long as their names continue in the Register of Members, it is a
continuing wrong as per Section 22 of the Limitation Act, 1963 and
therefore, the petition filed by the Petitioners is within the prescribed
period of limitation.
The fundamental nature of the continuing wrong is that the violation of
law makes the wrong doer continuously liable. The Hon'ble Supreme Court
in the case of Balakrishna Savalram Pujari Waghmare v. Shree
Dhyaneshwar Maharaj Sansthan, AIR 1959 SC 798 has, inter alia, held as
under:
“31. …That is the question which this contention raises for our decision.
In other words, did the cause of action arise de die in diem as claimed by
the appellants? In dealing with this argument it is necessary to bear in
mind that Section 23 refers not to a continuing right but to a continuing
wrong. It is the very essence of a continuing wrong that it is an act which
creates a continuing source of injury and renders the doer of the act
responsible and liable for the continuance of the sad injury. If the wrongful
act causes an injury which is complete, there is no continuing wrong even
though the damage resulting from the act may continue…”
In view of the above it is well settled position of law that a wrong
or a default which is complete but whose effect/damage may continue
to be felt even after its completion is, however, not a continuing
wrong. In the present case the Petitioners have claimed reliefs under
section 155 for rectification of register, inter alia restoration of status
quo ante. These reliefs are claimed based on alleged violation of
section 77. According to the Petitioners the wrongful act of advancing
monies from the Respondent No. 1 to M/s. Santosh Starch would
amount to a breach of section 77. Assuming while denying that the
Petitioners allegations are true, the said wrongful act or breach of the
use of the Respondent No. 1's funds to acquire its own shares (breach
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of section 77) would be a onetime breach and the same was over on
13.11.1982. The resulting damage may continue however the
wrongful act does not continue and in view of above well settled
position of law the above cannot be said to be a continuing wrong.
Respondent No. 12 and his family members have not challenged
either the transfer of shares in favour of the Respondent No. 2 and his
family members or the rectification of register of the Respondent No.
1 under Section 155 of the Companies Act, 1956. Neither the MoU nor
the MoMare under challenge in the present petition. The only
challenge is that the advance of monies by the Respondent No. 1 to
M/s. Santosh Starch is in breach of Section 77 of the Companies Act,
1956 and that in view of said alleged breach there should be
rectification of the register by restoring status quo-ante. It is
submitted that if the advance made by the Respondent No. 1 to M/s.
Santosh Starch is in breach of Section 77 of the Companies Act, 1956,
as sought to be contended by the Petitioners, then in that case the
injury is over on the date when such advance was made by the
Respondent No. 1 to M/s. Santosh Starch. Such one time advance
cannot be said to be a continuing injury. The effect of injury,
assuming it to be continuing, and continuing injury are separate and
distinct. Effect of injury cannot be read to be a continuing injury. In
such circumstances, Section 22 of the Limitation Act, 1963 is not
applicable to the facts of the present case and that the petition filed
by the Petitioners is barred by limitation.
(e) The Petitioners sought to explain the affidavit of the Petitioner No. 1
(Page 22 of the paperbook). It was contended that the words “true
to my knowledge” can mean “true to his knowledge” or “knowledge
derived from sources”. It was contended that Petitioners derived the
knowledge from sources and such knowledge was derived from the
criminal complaint.
The said contention is baseless. The words “knowledge derived
from sources” would mean that the Petitioners acquired the
knowledge based on “information received from others”. In the
affidavit there is no mention that the contents of the Company
Petition are based on information or that the Petitioners have
disclosed the name of the persons who have given the information to
them. Even this Hon'ble Tribunal inquired from the Petitioners as to
how the Petitioners could annex the copy of the MoU, MoM and the
details of the transactions as mentioned in Annexure C to the
Company Petition No. 35 of 1988. No answer has been given by the
Petitioners till date. Further, no explanation is given by the Petitioners
to the words below the Affidavit (Page 22 of the paperbook)
“Annexures are true copies of their originals of which they purport to
he copies”. From the aforesaid, it is evident that the Petitioner No. 1
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was aware of the transactions since inception and that the Petitioners
have the originals or was in a position to obtain the same from the
persons on whose behalf the present petition is filed.
D. The amount of Rs. 39 lacs and odd brought in by the Respondent
No. 2 and his family within C.V. Mehta Pvt. Ltd. was by way of
loan and not as a consideration towards purchase of shares of the
Respondent No. 1. There is no violation of Section 77 of the
Companies Act, 1956
1. At the time of hearing, a separate list of dates and events in respect
of the aforesaid issue was tendered before the Hon'ble Tribunal. The
same is annexed hereto and marked as Annexure ‘J’, for ready
reference.
2. The MoU and the MoM were executed as a part of family settlement
with a view to increase love and peace in the family (Clause 7, Page
25 of the paperbook).
3. Under the family arrangement it was agreed that the management of
the Respondent No. 1 and C.V. Mehta Pvt. Ltd. was to be entrusted to
the Respondent No. 2 (Clause 1, Page 25 of the paperbook).
4. Other companies as mentioned in the MoU were to remain with the
Respondent No. 12 as the same were even otherwise managed by the
Respondent No. 12 (Clause 2, at Page 26 read with Clause 5, at
Page 25 of the paperbook).
5. The shares of the Respondent No. 1 and C.V. Mehta Pvt. Ltd. held by
the Respondent No. 12 were to be sold/transferred to the Respondent
No. 2 and his family (Clause 4(a), Page 26 of the paperbook).
6. Similarly, the shares held by the Respondent No. 2 and his family in
other companies were to be sold/transferred to the Respondent No. 12
and his family (Clause 4(b), Page 26 of the paperbook).
7. The prices at which the shares were to be sold/transferred were
already agreed (Clause 6, Page 27 read with Page 45 of the
paperbook).
8. It is not in dispute that the separate consideration is paid for the said
purchase of shares. The same would be evident from Annexure
‘C’ (Colly) to the present written submissions.
9. However, the control and management of the Respondent No. 1 and
C.V. Mehta Pvt. Ltd. were to be transferred to the Respondent No. 2
only upon payment of certain amounts by the Respondent No. 2 to
C.V. Mehta Pvt. Ltd. who had certain liabilities which were required to
be discharged by it (Clause 10 and 12, Page 29 and 30 of the
paperbook).
10. In addition to the aforesaid, there were also certain other family
arrangements which were entered into.
11. The Respondent No. 2 felt certain difficulties and requested for
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modification of the MoU.

12. In this regard, MoM dated 13.11.1982 was executed.
13. Under the MoM, the amount to be brought in by the Respondent No.
2 in C.V. Mehta Pvt. Ltd. was fixed at Rs. 39,24,154.88/- (Clause 3,
Page 47 of the paperbook).
14. It was agreed that upon the amount of Rs. 20 lacs is brought in by
the Respondent No. 2 in C.V. Mehta Pvt. Ltd., the management of the
Respondent No. 1 would be transferred to the Respondent No. 2. The
said amount to be brought within C.V. Mehta Pvt. Ltd. was treated as
loan (Clause 3, at Page 48 of the paperbook).
15. Similar was the case in respect of C.V. Mehta Pvt. Ltd. (Clause 4,
Page 49-50 of the paperbook).
16. It is a matter of fact that the amounts brought in by the Respondent
No. 2 and his family members in C.V. Mehta Pvt. Ltd. has been
utilized by C.V. Mehta Pvt. Ltd. to discharge its liabilities(Page 471-
472 of the paperbook). Further, the amounts brought in by the
Respondent No. 2 and his family were a loan to C.V. Mehta Pvt. Ltd.
(Page 538, 540 and 542 of the paperbook). On perusal of the
same it would be evident that the amount brought in by the
Respondent No. 2 and his family members in C.V. Mehta Pvt. Ltd. has
not been utilized towards consideration for purchase of any shares
either of the Respondent No. 1 or of C.V. Mehta Pvt. Ltd.
17. It is pertinent to mention that the cheques issued by the
Respondent No. 1 to M/s. Santosh Starch were at the behest of late
Vadilal Mehta who was the Chairman and the Managing Director of the
Respondent No. 1 (Page 559 of the paperbook). At the relevant
time neither the Respondent No. 2 nor the Respondent No. 3 were
Directors or in management of the Respondent No. 1. Even the
cheque dated 25.11.1982 was signed by the Petitioner No. 1 who was
the confidant of late Vadilal Mehta and the Respondent No. 12.
Though the Respondent No. 2 was appointed as Additional Director on
18.11.1982, he had no signing authority. The said authority was given
only in March/April 1983. Even on 25.11.1982, late Vadilal Mehta was
the Chairman and Managing Director of the Respondent No. 1. The
Respondent No. 1 had extensive business dealings with M/s. Santosh
Starch since the year 1972/1975. The fact that the Respondent No. 2
was not a Director of the Respondent No. 1 during the relevant time
has also been observed by the Hon'ble High Court of Gujarat, while
quashing the criminal complaint filed by Ashim K. Roy, in its order
dated 2.12.1994 and by the Hon'ble Supreme Court of India by its
judgment dated 14.10.1997.
18. In the circumstances, the complete bogey raised by the Petitioners
that the loan amount brought in by the Respondent No. 2 and his
family members in C.V. Mehta Pvt. Ltd. is towards consideration for
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purchase of shares of the Respondent No. 1 and C.V. Mehta Pvt. Ltd.
is baseless and devoid of any merits.
19. Section 77(2) of the Companies Act, 1956 stipulates that no public
company, shall give, whether directly or indirectly, and whether by
means of a loan, guarantee or otherwise, any financial assistance for
the purpose of or in connection with a purchase for any shares in the
said public company.
20. As explained in the earlier paragraphs, the advance was made by the
Respondent No. 1 to M/s. Santosh Starch. M/s. Santosh Starch gave
certain loans to the Respondent No. 2 and his family members. The
Respondent No. 2 and his family members gave a loan to C.V. Mehta
Pvt. Ltd. C.V. Mehta Pvt. Ltd. in turn discharged its liabilities.
Assuming while denying that there is any connection with the
advances given by the Respondent No. 1 to the loan amount given by
the Respondent No. 2 and his family members to C.V. Mehta Pvt. Ltd.,
it is submitted that no payment given by the Respondent No. 2 and
his family members has been given as a consideration towards
purchase of shares of the Respondent No. 1. The Respondent No. 2
and his family members have made a separate payment to the
Respondent No. 12 and his family members for the purchase of the
shares of the Respondent No. 1 and C.V. Mehta Pvt. Ltd. In the
circumstances, there is no violation of Section 77 of the Companies
Act, 1956, at all.
21. Assuming while denying that there is any violation of Section 77 of
the Companies Act, 1956, it is submitted that the same would not
render the sale or the transaction void and that the same would only
entail punishment for the Company and every Officer of the Company
who is in default. In this regard, reference be made to the Judgment
of the Hon'ble Calcutta High Court in the case of Unity Company
Private Limited v. Diamond Sugar Mills, AIR 1971 Cal 18 (Para 73 and
80), the relevant portion of which, reads as under:
“73. The learned counsel for the purchaser defendants has
submitted that in view of the pleadings in the suit, it is not open to
the plaintiff company to raise any question of illegality or invalidity
of the sale. The learned counsel argues that the question of
illegality and invalidity of the sale sought to be raised and argued
on behalf of the plaintiff company on the basis of the provisions
contained in Section 108 and Section 77 of the Companies Act, is
not a pure question of law. It is his argument that the illegality
contended for by the learned counsel on behalf of the plaintiff
involves questions of fact and there cannot be any question of any
violation of the provisions contained in the said Sections, unless the
necessary facts are established. It is the submission that unless the
necessary facts are pleaded in the plaint, it cannot be open to the
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plaintiff company to raise any such contention, relying on some

portion of the evidence led for other purposes. The learned counsel
relies on the provision contained in O. 6, Rr. 6 and 8 of the CPC in
support of his contention that in the absence of proper pleadings
with regard to the legality of the transaction, the question of
illegality cannot be agitated; and the learned counsel has also
referred to the following observations of the Supreme Court in the
case of Sri VenkataramanaDevaru v. State of Mysore, AIR 1958 SC
255 at pp. 262-263:
“Mr. M.K. Nambiar invited our attention to Ex. A-2 which is a
copy of an award dated 28-11-1847, wherein it is recited that
the temple was originally founded for the benefit of five families
of GowdaSaraswata Brahmins. He also refers us to Ex. A-6, the
decree in the scheme suit, O.S. No. 26 of 1915, wherein it was
declared that the institution belonged to that community. He
contended on the basis of these documents and of other
evidence in the case that whether the temple was a private or
public institution was purely a matter of legal inference to be
drawn from the above materials, and that, notwithstanding that
the point was not taken in the pleadings, it could be allowed to
be raised as a pure question of law. We are unable to agree with
this contention. The object of requiring a party to put forward his
pleas in the pleadings is to enable the opposite party to
controvert them and to adduce evidence in support of his case.
And it would be neither legal nor just to refer to evidence
adduced with reference to a matter which was actually in issue
and on the basis of that evidence, to come to a finding of a
matter which was not in issued and decide the rights of the
parties on the basis of that finding. We have accordingly
declined to entertain this contention.”
80. In the facts of the present case I am satisfied that the
purchasers acted bonaflde and they are bona fide purchasers of the
shares for valuable consideration. It is to be noted that there is no
allegation of fraud, collusion, conspiracy or benami in the plaint.
Gopikissen Agarwal who has given evidence on behalf of the
purchasers has stated in details as to why and under what
circumstances, the purchasers agreed to purchase and purchased
the shares in question. He has stated that the purchasers had no
knowledge at the time of their purchase as to who were the owners
of the shares and he has also stated how the entire consideration
money was paid by the purchasers and it is also his evidence that
the value they paid for the shares was more than adequate or the
market value. I have no hesitation in accepting the evidence of
Gopikissen Agarwal whose testimony on all important matters is
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supported by documentary evidence and is also corroborated by the

testimony of Kedar Nath Dutt. I am satisfied that the documents
relied on by the purchasers are all genuine documents and have
not been subsequently prepared for the suit. I have already
observed that Gopikissen Agarwal created a very favourable
impression on me from the witness box and he appeared to be a
truthful witness. I am satisfied on the evidence on record that the
sum of Rs. 1,25,000/- which the defendant company paid to the
firm of KashiramKanhaiyalal was paid by the defendant company
and received by the said firm in repayment of the legitimate dues
of the said firm. In my opinion, payment of any sum to any person
in repayment of its legitimate dues with whatever intention such
payment may be made, cannot be construed to mean rendering of
any financial assistance within the meaning of Section 77 of the
Companies Act. I, therefore, hold that in the facts of the instant
case there has been no violation of the provisions contained in
Section 77 of the Companies Act. Even if I had held that the sum of
Rs. 1,25,000/- was paid by the defendant company by way of
financial assistance in breach of the provisions contained in Section
77 of the Companies Act, I would have held that the sale was not
vitiated or rendered void in consequence thereof. In my opinion
giving of any financial assistance by the company for the purchase
of any shares in the company in violation of the provisions
contained in Section 77 of the Companies Act, does not render the
sale or the transaction void and it only entails a punishment for the
company and its officers, as provided in Section 77(4) of the said
Act. To construe the said provisions in Section 77(2) to imply that
the transaction itself, if done in breach of the said provisions with
financial assistance of the company, will be rendered illegal and
void, will have the effect, in my opinion, of penalising the share-
holder to an unlimited extent, while the offending company and its
officers in default will only be liable to a fine not exceeding Rs.
1,000/-. Such a construction may also have the very undesirable
effect of putting premium on dishonesty and encouraging dishonest
dealings on the part of unscrupulous directors and officers of any
company, as it may enable any unscrupulous and dishonest
director or officer to defraud the company by advancing large sums
of money to its nominees by way of financial assistance which the
company may not be able to recover because of the illegality of the
transaction and the Director or officer concerned who swindles the
company in the aforesaid manner gets away by paying the fine
provided in Section 77(4). The decision of the English Court in the
cases of [1936] Ch. 544 and (1946) 1 All E.R. 519 on similar
provisions in the English Companies Act, relied on by the learned
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counsel for the defendant purchasers, clearly support, to my mind,

the view that the transaction itself is not rendered invalid.”
22. If the story of the alleged violation of Section 77 of the Companies
Act, 1956 of the Petitioners is to be believed, then in that case it is
submitted that the Petitioners have purposefully not initiated any
action under Section 77(4) of the Companies Act, 1956 as they were
aware that late Vadilal Mehta, the Respondent No. 12, including the
Petitioner No. 1 would have been exposed as “officer who is in default.
To circumvent the said process, the Petitioners took the route of
Section 155 of the Companies Act, 1956 for rectification of register by
indirectly seeking status quo-ante though being aware that the
Respondent No. 12 and his family members have taken no steps in
such direction.
23. Contentions raised by the Petitioners:
(i) It is contended by the Petitioners that the amount of Rs. 39 lacs
and odd paid by the Respondent No. 2 and his family to C.V. Mehta
Pvt. Ltd. was a pre-condition as a consideration for transfer of
shares. Thus, it is contended by the Petitioners that there is a
violation of Section 77 of the Companies Act, 1956. As stated
earlier, Rs. 39 lacs and odd was brought in by the Respondent No.
2 and his family members in C.V. Mehta Pvt. Ltd. as a loan so as to
enable C.V. Mehta Pvt. Ltd. to discharge its liabilities. C.V. Mehta
Pvt. Ltd. was required to make payment to certain entities which
were/are in control of the Respondent No. 12. The said amount of
Rs. 39 lacs and odd has been utilized by C.V. Mehta Pvt. Ltd.
towards discharge of its liabilities (Page 471-472 of the
paperbook). The said money was not paid or utilized as
consideration towards purchase of shares from the Respondent No.
12 and his family members. Separate payments have been made
by the Respondent No. 2 and his family members for purchase of
shares. The same would be evident from Annexure ‘C’ (Colly) to the
present written submissions. The said amount of Rs. 39 lacs and
odd was not a consideration towards acquiring management or
control of the Respondent No. 1. Under the MoU, the management
and control of the Respondent No. 1 and that of C.V. Mehta Pvt.
Ltd. was required to be handed over to the Respondent Nos. 2 and
3 only after the independent and distinct transaction of bringing
Rs. 39 lacs and odd within C.V. Mehta Pvt. Ltd. Merely the fact that
the control and management of the said companies was to come
only after the independent and distinct transaction of payment of
Rs. 39 lacs and odd by the Respondent No. 2 and his family
members, would not mean that the said amount of Rs. 39 lacs and
odd is the consideration for purchase of shares or transfer of shares
or for management or for control. It is reiterated that Rs. 39 lacs
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and odd is neither towards purchase of shares or in connection with

the purchase of shares. The Petitioners are neither the parties to
the MoU nor the MoM. The parties to the MoU and the MoM have not
challenged the MoU/MoM. It is surprising that an outsider to the
MoU/MoM is seeking to explain the intention between the parties to
the MoU/MoM.
(ii) The Petitioners by showing page 413 and page 417 of the
paperbook contended that the Respondents have not placed any
evidence to show the discharge of consideration towards shares and
thus, the amount of Rs. 39 lacs and odd is towards purchase of
shares.
The said contention is baseless and without any merit. As stated
earlier, the Respondent No. 2 and his family members have paid a
separate and distinct consideration towards purchase of shares. The
same would be evident from Annexure ‘C’ (Colly) to the present
written submissions. It is pertinent to highlight that the
Respondent Nos. 12 and 13 have raised no such objections as
sought to be raised by the Petitioners.
E. The issues raised in the present petition are not peripheral to
rectification and thus, Company Petition filed by the Petitioners is
not required to be entertained.
1. It is submitted that the issues involved in the present Company
Petition are not peripheral to rectification. The same would be evident,
inter alia, from the following:
(a) Whether the Respondent No. 2, at the relevant time, was in de-
facto management? (Para 4, Page 4 of the paperbook; Para 11,
Page 13 of the paperbook).
(b) Whether Respondent No. 2 devised any scheme? (Para 8, Page
11 of the paperbook).
(c) Whether the Respondent No. 1 had no knowledge of the advances
made to M/s. Santosh Starch? (Para 8, Page 11 of the
paperbook).
(d) Whether the Chairman and the Directors, at the relevant time,
were acting on the dictates of the Respondent Nos. 2 and 3? (Para
19, Page 17 of the paperbook).
(e) Whether Respondent Nos. 2 and 3 have committed any fraud?
(Para 20 at Page 19 of the paperbook).
In the circumstances, it is submitted that this Hon'ble Tribunal be
pleased to not entertain the present Company Petition No. 35 of 1988.
2. It is further submitted that pursuant to the provisions of Section 465
(2)(c) of the Companies Act, 2013, the principle or rule of law or
established jurisdiction are not affected pursuant to the repeal of the
Companies Act, 1956 and that the judicial precedents rendered before
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the repeal would equally apply even after the enactment of the
Companies Act, 2013.
3. Judgments:
• Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic
Containers Pvt. Ltd., (1998) 7 SCC 105 - [Paras 25 to 32];
The relevant portion of which reads as under:
“25. Now we proceed to examine the power of the court to rectify
the Register of Members of a company under Section 155. The
question raised for the appellant is that the court under this Act
cannot direct an applicant to seek his remedy by way of suit but the
court under the Act having exclusive jurisdiction should decide itself
In support, strong reliance is placed on the deletion of the proviso to
Section 38 of the 1913 Act. Section 38 of the old Act is quoted
hereunder:
“38. Power of the court to rectify Register.—(1) If—
(a) the name of any person is fraudulently or without sufficient cause
entered in or omitted from their Register of Members of a company;
or
(b) default is made or unnecessary delay takes place in entering in
the Register the fact of any person having ceased to be a member,
the person aggrieved, or any member of the company, or the
company, may apply to the court for rectification of the Register.
(2) The court may either refuse the application, or may order
rectification of the Register and payment by the company of any
damages sustained by any party aggrieved, and may make such
order as to costs as it in its discretion thinks fit
(3) On any application under this section, the court may decide
any question relating to the title of any person who is a party to the
application to have his name entered in or omitted from the
Register, whether the question arises between members or alleged
members, or between members or alleged members on the one
hand and the company on the other hand; and generally may
decide any question necessary or expedient to be decided for
rectification of the Register:
Provided that the court may direct an issue to be tried in which any
question of law may be raised; and an appeal from the decision on
such an issue shall lie in the manner directed by the Code of Civil
Procedure, 1908 (5 of 1908), on the grounds mentioned in Section
100 of that Code.”
26. The proviso gave discretion to the court to direct an issue of law
to be tried, if raised. By this deletion, submission is that the Company
Court now itself has to decide any question relating to the rectification
of the Register including the law and not to send one to the civil court.
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There could be no doubt any question raised within the peripheral

field of rectification, it is the court under Section 155 alone which
would have exclusive jurisdiction. However, the question raised does
not rest here. In case any claim is based on some seriously disputed
civil rights or title, denial of any transaction or any other basic facts
which may be the foundation to claim a right to be a member and if
the court feels such claim does not constitute to be a rectification but
instead seeking adjudication of basic pillar some such facts falling
outside the rectification, its discretion to send a party to seek his relief
before the civil court first for the adjudication of such facts, it cannot
be said such right of the court to have been taken away merely on
account of the deletion of the aforesaid proviso. Otherwise under the
garb of rectification one may lay claim of many such contentious
issues for adjudication not falling under it. Thus in other words, the
court under it has discretion to find whether the dispute raised is
really for rectification or is of such a nature that unless decided first it
would not come within the purview of rectification. The word
“rectification” itself connotes some error which has crept in requiring
correction. Error would only mean everything as required under the
law has been done yet by some mistake the name is either omitted or
wrongly recorded in the Register of the company. In T.P. Mukherjee's
Law Lexicon, Fifth Revised Edition:
“The expression rectification of the Register used in Section 155
is significant and purposeful. ‘Rectification’ implies the correctness
of an error or removal of defects or imperfections. It implies prior
existence of error, mistake or defect… the Register kept by the
company has to be shown to be wrong or defective.”
According to Stroud's Judicial Dictionary:
“Rectify.—Altering the Register of a company so as to make it
conformable with a lawful transfer.”
nd
In Venkataramaiya's Law Lexicon, 2 Edn.:
“The act to be done under the powers of that section is the
‘rectification’ of the Register, a term which itself implies that the
Register, either in what is, or what is not upon it, is wrong; but the
Register cannot be wrong unless there has been a failure on the part of
the company to comply with the directions in the Act as to the kind of
Register to be kept : for if the Act has been complied with, the Register
must be right and not wrong.”
27. In other words, in order to qualify for rectification, every procedure
as prescribed under the Companies Act before recording the name in
the Register of the company has to be stated to have been complied
with by the applicant — at least that part as required by the Act —
and assertion of what has not been complied with under the Act and
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the Rules by the person or authority of the respondent-Company

before the applicant claims for the rectification of such Register. The
court has to examine on the facts of each case whether an application
is for rectification or something else. So field or peripheral jurisdiction
of the court under it would be what comes under rectification, not
projected claims under the garb of rectification. So far exercising of
power for rectification within its field there could be no doubt the
court as referred under Section 155 read with Section 2(11) and
Section 10, it is the Company Court alone which has exclusive
jurisdiction. Similarly, under Section 446, the “court” refers to the
Company Judge which has exclusive jurisdiction to decide matters
what is covered under it by itself. But this does not mean by
interpreting such “court” having exclusive jurisdiction to include
within it what is not covered under it, merely because it is cloaked
under the nomenclature rectification does not mean the court cannot
see the substance after removing the cloak.
28. Question for scrutiny before us is the peripheral field within which
the court could exercise its jurisdiction for rectification. As aforesaid,
the very word “rectification” connotes something what ought to have
been done but by error not done and what ought not to have been
done was done requiring correction. Rectification in other words is the
failure on the part of the company to comply with the directions under
the Act. To show this error the burden is on the applicant, and to this
extent any matter or dispute between persons raised in such court it
may generally decide any matter which is necessary or expedient to
decide in connection with the rectification.
29. Both under the 1913 Act and the 1960 Act, a procedure is prescribed
for admitting a person as a member by purchase or transfer of shares
of that company. With reference to the 1913 Act under Section 29, a
certificate of shares or stock shall be prima facie evidence of the title
of the number of the shares or stock therein. Section 30 defines
“member” to be one who agrees to become a member of a company
and whose name is entered in its Register. Section 31 is to keep a
Register of its members. Section 34 deals with transfer of shares and
application for the registration of the transfer of shares is to be made
either by the transferor or the transferee. Where such application is
made by the transferor for registration of his share, a registered notice
is to be sent to the transferee. Section 34(3) restricts to register a
transfer share until the instrument of transfer duly stamped and
executed by the transferor and transferee has been delivered to the
company. Thus before the name of any transferee is registered this
procedure has to be shown to have been followed, which is an
obligation of any such applicant under the Act. This shows that an
application is to be made either by the transferor or transferee for
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registering the name of the transferee as members or shareholders of

the company by placing before the company duly stamped and signed
document both by the transferor and transferee. Similar is the
position under Section 155 of the Indian Companies Act, 1960 that
before power is exercised for rectification essential ingredients are to
exist Section 108 gives a mandate to a company not to register
transfer of shares unless proper instrument of transfer duly stamped
and executed by or on behalf of the transferor and by or on behalf of
the transferee has been delivered to the company along with
certificates relating to the shares.
30. All the above indicates the limitation and the peripheral jurisdiction
with which the court has to act. In spite of its exclusiveness, it cannot
take within its lap outside this scope of rectification. This is indicated
even by Section 155 itself:
“155. Power of court to rectify Register of Members.—(1) If—
(a) the name of any person—
(i) is without sufficient cause, entered in the Register of Members
of a company, or
(ii) after having been entered in the Register, is, without sufficient
cause, omitted therefrom; or
(b) default is made, or unnecessary delay takes place, in entering on
the Register the fact of any person having become, or ceased to be,
a member;”
the person aggrieved, or any member of the company, or the
company, may apply to the court for rectification of the Register.
31. Sub-section (1)(a) of Section 155 refers to a case where the name of
any person is without sufficient cause entered or omitted in the
Register of Members of a company. The word “sufficient cause” is to
be tested in relation to the Act and the Rules. Without sufficient cause
entered or omitted to be entered means done or omitted to do in
contradiction of the Act and the Rules or what ought to have been
done under the Act and the Rules but not done. Reading of this sub-
clause spells out the limitation under which the court has to exercise
its jurisdiction. It cannot be doubted that in spite of exclusiveness to
decide all matters pertaining to the rectification it has to act within
the said four comers and adjudication of such matters cannot be
doubted to be summary in nature. So, whenever a question is raised
the court has to adjudicate on the facts and circumstances of each
case. If it truly is rectification, all matters raised in that connection
should be decided by the court under Section 155 and if it finds
adjudication of any matter not falling under it it may direct a party to
get his right adjudicated by a civil court. Unless jurisdiction is
expressly or implicitly barred under a statute, for violation or redress
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of any such right the civil court would have jurisdiction. There is
nothing under the Companies Act expressly barring the jurisdiction of
the civil court, but the jurisdiction of the “court” as defined under the
Act exercising its powers under various sections where it has been
invested with exclusive jurisdiction, the jurisdiction of the civil court is
impliedly barred. We have already held above the jurisdiction of the
“court” under Section 155, to the extent it has is exclusive, the
jurisdiction of the civil court is impliedly barred. For what is not
covered as aforesaid the civil court would have jurisdiction. Similarly
we find even under Section 446(1), its words itself indicate the
jurisdiction of the civil court is not excluded. This sub-section states,
“…no suit or legal proceedings shall be commenced … or proceeded
with … except by leave of the court”. The words “except by leave of
the court” itself indicate on leave being given the civil court would
have jurisdiction to adjudicate one's right. Of course discretion to
exercise such power is with the “court”. Similarly under Section 446
(2), “court” is vested with powers to entertain or dispose of any suit or
proceedings by or against the company. Once this discretion is
exercised to have it decided by it, it by virtue of the language therein
excludes the jurisdiction of the civil court. So we conclude that the
principle of law as decided by the High Court that the jurisdiction of
the court under Section 155 is summary in nature cannot be faulted.
Reverting to the second limb of submission by learned counsel for the
appellant that the Court should not have directed for seeking
permission to file a suit only because a party for dispute's sake states
that the dispute raised is a complicated question of facts including
fraud to be adjudicated. The Court should have examined itself to see
whether even prima facie what is said is a complicated question or not
Even dispute of fraud, if by a bare perusal of the document or what is
apparent on the face of it on comparison of any disputed signature
with that of the admitted signature the Court is able to conclude no
fraud, then it should proceed to decide the matter and not reject it
only because fraud is stated. Further on the other hand learned
counsel for the respondent totally denies any share having been
purchased by the appellant-Company or any amount paid to it. No
transfer of any such share was ever approved by the Board of
Directors. It is urged that the money even if advanced to Shri V.K.
Bhargava by the appellant-Company, if at all, was a private
transaction between the two with which the respondent-Company has
no concern. So we find there is total denial by the respondent.
32. We have gone through the judgment of the High Court. It has rightly
held the law pertaining to the jurisdiction of the “court” under Section
155 and even referred to some of the documents of the appellant but
concluded that since they are disputed and said to be forged hence it
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directed for seeking leave if advised for suit We feel it would have
been appropriate if the Court would have seen for itself whether these
documents are disputed and if any document is alleged to be forged,
whether it is said to be so only to exclude the jurisdiction of the Court
or it is genuinely so. Similarly we feel appropriate that while deciding
this the Court should take into consideration the submissions for the
respondents, whether it would come within the scope of rectification
or not in the light of what we have said above.”
• National Insurance Co. Ltd. v. Glaxo India Ltd., (1999) 2 Mah LJ
883 - [at pages 887-888]; and
The relevant portion of which reads as under:
“5. The scope of section 155 of Civil Procedure Code came up for
consideration before the Apex Court in the case of Ammonia Supplies
Corporation Private Ltd. v. Modern Plastic Containers Pvt. Ltd., (1998)
7 SCC 105 : AIR 1998 SC 3153, which matter arose from a judgment
of the Delhi High Court, which relied on the Full Bench judgment in
the case of Ammonia Supplies Corporation Pvt Ltd. (supra). The Apex
Court was answering the following question:—
“Whether in the proceedings under section 155 of the
Companies Act the Court has exclusive jurisdiction in respect of the
matters raised therein or have only summary jurisdiction?”
It may be noted that insofar as the facts of that case were
concerned, the appellant company before the Apex Court had made
investment in shares of Modern Plastic Containers Pvt. Ltd. to the
extent of 50% shares. Shri D.P. Bhargava, son of M.L. Bhargava
married the sister-in-law of one V.K. Bhargava, one of the
Managing Directors of the respondent company. On account of this
relationship the appellant company invested in the aforesaid shares
of the respondent company. The dispute pertains to this
investment According to the respondent company there was no
such investment made by the appellant company nor any share
was transferred by the respondent company in favour of the
appellant company. On the other hand the bone of contention of
the appellant company was that in spite of the payment of the
aforesaid amount of the shares it was not invested in such shares.
The appellant company had become 50% shareholder of the
respondent company about which there was an acknowledgment of
the respondent company. Reliance was placed on the balance sheet
of the appellant company, as also the audited statement of
accounts and the Income-tax assessment orders. On 18th January,
1983 Shri V.K. Bhargava died in a car accident and according to the
appellant is the reason for the dispute between the appellant
company and the respondent company being raised by the brothers
of deceased Shri V.K Bhargava. A petition came to be filed amongst
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others under section 155 of the Companies Act. The petition was,
however, confined to relief under section 155 of the Companies Act.
The only issue before the Apex Court was the jurisdiction of the
Court under section 155 while dealing with the application. It was
contended that the sole beneficiary was Shri M.L. Bhargava. There
are certain other facts which need not be stated. The Apex Court,
thereafter referred to para 7 of its earlier judgment in the case of
Public Passenger Service Ltd. (supra). It was sought to be
contended before the Apex Court that the said judgment was per
incuriam. In the alternative it was contended that the attention of
both the Full Bench of the Delhi High Court and of the Apex Court
in Public Passenger Private Limited was not drawn to the definition
of ‘Court’ as defined under section 2(11) and section 10 of the
Companies Act. It was argued that if that had been considered a
different interpretation would have followed. If that definition is
read into section 155 the Court would only be a Company Judge
and not Civil Judge. In para 14 in so far as its own judgment in
Public Passenger Service Limited (supra) the Apex Court observed
that the argument that the judgment was per incuriam had to be
rejected as the issue was directly in issue and was considered with
respect to the interpretation of section 155 and hence it could not
be said by any stretch of imagination that the decision was per
incuriam. In para 13 the Apex Court culled the ratio in Public
Passenger Service Ltd. and held that by reasons of its complexity or
otherwise if the matter can more conveniently be decided in a suit,
the Court may refuse relief under section 155 and relegate the
parties to a suit. Thereafter considering the various provisions and
case law cited, the Apex Court in para 26 observed as follows:—
“There could be no doubt any question raised within the
peripheral field of rectification, it is the Court under section 155
alone which would have exclusive jurisdiction. However, the
question raised does not rest here. In case any claim is based on
some seriously disputed civil rights or title, denial of any
transaction or any other basic facts which may be the foundation to
claim a right to be a member and if the Court feels such claim does
not constitute to be a rectification but instead seeking adjudication
of basic pillar some such facts falling outside the rectification, its
discretion to send a party to seek his relief before Civil Court first
for the adjudication of such facts, it cannot be said such right of the
Court to have been taken away merely on account of the deletion of
the aforesaid proviso. Otherwise under the garb of rectification one
may lay claim of many such contentious issues for adjudication not
falling under it. Thus in other words, the Court under it has
discretion to find whether the dispute raised are really for
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rectification or is of such a nature, unless decided first it would not

come within the purview of rectification.”
Thereafter in para 27 the Apex Court observed as under:—
“The Court has to examine on the facts of each case, whether an
application is for rectification or something else.”
Thereafter it proceeded to observe as under:—
“So far exercising of power for rectification within its field there
could be no doubt the Court as referred under section 155 read with
section 2(11) and section 10, it is the Company Court alone which has
exclusive jurisdiction.”
The following observations are also material from para 31:—
“So, whenever a question is raised Court has to adjudicate on the
facts and circumstances of each case. If it truly is rectification all matter
raised in that connection should be decided by the Court under section
155 and if it finds adjudication of any matter not falling under it, it may
direct a party to get his right adjudicated by Civil Court.”
Thereafter the Apex Court observed as under:—
“We have already held above the jurisdiction of the ‘court’ under
section 155, to the extent it has exclusive, the jurisdiction of Civil Court
is impliedly barred. For what is not covered as aforesaid the Civil Court
would have jurisdiction.”
It is, therefore, now clear from the judgment of the Apex Court in A.S.
Corporation (P) Ltd. (supra), the Apex Court has held that insofar as the
matters of rectification are concerned, it is the company court alone
which would have jurisdiction. If issues which have to be answered are
not peripheral to rectification but issues regarding title, etc. then such
other issues will have to be decided by the Civil Court. The Apex Court
has now recognized that it is the Company Court which would be the
Court of exclusive jurisdiction insofar as rectification is concerned.
However, if issues arise, whether the applicant is the owner of the
shares : whether there is fraud or forgery in holding the shares or the
very title to the shares, then such issues will be beyond the jurisdiction
of the Company Court and will have to be decided by the Civil Court. To
that extent, the judgment of the Full Bench of the Delhi High Court
where it held that there is a jurisdiction in the Company Court to
relegate the parties to a suit has been departed from. The earlier
judgment of the Apex Court in the case of Public Passenger Service Ltd.
will have to be read in the context of the observations of the Apex Court
in the case of A.S. Corporation (P) Ltd. (supra).
6. Applying that ratio can it be said that the order of the Company Law
Board is liable to be set aside on the ground that there are complicated
questions of fact which the Company Law Board cannot go into. The learned
Counsel for the appellant would be right that the order of the Company Law
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Board would be contrary to the ratio of the Apex Court in A.S. Corporation
(P) Ltd. However, insofar as the final order is concerned I find it will be
difficult for this Court to interfere with the said order for the following
reasons.
The respondent company at the threshold had informed the appellants
that they had not received 6050 shares. In other words there is a dispute as
to the very transaction itself which is not merely a matter for rectification.
Secondly, there are disputes whether the persons who are holding the
shares are holding the shares on account of forged documents. In other
words it is not merely the case of the appellant being the owner of the
shares and the company for wrong reasons refusing to rectify the Register
without cause. When there are disputes as to whether the appellants are
the owners of the shares not be a case exclusively pertaining to rectification
which could be decided by the Company Law Board. In that light of the
matter though the reasons given by the Company Law Board cannot be
sustained, its ultimate conclusion cannot be set aside.
7. That leaves us with the other point as raised, that the Company Law
Board has not given the reasons and for that purpose the order has to be
set aside for giving fresh decision. The matter is in Appeal. It is now well
settled that the Appellate Court can exercise the same powers as the trial
Court. After the Court has come to the conclusion that the issues raised
cannot be decided by the Company Law Board it will be futile to send the
matter back to the Company Law Board to merely undergo the same
exercise in a different manner and reject the company petition. The
appellants have pointed out in the appeal memo that the suit was
withdrawn based on certain observations made by the Company Law Board.
That cannot be an answer for the Company Law Board to assume
jurisdiction.”
Jai Mahal Hotels Pvt. Ltd. v. Devraj Singh, (2016) 1 SCC 423 - [Paras
16 to 18]
The relevant portion of which reads as under:
“16. In Ammonia [(1998) 7 SCC 105], the scope of jurisdiction of the
Company Court to deal with an issue of rectification in the Register of
Members maintained by the Company was considered. Following Public
Passenger Service Ltd. v. M.A. Khadar [AIR 1966 SC 489], it was held
that jurisdiction under Section 155 was summary in nature. If for
reasons of complexity or otherwise, the matter could be more
conveniently decided in a suit the Court may relegate the parties to such
remedy. Subject to the said limitation, jurisdiction to deal with such
matter is exclusively with the Company Court. It was observed:
(Ammonia case [(1998) 7 SCC 105], SCC p. 122, para 31)
“31. … It cannot be doubted that in spite of exclusiveness to decide all
matters pertaining to the rectification it has to act within the said four
corners and adjudication of such matters cannot be doubted to be
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summary in nature. So, whenever a question is raised the court has

toadjudicate on the facts and circumstances of each case. If it truly is
rectification, all matters raised in that connection should be decided by
the court under Section 155 [Ed. : Corresponding to Section 111 of the
present Act, before its amendment by Act 31 of 1988.] and if it finds
adjudication of any matter not falling under it, it may direct a party to
get his right adjudicated by a civil court. Unless jurisdiction is expressly
or implicitly barred under a statute, for violation or redress of any such
right the civil court would have jurisdiction.”
17. Thus, there is a thin line in appreciating the scope of jurisdiction
of the Company Court/Company Law Board. The jurisdiction is exclusive
if the matter truly relates to rectification but if the issue is alien to
rectification, such matter may not be within the exclusive jurisdiction of
the Company Court/Company Law Board.
18. In Standard Chartered Bank [(2006) 6 SCC 94], scope of Section
111(7) was considered. It was observed that jurisdiction being summary
in nature, a seriously disputed question of title could be left to be
decided by the civil court. It was observed : (SCC p. 115, para 29)
“29. … The nature of proceedings under Section 111 is slightly
different from a title suit, although, sub-section (7) of Section 111 gives
to the Tribunal the jurisdiction to decide any question relating to the title
of any person who is a party to the application, to have his name entered
in or omitted from the register and also the general jurisdiction to decide
any question which it is necessary or expedient to decide in connection
with such an application. It has been held in Ammonia Supplies Corpn.
(P) Ltd. v. Modern Plastic Containers (P) Ltd. [(1998) 7 SCC 105] that
the jurisdiction exercised by the Company Court under Section 155 of
the Companies Act, 1956 (corresponding to Section 111 of the present
Act, before its amendment by Act 31 of 1988) was somewhat summary
in nature and that if a seriously disputed question of title arose, the
Company Court should relegate the parties to a suit, which was the more
appropriate remedy for investigation and adjudication of such seriously
disputed question of title.”
F. The relief under Section 155 of the Companies Act. 1956 is
equitable in character and that the powers conferred thereunder
are discretionary
1. Judgments:
• T.V. Somasundaram Pillai v. The official liquidator, High Court,
Madras (1967) 80 LW 367 - [at pages 368-369];
The relevant portion of which reads as under:
“…The expression “rectification” of a company's register is a
purposeful expression. It has a special signification of its own. The
word implies that there is a prior error, mistake or defect which is
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apparent on the face of the record of the register, which, after

rectification, is made good and corrected by removing such a mistake
or error. As was pointed out in Pulbrook v. Richmond Consolidated
Mining Co.’
“The effect of rectification is exactly the same as if the name struck
off had never been put in. That is the meaning of ‘rectification”’.
Unless the applicant establishes a just cause or an equity in him to
strike off his name in the register, the company court would not
exercise its discretion to rectify the reaister. As was pointed out in
Bellerby v. Rowland and Marwoods steamship Co. Ltd.
“In considering an application for rectification, the Court has always
had regard to the lapse of time, and to any factsand circumstances
indicating acquiescence in the existing state of things by whose on
whose behalf the application is made to disturb it”.
The power to correct a register of court has to be exercised with
caution. It has to be remembered that in such a summary
adjudication, a roving enquiry is not contemplated. The applicant is
seeking in the main to rest his contention on certain proceedings in
court, and particularly the judgment of this court in C.C.C.A. 95 of
1952. That was a case in which there were certain disputes between
the applicant and a director of the South Arcot Oil and Refineries Ltd.
The case of the applicant was that the director of the above company
borrowed certain moneys from the applicant and as security thereto,
the said director gave out that he would secure shares nominally in
the name of the applicant in the South Arcot Oil and Refineries Ltd.,
and also in the Cuddalore Construction Co. Ltd., which is now in
liquidation and whose register is sought to be amended in the first
petition. It is clear from the judgment of Govinda Menon and
Ramaswami JJ. that the applicant knew at all material times, ever
since he started the suit in 1950, that his name was in the register of
members in the Cuddalore Construction Co. Ltd., now in liquidation.
In fact, the applicant is reported to have signed certain transfer forms
for transfer of the shares by the applicant in favour of the director
above named. The learned Judges, after considering the probabilities
of the case, came to the conclusion that the applicant's version that
he lent money as a debt pure and simple was more reliable and
probable. But this observation of the learned Judges in the said
judgment cannot relieve the statutory responsibility which at all times
vested with the applicant's version that he lent money as a debt pure
and simple was more reliable and probable. But this observation of
the learned Judges in the said judgment cannot relieve the statutory
responsibility which at all times vested with the applicant to correct
the register of members in the company under consideration with
alacrity and promptitude. It might be that the applicant might have
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taken the precaution of claiming damages against the director for

having improperly included his name in the register of members and
ought to have also taken the precaution of claiming the damages that
might reasonably and naturally flow from the fact that the name of
the applicant indisputably appeared in the register of members. This
has not been done. The applicant cannot take advantage of his own
latches and avoid a claim in legi and which is undoubtedly not a claim
in contractu. Once a balance order is passed by court against a
contributory on the fact that his name appeared in the register of
members, and that his liability as a contributory has become
indubitable, then a remedy to rectify the register on the ground that
his name was incorrectly remaining in the register of members is not
available to such a person. A claim to rectify the register cannot be
asked for ex debitojustitiae. It must be based on certain accepted
principle, particular care being taken to find whether the applicant
who is seeking such a discretionary and equitable relief is guilty or not
guilty of laches.
This doctrine of laches has a very great significance as a member in
any event should repudiate the contract in unequivocal terms and
without undue delay, as otherwise such delay would be fatal to his
application for rectification. If the name of a person appears in the
register of members, he cannot at his whims and fancies ask for
recision of such a contract to take shares as it would be lost because
of inaction or lack of prompt action on his part. This rests on the
wholesome and salient principle that such a person has allowed the
company to obtain credit on the strength of it and in case the
company goes into liquidation the rights of creditors are deemed to
have been crystallised on such a date. A member therefore cannot
stand by and acquiesce in his name remaining in the register of
members and wake up at a late stage and particularly after the
winding up of the company and ask for rectification. Lord Romilly M.R.
in Walker's case, In re. Anglo Danubian Steam Navigation and Colliery
Co., observed:
“…Where there has been no fault on either side, the register
remains as it was-where the fault is on both sides the register also
remains as it was”.
Therefore, the onus is heavily on the shareholder to set right the
mistake, if any, in the register without any delay. The above decision
has been quoted with approval by a Division Bench of the Bombay
High Court in Mohamed Akbar v. Official Liquidator. A Division Bench
of this Court also in Lakshminaras Reddi v. Official Receiver, Sree
Films Ltd., observed that where a person allows his name to remain
on the register, without having it removed promptly he will be liable
on the doctrine of holding over…”
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• Mukundlal Manchanda v. Prakash Roadlines Ltd., (1996) 7 SCL 42

- [Paras 16 to 20],
The relevant portion of which reads as under:
“16. A plain reading of the provisions reproduced above shows that
the same vests the Court with the power to direct rectification, the
exercise of which power is discretionary with the Court as is apparent
from the word ‘may’ used in the section. The Court can in an
appropriate-case decline to exercise its power under section 155 if it
finds that the petitioner before it has disentitled himself of the said
relief for any reason like suppression of material facts, acquiescence
delay and laches, etc. Relief envisaged by section 155 is equitable in
nature, and all such considerations as are’ relevant to the grant or
refusal of any such relief - would be attracted to proceedings under
the said provision : In Benarsi Das Sara v. Dabnia Daciri Cement Ltd.
AIR 1959 P&H 232 while dealing with the scope of section 155 it was
held that the grant or refusal of relief under section 155 was in the
discretion of the Court, and that relief under section 155 could not be
granted ex debitojustitiate. The Court observed thus:
25.1 do not think that according to the scheme of the Act,
section 155 was intended to provide relief where a remedy
specifically provided under section 395 had not been availed of or
relief If sought could not he given because of non-compliance with
the provision. Relief under section 155 is not in the nature of an
additional or alternative remedy. It is true that the jurisdiction
conferred on the Court under section 155 is very wide. It is almost
unlimited but there is a discretion in the court to grant or refuse
the reliefs sought in the circumstances of each case and the
applicant is not entitled to an order ex debitofustitiae.” (p. 236)
[Emphasis supplied]
17. In TV. Somasundaram Pillai v. Official Liquidator (1967) 37
Comp Cas 440, the Madras High Court, while dealing with a petition
under section 155, held that the onus lies heavy on a shareholder of
the company to set right the mistake in the register without any
delay. The Court in this regard observed thus:
“This doctrine of laches has a very great significance as a
member in any event should repudiate the contract in unequivocal
terms and without undue delay as otherwise such delay would be
fatal to his application for rectification. If the name of a person
appears in the register of members, he cannot at his whims and
fancies ask for rescission of such a contract to take shares as it
would be lost because of inaction or lack of prompt action on his
part…
Therefore, the onus is heavily on the shareholder to set right the
mistake, if any, in the register without any delay. The above
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decision has been quoted with approval by a Division Bench of the

Bombay High Court in Mahomed Akbar Abdulla Fazalbhoy v. Official
Liquidator (1950) 20 Comp Cas 26. A Division Bench of this Court
also in Lakshmi Narasa Reddi v. Official Receiver, Sree Films Ltd.
(1951) 21 Comp Cas 201 observed that where a person allows his
name to remain on the register without having it removed promptly
he will be liable on the doctrine of holding over”, (p. 444)
18. In Bellesby v. Rowland & Marwood's Steamship Co. Ltd. [1901]
2 Ch. 265, it was held that:
“In considering an application for rectification, the Court has
always had regard to the lapse of time, and to any facts and
circumstances indicating acquiescence in the existing state of
things by those on whose behalf the appreciation is made to
disturb it.”
19. A Division. Bench of this Court in Muniyamma v. Arathi Line
Enterprises (P.) Ltd. KR-1992 Kar. 1262 while examining the scope of
proceedings under section 155 held that even though the said
proceedings were summary in nature, yet, the Court could in
appropriate case, examine and grant relief even when the same might
involve complicated questions of law and fact. It was further held that
the jurisdiction being discretionary it was oven to the Court to
examine the propriety of the petitioner and their conduct, while
deciding whether or not to grant relief under section 155. The Court
speaking through K.A. Swami, J. (as his Lordship then was) observed
thus:
“Thus the conspectus of these decisions leads us to a conclusion
that even though the proceeding under section 155 of the
Companies Act is a summary proceeding, as it is a relief provided
under the statute, in proper and appropriate case, it is open to the
Court to grant relief even though it may involve complicated
question of law and facts. Whether in a particular - case relief
should be granted or not, because the jurisdiction is discretionary
as the word used is ‘may’ in section 155 of the Act, would depend
upon the facts and circumstances of the case but the exercise of
jurisdiction cannot be ref used on the grounds that it involves
complicated questions of law and facts. Of course, the propriety of
the petitioners and their conduct having a bearing on the subject-
matter of the petition would be relevant to the decision as to
whether the discretion should or should not be exercised.”
20. There is a cleavage in judicial opinion as to whether relief under
section 155 can be granted even when complicated questions of law
and fact are involved in a given case. While High Courts of Punjab &
Haryana, Allahabad, Calcutta, Delhi have taken the view that
jurisdiction wider section 155 being summary in character,
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complicated question cannot be determined in proceedings for the

same, the High Court of Gujarat and Kerala, have taken a contrary
view. This Court in Muniyanma ‘s case (supra) has, upon a
construction of the two rival views, held that the involvement of
complicated questions cannot be made basis for refusal to exercise
jurisdiction under section 155, The true legal position in our opinion is
that while the very fact that complicated questions of fact and law are
involved cannot by itself be a ground for refusal of relief under section
155, yet, the exercise of powers under section 155 being equitable
and discretionary, it would constitute one of the relevant factors for
deciding whether the power should or should not be exercised; in a
given case. Summarising, therefore, it can be said that:
(a) The jurisdiction under section 155 is summary in character;
(b) The exercise of the power under section 155 is discretionary for
the Court;
(c) The power cannot be exercised ex dehitojustitiae;
(d) The relief under section 155 is equitable in character, and
consideration like delay and laches, acquiescence, etc., would be
relevant while granting or refusing the same;
(e) The fact that complicated questions of fact and law refusing oral
evidence are involved is a relevant if not decisive factor for deter-
mining whether or not to exercise the powers vested under section
155. Coming then to the facts of the instant case, certain important
events and facts which are established on record, may be
summarised thus:
(i) The share transfer forms in question specially mentioned that the
transfer is being made for valuable consideration; and the
consideration changing hands were clearly and specifically
mentioned in the relevant column of the prescribed form;
(ii) In the Board meeting held on 31-3-1990, the
petitioners/appellants herein were both present and participating
as special invitees;
(iii) The resolution approving the transfers in question was passed
unanimously without any dissent, protest or murmur from the
appellants or any of them; even when details about the transfers
were disclosed in the meeting by the Chairman, on the asking of
Shri Ashok Kumar. Manchanda, another special invitee attending
the meeting;
(iv) An extraordinary general meeting of the board was held on 4-4-
1990, in which the transferees of the shares in question exercised
their voting rights on the basis of the disputed share, without any
protest From any quarter including the appellants herein;
(v) In the board of directors meeting held on 14-4-1990 the
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proceedings and the minutes of the previous meeting dated 31-3-

1990 were confirmed when the appellants were present and
participating as members of the board of directors;
(vi) In the annual general meeting held on 17-9-1990 the transferee
of the disputed shares, again participated without any objection
from the appellants.”
• Bellerby v. Rowland &Marwood's Steamship Company Limited,
[1901] 2 Ch. 265 - [at pages 273-274/;and
The relevant portion of which reads as under:
“…It does not follow that because the surrenders of shares were
bad the plaintiffs are now entitled to succeed in their claim to be
restored to the register in respect of them. The power of rectifying the
register in respect of them. The power of rectifying the register given
by the 35th section of the Act of 1862 is discretionary in this sense -
that the court properly can only exercise it if satisfied of the justice of
the case, and on many applications the Court has declined to exercise
this power on the ground that it would be fair to do so, or, to put it
more technically, that the applicant has not established any equity to
disturb the existing state of thinas. And, in considering this, the Court
has always had regard to lapse of time, and to any facts and
circumstances indicating acquiescence in the existing state of things
by those on whose behalf the application is made to disturb it. The
applications have been generally made by official liquidators seeking
to establish liability for calls; but obviously the like considerations
must apply to applications by those who seek to be restored to the
privileges of shareholders. Of the authorities on such applications,
Sichell's Case s(3) is a good example; but I will not refer to it in detail
further than to add that it is particularly valuable for a considered
judgment of Lord Cairns. There is, I think one, even more pointed and
cognet authority to be found in Lord Macnaghten's comments on the
case of In Re Dronfield Silkstone Coal Co. (4) in the House of Lords.
That case was necessarily discussed in Trevor v. Whitwirth (2), and
the grounds of the decision of the Court of Appeal were not regarded
with favour. But Lord Macnaghten took occasion to point out that,
while disapproving of the grounds, he thought the decision itself was
sound. His reasons are given on p.440 of 12 App. Cos., and, in short,
he held that the liquidator had no equity to place Mr. Ward's name on
the register when it had been off it for seven years, during which the
company had been prosperous, and the shareholders who remained
had received dividends largely increased by Ward's retirement Lord
Macnaghten cites Lord Cairns' decision in Sichell's Case (1), and fully
approves it. Here the surrender took place in 1893, and more than
seven years afterwards the surrenderors ask the Court to restore them
to their original position. Nothing has occurred in the meantime
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except that the company which was embarrassed has turned out to be
prosperous, and the plaintiffs, if placed on the register, will become
entitled to share the fruits of prosperity which were renounced when
apparently not within reach. It is conceivable that some persons
purchased shares in the company, and perhaps at a premium, with
the knowledge that the capital had been reduced by the surrenders,
and with the anticipation that their proportion of profits would be
larger than it would have been if those surrenders had not been
made; but apart from this or any like consideration, it lies on the
applicants to satisfy the Court that justice requires their application to
be granted - that there is an equity in their favour to disturb the
existing state of things. I am told that the shareholders as a body
desire the application to be granted, and deem it only fair that those
who acted generously in past should be treated generously now; but,
dealing with the case judicially, I cannot hold that the plaintiffs have
brought themselves within the requirements of the statute by which
my conclusions must be guided…”
• Re : Piccadilly Radio PLC
(1989) 5 BCC 692 - [at pages 704-705]
The relevant portion of which reads as under:
“…But there was a broader and more fundamental ground for
refusing the applicants claim for relief, and I prefer to rest my decision
upon it. They were seeking an order under sec, 359 of the Companies
Act, 1985 for the rectification of the company's share register by
deleting the name of Albion and substituting the name of Virgin. That
remedy is discretionary. It is not automatic. The court must consider
the circumstances in which and the purpose for which’ the relief is
sought.
The present case was unusual far the applicants were not seeking
restoration of their own names to the register. They had no interest in
the shares and claimed none. They sought the restoration Virgin's
name, yet Virgin itself did not. It was embarrassed by the application.
It made no complaint of what had happened. The applicants alleged
breaches of art. 34(A), which is designed to protect the company from
the risk of losing its licence; but the company did not support the
application, the IBA was aware of the facts and made no complaint;
and the directors had ample powers to remedy the situation should
the IBA require it. Mr. Stubbs was unable to suggest that the licence
was in danger.
But of course the applicants were not aggrieved by the fact that the
Shares had been transferred-without the consent of the IBA, but by
the fact that they had been transferred to a company which was
unwilling to support the Miss World offer. They were searching for a
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means to disenfranchise the expected opposition to their offer, and

they seized on a breach of art. 34(A) which did not endanger the
licence because of a failure to obtain the IBA's consent, of which the
IBA itself did not complain. A less meritorious claim was difficult to
imagine. Their purpose in making it was foreign to the statutory
remedy which they invoked. In my judgment, it would not be proper
exercise of judicial discretion to grant the statutory remedy of
rectification in such circumstances.”
2. It is also required to be noted here that the Petitioners at
paragraph 15 of the Company Petition (Page 14 of the paperbook)
have stated as under:
“15. The petitioners further say that the Board of Directors at
relevant time were in the full knowledge of the illegality of these
transactions, in as much as they were affected to promote private,
oblique, collateral purposes and not for the commercial or bonafide
interest of the company”
Therefore the Petitioners themselves have averred that the
Respondent No. 12 and Late Shri Vadilal Mehta (father) who were the
directors at the relevant time were in full knowledge of the alleged
illegality and were a party to the same. It may be further noted that
neither Respondent No. 2 orthe Respondent No. 3 were even simple
directors on the relevant date of transaction i.e. 13.11.1982. Yet the
relief claimed by the Petitioners in the Petition seeks to restore status
quo ante in favour of Respondent No. 12 and his family members. In
light of what is stated in the earlier paragraphs, it is submitted that
the Petitioners are not entitled to any equitable relief from this
Hon'ble Tribunal.
3. It is submitted that the transfer of shares under the family
arrangement took place in the year 1982. About 38 years have
passed. It is further submitted that such a family settlement which
settles disputes within the family should not be lightly interfered with
especially when the settlement has already been acted upon. Such
settlements have to be viewed a little differently from ordinary
contracts. In the circumstances, it is humbly submitted that this
Hon'ble Tribunal be pleased to not disturb the status quo as prevalent
as on date.
Reference be made to the following judgments:
• K.K. Modi v. K.N. Modi
(1998) 3 SCC 573 - [Para 52]; and
The relevant portion of which reads as under:
“52. Group A also contends that there is no merit in the
challenge to the decision of the Chairman of IFCI which has been
made binding under the Memorandum of Understanding. The entire
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Memorandum of Understanding including clause 9 has to be looked

upon as a family settlement between various members of the Modi
family. Under the Memorandum of Understanding, all pending
disputes in respect of the rights of various members of the Modi
family forming part of either Group A or Group B have been finally
settled and adjusted. Where it has become necessary to split any of
the existing companies, this has also been provided for in the
Memorandum of Understanding. It is a complete settlement,
providing how assets are to be valued, how they are to be divided,
how a scheme for dividing some of the specified companies has to
be prepared and who has to do this work. In order to obviate any
dispute, the parties have agreed that the entire working out of this
agreement will be subject to such directions as the Chairman, IFCI
may give pertaining to the implementation of the Memorandum of
Understanding. He is also empowered to give clarifications and
decide any differences relating to the implementation of the
Memorandum of Understanding. Such a family settlement which
settles disputes within the family should not be lightly interfered
with especially when the settlement has been already acted upon
by some members of the family. In the present case, from 1989 to
1995 the Memorandum of Understanding has been substantially
acted upon and hence the parties must be held to the settlement
which is in the interest of the family and which avoids disputes
between the members of the family. Such settlements have to be
viewed a little differently from ordinary contracts and their internal
mechanism for working out the settlement should not be lightly
disturbed. The respondents may make appropriate submissions in
this connection before the High Court. We are sure that they will be
considered as and when the High Court is required to do so
whether in interlocutory proceedings or at the final hearing.”
• Hari Shankar Singhania v. Gaur HariSinghania
(2006) 4 SCC 658 - [Paras 42 to 53]
The relevant portion of which reads as under:
Family arrangement/family settlement
“42. Another fact that assumes importance at this stage is that,
a family settlement is treated differently from any other formal
commercial settlement as such settlement in the eye of the law
ensures peace and goodwill among the family members. Such
family settlements generally meet with approval of the courts. Such
settlements are governed by a special equity principle where the
terms are fair and bona fide, taking into account the well-being of a
family.’
43 [Ed. : Para 43 corrected vide Official Corrigendum No.
F.3/Ed.B.J./37/2006 dated 11-5-2006.] .The concept of “family
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arrangement or settlement” and the present one in hand, in our

opinion, should be treated differently. Technicalities of limitation,
etc. should not be put at risk of the implementation of a settlement
drawn by a family, which is essential for maintaining peace and
harmony in a family. Also it can be seen from decided cases of this
Court that any such arrangement would be upheld if family
settlements were entered into to allay disputes existing or
apprehended and even any dispute or difference apart, if it was
entered into bona fide to maintain peace or to bring about harmony
in the family. Even a semblance of a claim or some other ground,
as say affection, may suffice as observed by this Court in Ram
Charon Das v. Girjanandini Devi [(1965) 3 SCR 841 : AIR 1966 SC
323].
44. In Lala Khunni Lal v. Kunwar Gobind Krishna Narain [(1910-
11) 38 IA 87 : ILR (1911) 33 All 356 (PC)] the Privy Council
examined that it is the duty of the courts to uphold and give full
effect to a family arrangement.
45. In Sahu Madho Das v. Pandit Mukand Ram [(1955) 2 SCR
22 : AIR 1955 SC 481] (Vivian Bose, Jagannadhadas and B.P.
Sinha, JJ.) placing reliance on Clifton v. Cockburn [(1834) 3 My & K
76 : (1824-34) All ER Rep 181 : 40 ER 30] and Williams v.
Williams [[1867] 2 Ch. App. 294] this Court held that a family
arrangement can, as a matter of law, be implied from a long course
of dealings between the parties. It was held that : (SCR p. 43)
“[S]o strongly do the courts lean in favour of family
arrangements that bring about harmony in a family and do justice
to its various members and avoid, in anticipation, future disputes
which might ruin them all, that we have no hesitation in taking the
next step (fraud apart) and upholding an arrangement….”
46. The real question in this case as framed by the Court was
whether the appellant-plaintiff assented to the family arrangement.
The Court examined that “the family arrangement was one
composite whole in which the several dispositions formed parts of
the same transaction”.
47. In Ram Charon Das v. Girjanandini Devi [(1965) 3 SCR
841 : AIR 1966 SC 323] this Court observed as follows : (SCR pp.
850 G-851 B)
“Courts give effect to a family settlement upon the broad and
general ground that its object is to settle existing or future disputes
regarding property amongst members of a family. …
The consideration for such a settlement, if one may put it that
way, is the expectation that such a settlement will result in
establishing or ensuring amity and goodwill amongst persons
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bearing relationship with one another.”

48. In Maturi Pullaiah v. Maturi Narasimham [AIR 1966 SC
1836] this Court held that : (AIR p. 1841, para 17)
“[T]hough conflict of legal claims in praesenti or in future is
generally a condition for the validity of a family arrangement, it is
not necessarily so. Even bona fide disputes, present or possible,
which may not involve legal claims will suffice. Members of a joint
Hindu family may, to maintain peace or to bring about harmony in
the family, enter into such a family arrangement. If such an
arrangement is entered into bona fide and the terms thereof are
fair in the circumstances of a particular case, courts will more
readily give assent to such an arrangement than to avoid it.”
49. Further, in Krishna Beharilal v. Gulabchand [(1971) 1 SCC
837] this Court reiterated the approach of the courts to lean
strongly in favour of family arrangements to bring about harmony
in a family and do justice to its various members and avoid in
anticipation future disputes which might ruin them all This
approach was again re-emphasised in S. Shanmugam Pillai v. K.
Shanmugam Pillai [(1973) 2 SCC 312] where it was declared that
this Court will be reluctant to disturb a family arrangement.
50. In Kale v. Dy. Director of Consolidation [(1976) 3 SCC 119]
(V.R. Krishna Iyer, R.S. Sarkaria and S. MurtazaFazal Ali, JJ.) this
Court examined the effect and value of family arrangements
entered into between the parties with a view to resolving disputes
for all. This Court observed that : (SCC pp. 125-26, para-9
“By virtue of a family settlement or arrangement members of a
family descending from a common ancestor or a near relation seek
to sink their differences and disputes, settle and resolve their
conflicting claims or disputed titles once for all in order to buy
peace of mind and bring about complete harmony and goodwill in
the family. The family arrangements are governed by a special
equity peculiar to themselves and would be enforced if honestly
made. … The object of the arrangement is to protect the family
from long drawn litigation or perpetual strives which mar the unity
and solidarity of the family and create hatred and bad blood
between the various members of the family. Today when we are
striving to build up an egalitarian society and are trying for a
complete reconstruction of the society, to maintain and uphold the
unity and homogeneity of the family which ultimately results in the
unification of the society and, therefore, of the entire country, is the
prime need of the hour. … The courts have, therefore, leaned in
favour of upholding a family arrangement instead of disturbing the
same on technical or trivial grounds. Where the courts find that the
family arrangement suffers from a legal lacuna or a formal defect
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the rule of estoppel is pressed into service and is applied to shut

out plea of the person who being a party to family arrangement
seeks to unsettle a settled dispute and claims to revoke the family
arrangement… The law in England on this point is almost the
same.”
(emphasis supplied)
51. The valuable treatise Kerr on Fraud at p. 364 explains the
position of law:
“The principles which apply to the case of ordinary compromise
between strangers do not equally apply to the case of compromises
in the nature of family arrangements. Family arrangements are
governed by a special equity peculiar to themselves, and will be
enforced if honestly made, although they have not been meant as a
compromise, but have proceeded from an error of all parties
originating in mistake or ignorance of fact as to what their rights
actually are, or of the points on which their rights actually depend.”
Halsbury's Laws of England, Vol. 17, 3rd Edn. at pp. 215-16.
52. In K.K. Modi v. K.N. Modi [(1998) 3 SCC 573] (Sujata
Manohar and D.P. Wadhwa, JJ.) it was held that the true intent and
purport of the arbitration agreement must be examined (para 21).
Further, the Court examined that : (SCC pp. 594-95, para 52)
“[A] family settlement which settles disputes within the family
should not be lightly interfered with especially when the settlement
has been already acted upon by some members of the family. In
the present case, from 1989 to 1995 the memorandum of
understanding has been substantially acted upon and hence the
parties must be held to the settlement which is in the interest of
the family and which avoids disputes between the members of the
family. Such settlements have to be viewed a little differently from
ordinary contracts and their internal mechanism for working out the
settlement should not be lightly disturbed,”
(emphasis supplied)
53. Therefore, in our opinion, technical considerations should
give way to peace and harmony in the enforcement of family
arrangements or settlements.”
4. It is further submitted that neither the MoU nor the MoM is
under challenge before this Hon'ble Tribunal. No application has been
preferred by the parties to the said MoU and MoM for rectification of
the register of the Respondent No. 1. Some of the shares held by the
family HUF and by the Estate in the Respondent No. 1 have been
gifted to the Respondent No. 2 and his family members. Neither C.V.
Mehta Pvt. Ltd. is a party to the present Company Petition nor any
application has been preferred for rectification of the register of C.V.
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Mehta Pvt. Ltd. The shares held by C.V. Mehta Pvt. Ltd. in the
Respondent No. 1 is continued to be held by C.V. Mehta Pvt. Ltd. In
such circumstances, no relief, much less the relief with regard to
status quo-ante be granted by this Hon'ble Tribunal, much less to an
outsider to the family arrangement. In light of the aforesaid, the
Company Petition No. 35 of 1988 (Transfer Petition No. 2 of 2018) is
liable to be dismissed with exemplary cost.
6. We have carefully considered the submissions made by all parties and
material on record. Certain parties have expired during the intervening period;
hence, the name of the parties on either side have mentioned only who are
alive. We are of the view that in this petition we are called upon to examine in
substance, the validity of family arrangement which was executed and
implemented through Memorandum of Understanding dated 30.01.1982 and
Memorandum of Modification dated 13.11.1982.
7. This petition needs to be considered both on the grounds of jurisdiction
as well as on merits as the petitioner is neither having any direct or indirect
interests for himself nor any proprietary rights of such petitioners has been
adversely affected in any manner. Generally, issue of jurisdiction is decided
first, however, we would prefer to decide the issue on merit first so that this
litigation can be put to an end for all the times to come as it has dragged for
more than 30 years and has been examined only on technical grounds. In this
regard, issues framed by Hon'ble Gujarat High Court are a great help.
Accordingly, we frame following issues for our consideration:
(i) Whether impugned consideration can be said to have been paid for the
purpose of purchase of shares or in connection with the purchase of
shares of M/s. Sayaji Industries Ltd in terms of provisions of Section 77
of Companies Act, 1956?
(ii) Whether TOTAL consideration can be said to have been provided by M/s.
Sayaji Industries Ltd. to enable Respondent No. 2 and 3 to purchase
such shares?
(iii) Whether liability of the Respondent No. 2 can be fixed for executing the
transaction in this manner and consequently, penalty could be imposed
on him under Section 77(4) of Companies Act, 1956?
(iv) In the present case whether Petitioners have got any locus-standi to
file petition under Section 155 of the Companies Act, 1956?
(v) Whether decision of the company in entering the nameof Respondent
No. 2 and 3 in register of member is is without sufficient cause?
(vi) Assuming that petition is otherwise maintainable, whether petition is
barred by limitation?
(vii) Whether doctrine of latches and delay is applicable?
(viii) Whether equitable jurisdiction can be applied in the facts and
circumstances of the case?
(ix) Whether this petition falls within the scope of rectification of Register of
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Members as envisaged under Section 155 of Companies Act, 1956?

(x) Whether the alleged act can be categorised as fraud on the statute?
(xi) Whether present petition is an instance of sponsored litigation on
behalf of Respondent No. 12? If so, whether suitable costs need to be
imposed on Petitioner No. 1 i.e. Ramesh B Desai?
8. Now, we shall deliberate on the question no. 6(i) which is reproduced
again hereunder:
Whether impugned consideration can be said to have been paid
for the purpose of purchase of shares or in connection with the
purchase of shares of M/s. Sayaji Industries Ltd in terms of
provisions of Section 77 of Companies Act, 1956?
9. To find the answer of the above questions, we need to look into the
relevant terms and conditions of Memorandum of Understanding (MoU) dated
30.01.1982 and also of Memorandum of Modification dated 13.11.1982. It is
noted that the familywas headed by one Shri Vadilal Lallubhai Mehta who had
two sons. There were four daughters as well who were married. The family
held both movable and immovable property separately and independently and
it has been clarified in Clause 3 of MoU that such MoU was confined only to
and between his two sons namely Shri Bipinbhai Vadilal Mehta and Shri
Suhasbhai Vadilal Mehta. It is also provided that property and shares held by
Trust and HUF were also the subject matter of this MoU. There were six
companies in the group which have been mentioned in Clause 5 of MoU. Out of
these six companies only one company i.e. M/s Sayaji Mills Ltd. was a public
listed company and other companies were Private Limited Companies. It is
also mentioned that all these companies were managed by Shri Vadilal
Lallubhai Mehta and Shri Suhasbhai Vadilal Mehta at the time of
execution of MoU. Clause 6 of preamble of this MoU is of significance;
hence, reproduced as under:
6. The main object of this understanding is to entrust the
management of some of the Companies to Bipinbhai Vadilal Mehta and of
others to Suhasbhai Vadilal Mehta by mutual transfer of sharesand
other procedures and by transfer of some properties from one to
the other.
10. From the perusal of the above clause, it is noted that the main object
was to entrust the management of some companies to Bipinbhai Vadilal Mehta
and other companies to Shri Suhasbhai Vadilal Mehta. The modus operandi for
this purpose was : (i) mutual transfer of shares; (ii) other procedures and (iii)
transfer of some properties from one to another. Thus, this clause makes it
amply clear that consideration for transfer of such management was through
three modes and not confined only to transfer of shares.
11. Now, we shall consider the details of understanding as per various
cluses of MoU.
Clause 1 and 2 provide that management of Sayaji Mills Ltd and
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C.V. Mehta Pvt. Ltd will be entrusted to Bipinbhai Vadilal Mehta and the
management of (i) Industrial Machinery Manufacturers Pvt. Ltd. (ii) C.
Doctor & Co. Pvt. Ltd (iii) Mehta Machinery Manufacturer Pvt. Ltd. and
(iv) Oriental Corporation Pvt. Ltd. shall remain with Suhasbhai Vadilal
Mehta.
12. Clause 3 provides that shareholding pattern of the aforesaid
companies by various member/branches of the family and same is reflected in
Aneure II to this MOU.
13. Cluse 4(a), (b) and (c) provide as to how and by whom shares of the
company so devided between mutually transferred fromorto amongst two
branches of the family.
14. Clause 5 provides that shares to be transferred as specified in Clause
4 were to be sold or gifted as may be mutually agreed to or as may be
decided by Shri Vadilal Lallubhai Mehta on fulfilment of all obligations by Shri
Bipinbhai Vadilal Mehta under Clause 9,10,12,13,14,15,16 and 23 of this MoU.
15. It has been noted earlier that as per Clause 4(a), (b) and (c) shares
were to be sold or transferred. As in clause it is specifically mentioned that
shares to be transferred as aforesaid shall be sold or gifted as may be
mutually agreed to or as may be decided by Shri Vadilal Lallubhai Mehta on
fulfilment of the obligations of Shri Bipinbhai Vadilal Mehta under clauses
9,12,13,14,15,16 and 23 of this agreement. It again indicates that both these
events are independent in a sense that the consideration for sale or valuation
of shares in case of gift of shares is one part of the transaction which is to be
done at the price as mentioned in Annexure-III of the said MOU and fulfilment
of obligations as mentioned in aforesaid clauses. As my be noted that such
obligations are of different nature and have no co-relation with the sale
consideration/transfer consideration for the shares between two branches of
the families on mutually passed as per the terms of MOU. The use of word
“gift” also indicates that the transfer of shares other than by sale is without
consideration because “gift” is always without consideration and if that be so
then the subject funds cannot be said to be a consideration. Further, such
“gift” is an option in the overall scheme of family arrangement and shares
were actually been sold/transferred on the basis of valuation of these company
arrived at mutually.
16. Clause 6 provides that the prices at which shares were to be sold or
otherwise transferred had been determined and specified in Annexure-III
attached thereto. Thus, shareseither to be sold or giftedin the manner as may
be decided by Shri Vadilal Lallubhai Mehta, the price consideration for sales or
transfer of shares in other manner has also been decided. This also means that
the transfer other than by way of sale was also having value attached thereto.
The reconstitution of Board of respective companies was to happen when late
Shri Vadilal Lallubhai Mehta was satisfied that the entire understanding
recorded in the said MoU had been fully implemented.
17. Clause 7 provides that Bipinbhai Vadilal Mehta or his wife or his sons
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are not directors in any of the companies to remain with Suhasbhai Vadilal
Mehta. It also provides that Vadilal Lallubhai Mehta and Suhasbhai Vadilal
Mehta were directors in M/s Sayaji Mills Ltd. and other persons are directors in
C.V. Mehta Pvt. Ltd. From this clause, the fact that Bipinbhai Vadilal Mehta or
any member of his branch was not a director in any of the companies at that
point of time. They were to be incorporated in the management only after the
entire understanding had been fully implemented to the satisfaction of Vadilal
Mehta. Thus, any claim that Shri Bipinbhai Vadilal Mehta was not having de
facto control gets totally rebutted by their own admission particularly when
there is not material to suggest otherwise.
18. In Clause 8, it is also provided that Shri Vadilal Lallubhai Mehta will
continue as Chairman and Managing Director (in short “CMD”) of M/s Sayaji
Mills Limited and Shri Suhasbhai Vadilal Metha will continue as Managing
Director (in short “MD”) of M/s Sayaji Mills Limited till this understanding was
fully implemented and their liability as guarantors was released. Clause 8
also provides that the constitution of Board of Director was not be altered,
save and except that Shri Bipinbhai Vadilal Mehta and his son Shri Priyambhai
Bipinbhai Mehta could be appointed as Director until Shri Vadilal Lallubhai
Mehta and Shri Suhasbhai Vadilal Mehta were discharged from all their
guarantees.
19. Clause 9 provides that Shri Bipinbhai Vadilal Mehtawill resign as
trustee of some of the Suhasbhai Vadilal Mehta Trusts.
20. Clause 10, 11, 12 and 13 are reproduced hereunder:
10. C.V. Mehta Pr. Ltd. which is being allotted to Bipinbhai Vadilal
Mehta has certain amounts to pay to the members of the family of
Vadilal Lallubhai Mehta, Suhasbhai Vadilal Mehta, Suhasbhai Vadilal
Trusts, Vadilal Lallubhai H.U.F. Vimlaben Vadilal Trust, Bhuriben
Lallubhai Estate and the daughters and grand-children of Shri Vadilal
Lallubhai Mehta and Smt Vimlaben Vadilal Mehta. C.V. Mehta a Pr. Ltd.,
has also to pay substantial amount to C. Doctor & Co. Pr. Ltd. All such
payments shall be made immediately and according to the entires in the
books of account made upto date.
11. Similarly, C.V. Mehta Pr. Ltd., has to recover considerable amounts
from Mehta Machinery Manufacturers Pr. Ltd., Oriental Corporation Pr.
Ltd. and from others. All such payments shall be made immediately and
according to the entries made in the books of account made upto date.
12. The outstanding dues and liabilities of C.V. Mehta Pr. Ltd. shall be
adjusted as may be directed by Vadilal Lallubhai Mehta and in any event
it shall remain the responsibility of Bipinbhai Vadilal Mehta to see that all
the liabilities of C.V. Mehta Pr. Ltd. as mentioned above are fully paid
and discharged immediately.
13. Bipinbhai Vadilal Mehta owns agricultural land at Vasana,
Ahmedabad, bearing Survey No. 184, admeasuring about 19,481 sq.
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yds. He has made it apart of Bipinbhai Vadilal H.U.F. All the said land
shall be transferred by Bipinbai Vadilal Mehta to Suhasbhai Vadilal Mehta
or as he may desire.
21. From the perusal of Clause 10, it is noted that the C.V. Mehta Pvt. Ltd
had to pay amounts to the members of family of Shri Vadilal Lallubhai Mehta
as well as Shri Suhasbhai Vadilal Mehta. Further, C.V. Mehta Pvt. Ltdwas also
to pay substantial amount to C. Doctor & Co. Pvt. Ltd which remained with
Shri Suhasbhai Vadilal Mehta. Said payments were to be made immediately.
22. Similarly, as per Clause 11 C.V. Mehta Pvt. Ltd, which was entrusted to
Bipinbhai Vadilal Mehta had to recover amounts from companies remaining
with Mr. Suhasbhai Vadilal Mehta and from others. Such payments were also
made immediately.
23. Clause 12 provides that the outstanding dues and liability of C.V.
Mehta Pvt. Ltd could be adjusted inter se as per the decision of Shri Vadilal
Lallubhai Mehta and also mentioned that it was ultimate responsibility of Shri
Bipinbhai Vadilal Mehtathat all the responsibilities of C.V. Mehta Pvt. Ltd. were
fully paid and discharged immediately.
24. Clause 13 refers to transfer of agricultural lands situatedat Vasana
and owned by Bipinbhai Vadilal Mehta to Shri Suhasbhai Vadilal Mehta.
25. Clauses 14, 15 and 16 are not reproduced as these relate to
procedural formalities connected the transfer of said land to Suhasbhai Vadilal
Mehta.
26. As per Clause 16 Bipinbhai Vadilal Mehta was also to pay Shri
Suhasbhai Vadilal Mehta by way of gift such amount n\ as may be decided by
Shri Vadilal Lallubhai Mehta and such payment is also an integral part of this
understanding. It is also mentioned that the decision of Shri Vadilal Lallubhai
Mehta in this respect was final.
27. Clause 17 and 18 provide that certain movable properties/assets held
by each son and their family will remain with them. Clause 18 provides same
thing for other immovable property.
28. Clause 19 provides for the dissolution of Vadilal Mehta H.U.F. and
distribution of shares of companies to the respective son by whom such
companies were to be managed hence-forth.
29. Clause 20 provides for distribution of tax refunds/payment of tax
liability of Vadilal Lallubhai Mehta H.U.F.
30. Clause 21 provides that C. Doctor & Co. Pvt. Ltd. is having agencies of
two products of M/s Sayaji Mills Limited. In case, sole selling agents were
terminated by Shri Bipinbhai Vadilal Mehta after taking over M/s Sayaji Mills
Limited then office space/godown belonging to C. Doctor & Co. Pvt. Ltd. and
used for these two agencieshad to be vacated. Certain employees could/would
be retained by M/s Sayaji Mills Limited. The other properties belonging to C.
Doctor & Co. Pvt. Ltd., being used by M/s Sayaji Mills Limited or its staff had
also to be vacated.
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31. Clause 22 provides that two properties belonging to M/s Sayaji Mills
Limited will be given to Shri Bipinbhai Vadilal Mehta upon transfer of its
control and management.
32. Clause 23 provides that one flat owned by C. Doctor 6b Co. Pvt. Ltd.
in Mumbai which is presently given to Shri Bipinbhai Vadilal Mehta on rent
would had to be handed over to Shri Suhasbhai Vadilal Mehta upon
implementation of MOU.
33. Clause 24, 25, 26, 27 and 28 contain provisions regardingto other
properties as well as adjustment of staffs working for group companies.
34. Clause 29 deals with right of first refusal of other party for a period of
ten years in case transfer of shares of companies is involved.
35. In Clause 31 Shri Bipinbhai Vadilal Mehta has been made responsible
for release of personal guarantees given by Shri Vadilal Lallubhai Mehta and
Shri Suhasbhai Vadilal Mehta in respect of loans and advances given to M/s
Sayaji Mills Limited.
36. Clause 32 provides for extinguishment of liabilities of Shri Vadilal
Lallubhai Mehta and Shri Suhasbhai Vadilal Mehta and their family members
for any act of omission or commission in their capacity as Director of C.V.
Mehta Pvt. Ltd. In case of any liability being imposed, Mr. Bipinbhai shall
indemnify them. CIause 33 contains same provisions as regard to M/s
Sayaji Mills Limited.
37. Clause 34 provides that charges/costs which may be incurred in
implementing MOU will be born and paid for equally by Shri Bipnbhai Vadilal
Mehta and Suhasbhai Vadilal Mehta.
38. Clause 35 supersedes all previous understandings/discussions
whether entered orally or in writing?
39. Clause 36 provides that parties to this Memorandum of Understanding
agreed to faithfully abide by and carry out the same under the guidance of
Shri Vadilal Lallubhai Mehta. Further it is provided that his decision of
everymatter relating to this understanding or the interpretation or the
implementation orin relation to any matter omitted to be mentioned in this
MOU but connected with or arising out of the matter mentioned herein shall be
final and binding upon all the parties. It is further provided that Shri Vadilal
Lallubhai Mehta can decide this issue in a summary manner and without
reason assigningtherefor. Annexure-I contains list of Trusts and H.U.Fs being
part of this MOU. Annexure-II contains cross shareholdings in both companies
of parties to such MOU. Annexure-III provides prices at which shares are to be
sold or otherwise transferred. This Annexureis reproduced as under:
ANNEXURE-III
PRICES AT WHICH THE SHARES ARE TO BE SOLD OR OTHERWISE
TRANSFERRED
Name of the Company Status Price per Share.
1. Sayaji Mills Ltd. Public Ltd. Rs. 176/-
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2. Industrial Machinery Private Ltd. Rs. 1,285/-

Mfrs. Pr. Ltd.
3. C. Doctor & Co Pr. Ltd. Private Ltd. Rs. 1/-
4. Oriental Corporation Private Ltd. Rs. 482/-
Pr. Ltd.
5. Mehta Mechinery Mfrs. Private Ltd. Rs. 9/-
Pr. Ltd.
6. C.V. Mehta Pr. Ltd. Private Ltd. Rs. 1/-
B.V. Mehta
N.B. Mehta Chhayaben Suhasbhi
Priyam B. Mehta
40. It is, however, noted that Shri Bipinbhai Vadilal Mehta felt certain
difficulties in the execution and compliance of the said MOU, hence, he
requested for certain modifications to be made therein. Shri Suhasbhai Vadilal
Mehta agreed and accepted to make certain modifications. Consequently,
Memorandum of Modification (MOM) was executed by them on 13.11.1982. It
is provided that only certain clauses of MOU were altered/modified and rest of
the clauses of MOU remained unchanged. Clause 3 of Memorandum of
Modification is reproduced hereunder:
1. Clause-3. It has been agreed and the parties hereto confirm that the
amount to be brought in by Shri BipinbhaiVadilal Mehta towards the
amounts payable by C.V. Mehta Pvt. Ltd. to the members of the family of
Shri VadilalLallubhai Mehta and of Shri Suhasbhai Vadilal Mehta, Suhasbhai
Vadilal Trusts, Vadilal Lallubhai HUF, Vimlaben Vadilal Trusts, Bhuriben
Lallubhai Estate and the daughters and grand children of Shri Vadilal
Lallubhai Mehta and Smt. Vimlaben Vadilal Mehta and to C. Doctor & Co.
Pvt Ltd. has been fixed by the parties at Rs. 39,24,154-88 (Rupees Thirty
nine lacs twenty four thousand one hundered fifty four & paisa eighty eight
only) Shri Bipinbhai Vadilal Mehta has agreed to pay and bring in
immediately (and in any event latest on the day next after the day on
which the share Transfer forms in respect of Sayaji Mills Ltd. are handed
over by Shri Suhasbhai Vadilal Mehta and members of his family as
mentioned hereinafter) in C.V. Mehta Pvt. Ltd. a sum of Rs. 20,00,000.00
(Rupess twenty lacs only) towards the amount required to be paid by C. V
Mehta Pvt. Ltd. The said amount shall be treated as loan and Shri Bipinbhai
Vadilal Mehta is not to claim or demand any repayment of the said loan
from C.V. Mehta Pvt. Ltd. as long as the management thereof does not pass
into the hands of Shri Bipinbhai Vadilal Mehta as provided herein.
It is further agreed and understood that transfer of the management of
Sayaji Mills Ltd., and the appointment of Shri Bipinbhai Vadilal Mehta and
Shri Priyambhai Bipinbhai Mehta on the Board of Directors thereof are only
to be made after Shri Bipinbhai Vadilal Mehta has paid and brought in C.V.
Mehta Pvt. Ltd. the aforesaid sum of Rs. 20,00,000.00 (Rupees Twenty lacs
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only) and it is further agreed that this amount is to be brought and paid by
Shri Bipinbhai Vadilal Mehta latest on the day next after the transfer forms
in respect of the shares of Sayaji Mills Ltd. held by Shri Suhasbhai Vadilal
Mehta and members of his family are handed over to Shri Vadilal Lallubhai
Mehta on behalf of Shri Bipinbhai Vadilal Mehta and the members of his
family. It is also further agreed that the actual effect is to be given to such
share transfer of Sayaji Mills Ltd., by the Board of Directors of Sayaji Mills
Ltd. only after the payment of the aforesaid amount of Rs. 20,00,000.00
(Rupees Twenty lacs only) by Shri Bipinbhai Vadilal Mehta to C.V. Mehta
Pvt. Ltd. and it is also clarified that these changes are made at the instance
and request of Shri Bipinbhai Vadilal Mehta and are agreed to by Shri
Suhasbhai Vadilal Mehta, in order to accommodate Shri Bipinbhai Vadilal
Mehta.
41. From the perusal of above, it is apparent that this clause quantifies the
amount to be brought in by Shri Bipinbhai Vadilal Mehta towards the amount
payable by C.V. Mehta Pvt. Ltd. to the members of the family of Shri Vadilal
Lallubhai Mehta and Shri Suhasbhai Vadial Mehta their trusts and other family
members. The amount has been quantified at Rs. 39,24,154-88. It is
particularly to be noted that Shri Bipinbhai Vadilal Mehta agreed to pay
and bring in immediately a sum of Rs. 20,00,000-00 and in any event
latest on the day next after the day on which the share Transfer forms
in respect of Sayaji Mills Ltd. are handed over by Shri Suhasbhai Vadilal
Mehta and members of his family. Thus, payment of a sum of rupees is not
a condition precedent for handing over share transfer forms of Sayaji Mills
Limited. Thus, on this basis itself, it can be said that this is not a consideration
for transfer of shares of Sayaji Mills Limited leave apart other facts. An
obligation has also been cast upon on the Directors of Shri Sayaji Mills Ltd. to
register the such share transfer only after payment of Rs. 20,00,000-00. This
clause again shows that the reference to register the transfer after receipt of
said sum is not on consideration for transfer of shares but it has been so
provided to ensure that effective implementation and fulfilment of all
conditions of MOU as well as MOM happens. Thus, such reference cannot, in
any manner, construe that the said amount has been paid as a consideration
for purchase of shares of Sayaji Mills Ltd or in connection therewith. Thus, this
sum is essentially related to transfer of management and appointment of Shri
Bipinbhi Vadilal Mehta and his son as Directors of the said company. Further,
the said amount is to be treated as a loan in the hands of C.V. Mehta Pvt. Ltd.
till the management thereof did not pass to the hands of Shri Bipinbhai Vadilal
Mehta. It is further noted that Bipinbhai Vadilal Mehta could not claim or
demand any repayment of the said loan as well till such transfer of
management. We may also point out that such payment has gone to C.V.
Mehta Pvt. Ltd. to repay its liabilities to the Shri Suhasbhai Vadilal Group and
Shri Vadilal Mehta family and it is inextricably linked with the transfer of
management and control of C.V. Mehta Pvt. Ltd. to Bipinbhai Vadilal Mehta
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and, therefore, apparently it is not connected with the transfer of shares by

Shri Suhasbhai Vadilal group in Sayaji Mills Ltd. to Bipinbhai group. It may not
be out of space here to mention that transfer of management and control and
transfer of shares are two different aspects for the reason that shareholders
may be a purely shareholder having and enjoying only proprietoryrights as a
shareholder and may not have any claim or role in the management of the
company or running its affairs. Hence, for this reason also, transfer of shares
cannot be equated with transfer of management and control. It also to be
noted, as stated earlier that the transfer of management of Sayaji Mills Ltd is
also related to bringing the subject amount by Shri Bipinbhai Vadilal Mehta,
thus, considering this fact also, the relationship of this sum is established with
the transfer of management and control of both these companies and not
transfer of shares. Further, the other fact which is to be noted is that it is a
case of a family arrangement whereby not only business
undertakings/companies are being distributed amongst two groups of family
members but several other movable and immovable properties have also been
distributed. It is also to be noted that the sale price for sale of shares or
otherwise transfer has also been fixed separately. It is also to be noted that
the same price has been paid by either party to implement the MOU r.w. MOM.
Thus, for all these reasons, we hold that the impugned sum is not connected
in any manner either directly or indirectly for the purchase of shares or in
connection therewith of Sayaji Mills Ltd.
2. Clause 4of MOM is reproduced here-under:
Clause 4- It is agreed that Shri Bipinbhai Vadilal Mehta shall similarly
bring in a further sum of Rs. 19,24,154.88 (Rupees Nineteen lacs twenty
four thousand one hundred fifty four & paisa eighty eight only) as a loan
within a period of 24 months at the latest.
The management of C.V. Mehta Pvt Ltd. which was proposed to be
handed over to Shri Bipinbhai Vadilal Mehta under the said Memorandum
of Understanding shall not be so transferred to Shri Bipinbhai Vadilal
Mehtaso long as Shri Bipinbhai Vadilal Mehta has not brought in Rs.
19,24,154.88(Rupees Nineteen lacs twenty four thousand one hundred
fifty four & paisa eighty eight only) being the balance of the amount
required to be brought in by Shri Bipinbhai Vadilal Mehta towards the
amounts payable by C.V. Mehta Pvt. Ltd. to the members of the family of
Shri Vadilal Lallubhai Mehta and of Shri Suhasbhai Vadilal Mehta,
Suhasbhai Vadilal Trusts, Vadilal Lallubhai HUF, Vimlaben Vadilal Trusts,
Bhuriben Lallubha Estate and the daughters and grand children of Shri
Vadilal Lallubhai Mehta and Smt. Vimlaben Vadilal Mehta and to C.
Doctor & Co. Pvt. Ltd. and further amount towards and equivalent to the
amount of interest paid or payable thereon from time to time at the
banks current lending rate after 13th November, 1982 onwards.
It is agreed that Shri Bipinbhai Vadilal Mehta shall bring in every
quarter an amount of Rs. 44992.00 (Rupees forty four thousand nine
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hundred ninety two only) towards the amount of interest paid or payable
on the aforesaid amount of Rs. 1924154.88 (Rupees Nineteen lacs
twenty four thousand one hundred fifty four & paisa eighty eight only).
In default of such payment by, Shri Bipinbhai Vadilal Mehta to C.V.
Mehta Pvt Ltd. the same C.V. Mehta Pvt. Ltd. shall not be required to pay
Shri Bipinbhai Vadilal Mehta interest on the loan of Rs. 20,00,000-00
(Rupees Twenty Lacs Only) to be brought in by him as mentioned in para
3 hereinabove. It has been further agreed that Shri Bipinbhai Vadilal
Mehta has to arrange for such amount within 24 months of the latest
from the date of this Memorandum and if Shri Bipin Bhai Vadilal Mehta
fails, neglect or omits for any reason whatsoever, to bring in such
amount within the such period of 24 months, Shri Bipinbhai Vadilal shall
not be entitled to claim, demand and ask for the transfer of the
management of C.V. Mehta Pvt. Ltd. to him or to any of the members of
his family.
It is also agreed that it will be open to Shri Bipinbhai Vadilal Mehta to
bring in the amount mentioned hereinabove earlier than twenty four
months and at that time ask for the transfer of management in
accordance with the other provisions in this Memorandum of Modification
and the Memorandum of Understanding dated 30-1-1982.
42. Thus, Clause 4 provides for bringing further balance amount of Rs.
19,24,154-88 within a period of 24 months at the latest. It also provides that
management of C.V. Mehta Pvt. Ltd shall not be transferred until then to Shri
Bipinbhai Vadilal Mehta. It also provides that specific sum of Rs. 44,992-00
shall be brought in by Shri Bipinbhai Vadilal Mehta as interest on quarterly
basis on this outstanding sum. It also provides that in case such interest is
not paid, M/s C.V. Mehta Pvt. Ltd shall also not pay interest on loan of Rs.
20,00,000-00 provided by Shri Bipinbhai Vadilal Mehta. The most crucial
provision is that in case Shri Bipinbhai Vadilal Mehta fails to bring in such
amount (Rs. 19,24,154-88) within 24 months he becomes disentitled or
eligible to claim, demand and ask for the transfer of management of C.V.
Mehta Pvt. Ltd to him or any member of his family meaning thereby that this
sum is a consideration for transfer of management of C.V. Mehta Pvt. Ltd to
him of his persons and by no stretch of imagination it can be related to
purchase/transfer of Sayaji Mills Ltd or in connection therewith.
3. Clause 5 of MOM is reproduced here-under:
Clause-5. It is further agreed that the shares of C.V. Mehta Pvt. Ltd.
which were agreed to he transferred by Shri Suhasbhai Vadilal Mehta and
the members of his branch, his Trusts etc to Shri Bipinbhai Vadilal Mehta
by sale or otherwise under the said Memorandum of Understanding are
not to be so transferred immediately and shall continue to be held by
Shri Suhasbhai Vadilal Mehta and the members of his branch and the
companies going to his branch or Trusts. The shares of to C.V. Mehta Pvt
Ltd held by Vadilal Lallubhai HUF shall not on partition go to the branch
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of Shri Bipinbhai Vadilal Mehta but, shall go to the branch of Shri

Suhasbhai Vadilal Mehta.
43. Clause 5 provides that shares of C.V. Mehta Pvt. Ltd. belonging to
Suhasbhai Vadilal Mehta and members of this Branch, Trusts etc which were
otherwise to be transferred immediately will not be transferred immediately. It
is further provided that shares of C.V. Mehta Pvt. Ltd. held by Shri Vadilal
Lallubhai Mehta H.U.F. which were to go to the Bipinbhai Vadilal Mehta as per
MOUon partition, now, those will go to the branch of Shri Suhasbhai Mehta.
4. Clause-6 of MOM is reproduced here-under:
Clause-6. The management of C.V. Mehta Pvt. Ltd. shall be with Shri
Suhasbhai Vadilal Mehta and its Directors shall not be asked by Shri
Bipinbhai Vadilal Mehta to resign as Directors of the said Company till
Shri Bipinbhai Vadilal Mehta fulfils his obligations to pay and bring in
C.V. Mehta Pvt. Ltd. further sum of Rs. 19,24,154-88 (Rupees Nineteen
lacs twenty four thousand and one hundred fifty four poise eighty eight
only) and interest as mentioned hereinabove within the period of 24
months and the other conditions and obligations mentioned herein and
in the said Memorandum of Understanding, to be fulfilled by Shri
Bipinbhai Vadilal Mehta, have been fully implemented and fulfilled by
him to the satisfaction of Shri Vadilal Lallubhai Mehta.
44. Clause 6 provides that Suhasbhai Vadilal Mehta and its other
Directors of C.V. Mehta Pvt. Ltd. shall continue as such until such sum is
brought in by Shri Bipinbhai Vadilal Mehta and other conditions/obligations of
MOM and MOU are fully implemented and fulfilled by Shri Bipinbhai Vadilal
Mehta to the satisfaction of Shri Vadilal Lallubhai Mehta.
5. Clause 7 of MOM is reproduced here-under:
Clause-7. Clause 11 of the said Memorandum of Understanding is not to
be immediately implemented so long as the management of C.V. Mehta
Pvt. Ltd. remains with Shri Suhasbhai Vadilal Mehta.
45. Clause-7 provides that Clause 11 of MOU whereby companies
belonging to the Shri Suhasbhai Vadilal Mehta Branch were required to pay
the amount due by them to C.V. Mehta Pvt. Ltd will not be required to do so
until the management of C.V. Mehta Pvt. Ltd remains with Shri Suhasbhai
Vadilal Mehta.
6. Clause 8 of MOM is reproduced here-under:
Clause-8. The shares of Sayaji Mills Ltd belonging to C.V. Mehta Pvt.
Ltd. will not be transferred by C.V. Mehta Pvt Ltd. to Shri Bipinbhai
Vadilal Mehta or to the members of his branch or to his nominees but,
shall continue to be held by the said C.V. Mehta Pvt. Ltd. C.V. Mehta Pvt.
Ltd. shall, however, exercise the voting rights in respect of such shares
held by it in favour of Shri Bipinbhai Vadilal Mehta for a period of 24
months. If, within the period of 24 months Shri Bipinbhai Vadilal Mehta
has not paid and brought in the aforesaid further amount of Rs.
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19,24,154-88 (Rupees Nineteen Lacs twenty four thousand and one

hundred fifty four & Paise eighty eight only), along with interest, C.V.
Mehta Pvt. Ltd. shall be at liberty to sell the shares of Sayaji Mills Ltd.
owned and hold by it to anyone, as it likes and decides and it will not be
required to exercise the voting rights in respect of such shares of Sayaji
Mills Ltd. in favour of Shri Bipinbhai Vadilal Mehta after the expiry of the
said period of 24 months.
46. Clause 8 provides that till shares of Sayaji Mills Ltd held by C.V.
Mehta Pvt. Ltd. will not be transferred to Shri Bipinbhai Vadilal Mehta group,
voting rights in respect of such shares held by them would be exercised in
favour of Shri Bipinbhai Vadilal Mehta for a period of 24 months whereby Shri
Bipinbhai Vadilal Mehta was to bring in aforesaid amount of Rs. 19,24,154-88.
It also provides that in case after expiry of such period C.V. Mehta Pvt. Ltd
could sale the shares of Sayaji Mills Ltd to any third person without any
consent of Shri Bipinbiai Vadilal Mehta. Thus, these modalities again show that
said consideration is inextricably linked with the C.V. Mehta Pvt. Ltd and not at
all connected with either transfer of management or shares of Sayaji Mills Ltd
by Suhasbhai and his group. Any reference of shares of Sayaji Mills Ltd is only
to ensure that obligations by Shri Bipinbhai Vadilal Mehta towards C.V. Mehta
Pvt. Ltd. are fulfilled within the time frame as agreed upon between the
parties thereto.
7. Clause 9 of MOM is reproduced here-under:
Clause- 9. It is reiterated for the sake of clarification that Clause 32 of
the said Memorandum of Understanding shall be implemented and
complied with at the time of transfer of management of C.V Mehta Pvt. Ltd.
from the hands of Shri Suhasbhai Vadilal Mehta to Shri Bipinbhai Vadilal
Mehta and the members of his branch on fulfilment of the terms and
conditions mentioned herein and in the said Memorandum of
Understanding.
47. Clause 9 provides for deferment of implementation of clause 32 of
MOU which has been already discussed meaning thereby that liability of Shri
Suhasbhai Vadilal Mehta branch will remain till terms and conditions of MOM
and said MOU are fulfilled by Shri Bipinbhai Vadilal Mehta. Clause 32 of MOU is
reproduced as under:
8. Clause 10 of MOM is reproduced here-under:
Clause- 10. It is agreed that Shri Suhasbhai Vadilal Mehta shall be
entitled to utilise the amount brought in by Shri Bipinbhai Vadilal Mehta
forthwith for the payment of the dues payable by C.V. Mehta Pvt. Ltd. to
the members of the family of Shri Vadilal Lallubhai and others mentioned
in para 3 hereinabove and/or to C. Doctor & Co. Pvt. Ltd. and other
companies or associates of Shri Suhasbhai Vadilal Mehta and that Shri
Bipinbhai Vadilal Mehta has agreed that the management of C. V Mehta
Pvt. Ltd. will not be claimed or demanded by him before such payments
are made by C.V. Mehta Pvt. Ltd. under the management of Shri
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Suhasbhai Vadilal Mehta.

48. Clause 10 refers to Clause 3 of MOM. In Clause 3, as noted earlier, total
amount payable by Shri C.V. Mehta Pvt. Ltd. to Shri Suhasbhai Vadilal Mehta
branch has been quantified at Rs. 39,24,155-88 and in terms of provisions of
Clause 10 Shri Bipinbhai Vadilal Mehta has agreed that management of C.V.
Mehta Pvt. Ltd. will not be claimed or demanded by him before such payments
are made by C.V. Mehta Pvt. Ltd under the management of Shri Suhasbhai
Vadilal Mehta and his group. Thus, there remains no doubt that the total
amount claimed by the petitioner to have been utilised for purchase of
shares of Sayaji Mills Ltd or in connection therewith, in fact, is
consideration and it is connected exclusively and directly with the transfer of
management of C.V. Mehta Pvt. Ltd by Shri Suhasbhai Vadilal Mehta group to
Shri Bipinbhai Vadilal Mehta group.
9. Clause 11 of MOM is reproduced hereunder:
Clause-11. Shri Bipinbhai Vadilal Mehta has agreed that so long he
has not brought in the additional amount of Rs. 1924154-88 lacs
(Rupees Nineteen lacs twenty four thousand one hundred fifty four &
paise eighty eight only) plus interest thereon agreed to be brought in by
him in Messrs. C.V. Mehta Pvt. Ltd. as mentioned in clause 4 hereto, Shri
Suhasbhai Vadilal Mehta shall continue to be in possession of old Bipin
Nivas No. 1 let out to him and if he does not bring in the said amount in
M/s. C.V Mehta Pvt Ltd. within a period of 24 months, Shri Suhasbhai
Vadilal Mehta shall not be required to hand over the vacant possession
thereof to Shri Bipinbhai Vadilal Mehta Trust No. 1.
It is further agreed by Shri Suhasbhai Vadilal Mehta that on Shri
Bipinbhai Vadilal Mehta bringing in C.V. Mehta Pvt. Ltd. a sum of Rs.
9,63,000/'- (Rupees Nine lacs sixty three thousand only) out of the
aforesaid amount of Rs. 19,24,154-88 (Rupees nineteen lacs twenty four
thousand one hundred fifty four and paise eighty eight only) he shall
hand over the vacant possession of Bipin Nivas No. 1 to the Trustees of
Bipinbhai Vadilal Mehta Trust No. 1.
49. Clause 11 provides forsome property to remain in the possession of
Shri Suhasbhai Vadilal Mehta until sum referred in clause 4 hereinbefore is
brought by Shri Bipinbhai Vadilal Mehta. It also provides that on payment of
sum of Rs. 19,24,155-88, Shri Suhasbhai Vadilal Mehta shall hand over the
vacant possession of said property to the Trustees of Shri Bipinbhai Vadilal
Mehta Trust.
10. Clause 12 of MOM is reproduced hereunder:
Clause-12. Shri Bipinbhai Vadilal Mehta and the members of his
branch shall give a guarantee to M/s. C. Doctor & Co. Pvt Ltd. to the
extent of Rs. 19,24,154-88 (Rupees Nineteen lacs twenty four thousand
one hundred fifty four and paise eighty eight only) plus interest in
respect of its outstanding from M/s. C.V. Mehta Pvt. Ltd. as C. Doctor &
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Co. Pvt Ltd. will agree to the postponement of the payment of its dues by
M/s. C.V. Mehta Pvt. Ltd. only on the guarantee of Shri Bipinbhai Vadilal
Mehta and the members of his branch.
50. Clause 12 provides that Shri Bipinbhai Vadilal Mehta and members of
his branch shall also give guarantee for the postponement of payment of dues
by C.V. Mehta Pvt. Ltd to Shri Suhasbhai Vadilal Mehta group.
11. Clause 13 of MOM is reproduced here-under:
Clause-13. Shri Bipinbhai Vadilal Mehta has agreed that he is
responsible to the extent of one half of the loans and advances given by
M/s. C.V. Mehta Pvt. Ltd. to sisters and concerns in which they and
relatives are interested, i.e. the loans and advances to:
1. Shri Anupam K. Shah Rs. 09,62,297-72
2. Shri Arvindbhai K. Shah Rs. 06,73,245-00
3. M/s. Saburdas & Co. Rs. 01,62,411-49
4. M/s. Aarvy Power Tools Rs. 07,64,985-69
Pvt. Ltd.
5. M/s. Crown Containers Rs. 04,95.638-02
Rs. 30,58,577-72
It has, therefore, been agreed by him that in case he does not bring in
the additional amount of Rs. 19,24,154-88 (Rupees Nineteen lacs twenty
four thousand one hundred fifty four & paise eighty eight only) plus interest
within the period of 24 months as mentioned herein above the amount of
Rs. 20,00,000/- (Rupees Twenty lacs only) brought in by him immediately
after the execution of this memorandum of modification shall not be
claimed back by him at all and the amount standing to this credit shall be
adjusted against the advances to the aforesaid persons by M/s. C.V. Mehta
Pvt Ltd.
51. Clause 13 provides that in case the sum of Rs. 19,24,154-88 is not
brought by Shri Bipinbhai Vadilal Mehta and sum of Rs. 20,00,000-00 given
on the execution of this MOM shall not be claimed back by Bipinbhai Vadialal
Mehta at all and the amount standing to this credit shall be adjusted against
the advances given by C.V. Mehta Pvt. Ltd. to his sisters or to the concern in
which they are or their relatives are intested. This clause makes it clear that
the sum of Rs. 20,00,000-00 given earlier is to be adjusted against the
recovery of loans and advances given by C.V. Mehta Pvt. Ltd to his sisters or to
the concerns in which they or their relatives are interested. It again
conclusively proves that the sum is not in any way related to transfer of shares
of Shri Sayaji Mills Ltd or does not have any connection therewith.
52. Thus, considering the above clauses as a whole, it is established
beyond doubt that thesum of Rs. 39,24,154- 88 paid by Shri Bipinbhai
Vadilal Mehta to C.V. Mehta Pvt. Ltd is connected with the transfer of
management of C.V. Mehta Pvt. Ltd and is neither consideration nor in
anyway connected with the transfer of shares of Sayaji Mills Ltd by
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Shri Suhasbhai Vadilal Mehta and his branch to Shri Bipinbhai Vadilal
Mehta. To further support this view, we reproducethe letter written by
Shri Suhasbhai Vadilal Mehta on 13.11.1982 itself to Shri Bipinbhai
Vadilal Mehta as under:
ANNEEXURE (at page no. 547of original paper book).
SUHASBHAI VADILAL
13, LALLUBHAI PARK
ST. XAVIER'S CORNER
NAVRANGUPRA
AHMEDABAD-9 Dt. 13.11.1982
Shri Bipinbhai Vadilal Mehta
Bipin Nivas,
Ellisbridge,
Ahmedabad 380006.
My dear Bipinbhai,
In view of your difficulty to pay up immediately the amount payable
by C.V. Mehta Put. Ltd. to C. Doctor & Co. Pvt. Ltd, the members of my
family and other, you have brought in only apart of the amount are have
agreed and under taken to bring further necessary amount within a
period of 24 months as provided in the memorandum of modification
dated 13.11.1982 executed between us.
It has been provided in the said Memorandum of Modification that the
shares of C.V. Mehta P. Ltd. shall continue to be vested in me and/or
members of my family and that the shares of C.V. Mehta P. Ltd. held by
Vadilal Lallubhai Mehta HUF shall, on partition, be given to my share. It
is also provided that management of C.V. Mehta P. Ltd. shall remain with
me. You have agreed to pay the balance of Rs. 19,24,154-88 with
interest as mentioned in para 4 of Memorandum of Modification dated
13.11.1982 within a period of twenty four months and on such payment
being made and not till then, you can claim that the management of C.V.
Mehta P. Ltd should be transferred to you. At the time of such transfer, of
management of C.V. Mehta P. Ltd., I and other members of my family
shall transfer to you and/or members of your family, shares of C.V.
Mehta P. Ltd. held by us at a price of Rs. 1/- per share.
It is understood that the transfer of management is only on fulfilment
of the terms and conditions of Memorandum of Understanding and the
Memorandum of Modification and that you have to comply all the
conditions and requirements before demanding the shares and the
management of C.V. Mehta P. Ltd.
Yours faithfully,
Sd/-
Suhasbhai V Mehta
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53. From the perusal of the above letter even a layman can draw
same conclusion i.e., total impugned amount is related to transfer of
management of C.V. Mehta Pvt. Ltd only. In the said letter, it has also
been stated that shares of C.V. Mehta Pvt. Ltd are to be transferredat
price of Rs. 1/- per share. It is also noted that Annexure-III of MOU
showing the value of each share of the each company being part of
that MOU has been determined. It is also not in dispute that said
consideration has been transferred separately. This factfurther
strengthens the view taken by us. Thus, this petition can be disposed
of at this stage only by holding that there is no merit in the claims
made by petitioners. Still, we consider it appropriate to deal with legal
aspects in view of issues framed by Hon'ble Gujarat High Court and
importance thereby for public at large.
54. Now, we need to consider the scope and purpose of Section 77 of
Companies Act, 1956 assuming that the same is applicable to the present
case. For this purpose, we reproduce Section 77 as it existed at relevant point
of time as under:
Section 77- Restrictions on purchase by company or loans by
company for purchase, of its own or its holding company's shares.
(1)No company limited by shares, and no company limited by guarantee
and having a share capital, shall have power to buy its own shares,
unless the consequent reduction of capital is effected and sanctioned in
pursuance of sections 100 to 104 or of section 402.
(2)No public company, and no private company which is a subsidiary of a
public company, shall give, whether directly or indirectly, and whether
by means of a loan, guarantee, the provision of security or otherwise,
any financial assistance for the purpose of or in connection with a
purchase or subscription made or to be made by any person of or for any
shares in the company or in its holding company:
Provided that nothing in this sub-section shall be taken to prohibit-
(a) the lending of money by a banking company in the ordinary course of
its business; or
(b) the provision by a company, in accordance with any scheme for the
time being in force, of money for the purchase of, or subscription for,
fully paid shares in the company or its holding company, being a
purchase or subscription by trustees of or for shares to be held by or
for the benefit of employees of the company, including any director
holding a salaried office or employment in the company; or
(c) the making by a company of loans, within the limit laid down in sub-
section (3), to persons (other than directors l[***]or managers) bona
fide in the employment of the company with a view to enabling those
persons to purchase or subscribe for fully paid shares in the company
or its holding company to be held by themselves by way of beneficial
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ownership.
(3) No loan made to any person in pursuance of clause (c) of the
foregoing proviso shall exceed in amount his salary or wages at that time
for a period of six months.
(4) If a company acts in contravention of sub-sections (1) to (3), the
company, and every officer of the company who is in default, shall be
punishable with fine which may extend to 2[ten thousand rupees.
(5) Nothing in this section shall affect the right of a company to redeem
any shares issued under section 80 or under any corresponding provision in
any previous companies law.
55. As observed, Section 77(1) of Companies Act, 1956 is applicable to a
situation where Reduction of Capital as per the relevant provisions of the
Companies Act, 1956 is involved; hence, not applicable to the situation on
hand.
56. Section 77(2) is applicable to a public company or a private company
which is a subsidiary of public company. This means that it is not applicable to
an exclusive private limited company. This position indicates that Legislature
wants to apply the provisions of Section 77 relating to restrictions on giving
the loans or any financial assistance in other forms only to companies where
larger public interest is involved apparently. Thus, object appears that public
company or its subsidiary should not beallowed to manipulate the price of
shares or create, design and implement ownership structure/pattern of such
companies in a manner beneficial to a particular class of persons or owners or
promoters. The other important words are “for the purpose of or in connection
with a purchase or subscription made or to be made by any person of or for
any shares of the company or in its holding company”. Financing for the
purchase of shares and subscription to shares are the events which result into
triggering of this clause. Thus, itindicates an intention that this clause will
come into play when the company is offering its shares i.e., in case of
purchase, it could be issue of shares onright basis or issueof forfeited shares
etc. by the company. In case of subscription, it could be initial public offer or
preferential offer/private placement of shares etc. The reference to
subscription is also important because there are provisions of minimum
subscription compliance to which is a must to make a valid issue of shares.
This view is further supported by the exceptions given in the proviso to this
sub-section as for certain situations/cases theseprovisions are not to be
applicable. These exceptions also indicate that intent and purpose of
provisions of Section 77(2) of Companies Act, 1956 is to curbmanipulative and
fraudulant practices in rigging share prices or otherwise gaining control of the
company in an illegal manner. Another important aspect, in our view, is that
provisions of Section 77(2) of Companies Act, 1956 are applicable for the
purpose of or in connection with purchase. The words “purpose of or in
connection with” are prefix to the word “purchase”. These words also indicate
that provisions of this Section i.e., Section 77(2) are to be applied only when
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event of purchase or subscription of shares is involved exclusively i.e., it is the

only event and not collateral or incidental event or purpose or requirement to
implement to any scheme of arrangement or settlement between two groups
or promoters. In the present case, as evident from the discussion made
hereinbefore transfer of shares is a part of family arrangement involving
division of companies and movable and immovable assets amongst two
branches of a particular family and transfer of shares is not the sole or primary
purpose. Thus, in our considered opinion, the provisions of Section 77(2) are
not attracted at all in the present case.
57. As stated earlier that consideration for purchase of shares has been
paid separately in terms of provisions of Clause 4 and 5 of MOU. It is also
noted that some shares have also been gifted in terms of provisions of Clause
5 of MOU. The details of sale consideration and shares gifted have been
provided by Respondent No. 2 and which are at Annexure-C at page 48 of
their written submission are reproduced as under:
ANNEXURE-C
Statement of shares of Sayaji Industries Limited held on the date of MOU
(from paid up capital comprising of 60,000 equity shares of Rs. 100/- each
aggregating to Rs. 60,00,000/-
Name of No. of % of Consideration Total Cheque
Family Shares Total per share in Amount No. and
Rs. Rs. Date
Vadilal Lallubhai 2900 Gift on
Mehta HUF partition of
Vadilal
Lallubhai HUF
Vimlaben 1430 176/- per 251680.00 Chq. No.
Vadilal Trust share 889759
of Punjab
National
Bank dtd.
13.11.82
Total (A) 4330 7.217
Suhasbhai 1633 176/- per 287408.00 Chq. No.
Vadilal Mehta share 185666
(Respondent of Punjab
No. 12) National
Bank dtd.
13.11.82
Suhasbhai 1074 176/- per 189024.00 Chq. No.
Vadilal Mehta share 185645
(Respondent of Punjab
No. 12) National
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Bank dtd.
13.11.82
Suhasbhai 4852 176/- per 853952.00 Chq. No.
Vadilal Mehta share 185678
(Respondent of Punjab
No. 12) National
Bank dtd.
13.11.82
Suhasbhai 227 176/- per 39952.00 Chq. No.
Vadilal Trust share 889852
of Punjab
National
Bank dtd.
13.11.82
Suhasbhai 840 176/- per 147840.00 Chq. No.
Vadilal Trust share 889758
No. 1 of Punjab
National
Bank dtd.
13.11.82
Total (B) 8626 14.377

Total 1295 21.59

Transferred 6 3
from SVM to
BVM as per
Annexure II of
MOU (A+B)
Shares trf. From
SVM to BVM Not
forming part of
Annexure II of
MOU
Shares held in 106 0.177 Gift from Gift as
Bhuriben Bhuriben pre Will
Lallubhai Estate Lallubhai Will of
Bhuriben
Lallubhai
Shares held in 658 1.097 176/- per 115808.00 Chq. No.
Industrial share 185652
Machinery of Punjab
Manufacturers National
Pvt. Ltd. Bank dtd.
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13.11.82
Shares held in C 1 0.002 176/- per 176.00 Chq. No.
Doctor & Co. share 185653
Private Ltd. of Punjab
National
Bank dtd.
13.11.82
Total (C) 765 1.275 1885840.0
0

Total shares 1372 22.86

trasferred 1 8
from SVM
Group to BVM
Group
(A+B+C)
Shares held by
Bipinbhai
Vadilal Mehta
Branch
Bipinbhai 2754 4.590
Vadilal Mehta
(Respondent
No. 2)
Bipinbhai 870 1.450
Vadilal Mehta
Family Trust
Priyambhai 414 0.690
Bipinbhai Mehta
(Respondent
No. 3)
Priyaben 378 0.630
amalbhai
Kothari
Total (D) 4416 7.360

Shares held by 9185 15.308

C V Mehta
Private
Limited

Grand Total 27322 45.537

(A+B+C+D+E)
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Total shares received by BVM as 2900

gift 106
On partition of VLM HUF
From Bhuriben Lallubhai Estate as
per will of Bhuriben Lallubhai
3006
Total shares received by BVM on 10715
payment of consideration of Rs. 1885840
176/- per share to SVM
Total consideration paid
58. It is noted that a sum of Rs. 18,85,840.00 has been paid to Shri
Suhasbhai Mehta Branch in respect of shares transferred by them at the rate
of Rs. 176/- per share. This fact has remained uncontroverted during the
course of hearing it was tried to be arguedbut thereafter in the written
submissions filed on behalf of Petitioner or Respondent Nos. 12 and 13
nothing has been said on this aspect of the matter. Thus, this position not only
supports the claims made on behalf of Respondent Nos. 2and 3 but it also
leads to an unambiguous conclusion that the petitioner has filed this petition
even after having knowledge of the MOU and MOM as claimed by the Petitioner
in the affidavit in the petition only with a view to harass the Respondent Nos.
1,2 and 3.
Whether TOTAL consideration can be said to have been provided by
M/s. Sayaji Industries Ltd. to enable Respondent No. 2 and 3 to
purchase such shares?
59. Though, this aspect has lost its relevance in view of the conclusion
already arrived at but it needs to be discussed for the simple reason that it will
again show the intent and motive of the petitioner for filing of this petition.
From the written submissions and arguments made during the course of
hearing of this petition the focus has remained only on the transactions of
advance of money to Santosh Starch Products with whom transactions worth
of Rs. 20,00,000.00 have been made in three tranches and one of the
transactions is through petitioner itself. As regard to other transactions with
other parties, no written submissions have been made. The total money
involved is Rs. 39,24,154.88. As far as other parties are concerned, it is noted
that Sayaji Industries Ltd. has given Rs. 8,00,000.00 to M/s. Tirupati Traders
on 23.08.1983 and 09.09.1983 in two tranches whereas money from this
party has been received by Shri Bipinbhai Vadilal Mehta on 09.08.1983 and
27.08.1983. Said party has given a sum of Rs. 6,00,000.00 directly to L.G 8b
Doctor Associates Pvt. Ltd on 09.08.1983 which is prior to the date of Rs. 6
lacs given by Sayaji Industries Ltd on 23.08.1983; hence, no nexus between
the two. Similarly, a sum of Rs. 2 lac has been given by M/s. Tirupati Traders
directly to C.V. Mehta Pvt. Ltd on 27.08.1983 which is also prior to sum of Rs.
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2 lac given by Sayaji Mills Ltd to M/s. Tirupati Traders on 09.09.1983. We

further note that the party to whom this money has been given, has not been
given back to Shri Bipinbhai Vadilal Mehta and his branch members as no
details or material to that effect has been brought on record by Petitioner or
Respondent No. 12 and this fact clearly weakens the claim of the petitioner. As
far as other parties who have given loan to Shri Bipinbhai Vadilal Mehta and
his branch, no evidence has been brought on record to show that any money
was given by the Respondent No. 1 Sayaji Industries Ltd. to such parties at
all. Thus, there is no evidence which justifies the claim made by the petitioner
as far as this lack of transitionis considered. Now, coming to the transactions
with the Santosh Starch Products as far as transaction of Rs. 5,00,000.00 is
concerned, the same is after the date of money given by M/s Santosh Starch
Products to Shri Bipinbhai Vadilal Mehta branch; hence, this part of the
transaction also does not have any relevance so far as applicability of Section
77 of Companies Act, 1956 is concerned. Thus, out of total amount of Rs.
39,25,154-00 payable by C.V. Mehta &Pvt. Ltd. to Suhasbhai Mehta and his
branch only a sum of Rs. 15,00,000,00 remains which can be at the most said
to have got the nexus. This again shows that the claims have been made by
Petitioner just to create cause of action without any substance and support of
any cogent material/evidence and without appreciation of facts correctly. We
have already stated that even this consideration is not for the purpose of
purchase of shares but for transfer of management of C.V. Mehta & Pvt. Ltd.
The shares of M/s Sayaji Industries Ltd. belonging to Suhasbhai branch have
to be delivered latest by one day after payment of Rs. 20,00,000-00by itself
proves the that the same is not a consideration for transfer of shares but only
step to secure the smooth and timely implementation of the family
arrangement. It is also, at the cost of repetition, may not be out of place to
mention that even an obligation cast on the Board of Directors to approve the
transfer of shares to Shri Bipinbhai Vadilal Mehta group after the payment of
Rs. 20,00,000.00 ismerely formality at the most. Further, such family
arrangement cannot bind the Board of Directors of a public limited company
nor it can override the provisions of Companies Act, 1956, if all the formalities
as regard to transfer of shares along with relevant documentary
evidences/material are submitted for the transfer. Thus, such mechanism is
only a precautionary tactic to enforce the full and timely implementation of
family arrangement. In this context, it is also relevant that this amount of Rs.
20 lacs can be forfeited/adjusted against certain amounts recoverable by C.V.
Mehta Pvt. Ltd and not to be refunded in case the balance amount of Rs.
19,24,154-88 is not brought in by Shri Bipinbhai Vadilal Mehta as per terms
and conditions of MOU r.w. MOM, then, how the said loan of Rs. 20 lacs can be
treated for purchase of or transfer of shares of Sayaji Industries Ltd.
60. We are further of the view andwe have already held that the impugned
sum is not a consideration for the purpose of purchase of shares of M/s Sayaji
Industries Ltd. when the various transactions are involved as a part of family
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arrangement and in that situation even if some technical flaw happens for a
part transaction, the whole transaction cannot be declared null and void.
Accordingly, this plea of the petitioner is also rejected.
Whether liability of the Respondent No. 2 can be fixed for executing
the transaction in this manner and consequently, penalty could be
imposed on him under Section 77(4) of Companies Act, 1956?
61. This question is only of an academic relevance as by the discussions in
regard to earlier questions, it has been established that there is no violation of
provisions of Section 77 of the Companies Act, 1956. Having said so, the
question still needs to be answered assuming that impugned amount is a
consideration for the purpose of purchase of shares or in connection therewith.
Even in that circumstance, Respondent No. 2 cannot be held liable for an
action under Section 77(4) of the Companies Act, 1956 as he was neither a
Managing Director nor a Director or holding any other office or even otherwise
associated with the affairs/operations of the Respondent No. 1 Company in
any capacity at the relevant time. It is particular to be noted that the
Respondent No. 1 Company is a listed public company; hence, it is to be
governed not only by the provisions of Companies Act, 1956 r.w. Regulations
made thereunder but it is also subject to rules and regulations/compliances as
per the norms and provisions of listing agreements. Having noted this fact and
legal position, it is not in dispute that Shri Bipinbhai Vadilal Mehta was not
having cheques signing authority even on behalf of the Respondent No. 1
Company in November, 1982. It is also to be noted that Respondent No. 2 was
appointed as an Additional Director on 18.11.1982 up to which date
Respondent No. 12 i.e. Suhasbhai Vadilal Mehta was the Managing Director of
the Respondent No. 1 Company and he continued as the Director of the
Respondent No. 1 Company till 07.09.1983 though he resigned from the
position of Managing Director as on 18.11.1982 as per the term of the family
arrangement. Shri Vdilal Lallubhai Mehta remained Chairman and Managing
Director of Respondent No. 1 Company and he resigned only on 07.09.1983.
Thus, Shri Vadilal Lallubhai Mehta and Shri Suhasbhai Vadilal Mehta were in
the management of the Respondent No. 1 Company till 18.11.1982. Further,
Petitioner No. 1 in his normal deposition as witness in Criminal complaint
dated 25.03.1988, has admitted that he was handling all business
transactions of the Company. It has also been admitted that power of attorney
had been given to six persons to manage the affairs of the company on its
behalf and he was one of them. Importantly, it has been asserted that he used
to manage as per the directions of Managing Director and in their absence, he
used to take decision and manage the affairs on his own and there was no
necessity even to inform them as regard to the decision taken by him. Thus,
such statement given by him before Court of law which is duly supported by
the fact that he was signatory to the Bank operations and also the power of
attorney holder as regard to affairs of the public listed company, any contrary
statement given to that factual situation without being supported by any
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cogent material would not have any evidential value. Thus, claim by him that
Bipinbhai Mehta was in de facto Management is of that nature and category as
not even a single iota of evidence has been brought on record to support this
claim and that too in case of a public listed company where such
methodology/practice cannot be possible legally as well as for all practical
purposes. Interestingly, after making these averments in the said deposition
as he has stated that these three cheques were given under the instructions of
Bipinbhai VadilalMehta which fact is also unsupported by any material on
record. However, this fact establishes that he was aware of all transactions
even where he was not a signatory of cheque. On the contrary, the
Respondent No. 2 has brought on record a letter which is placed at page 559
of the petition that Rs. 15,00,000.00 in three tranches were issued in favour of
M/s Santosh Traders Products on 12.11.1982 at the instructions of the then
Chairman Shri. Vadilal Lallubhai Mehta. Another factor which needs to be
taken into consideration to prove that Bipinbhai Vadilal Mehta could not be
given de facto control that as per Clause 8 of MOU Vadilal Lallubhai Mehta and
Suhasbhai Vadilal Mehta would resign from Chairmanship, Directorship and
Managing Directorship respectively only when Shri Vadilal Lallubhai Mehta was
satisfied that MOU had been fully implemented and they had been released
from all their guarantees including Bank guarantees. It is also provided that
Suhasbhai Vadilal Mehta would resign as Managing Director on the
appointment or just prior to the appointment of Bipinbhai VadilalMehta as the
Managing Director by the Board of Director of the Respondent No. 1 Company
and Shri Vadilal Lallubhai Mehta was even then to continue as Managing
Director. It is also noted that Clause 31 also cast an obligation on Bipinbhai
Vadilal Mehta to procure release all such guarantees when he is put in control
in management of the Respondent No. 1 Company. Thus, these provisions
clearly show that Bipinbhai Vadilal Mehta had neither any legal control nor any
say in the management of the affairs of Respondent No. 1 Company till the
above obligations were discharged. Further, this understanding, we also find
that Respondent Nos. 12 and 13 in their replies have claimed that Bipinbhai
Vadilal Mehta had been asked to resign from the Managing Directorship of the
Respondent No. 1 Company, Unit-2 after 12.11.1975 for the reason that
certain wrong stock statements had been submitted to the Bank. Even, the
veracity of instructions given by Shri Vadilal Lallubhai Mehta to issue
impugned cheques to M/s Santosh Starch Products has been doubted on this
basis. Once the integrity of the person is doubted to this extent then
allegation of giving him control of a listed public company in a de-facto
manner unsupported by anyevidence, is only afterthought; hence, not of any
help to the cause of the petitioners and Respondent No. 12, 13. Rather such
pleas make their claims self contrary as well as an attempt to frame the
Respondent No. 2 for a transaction which appears to have been devisedand
executed by the Respondent Nos. 12 under the guidance of Vadilal Lallubhai
Mehta as Respondent No. 2 was having financial difficulties and management
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and the company whose management and control was to be transferred were
not doing well as evident from the price fixed for the sale of shares of this
company and the other companies going to the Suhasbhi Vadilal Mehta i.e.
as against Rs. 176/- per share for the share of Sayaji Mills Ltd., the price per
share of Industrial Machinery Pvt. Ltd. has been fixed at Rs. 1285 and of
Oriental Corporation Pvt. Ltd has been fixed at Rs. 482. Terms and
conditions of MOM have also been designed so as to favour Suhasbhai
Mehta branch as evident there-from.
62. Thus, consideration of the above facts and legal position as enumerated
in Section 77(4) of the Companies Act, 1956 Bipinbhai Vadilal Mehta cannot
be held guilty or liable for penalty thereunder. On the contrary, we are of the
view that Respondent No. 12 as well as Petitioner could have been made liable
if impugned sum was found to have been paid by Respondent No. 1 Company
in the purchase of such shares in spite of the fact that no equitable relief by
rectification of Register of Members would have been granted for various other
reasons.
In the present case whether Petitioners have got any locus-standi to
file petition under Section 155 of the Companies Act, 1956?
63. In the present case, application has been filed by members who are
having miniscule shareholding in the Respondent no. 1 company. It is an
undisputed fact that they are not going to be beneficiary in any manner even
if this petition is allowed. It is also an admitted fact that neither any right of
such persons as member of the company has been adversely affected nor
there a case of oppression and mismanagement which is prejudicial to the
interest of any member or members or to the interests of the company as a
whole. It has also been noted that transfer of shares have happened between
two groups of one family holding majority shares as a consequence of
implementation of MoU/MoM between them. This question though of academic
nature, in view of our decision/conclusion already arrived at, still this needs to
be dealt with considering its general importance to prevent abuse/misuse of
such provision. In this background, now, we still look at the scheme of the
Act, 1956 relating to transfer of shares. At the relevant time, Section 108 of
the Companies Act, 1956 governed the procedure for registration of transfer of
shares or debentures. It is noted that for registration of transfer, it was
mandatory that proper instrument of transfer duly stamped and executed as
per the provision of this section had to be delivered along with share
certificate and in case such share certificate was not there, then letter of
allotment was sufficient. The applications are to be made in writing. In case of
non-production of share certificate, the Board of company could register such
transfer after taking an indemnity bond. There are other formalities and
guidelines in various other sub-section/clauses of this Section which are not of
any relevance, hence, not discussed. The only salient feature which is to be
considered is that except compliance to such procedural formalities, there is
no requirement in said section as regard of production of certificate or
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declaration or undertaking in any manner as regard to the fact that there is no

violation of Section 77 of the Companies Act, 1956. It is also to be noted that
on receipt of specified form duly filled in and complying to the provision of
Section 108 of Companies Act, 1956, the Board of Directors are required to
register the transfer or in case, company refuses to register transfer which
shall, within two months from the date on which instrument of transfer was
required, notice of the refusal of the transfer. Thereafter, transferor or
transferee asper provision of Section 111 of the Companies Act, 1956 could
appeal to the Tribunal against such refusal. In case of transmission of shares,
the person, who gave intimation of the transmission by operation of law, is
also eligible to file the appeal. Thus, only persons who are affected or going to
be affected from such refusal or authorized representative of such person can
file an appeal and no other person is eligible to do so. Now, going back to
section 108(4) of the Companies Act, 1956, it provides that delivery of
certificate of all securities has to be made within specified period unless
prohibited by provision of law or order of a Court/Tribunal or Authority. This
again deals only with regard to issue of delivery of certificates. It may not be
out of place that even in Section 77 of the Companies Act, 1956, there is no
obligation either on the company or any officer thereof transferor or transferee
to give an undertaking or declaration that every instrument of transfer is in
compliance to the provision of Section 77 of the Companies Act, 1956. Thus, it
is evident that Section 108 r.w. Section 111 of the Companies Act, 1956 and
section 77 of the Companies Act, 1956 do not have inter-linkage nor create
any disability to register transfer in case provision of Section 77(1) and 77(2)
of the Companies Act, 1956 are violated. Accordingly, we are of the considered
view that both these sections operate in different field and for different
purposes. Section 108 r.w. Section 111 of the Companies Act, 1956 is
procedural sections relating to registeration or transfer/transmission of shares.
The Board of Directors can also refuse to register transfer of
shares/transmission of shares in certain situations such as if the board
perceives threat of hostile take-over but no situation has been prescribed as a
ground for refusal of transfer bin noncompliance/violation of Section 77 of the
Companies Act, 1956.
64. We may also take note of the provision of Section 111(5) of the
Companies Act, 1956, whereby the Tribunal on an appeal may direct the
company to register the transfer or transmission of shares. It may also direct
for rectification of the register and company to pay damages, if any, to ANY
PARTY AGGREIVED.
65. After having a brief idea of registration of transfer and transmission of
shares by the companies and before deciding the impugned question, it is
considered necessary to have little overview of the provisions relating to
register of members and its significance. Section 150 of the Companies Act,
1956 deals with register of members and provides that every company shall
keep a register of its members and particulars/details of each member. It is
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also noted that section 150(1)(b) of the Companies Act, 1956 also provides
that amount paid or agree or considered to be paid on those shares is also to
be mentioned. In the present case, it is not the case of petitioner that in such
register, impugned amount had been mentioned as consideration. In such
register of members, the date of a person becoming as a member as well as
ceasing to be a member is to be mentioned. As per Section 150(1) of the
Companies Act, 1956, index of member is also required to maintain so that
entries relating to that member in the register of members can be readily
found. Section 164 of the Act, 1956 provides register of members shall be
prima-facie evidence of any matters directed or authorized to be inserted
therein by this Act. Significance of such register to a member is important
mostly from the perspective of rights of members in the governance of the
affairs of the company and theirperspective rights which they obtained as
shareholder but such rights can be enforced only when their names, appearin
the register of members. It is a settled principle that shareholders and
members are distinct and different from each other though the person may be
the same andunless, name of shareholderenters into register of members, he
may not be entitled to various rights such as bonus shares, dividend, right,
issue or even to file a petition under Section 235 in a collective manner for
investigation into the affairs of the company or under Section 397-398 for
seeking relief in case of oppression and mismanagement or to participate in
general meeting of the Company. The definition of member as contained in
Section 2(55) of the Companies Act, 2013 is more comprehensive but in
substance it is expanatiory of the legal position relating to the term “member”
as prevailing for all times. Thus, Register of Members is a valuable record.
66. Now, having discussed, in brief, scheme of the Companies Act, 1956
relating to transfer and transmission of shares as well as maintenance of
register of members and purpose of register of members, we come to the
provision of Section 155 of the Companies Act, 1956 interpretation of which is
the contract issue. The said provisions are reproduced hereunder:
“155. Power of Court to rectify register of member.-(1.) If-
(a) the name of any person-
(i) is without sufficient cause, entered in the register of members of a
company, or
(ii) after having been entered in the register, is, without sufficient cause,
omitted therefrom;
or
(b) default is made, or unnecessary delay takes place, in entering on the
register the fact of any person having become, or ceased to be, a
member; the person aggrieved, or any member of the company, or
the company, may apply to the Court for rectification of register;
(2.) The Court may either reject the application or order rectification of
the register; and in the latter case, may direct to company to pay the
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damages, if any, sustained by any party aggrieved. In either case, the

Court in its discretion may make such order as to costs as it thinks fit.
(3.) On an application under this section, the Court-
(a) may decide any question relating to the title of any person who is a
party to the application to have his name entered in or omitted from
the register, whether the question arises between members or alleged
members, or between members or alleged members on the one hand
and the company on the other hand; and (b) generally, may decide
any question which it is necessary or expedient to decide in
connection with the application for rectification.
(4.) From any order passed by the Court on the application, or on any
issue raised therein and tried separately, an appeal shall lie on the grounds
mentioned in section 100 of the Code of Civil Procedure, 1908 (5 of 1908)-
(a) if the order be passed by District Court, to the High Court;
(b) if the order be passed by a single Judge of a High Court consisting
three or more judges, to a Bench of that High Court.
(5.) The provisions of sub-sections (1) to (4) shall apply in relation to
the rectification of the register of debenture holders as they apply in
relation to the rectification of the register of members.”
67. From the perusal of sub-section (1) following salient features are
noted : (i) this relates to powers of the Court to rectify the register of
members in certain situation, (ii) this power is discretionary as well as of
equitable nature (iii) the cause of action/situation arises on account of
mistakes happening in the register of members without sufficient cause
whether aspect we will discuss later on. (iv) in entering the name of person in
such register or after entering the name of the register omitting therefrom or
default is made or (v) unnecessary delay takes place in making entry of a
person becoming a member or ceasing to be a member in the said register. As
per Section (2), the Court may reject the application or order rectification of
register. If the Court orders rectification of register, then in that extent the
Court made direct the company to pay damages sustained by any party
aggrieved. Three category of persons i.e.,(1) person aggrieved (2) any
member of the company and (3) the company itself can apply for rectification
of registration of members. As far as company is concerned, it would be a
necessary party in case application is filed by other two categories of persons.
The company, being responsible to maintain Register of Members is legally
oblised to maintain it correctly, hence, it can suo motu may apply to Court for
rectification of Register of Members to get the issue resolved in a permanent
manner although it may also correct Regiser of Member or an application made
by a person, whether member or not to the company for correcting the error.
Provisions of Section 155 will come into play only therafter. The Respondent in
such a situation would be either transferor or transferee or both only and other
unrelated other party would not be there neither as a necessary party nor a
proper party. Thus, aspect makes a third party, who is neither a transferor or
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transferee or a beneficiary or legal or authorize representative, to go out the

picture at the very outset.
68. Vth aspect of Section 155(1) needs elaborate consideration as it is
the claim of the Petitioner that since all Petitioners being member of the
company though not aggrieved per-se for and on their own cause may file
application for rectification of register as there is no requirement as to holding
of minimum number of shares or that such applicant member should be
aggrieved person itself. For this proposition, they have relied on the language
of section itself. On the face of it, such argument appears to be very attractive
but can it be so in real sense that a person having no direct or indirect interest
in any cause of action may raise issue of this nature whereas in all other
provisions of Companies Act, 1956 such as 397-398 unless some direct or
indirect interest is involved and such member(s) without having requisite
minimum number no action thereunder can be taken. For the sake of ready
reference, Rule 88 of Companies (Court) Rule, 1959 is reproduced hereunder:
88. Petition under section 397 or 398
(1) Where a petition is presented under section 397 or 398 on behalf of
any members of a company entitled to apply under section 399(1), by
any one or more of them, the letter of consent signed by the rest of
the members so entitled authorizing the petitioner or petitioners to
present the petition on their behalf, shall be annexed to the petition,
and the names and addresses of all the members on whose behalf the
petition is presented shall be set out in a Schedule to the petition, and
where the company has a share capital, the petition shall state
whether the petitioners have paid all calls and other sums due on
their respective shares. Where the petition is presented by any
member or members authorized by the Central Government under
section 399(4), the order of the Central Government authorizing such
member or members to present the petition shall be similarly annexed
to the petition. A petition under section 397 shall be in Form No. 43,
and a petition under section 398 shall be in Form No. 44.
(2) A petition under section 397 or 398 shall not be withdrawn without
leave of the Court, and where the petition has been presented by a
member or members authorized by the Central Government under
subsection (4) of section 399, notice of the application for leave to
withdraw shall be given to the Central Government.
69. Apart from requirement of minimum number of members to file the
petition under Section 397 or 398, Rule 88 of Companies (Court) Rules 1959
prescribe that when an application is filed by a member on behalf of any
members the letter of consent signed by rests of the members so entitled
authorizing the petitioner or petitioners to present petition on their behalf shall
be annexed to the petition and the names of all members including members
on whose behalf the petition is filed shall be set out in a schedule to the
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petition. Thus, the provision of Rule 88 (which is incorporated as such by way

of Rule 81 in NCLT Rules, 2016) makes it clear that wherever an application is
to be filed on behalf of some other person/member consent of such
person/member required by the person to file such petition. This position of
law further support our view that an application under Section 155 of
Companies Act, 1956 can be filed only a person aggrieved or member
aggrieved.
70. Further, even Section 111 of Companies Act, 1956 provide that only
aggrieved parties can file an appeal against refusal of registration of transfer
or transmission of shares which is closely interlinked with of Section 155 of
Companies Act, 1956 in a sense, the cause of action of wrong entries or wrong
deletion or non-registration leading to error roccuring in register of members
would arise as consequence of action in Section 111 of the Companies Act,
1956. As noted while considering the role and responsibility of company that
in case of any application filed by the company only a transferor or transferee
can be other party who may be an aggrieved paty either as a person or
member contention of the petition gets deleted for these reason also. In our
view, for this reason alone, minimum of number of members to file application
is not provided. In other words, it is not required at all as any member not
being aggrieved does not have any locus at any stage. We are further of the
view that becase of this reason only no requirement or mnimum number of
members has been provided to file an applcaiton, hence, the claim of
petitioner that no such requirement exists in fact support our view that a
member not, being aggrieved cannot file application under Seciton 155 of the
Companies Act, 1956. Further, if we take clue from the provision of Section
155(2) of the Companies Act, 1956 itself, damages for any loss/other adverse
consequences faced by any party aggrieved can be awarded the damages in
case claim of such party is accepted by the Court/NCLT and by ordering
rectification of register of members as prayed by such parties. Thus, just if
both the sections are 155(1) and 155(2) are read together itself then the
claim made by the Petitioner becomes liable to be rejected.
71. In this regard, we are further of the view that as per the Petitioner's
after-words “any member of the company”, the word “aggrieved” is being
tried to be incorporated and read therein. If we agree with this plea, then
there is also other side to the plea of the Petitioners i.e. they are trying to
reconstruct these words i.e. “any member of the company” as “any member
of the company on behalf of a person aggrieved” which is also not here.
Therefore, for this reason also, their plea is not acceptable. This aspect further
leads to situation where necessity of understanding as to who can be a person
aggrieved and what is co-relation of such aggrieved person with the
membership of the company would have to look into. There could be three
situations where even member of the company would become a person
aggrieved which is as under:
(i) Name of person is omitted after entering name the same person as
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member in the register of the members as in this situation such member

would not remain a member as per the provision of law and, hence, after
such omission, this person would fall in the category of person
aggrieved.
(ii) There can be a situation whether name of some other person is entered
in register of members by default. The name of the person who should
be a member infact would bea person aggrieved in this satiation and
whose name is incorrectly entered into the register of member would be
a member aggrieved and also a person aggrieved.
(iii) There could be a situation where delay is made in registration of
transfer or transmission of shares then in that situation, applicant would
be a person aggrieved but for its own cause. In case of a person claiming
membership is not made entitled to apply and condition of membership
is made pre-requisite then such person can never file application before
Court or Tribunal. Hence, to make the provision workable such person
has been made eligible to apply as person aggrieved. Thus, grievance of
person is inbuilt and that should be connected to its own cause. The
situation in case of transmission of shares may be little different as in
that case, the person in whose name, shares are to be transferred may
be dead or otherwise incompetent to do so and his authorized
representative/nominee may apply but in that situation also doctrine of
self interest will be applicable as cause of action and purpose are
correlated, inter-twined and inter-woven and not unconnected.
72. It is an admitted position that transfer of shares or transmission of
shares arise out of direct arrangement between the parties or by operation of
law governing their private rights. Thus, the provision does not deal with the
situation of enforcement of public law or statutory publicrights arising out of
different public laws, hence, this provision cannot be treated as operating in
rem and these operate in personam. It is an accepted judicial/legal approach
that locus-standi to sue arises out of different three situation (i) injury in fact
(ii) causation and (iii) redressability. There is a clear cut prohibition in all
contract laws or laws governing private rights as regard to third party
standing. Even in case of public interest litigation, Court see that what is
interest/motive of the applicant. The Petitioners have also claimed that it
should be treated as public interest litigation in their pleadings which itself
show that Petitioners know themselves that they have no locus to file this
application as they have no grievance of their own rights be prejudicial in any
manner. The Companies Act, 1956 specifically deals with private rights of
parties in general. In case of cumulative acts or cause of action even as per
the provision of CPC or under Section 245 of the Companies Act, 2013, some
common cause or interest of all the applicants needs to exist essentially. Even,
as per Section 31(3) of the Supreme Court Act, 1981, no application for
judicial review shall be made unless applicant has a sufficient interest in the
matter to which application relates. The Courts have also evolved the principle
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of locus-standi to see that whether the applicant appears to be a mere busy-

body or mischief maker. In the present case, as evident from various facts
discussed hereinbefore that the Petitioner falls in the category of busybody or
mischief maker only as none of his rights as member of shareholder of the
company haveever been affected. It is also noteworthy that the transferor has
not come before the Court or the Tribunal at any stagefor seeking such relief.
We are further of the view that even term “person aggrieved” cannot be
anybody, hence, what to say about a member who is not aggrieved for himself
as evident here. In common parlance a “person aggrieved” is a person whose
interests are prejudicially affected by a decision or action i.e., he has been
deprived of something which was otherwise legally due to him or has been
burdened with some obligation wrongfully which he would have not been
otherwise required to discharge. The Hon'ble Supreme Court in the case of
Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed while deciding
the validity of an action of Government Authority in regard to granting of a
license of a Cinema and certain objections being taken by some persons,
discussed the concept of locus standi and the meaning of an “aggrieved
person”. In that case appellant was holding a license to run a Cinema and
Respondents were given licenses on the basis of some certificate for building
on cinema theatre. The appellant, in this situation, had challenged the action
of the Government under Article 226 of the Constitution of India. In our case,
as compared to that appellant, the petitioners have got not even that much of
possible adverse impact on their rights of members in any manner. The
Hon'ble Supreme Court dismissed the claim on this ground alone. The relevant
observations of Hon'ble Supreme Court in that case are as under:
HELD : (1) The founding fathers of the Constitution have designedly
couched Article 226 in comprehensive Phraseology to enable the High Court
to reach injustice, wherever it is found. In a sense, the scope and nature of
the power conferred by the Article is wider than that exercised by the writ
courts in England.
Dwarka Nath v. Income Tax Officer, Kanpur, (1965) 3 SCR 563, referred
to.
(2) The adoption of the nomenclature of English writs with the prefix
“nature of superadded, indicates that the general principles grown over the
years in the English courts, can shorn of unnecessary technical procedural
restrictions, and adapted to the special conditions of this vast country, in so
far as they do met conflict with any provision of the Constitution, or the law
declared by this court be usefully considered in directing the exercise of this
discretionary jurisdiction in accordance with well recognised rules of
practice. [64 D-F]
(3) According to most English decisions, in order to have the locus standi
to invoke certiorari jurisdiction the petitioner should be an “aggrieved
person”, and in a case of defect of jurisdiction, such a petitioner shall be
entitled to a writ of certiorari as a matter of course,, but if he does not fulfil
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that character and is a “stranger” the court will, in its discretion, deny him
this extraordinary remedy, save in exceptional circumstances. [64 F-G]
(4) The expression “aggrieved person” denotes an elastic and to an
extent an elusive concept. It cannot be confined within the bounds of a
rigid, exact and comprehensive definition. At best, its features can be
described in a broad tentative manner. Its scope and meaning depends on
diverse, variable factors such as the content and intenV of the statute of
which contravention is alleged the specific circumstances of the case, the
nature and extent of the prejudice or injury suffered by him. English courts
have sometimes put a restricted and sometimes a wide construction on the
expression, “aggrieved person”. [64 H. 65 A]
(5) In order to have the ‘locus standi’ to invoke the extraordinary
jurisdiction under Art. 226 an applicant should ordinarily be one who has a
personal or individual right in the subject matter of the application, though
in the case of some of the writs like habeas corpus or quo warranto, this
rule is relaxed or modified. The expression “ordinarily” indicates that this is
not a cast-iron rule. It is flexible enough to take in those cases where the
applicant has been prejudicially affected by an act or omission of an
authority, even though he has no propriety or even a fiduciary interest in
the subject matter. That apart in exceptional cases even a stranger or a
person who was not a party to the proceedings before the authority, but has
a substantial and genuine interest in the subject matter of the proceedings
will be covered by this rule. [10 A, C-D]
(6) In the context of locus standi to apply for a writ of certiorari, an
applicant may ordinarily fall in any of these categories : (i) person
aggrieved, (ii) stranger. (iii) busybody or meddlesome interloper Persons in
the last category are easily distinguishable from those coming under the
first two categories inasmuch as they interfere in things which do not
concern them, masquerading as crusaders for justice in the name of pro
bono publico, though they have no interest of the public or even of their
own to protect The distinction between the first and second categories
though real, is not always well demarcated. The first category has, as it
were, two concentric zones; a solid central zone of certainty and a grey
outer circle of lessening certainty in a sliding centrifugal scale with an
outermost nebulous fringe of uncertainty. Applicants falling within the
central zone are those whose legal rights have been infringed. Such
applicants undoubtedly stand in the category of “persons aggrieved’. In the
grey outer-circle the bounds which separate the first category 60 from the
second, intermix, interfuse and overlap increasingly in a centrifugal
direction. All persons in this outerzone may not be “persons aggrieved”. [71
A-C, D-E]
(7) To distinguish such applicants from “strangers” among them, some
broad tests may be deduced from case law, the efficacy of which varies
according to the circumstances of the case, including the statutory context
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in which the matter falls to be considered. These are : (1) Whether the
applicant is a person whose legal right has been infringed? (2) Has he
suffered a legal wrong or injury, in the sense that his interest recognised by
law has been prejudicially and directly affected by the act or omission of the
authority complained of? (3) Is he a person who has suffered a legal
grievance, a person against whom a decision has been pronounced which
has wrongfully deprived him of something or wrongfully refused him
something or wrongfully affected his title to something? (4) Has he a
special and substantial grievance of his own beyond some grievance or
inconvenience suffered by him in common with the rest of the public? (5)
Was he entitled to object and be heard by the authority before it took the
impugned action? If so, was he prejudicially affected in the exercise of that
right by the act of usurpation of jurisdiction on the part of the authority?
(6) Is the statute, in the context of which the scope of the words “person
aggrieved” is being considered, a special welfare measure designed to lay
down ethical or professional standards of conduct for the community? (7) or
is it a statute dealing with private rights of particular individuals? [71 E-H,
72 A]
(10) In the instant case, none of the appellant's rights orinterests
recognised by the general law has been infringed as a result of the grant of
‘No Objection certificate’. He has not been denied or deprived of a legal
right He has not sustained injury to any legally protected interest. In fact,
the impugned order does not operate as a decision against him, much less
does it wrongfully affect his title to something. He has not been subjected
to a, legal wrong. He has suffered no legal grievance. He has no legal peg
for a justicable claim to hang on. Therefore, he is not a “person aggrieved”
within the meaning of s. 8A or 8B of the Bombay Cinema Rules, 1954 and
has no locus standi to challenge the grant of the ‘No objection certificate’.
[73 C, F-G] D Rice & Flour Mills case (1970) 3 SCR 846 applied.
(11) Assuming that the appellant is a stranger, and not a busybody,
then also there are no exceptional circumstances in the present case which
would justify the issue of a writ of certiorari at his instance. On the
contrary, the result of the exercise of these discretionary powers, in his
favour, will, on balance, be against public policy. It will eliminate healthy
competition in business which is so essential to raise commercial morality,
it will tend to perpetuate the appellant's monopoly of cinema business in
the town, and above all, it will seriously injure the fundamental rights of
respondents 1 and 2 which they have under Article 19(1)(g) of the
Constitution to carry on trade or business subject to “reasonable restrictions
imposed by law”. [74 C-D]
(12) It is true that in the ultimate analysis, the jurisdiction under Art.
226 is discretionary. But in a country like India where writ petitions are
instituted in the High Courts by the thousand many of them frivolous, a
strict ascertainment, at the outset, of the standing of the petitioner to
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invoke this extraordinary jurisdiction must be insisted upon. The broad

guidelines indicated coupled with other well established, self-
devised rules of practice, such as the availability of an alternative
remedy, the conduct of the petitioner etc., can go a long way to help
the Courts in weeding out a large number of writ petitions at the
initial stage with consequent saving of public time and money. While
a Procrustean approach should be avoided, as a rule, the court
should not interfere at the instance of a “stranger” unless there are
exceptional circumstance involving a grave miscarriage of justice
having an adverse impact on public interests.
73. The above findings are aptly appllicable to the facts of the present case
as the petitioner has got no direct or indirect interest at all and do not fall
even in the category of person aggrieved. Further, assuming it to be a case of
public interest litigation as pleaded by the petitioners themselves even then
on the ground of him being a stranger he has got no locus to file such petition.
We are further of the view that for this reason even petitioners being member
cannot be considered as eligible to file the petition as member. Further, as we
have already seen that in that event rewriting of the provisions of law occurs.
Having said so, we cannot forget the celebrated principle of interpretation that
an interpretation which makes a provision workable having regard to the
purpose and intent of the statute as well as of a specific provision then such
interpretation needs to be made as against the interpretation which may lead
to a situation of unwanted and avoidable litigation apart from making the
provision unworkable. This principle of interpretation of known as relevance of
text and context of purposive construction. In this regard, we cannot do better
than reproducing the observations of Hon'ble Supreme Court in eh case of
Arcelormittal India Private v. Satish Kumar Gupta in para 29 as under:
29. “It is in this background that the section has to be construed. In Ms.
Eera Through Dr. Manjula Krippendorf v. State (Govt, of NCT of Delhi),
(2017) 15 SCC 133, this Court, after referring to the golden rule of literal
construction, and its older counterpart the object rule in Heydons case,
referred to the theory of creative interpretation as follows:—
122. Instances of creative interpretation are when the Court looks at
both the literal language as well as the purpose or object of the statute
in order to better determine what the words used by the draftsman of
legislation mean. In D.R. Venkatachalam v. Transport Commr. [D.R.
Venkatachalam v. Transport Commr., (1977) 2 SCC 273], an early
instance of this is found in the concurring judgment of Beg, J. The
learned Judge put it rather well when he said : (SCC p. 287, para 28)
28. It is, however, becoming increasingly fashionable to start with some
theory of what is basic to a provision or a chapter or in a statute or even to
our Constitution in order to interpret and determine the meaning of a
particular provision or rule made to subserve an assumed basic
requirement. I think that this novel method of construction puts, if I may
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say so, the cart before the horse. It is apt to seriously mislead us unless the
tendency to use such a mode of construction is checked or corrected by this
Court. What is basic for a section or a chapter in a statute is provided :
firstly, by the words used in the statute itself; secondly, by the context in
which a provision occurs, or, in other words, by reading the statute as a
whole; thirdly, by the Preamble which could supply the key to the meaning
of the statute in cases of uncertainty or doubt; and, fourthly, where some
further aid to construction may still be needed to resolve an uncertainty, by
the legislative history which discloses the wider context or perspective in
which a provision was made to meet a particular need or to satisfy a
particular purpose. The last mentioned method consists of an application of
the mischief rule laid down in Heydon case [Heydon case, (1584) 3 Co Rep
7a : 76 ER 637] long ago.’
Xxx xxx xxx
127. It is thus clear on a reading of English, US, Australian and our
own Supreme Court judgments that the Lakshman Rekha has in fact
been extended to move away from the strictly literal rule of
interpretation back to the rule of the old English case of Heydon [Heydon
case, (1584) 3 Co Rep 7a : 76 ER 637], where the Court must have
recourse to the purpose, object, text and context of a particular provision
before arriving at a judicial result In fact, the wheel has turned full circle.
It started out by the rule as stated in 1584 in Heydon case [Heydon
case, (1584) 3 Co Rep 7a : 76 ER 637], which was then waylaid by the
literal interpretation rule laid down by the Privy Council and the House of
Lords in the mid-1800s, and has come back to restate the rule somewhat
in terms of what was most felicitously put over 400 years ago in Heydon
case [Heydon case, (1584) 3 Co Rep 7a : 76 ER 637].”
74. Thus, considering the above legal position, we hold that any member of
the company cannot file an application for rectification of registration under
Section 155 of Companies Act, 1956 merely because he is a member though
he may not have any cause of action of its own for doing so. From this
discussion, it is also evident that no disability would be attached to any person
aggrieved or member of the company if word “aggrieved” is considered
impliedly inbuilt therein as if a person who is not member but aggrieved can
file an application as person aggrieved under Section 155 of Companies Act,
1956 without any hindrance or obstacle. Similarly, any member being
aggrieved can file application under this section. Thus, this interpretation
would serve the purpose of this section in all possible ways rather such
interpretation results into savings of public money and judicial time which
would arise on the ground of frivolous litigation/obligation by strangers. For
example, if claim of petitioner accepted then any person can drag any
company and create nuisance. In this view of the matter, we hold that the
petition filed by the Petitioners is liable to be dismissed on this ground as well.
Whether decision of the company in entering the nameof Respondent
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No. 2 and 3 in register of member is is without sufficient cause?

75. This question has also become of academic importance. However, this
issue is also of general importance, hence, we think it proper to deal with this
aspect as well. The word “sufficient cause” has not been defined in the Act.
The word sufficient is prefix to the word “cause”. It is lso true that this is
discretionary provision and objective discretion is to be applied by the Court or
Tribunal while considering any issue raised before them particularly when it is
not necessary that each and every entry would be corrected in all
circumstances. In our view, the question of consideration sufficiency of a
cause would arise only when firstly there exists some cause. The word cause
means a reason for an action or condition or a ground of a legal action or
something that precedes and bring about an effect or result. It can also be
understood that it produces a justification or reason for resultant action. The
word cause itself indicates some reason for grievance and therefore, it
supports our views that an application under Section 155 of the Companies
Act, 1956 can be filed only a person aggrieved whether a member or
otherwise. In our view, the first impact of the use of this word is connected or
in relation to the eligibility of the person who can apply. Next point is that
words “without sufficient cause” are connected with the grounds or events
which have been mentioned in said section and therefore, this would come
into play only happening of these events. Therefore, it would go to the root
cause of action and its impact on a party concerned. These words also relate to
the law which needs to be complied by respective parties. Supposed for
example, if the transfer form is neither duly stamped or the signature differs
from the records of the company, then, in that event, if the company refused
to register the transfer or having register the transfer finds that this error had
happened then it would be a sufficient cause under Section 155 of the
Companies Act, 1956 to rectify its register of members on its own or on
coming to know this mistake through an application filed by the concerned
parties. Thus, another aspect which would require to be considered is that
bonafides of the applicant or motive of applicant to allege that action/decision
of the company is without sufficient cause. When above legal discussed
position is applied to the facts of the case, it is evidently clear that motive of
the Petitioner is to get the register of members rectified but it'is in real sense
to get annulment of MoU and MoM that too in partial manner for the benefit of
Respondent no. 12 and 13 only. Having said so, it is not in dispute that
company had been registered shares in the name of the Respondent No. 2 and
its branch by competent committee and, therefore, it implies with all
formalities requiredfor registration of shares have been completed. Such
committee has been formed by the Board of DirectorsShri Vadilal Mehta and
Shri Suhasbhai Mehta were in the Board of Directors at the relevant point of
time. Hence, the action of the Respondent No. 1 Company in registering the
transfer of shares was with sufficient cause. It is also to be read in the context
that there is no linkage between Section 77 and section 108 of the Companies
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Act, 1956, hence, irrespective of the fact, whether there was compliance or
non-compliance of provision of Section 77 of the Companies Act, 1956, such
action of the company remains valid in law. It may also be noted that
company is listed company and if Petitioner no. 1 or Respondent no. 12 were
interested only in acquiring the shares in the company they could have done
so by purchasing shares, thus, the real intent behind this petition is not so. A
lot of reliance has been placed on the decision of the Hon'ble Supreme Court
in the case of Ammonia Supplies Corporation (P) Ltd. In that case, issue was
whether the Company Court had exclusive jurisdiction in respect of all the
matters or had only summary jurisdiction in respect of matters raised under
Section 155 of the Companies Act, 1956. The provisions of Section 77 of the
Companies Act, 1956 were not at all involved in that case. It is also noted that
Hon'ble Supreme Court in that case considered various decision as well as
provisions of law. The relevant findings of the Hon'ble Supreme Court, for our
purpose, are contained in para 25 to 31 of the said order. From the perusal of
the said paragraphs, it is apparent that the Hon'ble Supreme Court has
analyzed the process/procedures involved of share transfer and provision
relting to register of members. Thereafter, the Court has simultaneously
analyzed provision of Section 155 of the Companies Act, 1956. The Hon'ble
Supreme Court in para 31 has observed that “without sufficient cause entered
or omitted to be entered means done or omitted to do in contradiction of the
Act and the rules or what ought to have been done under the Act and the rules
but not done”. In our humble view, these observations have to be read in the
context in which these were made i.e. whether the jurisdiction of Company
Court under Section 155 of the Companies Act, 1956 is of summary nature
inspite of being exclusive or it could have expanded jurisdiction to decide the
peripheral issue as a whole. Secondly, these paras when thererefer to the
contradiction of the Act or compliance of the Act, refer only to provisions
relating to transfer of shares or transmission of shares or rectification of
register of members in certain situation and not to any other provisions of the
Companies Act, 1956. Hence, such observations, as we have already stated
are to be read only with reference to provision of Section 108, 111 or Section
155 of the Companies Act, 1956 only. In this view of the matter, we hold that
reliance on these observations by the Petitioner is of devoid of any merit;
therefore, it does not help the cause of the Petitioner.
76. Apart from above legal position, one cannot overlook the fact that the
registration of transfer of shares have been done to give effect/implement to
the family settlement/arrangement. This fact is of paramount importance as a
family settlement is to be treated on a different footing as compared to any
other formal commercial settlement because such family
settlements/arrangements are entered into to ensure smooth
succession/division so that peace and harmony between the family members
remain. Such family arrangements are governed by equity principles to give
effect to them and not to disturb them in a like manner or for technical
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reasons as the well being of the family is involved. Thus, this is not only a
sufficient cause but essential cause also to give effect to such family
arrangements even when such some technical or frivolous non-compliance of
statutory provisions is involved so long such technical violation does not
amount to fraud against the general public or minority shareholders or
creditors etc. at large. In the present case, it is not so, hence, in our
considered opinion, even it is assumed that there is some minor violation of
provisions of Section 77 of Companies Act, 1956 the same cannot come in any
way to maintain status quo of family arrangement entered into and
implemented by respective parties. Having sated so, we cannot also ignore the
fact that the petitioners have got no locus thereof nor any harm has been
made to any person involved with the affairs of the Respondent No. 1
company either immediately after change of management as a consequence of
implementation of family appointment or thereafter till date. It may not be out
of place to mention that our view as regard to the due weightage/importance
to be given to a family settlement also finds support from the following
observations of Hon'ble Supreme Court in the case of Hari Shankar Singhania
v. Gauri Hari Singhania, (2006) 4 SCC 658 wherein the Hon'ble Supreme
Court elaborately discussed the judicial approach towards family arrangement.
The relevant paragraphs of the said order are reproduced as under:
42. Another fact that assumes importance at this stage is that, a family
settlement is treated differently from any other formal commercial
settlement as such settlement in the eyes of law ensures peace and
goodwill among the family members. Such family settlements generally
meet with approval of the Courts. Such settlements are governed by a
special equity principle where the terms are fair and bona fide, taking into
account the well being of a family.
43. The concept of ‘family arrangement or settlement’ and the present
one in hand, in our opinion, should be treated differently. Technicalities of
limitation etc should not be put at risk of the implementation of a
settlement drawn by a family, which is essential for maintaining peace and
harmony in a family. Also it can be seen from decided cases of this Court
that, any such arrangement would be upheld if family settlements were
entered into ally disputes existing or apprehended and even any dispute or
difference apart, if it was entered into bona fide to maintain peace or to
bring about harmony in the family. Even a semblance of a claim or some
other ground, as say affection, may suffice as observed by this Court in the
case of Ram Charan v. Girija Nandini AIR 1966 SC 323.
44. In Lala Khunni Lal v. Kunwar Gobind Krishna Nairain, the Privy
Council examined that it is the duty of the courts to uphold and give full
effect to a family arrangement.
45. In Sahu Madho Das v. Pandit Mukand Ram, (1955) 2 SCR 22 [Vivian
Bose Jagannadhadas and BP Sinha JJ.] placing reliance on Clifton v.
Cockbum, (1834) 3 My &K 76 and William v. William, [1866] 2 Ch. 29, this
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Court held that a family arrangement can, as a matter of law, be implied

from a long course of dealings between the parties. It was held that
“..so strongly do the courts lean in favour of family arrangements that
bring about harmony in a family and do justice to its various members
and avoid, in anticipation, future disputes which might ruin them all,
that we have no hesitation in taking the next step (fraud apart) and
upholding an arrangement.”
46. The real question in this case as framed by the Court was whether
the appellant/plaintiff assented to the family arrangement. The court
examined that “the family arrangement was one composite whole in which
the several dispositions formed parts of the same transaction”
47. In Ram Charon Das v. Girjanadini Devi, (Supra), this Court observed
as follows:
“Courts give effect to a family settlement upon the broad and general
ground that its object is to settle existing or future disputes regarding
property amongst members of a family The consideration for such a
settlement will result in establishing or ensuring amity and good will
amongst persons bearing relationship with one another.”
48. In Maturi Pullaiah v. Maturi Narasimham, AIR 1966 SC 1836, this
court held that
“[T]hough conflict of legal claims in praesenti or in future is generally
a condition for the validity of family arrangements, it is not necessarily
so. Even bona fide disputes, present or possible, which may not involve
legal claims, will suffice. Members of a joint Hindu family may, to
maintain peace or to bring about harmony in the family, enter into such
a family arrangement. If such an arrangement is entered into bona fide
and the terms thereof are fair in the circumstances of a particular case,
courts will more readily give assent to such an arrangement than to
avoid it.”
49. Further in Krishna Biharilal v. Gulabchand, (1971) 1 SCC 837, this
Court reiterated the approach of courts to lean strongly in favour of family
arrangements to bring about harmony in a family and do justice to its
various members and avoid in anticipation future disputes which might ruin
them all. This approach was again re-emphasised in S. Shanmugam Pillai v.
K. Shanmugam Pillai (1973) 2 SCC 312 where it was declared that this
court will be reluctant to disturb a family arrangement.
50. In Kale v. Deputy Director of Consolidation, (1976) 3 SCC 119 [VR
Krishna Iyer, RS Sarkaria Ss S Murtaza Fazal Ali, JJ.] this Court examined
the effect and value of family arrangements entered into between the
parties with a view to resolving disputes for all. This Court observed that:
“By virtue of a family settlement or arrangement members of a family
descending from a common ancestor or a near relation seek to sink their
differences and disputes, settle and resolve their conflicting claims or
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disputed titles once for all in order to buy peace of mind and bring about
complete harmony and goodwill in the family. The family arrangements are
governed by a special equity peculiar to themselves and would be enforced
if honestly made the object of the arrangement is to protect the family from
long drawn litigation or perpetual strives which mar the unity and solidarity
of the family and create hatred and bad blood between the various
members of the family. Today when we are striving to build up an
egalitarian society and are trying for a complete reconstruction of the
society, to maintain and uphold the unity and homogeneity of the family
which ultimately results in the unification of the society and therefore, of
the entire country, is the prime need of the hour the courts have, therefore,
leaned in favour of upholding a family arrangement instead of disturbing
the same on technical or trivial grounds. Where the courts find that the
family arrangement suffers from a legal lacuna or a formal defect the rule of
estoppel is pressed into service and is applied to shut out plea of the person
who being a party to family arrangement seeks to unsettle a settled dispute
and claims to revoke the family arrangement The law in England on this
point is almost the same.”
(emphasis supplied)
51. The valuable treatise Kerr on Fraud at p. 364 explains the position of
law:
“the principles which apply to the case of ordinary compromise
between strangers do not equally apply to the case of compromises in
the nature of family arrangements. Family arrangements are governed
by a special equity peculiar to themselves, and will be enforced if
honestly made, although they have not been meant as a compromise,
but have proceeded from an error of all parties originating in mistake or
ignorance of fact as to what their rights actually are, or of the points on
which their rights actually depend.” Halsbury's Laws of England, Vol. 17,
Third edition at pp. 215-216.
52. In KK Modi v. KN Modi SS, (1998) 3 SCC 573 [Sujata Manohar & DP
Wadhwa, JJ.], it was held that the true intent and purport of the arbitration
agreement must be examined- [para 21] Further the court examined that
“a family settlement which settles disputes within the family should not
be lightly interfered with especially when the settlement has been already
acted upon by some members of the family. In the present case, from 1989
to 1995 the Memorandum of Understanding has been substantially acted
upon and hence the parties must be held to the settlement which is in the
interest of the family and which avoids disputes between the members of
the family. Such settlements have to be viewed a little differently from
ordinary contracts and their internal mechanism for working out the
settlement should not be lightly disturbed.”
(emphasis supplied)
53. Therefore, in our opinion, technical considerations should give way to
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peace and harmony in enforcement of family arrangements or settlements.

77. Accordingly, we submit that it is an instance where the names of the
Respondent No. 2 and his branch member have entered into register of
members without sufficient cause.
Assuming that petition is otherwise maintainable, whether petition is
barred by limitation?
78. This issue also has become of academic nature in view of our decision
that the amount so paid is not at all related to purchase of shares as it is
related to obtain management and control of C.V. Mehta Pvt. Ltd and reference
to transfer of shares of Sayaji Mills Ltd is only for the purpose of ensuring the
timely and full implementation of MOU r.w. MOM. No fraus is involved.
Therefore, provisions of Section 17(1)(a) of Companies Act, 1963 do not come
into play. Accordingly, for the transactions executed in 1982 and 1983 the
limitation period for filing suit expired much before the filing of present
petition in October, 1987. Further such transactions were one time
transactions and if it is assumed that provisions of Section 77 were violated,
even then provisions of Section 22 of the Limitation Act, 1963 are also not
applicable for the simple reason that this is not an instance of fresh injury
caused on day to day basis giving fresh rather what to say of fresh injury no
injury is caused at all. It is further supported by the fact that the Respondent
No. 12 and 13 never challenged this MOUand MOM nor they demanded any
rectification of Register of Members of their own. Further, it is a case of an
event which was concluded through one transaction whose impact is
permanent assuming that the claims of the petitioner are acceptable. Thus, we
are also of the view that decision and submissions made on behalf of
Respondent No. 2 as reproduced hereinbefore are valid and legally acceptable.
Although, we have already decided the matters on so many other grounds,
one aspect which has remained to be discussed is that whether this petition
can be held as not barred by limitation assuming that claims of the petitioners
are accepted. Before doing so, we need to understand the policy behind the
statute of limitation. It has been thus stated in Halsbury's Laws of England Vol
24, p. 181 (para 130) “330. Policy of Limitation Acts. The courts have
expressed at least three differing reasons supporting the existence of statutes
of limitation, namely, (1) that lonbg dormant claims have more of cruelty than
justice in them, (2) that a defendant might have lost the evidence to disprove
a stale claim, and (3) that persons with good causes of actions should pursue
them with reasonable diligence. “The object of the law of limitation is to
prevent disturbance or depreviation of what may have been acquired in equity
and justice by long enjoyment or what may have been lost by a party's own
inaction, negligence, or laches. Having discussed the above legal philophy, we
wondered and posed a question to ourselves as to why criminal complaint was
filed in 1987 and this petition was filed thereafter only? We asked the
petitioner to explain the same but he remained evasive in spite of the fact that
we posed a question to him that it was his legal burden to discharge this
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liability as it has been claimed by both Petitioner and Respondent Nos. 12 and
13 that they came to know the fact of such alleged fraud only in 1987. In this
situation, we analyzed the facts of the case with reference to the
circumstances under which such family arrangement was made. We had also
asked a question to the Respondent that why the Chairman and Managing
Director Vadilal Mehta in whom both the sonshad reposedconfidence favoured
Suhasbhai Vadilal Mehta. The Respondent Nos. 12 and 13 suggested that style
of functioning Shri Bipinbhai Vadilal Mehta was different from the approach of
late Vadilal Lallubhai Mehta and Suhasbhai Vadilal Mehta; hence, he was
disassociated from the management and affairs of the company way back in
1975 itself. However, when were going through the material on record,
particularly petition filed before City Court Ahmedabad which was decided in
favour of Bipinbhai Vadilal Mehta ultimately as Hon'ble Supreme Court also
dismissed the SLP filed by Suhasbhai Vadilal Mehta in that case, we came
across a fact that differences between Bipinbhai Mehta and Vadilal Mehta arose
due to intercast marriage by Bipinbhai Vadilal Mehta. It also noted that Vadilal
Lallubhai was a person of high social status in addition to being a wealthy
person as he was also first non-governmentdirector of LIC and was also
associated with other prominent institutions. In these circumstances, inter
cast marriage in those days;in our considered opinion, certainly a factor for
being aggrieved and painful. It is also noted that Bipinbhai was residing in
Mumbai since then till 1982 when such family such arrangement was made.
Apart from this social factor, it is also noted that the Sayaji Mills Ltd was not
doing well and was in financial hardship which fact is also corroborated by this
deposition of the petitioner no. 1 in the criminal complaint on 25.03.1988. It
is also noted that even Bipinbhai Vadilal Mehta was not of soundfinancial
conditionwhich resulted into executionof Memorandum of Modification. As
stated earlier, if both agreements are read, leaningof Mr. Vadilal Mehta
towards Suhasbhai Mehta and branch is apparent. From the material on
record, it is noted that after change of management Respondent No. 1 Sayaji
Mills Ltd started to function better and there was a substantial growth in next
three years which resulted into first attempt bySuhasbhai to raise grievance
by writing a letter dated October, 1985 to Shri Vadilal Lallubhai Mehta under
clause 36 of MOU to provide him some compensation. This letter was first
attemp to fail the already executed family arrangement and it resultedinto
Civil Procedure where Suhasbhai Vadilal Mehta could not succeed. Further, C.
Doctor & Company Ltd. which was a sole selling agent had been removed by
Bipinbhai Vadilal Mehta after taking over the management of the Sayaji Mills
Ltd and that was done in accordance with the provisions of MOU. That was also
challenged by the petitioner herein in Company Law Board;however, the
matter wasultimately decided by the Board as well as other judicial forums in
favour of Bipinbhai Vadilal Mehta. In these proceedings, time passed and after
not getting success, present petition was filed. It has been claimed that the
basis of the information of alleged violation/non-compliance of provisions of
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Section 77 of the Companies Act, 1956 came to the notice of the petitioner as
well other petitioners only in 1987. We analyzed the facts and the
importance/confidentiality attached to MOU/MOM as well as transactions with
M/s Santosh Starch Products. None of the Petitionersis a witness to MOU/MOM;
hence, such transactionscannot come to their notice at any stage what to say
of the year 1987 unless it is provided by a party to such family arrangement or
leaked by some close confident. It is also not a situation where such
documents had become public documents as it pertained to transfer of shares
of listed public company as such documents were not required to be
submitted to the company or any other Authority for registration of Transfer of
Shares in the records of the company. Thus, when this fact is analyzed along
with the failure of other attempts made by Suhasbhai Vadilal Mehta either
directly or through the petitioner earlier, it is apparent that this information
was always with them and it is not a new information which came to their
notice but was withheld and used as last resort after failing in other attempts.
It is particular to be noted that said criminal complaint had been filed by a
person whowas not an employee of the Respondent No. 1 Companyat any
stage nor he could have any information or approach to obtain these
documents in any manner. In the criminal complaint, it has been mentioned
that this information was noted by the complainant in some news paper
published in 1983, however, copy of the said news item or other documentary
evidences to support that when such cbmplainantgot access to such
information and source thereof has not been discussed. Interestingly, Mr.
Ramesh B Desai is a witness to such criminal complaint. That completesthe
channel as far as the use of MOU/MOM already existing in their possession of
Respondent Nos. 12 and 13 for whom the petitioner in the petition itself has
asked by way of reversal of this transaction and granting of status-quo ante.
Now, there remains second part of the transaction i.e., money was given back
to Bipinbhai Vadilal Mehta and his branch and how the accounting records the
transaction M/s Santosh Starch Product could come to the notice of the
criminal complaint and petitioners. Apart from at this aspect, before we
proceed further, we would like to mention that except petitioner no. 1 no other
petitioners can be said to have access or approach to said privileged
information. The other persons who could have information regarding such
transactions are : Vadilal Mehta, Suhasbh Mehta, Bipinbhai Mehta and Santosh
Starch Product only. It is also to be noted that one of the employees of
Santosh Starch Products is also a witness to the said criminal complaint. It is
also noteworthy that after change of management, as evident from the
material on record, M/s Santosh Starch Product stopped business
transactions/supplies to Respondent No. 1 Company since 1984-85. It is also
to be noted that the petitioner Ramesh B. Desai had also resigned
immediately after the resignation of Vadilal Mehta and Suhasbhai Mehta from
the Chairmanship and Managing Directorship/Directorship of the company. It
is also to be noted that Petitioner No. 1 is also one of the witness to the will
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made by Vadilal Mehta. Thus, the whole circuit is complete. In the absence of
discharge of legal burden by the petitioners that how they came to know about
such transactions only in 1987 and not before that period, the only conclusion
which can be arrived at is that for this reason alone this plea is liable to be
rejected as bared by limitation, apart from other related asects already
adjudicated upon by us.
Whether doctrine of latches and delay is applicable?
79. Undisputedly, transactions were entered into the year 1982. The
companies and various other immovable and movable assets were divided
among two branches of the same family. Both grounds moved on thereafter
though one branch led by Suhasbhai Vadilal Mehta always acted in a manner
which appeared to be in the direction of getting further advantage. The
doctrine of latches and delay is clearly attracted as after 38 years, the reliefs
sought that tooin impartial manner and indirectly cannot be granted. Even
otherwise application was filed after 5 years of one time transaction and full
implementation of family arrangement in 1982 and 1983; hence, considering
this delay the relief sought cannot be granted on account of delay and latches
particularly where financial parameters had already been transformed. In this
regard as well as regarding the all motive of the petitioners, we find support
from the observations of NCLT Kolkata Bench in para 32, 33 34 in the case of
Dilip Kumar Ari v. Matrikalyan Nuring Home Private Limited in CP No. 179 of
2014 dated 18.08.2017 which is reproduced as under:
32. While dealing with delay and latches it is a fundamental principle of
administration of justice that the court will aid those who are vigilant and
who do not sleep on their right. In other words, the court would refuse to
exercise their jurisdiction in favour of the party who moves them after
considerable delay and is otherwise guilty of laches.
The principle embodied in the Equites Maxim “delay defeats equity” and
for the statute of the limitation is intended to discharge unreasonable delay
for presentation of the claim and enforcement of right. Claims which have
been delayed unreasonably in being brought forward may be rejected. In
this regard, a reliance may be placed on seven judges' judgment rendered
in the case of State of M.P. v. Bhailal Bhai, AIR 1964 SC 106 where if the
delay is more than the period prescribed by the Limitation Act, then
it would be appropriate by the court to hold that it is unreasonable,
the court ought not ordinarily to lend its aid to a party guilty of
delay.
A similar view is also taken in MTNL v. State of Maharasthra, (2013) 9
SCC 92 - Hon'ble Supreme Court observed that in equitable jurisdiction the
maximum period of limitation can reasonably held to be the same as has
been provided by the Limitation Act and therefore a huge delay and laches
cannot be surmounted. In State of Tamil Nadu v. Seshachalam, (2007) 10
SCC 137 this court distinguish the equality cause on the bedrock of delay
and laches pertaining to grant of service benefits as the rule reads
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“.……..filing of representation alone would not save the period of

limitation. Delay or laches is a relevant factor for a court of law to
determine the question as to where the claim made by the applicant
deserve consideration. Delay and/or laches on the part of the
Government servant may deprive him of the benefit which has been
given to others. Article 14 of the Constitution of India holds, in a
situation of that nature, attracted as it is well known law leans in
favour of those who are alert and vigilant.
The same view has. also been taken in Division Bench in C.P. No.
4/ND/2016 passed by Hon'ble Chief Justice (Retd.) Mr. M.M. Kumar,
Hon'ble President of NCLT and Mr. S.K. Mahapatra, Member
(Technical) wherein they also relied upon Bhailal Bhai casealso MTNL
wherein it was observed that
“In the absence of application of the provision of Limitation Act, the
petitioner cannot surmount the difficulties of delay and laches. It is well
settled that when a member of the company filed a petition under Section
397/398 read with Section 402(g) of the 1956 Act……he is necessarily….
Equitable jurisdiction to the Tribunal Section 402 of the Act expressly
provided that the Tribunal is empowered to pass any order which it
considers as just and equitable. Similar provision has been made under
Section 403 of the Act empowering the tribunal with the power to pass any
interim order as it deems just and equitable. Similar provision has now
been made under Section 242(2) of 2013 Act. Therefore, from that point of
view also his petition is liable to be dismissed as barred by delay and
laches.
33. In the instant case, admittedly the dispute arose some time in 2005
i.e. 9 years' back and in between the petitioner upheld his grievances
before the civil court as well as also in the Hon'ble High Court and then filed
the instant application under Section 397 and 398 of the Companies Act,
2013 and thereby has adopted a forum shopping. However, otherwise also
the instant petition is hopelessly barred by limitation as per the provisions
of Limitation Act. The delay and laches do apply which started from the
date of knowledge. Admittedly, the date of knowledge is from the year
2005 as reflected in the petition. The doctrine of laches is based on
equitable consideration and depends on general principle of justice and fair
play. Therefore, on the point of delay and laches, the petition is also liable
to be dismissed. In this regard, it is pertinent to mention the case of
Beladore Silk Limited, (1965) - on Re 667 it has been held as under at page
672:
“A petition which is lodged not with the genuine object of
obtaining relief prayed but with the object of exerting pressure in
order to achieve co-lateral purpose is that, in my judgement, an
abuse of process of the court and it is primarily on that ground
that I would dismiss this petition.”
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34. As discussed above, I find that the petition filed by the petitioner is
not maintainable though attempt has been taken to rake up the issues
bifurcating the civil courts on the self same cause of action. Even otherwise,
the petition is not only tenable for delay and laches but it is also bereft of
merit and C.P. No. 179/2014 is dismissed. C.A., if any, also stands disposed
of at no cost.
80. Thus, it can be concluded that it is a settled position of law that delay
defeats equity especially when such delay would either result in fait
accomplice rendering the developments irreversible. Thus, for this reason also,
this petition is liable to be dismissed.
Whether equitable jurisdiction can be applied in the facts and
circumstances of the case?
81. It is not in dispute that the transactions under dispute are a part of the
family arrangement being implemented through MOU/MOM in the year 1982.
It is not the only transaction but it incidental to main purpose of devision of
management and control of group companies between the two branches of
families. It is necessary for effective and timely implementation of such
MOU/MOM. It is also not in dispute that late Vadilal Mehta had the final say in
all matters covered by such arrangements. It is also to be noted that he was a
Chairman and Managing Director has directed to give the impugned sum to
M/s Santosh Starch Products. The Respondent No. 12 Suhasbhai Mehta was
also Managing Director and the executor of MOU/MOM i.e. one party of such
family arrangement. It is also to be noted that Petitioner No. 1 was also
directly or indirectly connected with the affairs of Respondent No. 1 Company
and was a close confident of both these persons. Thus, collusive involvement
of Petitioner No. 1 and Respondent No. 12 cannot be logically ruled out. It is a
settled principle that who seeks equity must come with clean hands and
should not be a party himself to such transactions either directly or indirectly.
It is also settled principle that equity can be exercised only when the person
seeking equitable relief is vigilant and comes in time and in the present case
by anefflux of such a long time, the doctrine of equitable relief cannot be
pressed into service. Now, this is also so for the reason that the economic
conditions and financial status/valuation of the assets which were part of such
family arrangement and other dynamicshave altogether changed. Thus, for
these reasons, equitable relief cannot be granted.
Whether this petition falls within the scope of rectification of Register
of Members as envisaged under Section 155 of Companies Act, 1956?
82. The aforesaid section, as stated earlier, relates to protection of
proprietary rights of members and under the garb of rectification of Register of
Members, a petition of this nature and magnitude whereby status quo ante
MOU/MOM being sought to be granted cannot fall within the scope of
jurisdiction as envisaged under Section 155 of Companies Act, 1956. Further,
the Respondent No. 1 Company, in the present case, is a listed company
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whose shares can be acquired through Stock Exchange transaction as well if

the Petitioner or Respondent No. 12 wishes to buy the shares only. It is further
to be noted that except proprietary rights of them as member, nothing more
can be gained by both of them even if such petition is allowed as the control
and management is governed by the provisions of Family Arrangement and
which has been given to Respondent No. 2 and his Branch independently.
Thus, patently, this application does not serve any purpose of the petitioner
and admittedly the relief sought does not fall within the scope of this Section.
Whether the alleged act can be categorised as fraud on the statute?
83. As evident from the discussion hereinbefore, that MOU/MOM did not
provide that Bipinbhai Mehta and his branch was to provide the impugned
funds only from their savings or the money belonging to them and could not
be arranged by way of loan or in other manner from any source. Thus,
apparently this is not a case where the Respondent No. 12 was induced to act
to his disadvantage by not complying with the provisions of MOU/MOM. It is
also not a case that any loss has been suffered by the Respondent No. 12 or
any undue advantage has been gained by Respondent No. 2 and Respondent
No. 3 because, in any case, the consideration was fixed separately and various
other factors were part of the MOU/MOM. In any case, the management and
control of the company whose shares are being transferred had gone to the
Respondent No. 2 and his branch as a part of division of the companies
belonging to the group. It is also to be noted that MOM has been executed at
the request of Respondent No. 2 for the reason that Respondent No. 2 was
having some financial constraints. The main object of MOM has been to
provide him time to arrange the funds. It is also to be noted that he was not
in the affairs of the Company at the relevant time, nor he was having any
personal relationship with M/s Santosh Starch Products so that said
transaction can be said to have been entered at his initiative. It is also to be
noted that if Respondent No. 2 wanted to arrange the funds in such a manner,
he could have done so without requesting for execution of MOM and MOU could
have been implemented without the necessity of such alleged mechanism
being designed. Thus, there are no elements of fraud on the basis of
commercial considerations. Thus, provisions of Section 17 of Indian Contract
Act, 1872 are not attracted. It is also a settled position that principle of fraud
governing the commercial contracts will not be applicable to public laws or
administrative laws as the considerations and object of both are altogether
different. In case of administrative laws, the fraud is generally presumed or
inferred through statutorily created provisions. The actual gain or loss may not
be a consideration but intent is to be considered as the main ingredient. Fraud
on statute generally arises by opression of law where a particular action is
approved then that would secure an unconscionable advantage. In the facts
and circumstances of the case, no such unconscionable advantage or gain
have obtained by Respondent No. 2 because as per Respondent No. 2 said
MOU/MOM was a compelling situation for him having regard to the influence
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and control of his father.

84. As far as non-compliance of provision of Section 77 of the Companies
Act, 1956 is concerned, assuming it to be so, we have already seen that there
is no linkage between Section 77 and 155 r.w. Section 108 and 111 of the
Companies Act, 1956. We are further of the view that having considered
judicial decisions as well every violation cannot amount to make the contract
or arrangement null and void in such circumstances. If this plea is accepted
then provisions of Section 77(4) would become redundant in a sense that once
there is a specific separate penalty and nohint/whisper appears that the
transactions entered into in violation of provisions of Section 77 of the
Companies Act, 1956 would be null and void, the general principles of law
cannot be applied to specific statute. If we accept this then the management
and administration of the affairs of the company under various provisions of
the Companies Act would become impossible, wherever penal provisions have
been made. In the Companies Act, 1956, there was no provision like Section
447 of Companies Act, 2013. The punishment for fraud has been provided
which is restricted to default in repayment of any debt. Thus, fraud is to be
considered in this limited perspective even under the new Companies Act. In
view of the above discussion, it cannot be said that any fraud has been
committed by Respondent No. 2 even if it is assumed that there is a violation
of provisions of Section 77 of Companies Act, 1956.
Whether present petition is an instance of sponsored litigation on
behalf of Respondent No. 12? If so, whether suitable costs need to be
imposed on Petitioner No. 1 i.e. Ramesh B Desai?
85. In this regard, it is to be noted that plea by the petitioner has been
made that it should be treated as public interest ligation which we have
already rejected having regard to the scheme and purpose of the Companies
Act, 1956. In addition to that in the absence of any maerial on record, it is
worth to note that the petitioner is not crusader or champion of public cause.
No materials have been brought on record or otherwise stated during the
course of hearing to show that petitioner no. 1 or other petitioners had filed
any petition for similar causes or for other public causes in other matters.
Further, the Petitioner also filed a petition before Company Law Board against
the removal of Company holding sole selling agencies of Respondent No. 1
Company by the Respondent No. 2 in terms of provisions of MOU which
attempt, however, failed and the petitioner apparently had no locus nor any
right of the petitioner were affected from such removal. Thus, this position
leads to an inevitable conclusion that the petition has been filed with oblique
motive and due to some personal prejudice and in such situation the equitable
relief is denied in all cases by all courts enevitably.
86. In this regard, we need not to repeat the facts in detail as other
circumstantial surroundings of the case make it amply clear that there is a
close nexus between the Petitioner and Respondent No. 12. It is also noted
that other petitioners are either relatives of the Petitioner No. 1 or
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neighbours/friends who appear to have acted on the motivation of Petitioner

No. 1/Respondent No. 12 only. Not only in this petition but there have been
several other attempts by them to undo the family arrangement and that too
after enjoying the benefits of the family arrangement which apparently
tiltedheavily in favour of Respondent No. 12. The Respondent No. 12 has also
not produced any material to show its bona fide as regard to its financial
growth or toeffectively controvert fact that he was not aware of reed purpose
of impugned transactions though he was Managing Director at the relevant
point of time and also having access to Bank accounts as the Managing
Director and it is particularly so when Petitioner No. 1 has categorically stated
that Respondent No. 1 Company was not doing well and there was no policy of
giving advance to suppliers. It is also to be noted that the impugned sum
considering the time (1982) when the transactions were done is of
substantialvalue as compared to present day; hence, when there is neither a
policy nor any apparent request by M/s. Santosh Starch Products, how, it can
be said that Vadilal Lallubhai Mehta and Suhasbhai Vadilal Mehta were not
aware of the real purpose of these transactions as no money can be given in
such circumstances without knowing the real purpose or object particularly, at
the relevant time, implementation of family arrangement was a focus/priority
of both of them and it can be inferred so from the terms and conditions of
MOU/MOM. Having said so, it also compels us to think that by doing so
petitioner was not going to get anything personally on the face of it though he
could be rewarded by Suhasbhai Mehta indirectly or otherwise if the petition or
his other effortswould have succeeded. It painsus to say that through this kind
modus-operandi entrepreneurship is curtailed as the focus of all the parties
get distracted when sword of change of management or ownership hangs, no
capital commitment or expansion takes place which also impactsthe economic
growthof the society adversely. It is seen from the chequered history of
litigation that counsels of great stature appeared and the energies of the Court
as well as such persons have been grossly misused. Further, the Respondent
No. 2 and 3 have already been burdened with the enormous costs of litigation
during 33 years of pendency of this petition. It is also a settled policy that
judicial process/forums cannot be allowed to be used as an instrument of
oppression. We draw support for this proposition from the decision of the
Hon'ble Supreme Court in the case of Punjab National Bank v. Surendra Prasad
Sinha wherein in a case where the appellant had filed criminal proceedings
against the bank where fixed deposit given by them as security against a loan
given by bank to a third party and which was adjusted by the bank after the
recovery of such loan had become time barred. The appellant filed criminal
suit. The Hon'ble Supreme Court not only dismissed the case on merit but also
observed as under:
“It is also salutary to note that judicial process should not be an
instrument of opperession of needless harassment. The complaint was
laid impleading the Chairman, the Managing Director of the Bank by name
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and a host of officiers. There lies responsibilities and duty on the Magistracy
to find whether the concerned excuse should be legally responsible for the
offence against the juristic person or the persons impleaded then only
process would be issued. At that statge the court would be circumspect and
judicious in exercising discretion and should take all the relevant facts and
circumstnces into consideration before issuing process lest it would be an
instrument in the hands of private complaint as vendetta to harass
the persons needlessly. Vindication of majesty of justice and maitainance
of law and order in the society are the prime objects of criminal justice but
it would not be the means to wreak personal vengeance. Considered from
any angle we find that the respondet had abused the process and
laid complaind against all the appellants without any prima facie
case to harass them for vendetta.”
87. In the present case the position of the petitioner is worst than the
appellant in that case because in that case they had given their own Fixed
Deposit (FD) as security which has been adjusted time barred whereas in the
present case the petitioner has got no such locus or interest of its own.
Further, by making the ultimate beneficiary as Respondent No. 12, the
petitioner is acting with all malafide and in clever manner thinking that
judicial forum can be used indirectly to obtain an undue gain and at least to
harass the Respondent No. 2. In these circumstances, we are of the
considered view that cost of litigation born by Respondent Nos. 1, 2 and 3
needs to be reimbursed. Accordingly, under Rule 113 of NCLT Rules, 2016, we
order the Petitioner to pay a sum of Rs. 25,00,000-00 (Rupees Twenty Five
Lacs Only) as litigation costs to Respondent No. 1 within a period of 30 days
from the date of this order and submit proof thereof to the Registry of this
Authority. We further hold that this is a clear cut case of abuse of process of
law and waste of precious judicial time; hence, exemplary costs axe also
required to be imposed. Thus, we also impose a cost of Rs. 25,00,000-00
(Rupees Twenty Five Lacs Only) on Petitioner No. 1 for doing so under Rule
113 of NCLT Rules, 2016 pay the same to PMCares Fundwithin a period of 30
days from the date of this order and submit proof of payment to Registery of
this Authority.
MISCELLANEOUS
88. It was also contended that there is violation of provisions of Article 20
and provisions of Section 36 of the Companies Act, 1956, which, in view of our
decision hereinabove, as got no merit; hence, rejected. We also find that
certain claims have been made at various places by the Petitioner/Respondent
No 12 which remains unsupported by any cogent material; hence, such
averments stand rejected. In this regard, we may farther point out that the
evidentiary value of an affidavit per se depends upon cogent evidence being
attached or produced to support the claims made therein and in the absence
thereof merely because a statement has been made by way of affidavit, the
same, in our considered view, provide any assistance to the cause of such
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person.
89. Before parting, we submit that we have considered the submissions of
all the parties carefully and in depth. The findings given by us are based upon
such submissions, material on record as well facts and circumstance of the
case. Thus, non-mentioning of any specific reply to any contention is for the
sake of brevity only. We specifically point out that the Respondent No. 2 has
made detailed submissions on each ground and as effectively controverted the
claims both factual as well as legal made on behalf of the petitioner as well as
Respondent No. 12 and 13.
90. In view of the above discussion, this petition stands dismissed and
disposed of with costs as mentioned hereinbefore.
91. Urgent certified copy of this order, if applied for, to be issued to all
concerned parties upon compliance with all requisite formalities.
———
†
Ahmedabad Bench

‡
[A petition under Section 155 of the Companies Act, 1956]

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