Companies Act Case Law Dankha Devi Agarwal (Dead) Through Lrs Vs Tara Properties Pvt. Limited & Ors

CASE NO.:
Appeal (civil) 1015 of 2000

PETITIONER:
DANKHA DEVI AGARWAL (DEAD) THROUGH LRs

RESPONDENT:
TARA PROPERTIES PVT. LIMITED & ORS

DATE OF JUDGMENT: 17/08/2006

BENCH:
B.P. Singh & Altamas Kabir

JUDGMENT:
J U D G M E N T
WITH
CIVIL APPEAL NO. 6535 OF 2004
TARA PROPERTIES PVT. LTD. & ORS. ..Appellants
Versus
BHAGIRATH AGARWAL & ORS. ..Respondents
ALTAMAS KABIR, J.

Dankha Devi Agarwal (since deceased) is the appellant in
Civil Appeal No.1015/2000. She was the mother of Bhagirath
Agarwal (respondent No.2 in the appeal) and Smt. Leela
Agarwal (respondent No.3) is the wife of the respondent No.2.
Tara Properties Private Limited and three others are the
appellants in Civil Appeal No.6535/2004. It may be
mentioned that the appellant in this appeal is the respondent
No.1 in the earlier appeal and respondent No.1 in this appeal
is also the respondent No.2. in the earlier appeal and the
other parties are common.
Since the two appeals arise out of the same set of facts
between the same parties, they have been taken up together
for hearing and disposal and are being disposed of by this
common judgment.
Tara Properties Private Limited (hereinafter referred to as
‘the Company’) was incorporated on 28th December, 1962, as
a family company with Tara Chand Agarwal (since deceased),
Dankha Devi Agarwal, his wife (since deceased), their elder
son, Bhagirath Agarwal and younger son Chandra Prakash
Agarwal. Each of them was allotted 10 shares each in the
newly-formed company. On 2nd March, 1963 Dankha Devi
Agarwal granted a lease of the land at 13, Camac Street,
Calcutta, to the Company and in lieu of premium of Rs.3
lakhs, 3000 shares of the Company were allotted in favour
of Dankha Devi Agarwal. By virtue of such allotment,
Dankha Devi Agarwal came to hold 3010 shares and the rest
continued to hold 10 shares each. All the share holders were
indicated as the first Directors of the Company.
On account of transfer of shares by Dankha Devi Agarwal
during her life time, the share holding pattern as on 28th
June, 1977, was as follows:-

Dankha Devi – 1660 shares
Tara Chand Agarwalla – 10 shares
Bhagirath Agarwal – 10 shares
Chandra Prakash Agarwal – 10 shares
Smt. Lila Agarwalal wife of
Bhagirath Agarwal – 200 shares

Smt. Rekha Agarwal wife of
Chandra Prakash Agarwal – 300 shares

Rajesh S/o Bhagirath Agarwal – 200 shares

Vandana D/o Chandra Prakash
Agarwal – 300 shares

Anita D/o Bhagirath Agarwal – 350 shares
The aforesaid share-holding will indicate that the
company was a family company.
As will appear from the materials on record, Tara Chand
Agarwal moved to New Delhi in 1978 along with his wife and
younger son leaving the family company in the sole charge of
his elder son Bhagirath Agarwal. Subsequently, the family
returned to Calcutta and from a public notice issued by the
Calcutta Municipal Corporation on 25th September, 1989, in
the Calcutta Edition of the Daily Statesman, it came to light
that the tax liability of the company in so far as the property
leased to the company was concerned was to the tune of
Rs.23,06,748/- which was outstanding. On coming to learn of
the said outstanding dues, a meeting of the Directors of the
company was convened by Tara Chand Agarwal where the
agenda was for production of relevant records by Bhagirath
Agarwal for the inspection of the other Directors. However, as
the records were not produced by Bhagirath Agarwal on the
plea that the same had been misplaced, Tara Chand Agarwal
caused an investigation to be made by a Chartered
Accountant from whose report it transpired that on or about
17th May, 1983 out of the share holding of 1660 shares held
by Dankha Devi Agarwal, 1150 shares were purported to have
been transferred by her to Bhagirath Agarwal and a further
500 shares were purported to have been transferred in favour
of his wife. By the said process, Bhagirath Agarwal and his
wife increased their share holding from 10 to 1410 and from
200 to 700 respectively while reducing the share holding of
late Dankha Devi Agarwal from 1660 shares to only 10 shares.
On discovery of the aforesaid facts and other irregularities
alleged to have been committed by Bhagirath Agarwal, the
Board of Directors decided to issue a balance of 1960 equity
shares out of the authorized share capital which had remained
unsubscribed at the meeting of the Board of Directors held on
20th October, 1989. The Company decided to allot 1500
shares out of the said 1960 equity shares to Tara Chand
Agarwal and to allot the remaining 450 shares to his younger
son, Chandra Prakash Agarwal.
On 24th October, 1989, a special notice was given for
calling an extra-ordinary general meeting. A copy of the said
notice was duly served on Bhagirath Agarwal, and a copy was
also sent to the Registrar of Companies. Despite receipt of
notice, Bhagirath Agarwal did not attend the meeting and the
Board of Directors took a Resolution to remove both Bhagirath
Agarwal and Smt. Leela Agarwal from the Directorship of the
company. The decision of the Board of Directors was
conveyed to the Registrar of Companies and the requisite
forms were also deposited with him.
Simultaneously, with the notice for holding the extra-
ordinary general meeting of the company, Dankha Devi
Agarwal also filed a suit, being No.874 of 1989, in the
Ordinary Original Civil Jurisdiction of the Calcutta High Court
for a declaration that the purported transfer of 1650 shares in
the name of the plaintiff to Bhagirath Agarwal and his wife
were null and void and without any effect and for a further
declaration that Dankha Devi Agarwal was the sole and
absolute owner of 1660 shares in the defendant-company.
She also claimed a decree against the said Bhagirath
Agarwal, to deliver up and cancel the relevant shares in
connection with the transfer of the said 1650 shares in favour
of Bhagirath Agarwal and his wife who were made defendant
Nos. 2 and 3 in the suit. On 6th November, 1989 itself, an ad
interim order of injunction was passed in the suit
restraining the defendant Nos. 2 and 3 from transferring or
otherwise dealing with the shares in question and also from
exercising any voting right or from receiving dividends in
respect of the said 1650 shares.
Bhagirath Agarwal filed a Company Petition No.290/1990
on 18th June, 1990, before the Calcutta High Court against
the company, Tara Chand Agarwal, Smt. Dankha Devi
Agarwal, Chandra Prakash Agarwal and others inter alia
under Sections 397 and 399 of the Companies Act. The same
was admitted and an order of status quo was passed by the
learned Single Judge on 18th June, 1990 and an additional
interim order was also passed to the effect that no Board
meeting or any General Meeting were to be held. The matter
was duly contested and ultimately on 20th March, 1992 the
Company Application was disposed of by the learned Single
Judge with a direction for settlement of all the family assets
in three equal shares of Tara Chand Agarwal and Dankha
Devi Agarwal, Bhagirath Agarwal and Chandra Prakash
Agarwal. The said order was, however, stayed by the Division
Bench on 15th July, 1993 in an appeal filed by Bhagirath
Agarwal. Subsequently, in March 1995, Tara Chand Agarwal
died. Subsequent to his death, on or about 28th July, 1995,
the suit filed by Dankha Devi Agarwal was sought to be
withdrawn,purportedly without the knowledge of Smt.
Dankha Devi Agarwal.
On 2nd September, 1998 upon discovering that her suit
had been dismissed as withdrawn, Smt. Dankha Devi Agarwal
made an application for recalling of the orders dated 20th
June, 1995 and 28th July, 1995 on the ground that she had
not withdrawn her suit and that the application for withdrawal
was based on her forged signatures obtained by Shri
Bhagirath Agarwal. The said application was contested by
Shri Bhaghirath Agarwal and was ultimately dismissed by the
learned Single Judge on 4th August, 1999. An appeal
preferred from the said order dated 4th August, 1999, was
dismissed by the Division Bench on 13th September, 1999. In
the first of the two appeals being heard by us, this Court
granted leave to appeal to Smt Dankha Devi Agarwal against
the aforesaid order of the Division Bench of the High Court
dated 13th September, 1999. While the said appeal was
pending in this Court, Smt. Dankha Devi Agarwal died in
January, 2001.
Simultaneously with the aforesaid proceedings Shri
Bhagirath Agarwal also filed an application for setting aside
the resolution adopted by the Board of Directors of the
Company removing him and his wife from the Directorship of
the Company. On 6th August, 2001, the said application was
allowed by the learned Single Judge and the removal of the
said respondents from the Board of Directors and the
allotment of 1960 shares to Tara Chand Agarwal and Chandra
Prakash Agarwal were struck down. Further, the
appointment of the respondents 1 to 5 as Directors of the
Company in the Board meeting of 5th September, 1998, was
upheld.
Aggrieved by the said Judgment and Order of the learned
Single Judge, the appellant filed an appeal, being APOT No.
594 of 2001, and filed an application therein for appointment
of Receiver and other reliefs, On 6th August, 2003, the Division
Bench dismissed the appeal leaving the interim application,
being ACO No. 19 of 2002, undecided. Civil Appeal No. 6535 of
2004 is directed against the said judgment and order of the
Division Bench of the Calcutta High Court.
Appearing for the appellant, Mr. Vijay Hansaria sought to
highlight the case of the appellant that Bhagirath Agarwal had
forged the signatures of Smt. Dankha Devi Agarwal to illegally
and wrongfully transfer 1650 shares belonging to Smt.
Dankha Devi Agarwal to himself and his wife in a bid to wrest
control of the management and affairs of the respondent-
Company, which had been founded by Shri Tara Chand
Agarwal. Mr. Hansaria, also highlighted subsequent facts
involving the withdrawal of the suit filed by Smt. Dankha Devi
Agarwal questioning the transfer of the aforesaid shares in the
name of Shri Bhagirath Agarwal and his wife. He emphasized
that even for the purpose of withdrawing the suit the signature
of Smt. Dankha Devi Agarwal had been forged and the
advocate appearing on her behalf in the said application was
changed and another advocate was appointed. The changed
advocate appeared before the Court on a day when the matter
was not listed and upon mentioning, the application was
treated to be listed on that day’s list and was allowed to be
withdrawn.
Mr. Hansaria submitted that despite the unusual facts
brought to notice of the learned Single Judge and the fraud
perpetuated in withdrawal of the application for restoration of
the suit, the learned Single Judge dismissed the application
for revival of the suit and even the appeal filed by Smt.
Dankha Devi Agarwal against the said order of the learned
Single Judge was dismissed by the Division Bench at the ad-
interim stage leaving her deprived of her assets.
Mr. Hansasria submitted that the second of the two
appeals before us, is an off-shoot of the facts relating to the
first appeal and a decision therein will be dependent on the
out-come of the first of the said two appeals.
Mr. Hansaria submitted that under unavoidable
circumstances Shri Tara Chand Agarwal had moved to Delhi
along with his wife, Smt. Dankha Devi Agarwal and second
son, Shri Chandra Prakash Agarwal, leaving the family
business in the care of their elder son, Shri Bhagirath Agarwal
but on coming to learn of the manner in which the affairs of
the company were being managed by Shri Bhagirath Agarwal,
Smt. Dankha Devi Agarwal, his own mother, was compelled to
file a suit to undo the fraudulent activities of Shri Bhagirath
Agarwal. Mr. Hansaria submitted further that the learned
Single Judge of the Calcutta High Court decided Smt. Dankha
Devi Agarwal’s application for restoration of her suit in a
completely injudicious manner and based his decision on a
comparison of Smt. Dankha Devi Agarwal’s signatures on the
different documents in the case without taking into
consideration the passage of time and the age of Smt. Dankha
Devi Agarwal.
The defence set up by Shri Bhagirath Agarwal is one of
denial of all the allegations made on behalf of the appellant.
In fact, it is his specific case that Dankha Devi had no role to
play in the events subsequent to the transfer of 1650 shares
by her in his and his wife’s favour. It was contended that the
transfers had been effected by Dankha Devi Agarwal in favour
of her elder son on her own volition as far back as in 1983-84
and returns were filed before the Registrar of Companies on
15th June, 1984 where such transfer of shares was recorded.
Nothing was done in respect of the transfer of the said shares
till 6th November, 1989, when Smt. Dankha Devi Agarwal
allegedly filed the suit for cancellation of the transfer
documents relating to the said 1650 shares. An interim order
was passed in the suit restraining Shri Bhagirath Agarwal
and the group represented by him from disposing of the said
shares or exercising their right to vote on the basis thereof. It
was urged that the subsequent steps taken for withdrawal of
the suit after the death of her husband was also at the
instance of Smt. Dankha Devi Agarwal who obviously did
not wish to pursue the matter further. It was submitted that
only upon being satisfied that Smt. Dankha Devi Agarwal
did not wish to proceed with the suit was an order passed
therein permitting her to withdraw the suit.
Appearing for Shri Bhagirath Agarwal, Mr.R.F. Nariman,
learned senior counsel, pointed out that an extra-ordinary
general meeting had been convened on 5th September, 1998,
as per the orders passed by the Calcutta High Court in which
Smt. Dankha Devi Agarwal was brought in a wheel-chair.
According to the report of the Chairman of the meeting
appointed by the High Court, she had been completely
reduced to a vegetable existence and did not respond to any
question or realize what was happening around her. The
Chairman expressed the opinion that although Dankha Devi
Agarwal was in the meeting room, she did not have the
slightest notion of what was going on there and she did not
cast her vote in the meeting.
Mr. Nariman further contended that the Special Leave
Petitions which have been filed did not contain the left thumb
impression of Dankha Devi Agarwal, as has been made out,
and that the same was forged for the purpose of presenting
the Special Leave Petitions. It was further contended that
after the death of Dankha Devi Agarwal, Shri Chandra
Prakash Agarwal has substituted his name and the name of
his wife as appellants in place of Dankha Devi Agarwala and it
was, therefore, quite clear that the entire matter had been
engineered by Shri Chandra Prakash Agarwal to prevent Shri
Bhagirath Agarwal and his group from enjoying the benefits of
the profits and income from the business of the company
which comprised of house properties as well as two tea
gardens.
Regarding the allotment of 1960 shares by Shri Tara
Chand Agarwal in his own favour and in favour of Shri
Chandra Prakash Agarwal, Mr. Nariman submitted that it had
been rightly decided by the learned Company Judge that the
removal of Shri Bhagirath Agarwal and his wife from the
Board of Directors of the company was unlawful as was the
allotment of the said 1960 shares. Both the decisions said to
have been adopted by the Board of Directors at the meeting
held on 22nd November, 1989 were struck down and the
appointment of the respondent Nos. 1 to 5 as Directors of the
company at the Board meeting held on 5th September, 1998,
was upheld.
From the facts as disclosed, it is quite clear that there
were differences within the family with Shri Tara Chand
Agarwal and his younger son, Shri Chandra Prakash Agarwal,
on one side and his elder son, Shri Bhagirath Agarwal on the
other, and that Smt. Dankha Devi Agarwal was merely used
as a front for the parties to further their individual gains.
As has been revealed from the materials on record, the
transfer of the 1650 shares of Smt. Dankha Devi Agarwal in
favour of Shri Bhagirath Agarwal and his wife was effected
some time in 1983-84 at a time when Shri Tara Chand
Agarwal and Smt. Dankha Devi Agarwal along with the family
of Chandra Prakash Agarwal had shifted to Delhi. It was after
Shri Tara Chand Agarwal and others returned to Calcutta in
1985 that a Board Meeting of the Company was convened by
Tara Chand Agarwal on 26th May, 1989, when Shri Bhagirath
Agarwal was requested to produce the minute book of the
Board’s meetings. It was thereafter that CS No.874/1989 was
filed by Smt. Dankha Devi Agarwal against the respondents in
the Calcutta High Court inter alia praying for a declaration
that she was the sole and absolute owner of 1660 shares and
that the transfer of 1650 shares in favour of respondents Nos.
2 and 3 be declared null and void.
Be that as it may, there are certain unusual
circumstances in which the aforesaid suit filed by Smt.
Dankha Devi Agarwal was withdrawn as also the manner in
which the application filed by her for recalling the order of
dismissal of the suit was dismissed by the learned Single
Judge. The manner in which Smt. Anjali Agarwal, who was
Shri Bhagirath Agarwal’s Advocate, assumed charge of the
proceedings on behalf of Smt. Dankha Devi Agarwal in the
suit filed by her against Bhagirath Agarwal, generates an
impression that all was not above board. The withdrawal of
the suit soon after Smt. Anjali Agarwal took over the
proceedings heightens the said suspicion. Added to the above
circumstances, is the fact that the suit was mentioned by the
learned counsel briefed by Smt. Anjali Agarwal for the purpose
of withdrawal thereof on a day when the same was not even
listed for the said purpose.
The developments after the filing of the application by
Smt. Dankha Devi Agarwal for a declaration that the
purported transfer of 1650 shares in favour of Bhagirath
Agarwal and his wife was null and void, leading to the
withdrawal of the suit, has not been properly dealt with either
by the learned Single Judge or the Division Bench which
merely followed the order of the learned Single Judge. Both
the Single Judge and the Division Bench appear to have been
influenced by the affidavit said to have been sworn by Shri
Chandra Prakash Agarwal on 24th July, 1995, wherein it had
been stated that Smt. Dankha Devi Agarwal was unable to
hear, speak, read or write and that she was leading a vegetable
existence and her mind had gone completely blank. The
events, as disclosed leave a lingering doubt as to whether
Smt. Dankha Devi Agarwal had really instructed her Advocate
on Record to give a change in favour of Smt. Anjali Agarwal,
who, as indicated hereinabove, was the advocate of Shri
Bhagirath Agarwal against whom the suit had been filed,
particularly when it was to his interest that the suit stood
withdrawn.
In such circumstances, we allow the appeal and set aside
the order passed by the Division Bench of the High Court
dated 13th September, 1999, dismissing the appeal against
the order dated 4th August, 1999, passed by the learned Single
Judge dismissing the application filed by Smt. Dankha Devi
Agarwal for recalling the orders passed by the learned Single
Judge dated 20th June, 1995 and 28th July, 1995. We also set
aside the said order of the learned Single Judge dated 4th
August, 1999 and direct the aforesaid application to be re-
heard and decided afresh after taking into consideration the
manner in which the change was obtained by Smt. Anjali
Agarwal and the mentioning of the matter ex-parte for non-
prosecution of the suit on a date when the matter was not
listed for such purpose.
As far as Civil Appeal No.6535/2004 is concerned, it has
not been seriously argued on behalf of the appellant that the
learned Single Judge had erred in holding that the removal of
Shri Bhagirath Agarwal and his wife from the Board of
Directors of the company was illegal, on the ground that the
meetings of the company held on 26th October, 1989 and 21st
November, 1989 were without due compliance with the
provisions of Section 286 of the Companies Act. Similar is the
case as far as the issuance and allotment of 1960 shares in
favour of Shri Tara Chand Agarwal and Shri Chandra
Prakash Agarwal is concerned. The Division Bench has
affirmed the view of the learned Single Judge that the story of
notice having been given to Shri Bhagirath Agarwal of the
meeting where his directorship was in question, and his
staying away from such meeting, was difficult to accept. The
decision of the Single Bench or the Division Bench has not
been seriously contested on behalf of the appellant. In the
facts of the case, it is difficult to take a view which is different
from that taken both by the Single Judge and the Division
Bench of the High Court.
The aforesaid appeal, therefore, fails and is dismissed.
Consequently, we are not convinced that any order is
required to be passed as prayed for in the application filed on
behalf of Shri Bhagirath Agarwal under Section 340, Code of
Criminal Procedure being I.A.No. 10/2006 and the same is
also dismissed.
Let a copy of this order in so far as it relates to Civil
Appeal No.1015/2000 be communicated to the High Court.

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