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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

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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  

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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

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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

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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

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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

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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.