Research › Search › Judgment

Orissa High Court · body

2006 DIGILAW 381 (ORI)

Dhruba Charan Pattnaik v. Antaryami Pattnaik

2006-05-12

L.MOHAPATRA

body2006
JUDGMENT L. MOHAPATRA, J. : This appeal has been filed at the in¬stance of the plaintiff against a confirming judgment. The re¬spondents have also filed cross appeal. 2. Though this matter was listed for admission, the learned counsel appearing for the parties, prayed for disposal of the appeal at the stage of admission and accordingly, the learned counsel appearing for the parties were heard on merit. The plaintiff-appellant filed the suit in the Court of the learned Civil Judge (Junior Division), Second Court, Cuttack for permanent injunction restraining the defendant-respondent No.1 from transferring or selling any share of the company to any person who is not a member of the company so long as any member is willing to purchase the Same and also restraining the defend¬ant-respondent No.1 from disturbing the status quo of the suit property so far as its nature and character is concerned and inducting any new share holder/Director in the company or inter¬fering with the day to day affairs of the company. 3. The case of the plaintiff is that M/s. Hotel ARISTOCRAT is a Private Limited Company incorporated under the Companies Act, 1956 and the land used for construction of the said hotel was obtained from Paradeep Port Trust by way of lease. The hotel was constructed with the financial assistance received from the Orissa State Financial Corporation and IPICOL. The Company was constituted as a joint family nucleus confined to the family members of the plaintiff-appellant. Initially there were four share-holders namely, Shayama Charan Pattanaik, his two sons namely, Dhruba Charan Pattanaik and Antaryami Pattanaik and his daughter-in-law Reeta Mohanty. Shyama Charan Pattanaik, Antaryami Pattanaik and Reeta Mohanty were three life time Directors of the Company. Antaryami Pattnaik was the Managing Director of the said Company. Shyama Charan Pattanaik died on 20th December, 1997, but the Board of Directors of the Company was not reconstituted and by virtue of amicable arrangement, the defendant-respondent No.1 was chosen to act as Managing Director of the Company and the plaintiff continued to be a share-holder having 15 shares. Due to mismanagement of the hotel by the defendant No.1, instalments to the financing institutions could not be paid and the company suffered. In the meantime, defendant-respondent No.1 submitted an application to the Registrar, Companies for induction of number of new share-holders and Directors in the Company. Due to mismanagement of the hotel by the defendant No.1, instalments to the financing institutions could not be paid and the company suffered. In the meantime, defendant-respondent No.1 submitted an application to the Registrar, Companies for induction of number of new share-holders and Directors in the Company. The case of the plaintiff is that the said defendant No.1 had no right to alienate the share of the Company at his own sweet will and he is bound by the conditions, stipulated in the Memorandum and Arti¬cles of Association of the Company. Clause-24 of the Articles of Association prescribes that no share shall transferred to any person, who is not a member of the Company so long as any member is willing to purchase the same. The defendant-respondent No.1 without adhering to the said condition had submitted the afore¬said application before the Registrar of Companies. It is further alleged that the defendant-respondent No.1 tried to sale away the share with the help of the outsiders. The plaintiff in the plaint has specifically expressed his willingness to purchase the shares of other share-holders. On the above allegations, the suit was filed. 4. Defendants 1 and 7 who contested the suit filed a joint written statement challenging maintainability of the suit on several grounds. It was contended by them in the written state¬ment that Mrs. Reeta Mohanty, who is wife of the plaintiff had filed Title Suit No.116 of 1997 in the Court of the learned Civil Judge (Junior Division), Kujanga seeking relief of permanent injunction against the defendant-respondent No.1 on similar grounds. It was the stand of the defendants 1 and 7 that defendant No.1 being the Managing Director of the Company had personally negotiated with the defendants 5 to 7 to increase the shares of the Company and induction of the said defendants 5 to 7 as the Directors and share-holders of the Company and same was duly recognized by the Registrar of Companies. It is also the case of the defendants 1 and 7 that defendant No.1 is continuing as the Managing Director of the Company and the Director Mrs. Reeta Mohanty resigned from the Company from 9.2.1994 and trans¬ferred her share to the newly inducted Director, Nidhisudan Behera for a total consideration of Rs.7,50,000/-. The resignation of Reeta Mohanty was placed before the Board’s meet¬ing on 4.3.1994 and the Board accepted her resignation. Reeta Mohanty resigned from the Company from 9.2.1994 and trans¬ferred her share to the newly inducted Director, Nidhisudan Behera for a total consideration of Rs.7,50,000/-. The resignation of Reeta Mohanty was placed before the Board’s meet¬ing on 4.3.1994 and the Board accepted her resignation. The Registrar of Companies has also been intimated about the said fact and the same has been accepted. Due to measurable financial condition of the company, new share-holders/Directors were also inducted to shoulder the liability of the financial institutions. In the written statement of defendants 1 and 7 a specific reference has been made to the minutes of the meeting held on 22.3.1996, 22.5.1996, 22.8.1996, 28.5.1997, 2.7.1997, 12.7.1997 and 18.7.1997 wherein transfer of shares and induction of Direc¬tors have been allowed and accepted by the Board. On the above plea, the defendants 1 and 7 prayed for dismissal of the suit. The other defendants filed separate written statements which are not relevant for the purpose of deciding the issue in ques¬tion. The trial Court on pleadings of the parties framed seven issues and found that the plaintiff is continuing as share-holder of the Company. The Court further held that defendants 5 to 7 have purchased some shares from the Company and in absence of them, the suit was bad for non-joinder of necessary parties. The Court further held that there was no cause of action for filing the suit against the defendant and on the above findings, the suit was dismissed. Challenging the judgment and order of the learned Civil Jude (Junior Division), the plaintiff filed an appeal before the learned Second Additional District Judge, Cuttack vide Title Appeal No.13 of 2003. The contesting defend¬ants 1 and 7 also filed cross-objection under Order 41, Rule 22 C.P.C. challenging the finding in respect of Issue No.4 holding that the plaintiff continued to be a share-holder of the Company. The learned Additional District Judge after hearing the parties dismissed the appeal as well as the cross-objection. Therefore, both plaintiff and contesting defendants are before this Court in appeal and cross-appeal. 5. The learned Additional District Judge after hearing the parties dismissed the appeal as well as the cross-objection. Therefore, both plaintiff and contesting defendants are before this Court in appeal and cross-appeal. 5. Shri B. H. Mohanty, the learned counsel appearing for the appellant submitted that though several grounds have been taken in the second appeal, most of the grounds had already been taken in R.S.A. No.195 of 2002 and the same having been answered in the said second appeal against the appellant therein, who is the wife of the present appellant, the only ground on which the appeal is pressed is ground No.(J). The case of the plaintiff-appellant in the said ground is that the Article of Association of the Company specifically contains a Clause stating that an existing share-holder has the right to acquire the shares sought to be transferred by another existing share-holder or new shares floated by the Company. In view of the above clause in the Arti¬cle of Association and in view of the willingness of the plain¬tiff to purchase the shares, the defendant-respondent No.1 could not have sold the shares to outsiders. Both the Courts below concurrently held that even though the plaintiff continued to be a share-holder, he never expressed his willingness to purchase the share of his wife Mrs. Reeta Mohanty and therefore there is hardly and question of law involved in this appeal for determination. Undisputedly, Reeta Mohanty is the wife of the plaintiff-appellant. She had filed a suit on similar grounds in the Court of the learned Civil Judge (Junior Division), Kujanga challenging the transfer of shares supposed to have been made by her as well as her resignation from Director¬ship of the Company and she ultimately lost the suit in view judgment of this Court in R.S.A. No.195 of 2002. In view of the fact that Reeta Mohanty is the wife of the plaintiff-appellant, under no stretch of imagination, it can be accepted that the wife of the plaintiff appellant intended to sale her share and the plaintiff had no knowledge about it. Both the Courts below have concurrently held that even if the wife of the plaintiff intended to sale away her share and resigned from Directorship, the plain¬tiff never expressed his willingness to purchase the share of his wife. Both the Courts below have concurrently held that even if the wife of the plaintiff intended to sale away her share and resigned from Directorship, the plain¬tiff never expressed his willingness to purchase the share of his wife. In view of the above both the Courts below were justified in holding that there was no contravention of Clause-24 of the Articles of Association of the Company. I therefore do not find any substantial question of law involved in the said ground. Since no other ground is pressed by the appellant, I do not find any merit in the appeal. Accordingly, the Second Appeal is dismissed. 6. So far as cross appeal is concerned, the concurrent findings of both the Courts below that the plaintiff-appellant had not sold his share and is continuing as a share-holder of the Company is under challenge. Shri Mohapatra, the learned counsel appearing for the respondents submitted that at no point of time during pendency of the suit or appeal, the plaintiff produced the share certificates to show that he is still continu¬ing to be a share-holder. On the other hand, Shri B. H. Mohanty, the learned counsel appearing for the appellant contended that all the records were under the possession of the contesting defendants-respondents and the share certificates of the plain¬tiff were available in the record of the Company and therefore, there was no possibility on the part of the appellant to produce the share certificates before the Courts below. 7. On analysis of evidence adduced by both the parties, since both the Courts below have held that the plaintiff-appellant continued to be a share-holder of the Company and the said finding is concurrent finding of fact, I am of the view that no substantial question of law is involved in the cross-appeal. Accordingly the cross-appeal is dismissed. Appeal dismissed.