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2014 DIGILAW 1805 (ALL)

Rupak Gupta v. Birendra Kumar

2014-05-30

BRIJESH KUMAR SRIVASTAVA II, RAJIV SHARMA

body2014
JUDGMENT B.K. Srivastava-II,J.: - Brief facts of the case are that on 13.2.1961, U.P. Hotels Ltd. (formerly known as Uttar Pradesh Hotels & Restaurants Limited) promoted by Gupta Family was incorporated as a Public Limited Company. In the year 1961, initially, the said company was established under the name and style of Banaras House Pvt. Limited (formerly Banaras Art House Pvt. Ltd.) and by passage of time, the organization has expanded and different companies were incorporated, such as U.P. Hotels Limited (UPHL), Hotel Clarks Varanasi Ltd. (HCVL), Indian Textiles Private Ltd. (ITCPL); and Banaras House Pvt. Ltd. (BHL) and on account of dispute with regard to the management of different organizations, the plaintiffs-respondent nos. 1 to 3 preferred a suit bearing Regular Suit No. 1574 of 2012 [Sri Birendra Kumar and others Versus Sri Sushil Kumar and others] with the following reliefs: (a) It be declared by a declaratory decree that the plaintiffs and the defendant nos. 1 to 11 (one to eleven) and their predecessors in interest arrived at the family settlement duly acknowledged in writing on 5.8.1998 (fifth August Nineteen ninety eight) coupled with the Memorandum of Understanding in respect of the properties more fully described in paragraph 19 and 23 above and the schedule-II annexed hereto with the plaint having been duly acted upon the same and they are bound by it. (b) By means of a decree for perpetual injunction, the defendants and their agents may kindly be restrained from acting contrary to the terms of the family settlement and the Memorandum of Understanding in respect of properties mentioned in paragraph 19 and 23 above and the Schedule-II annexed hereto and be restrained from alienating or transferring the same including its possession, in any manner whatsoever to any person or persons by acting illegally or otherwise. (c) By means of a decree for mandatory injunction, this Hon'ble Court may very kindly be graciously pleased to direct the defendants to perform their obligations fastened upon them pursuant to the aforesaid family settlement and Memorandum of Understanding dated 5.8.1998 as well, as mentioned in paragraph 14 above including thereby, to execute such deed or deeds as required from them in favour of the plaintiffs or the respective parties in the manner as mentioned therein within such day and time to be fixed by this Hon'ble Court, failing which the same may kindly be done through the process of this Hon'ble Court. (d) Cost of the suit may kindly be awarded to the plaintiffs and against the defendants. (e) Such other reliefs or reliefs as this Hon'ble Court may kindly deemed just and proper in the circumstances of the case may also kindly be passed in favour of the plaintiffs against the defendants. 2. In the said suit, notices were issued and after hearing the parties, the trial Court passed an injunction order dated 20.3.2013 on the application under Order 39 Rules 1 and 2 CPC directing all the parties to the suit to maintain status quo. Being aggrieved, one of the defendants, namely, Rupak Gupta [appellant herein] has preferred an F.A.F.O. No. 447 of 2013 [Rupak Gupta Vs. Birendra Kumar And Ors]. 3. At the same instance another appeal was preferred as F.A.F.O. No. 448 of 2013 by one Shushil Kumar as appellant then defendant. Both the appeals got connected vide order dated 29.04.2013 and notices were issued and all the parties have put in appearance through their respective Counsel. During the course of hearing, learned Counsel for the respective parties have agreed that the matter may be referred to the Mediation and Conciliation Centre and accordingly, Mr.I.B. Singh was appointed as Mediator to look into the matter and to mediate between the parties, as the dispute is purely a family dispute with regard to the management of different organizations. The said order was passed on 25.7.2013. In compliance of this Court's Order dated 25.7.2013, the matter was mediated by Mr. I.B. Singh, Senior Advocate. According to the report of Mediator dated 29.11.2013, though the matter was fixed on thirty six (36) dates, yet the mediation is unsuccessful. 4. The said order was passed on 25.7.2013. In compliance of this Court's Order dated 25.7.2013, the matter was mediated by Mr. I.B. Singh, Senior Advocate. According to the report of Mediator dated 29.11.2013, though the matter was fixed on thirty six (36) dates, yet the mediation is unsuccessful. 4. It is also asserted that when the parties were trying for mediation for settling the dispute and on one hand plaintiff-respondent moved an application C-54 under Section 151 CPC complaining therein that defendant No.4-Rupak Gupta is altering the operation of the Board and is keeping all the rights with himself and believing the allegations of the plaintiff-respondent to be true , the Additional Civil Judge (S.D.) allowed the application C-54 in part vide order dated 14.8.2013 and prohibited the operation of the resolution dated 14.7.2013. 5. It is also pertinent to mention here that First Appeal From Order Nos. 806 of 2013 and 840 of 2013 were preferred challenging the impugned order dated 14.8.2013 and this Hon'ble Court vide order dated 9.9.2013 directed the impugned order dated 14.8.2013 passed by the learned Additional Civil Judge (Senior Division) in Regular Suit No. 1574 of 2012 to remain in abeyance. 6. It is also important to mention here that vide order dated 29.4.2013 the FAFO No. 448 of 2013 has been connected with FAFO No. 447 of 2013 and subsequently vide order dated 26.8.2013 FAFO No. 806 of 2013 has been connected with FAFO No. 447 of 2013 and vide order dated 9.9.2013 FAFO No. 840 of 2013 has been connected with FAFO No. 806 of 2013. 7. It also appears from record that by the resolution dated 13.2.2013 passed by the Board of Directors, Rupak Gupta and Apruv Kumar (Joint Managing Directors of the Company) were authorized to take all steps as necessary to comply with clause 40-a of Listing Agreement and in this regard to sign, execute and deliver any documents and pleadings as necessary and to authorize any other persons in this regard. This resolution was ratified by the Board on 11.5.2013. 8. Apart from above, learned Counsel has submitted that application dated 24.5.2013 is contrary to the unanimous Board decision dated 12.5.2013 to which plaintiff nos.1 and 2 were assenting parties including the shareholders resolution. This resolution was ratified by the Board on 11.5.2013. 8. Apart from above, learned Counsel has submitted that application dated 24.5.2013 is contrary to the unanimous Board decision dated 12.5.2013 to which plaintiff nos.1 and 2 were assenting parties including the shareholders resolution. Moreover, the Circular Resolutions of 13.7.2013 (circulated on 12th July, 2013) and 15.7.2013 (Circulated on 14th July, 2013) have been assailed after a lapse of about one month with oblique motive. 9. It also appears that First Appeal From Order No.840 of 2013 has been filed by Sushil Kumar, Upendra Kumar and Chetan Kumar who are defendant nos.1, 2 and 7 before the Trial Court. They have also assailed the order dated 14.8.2013 passed by the Trial Court. While adopting the arguments advanced by the Counsel for the appellant appearing in First Appeal No.806 of 2013 added that the Trial Court completely ignored the settled principles of law regulating the administration of companies and their separate corporate identity. He also pointed out that the Trial Court allowed the application without even issuing notices to them and wrongly reached to an incorrect presumption that the Circular/Resolution dated 14.7.2013 violates the order dated 20.3.2013. 10. It also appears from the perusal of record that in fact the mediation was unsuccessful. 11. It also appears that in First Appeal From Order No.447 of 2013 the order dated 20.3.2013 passed by Additional Civil Judge (Senior Division), Lucknow in Regular Suit No. 1574 of 2012 has been challenged on various points and it was asserted that the findings recorded by the courts below cannot be sustained in the eyes of law. 12. It is also submitted that the company is a legal person, separate and distinct from its individual members and property of the company is not the property of the share holders. A shareholder has merely an interest in the company arising out of its Articles of Association measured by a sum of money for the purpose of liability and a share in the distributed profits. It is also asserted that in fact 1998 Memorandum of Understanding have never been given effect to and abandoned on the question of ownership while there has been at least 142 draft MOUs exchanged between the parties after 1998. 13. It is also asserted that in fact 1998 Memorandum of Understanding have never been given effect to and abandoned on the question of ownership while there has been at least 142 draft MOUs exchanged between the parties after 1998. 13. It was also submitted that in fact material points were suppressed and instead of that the trial court allowed the injunction application and subsequently the order dated 14.8.2013 was also passed. 14. We have heard learned counsel for appellants as well as learned counsel for opposite parties and perused the records. 15. The main controversy revolved around the fact that the trial court completely ignored the settled principles of law regulating the administration, office and its separate corporate identity. The controversy also revolves around the fact that there were various MoUs and the matter was also pending before the Company Law Board. 16. The main argument of the learned counsel for appellant is that the trial court does not have the territorial jurisdiction to entertain the suit because the 1998 MOU was signed at Delhi and U.P. Hotels Limited, whose assets this suit relates to, is registered in Delhi. It is also contended that a suit for declaration would not lie for the reason that the plaintiffs are not the owners of any of the assets set out in the 1998 MOU. 17. It is also asserted that appellant has filed a petition as a shareholder for redressal of his grievance and mismanagement and operation before the Company Law Board at New Delhi and the Board on 18.9.2012 passed an interim order in favour of the appellant but in spite of that suit has been filed at Lucknow being original suit no. 1574 of 2012 seeking declaration and mandatory injunction. The plaintiffs have also claimed in the suit that the said 1998 MOU records the family settlement partitioning the properties amongst the members of the Gupta family. 18. In support of his submissions learned counsel for appellant has placed reliance upon the judgment passed by the Apex Court and various High Courts wherein it has been held that the decree or interim injunction obtained by the plaintiff-appellant by suppression of material facts to be treated as nullity and can be questioned even in collateral proceedings. 1. Oswal Fats and Oils Limited Vs. Additional Commissioner (Admin), Bareilly Division, Bareilly and others [2010(4) SCC 728]. 2. 1. Oswal Fats and Oils Limited Vs. Additional Commissioner (Admin), Bareilly Division, Bareilly and others [2010(4) SCC 728]. 2. S.P. Chengal Varaya Naidu (dead) by LRS. Vs. Jagannath (dead) by Lrs. And others [ 1994(1) SCC 1 ]. 3. Hari Narain Vs. Badri Das [ AIR 1963 SC 1558 ]. 4. Satish Khosla Vs. M/s Eli Lilly Ranbaxy Ltd. and another [ 1998(71) DLT 1 ]. 5. K.D. Sharma Vs. Steel Authorities of India and others [2008(12) SCC 481]. 19. Learned counsel for appellant further placed reliance on the proposition that no private arrangement between shareholders can bind a corporate entity unless such agreement is reflected in the Articles of Association of the company and has cited the following judgments: 1. V.B. Rangaraj Vs. V.B. Gopalakrishnan and others [ 1992(1) SCC 160 ] 2. Rustom Cavasjee Cooper Vs. Union of India [ 1970(1) SCC 248 ]. 3. Bacha F. Guzdar, Bombay Vs. Commissioner of Income Tax, Bombay [ AIR 1955 SC 74 ] 4. Electronics Corporation of India Ltd. and others vs. Secretary, Revenue Department, Govt. of Andhra Pradesh and others [ 1999 (4) SCC 458 ] 5. Reliance Natural Resources Ltd. Vs. Reliance Industries Ltd. [ 2010(7) SCC 1 ]. 20. The submission of the learned counsel for respondent-plaintiffs no. 1, 2 and 3 are that the plaintiffs have got a prima-facie case and in this connection they mentioned the various original MOU dated 5.8.1998 and other records. A mention of various letters and E-mails has also been alleged which clearly show that the prima-facie case of the respondent-plaintiffs no.1, 2 and 3. Plaintiffs have basically relied upon the MOU of 1998, which as per his assertions stood by and large implemented. Evidenced by the list of properties which fell in the share of each group and duly signed by each groups and its members including group-A. 21. It is also submitted that the plaintiffs are only interested in the preservation of the property which may not be transferred to any third party with a request to restrain the defendants from acting contrary to the terms of MOU dated 5.8.1998. It is also submitted that the plaintiffs are only interested in the preservation of the property which may not be transferred to any third party with a request to restrain the defendants from acting contrary to the terms of MOU dated 5.8.1998. It is also submitted by the respondents that this Hon'ble Court has to prima-facie consider the case and it does not require to hold that the trial court may hear the application moved under Order XXXIX Rules 1 and 2 C.P.C. As per him the trial court has rightly recorded the finding that serious questions have been raised which requires to be adjudicated and can only be determined after the parties lead the evidences. It appears to us that there are various papers, records, valuation reports, E-mails and MOUs which can only be legally appreciated after proper evidence is adduced before the competent court of law. 22. In support of his submissions learned counsel appearing for respondents no. 1, 2, 3, 7 and 8 has placed reliance on the judgments of the Apex Court wherein it has been held that existence of a prima facie case must be shown by the plaintiff-Non-grant of injunction must result in irreparable injury to the party seeking relief-Balance of convenience must be in favour of grant of injunction-In suit seeking to set aside decree, court can grant interim injunction when the suit is based on the ground of fraud or want of courts jurisdiction-While granting injunction in such cases Court should cautiously look to the conduct of the party, probable injuries to the either party and whether plaintiff would be adequately compensated, if injunction is refused. The details of judgments are as under: 1. Dalpat Kumar and another Vs. Prahlad Singh and others [ 1992 (1) SCC 719 ]. 2. Anand Prasad Agarwalla Vs. Tarkeshwar Prasad & others [ 2001 (5) SCC 568 ] 3. Anupam Sahkari Awas Samiti Ltd. Vs. Additional District Judge, Lucknow and others [2006 (24)LCD 137] 4. Madhao Vs. Madhav [ 1988 (3) SCC 511 ] 5. Prem Kumar and Others Vs. Dharama Pal Sehgal and others [AIR 1972 Delhi 90] 6. Madhuri Devi Vs. Kamlakar Dubey and others [ 2006 (24) LCD 397 ] 7. M/s Motillal Padmapat Sugar Mills Co. Ltd. Vs. State of U.P. and Others [ 1979 (2) SCC 409 ] 8. Delhi Cloth and Genral Mils Ltd. Vs. Prem Kumar and Others Vs. Dharama Pal Sehgal and others [AIR 1972 Delhi 90] 6. Madhuri Devi Vs. Kamlakar Dubey and others [ 2006 (24) LCD 397 ] 7. M/s Motillal Padmapat Sugar Mills Co. Ltd. Vs. State of U.P. and Others [ 1979 (2) SCC 409 ] 8. Delhi Cloth and Genral Mils Ltd. Vs. Union of India [ 1988 (1) SCC 86 ] 9. B.L Shreedhar and Others Vs. K.M. Munireddy (dead) and others [ 2003 (2) SCC 355 ] 10. C.Natrajan Vs. Ashim Bhai and Others [ 2007 (14) SCC 183 ] 11. Encure Pharmaceutical Ltd. Vs. Civil Judge (S.D.), Lucknow and Others [ 2012 (30) LCD 1924 ] 12. Narendra Kumar Jain and Others Vs. Sukumar Chand Jain and Others [1994 AIR (Addl.) 1] 13. Dwarka Prasad Agarwal (dead) by Lrs Vs. Ramesh Chand Agarwal [ 2003 (6) SCC 220 ] 14. Kale Vs. Deputy Director of Consolidation [ 1976 (3) SCC 119 ] 15. Ramdev Food Products Pvt. Ltd. Vs. Arvindbhai Rambhai Patel and Others [ 2006 (8) SCC 726 ] 16. Narendra Kante Vs. Anuradha Kante and Others [ 2010 (2) SCC 77 ] 17. M.S. Madhusudhanan Vs. Kerala Kaumudi Pvt. Ltd. [ 2003 (9) SCC 204 ] 18. Anupam Sahkari Samiti Ltd. Vs. additional Distrcit Judge, Lucknow and Others [ 2006 (24) LCD 137 ] 23. Admittedly the order dated 20.3.2013 has been challenged by the appellant on the ground that the Memorandum of Understanding did not constitute a binding document and this Hon'ble Court at Lucknow does not have the territorial jurisdiction. The other ground as alleged are that the suit is barred by limitation and is in counter-blast to the initiation of proceedings before the Company Law Board. Another ground taken is that the suit has not been filed with clean hands and concealment of material fact is there. 24. Basically the respondents have relied on original Memorandum of Understanding dated 5.8.1998, which bears the signatures of respective group members (except group-A) and subsequently acknowledgment of certain facts have also been alleged. Various other memorandum of understandings have also been exchanged. Various E-mail, valuation reports are also alleged. 24. Basically the respondents have relied on original Memorandum of Understanding dated 5.8.1998, which bears the signatures of respective group members (except group-A) and subsequently acknowledgment of certain facts have also been alleged. Various other memorandum of understandings have also been exchanged. Various E-mail, valuation reports are also alleged. It also appears that regarding right of enjoyment and contrary management, the trial court has passed the impugned order and the trial court was of the view that serious questions have been raised, which are to be addressed and can be determined after evidence is filed and appreciated. It also appears from the record that this Court vide order dated 17.7.2013 has held that the proceedings pending before the Company Law Board would proceed without being influenced by the proceedings before this Court. 25. It also appears from the record that the suit has been filed in the year 2012 and the pleadings are being exchanged. The proceedings are pending before the Company Law Board and the notices have already been issued. The parties have yet to led evidence. Various documents which have been placed on record requires close scrutiny by the competent court of jurisdiction and for this purpose appreciation of evidence is must. If the trial court has directed the parties to maintain status quo and it will be better if the parties are required to get their rights adjudicated in accordance with law and achieve the aforesaid purpose and the proceedings of the suit may be expedited. 26. A plea of territorial jurisdiction has also been taken which can be decided by the courts below after framing of proper issues and then recording finding thereon on the basis of hearing. 27. A plea of limitation has also been taken. It is objected that the suit is barred by limitation. We feel that this issue cannot be decided by this Court at this juncture because the question of limitation, in the present case, is a mixed question of law and facts which cannot be considered at this stage without framing of issues and appreciation of evidence. 28. As far as the proceedings before the Company Law Board is concerned, this Court vide order dated 17.7.2013 had provided that the proceedings before the Company Law Board may proceed without being influenced by the proceedings pending before this Court. 28. As far as the proceedings before the Company Law Board is concerned, this Court vide order dated 17.7.2013 had provided that the proceedings before the Company Law Board may proceed without being influenced by the proceedings pending before this Court. It is also the assertions of the learned counsel for plaintiffs that the present suit is not even remotely connected with any act of mismanagement. 29. In view of the above facts and circumstances of the case and keeping in view the case laws cited by the parties to the case, we are of the opinion that all the issues can be effectively adjudicated upon by the learned lower court after framing of proper issues and record finding thereon. There are certain issues which can be conveniently taken up to facilitate the speedy hearing. In certain matters appreciation of evidence is also requires which cannot be done at this stage by this Court, therefore, it will be just and proper to direct the trial court to expedite the hearing of Regular Suit No. 1574 of 2012. All the appeals are disposed of keeping in mind the order dated 17.7.2013 passed in FAFO No. 447 of 2013 and order dated 9.9.2013 passed in FAFO No. 806 of 2013 and the trial court is directed to expedite the hearing of regular suit no. 1574 of 2012 without granting any unnecessary adjournment to either of the parties. It is made clear that status quo shall be maintained amongst the parties with regard to management of assets only, as granted by the trial Court vide order dated 20.3.2013. 30. Before parting, we would like to add that though, the mediation has been unsuccessful, but the Mediator, Mr. I.B. Singh, Senior Advocate has consumed his precious time, almost 180 hours in thirty six sessions, therefore, we assess Rs.2,00,000/- [Rupees Two Lakhs] to be paid to him and the amount shall be borne by all the four groups ['A', 'B', 'C' and 'D'] in equal proportion and the same shall be paid within a month from today before the Senior Registrar of this Court. On receipt of the said amount the Senior Registrar is directed to pay the said amount to Mr. I.B. Singh, Senior Advocate, forthwith through cheque.