7/30/2019 Bagpat Engineering Company Limitedwas Incorporated as a Private Limited Company in March

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SUMMARY OF FACTS

1) Bagpat Engineering Company Limitedwas incorporated as a private limited company in March,1987 with 26 shareholders.

2) In August, 1994, its name was changed to Bagpat Industries Private Limited and it wasconverted into a public company in the name of M/S Bagpat Industries Limited in October,

1994.

3) The petitioners and the respondents are closely related family membersThe petitioners areilliterate living in a small village

4) Therespondent gained some experience in paper technology while working in Germany,induced the petitioners to invest huge sums of money in the proposed company giving rosy

promises5) the petitioners invested a sum of Rs.13,34,000 of which shares were allotted for Rs. 5,61,000

and a sum of Rs. 3,61,518 was kept as share application money, the balance was spent by the

petitioners' group for the benefit of the company

6) the 2nd respondent and his family members did not have any funds to contribute towards sharecapital, the 1st petitioner accommodated them by permitting the 2nd respondent to withdraw

money from the company's account and invest the same in the share capital of the company.

7) There was an agreement between the 1st petitioner and the 2nd respondent that the formerwould continue as the Chairman of the company and the later as the Managing Director of the

company and that the profits of the company would be divided equally among the shareholders

in the proportion of the amount invested by both the groups with 24% interest on the loans.

8) disputes arose between the parties and on intervention of one late Shri Ram Kumar Sharma,Principal of a College, it was decided that all the directors would hand over him the resignation

letters and accordingly, the 1st petitioner also did so. Before the disputes could be sorted out,

Shri Ram Kumar Sharma expired and the 2nd respondent somehow obtained the resignation

letter of the 1st petitioner from the wife of late Shri Ram Kumar Sharma and got it accepted by

the Board of Directors of the company.

9) the first act of oppression against the petitioners was committed by throwing out the mainpromoter of the company from the affairs of the company

10)According to the respondent at the time of filing of the petition, the share capital of thecompany had gone up to about Rs.2.04 crores and as such the petition itself is not maintainable

in terms of Section 399 of the Act since the shareholding of the petitioners would be only about

2.7%. They have also raised various other technical objections inter alia that in the first

paragraph of the petition itself, the petitioners have sought for winding up of the company,

which is beyond the scope of Sections 397/398 of the Act and that the petition does not comply

with various provisions of the Company Law

11)in the year 1994, the share capital had been increased from Rs.12.81 lacs to Rs.24.81 lacs andthat these additional shares had been allotted to 35 shareholders. By this allotment, the

petitioners were reduced from 40% to 22.6%. The petitioners were not offered any shares even

though they were promoters of the company.

7/30/2019 Bagpat Engineering Company Limitedwas Incorporated as a Private Limited Company in March

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12)Even for the allotment of shares, no consideration was actually received by the company andthe very purpose of the allotment was to reduce the petitioner to an insignificant minority. This

allotment would also indicate that in breach of the fiduciary duties the 2nd respondent has

benefited himself and his group at the cost of the petitioners' group. In all fairness, the

company should have allotted shares to the petitioners against the share application money

deposited with the company before allotting to the relatives of the 2nd respondent. Since no

consideration was received in respect of these shares, the company itself was not benefited in

any way

13)After the change in the status of the company, the respondents are alleged to have passed aresolution in terms of Section 81 (1A) of the Act with a view to deny proportionate allotment of

further shares to the petitioners. After this, the respondents have increased the share capital of

the company periodically without offering any shares to the petitioners.

14)counsel further argued that when further shares were allotted, nearly 11.8 lakh shares for aboutRs. 1.18 crores were allotted to 17 companies. Most of the companies are fake companies.

According to him, most of the companies belong to either the 2nd respondent/ his familymembers or the 8th and 9th respondents

15)The directors of some of the companies are fictitious persons as is evident from the fact that thealleged directors are not available in their registered addresses as the letters sent to them had

been returned undelivered. He also pointed out that in addition to the allotment of shares to

the fake companies, the 2nd respondent and their family members have acquired shares for

over Rs.48 lacs besides investing over Rs. 61 lacs in other companies. They have not disclosed

the source from which these investments were made.

16)It is a fact that the petitioners and the respondents joined together to incorporate this companyand the 1st petitioner was appointed as the Chairman of the company. However, it is wrong to

contend that the petitioners had invested Rs.13.5 lacs. Actually, they had invested Rs.5.61 lacs

as share capital and they have given unsecured loans of Rs.3.61 lacs.

17)The claim that the balance was spent by the petitioners for the benefit of the company is notborne out by any records of the company. Their claim on the basis of the bank account showing

withdrawal of cash which was spent for the benefit of the company cannot also be sustained in

as much as both their accounts as well as the accounts of the company were maintained in the

same bank and they could have transferred the said amount into the bank account of the

company.

18)At this point of time, Shri R.K. Sharma was alive and therefore to contend that after is death theresignation letter was obtained from the wife is wrong. Further, while admitting that he had

signed the resignation letter, in various averments in the pleadings, the 1st petitioner has

claimed that the said letter was forged which is also incorrect.

19) It is on record that the petitioners group being one of the promoters had contributed to the seed capitalof the company, the use of which has made the company to reach the present position having a high

turnover, profitability etc.

20) With the above observations/directions we dispose of this petition without any order as to cost.