Pradeep Nandrajog, J.:— The two appeals are directed against a common order dated February 2, 2006, passed by the Company Law Board disposing of C.P No. 54 of 2005 and C.P No. 59 of 20051.

2. Vide C.P No. 54 of 2005, Arun Mehra and his wife, Mrs. Seema Mehra, invoked sections 111, 235, 237, 397, 398, 402 and 403 of the Companies Act, 1956. Their grievance related to Durga Builders P. Ltd., and the manner in which respondents Nos. 2 to 5 of the said petition were alleged to be conducting affairs of Durga Builders P. Ltd.

3. Arun Mehra and his wife, Mrs. Seema Mehra, were the petitioners in C.P No. 59 of 2005. They invoked sections 397 and 398 of the Act.

4. Grievance related to the affairs of Rajdhani Housing Syndicate P. Ltd. It was alleged that respondents Nos. 2 to 5 were conducting business in a manner which was oppressive to the petitioners. Durga Builders P. Ltd., was impleaded as respondent No. 6 in said company petition.

5. R.K Nanda, his wife, Mrs. Promila Nanda, their friends Ram Gopal Sharma and his wife, Mrs. Shakuntala Devi Sharma, are the common respondents in the two petitions.

6. Rival versions of the parties, as per pleadings in C.P No. 54 of 2005 and C.P No. 59 of 2005, have been pithily culled out by the Company Law Board in the order impugned. I note the said rival versions as extracted by the Company Law Board. Following has been noted by the Company Law Board:

1. In so far as C.P No. 59 of 2005, (Rajdhani Builders) is concerned, the allegations of the petitioners are: The company is engaged in the business of development of land for building purposes. In June, 1992, Haryana Government granted a licence to the company for setting up a residential colony in district Faridabad, in respect of 84.54 acres. The authorised and paid up capital of the company is Rs. 5 lakhs divided into 5,000 equity shares of Rs. 100 each. Out of 5,000 shares, the second respondent held 2,500 shares and the third respondent 2,300 shares, balance shares were held by 8 other shareholders at 25 shares each. The petitioners and the second and third respondents entered into an agreement on May 19, 1997, by which the first petitioner acquired 2,500 shares from the second respondent for a consideration of Rs. 2.5 lakhs and the second petitioner acquired 2,300 shares from the third respondent for a sum of Rs. 2.3 lakhs. In terms of the agreement, a board meeting was called on May 19, 1997, in which the first and second petitioners were appointed as directors and the second and third respondents resigned as directors. The share certificates in respect of 4,800 shares were handed over to the petitioners after duly registering the transfers. Thus, the petitioners came to hold 96 per cent, shares in the company. The reason for the agreement was that the petitioners, through various companies controlled by them, had given substantial financial help to the sixth respondent which is a company controlled by the second and third respondents. In addition, the petitioners had also done substantial work for the colony being promoted by the sixth respondent. Even though the petitioners became majority shareholders and directors of the company, since the first respondent-company could not develop the said colony due to paucity of funds, the petitioners did not take much interest in the affairs of the company. Only in the month of September, 2005, the petitioners came to know from the proceedings in a writ petition filed by the sixth respondent before the High Court of Punjab and Haryana that the sixth respondent had obtained licence for development of 235 acres of land from the second respondent. Since the petitioners were aware that the sixth respondent had a licence for 150 acres of land, the 85 acres of land which belonged to the first respondent-company should have been transferred to the sixth respondent. In addition, the petitioners also came to know that the first respondent-company had entered into an agreement with one Aditya Cable Co. Ltd., for transfer of 100 per cent, equity shares in the company. Thereafter, the petitioners took inspection of the books of records in the office of the Registrar of Companies and found that the second and third respondent are being shown as shareholders in respect of 4,800 shares and they are also shown as directors notwithstanding the fact that these shares had been transferred to the petitioner in 1997, and both the second and third respondents had resigned as directors and the first and second petitioners have been appointed as directors. This would indicate the substantial manipulation of the records of the company. With these allegations, the petitioners have sought for rectification of the register of members of the company by inserting the name of the first petitioner as shareholder in respect of the impugned 2,500 shares and also the name of the second petitioner in respect of 2,300 shares impugned in the petition. They have also sought for removing second and third respondent and appointment of first and second petitioners of their nominees as directors. They have also sought for a declaration that the purported transfer of the licence in favour of the sixth respondent be declared as null and void.

2. In so far as C.P No. 54 of 2005 (Durga Builders) is concerned, the allegations of the petitioners are: This company is engaged in the business of development of land for purposes of building colonies. The authorised capital of the company is Rs. 10 lakhs divided into 1 lakh equity shares of Rs. 10 each and the issued and paid up capital consists of 28,500 equity shares of Rs. 10 each. The second respondent held 1,45,000 equity shares and the third respondent held 14,000 shares. By an agreement dated May 19, 1997, the first petitioner acquired the shares held by the second respondent for a consideration of Rs. 4.35 lakhs and the second petitioner acquired shares held by the third respondent for valuable consideration. On the same day, i.e, May 19, 1997, in a board meeting of the company, the registration of transfers was approved and the share certificates were handed over to the petitioners. The second and third respondents resigned as directors and the first and second petitioners were appointed as directors and the first petitioner was also authorised to operate the bank accounts of the company. In view of this, the second and third respondents ceased to have any right or title or interest in the company. After the implementation of the agreement, the petitioners came to know that the company was faced criminal litigations due to its failure to discharge its obligations to the plot holders. The petitioners also came to know that they have not been shown as directors in the records of the company. Since the respondents assured the petitioners that after the conclusion of criminal litigations, the petitioners could take over the control of the company, they did not protest. However, criminal cases are still pending and in the exclusion of the petitioners, the respondents are enjoying the properties and benefits of the company. The petitioners have learnt that the respondents are proposing to sell the company which would be in complete breach of the agreement dated May 19, 1997. In the returns filed with the Registrar of Companies, the respondents are shown to hold the impugned shares even though they had been transferred to the petitioners. With these allegations, the petitioners have sought for directions to the second and third respondents to act strictly in accordance with the agreement dated May 19, 1997, and the board resolution of that date and also for directions that the continuance of these respondents as directors after May 19, 1997, is illegal, null and void and also for a direction to induct the petitioners as directors of the company.

3. In reply to C.P No. 59 of 2005 (Rajdhani) the respondents have submitted: The petitioners are not shareholders of the company. The first petitioner was a contractor to develop the colony for the company and he has manipulated the accounts of the company, and as such, respondents have filed a suit for recovery of dues and rendition of accounts. The petitioners are trying to grab the company after the respondents have paid over Rs. 25 crores through the Deputy Commissioner of Police, Economic Offences Wing, to various investors. As a matter of fact, the petitioners themselves have moved an application before the Delhi High Court stating that the agreement is time-barred. The petitioners were never interested in the company, and as such, it is wrong on their part to contend that because the company was in a bad shape, they did not take over the control of the company. The agreement dated May 19, 1997, was purportedly entered into between the first and second petitioners, on Class Sales P. Ltd., respondents Nos. 2 and 3 admittedly, the said agreement was not signed by the second petitioner and anyone on behalf of M/s. Class Sales P. Ltd. Therefore, the said agreement is no agreement in the eyes of law. Originally, the petitioners were interested in purchasing 50 plots of 505 sq. yds for a total consideration of Rs. 2.5 crores to be funded through their various sister concerns. With a view to grab the company through the second respondent for taking over the entire assets and liabilities of the company. Thereafter, the first petitioner as a director of the company started issuing various cheques on behalf of the company. M/s. Class Sales P. Ltd. also booked various plots in various schemes of the company and issued bogus receipts and misappropriated the amount collected. This has caused a number of investors to file criminal cases against the company. There is nothing on record of the Office of the Registrar of Companies that the petitioners had become directors of the company even though they had acted as such in issuing various cheques on behalf of the company. Only when criminal cases started, the petitioners ran away from the company to avoid any penal action. Because of that, the second respondent was forced to take over the company and has been facing all the criminal cases. Further, since the entire petition has been filed on the basis of the agreement dated May 19, 1997, the same has been barred by limitation. If the petitioners are desirous of taking over the control of the company, they should also assume the responsibility of dealing with all criminal cases by substituting their names in those cases in place of the second and third respondents. The efforts put in by the second and third respondents as directors of the company is evident from the fact that so far, they have paid more than Rs. 25 crores to the investors, they have settled around 28 cases under section 138 of the Negotiable Instruments Act by paying full amount, around 12 cases under Order 37 of the CPC have been settled out of court, the company has sold all vital properties and only registration is pending, the respondents are also prosecuting 52 civil cases which are pending before various civil and criminal courts.

4. In so far as C.P No. 54 of 2005 (Durga Builders) is concerned, the respondents have filed a reply which is more or less similar to the reply to C.P No. 59 of 2005.

7. Noting that prior to filing of the two company petitions, civil suit bearing No. 961 of 2004 was filed in this court by Durga Builders P. Ltd., and R.K Nanda in which Arun Mehra, his wife, Seema Mehra, and Deutsch Bank were impleaded as defendants, the Company Law Board held that, in view of pleadings of Mehras in written statement filed by them in Suit No. 961 of 2004, the two could not blow hot and cold and, therefore, were held entitled to no relief. Additionally, learned Company Law Board has noted that Nandas, as directors of Durga Builders P. Ltd., faced the brunt of criminal prosecution, Mehras could not claim any right in the two companies.

8. Unfortunately, the order of the Company Law Board is a little cryptic (as I read it), therefore, a few more facts need to be noted. Foundation of the dispute projected under both petitions were two agreements dated May 19, 1997.

9. Pertaining to Durga Builders P. Ltd., agreement dated May 19, 1997, executed between R.K Nanda and his wife (sellers) and the Mehras, including their company M/s. Class Sales P. Ltd., and M/s. True Value Trade Link P. Ltd., (buyers) records that the sellers hold 28,500 fully paid-up equity shares of Rs. 10 each in Durga Builders P. Ltd. That, for a total sale consideration of Rs. 8.55 lakhs, said shares were being sold to the buyers. Thus, price per share came to Rs. 30. The sale consideration is recorded as having been received. It is recorded that the sellers shall resign as directors of the company and, henceforth, would have no right, title or interest in the company.

10. Simultaneously, on May 19, 1997, a board resolution was passed by the Nandas in which Mehras joined as special invitees. The resolution passed is as under:

Resolved that Smt. Seema Mehra, w/o Shri Arun Mehra, r/o A-74, New Friends Colony, New Delhi, be and is hereby appointed as director on the board of the company with immediate effect.

Resolved that Mr. Arun Mehra, r/o A-74, New Friends Colony, New Delhi, be and is hereby appointed as director on the board of the company with immediate effect.

It was further resolved that the above changes be notified to the Registrar of Companies by filing suitable forms.

It was further resolved that Shri Arun Mehra be and is hereby appointed unanimously to be the chairperson of all the board meetings of the company in future.

Shri R.K Nanda informed the board that in order to consolidate and expand the activities of the company, an executive director be taken on the board. Hence, it was unanimously decided that, Shri S.K Gauba, general manager of the company be taken on the board as executive director.

Shri S.K Gauba be appointed executive director of the company and be authorised to deal with the banks, and sign cheques up to a limit of Rs. 10,000 (rupees ten thousand only).

It was further resolved to intimate the Registrar of Companies about the above changes on the board within the statutory period.

It was also resolved that all the records, books of account, vouchers, files, movable assets, bank passbooks, cheque books, income-tax files, house tax files, property ownership document files, assets files, etc., should be handed over to the new executive director of the company with immediate effect.

11. Regarding Rajdhani Housing Syndicate Ltd., agreement dated May 19, 1997, recorded similar seller and similar buyer. 4,800 fully paid up equity shares of Rs. 100 each were sold to the buyers at the face value. Sale consideration of Rs. 4.8 lakhs was received. Other terms of the agreement are pari materia with the terms recorded in the agreement pertaining to M/s. Durga Builders P. Ltd. Simultaneously, on May 19, 1997, board meeting of Rajdhani Housing Syndicate P. Ltd., was held in which Mehras joined as special invitees. Following resolution was passed:

Resolved that Smt. Seema Mehra, w/o Sh. Arun Mehra, r/o A-74, New Friends Colony, New Delhi, be and is hereby appointed as director on the board of the company with immediate effect.

Resolved that Mr. Arun Mehra, r/o A-74, New Friends Colony, New Delhi, be and is hereby appointed as director on the board of the company with immediate effect.

It was further resolved that the above changes be notified to the Registrar of Companies by filing suitable forms.

It was further resolved that Shri Arun Mehra be and is hereby appointed unanimously to be chairperson of all the board meetings of the company in future.

It was further discussed and resolved that the bank operations of the company be henceforth conducted by the new directors only and the bankers be informed of the same forthwith.

The bankers should be supplied with the copies of the following resolutions, cancelling the earlier authorisation of signatories for the operations of the bank accounts, except the post-dated refund issued for which a list is to be submitted to the concerned banks and empowering henceforth Mr. Arun Mehra, director and to operate the same.

Shri R.K Nanda informed the board that in order to consolidate and expand the activities of the company, an executive director be taken on the board. Hence it was unanimously decided that Shri S.K Gauba, general manager of the company, be taken on the board as executive director.

Shri S.K Gauba be appointed as executive director of the company and be authorised to deal with the banks, and sign cheques up to a limit of rupees ten thousand only.

Shri R.K Nanda placed before the board, certain share certificates and duly stamped completed and signed transfer deeds, for transfer of the same in the name of the transferee mentioned therein. He further informed the board that the consideration agreed to by the buyer and the sellers of the shares had been fully paid. He also informed the board that all the existing shareholders had been informed of the same, and that there was no objection to the sale nor was there any offer from any existing shareholder for the purchase of any part of the said shares. After due discussion, the board of directors unanimously approved the transfer and the following resolution was adopted.

Resolved that the following share transfers be and hereby approved unanimously.

S. No. Transferor Transferee Distinctive No. of shares 1. R.K Nanda Arun Mehra 2, 500 2. Promila Nanda Seema Mehra 2, 300

Shri R.K Nanda informed the board that he has received resignation letters from Smt. Promila Nanda and Shri R.K Nanda, from the directorship of the company. The matter was duly discussed and it was decided by the board that the same be accepted with immediate effect. The board of directors unanimously adopted the following resolutions in this regard.

Resolved that the resignation of Shri R.K Nanda and Smt. Promila Nanda from the directorship of the company and from the board of directors, be and is hereby accepted with immediate effect.

It was further resolved by the board to place on record appreciation of their services to the company from time to time.

It was further resolved to intimate the Registrar of Companies about the above changes on the board within the statutory period

It was further resolved that all power of attornies thereto before given to Shri R.K Nanda, or to Smt. Promila Nanda, or to any other person whosoever, be and are hereby revoked, nullified and cancelled.

It was also resolved that all the records, books of account, vouchers, files, movable assets, bank pass books, revenue books, income-tax files, house-tax files, property ownership document files, assets files, etc., should be handed over to the new executive director of the company with immediate effect.

12. Notwithstanding recitals in the two agreements, and seller's warranty to the effect that there were no adverse claims against the two companies, fact of the matter remains that large number of FIRs were registered by various buyers to whom representations were made by Nandas that they had a licence to develop a residential colony in Faridabad (Haryana). Over booking was done. Cases of cheating were registered against the Nandas.

13. Admitted position between the parties is that Mehras did not function as directors of the two companies. No intimation was furnished to the Registrar of Companies regarding change in the constitution of the board of directors of the two companies. Pursuant to the two agreements and the board resolutions, information as per Form No. 32 was not submitted.

14. What happened till the year 2004, is not known. But, in the year 2004, a civil suit registered as Suit No. 961 of 2004 was filed by the Nandas seeking declaration, permanent injunction and damages. Mehras were the defendants.

15. In the suit, Nandas stated that, somewhere, in the year 1995, Mehras approached them holding that they were directors of M/s. Class Sales P. Ltd. They wanted to purchase 50 plots in the colony being developed by Durga Builders P. Ltd., colony being called Edenburg City. That Mehras stated that they would make payment through two companies, M/s. Hindustan Commercial Investment Trust Ltd., and MGF Ltd., stated to be sister concerns of M/s. Class Sales P. Ltd. That on May 19, 1997, Mehras and Nandas entered into an agreement dated May 19, 1997. It was pleaded that the agreement was a game plan of Mehras to grab the companies of Nandas. Stating that after agreement dated May 19, 1997, was entered into, Arun Mehra opened an account in the name of M/s. Durga Builders P. Ltd., with Deutsch Bank, Nandas pleaded that Arun Mehra started operating the said account and employees of M/s. Class Sales P. Ltd., started booking various plots. Money received from buyers was credited into the account of Deutsch Bank. Money was misappropriated. It was pleaded that, notwithstanding the board resolution of May 19, 1997, Form No. 32 was never submitted to the Registrar of Companies. Stating that acts of Mehras were to the prejudice of Durga Builders P. Ltd., it was pleaded that Nandas were constrained to file the suit seeking the following prayers:

(i) Pass a decree of declaration in favour of the plaintiffs and against the defendants thereby declaring that, as of today, defendants Nos. 1 and 2 are neither the directors of the plaintiff-company, nor have they any role to play in the day-to-day affairs of the plaintiff-company and pass a decree of declaration thereby declaring agreement dated May 19, 1997, between plaintiffs and defendants Nos. 1 and 2 as null and void.

(ii) Pass a decree of permanent injunction in favour of the plaintiffs and against the defendants thereby restraining defendants Nos. 1 and 2, their agents, servants and representatives from acting as the directors of the plaintiff-company.

(iii) Pass a decree of declaration in favour of the plaintiffs and against the defendants thereby declaring that defendant No. 3 passed/honoured cheques issued by defendants Nos. 1 and 2 on behalf of plaintiff-company as directors of plaintiff-company in the years 1997 to 2001 towards running account with defendant No. 3.

(iv) Pass a decree of recovery of damages and compensation and interest at 24 per cent, per annum for 2 days to the tune of Rs. 30,05,000 in favour of the plaintiffs and against the defendants.

(v) Make the defendants jointly and severally liable for the abovesaid decree.

(vi) Award interest from the date of filing of this suit till the realisation of decree at the rate of 24 per cent, per annum (pendente lite and future interest).

(vii) Award the costs of the proceedings.

(viii) Pass any other order deemed fit and proper.

16. Since the Company Law Board has non-suited the Mehras on their pleadings in the written statement filed in Suit No. 961 of 2004, it would be important to reproduce relevant parts of the written statement in verbatim.

17. Stating facts as a prelude to the agreement dated May 19, 1997, Mehras pleaded as under:

That the contents of paragraphs Nos. 2, 3 and 4 of the suit are wrong and denied. In the present case the plaintiff-company in the year 1992–93 had awarded the works of development of Satellite Town Phase-I, Okhla Enclave, Faridabad, for a value of approximately Rs. 12.22 crores to CE Construction Ltd., company of defendant No. 1. The correspondence in this regard annexed along with the list of documents so as to certify that initially, the dealings between the plaintiff-company and the answering defendants executed the works in respect of the development of the Satellite Township at Faridabad. As such the dealings between the plaintiff-company and the answering defendants started in the year 1992–93 and not in 1995 as alleged in the corresponding paragraph of the plaint.

It is denied that M/s. Class Sales P. Ltd., were ever interested in purchasing any lots from the plaintiff much less in the Edenburg City colony. The defendants through their group company which also included M/s. Class Sales had only advanced directly or indirectly substantial sum to the plaintiff as loan, for the purpose of the present project. It was under this transaction that the plaintiff had given securities and created charge in favour of the defendant and his group company, inter alia, by depositing title deeds of various plots and other properties.

In so far as MGF is concerned, the defendants have no interest of stakes or for that matter, any control in the said company. The defendants as a business proposition had requested the said MGF Ltd., on the request of Mr. R.K Nanda, director of the company, to arrange finances for the plaintiff-company.

That the contents of the aforesaid paragraphs are wrong and denied. It is denied that there was any correspondence exchanged between plaintiffs Nos. 1 and 2 which even remotely suggested of any interest on the part of the defendants in purchasing any plot from the plaintiff. On the contrary, the relationship between the plaintiff and the answering defendant was that of lender and a creditor, under which the defendants through their group companies had arranged for substantial loan in favour of the plaintiff-company for the development of Edenburg City, Faridabad, and as intended in the foregoing paragraph, the plaintiff, against the said loans and payments due towards execution of works had provided divers securities and created charges in favour of the defendant and their group companies.

18. Pertaining to the agreement dated May 19, 1997, Mehras pleaded as under:

That in reference to paragraph 6 of the plaint, it is submitted that the agreement dated May 19, 1997, was entered between the plaintiff and defendant No. 1 with the sole intention of securing the substantial loan which the defendant through his group companies had advanced to the plaintiff. It is submitted that the plaintiff did not, in fact, fulfil substantial part of their obligation, under the said agreement. The only thing they did under the said agreement was the sale of shares of the plaintiff-company in favour of the defendants and their group companies. The defendants were never put on the board of the plaintiff-company. Moreover, the plaintiff also failed to clear all their liabilities and obligations under the said project. Despite, the said failures on part of the plaintiff, the defendants did not take any precipitative action as the real intention behind executing the said agreement was to safeguard/protect the various pending payments towards execution of works and loans which had been advanced by the defendants and its group companies in favour of the plaintiff. It is, therefore, submitted that the entire contention raised by the plaintiff in the present paragraph under reply dealing with the agreement dated May 19, 1997, are incorrect, afterthought, mischievous and contrary to the provisions of the said agreement itself and contemporaneous understanding between the parties. In so far as the averments made in the present paragraph under reply dealing with MGF Ltd., is concerned, the defendants are aware that loans were advanced by the said company in favour of the plaintiff-company. Apart from that the defendants are only aware that a suit has been filed by the said MGF Ltd., seeking for closure and sale of the properties of the plaintiff duly mortgaged by the plaintiff with the said MGF Ltd., as the plaintiff had failed to repay the loan granted to them by MGF Ltd. To the best knowledge of the defendants, the said suit is pending before this hon'ble court as on date. But what is curious is that the plaintiff has chosen to make certain averments regarding the said transaction with MGF Ltd., in the present paragraph under reply despite themselves admitting that the same has no relevance with the present dispute. Hence, the contents dealing with the transaction with MGF Ltd., in any event deserves to be struck off.

19. Further pleadings made in the written statement are as under:

With reference to the present para under reply, it is submitted that the defendants through its group companies arranged for substantial sum of money in order to enable the plaintiffs to pay to the Haryana Government the necessary amount in order to have the guarantee released, thus, resulting in 100 per cent, release of the margin money. It is against this particular financial help, that the plaintiffs made a deposit of Rs. 2 crores with defendant No. 3 as a security and authorised defendant No. 1 to operate the said account. Under the said arrangement, defendant No. 1 was authorised to issue cheques of the plaintiff-company to make the necessary withdrawals of the interest amount which were getting accrued in the said account against the said deposit of Rs. 2 crores.

It was only on the completion of the works and payments of external development charges which would have released these funds on which the right was given to the defendant to take monthly interest accrued on the FRD till such time of release of B.G This was the limited role which defendant No. 1 had in connection with the plaintiffs account which under no circumstances can amount to defendant No. 1 taking over the financial control of the plaintiff-company…

That the contents of paragraph No. 11 of the suit are wrong and denied. With reference to the present paragraph under reply, it is submitted that the question of filing Form No. 32 or any other form did not arise as defendants Nos. 1 and 2 had never become the directors in the plaintiff-company. In fact, the defendants never functioned as a director of the company even otherwise. It is rather incomprehensible to even suggest that the defendants were allowed to function as a director by plaintiff No. 2, i.e, managing director of plaintiff No. 1 without there being a valid appointment. In fact, the present attempt on the part of the plaintiffs shows the ulterior motive on the part of the plaintiffs to use the present suit for some collateral purpose which cannot be permitted. Significantly, Mr. R.K Nanda is permanent director of M/s. Durga Builders as per article and memorandum of association.

20. Arguing Company Appeal No. 8 of 2006, which pertains to Rajdhani Housing Syndicate P. Ltd., Shri Parag Tripathi, learned senior counsel, urged that pleadings in the Suit No. 961 of 2004 related to M/s. Durga Builders P. Ltd., and, therefore, the Company Law Board gravely erred in disposing of C.P No. 59 of 2005 by placing reliance on the pleadings in the said suit.

21. In addition to the aforesaid plea, other pleas raised were common to the pleas raised by Shri Aman Lekhi, learned senior counsel, who appeared in Company Appeal No. 7 of 2006, pertaining to M/s. Durga Builders P. Ltd.

22. Learned senior counsel, Shri Parag Tripathi and Shri Aman Lekhi, urged that factum of the agreements dated May 19, 1997, was not in dispute. That board resolutions were passed on May 19, 1997, was also not in dispute. It was urged that, as held in the report published as Needle Industries (India) Limited v. Needle Industries Newey (India) Holding Ltd., [1981] 51 Comp Cas 743 : (1981) 3 SCC 333, a conduct which lacks in probity and is unfair or causes prejudice to the exercise of proprietary rights as a shareholder constitutes an act of oppression. Elaborating further, placing reliance upon the report published as Gajarabai Patny v. Patny Transport P. Ltd., [1966] 36 Comp Cas 745 (AP), counsel urged that refusal by the Nandas to register Mehras as shareholders despite agreeing to transfer their shareholding and accepting consideration, lacks in probity and has been judicially recognised as unreasonable, amounting to acts of oppression. Learned counsel urged that the said decision held that conduct of the directors in refusing to transfer shares after receiving money amounts to oppression, inasmuch as it involves violation of the conditions of fair play on which every shareholder who entrusts his money to the company is entitled to rely.

23. Relying upon the report published as V.B Rangaraj v. V.B Gopalakrishnan, [1991] 4 JT SC 430 : [1992] 73 Comp Cas 201, counsel urged that a vendee cannot be denied registration of shares purchased by him. Counsel urged that refusal to register the shares in favour of the Mehras by the Nandas was intended to retain control over the affairs of the two companies and hence interfered with the democratic rights of the majority of members to manage the affairs of the companies. It was urged that the effect of the illegal acts committed by Nandas was deprivation for all times to come of the rights and privileges which Mehras could have enjoyed as members of the two companies. Counsel relied upon the reports published as Kumar Exporters P. Ltd. v. Naini Oxygen and Acetylene Gas Ltd., [1986] 60 Comp Cas 984 (All); B.R Kundra v. Motion Pictures Association (No. 1), [1978] 48 Comp Cas 536 (Delhi) and Tea Brokers P. Ltd. v. Hemendra Prosad Barooah, [1998] 5 Crl. LJ 463 (Cal), to support the said contention.

24. To overcome the observations made by the Company Law Board, while denying relief to the appellants that there was inordinate delay in bringing the action for the reason agreements and board resolutions were dated May 19, 1997, and the company petitions were filed in the year 2004, learned counsel relied upon the decision reported as Surinder Singh Bindra v. Hindustan Fasteners P. Ltd., [1990] 69 Comp Cas 718 : AIR 1990 Delhi 32, to urge that where acts of oppression and mismanagement continued, it being a continuing cause of action, limitation, if any, would not run as long as oppression continued. Counsel urged that each day gave rise to a fresh cause of action as long as shares were not transferred in the name of the Mehras and the Mehras were not put in control of the two companies.

25. Questioning the finding of the Company Law Board that Nandas have incurred expenses of nearly 25 crores in settling claims of third parties post 1997, learned senior counsel stated that the finding was an ipse dixit finding of the Company Law Board. Counsel urged that best evidence was the books of account of the two companies, which were not produced. In Hiralal v. Badkulal, AIR 1953 SC 225, counsel urged that, where a party in possession of documentary evidence withholds the same, adverse presumption needs to be drawn against the party that had documentary evidence been produced, contents would have gone against the said party.

26. Counsel urged that the order of the Company Law Board failed to note investment of 10 crores made by the Mehras in the companies, as a consequence, counsel urged that equities were not fairly considered by the Company Law Board.

27. Citing the decisions reported as Vijay Krishan Jaidka v. Jaidka Motor Co. Ltd., [1997] 1 Comp. LJ 268 (CLB); R.R Rajendra Menon (No. 2) v. Cochin Stock Exchange Ltd., [1990] 69 Comp Cas 256 (Ker) and Dwarka Prasad Agarwal v. Ramesh Chandra Agarwala, [2003] 117 Comp Cas 206 (SC), counsel urged that pendency of Suit No. 961 of 2004 was no bar for the Company Law Board to grant the relief prayed for.

28. Citing the report published as Pukhraj D. Jain v. G. Gopalakrishna, (2004) 7 SCC 251 : AIR 2004 SC 3504, counsel urged that where a proceeding can be disposed of purely on legal points, without taking evidence, it is open to the court to decide relevant issues and not keep the proceeding pending merely because a previously instituted proceeding was pending in a court of competent jurisdiction.

29. Citing the report published as Shri Udhav Singh v. Madhav Rao Scindia , [1976] 2 SCR 246, counsel urged that the case of the Nandas that the agreement dated May 19, 1997, was a bogus agreement, was liable to be ignored inasmuch as material particulars to support how agreement was bogus, was not pleaded.

30. Lastly, counsel urged that the Company Law Board has gravely erred in doubting sale consideration passing from Mehras to Nandas when shares were sold, ignoring that payments were paid by cheque. Plea by Nandas that share scrips were stolen was an afterthought as it surfaced much after litigation commenced between the parties.

31. I am eschewing a few minor contentions urged which, in my opinion, are wholly irrelevant for decision of the two appeals as the Company Law Board has not predicated its findings on the said issues, though it has noted the same as submissions made by Nandas. But, for the sake of record, I note that it was submitted by learned senior counsel that absence of signatures on the two agreements by M/s. Class Sales P. Ltd., and M/s. True Value Trade Link P. Ltd., as also Mrs. Uma Mehra was neither here nor there, for the reason as held in the report published as Rajendra Pratap Singh v. Rameshwar Prasad, (1998) 7 SCC 602, mere absence of signatures of a party on a document is not conclusive of no agreement. It was held, in the said decision, that signatures of a party on an instrument, raises a presumption of the fact that the agreement was entered into.

32. Counsel also urged that Nandas had got a false suit filed, purportedly through one Vishesh Jain, the suit filed was ultimately dismissed for non-prosecution.

33. Since the Company Law Board, save and except noting the aforesaid two aspects, has not based its finding on the said facts, I leave the issue pertaining to the suit filed by Vishesh Jain and no signatures of three parties on the agreement, at that, noting that nothing turns thereon.

34. Shri Sharad Aggarwal, learned counsel for the Nandas, urged that complete averments were made as to why agreement dated May 19, 1997, were bogus agreements. Counsel urged that the Company Law Board rightly opined that, in view of the civil suit filed, i.e, Suit No. 961 of 2004, where the issue raised was whether the agreements dated May 19, 1997, are void, no relief ought to be granted. Counsel further urged that as pleaded by Mehras in their written statement, Mehras themselves pleaded that the two agreements were to secure investments made by Mehras through their companies in the project of M/s. Durga Builders P. Ltd., and M/s. Rajdhani Housing Syndicate Ltd., Rs. 10 crores, stated to have been invested by Mehras was disputed by Shri Sharad Aggarwal. Alternatively, counsel stated that the said investment was a business investment by the companies of Mehras in the project of Durga Builders and Rajdhani Housing Syndicate Ltd. Counsel urged that the investment was not post 1995–97. Counsel urged that the project Edenburg City was a composite project where land of Durga Builders, Rajdhani Builders and two other entities of Nandas was pooled and it was not possible to segregate the lands of the two companies.

35. Though various questions of law have been framed by the appellants in the two appeals, the only question which arises for consideration is whether, in view of the stand taken by Mehras in Suit No. 961 of 2004, finding returned by the Company Law Board is legal and valid.

36. From the facts noted above, it is apparent that the agreement dated May 19, 1997, and the board resolutions of even date were, admittedly, not given effect to in relation to the affairs of the two companies. Mehras never came on the board of directors of the two companies. No information as per Form No. 32 was furnished to the Registrar of Companies pertaining to the changes effected in the board of the two companies. The share certificates, duly endorsed, were handed over to the Mehras but the transfer was not recorded in the register of members of the companies.

37. Under the two agreements, Nandas had to walk out of the two companies. The agreements record that the entire records of the two companies has been taken over by the buyers. As a matter of fact, this has not happened.

38. No worthwhile explanation has been given by Mehras as to why, having purchased the entire equity of the two companies, they did not take steps to file Form No. 32 and as 100 per cent, shareholders take control of the company.

39. A faint explanation was furnished that after agreements were entered into, Mehras realised that the warranties held out to them that there was no major litigation faced by the companies, was found to be incorrect as Nandas had cheated investors by over-booking plots and FIRs were registered. Therefore, Mehras did not take control of the companies till Nandas cleared the dues of the duped investors.

40. The argument, though attractive, has to be noted and rejected for the reason if this was so, agreement between the parties became voidable, at the instance of Mehras. It was open to the Mehras to avoid the agreements. It was equally open to them to enforce the agreements while reserving right to seek damages from Nandas.

41. Having chosen not to adopt either course of action, a strong presumption arises in favour of Nandas that the agreements were intended to secure the investments made by Mehras in the ongoing project of the two companies.

42. It is true that while pleading that the agreements dated May 19, 1997, are bogus, Nandas have not elaborated with clarity as to what facts are relied upon to establish that the two agreements are bogus, but pleadings have to be read meaningfully and with an intention to find whether the opposite party has meaningfully understood the case pleaded.

43. I need not elaborate further for the reason that in the written statement filed in Suit No. 961 of 2004, Mehras themselves have pleaded that the agreements were to secure the investments by them in the project of the two companies.

44. It is a careless use of words, by counsel, who drafted the pleadings on behalf of the Nandas. What is intended to be conveyed is that there was a distinct oral understanding between the parties that the two agreements would not be given effect to and were actually intended to secure investments by Mehras in the project of the two companies.

45. Conduct of the parties shows that having got the share certificates, duly endorsed in their favour, by not taking any steps to control the two companies, Mehras intended to retain lien over the shares to secure their investments made in the two companies.

46. Acquiescence by a party in the conduct of which he complains, disentitles the party to obtain relief (see R.A Noble and Sons (Clothing) Ltd., In re, [1983] BCLC 273).

47. Though delay in seeking relief under sections 397 and 398 of the Act, will not, by itself, bar the remedy, but where delay is evidence of acquiescence or condonation of a wrongful act, the court may not exercise its discretion in granting relief (see Hungerford Investment Trust Ltd. v. Turner Morrison and Co. Ltd., [1972] 1 ILR Cal 286).

48. Assuming that Mehras are right, the delay, in the instant case, evidences acquiescence on the part of Mehras and amounts to condonation of the wrongful acts (if any) of Nandas.

49. Though pendency of a civil suit between the same parties over the same subject-matter would not be a bar to grant relief under sections 397 and 398 of the Act, but the issue would have to be considered in the context of the cause of action pleaded in a civil suit, if filed, and a company petition.

50. Where the issue in the two proceedings is common, and as in the instant case, centres on the issue whether the two agreements dated May 19, 1997, were serving a collateral purpose or not and whether parties intended to sell the shareholding by one group to the other or whether intention was to secure the investment made by the so-called buyers in the two companies, additionally, complicated questions of fact arising out for consideration, pendency of a civil suit would be a relevant circumstance to deny relief.

51. Though the suit does not relate to Rajdhani Developers but it cannot be ignored that land assets of Rajdhani Developers and Durga Builders have been pooled. That is why appellants impleaded Durga Builders as a respondent in petition relating to Rajdhani Developers.

52. Principal reason given by the Company Law Board in denying relief is the pleadings of the parties in Suit No. 961 of 2004 where Mehras have taken a stand that the two agreements were intended to secure their investment in the two companies.

53. All other observations which were questioned by learned counsel for the appellants are stray observations and, to my mind, are not the signature tune of the order impugned.

54. I dismiss the two appeals holding that the Company Law Board has arrived at correct findings taking into consideration the pleadings made by Mehras in Suit No. 961 of 2004.

55. The usual mantra. Nothing in this order would be construed as an expression on the merits of the rival version qua the agreements dated May 19, 1997. Issue would be decided in Suit No. 961 of 2004 after evidence is led. Observations made in the present order are only prima facie, finding for disposal of the appeals.

56. No costs.