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Section 186 in The Companies Act, 1956
Section 111 in The Companies Act, 1956
The Companies Act, 1956
World Wide Agencies Pvt. Ltd. And ... vs Mrs. Margarat T. Desor And Ors on 19 December, 1989
Article 25 in The Constitution Of India 1949

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Company Law Board
Debasish Dutta vs B.G. Somadder & Sons (P.) Ltd. on 15 February, 2002
Equivalent citations: 2003 115 CompCas 70 CLB
Bench: S Balasubramanian, C Das

ORDER C.R. Das, Member

1. This is a petition filed under Section 111 of the Companies Act, 1956 ('the Act') by the petitioner, Shri Debasish Dutta, seeking relief, inter alia, that the respondents may be directed to register transmission of 400 equity shares held by Fani Dutta (since deceased) in B. G. Somadder & Sons P. Ltd. ('the respondent company'), in the name of the petitioner and the register of members be rectified accordingly. The petition has been filed on 24-8-2001.

2. Briefly the facts of the case, as stated in the petition, are that the respondent-company was incorporated on 17-1-1990, under the provisions of the Companies Act, 1956, having its registered office at 9, Bakery Road, Hastings, Kolkata, 700 022. The authorised share capital of the company is Rs. 5 lakhs divided into 5,000 equity shares of Rs. 100 each and the issued, subscribed and paid-up share capital is Rs. 1 lakh divided into 1,000 equity shares of Rs. 100 each. The respondent No. 2, Shri Kali Das Somadder is the Chairman-cum-Managing Director of the respondent-company and is the owner of 600 fully paid equity shares of Rs. 100 each in the respondent-company. The petitioner is the director of the respondent-company and an heir and son of one Fani Dutta (since deceased) and has inherited and succeeded to 400 fully paid equity shares of Rs. 100 each in the respondent-company, which he claims to constitute 40 per cent of the total issued, subscribed and paid-up capital of the respondent-company. Fani Dutta (since deceased), father of the petitioner had extensive knowledge in the matter of clearing and forwarding of cargo and was a very well-known person in the shipping circle. The partnership firm, B.G. Somadder & Sons was not doing good business and in 1977 the said Fani Dutta was invited by the partners of B.G. Somadder & Sons to join partnership firm and to bring his expertise in running the business of the firm. The said Fani Dutta was entrusted by the partners of the said firm to run the entire business of the firm. However, the Somadder brothers started squabbling amongst themselves which caused hindrance to the expansion of the business of the firm. With the intervention of Fani Dutta, the disputes amongst three Somadder brothers were settled and Kali Das Somadder, who was the eldest of the three brothers, was allowed to become the proprietor of the firm while the other two brothers, Chandidas Somadder and Debidas Somadder, retired from the partnership firm. The said two brothers gave up their interest and claim in the partnership of the firm and were duly compensated by receiving payment. Upon retirement of the said two brothers from the partnership firm in 1983, the partnership firm stood dissolved and the said Kali Das Somadder became the sole proprietor of B. G. Somadder & Sons but the running, supervision and administration of the business was entrusted by him in the hands of Fani Dutta. The said Kali Das Somadder never showed any interest in running of the business and was content to leave it entirely to the said Fani Dutta who in course of time made the proprietorship concern prosper more. The respondent No. 2 had no occasion to doubt and never doubted the honesty and integrity of Fani Dutta right up to the date of his death. The respondent No. 2 always received payment of his dues from the firm and was fully satisfied with the maintenance of accounts, management of the affairs of the firm and running of the business by Fani Dutta and never interfered in such affairs. The relationship between the two was always very cordial. The business gradually expanded and its profit enhanced considerably as well appears from the schedule annexed hereto, to which the respondent No. 2 expressed great satisfaction. The respondent No. 2 always held the said Fani Dutta in high esteem and regard because of his sincerity, integrity and industry. When the proprietorship concern was converted into a private limited company, the respondent No. 2 had over drawn and had a debit balance against his account at the time of incorporation of the respondent-company. In 1990, the respondent-company was incorporated as a private limited company with the respondent No. 2 and the said Fani Dutta as the two shareholders. The respondent-company was formed by taking over the entire assets and liabilities of the proprietorship firm. The net valuation of business of B.G. Somadder & Sons to operate as customs authorised clearing agents as a going concern as on the date of incorporation was assessed and was paid to the respondent No. 2 by allotting fully paid-up equity shares of the respondent-company. The said company was incorporated with two subscribers initially. Shri Kali Das Somadder, the respondent No. 2 subscribed to 200 equity shares of the respondent-company and Fani Dutta (since deceased) subscribed 400 equity shares for cash at par. Later the respondent No. 2 was allotted 400 fully paid up equity shares of the respondent-company for consideration other than cash for the private limited company taking over the running business of the proprietary firm. Thus, after the allotment of further 400 equity shares, Shri Kali Das Somadder became the owner of 600 equity shares. Fani Dutta continued to hold 400 fully paid-up equity shares of the respondent-company. It was all along understood by and between the respondent No. 2 and Fani Dutta that the business of the respondent-company would be run on the partnership style and that Fani Dutta would run and administer the said business and be paid Rs. 5,000 per month and the respondent No. 2 as a non-active partner of the said business would enjoy the benefits and profits thereof at the rate of Rs. 7,500 per month. The respondent No. 2 and Fani Dutta were appointed as permanent directors for life, in keeping with the partnership principle, the respondent-company all along had two shareholders, namely, the respondent No. 2 and Fani Dutta. Both of them had equal right pertaining to finance and each of them were empowered to operate bank accounts and to give discharge in respect of any liabilities. Besides, the articles of association of the respondent-company provided that in the event of issuance of further shares in future, the same would be allotted to existing members in accordance with their ratio of shareholding in the respondent-company. The articles of association of the respondent-company also provided that in the event of death of any of the members, the heirs of such member would succeed to the shareholding of the deceased member to maintain the continuity of the business in the hands of the two families, i.e., the family of the respondent No. 2 and that of Fani Dutta, since deceased. The petitioner was appointed as chief executive of the respondent-company in the year 1994 and along with his father ran the affairs of the company with utmost efficiency. The respondent-company achieved all India status as clearing and forwarding agents in the shipping circle. Fani Dutta became a trustee of Calcutta Port Trust and President of Calcutta Clearing Agents' Association. It was all along understood by and between the respondent No. 2 and the said Fani Dutta that in the event of death of Fani Dutta, his son, the petitioner herein, who is the only heir and legal representative would step into the shoes of his father and would be given the same rights and powers as enjoyed by the said Fani Dutta. It was pursuant to the said arrangement and/or understanding that when Fani Dutta was not keeping good health, a resolution dated 29-11-2000, was passed by the Board of Directors of the respondent-company authorizing the petitioner to sign all cheques and documents relating to the bank accounts and thereby the petitioner was given the same and/or similar powers as enjoyed by his father. The petitioner was appointed as a director pursuant to a resolution dated 18-12-2000 and pursuant to another resolution dated 18-12-2000, the petitioner was authorized to sign documents, cheques and other similar powers as a director in line with the board resolution dated 29-11-2000. On 30-12-2000, Fani Dutta died intestate leaving the petitioner as the sole heir and legal representative. Upon the death of Fani Dutta, the respondent No. 2 has suddenly changed his attitude towards the petitioner and has been trying to back out from the aforesaid agreement in breach and in derogation of the partnership principles applicable to the said company. The respondent No. 2 is not taking steps to convene the Board Meetings to transmit and/ or transfer the shares of Fani Dutta (since deceased) to the petitioner to enable the petitioner to exercise his rights as a member of the respondent-company in spite of several verbal requests and subsequently followed by a letter of demand. The respondent No. 2 has not convened any Board Meetings as yet for transmitting the shares to the petitioner and has informed the bankers of the respondent-company that only the respondent No. 2 is entitled to sign cheques, etc., upon the death of Fani Dutta as the Chairman-cum-Managing Director. It is also alleged that the aforesaid conduct of the respondent No. 2 is in breach of understanding/agreement between the respondent No. 2 and the said Fani Dutta and the petitioner, in running the business of the respondent-company and is harsh, oppressive, burdensome and unfairly prejudicial to the petitioner. It is further alleged that the respondent No. 2 instead of taking steps to convene Board Meeting to transmit the shares in favour of the petitioner to enable the petitioner to exercise the rights as a member of the respondent-company and treat him as an equal partner in the business, is bent upon creating the deadlock in the administration of the respondent-company. In fact, no Board Meeting of the company was held since January, 2001 till date though under the law, at least one meeting in each quarter should have been held in the meantime. By a letter dated 15-6-2001 and several verbal requests before the said letter, the petitioner had requested the respondents to transmit the said shares which rightfully belong to the petitioner. It is further alleged that the respondent No. 2 has been creating problems in smooth functioning of the business of the respondent company, by illegally denying the petitioner his rights and entitlement to sign cheques and to conduct other financial dealings of the respondent company, after the death of Fani Dutta. The petitioner claimed that he was appointed as a director of the respondent-company pursuant to the resolution dated 18-12-2000, of the respondent-company in accordance with the articles of association of the respondent-company. It is further alleged that instead of transmitting the shares to the petitioner, the respondent No. 2 is now wrongfully trying to induct his son, who never applied himself or got himself involved in the business of the respondent-company, into the Board of the company. The petitioner claimed that as an heir of Fani Dutta, he is entitled to become the member of the said company and enjoy all rights as shareholder thereof. Aggrieved, the petitioner sought directions of CLB upon the respondents to transmit the 400 fully paid-up equity shares held by Fani Dutta (since deceased) in the name of the petitioner and the register of members and all other relevant records of the company be rectified by registering the said shares in the register of members of the respondent-company, in the name of the petitioner.

3. The respondents filed their reply to the petition refuting all the allegations made against them in the petition. The respondents have stated that in or about the year 1920, B. G. Somadder, since deceased, father of the respondent No. 2, started carrying on business as a licensed custom house agent at Calcutta in his own name. In or about 1973, the said B. G. Somadder formed a partnership in the name of B. G. Somadder & Sons of which the said B. G. Somadder and his three sons, namely, Shri Debi Das Somadder, Shri Chandi Das Somadder and the respondent No. 2 herein were partners. In or about 1975, after the death of B.G. Somadder, the partnership firm B. G. Somadder & Sons was reconstituted and comprised of the respondent No. 2, Shri Debi Das Somadder and Shri Chandi Das Somadder as partners of the said firm. Thereafter, in or about 1983, the said partnership firm become a sole proprietorship concern of the respondent No. 2 on the retirement of Shri Debi Das Somadder and Shri Chandi Das Somadder as partners. Since then, B. G. Somader & Sons continued a sole proprietary concern of the respondent No. 2, till the incorporation of B.G. Somadder & Sons (P.) Ltd. the said partnership firm which later became a sole proprietorship concern of the respondent No. 2 had earned a tremendous goodwill in the market and had a great reputation. Thus, at all material times and till the incorporation of the respondent-company, the respondent No. 2 was carrying on business as licensed custom house agent under the name and style of B.G. Somadder & Sons as a sole proprietor thereof from his office at No. 19, Strand Road, Calcutta 700 001. During the period between 1947-48 and 1955-56, one Fani Dutta was in the employment of the said B.G. Somadder as a Jetty Sarkar. Thereafter, in or about 1956, the said Fani Dutta left the employment of B.G. Somadder, since deceased. In or about 1980, when the respondent No. 2 was one of the partners of B.G. Somadder & Sons, the respondent No. 2 at the request of the said Fani Dutta, employed him in the firm as a Financial Advisor. Later, in or about 1983, the partnership firm, B.G. Somadder & Sons converted into a sole proprietorship business of the respondent No. 2 and the said Fani Dutta continued as an employee of the respondent No. 2's proprietorship concern. In course of time, the respondent No. 2 developed faith and confidence in the said Fani Dutta as he used to look after the business of B.G. Somadder & Sons, the proprietary concern of the respondent-company in the capacity of Financial Advisor. In the latter part of eighties, the respondent No. 2 started developing various ailments as a result whereof it became difficult on the part of the respondent No. 2 to regularly participate in the day-to-day business of his sole proprietary business. During the relevant time, it was represented by the said Fani Dutta that in view of indisposed health of the respondent No. 2, he need not actively participate in the day-to-day business and could entrust the same to the said Fani Dutta. Due to the reason of long association of the said Fani Dutta as an employee of the family business and further due to frequent indisposition health of the respondent No. 2, the said respondent entrusted the day-to-day business of his proprietary concern unto the said Fani Dutta. Though the respondent No. 2 used to attend his business frequently for the purpose of overall management and signing various documents as a licensed custom house agent. In or about 1989, it was decided by the respondent No. 2 that the said proprietary business of the respondent No. 2 be converted into a private limited company. During the relevant times, it was represented by the said Fani Dutta that he was willing to join the proposed company intended to be promoted by the respondent No. 2, as a minority shareholder, which was accepted by the respondent No. 2 who agreed to allot 40 per cent of the total issued and subscribed share capital of the proposed company in favour of the said Fani Dutta. Thereafter, on or about 22-12-1989, the respondent No. 2 and the said Fani Dutta subscribed to the articles of association of the respondent-company and agreed to own the shares in the capital of the company, in the manner, i.e., 600 equity shares of Rs. 100 each to be held by the respondent No. 2 and 400 equity shares of Rs. 100 each to be held by the said Fani Dutta which shareholding pattern continues to be same till date. In or about January, 1990, the respondent-company was formed with the objects, inter alia, to take over the business of B.G. Somadder & Sons, of which the respondent No. 2 was the sole proprietor, as a going concern at a net valuation of Rs. 40,000 which was paid to the respondent No. 2 in form of 400 fully paid equity shares of Rs. 100 each in the capital of the respondent-company. Under the provisions of articles of association, the respondent No. 2 and the said Fani Dutta were appointed as the respondent company's permanent Directors not liable to retire. The respondent No. 2 was appointed as Chairman-cum-Managing Director of the respondent-company having additional powers as more fully stated in the Article 25 of the articles of association. From time to time Chartered Accountant of the said company along with various employees were appointed on the basis of advice of the said Fani Dutta. From time to time and till the year 2000, the meetings of the Board of Directors and annual general meetings of the shareholders of the respondent company were duly held. In or about 1995, it was represented by the said Fani Dutta that he wanted to appoint his son, the petitioner herein, as the Chief Executive of the respondent-company. The respondent No. 2 who had full faith and confidence in the said Fani Dutta consented to such appointment of the petitioner and on or about 1 -2-1995, the petitioner was appointed as Chief Executive of the respondent-company with effect from December, 1994. In or about middle of the year 2000, the said Fani Dutta started keeping an indisposed health and was often undergoing medical treatment. In or about November, 2000, it was represented by the said Fani Dutta that since he was not keeping well all the time and his signature pertaining to the bank transactions differed and the petitioner was the chief executive of the respondent-company, for the purpose of convenience, the petitioner be authorised to sign all cheques and documents pertaining to the bank accounts of the respondent-company with UCO Bank, Hastings Branch, Calcutta and Punjab National Bank, Netaji Subhas Extension, Calcutta, until further instructions to which the respondent No. 2 agreed. On the basis of the aforesaid understanding, minutes of the meeting of the Board of Directors was prepared and was signed by the respondent No. 2 as the Chairman-cum-Managing Director of the respondent-company. In or about December, 2000, the said Fani Dutta, being seriously ill, was admitted in a nursing home and it was apprehended that it might take a long time for his recovery. Since the said Fani Dutta along with his son, the petitioner herein, who was the Chief Executive of the respondent-company were looking after the day-to-day business, on or about 18-12-2000, on the basis of the representation of petitioner, it was decided by the respondent No. 2 that till the time of recovery of the said Fani Dutta, in order to run the day-to-day business of the respondent-company, under an effective Board, the petitioner be appointed as an additional Director of the respondent-company. Accordingly, on or about 18-12-2000, the respondent No. 2, as the Chairman-cum-Managing Director, passed a resolution appointing the petitioner as an Additional Director of the respondent company. On or about 18-12-2000, another resolution was passed by the respondent No. 2, as the Chairman-cum-Managing Director of the respondent-company, whereby and whereunder the petitioner was authorized to sign documents, cheques, promissory notes, etc., pertaining to the bank transaction with the banks of the respondent-company. The respondents contended that the said purported resolutions dated 29-11-2000 and 18-12-2000, are not valid, ultra vires and not binding upon the respondents. On or about 30-12-2000, the said Fani Dutta succumbed to his illness and died at Calcutta. In view of the provisions contained in Articles 14 and 15 of the articles of association of the respondent-company and Section 260 of the Act, the petitioner in effect has been appointed as an Additional Director of the respondent-company who is liable to vacate his office at the next annual general meeting of the company inasmuch as such appointment was made by the respondent No. 2 as the Chairman-cum-Managing Director and not in a meeting of the shareholders or Board of Directors of the respondent-company. Since the date of incorporation, the respondent company has been carrying on business as the licensed customs house agent. Such license was issued on the basis of license existing in favour of the respondent No. 2 as the sole proprietor of B.G. Somadder & Sons, prior to incorporation of the respondent-company. The respondent No. 2 is the person actually engaged in the work of custom house agent on behalf of the respondent company holding the equivalent qualification of Regulation 9 of Customs Act, 1962. The respondent No. 2 is holding his Customs House Agent (CHA) qualification since the time of death of his father B.G. Somadder, in 1975. The said custom house agent's license in favour of the respondent-company was granted on 19-2-1990, by the Collector of Customs, Calcutta and on the basis of such license, the respondent-company was authorized to transact business as custom house agent at any customs station. The said license was initially valid for a period of three years from the date of its issue. From time to time and lastly on 16-2-2001, the said license has been renewed and the same is valid for five years with effect from 19-2-2001. Since after death of the said Fani Dutta and till the time, no one mentioned hereinafter, applied to the respondent-company for transmission of the shares held by the said Fani Dutta (since deceased). At present there is only one shareholder, i.e., the respondent No. 2 herein left in the capital of the respondent-company which is below the minimum two shareholders as required in the instant case. Since the number of members/shareholders of the respondent-company has fallen below two and in view of the facts stated hereinbefore, it has become impracticable to call any general meeting of the shareholders. The only shareholder being the respondent No. 2 herein is left in the respondent-company and it is not possible to hold any general meeting by a shareholder unless, however, an order is made by CLB to such effect. Such general meeting is required to elect and appoint a valid Board of Directors of the company in accordance with the wishes of the majority shareholding and pass and/or adopt necessary resolutions. In view of death of the said Fani Dutta and there being only one shareholder, being the respondent No. 2 herein, an order became necessary in the larger interest of the company for covering a deadlock otherwise irremovable. Furthermore, in the event, a meeting is called or conveyed by the respondent No. 2 otherwise than under a direction of the CLB, it may be contended to be invalid by the petitioner and the respondent No. 2 who is majority shareholder would be exposed to uncertainties and as such a position has arisen which makes it impracticable to convene a meeting in any manner in which a meeting of the company may be called.

4. In the aforesaid facts and circumstances, the respondents have made an application under Section 186 of the Act, being Company Petition No. 205 (186)/ERB/2001(B.G. Somadder & Sons (P.) Ltd v. Sri Debashis Dutta) before the CLB for the following relief:

An order be made directing a general meeting of the shareholder be called, held and conducted and authorizing the petitioner No. 2 to conduct such meeting as the Chairman and only shareholder of the Petitioner No. 1 and adopt resolutions, inter alia, as mentioned in the draft resolution, with or without modification, which is set out below:

"Resolved that Shri Biswanath Somadder, son of Shri Kali Das Somadder, is hereby appointed as the Director of the company":

After making the said application under Section 186 of the Act, the petitioner herein by a letter dated 15-6-2000, has asked the respondents for transmission of the said 400 shares of Fani Dutta (since deceased) in the respondent-company in favour of the petitioner. The respondents have contended that the said purported letter is not in compliance of legal requirement and the same is wrongful, illegal and without any basis. The respondents have denied that the petitioner is the director of the said company or an heir of Late Fani Dutta or has inherited or succeeded to 400 fully paid equity shares of Rs. 100 each in the share capital of the respondent-company. The respondents further contended that the Board Meetings dated 29-11-2000 and 18-12-2000 and the resolutions passed therein and each one of them was illegal and ultra vires for the reasons that:

(a) in the purported Board Meetings said to be held on 29-11-2000 and 18-12-2000, the said Fani Dutta (since deceased) was not present;

(b) in both of the said purported Board Meetings, the quorum, which is statutorily required to be present (i.e., minimum 2) was not present;

(c) the petitioner has not annexed any copy of the resolution of the Board Meeting dated 18-12-2000; and

(d) the said Fani Dutta was not present in the purported Board meetings dated 29-11 -2000 and 18-12-2000.

It has also been alleged that on or about 1-1-2001, a meeting was held between the petitioner and the respondent No. 2 at the registered office of the respondent-company, wherein it was decided that henceforth, all cheques, documents, etc., relating to bank transaction of the respondent-company would be signed only by the respondent No. 2 till further decision was taken by the respondent No. 2 in that regard, which was consented to on the part of the petitioner. The said letter dated 1-1-2001, was written to the bankers of the respondent-company on the basis of the aforesaid decision. The petitioner duly signified his consent to such decision by subscribing his signature on the said letter dated 1-1-2001 and is relied upon by the petitioner. The said resolutions dated 29-11-2000 and 18-12-2000, insofar as the signing authority, if any, is concerned have been superseded by the letter dated 1-1-2001 which was written as aforesaid and subscribed to by the petitioner as well. Under the circumstances, the petitioner is estopped from contending otherwise and the allegations made by the petitioner in that regard are not tenable under the principles of estoppel and/or waiver and/or acquiescence and/or the principles analogous thereto. It has also been contended that till date the petitioner has neither been able to prove himself as the sole heir/successor of the said Fani Dutta nor produced any succession certificate or letter of administration or probate of will, if any, of the said Fani Dutta for the alleged entitlement of the shares of the said deceased. The purported letter of demand dated 15-6-2001, was written for the first time after filing of the application under Section 186. The said letter dated 15-6-2001 was not in compliance with legal requirements and the same was without any basis. It has also been denied that the petitioner is entitled to transmission of 400 equity shares pursuant to articles of association of the company and that the petitioner is an heir of Late Fani Dutta or is entitled to enjoy all rights as shareholder of the respondent-company and that the respondents have wrongfully or illegally not transmitted the shares to the petitioner. The respondents have stressed that the petitioner has given no evidence for his entitlement to the shares held by the said Fani Dutta and as such, amongst other reasons, no order should be made on the basis of the said application.

5. Prior to the application under Section 111 by Shri Debasish Dutta, the respondent-company and Shri Kali Das Somadder filed an application under Section 186 before this Bench, on or about 24-5-2001, for an order from this Bench directing a general meeting of the shareholder to be called, held and conducted under the chairmanship of one shareholder, Shri Kali Das Somadder (Petitioner No. 2 of the application) to adopt resolutions as indicated hereinabove.

6. Refuting all the contentions and allegations made in the application under Section 186, the respondent, Shri Debasis Dutta, has reiterated what has been stated in the petition filed by him under Section 111. He also contended that the purported deadlock, if any, has been created by the conduct of the petitioner No. 2 (Shri Kali Das Somadder) by refusing to convene a Board Meeting for transacting business, including transmission of shares to the respondent (Shri Debasish Dutta) and that the petitioner No. 2 should not be allowed to take advantage of his own wrong, specially when the said purported deadlock, if any, could have been easily avoided by transmitting the shares to the deponent. Instant application is not maintainable, inasmuch as after purporting to create a deadlock in the management by refusing to convene a meeting of a validly constituted Board of Directors of the petitioner-company. Petitioner No. 2 has to approach the CLB for misconceived reliefs, which will have the effect of interfering with the internal management of the petitioner company. Further, petitioner No. 2 cannot make the limited company a party as the petitioner No. 1 when no such resolution was passed by the existing Board of the limited company. In the event of the transmission of the shares the petitioner-company would have requisite number of members to conduct the business of the petitioner company and, accordingly, the petitioner-company be directed to take steps to transmit the shares to the respondent immediately. It is also stated that the petitioner-company already has two directors which in the Board is sufficient to form the quorum for conducting the business of the petitioner-company and that there is no question of further appointment of any other director pursuant to instant application. Inasmuch as a valid board of directors is in existence in the circumstances also no application can be filed under Section 186. In any event the application is not maintainable as the same has been filed without any resolution of the Board of the petitioner company authorizing the filing of the said application and the said application is not signed by the petitioners nor any documentary evidence in proof of status of the petitioners has been annexed to the application. It is further contended that valid board of directors is in existence and there are no circumstances that require calling of a general meeting of the shareholders and that if orders are passed as prayed for in the application and Biswanath Somadder, the son of the petitioner No. 2 is appointed as a director, in the said event, it would amount to ouster of the respondent from the petitioner-company. In the said event respondent would be left at the mercy of the petitioner No. 2, who would have two directors from the same group in violation of principles of equality of the groups, each group having equal members and directors. Even if shares are ultimately transmitted to the respondent, the group of respondent would have only one director on the Board and the petitioner No. 2 would have two directors in violation of principle of equality and that would be prejudicial to the interest of the respondent and in the said event the petitioner No. 2 would succeed in having total power in violation of principles of partnership between the petitioner No. 2 and the respondent who has inherited the shareholding of his father. On the contrary, since the success of the company can be attributable only to the said Fani Dutta and the respondent, it is only fit and proper that any further director appointed should be of the respondent's choice. It is also contended that the alleged deadlock, if any, is created by the conduct of the petitioner No. 2 and can be resolved by transmission of the shares to the respondent and that the petitioner No. 2 to avoid the transmission, has filed the instant application and the same should not be allowed as thereby the petitioner No. 2 is taking advantage of his own wrong. If any order is made appointing the son of the petitioner No. 2 as director, the petitioner No. 2 would succeed in victimizing the respondent who is the owner of 40 per cent shares of the petitioner-company and is entitled to become member of the petitioner-company. It is submitted that the application is not maintainable and has been filed in abuse of process for causing ouster of the respondent and no order should be passed.

7. In the rejoinder, the petitioner denied and disputed all the contentions and submissions of the respondent and urged this Bench to pass an order in terms of the prayer of the application.

8. With the consent of the respective parties, the petition under Section 111 and the application under Section 186, have been heard together and by this common order, both the petitions and the application are disposed of.

9. In course of hearing before this Bench, Shri Jayanta Kr. Mitra, the senior counsel, Shri P.K. Ghosh the senior counsel, Shri S.K. Poddar, advocate and Shri P.R. Mukhopadhyay, Practising Company Secretary, appeared for the petitioner (Shri Debasish Dutta) while Shri P.C. Sen, senior counsel, Shri S.N. Mookherjee, the counsel, Shri R. Sharma, advocate and Shri A.K. Chowdhary, advocate, appeared for the company (B.G. Somadder & Sons), and Shri Kali Das Somadder.

10. The learned counsel for Shri Debasish Dutta has reiterated what has been stated in the pleading. According to him, the company was incorporated in the year 1990 with Kali Das Somadder (respondent No. 2) and Fani Dutta (since deceased) as the two shareholders and the company was formed by taking over the entire assets and liabilities of the proprietorship firm (B. G. Somadder & Sons). At the formation of the company. Kali Das Somadder subscribed to 200 equity shares of the company and Fani Dutta subscribed to 400 equity shares for cash at par. Later, Kali Das Somadder was allotted 400 fully paid up equity shares of the company for consideration other than cash for the private limited company taking over the running business of the proprietary firm, while Fani Dutta continued to hold 400 fully paid up equity shares of the company. Upon the death of Fani Dutta on 30-12-2000, Shri Debasish Dutta as the only heir and legal representative of Late Fani Dutta, by a letter dated 15-6-2001, requested the company to transmit 400 equity shares, held by his late father, to his name. The said letter of request was preceded by several verbal requests to the company to register transmission of the said 400 shares in the name of Debasish Dutta. The learned counsel also drew our attention to Regulations 25 and 26 of Table 'A' under Schedule I to the Companies Act, which is applicable in the instant case and also submitted that in the event of death of any of the members, the heirs of such member would succeed to the shareholding of the deceased member to maintain the continuity of the business in the hands of the two families, i.e., the family of Kali Das Somadder and Fani Dutta (since deceased). It is stressed that Debasish Dutta being the only heir and legal representative, is entitled to become the member of the company and enjoy all rights as shareholder thereof. It is submitted that the respondents have wrongfully and illegally not transmitted the said 400 shares standing in the name of registered member, Fani Dutta (since deceased) in favour of the petitioner (Debasish Dutta). In support of his contentions, the learned counsel cited the following reported decisions of Courts/CLBs:

* Simret Katyal v. Bhagwan Das & Co. (P.) Ltd. [1994] 1 Comp. L.J. 442 (CLB).

* Simret Katyal v. Mahvir Ice Mills (P.) Ltd. [1995] 83 Comp. Cas. 699 (CLB) * World Wide Agencies (P.) Ltd. v. Mrs. Margaret Desor [1990] 67 Comp. Cas. 607 (SC) - to emphasize the point that when a member dies, his estate is entrusted with the legal representatives.

* Hemendra Prasad Barooah v. Bahadur Tea Co. (P.) Ltd. [1991] 70 Comp. Cas. 792 (Gauhati) - to emphasise the desolution of property on the legal representatives.

11. As regards the application under Section 186 filed by B.G. Somadder & Sons and Shri Kali Das Somadder, petitioner Nos. 1 and 2, respectively, (who are the respondent Nos. 1 and 2, respectively, in the petition under Section 111), the learned counsel while reiterating the pleadings, has argued that there is no deadlock in the company and if any, is created by the conduct of the petitioner No. 2 can be resolved by transmission of shares to the respondent (Shri Debasish Dutta) and in order to avoid the transmission of shares, has filed the application which should not be allowed. He also argued that if any order is made appointing the son of the petitioner No. 2, as a director, the petitioner No. 2 would succeed in victimizing the respondent who is owner of 40 per cent shares of the petitioner-company and is entitled to become member of the company and that the application filed by the company and another, is not maintainable and no order should be passed.

12. While refuting all the contentions of the counsel for Shri Debasish Dutta, the learned counsel of B.G. Somadder & Sons (P.) Ltd., has reiterated what has been stated in their pleadings. They have taken a stand that Shri Debasish Dutta is entitled to transmission of 400 equity shares pursuant to articles of association of the company and that the petitioner is an heir of Late Fani Dutta or is entitled to enjoy all rights as shareholder of the company. It is also argued that Shri Debasish Dutta has not given any evidence for his entitlement to the shares held by the said Fani Dutta, since deceased, and as such, no order should be made on the petition under Section 111.

13. As regards non-transmission of 400 equity shares of and in the company standing in the name of Fani Dutta, in favour of Debasish Dutta, the heir and legal representative of Late Fani Dutta, the company lent support from the ratio already enumerated in the following decision of Courts/CLBs:

* Arjun Kr. Israni v. Cipla Ltd. [2000] 2 Comp. L.J. 136 (CLB) * Mrs. Nandita Bhardwaj v. Sapphire Machines (P.) Ltd. [2000] 2 Comp. L.J. 109/24 SCL 488 (CLB) * Worldwide Agencies (P.) Ltd. v. Margaret T. Desor

14. As regards the application under Section 186, the learned counsel for the company and Kali Das Somadder, has argued that after the death of Fani Dutta and till the time, no one applied to the Company for transmission of the shares held by the said Fani Dutta and that at present here is only one shareholder, i.e., Shri Kali Das Somadder, which is below the minimum two and in view of the position stated above, it has become impracticable to call any general meeting of the shareholders and that the only shareholder being Shri K.D. Somadder left in the company, it is not possible to hold any general meeting by the shareholder unless an order is made for calling the general meeting and such general meeting is required to elect and appoint a valid Board of Directors of the company and pass necessary resolutions. The petitioner lent support from the English decision Jarvis Motors (Harrow) Ltd. v. Carabatt. [1964] 3 ALL E.R. (ChD) :

15. We have considered the pleadings and arguments of the counsels. Even though the only issues for consideration in these two petitions are whether the shares should be registered in the name of Shri Debasish Dutta on transmission and whether we should order for holding of a general body meeting under Section 186 with the presence of one shareholder, yet the pleadings and the arguments traversed on various matters not concerned with these two aspects and as such we are not dealing with any other issue than two issues in this order. It is not denied by the company that Fani Dutta, since deceased, held 400 shares in his name. It is also not disputed by the company that Shri Debasish Dutta is the son of the deceased. In case of transmission of shares, the company has to follow the provisions of its articles. There are no specific provisions in the articles in regard to transfer or transmission of shares. However, the company adopted Table 'A', and, therefore, we have to go by the provisions of Table 'A' in regard to transmission of shares. Articles 25 and 26 of Table 'A' deal with transmission of shares. As per Article 25, on the death of a member, his legal representative shall be the only person recognized by the company as having any title to his interest in the shares. Article 26 provides for liberty to the CLB to seek such evidence as it may require before doing so. In the present case, the petitioner has requested the company for transmission of the impugned shares by a letter dated 15-6-2001 along with the copy of the death certificate. The company does not seem to have replied this letter at all. The present petition was affirmed on 24-8-2001. As per Section 111(1), the company is to take a decision on an application for transfer/transmission within a period of two months and send requisite communication to the transferor and transferee. Since the company has not sent any intimation in regard to the transmission of shares within a period of two months, the petitioner has the right to apply to the CLB for relief. Even though in the reply, the company has denied that Shri Debasish Dutta is legally entitled for transmission of shares, it has not been explained as to why such a stand has been taken by the company. In the same reply, we also find that the company was not able to take any decision since the Board consists of only one director. Whatever may be the reason there is default on the part of the company in regard to the transmission of shares in terms of Section 111(1). Since there is a dispute in regard to the composition of the Board with which we are not concerned with, the instant proceedings and since the company has not been able to establish as to why Shri Debasish Dutta cannot be considered as a legal heir entitled to get shares transmitted in his favour and since there is no other claim in respect of these shares, we consider it appropriate to direct that these 400 shares should be transmitted in favour of the petitioner. Since the transmission of shares cannot be left hanging on the plea of the company that it has only one Director at present notwithstanding the claim of the petitioner that he is also a Director, there is unlikely to be any board meeting to consider the transmission of shares, we direct that on the strength of this order, the shares shall be deemed to have been transmitted in favour of the petitioner with immediate effect.

16. As far as the petition under Section 186 is concerned, the foundation in the petition is that there is only one shareholder in the company and as such the intervention of the CLB is necessary to convene an extraordinary general meeting with the direction that one shareholder will constitute the quorum. Since in the earlier paragraph we have directed that by virtue of this order, the 400 shares shall be deemed to have been transmitted and registered in favour of the petitioner, Shri Debasish Dutta, there will be two shareholders in the company as such it may follow the procedure in accordance with law in convening the general meeting. There is no need for invoking Section 186.

Both the petitions are disposed of on the above terms.

No order as to costs.