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 was converted 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 are illiterate 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 promises 5) 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 share capital, 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 former would 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 main promoter 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 the company 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 and that 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.

12) Even for the allotment of shares, no consideration was actually received by the company and the 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 a resolution 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 about Rs. 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 family members or the 8th and 9th respondents 15) The directors of some of the companies are fictitious persons as is evident from the fact that the alleged 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 company and 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 not borne 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 the resignation 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 capital of 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.