Kader Textiles (Pvt) Ltd. and another Vs. Md. Lehajuddin Miah, and others, 58 DLR (2006) (AD) 238

Case No: Civil Petition for Leave to Appeal No. 1405 of 2002

Judge: Abu Sayeed Ahammed ,

Court: Appellate Division ,,

Advocate: Mr. Rokanuddin Mahmud,,

Citation: 58 DLR (2006) (AD) 238

Case Year: 2006

Appellant: Kader Textiles (Pvt) Ltd.

Respondent: Md. Lehajuddin Miah

Subject: Company Matter,

Delivery Date: 2003-2-1

 
Supreme Court of Bangladesh
Appellate Division
(Civil)
 
Present:
M Reza Chowdhury, CJ.
Syed JR Mudassir Husain, J.
Abu Sayeed Ahammed, J.
 
Kader Textiles (Pvt) Ltd. and another
...............Petitioners
Vs.
Md. Lehajuddin Miah, and others
...............Respondents
 
Judgment
February 1, 2003
 
The Companies Act, 1994
Section 233
The Company Court has been given jurisdiction to pass any order or orders for the purpose of protection of the interest of the minority Share holders under the provision of section 233 of the Companies Act. No illegality has been committed by the company Court in allowing the Petition and passing the Judgment and order. There is no merit in a leave Petition and it is dismissed………(12)
 
Case Referred to-
Syed Al Nesar Ahmed MD, United Food Complex Ltd. vs. Nafisa Choudhury and others 53 DLR (AD) 83.
 
Lawyers Involved:
Rokanuddin Mahmud, Senior Advocate instructed by Md. Ataur Rahman Khan, Advocate-on-Record—For the Petitioners.
Zafarullah Chowdhury, Advocate, instructed by Md. Wahidullah, Advocate-on-Record—For Respondent Nos. 1(1a-d) & 3.
Not Represented—For Respondent No. 2.
 
Civil Petition for Leave to Appeal No. 1405 of 2002
 
JUDGMENT

Abu Sayeed Ahammed J.
 
1. Petitioners seek leave to appeal against the judgment and order dated 12-5-2002 of a Company Judge of the High Court Division passed in Company Matter No. 5 of 1995 arising under section 233 of the Companies Act, 1994, which was instituted by the respondents for protection of the interest of the minority share holders.
 
2. The short facts, leading to this leave petition are that the respondents are promoters/ shareholders of the petitioner No.1 Company, hereinafter shortly called the company. The deceased respondent No.1 purchased 1,875 shares out of 6000 shares of the Company. Respondent No. 2 Md. Abed Ali purchased 1,875 shares and Abdul Kader, respondent No.3 held 375 shares and Md. Chand Mia, respondent No. 4, held 1,875 shares. They are related to one other. The company was incorporated in 1980 according to the Articles of Association of the Company and was registered under the Companies Act, 1913. It was stipulated in the memo of Articles that the respondent No. 2 would remain the Managing Director and hold the office as such for life. The grievance of the respondent is that the company never declared any dividend and no formal board meeting or annual general meeting of the company was ever held and the accounts were never audited. Although the minority share holders were claiming that the com­pany was making profit but the Managing Director and the majority shareholders were telling that the company was running at a loss and it did not disclose  any dividend  and  even the minority members were not allowed any access to the account of the company and a salish was held on 18th August 1985 and another on 27th September 1985 over the affairs of the company and it was disclosed  in the salish that there was profit amounting Taka 36,30,000 made by the company during the period of 1980-84. Accordingly, an award was also given in that salish on 27th September, 1985 for the amount of Taka 3,69,730.63 and Taka 2,86,220.63 respectively to be paid to the respondent No.1 and the respondent No. 2 respectively but the same was not paid to the respondents.  The   respondent No.2 asked the petitioner to pay 75% of their money subscribed by him but it was not paid on the allegation that the company was running at a loss.
 
3. The respondent No. 1 Lehajuddin Miah, (now deceased) during his lifetime was demanding to hold board meeting of the directors and the annual general meeting of the share holders but the petitioners 2 and 3 did not make any response. The respondents then referred the matter to the Registrar, Joint Stock Companies. On examination of the papers, he referred the matter to the Ministry of Commerce who appointed a firm of the Chartered Accountants by its letter dated 16-9-1986 to look into the irregularities of the company, if any. But the petitioner Nos. 2 and 3 filed Title Suit No. 294 of 1986 on 28th September, 1986 challenging the authority of the Registrar and the authority of the Ministry of Commerce to look into the allegations made against the company. They also filed an application for injunction against the firm of the Charted Accountants praying for restraining them to look into the matters of the company. The respondents also removed the name of the respondent No. 2 and his brother the respondent No. 4 as directors and members of the company. The respondent No. 1 and the respondent No. 4 filed an application under section 38 of the Companies Act, 1913 being Matter No. 18 of 1990 praying for rectification of the share register of the company which was allowed. The High Court Division by an order dated 14-11-1991 directed for rectification of the share register. An appeal was taken before the Appellate Division. The appeal was dismissed by the judgment and order dated 22-7-1993. The further allegation of the respondent is that in spite of the order for rectification of the share register in respect of their 1875 shares, they could not enter into the mill premises and could not have access to the records and books of the company although the respondent No. 1 and the respondent No. 2, together were holding the majority shares of the company, but they were kept in complete darkness in respect of the management and the financial aspect of the company although the respondents gave personal guarantee in favour of the bank and the respondent No. 4 and his wife mortgaged their properties to secure repayment of the loan taken by the respondent company. In the meantime, the Agrani Bank filed Title Suit No. 8 of 1992 in the Court of the Subordinate Judge and Artha Rin Court No. 1, Dhaka against the company and the respondents with a prayer for recovery of its loan by sale of the properties of the company mortgaged to the Agrani Bank. Although the company was making huge profits but the same was being illegally misappro­priated by the respondent Nos. 2 and 3. Under the aforesaid facts and circumstances, the respondents filed a petition under section 233 of the Companies Act. Upon that application the relevant company case was started.
 
4. The petitioner contested the Company case by filing an affidavit-in-opposition contending, inter alia, that the company was all along in financial troubles since its inception in 1980 and, as such, could not declare any dividend during this period and they denied that the company agreed to pay some amount to the writ petitioner in the salish or that they admitted profit of Taka 36,30,000 or any profit in the salish, and it was stated that no salish was ever held. It was also stated by the petitioners that from time to time the company has increased the share capital of the company in order to repay the dues of the bank in the interest of the company itself and the petitioner, also offered those shares both to the petitioner and to the respondent No. 4 who declined to accept any of those shares.
 
5. The learned Company Judge after hearing the parties allowed the petition case under section 233 of the Companies Act in part, holding, inter alia, as follows:
 
"However, in pursuance of the judgment passed in the Matter No. 18 of 1990, the original petitioner and the respondent No. 4, remained directors, whether the respondent Nos. 2 and 3 recognised them or not as such directors. As such, the petitioner till his death and the respondent No. 4 shall still be deemed to be a director. Besides, in view of section 110 of the Companies Act, 1994, the prayer for deletion of Article 38 of the Articles of Association is not required, it will be deemed to be so by operation of law. It also appears that there was all along an admission on behalf of the respondent Nos.1 to 3 that the company is running at a loss. Admittedly, since its inception the directors and the share holders are at loggerheads from the very beginning. Since there is a clamour for profit, made on behalf of the substituted petitioners and the respondent No. 4 for the last 20 (twenty) years or so, it will be proper that a board meeting shall be called under the Chairmanship of a neutral person who will hold the board meeting with all 3 (three) directors, the respondent Nos.2 to 4 and also a representative of the substituted petitioners who are the heirs of deceased Md. Lehajuddin Mia and shall appoint an auditor to look into the affairs of the company impartially to find out as to whether the accounts were properly maintained in accordance with law and whether there was any profit since its inception."
 
6.  It is noticed that the learned Company Judge discussed the materials on record in a thread­bare manner and considered the cases of the parties in the facts and circumstances of the dispute in a very precise manner. The learned Company Judge passed the operative portion of the impugned judgment and order as follows:
 
"Under such circumstances, I would appoint Mr. Md. Abdul Baset Majumder, a Senior Advocate of this Court, to hold the board meetings for a period of six months from the date of drawing up of the order or till the audits are completed. On the first board meeting, he will appoint an auditor. The auditor shall audit the accounts of the company along with all its paraphernalias since its inception till date. After completion of the audit Mr. Mujumder will furnish his report before this Court.”
 
7. Mr. Majumder, Senior Advocate, shall be paid an honorarium of Taka 5,000 for holding each meeting of the board from the funds of the Com­pany.
 
8. In the result, the petition is allowed in part with the above observations and directions.
 
The provision of section 233 of Companies Act reads as follows:

"233. Power of Court to give direction for protecting interest of the minority.— (1)Subject to fulfillment of the conditions of the required minimum as specified in section 195 (a) and (b) any member or debenture holder of a company may either individually or jointly bring to the notice of the Court by application that—
(a) the affairs of the company are being conducted or the powers of the directors are being exercised in a manner prejudicial to one or more of its members or debenture holders or in disregard of his or their interest; or
(b) the company is acting or is likely to act in a manner which discriminates or is likely to discriminate the interest of any member or debenture holder;
(c) a resolution of the members, debenture holders or any class of them has been passed or is likely to be passed which discriminates or is likely to discriminate the interest of one or more of the members or debenture holders; and pray for such order as, in his or their opinion, would be necessary for safeguarding his or their interest and also the interest of any other member or debenture holder.
(2) The Court shall, on receipt of an application under sub-section (1) send a copy thereof to the Board and fix a date for hearing the application."
 
9. Mr. Rokanuddin Mahmud, the learned Counsel appearing for the petitioners, submits that the Company Court cannot appoint a Chairman for holding meeting of the directors and the Company Court also cannot appoint Chairman of the meeting and also cannot direct for a board meeting and also cannot direct for appointment of an auditor.
 
10. Mr. Zafarullah Chowdhury, the learned Counsel for the respondents-writ petitioners, submits that the impugned judgment and order is in accordance with law and that the High Court Division has not committed any error in law. He cites the decision in the case of Syed Al Nesar Ahmed MD, United Food Complex Ltd vs. Nafisa Choudhury and others, 53 DLR (AD) 83. He further submits that the Company Court for protection of the interest of the minority share holders can legally pass necessary order and, according to him, the impugned order passed by the Company Judge is within the ambit of section 233 of the Company Act. He referred to paragraph 9 of the said decision to justify his argument, which is as under:
 
“The High Court Division also held that the petitioner, admittedly being a minority share holder, was competent to file an application under section 233 of the Companies Act and, in the facts and circumstances, the application under section 233 could be maintained. The petitioner had claimed that the affairs of the company were being conducted in disregard of her interest and the interest of respondent No. 3 and clause (c) of section 233 provides that applicant may pray for such order as, in his or their opinion, would be necessary for safe­guarding his or their interest and also the interest of the company. In sub-section (3) it has been laid down that if the Court is of opinion that the interest of the applicant is being or is likely to be prejudicially affected for reasons given in the application, the Court may make such order as prayed for or such other order as it deems fit......" Having gone through the judgment of the High Court Division we do not find any illegality in its findings that the petitioner is minority shareholder, that the application was a proper application under section 233 of Companies Act and thus the directions given by the High Court Division were in accordance with law and the Com­panies Act, 1994 and calls for no interference."
 
11. Our careful consideration of the relevant legal provision and the spirit of the above decision, reveals that after amendment of the provision of section 233 by addition of sub-section 3 for protection of the interest of the minority share holders the company Court has legally passed the impugned order as in the operative portion of its judgment. Sub-section (3) of section 233 reads as follows:
 
"If after hearing the parties present on the date so fixed, the Court is of opinion that the interest of the applicant or applicants has been or is being or is likely to be prejudicially affected for reasons specified in the application, it may make such order as prayed for or such other order as it deems fit including a direction—
(c)  to cancel or modify any resolution or transaction; or
(d) to regulate the conduct of the company affairs in future in such manner as is specified therein;
(e) to amend any provision of the mem­orandum and articles of the company."
 
12. It appears to us that the Company Court has been given jurisdiction to pass any order or orders for the purpose of protection of the interest of the minority share holders under the provision of section 233 of the Companies Act.
 
For the reasons and discussion made above, we find no illegality committed by the Company Court in allowing the petition filed under section 233 of the Company law and thus in passing the impugned judgment and order. Therefore, we do not find merits in this leave petition. Accordingly, this leave petition is dismissed.
 
Ed.