Case No: Company Matter No. 83 of 2013
Judge: Md. Rezaul Hasan,
Court: High Court Division,,
Advocate: Mr. Akhtar Imam,Ms. Rashna Imam,Mr. Reshad Imam,Mr. Mohammad Mehedi Hasan Chowdhury,Mr. Sheikh Fazle Noor Taposh,Mr. A. K. M. Rabiul Hasan,Mr. Mohammed Selim Jhangir,Mr. Apurba Kumar Biswas,,
Citation: 4 LNJ (2015) 8
Case Year: 2015
Appellant: Mr. Nuher Latif Khan and others
Respondent: Desh Energy Ltd. and others
Delivery Date: 2014-05-19
|Md. Rezaul Hasan, J.
|Mr. Nuher Latif Khan and others
Desh Energy Limited Registered Office at ABC House (7th Floor), 8 Kemal Ataturk Avenue, Banani, P.s. Gulshan, Dhaka 1213 and others
Companies Act (XVIII of 1994)
Any court of law can take into consideration the subsequent events, like the EGM resolution dated 27.4.2013, for resolving the disputes completely and efficaciously. ...(10)
Bank Companies Act (XIV of 1991)
Section 27(1)(a) of the Bank Companies Act, 1991, requires permission of a lender bank in the case of transfer of shares to be made voluntarily by the share holder of a borrower company and in the case of voluntary resignation tendered by the directors of a borrower company pursuant to their own decision. . . . (19)
Companies Act (XVIII of 1994)
Bank Companies Act (XIV of 1991)
The bar provided in section 27(a) of the Bank Companies Act is not applicable in the matter of transferring of the shares pursuant to court’s order passed under section 233 of the Act or in the matter of a consequent resignation or vacation of office pursuant to order passed under section 233. Besides, when entire shares of the petitioners are transferred to the respondents then the petitioners have no stake in the company and there is no reason to saddle them with liability of the company in running and managing which they have no say, nor do they have any right to claim any interest in the profit. So, they will have no personal liability for the loan of a company after their relation with the company has been perpetually served. There is no reason to keep their personal guarantee alive in such circumstances. Hence, a direction upon the bank shall be made to relinquish the petitioners from their personal guarantees as well. . . . (20)
7 BLC (HCD) 107; Homera Ahmed Vs. Nahar Shipping Lines, 56 DLR(AD) page 36; Nahar Shipping Lines Ltd Vs. Homera Ahmed & ors, 53 DLR (AD) (2001)83; Syed Al Nesar Ahmed, MD, United Food Complex Ltd. Vs. Nafisa Choudhury and others, 11 BLC (AD) (2006) page 67; HBS Association Private Limited and others Vs. Professor Shahabuddin Khaled Chowdhury and the case of Re, Westbourne Galleries Ltd., (1972) 2 All ER 492 (HL); 7 BLC 107, 56 DLR (AD) 36; 11 BLC (author Judge Mr. Justice Md. Tofazzal Islam, as his Lord ship then was) (AD) 67; HBS Association (Pvt) Ltd Vs. Prof. S.K. Chowdhury; 7 BLC 107; Homera Ahmed Vs. Nahar Shipping Lines Ltd. another Judge Mr. Justice K.M. Hasan; 7 BLC 109; 56 DLR (AD) 36; 56 DLR (AD)36; Nahar Shipping Lines Vs. Homera Ahmed, 11 BLC (AD)67; HBS Association (Pvt) Ltd Vs. Professor Shahabuddin Khaled Chowdhury, 53 DLR (AD) 83; Sayed AL Naser Ahmed Vs. Nafisa Chowdhury and in Re, Westbourne Gallerin Ltd. (1972) 2 ALLER 422 (H2); 3 NLJ 130 and Sunglary Apparel Ltd Vs. BCBL in 11 BLC (AD) 67 ref.
Mr. Akhtar Imam, Senior Advocate with
Ms. Rashna Imam, Advocate with
Mr. Reshad Imam, Advocate
Mr. Mohammad Mehedi Hasan Chowdhury, Advocate with
Mr. Sheikh Fazle Noor Taposh, Advocate with
Mr. A. K. M. Rabiul Hasan, Advcoate with
Mr. Mohammed Selim Jhangir, Advocate and
Mr. Apurba Kumar Biswas, Advocate
Company Matter No. 83 of 2013
Let the supplementary affidavits filed by the petitioner do form part of the substantive petition.
This petition has been filed under section 233 of the Companies Act, 1994 (herein after referred to as (the Act).
It has been stated in the petition, amongst other, that the Petitioner No. 1 is a founder shareholder and director of the Respondent No. 1 Company, holding 10% shares in the paid-up capital of the respondent company. The Petitioner No. 1 was also the first and only Managing Director of the Company up until 23 March 2013, on which date the Respondent No. 2 and 3 removed him from the said position by passing a Board Resolution to that effect in a Board Meeting. The Petitioner No. 2, sister of the Petitioner No. 1, is also a founder shareholder and director of the Respondent No. 1 Company, holding 10% of its issued shares. The Petitioners, both individually and jointly, fulfill the condition imposed by section 195 (a) of the Companies Act 1994 (hereinafter referred to as “the Act”) of the required minimum shareholding (one-tenth of the issued shares) prior to filing this application under section 233 of the Act; that the Respondent No. 1 (hereinafter referred to as “the Company” or “the Respondent No. 1”) is a private company limited by shares, incorpor-ated under the Companies Act 1994 on 23 August 2005, bearing Registration No. C-58732(738)/05. The Company operates in the energy sector of Bangladesh and has a current portfolio of 110MW. The Company currently operates a 10MW Gas Fired power plant in Kumargaon, Sylhet and a 100MW Diesel Fired power plant in Siddhirganj, Narayganj. The Founder shareholders and directors of the Company were as follows:
NuherLatif Khan (the Petitioner No. 1)
Shahpar Saba (the Petitioner No. 2)
|Name of Directors||Number of Shares||Percentage of Shareholding|
|Mr. Nuher Latif Khan||
|Ms. Shahpar Shaba||
|Mr. Navidul Huq||
Photocopies of the letter from the Petitioner No. 1 to the Respondent No. 2 dated 3 February 2013, and letter from Bangla Trac Limited to the Petitioner No. 1 dated 2nd April 2013 are annexed hereto; that another instance of serious mismanagement on the part of the Respondent No. 2 and 3 is their arbitrary decision, without the consent of the Board and without the knowledge of the Petitioner No. 1, who was the Managing Director of the Company at the relevant time, to settle unsubstantiated and frivolous claims made by BPDB by agreeing to almost 6% deductions by BPDB on account of excess outage from their monthly invoices for three months from November 2012 to January 2013 as reflected in the Company’s Invoices for those months read with the BPDB’s debiting/payment instructions to Bangladesh Krishi Bank and the Revenue Account Statement of the Company. The Petitioner brought it to the Respondent No. 2’s attention time and again that the Company was not at fault for excess outage, but to no avail. The excess outage has mostly taken place due to the fact that the BPDB had failed to clear the Company’s invoices as per Article 13.2 of the Contract for Supply of Electricity on Rental Basis for 3 Years between the Company and BPDB, that is, within 15 working days of issue of invoice. As a result, the Company could not service its power plants, which eventually led to excess outages. In any case, BPDB had made unsubstantiated claims in the past against Desh Cambridge Kumargan Power Company Limited, a subsidiary of the Company, in relation to its 10 MW power plant operations and was successfully sued for illegal deduction from monthly invoices. Despite having such knowledge, the Respondent No. 2 refused to take legal action against BPDB and arbitrarily accepted almost 6% deductions from monthly invoices. As a result, the Company suffered deductions amounting to hundreds of thousands of US dollars, which is highly detrimental to the interest of the Company and its shareholders has been annexed to the petition; that in addition, since the Respondents No. 2 and 3 have illegally and arbitrarily usurped control of the management of the Company from the Board of Directors and the role of the Managing Director, they have failed to conduct the essential Annual Capacity Tests of the 100 MW to the detriment of the Company. Already almost two months have elapsed since the scheduled date of that test. The Company contract with BPDB for Supply of Electricity puts the Company under a contractual obligation to carry out this test within the scheduled date. The Petitioner No. 1 has sought an explanation from the Respondent No. 2 with regard to this delay but the Respondent No. 2 has not yet provided any explanation and/or justification for the delay; that in complete violation of the legitimate expectation of the Petitioner to be actively involved in management of the Respondent No. 1 Company, he was excluded from major management decisions and from operating the Company’s bank account. That the Respondent Nos. 2 and 3 operated the Company’s bank account without the Petitioner’s signature, contrary to a Board Resolution (Annexure G) passed on 3.06.2010. The Board Resolution mandated that the Company’s bank account would be operated under joint signatures from any one of the members of the designated Group A, consisting of Respondent Nos. 2 and 3, and Group B, consisting of the Petitioner and his sister. Despite such a resolution and instructions to the Company’s bank, Respondent Nos. 2 and 3 withdrew an amount of Tk. 28,00,000.00 without the Petitioner’s signature on the cheque; that the Respondent Nos. 2 and 3 made the major decision of reaching a settlement with BPDB by agreeing to almost 6% deduction from monthly invoices without the Board’s approval and without notifying the Petitioner No. 1, thus usurping his role as both, a director and the Managing Director of the Company. In addition, lately, the Respondent No. 2 has not been forwarding any letter from the BPDB to the Petitioners thus excluding the Petitioners from all dealings with the BPDB; that for the last two years the Petitioner No. 1, despite being the Managing Director and a Director, was forced by the Respondents No. 2 and 3 to stop using the Company’s premises as his office. This, the Respondents No. 2 and3 did by resorting to all sorts of threats and bullying tactics to the extent that the Petitioner No. 1 feared for his own physical safety and security and was forced to stop using the Company’s office and operate from a different venue; that the Respondents No.2 and 3 continued to harass and bully the Petitioner No. 1 further by stopping his fuel allowance, his cell phone allowance, seizing the Company car that was at his disposal, and making false and baseless allegations against him, solely intended to create a false basis for eventually dismissing him from his position as the Managing Director of the Company, which was the ulterior motive of the Respondents No. 2 and 3 all along. The Petitioner wrote multiple letters to the Respondent No. 2 challenging various decisions taken by the Respondents No. 2 and 3 arbitrarily and seeking clarification as to why the Petitioner No. 1 being the Managing Director and a Director was being excluded from major management decisions. The Respondent No. 2, while ignoring most of those letters, through letter dated 27 February 2013 to the Petitioner No. 1, as a devious defence tactic, made a host of random, false and fabricated allegations against the Petitioner No. 1. Amongst others, the Respondents No. 2 and 3 claimed that it was the Petitioner No. 1’s negligence when negotiating the contract with Bangla Trac Limited (caterpillar appointed dealer in Bangladesh) for supply of machines that caused the excess fuel consumption for which the BPDB deducted over 9 Crores taka from five invoices of the Company from November 2011 to March 2012. The Respondent No. 2 alleged that Bangla Trac limited misrepresented the specifications of the machines. Bangla Trac Ltd through letter dated 27 January 2013 to the Respondent No. 2 refuted all these allegations and attributed the cause of excess fuel consumption the high sulphur content of the fuel provided by BPDB, using the wrong unit of measurement (HHV) instead of LHV, frequency and voltage fluctuations, frequent start/stop, poor operation of generator sets, using fake or damaged spare parts from BCB and Mir Power and using outside service providers for maintenance. The Petitioner No. 1 responded to the Respondent No. 2’s letter by a letter dated 21 March 2013 refuting the false and fabricated allegations, pointing out the major decisions on the part of the Respondents No. 2 and 3 that was tantamount to serious mismanagement and expressing serious concern over the manner in which the Respondents No. 2 and 3 have been and are arbitrarily running the affairs of the Company to the serious prejudice of the Petitioners and the detriment of the Company; that in the Board Meeting dated 23 March 2013, the habitual antagonism and hostility of the Respondents No. 2 and 3 towards the Petitioners, in particular, the Petitioner No. 1 culminated in the Respondents No. 2 and 3 dismissing the Petitioner No. 1 from his position as the Managing Director and appointing the Respondent No. 2 as the new Managing Director by exercising their majority voting rights. The Petitioner No. 1 has not reviewed the Minutes of the said meeting yet as he has not been provided with the same despite a formal request; that in the light of the irretrievable breakdown of the relationship between the Petitioners and the Respondents No. 2 and 3, the Petitioners, having no other option, offered to sell their shares to the Respondents No. 2 and 3 at a fair value, which was most unreasonably declined by the Respondents No. 2 and 3; that as a result of the Respondents’ malafide/motivated refusal to buy the shares of the Petitioners, the Petitioners found themselves in the most undesirable position with their 20% shares being stuck in the Company (there being restrictions of share transfer incorporated in the Articles of Association), while they are being totally excluded from participating in the management of the Company, the Petitioner No. 1 having been dismissed as MD and the Petitioners being out voted at every board meeting by the father-son duo, the Respondents No. 2 and 3, the controlling majority. In addition, the Respondents No. 2 and 3 have stopped the Petitioner No. 1’s fuel allowance and his mobile phone allowance; that even though the Petitioners were minority shareholders, holding no more than 20% of the issued shares, the Company was run as a quasi-partnership Company, that is, it was run on the basis of mutual confidence and a personal relationship between the Petitioners and Respondent Nos. 2 and 3. There existed an implied understanding between and amongst all the shareholders that, no matter how meager their shareholding was, they shall all be involved in the management of the Company and out of that understanding arose a legitimate expectation on the part of the Petitioners to participate in the management; that it is submitted that section 233 of the Act confers on the court wide powers to grant relief appropriate relief to minority shareholders whose interests have been or is likely to be prejudicially affected by the manner in which the affairs of the Company are being conducted or the powers of the directors are being exercised.
The petitioner has also submitted a supplementary affidavit, sworn on 28.1.2014, and at paragraph No.5, stated that the respondent Nos. 2 and 3 have made a huge cash withdrawals each exceeding and out of Tk. 5,00000/- from the bank account of the respondent No.1 company, maintained the City Bank Ltd, for the purposes which could not be traced and particulars of the said withdrawals and that the statement of account reveals a shocking scenario where the respondent Nos. 2 and 3 have made huge cash withdrawals, each exceeding an amount of Tk. 5, 00,000/- from the account for purposes which cannot be traced. The particulars of these are as follows:
The respondents have appeared in this case and submitted affidavit-in-opposition denying all material allegations and further stating in a supplementary affidavit, sworn on 30.9.2013; that when the Petitioners were in full control of the company, although all the machineries were imported in time and the power plant was constructed, still the Petitioners delayed in getting the plant in operation and due to this late production the company had to pay an amount of Tk. 40,12,64,009/- to BPDB as liquidated damage; that during the tenure of the Petitioner No. 1 as the Managing Director of the company, he was involved in various activities which caused huge loss to the company. In the said process Bangla Cad has supplied inferior quality rubber pads from the local market instead of the original specifications provided by Catterpillar and the Petitioner No. 1 has accepted the said products and as a result the rubber pads could not absolve the vibrations of the machines and hence 93, out of 96, machines cracked at its base. After the crackdown, the company sent the said rubber pads to BUET for testing and on 18.09.2013 BUET certified the rubber pads were of inferior quality.
The learned Mr. Akhtar Imam, appearing alongwith the learned Advocates Ms. Rashna Imam and Rashed Imam, having placed the petition alongwith the documents annexed, first of all submits that admittedly the respondent No.1 company was incorporated, on 23.08.2005, with 4 promoter share holders, namely Md. Jahangir Alam, Mrs. Tasneem Sultana, Nuher Latif Khan (petitioner no.1) and Ms. Shaphar Shaba (petitioner No.2), each equally holding 25,0000 (twenty five thousand) shares in the company. Subsequently, the respondent Nos. 2 and 3 have acquired the shares of Md. Jahangir Alam and Mrs.Tasneem Sultana by way of transfer. Thereafter further shares were allotted and at the time of filling of this petition the respondent No.2 is holding, 3,75,000 shares and the respondent No.3 is holding 25,000 (twenty five) thousand shares, while the petitioner No.1 is holding 50,000 (Fifty thousand) shares and petitioner No.2 is holding 50,000 (Fifty thousand) shares. As such, at present the respondent Nos. 2 and 3 are jointly holding 80% shares in the company, whereas the petitioners jointly hold 20% shares in the company, each of them holding 10% of the total paid up shares. He also submits that at the time of incorporation of the company, the petitioner No.1 was the Managing Director (MD) as a technical expert in the matter of installing power plant and he, along with other promoter share holders, has incorporate the respondent No.1 company. Subsequently the respondent Nos. 2 and 3 entered into the company by purchasing the shares of two other promoters. However, the respondent No.2 did not disturb functioning of the petitioner No.1 as the managing director and did not express his mind or his ulterior motive to oust the petitioner No.1 from the office of the Managing Director, as he was waiting for an opportune moment to outs the petitioners and thereby to usurp the entire power, control management of the company. The learned Advocate also submits that the respondent No.2, although holder of 75% shares, he, however, behave very discretely in order to keep the petitioner in comfort, at the initial stage, and thereby secured trust and confidence of the petitioners to house the office of the respondent No.1 company in the premises of the Mohammadi Group, owned by the respondent No.1 and staffed by his own persons. Besides, all the senior executives, controlling the financial affairs of Mohammadi Group, were also controlling the financial affairs of respondent No.1 company. At the inception and owing to a managed cordial relationship between the parties, the petitioner did not suspect anything wrong in running the affairs of the company in that way. However, the company has went into commercial production during the tenure of the petitioner, working as the Managing Director of the company. But he continues, subsequently the petitioner has begun to exercise his power and advantage our share holding position phase by phase. He also submits that originally the Bank accounts of the company was being jointly operated by the respondent No.2 as the Chairman and the petitioner No.1 as the Managing Director, but subsequently by a resolution dated 17.4.2013, annexure-23(B), the office of the Managing Director has been taken away from petitioner No.1 and the respondent No.3 (son of the respondent No.2 and holder of 5% hares) was appointed as the Managing Director vide agenda No.1, of the EGM held on 17.4.2013. Beside it has also been resolved, vide agenda no.3, of the Board meeting dated 23.3.2013 (Annexure-X) that the respondent No.2 shall operate the bank account as mandatory signatory along with the joint signature of any one of the 3(three) other directors and thereby practically excluded the petitioners from operating the bank account inasmuch as the respondent No.1, as the mandatory signatory, have been operating the bank account since then under the signature of himself and respondent No.3 (his son). The learned Advocate further submits that although section 110 (1) of the Companies Act, provides that the tenure of the Managing Director shall be for a period of 5 years, however, sub-section (3) of section 110 provides that the initial tenure of the M.D. can be renewed, in the general meeting, for further period of 5 years and the respondent Nos. 2 and 3, holder of 80% shares, ought to have to exercised their voting right, in order to re-appoint the petitioner No.1 as the Managing Director for further period of 5 years as he was eligible as an expert in the field of business of respondent No.1 company and he was the founder Managing Director. Instead, the respondent No.2, holder of 75% shares, with the support of his son (holder of 5% shares), have discharged him from the office of the M.D and appointed the respondent No.3 as the M.D, vide a resolution dated 17.4.2013, adopted in an EGM that was held to implement the decision taken in the Board Meeting dated 23.3.2013, vide Annexures-23(B) and Annexure-X. As such, by way of exercising the position of 80% holder of the shares, the Respondent Nos. 2 and 3 have gradually captured, seized and usurped the entire financial control and management of the company, as a intruder, by purchasing out two original promoter share holders and appropr-iated the entire profit and fortune of the respondent No.1 company having a huge marketing opportunity in the energy sector. Next, referring to Annexure-Z, which is statement of accounts of the City Bank Limited (showing accounting position since 19.1.2013 to 19.1.2014), he submits that after obtaining the power to run and operate the bank account, by the aforesaid board resolution dated 23.3.2013, the respondent Nos. 2 and 3 have removed a huge amount of money as stated in paragraph number 5 of the supplementary affidavit and that totally stands at Tk. 4,92,59,181.00 and there is no trace where and how this amount has gone or used. He also submits that in order to show who are the real persons in fact, managing and controlling the financial affairs of the company, this court has directed the respondents to submit certain documents, but they have not complied with the court’s order by suppressing the documents called for and instead filed certain documents which have no relevance to the documents called for by this court. He next submits that the petitioner No.1, no doubt, have signed several documents and agreements, but all these documents and agreements were signed with approval of the board of directors in which the respondent Nos.2 and 3 were holding majority shares and have full control. As such, he adds, not a single piece of document was signed nor any decision was ever taken by the petitioner No.1 or 2 without the desire, instruction, consent and approval of the majority share holders, namely the respondent No.2 and 3. Besides, the learned advocate continues, the respondent Nos. 2 and 3 are not only the majority share holders exercising majority voting right in general meeting, but the respondent No.2 being the Chairman also had a casting vote in order to mould any decision taking in any general meeting (AGM/EGM) of the company. As such, it as stated in their affidavits in opposition, it is not at all correct that the petitioner No.1 has solely run and managed the affairs of the company during his tenure as Managing Director. Rather it was the Board of Directors, subject to whose control and decision, the petitioner No.1 had acted. Such kind of statement made by the said respondents is not only misleading but also a travesty of truth. He then submits that there are a lot of materials on record to show that the relationship between the petitioners and the respondents No.2 and 3 have come to a state of total dead lock. None of the petitioners are either in a position to participate in the management of the affairs of the company, nor they have any authority or control over the financial affairs or in operating the bank accounts of the company. As such, the learned advocate concludes, that the conduct of the Respondent numbers 2 and 3 is evidently prejudicial to the interest of the petitioners, discriminatory to the interest of the petitioners, amounts to denial of the legitimate expectation of the petitioners and unfairly oppressive. Hence, the learned advocate prays that it is a fit case where the direction should be given upon the respondents to buy out the petitioners and to relive them of all personal guarantees/ securities, as prayed for. In support of his contention the learned Advocate has referred to the cases reported in 7 BLC (HCD) 107: Homera Ahmed Vs. Nahar Shipping Lines, 56 DLR(AD) page 36: Nahar Shipping Lines Ltd Vs. Homera Ahmed & ors, 53 DLR (AD) (2001)83: Syed Al Nesar Ahmed, MD, United Food Complex Ltd. Vs. Nafisa Choudhury and others, 11 BLC (AD) (2006) page 67: HBS Association Private Limited and others Vs. Professor Shahabuddin Khaled Chowdhury and the case of Re, Westbourne Galleries Ltd., (1972) 2 All ER 492 (HL). He finally submits that in the case reported in 7 BLC 107, affirmed by the Appellate Division in 56 DLR (AD) 36, direction upon the respondents were given to purchase jointly or severally all shares of the petitioners (the minority share holders) and there was bank loan in that case. But, no difficulty, nor of any lack of power in this court, arose in passing the direction inspite of there being bank loan obtained by the respondent company, as obtained in the present case. Besides in this case, all the lenders have been made parties as respondents Nos.5 and 6, as per court’s order dated 27.5.2013, but they have neither appeared, nor opposed the prayer made in the petition. Besides, he emphatically submits that once the petitioners’ shares are bought out by the respondents there is no justification in law that they should not be absolved from their personal guarantees inasmuch as they will have no say, no profit, nor any stake in the business of respondent No.1 company. Hence, the mere fact that the company has debt and liability to the banks is not a bar in passing the direction to purchase the shares of the petitioners and in relinquishing them from all personal liabilities as prayed for in the petition.
The learned Advocates Mr. Mohammad Mehedi Hasan Chowdhury and Mr. Sheikh Fazle Noor Taposh, with learned advocates Mr, A. K. M.Rabiul Hassan, Mr. Mohammed Selim Jahangir and Mr. Apurba Kumar Biswas, on the other hand, submits that the petitioner number.1 was the Managing Director of the company till he was relived of his office by resolution adopted on 17.4.2013 in an EGM, Annexure-23(B). The petitioners have filed this petition on 16.4.2013, that before the said resolution was adopted in the EGM. Hence, at the time of filing this petition there was no cause of action. He next submits that during his tenure, the petitioner number.1 has left the company at a huge loss because of his mismanagement. The petitioner even did not claim damages for supply of faulty machineries by the suppliers, inspite of his raising objection about the supply. In the result the company had to pay an amount of Tk.40,00000/- (forty lac) to BPDB on account of demurrage. He also submits that there was lot of unexplained expenditure incurred during the tenure of the petitioner No.1 as Managing Director as well. As such, it cannot be ground that the respondent No.2 and 3 have allowed certain expenditure exgratia or that there is lacing proper explanation as regards these expenditure. In fact the petitioners have filed this petition with collateral purpose to relive themselves of the financial liability as guarantors to the bank which they are obliged to discharge since the company has incurred a huge loss during tenure of the petitioner No.1. He submits that the respondents also relies on the decisions cited on behalf of the petitioners, but in those case the respondents have succeeded in showing that there was prejudicial acts done by the majority shareholders. But, in the instant case the petitioners have utterly failed to show that any prejudicial acts or conducts were done by the respondents. Hence the decision cited by the petitioners are liable to be disguished and are not applicable in the facts of the present case. He also submits that the petitioners are existing members of the board of direction and they could participate in the board meeting in taking decisions by the board of directors. As such, he concludes, the petition has no merit, no case under section 233 has been made out and the petition is liable to be dismissed.
I have heard the learned Advocates, perused the petition and the affidavit in opposition along with the supplementary affidavits filed by both sides. I have also taken into consideration all the documents and materials on record.
It appears from the record that the respondent No.1 company was promoted by 4 share holders, each holding 25000 shares, of which 2(two) are the petitioners and the rest 2(two) are one Jahangir Alam and another Mrs. Tasneem Sultana. The company was incorporated on 23.08.2005. The respondent Nos. 2 and 3 have acquired shares of of Jahanjir Alam and Tasneem, by purchase, on 23.8.2005. As such, the respondents No. 2 and 3, each were holding 25,000 (twenty-five thousand) shares as transferee. Subsequently, further 4 (four lac) shares were allotted, of which the respondent No.2 received 3,50,000 shares, the petitioner No.1 received 25,000 shares and petitioner No.2 received 25,000 (twenty five thousand) shares. As such, at the time of filling of this petition, the share holding position of respondent Nos. 2 and 3 is 3, 75,000 and 25,000 respectively, while the share holding position of petitioner No.1 is 50,000/- and petitioner No.2 is 50,000/-. In other words, respondent No.2 is holding 75% shares and respondent No.3 is holding 5% shares. Thus the respondents No. 2 and 3 are jointly holding 80% shares as at the date of filing of this petition, whereas the petitioners are holding 20% as at the date of filing of this petition. As such I find that the petitioners have locus standi to file this petition.
I have also considered the board resolution dated 23.3.2013 (annexure-X) to the supplementary affidavit dated 14.11.2013, filed by the petitioner. From agenda No.4, it appears that Mr. Anisul Haq (respondent No. 2) had proposed that the petitioner No. 1 (Mr. Nuher L. Khan) should officially handover the position and responsibility of the Managing Director (M.D.) to Mr. Anisul Haq and respondent No. 3 (his son) has supported the proposal. But, both the petitioners declined. Howecer, there was a tie, but the chairman Mr. Anisul Haq (respondent No. 2) did not have any casting vote as chairman of the board meeting. So, it was decided that this issue should be resolved in the EGM to be called and hold, as authorized by Article 27 of the Articles of Association (AOA) of the company. Accordingly, in the EGM dated 17.4.2013 [Annexure-23(B) to the Supplementary Affidavit, sworn on 12.2.14, by the respondents Nos. 2 and 3], the company has adopted a resolution discharging the petitioner No. 1 from the office of M.D. and appointed Mr. Navidul Haq as M.D., in furtherance of the decision taken in Board Meeting dated 23.03.2013 (Annexure-X). This conduct alone establishes a case for granting relief under section 233 of the Act. This also renders neguatory the submission that this petition has been filed before the cause of action had arisen, as advanced by the learned advocate for the petition. Because, the resolution dated 17.4.2013 [Annexure-23(B), reliving the petitioner from the office of the M.D is, in deed, is continuation of the resolution taken against agenda No. 4 in the Board Meeting dated 23.03.2013 (Annexure-X) and the cuase of action arose on 23.03.2013. Besides, in my considered view, any court of law can take into consideration the subsequent events, like the EGM resolution dated 27.4.2013, for resolving the disputes completely and efficaciously, and there is authority supporting this view. Besides, the excuses that the petitioner No. 1 was liable to be discharged as per provision of section 110(1) of the Act, is nothing but a contrivance to implement the decision taken against agenda No. 4 of the Board meeting dated 23.04.2013, because section 110(3) of the Act permits extension of the tenure of the M.D., i.e. the petitioner No. 1 in this case, for further period of five years, and the respondents No. 2 and 3 could have exercised their 80% voting right, in EGM dated 17.4.2013, to extend the tenure of the petitioner No. 1 (founder M.D) for further five years, if these respondent were fair and were committed to uphold the legitimate expectation of the petitioner (the promoter share holders). Similarly, from the same motive, these respondents No. 2 and 3 have technically ousted the petitioners from operating the bank account, by adopting a resolution that the account shall be operated under joint signature of the respondent No. 2 (chairman), as the mandatory signatory, with any one of the three other directors, of whom one is respondent No. 3 and the rest two are the petitioners (as mere name leaders), thereby it has been ensured that the respondent No. 2 and 3 can very well operate bank account, under their joint signature, excluding the petitioners. In this context, I should refer to the ratio of the case reported in 11 BLC (author Judge Mr. Justice Md. Tofazzal Islam, as his Lord ship then was) (AD) 67 : HBS Association (Pvt) Ltd Vs. Prof. S.K. Chowdhury, wherein it has been held by the apex court (at paragraph 31) ‘that in the instant case the respondent No.1 was a director as well as a joint signatory for operating the bank accounts of the company and had legitimate expectation to remain as such and more over his investment in the Company has been stuck off because of his removal from directorship of the company and no opportunity at all was given to the respondent No.1 to remove his capital upon reasonable terms and, as under section 233, the court in a fit case may pass appropriate order and accordingly the High Court Division gave direction upon appellant No.2 and 3 to purchase the shares of the respondents No.1” In the instant case, the petitioners were not removed as directors, but in consequence of the above said resolution they existed as directors in paper only, having no say in any decision making process. Though it may not be necessary to unearth the motive in so doing, however it seems that the majority share holders (the respondent No.2 and 3) might have thought to keep the petitioners bundled with the entire liability of the company jointly and severally alongwith the respondent No.2 and 3, for loan liability of the company, although the petitioners have no equal stake, and no say at all, in managing the business, financial or other affairs of the company or in operating the bank account of the company. May be, the respondents wanted giving a sugar coat over their unfair, prejudicial and discriminatory deeds and conducts or to put a façade of fairness to disguise their oppressive and discriminatory conduct.
Next, I should refer to the ratio of the case reported in 7 BLC 107: Homera Ahmed Vs. Nahar Shipping Lines Ltd. [another Judge Mr. Justice K.M. Hasan, as his Lordship then was]. In that case, at paragraph 73, the High Court Division has held that “As a matter of law the petitioners are entitled to have a say in running and management of the company. Further, as a matter of law, the failure on the part of the majority to give the petitioner a say in running and management of the company is prejudicial conduct under section 233…… As a result, the prejudice suffered by the petitioners is that they were “locked out” of the company within which the investment was locked in. They can neither take out their investment nor participate in the affairs of the company.” Accordingly, in that case, the High Court Division allowed the petition and jointly or severally directed the majority shareholders to purchase, jointly or severally, all shares of the minority. That judgment passed in Matter No.151 of 1997, reported in 7 BLC 109, was upheld by the Appellate Division in the case reported in 56 DLR (AD) 36 (i.e. in CPLA No. 1382 of 2002 arose out of Matter No.151 of 1997) .
In the facts of this case, it is also pertinent to quote views of the apex court; expressed in para 31 and 32 of the case reported in 11 BLC (AD) 67, that reads as follows
“31. In the instant case the respondent No. 1, who was a director as well as a joint signatory for operating the bank accounts of the company, also had a legitimate expectation to remain as such and moreover, his investment in the company has been struck off because of his removal from directorship of given to the respondent No. 1 to remove his capital upon reasonable terms and, as under section 233, the court in a fit case may pass appropriate order and accordingly, the High Court Division gave direction upon the appellant Nos. 2 and 3 to purchase the shares of the respondent No. 1.
32. We are of the view that on correct appreciation of the materials on record the High Court Division gave the above direction and we find no cogent reason to interfere with the same.”
Having consulted the ratio of the case settled, by the apex court, in the case reported in 56 DLR (AD)36: Nahar Shipping Lines Vs. Homera Ahmed and in the case reported in 11 BLC (AD)67: HBS Association (Pvt) Ltd Vs. Professor Shahabuddin Khaled Chowdhury vis-a-vis the facts and circumstances of the instant matter, I am of the considered view that this an apt case where relief should be given, as prayed for, under section 233 of the Act.
Similarly, the views taken in 53 DLR (AD) 83: Sayed AL Naser Ahmed Vs. Nafisa Chowdhury and in Re, Westbourne Gallerin Ltd. (1972) 2 ALLER 422 (H2) squarely supports giving reliefs prayed for in the facts and circumstances of this case. In 53 DLR (AD) 83, the apex court has held that, a minority share holder can petition the court for relief (1) if there has been fundamental breach rules, (2) where the majority endeavoring directly or indirectly to appropriate to themselves or (3) money, property or advantages which belonged to the company or in which the other members are entitled to participate or (3) 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 petition, the court may make such order as prayed for or such other order as it deems fit.
As regards legitimate expectation, the respondents had relied on a judgment reported on 3 NLJ 130: Sunglary Apparel Ltd Vs. BCBL. In that case, it was held in the facts of that case, that the doctrine of legitimate expect-ation is not applicable in company matter. In that case, a share holder claimed that he has right to share that remained unsubscribed. The court held that the shares were allotted pursuant to section 155 of the Act and the unsubscribed shares, if any, shall remain under the disposal of the board of directors, for allotment in the manner, as laid down in that section and keeping in view the paramount interest of the company. The petitioner, who had subscribed for the proportionate shares allotted to him, had no legitimate right to get the unsubscribed shares allotted to him. Hence, that case is liable to be distinguished in the facts of this case. Here, the principle of the case, as regards legitimate expectation by minority shares holders, laid down in 11 BLC (AD) 67 will apply.
Similarly, the pretense or excuse, recorded in EGM resolution dated 17.04.2013, that the petitioners are share holder in another company formed with object to do similar business, simply highlight the motive of the respondents to capture any issue, whatsoever, to oust the petitioner and to usurp the entire control of the company keeping the petitioners existence only in paper, so that they can be saddled with an victimize for the loan liability of the company of which the respondent No.2 and 3, are in substance, proprietors as evident from the facts and circumstances of this case.
In the facts and circumstances of this case I find that since after 23.3.2013, the date of adopting board resolution (vide Annexure-X), the petitioner had no say in running or managing the affairs of the company as well as they have no say in operating the bank account of the company. On the other hand they can not go out with their stake in the company by transferring shares to an outsider, because, the respondent Nos. 2 and 3, using and exercising enormous power and having 100% control over the affairs of the company, no outsider is expected to come forward to purchase the shares of the petitioners, as has been rightly pointed out and submitted by the learned Advocate for the petitioners.
In this view of the matter, I find that the ratio of the cases cited by the learned Advocate for the petitioners, referred to in the course of his submission and quoted herein above, is squarely applicable in the facts and circumst-ances of this case and a clear case has been made out by the petitioners to pass the relief as prayed for in the petition.
The Appellate Division in, appropriate case, has directed to purchase the minority shares, although the company had bank liability. In this case as well the respondents could not cite any decision to the contrary to take a view that merely because the company has bank loan and the petitioners have executed some personal guarantee, as alleged, their shares cannot be transferred pursuant to this court’s order.
In my considered opinion, section 27(1)(a) of the Bank Companies Act, 1991, requires permission of a lender bank in the case of transfer of shares to be made voluntarily by the share holder of a borrower company and in the case of voluntary resignation tendered by the directors of a borrower company pursuant to their own decision. In this case, the transfer of shares is to be made pursuant judgment and order passed as per provisions of section 233 of the Act and relinquishment of the liability of the petitioners arises pursuant to the court’s order passed section 233 of the Act.
Hence, the bar provided in section 27(a) of the Bank Companies Act is not applicable in the matter of transferring of the shares pursuant to court’s order passed under section 233 of the Act or in the matter of a consequent resignation or vacation of office pursuant to order passed under section 233. Besides, when entire shares of the petitioners are transferred to the respondents then the petitioners have no stake in the company and there is no reason to saddle them with liability of the company in running and managing which they have no say, nor do they have any right to claim any interest in the profit. So, they will have no personal liability for the loan of a company after their relation with the company has been perpetually served. There is no reason to keep their personal guarantee alive in such circumstances. Hence, a direction upon the bank shall be made to relinquish the petitioners from their personal guarantees as well.
In view of the deliberation recorded above I find merit in this petition and the petition is allowed.
Accordingly, it is directed that,
- the company or the respondents No. 2 shall request Hodavasi Chowdhury & Co., Chartered Accountants, BTMC Bhaban, Karwan Bazar, Dhaka, to make valuation of the shares and to submit their report. The respondent Nos. 2 and 3 or any of them, jointly or severally, or their nominee shall buy 20% shares of the petitioners within 30 (thirty) days of receiving the valuation report, whether received from the auditors or from the petitioners.
- The auditors shall submit their report within 3(three) months from receiving the letter of request, subject to extension of time by the court, if so required reasonably. The respondents No. 2 and 3 shall render all corporation and shall disclose and furnish all such documents and particulars as may be required by the auditors.
- The petitioners shall have excess in the entire process of valuation of the shares and to furnish necessary facts and figures from their side, as well.
- The fees of the auditors is fixed at Tk. 5,00,000/- to be paid from the assets of the company, of which 50% shall be paid within seven days of receiving the valuation report and the rest 50% within 7(seven) days of submitting the report to the company, with true copy of the petitioner(s).
- The personal guarantees of the petitioners shall stand cancelled. The respondents are directed to give fresh personal guarantees, if so required by the banks, and the company shall forward copies of this judgment and order to its bankers.
- The company is directed to appoint the auditor within 15 days from the date of drawing up of this judgment and order.
No order as to costs.
Reference: 4 LNJ (2015) 8