Case Note & Summary
The appellants, Madhavlal Narayanlal Pittie and others, filed a derivative suit in 2008 against Bachharaj & Company Pvt Ltd and others, challenging the proposed sale of 3,46,96,250 shares of Bajaj Hindustan Ltd held by the first respondent company for over 70 years, constituting about 55% of its investments. The appellants, minority shareholders, alleged that the sale was unnecessary, at a wrong time, and part of a Bajaj family settlement behind their backs. An interim order was passed directing defendant nos.3 and 6 to deposit the market value of 12.5% of the suit schedule shares as on 1st March 2008. The present appeal arose from Chamber Summons No.366 of 2016 and Notice of Motion No.305 of 2009 in Suit No.77 of 2009. The appellants sought inspection of the Bajaj family settlement agreement dated 21st December 2008, which was allowed by the trial court. The court noted that the agreement was unstamped and unregistered but held that inspection does not require stamping or registration at that stage. On the merits of the interim relief, the court found that the appellants failed to establish a prima facie case, as the sale was part of a family settlement and no fraud or oppression was demonstrated. The balance of convenience was in favor of the respondents, and no irreparable loss was shown. The appeal was dismissed.
Headnote
A) Company Law - Derivative Action - Minority Shareholders - Interim Relief - Appellants, minority shareholders of respondent company, challenged sale of shares of Bajaj Hindustan Ltd held by the company for over 70 years, alleging no necessity and wrong timing - Court held that no prima facie case was made out for interim relief as the sale was part of a family settlement and the appellants had not demonstrated any fraud or oppression - Balance of convenience was in favor of the respondents (Paras 1-3).
B) Civil Procedure - Inspection of Documents - Unstamped Agreement - Appellants sought inspection of the Bajaj family settlement agreement dated 21st December 2008, which was allowed by the trial court - Court upheld the order, noting that inspection does not require the document to be stamped or registered at that stage (Paras 2-3).
Issue of Consideration
Whether the appellants (minority shareholders) are entitled to interim relief restraining the sale of shares by the company management, and whether the Chamber Summons seeking inspection of the family settlement agreement was rightly allowed.
Final Decision
Appeal dismissed. The order allowing inspection of the family settlement agreement is upheld. No interim relief granted.
Law Points
- Derivative action
- minority shareholders
- interim relief
- prima facie case
- balance of convenience
- irreparable loss
- family settlement
- unstamped document
- inspection of documents
Case Details
2016 LawText (BOM) (12) 32
APPEAL (L) NO.423 OF 2016 IN CHAMBER SUMMONS NO.366 of 2016 IN SUIT NO.77 OF 2009
Dr. Manjula Chellur, CJ., M.S. Sonak, J.
Mr. Zal Andhyarujina with Mr. Ashish Kamath, Mr. Abhay Jadeja and Mr. Pradeep Mane i/b M/s. Crawford Bayley & Co. for the appellants. Mr. Janak Dwarkadas, Sr. Advocate with Mr. Sharan Jagtiani and Mr. S.V. Mehta i/b M/s. Malvi Ranchhoddas & Co. for respondent nos.1, 3, 4 and 6. Ms. Sneha Phene with Mr. Vishesh Malviya i/b M/s. Federal & Rashmikant for respondent no.2. Mr. Kalpesh Joshi i/b M/s. Kalpesh Joshi & Associates for respondent no.5. Ms Tejal Pandya i/b. M/s. Ashwin Pandya & Associates for respondent no.7.
Shri Madhavlal Narayanlal Pittie and others
Bachharaj & Company Pvt Ltd and others
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Nature of Litigation
Derivative suit challenging sale of shares by company management.
Remedy Sought
Appellants sought interim relief restraining sale of shares and inspection of family settlement agreement.
Filing Reason
Appellants alleged that sale of shares was unnecessary, at wrong time, and part of a family settlement behind their backs.
Previous Decisions
Trial court passed interim order directing defendant nos.3 and 6 to deposit market value of 12.5% of suit schedule shares as on 1st March 2008. Chamber Summons for inspection of family settlement agreement was allowed.
Issues
Whether the appellants are entitled to interim relief restraining the sale of shares.
Whether the inspection of the unstamped family settlement agreement was rightly allowed.
Submissions/Arguments
Appellants argued that sale was unnecessary and at wrong time, and that they were not supplied with the family settlement agreement.
Respondents contended that sale was part of a family settlement and no prima facie case for interim relief was made out.
Ratio Decidendi
In a derivative suit by minority shareholders, interim relief cannot be granted unless a prima facie case of fraud or oppression is established. The balance of convenience must favor the plaintiffs, and irreparable loss must be shown. Inspection of an unstamped document does not require stamping at the stage of inspection.
Judgment Excerpts
The appellants have filed the above suit against the respondents challenging the proposed sale of shares mentioned in the Schedule to the plaint numbering 3,46,96,250 of Bajaj Hindustan Limited.
There is an admission with regard to Bajaj family settlement agreement dated 21st December 2008. Inspection of the said documents was sought by the appellant and the same was allowed.
Procedural History
Suit filed in 2008. Interim order passed directing deposit of market value of 12.5% shares. Chamber Summons No.366 of 2016 filed for inspection of family settlement agreement, allowed by trial court. Appeal filed against that order.
