JUDGEMENT
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(1.)The dispute begins with even the description of the form of the action. THE plaintiffs and the third defendant claim it to be a partition suit; the first defendant insists that it is not.
(2.)The reliefs claimed in the suit are as follows:
"(a) Declaration that the family settlement dated 24th April, 2007 as recorded in the 3 memoranda of understanding all dated 24th April, 2007 being Annexure "C" hereto stands revoked and/or cancelled and is not valid and binding on the parties thereto;
(b) Declaration that all acts done or steps taken by the defendant Nos. 1, 2 and 3 in reliance upon or pursuance of the family settlement be invalid and be adjudged void and cancelled;
(c) Declaration that the defendant Nos. 5, 6, 7 and 8 are joint family companies/firms of Agarwal family and three branches of three sons of Bishan Swarup Agarwal are entitled to equal 173rd share thereof;
(d) Partition of the assets of the Agarwal family as set out in Annexure "D" hereto and allotment of 1/3rd share to the name plaintiff No. 1; (e) THE defendant Nos. 1 and 9 be directed to transfer back 2,75,000 shares in the defendant No. 7 in favour of the plaintiff No. 1 and/or nominee family members;
(f) Decree for declaration that 3,30,000 new shares in the defendant No. 7 caused to be issued by defendant No.1 mentioned in the plaint are illegal and void and allotment of all the said shares be adjudged void and be cancelled;
(g) Declaration that the plaintiff No.1 is entitled to hold and is a holder of 1/3rd issued share capital of defendant No.7; (h) Mandatory injunction directing the defendants to take steps so that plaintiffs 1/3rd shareholding in defendant No.7 is restored; (i) Decree for administration and management of defendant Nos. 5, 6, 7 and 8 in such manner as this Hon'ble Court may deem fit and proper; (j) Transfer deeds, share scripts and all other documents in connection with issuance of 3,30,000 shares of the defendant No.7 between the period 2004 to 2007 be adjudged null and void, delivered up and cancelled;
(k) Mandatory injunction upon the defendants directing as follows: i. THE defendant No.1 do return/retransfer 2,75,000 shares of the respondent No.7 to the petitioner and the respondent No.7 is liable to record such return. ii. THE respondent Nos. 1 to 4 to make the plaintiff No. 1 and his nominees, Directors of the defendant No.7 and the defendant No. 7 should accept the same. iii. THE defendant Nos. 1 to 4 do immediately cause the defendant No.7 to return/replenish the corporate guarantees given in favour of the defendant No.7 ING Vysya Bank. iv. THE defendant Nos. 1 and 3 do immediately return/replenish the guarantees given in favour of the defendant No.8 in favour of ING Vysya Bank.
(1) An enquiry be held into loss and damage suffered by the plaintiffs as pleaded in paragraph 55 hereof and a decree be made for such sums as be found fit and proper; (m) Receiver; (n) Injunction; (o) Attachment; (p) Costs; (q) Such further and/or other reliefs."
The first plaintiff, the first defendant and the third defendant are the three sons of Bishan Swarup Agarwal who has left a sizeable legacy, not of the least of them being the present and other likely legal actions. The plaintiff's have described the patriarch of the Agarwal family as being a man of modest means when he started off his business. The plaintiff's say that the corpus burgeoned into an impressive empire which the first defendant, as the eldest male member of the next generation, came to control. Between Bishan Swarup's death in 1983 and a family settlement about a quarter of a century later, the business had prospered and had grown out from two partnership firms to several other firms and companies. The family's interest diversified, its members grew and, finally, the time came to split the pie. The narration of the family's prosperity continues through the first 25 paragraphs of the plaint and the plaintiffs' principal interlocutory application. The good things that happened to the family, according to the plaintiffs, went awry in or after the year 2005. The plaintiffs claim that by then the seventh defendant had become the flagship business entity of the family and the first defendant apparently conferred undue benefits unto himself and other members of his branch both in the shareholding composition of such company and in the matter of enjoying the profits therefrom. The early disputes are recounted over paragraphs 26 to 29 of the plaintiffs' first petition. Paragraph 30 describes the initial confrontation when the first plaintiff apparently charged the first defendant of inequitable conduct and demanded that a measure of parity be restored in the command and control of the family business between the three branches. At paragraph 34 of the petition, the plaintiffs claim that three sons of Bishan Swarup and their respective wives "agreed to enter into a conciliation process for the purpose of affecting (sic, effecting) partition of the assets and all the family businesses of (the) Agarwal family." Three conciliators were initially appointed. From the summer of 2006 to the spring of 2007, the conciliation continued, till on April. 24, 2007, "a composite family settlement between the (plaintiffs) and the (defendant) Nos. 1 to 4 was achieved." The plaintiffs suggest that the first defendant insisted that the "entire settlement" be recorded in three several memoranda of understanding, one covering the fifth and sixth defendant partnership firms and the two others providing for the seventh and eighth defendant companies. It is the plaintiffs' avowed case that the "said three memoranda of understanding (of April 24, 2007) read together constitute the family settlement of the Agarwal family and cannot be read in isolation." Paragraph 38 of the petition goes on to say that the settlement was based on the fundamental premise that the net share of each of the three branches would be a third of the total value of the assets of the Agarwal family.
After describing the principal contents of the memoranda, the plaintiffs have detailed the steps taken by the plaintiffs in pursuance thereof at paragraph 41 of the petition. Roughly, the first defendant was to get the seventh defendant flagship company less its Jharsuguda unit and a share in the two premier partnership firms of the family; the first plaintiff was to get the eighth defendant company free from all its liabilities and a share in the two main partnership firms; and, the third defendant was to get the Jharsuguda unit of the seventh defendant company and a share in the said partnership firms. In addition to the three memoranda there was a chart indicating owelty money and balancing of the immovable properties of the family irrespective of the ostensible ownership therein. One of the key steps for implementing the settlement was to have the Jharsuguda unit demerged from the seventh defendant company.
(3.)What emerges from the plaint case and its reflection in the plaintiffs' petition is that there was a complete settlement of family businesses and properties to make a three-way division for the three branches. The plaintiffs do not indicate much grievance in some of the businesses and properties relating thereto remaining joint since the extent of the entitlement of the three groups was spelt out in the memoranda and the attendant papers. The charge in the plaint and the plaintiffs' petition is that the first defendant (there is an insinuation of the third defendant playing along with the first defendant) did not take steps subsequent to the execution of the memoranda to effectuate the settlement and family partnership. The plaintiffs say that the plaintiffs have complied with their side of the bargain but the first defendant has not. The particulars of the breach have been detailed at paragraph 43 of the petition. The underlying sentiment of the petition is that the first defendant (and, may be, the third defendant) did not really intend to give the first plaintiff his due but had induced the plaintiffs into believing that the settlement would be implemented with the ulterior motive of relieving the seventh defendant company, which was primarily to come to the first defendant, of the first plaintiffs uncomfortable presence. Into the forty-fifth paragraph of the petition the plaintiffs assert that in the first and third defendants having committed breach of the essential terms of the family settlement, they had repudiated the settlement recorded in the three memoranda of understanding. The plaintiffs maintain that they have "accepted the repudiation and by a formal letter dated 28th January, 2008 have recorded cancellation of the family settlement." In such letter, addressed by the first plaintiff to both the first and third defendants, the first plaintiff offered to restore the benefits received by him from the joint family funds and requested his two brothers "to undertake valuation of all the family owned, promoted businesses, properties and other valuables and to divide all such assets equally amongst all three brothers."
Having thus given the basis for getting the three memoranda of understanding out of the way, so to say, the plaintiffs have launched into an attack on the first defendant's role in the disproportionate issuance of shares in the seventh defendant flagship company. Such allotment of shares was long prior to the execution of the three memoranda and may have been the flashpoint that triggered the division. The plaintiffs suggest that the first defendant had "tricked" the first plaintiff to sign the memoranda only to acquire the plaintiffs' shareholding in the seventh defendant at a nominal price and have the plaintiffs resign as directors of such company. The plaintiffs contend that once the transaction relating to the seventh defendant was completed by the plaintiffs, the first defendant was not interested in implementing the settlement any further. The plaintiffs complain that the third defendant was in league with the first defendant in such unholy exercise.