Tycoon Mohan Galot has won a 15-year ownership battle over Manchester Outfitters (K) Ltd, effectively locking three of his nephews out of the garment manufacturing giant.
High Court judges Lilian Mutende, Enock Chacha Mwita and Mugure Thande ruled that Mohan's removal of his nephews - Pravin, Rajesh and Ganeshlal - from the board of directors in 2007 was done properly and that they were therefore not entitled to control the company's affairs.
Mr Galot, through Manchester Outfitters, brought the action against his nephews in 2009, seeking a declaration that the three were neither significant shareholders nor directors of the company.
Pravin, Rajesh and Ganesh claimed to have inherited 349 shares from their fathers (Mohan's brothers), Sohanlal and Ganeshlal, and to be directors of Manchester Outfitters.
Mohan told the court that he removed the trio as directors after they registered a rival company with a strikingly similar name, which they used to steal customers, money and even the company's premises on Mombasa Road.
According to court documents, Manchester Outfitters started out as a sole proprietorship set up in 1954 by Pusharam Galot, the family patriarch. Pusharam later converted the business into a partnership with Mohan.
They employed Pusharam's other three sons (Mohan's brothers) - Lalchand, Ganeshlal and Sohanlal - in the partnership business.
When Pusharam died in 1973, he left a quarter of his shares to each of his sons. This increased Mohan's shareholding to 62.5 per cent, with his brothers holding 12.5 per cent each.
Claimed to have inherited 349 shares each
In 1977, the company was registered as a private limited company, but only Lalchand and Mohan were shareholders.
Pravin and Rajesh claimed to have inherited 349 shares each from their fathers, Sohanlal and Ganeshlal respectively.
The three judges ruled that there was no evidence that Sohanlal and Ganeshlal could have acquired 349 shares each in Manchester Outfitters and bequeathed them to Pravin, Rajesh and Ganeshlal.
The judges ruled that the only brother of Mohan who has shares in Manchester Outfitters is Lalchand, who has no children to lay claim to the company.
They added that court documents showed that the patriarch, Pusharam, had indicated that Mohan, as managing director, would have full control of the company after his death, including the power to hire and fire directors at will.
“In the end, we find that the shareholders of MOL are Lalchand and Mohan with 1 management share and 349 ordinary shares each and Galot Ltd with 700 shares… We therefore find that the removal of Pravin, Rajesh and Ganeshlal as directors of MOL by Mohan in 2007, was in exercise of the power conferred upon him as governing director by article 10 (of the company’s articles of association). On that basis, the impugned removal cannot be faulted,” the judges ruled.
The ruling by the three judges could affect several other cases in which the two parties are fighting for control of Manchester Outfitters subsidiaries and related companies.
Interestingly, all the family members live at Galot estate in Kiambu County, where each son of patriarch Pusharam owns a house. Although each household lives in a separate dwelling, they all enter through the same gate.
