1981 (11) TMI 157 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the petition.
2. Alleged oppressive conduct by respondents Nos. 2 to 7.
3. Alleged collusion between petitioners and respondents Nos. 8, 9, and 10.
4. Status of the second respondent as a director.
5. Reliefs sought by the petitioners.

Detailed Analysis:

1. Maintainability of the Petition:
The court found that all the ingredients of section 397 of the Companies Act, 1956, were not satisfied. The petitioners failed to demonstrate that the company's affairs were conducted in a manner oppressive to any member or members, nor did they establish that the facts justified a winding-up order on just and equitable grounds. Consequently, the petition was deemed not maintainable.

2. Alleged Oppressive Conduct by Respondents Nos. 2 to 7:
The petitioners alleged that the second respondent and the Bham group engaged in oppressive and harsh conduct against the company and its directors from the Patel group. Specific allegations included:
- Issuing a false certificate.
- Misappropriating funds.
- Influencing business decisions against the company's interest.
- Refusing to vacate company premises.
- Instigating workers and making false charges.

The court concluded that the conduct of respondents Nos. 2 to 7 was not oppressive or harsh. The allegations were either related to the period before the second respondent was removed as managing director or were not substantiated to the extent required under section 397.

3. Alleged Collusion Between Petitioners and Respondents Nos. 8, 9, and 10:
The court found that the petitioners and respondents Nos. 8, 9, and 10 had made a common cause to oust the second respondent from the management. This was evident from the coordinated actions taken by the Patel group to deny the second respondent participation in the company's affairs.

4. Status of the Second Respondent as a Director:
The court did not adjudicate on whether the second respondent had ceased to be a director due to the matter being sub-judice in proceedings pending in lower courts. The issue was tied to whether the second respondent had vacated office under section 314(2)(a) and/or section 283 of the Companies Act, which required a detailed examination of evidence.

5. Reliefs Sought by the Petitioners:
The petitioners sought several reliefs, including:
- A declaration that the second respondent had ceased to be a director.
- An injunction to restrain him from acting as a director.
- Directions to the Bham group to refrain from instituting legal proceedings without court permission.
- Orders for the Bham group to sell their shares to the Patel group.

The court dismissed the petition, concluding that the petitioners failed to establish a case under section 397 of the Companies Act. The allegations did not demonstrate that the affairs of the company were being conducted in a manner oppressive to the petitioners or that the facts warranted a winding-up order.

Conclusion:
The court dismissed the company petition and the appeal from order, making no order as to costs. The petitioners did not meet the necessary criteria under section 397 of the Companies Act, and the issues regarding the second respondent's directorship were left to be resolved in the pending lower court proceedings.