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Issues:
Petition under sections 397 and 398 of the Companies Act, 1956 alleging mismanagement, lack of meetings, and prosecutions against petitioners. Respondents claim petitioners are not members of the company. Analysis: The petitioners filed a petition under sections 397 and 398 of the Companies Act, 1956, against the first respondent company and others for gross mismanagement, lack of meetings, and prosecutions. Allegations include non-functioning of the company, absence of meetings, and mismanagement leading to petitioners' prosecution. Respondents argue that petitioners are not members of the company and lack the capacity under section 399. The respondents rely on a reconstituted register of members to challenge petitioners' membership status. However, the original register is missing, and the company's claim of reconstructing records lacks credibility. The company's reliance on the reconstituted register is weakened by the absence of the original register and the dubious circumstances surrounding record reconstruction. Petitioners presented receipts signed by the second respondent for payments towards equity shares of the company, totaling about Rs. 94,000. Respondents contend these were personal loans, not share payments. The discrepancy between the receipts issued on the company's letterhead and the nature of the transactions raises doubts about the respondents' explanations. The petitioners, despite not specifying the number of shares held, claim to constitute over 1/10th of the total members. The company failed to refute this claim, and the lack of definitive records or denials weakens the respondents' argument against petitioners' membership status. Given the lack of proper records, annual meetings held only after the petition, and indications of mismanagement, the court decided to appoint the official liquidator as the administrator of the company for three years. This decision aims to rectify the company's affairs and transition to a new board of directors afterward. The respondents were directed to bear the costs of the petition, emphasizing the seriousness of the mismanagement allegations and the need for intervention to restore order in the company.
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