1982 (8) TMI 189 - HC - Companies Law

Oppression of mismanagement Application of sections 539 to 544 to proceedings under sections 397 & 398, Winding up Power of court to assess damages against delinquent directors, etc.

Issues Involved:
1. Preparation of a correct list of members and issuance of share certificates.
2. Assessment of remuneration drawn by directors in violation of Section 314 of the Companies Act.
3. Calculation of amounts taken by specific individuals without proper accounting.
4. Calculation of rent received by a director from the company.
5. Declaration of fraudulent conduct and falsification of books by certain individuals.
6. Enquiry into non-maintenance of statutory books.
7. Enquiry into damages suffered by the company due to misfeasance.
8. Maintainability of the application under Sections 397 and 398 after termination of proceedings.

Detailed Analysis:

1. Preparation of a Correct List of Members and Issuance of Share Certificates:
The applicants sought directions for the special officer to prepare a correct list of members and issue share certificates to those who had not received them. The court noted that similar reliefs were sought in previous proceedings, and no order was passed in favor of the applicants by the appeal court. Hence, the court held that re-agitating the same issues is not maintainable.

2. Assessment of Remuneration Drawn by Directors in Violation of Section 314:
The applicants requested an assessment of remuneration drawn by directors in violation of Section 314 of the Companies Act, 1956. The court found that such reliefs were punitive in nature and could not be granted summarily without affording the respondents an opportunity to meet the charges. The court emphasized the need for a fair procedure, which was not followed in the present application.

3. Calculation of Amounts Taken by Specific Individuals Without Proper Accounting:
The applicants sought directions for the special officer to calculate amounts taken by certain individuals without proper accounting. The court observed that the special officer's report was inconclusive due to the absence of books of account and relevant documents. Therefore, it would be unsafe and hard on the respondents to direct such an enquiry based on an inconclusive report.

4. Calculation of Rent Received by a Director from the Company:
The applicants requested the calculation of rent received by a director from the company. The court reiterated that such reliefs were already sought in previous proceedings and were not granted by the appeal court. Re-agitating the same issues was deemed not maintainable.

5. Declaration of Fraudulent Conduct and Falsification of Books:
The applicants sought a declaration that certain individuals conducted the affairs of the company with intent to defraud and falsified books. The court held that such severe allegations require a detailed procedure, including framing of charges, discovery of documents, and cross-examination, which was not followed in the present application. Hence, the application was not maintainable.

6. Enquiry into Non-Maintenance of Statutory Books:
The applicants requested an enquiry into the non-maintenance of statutory books. The court noted that such reliefs were part of the previous proceedings, and no orders were passed in favor of the applicants. Therefore, the present application was not maintainable.

7. Enquiry into Damages Suffered by the Company Due to Misfeasance:
The applicants sought an enquiry into the damages suffered by the company due to various acts of misfeasance. The court emphasized that such proceedings are akin to a suit and require a detailed procedure, which was not adhered to in the present application. Therefore, the application was not maintainable.

8. Maintainability of the Application Under Sections 397 and 398 After Termination of Proceedings:
The main point of opposition was that the original proceedings under Sections 397 and 398 had been terminated by the appeal court, and no lis was pending in which the present application could be made. The court agreed with this contention, stating that the application could only be made in the course of or in relation to ongoing proceedings under Sections 397 or 398. Since the original proceedings had concluded, the present application was not maintainable.

The court referred to several cases, including *Colaba Land and Mill Co. Ltd. v. Vasant Investment Corporation Ltd.*, *Life Insurance Corporation of India v. Hari Das Mundhra*, and *Cosmosteels P. Ltd. v. Jairam Das Gupta*, to support its decision that applications under Schedule XI must be made in the course of ongoing proceedings under Sections 397 or 398. The court concluded that since the original proceedings had ended, the present application was not maintainable.

Conclusion:
The application was dismissed with costs, and all interim orders were vacated. The court held that the applicants could not re-agitate issues that were already decided or not granted in previous proceedings. The court emphasized the need for a fair and detailed procedure for severe allegations and punitive actions, which was not followed in the present application.

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