1988 (9) TMI 272 - HC - Companies Law

Shares warrants and entries in register of members Oppression and Mismanagement Oppression and Mismanagement Right to apply under section 397 and 398

Summary

Issues Involved:
1. Maintainability of the petition under Sections 397, 398, and 433 of the Companies Act.
2. Whether the petitioners, not being registered members, can file a petition under Sections 397/398.
3. Whether a composite petition under Sections 397, 398, and 433 is maintainable.

Detailed Analysis:

Issue 1: Maintainability of the Petition under Sections 397, 398, and 433 of the Companies Act
The judgment addresses the preliminary objection raised by respondent No. 2 regarding the maintainability of the petition filed under Sections 397, 398, and 433 of the Companies Act. The petitioners, heirs of S. K. Desor, claim ownership of shares by transmission through operation of law. The court notes that the board of directors has not refused to register the transmission of shares in the petitioners' names, but required a succession certificate and Reserve Bank of India (RBI) permission due to the petitioners being non-Indian nationals. The court concludes that the requirement for a succession certificate does not amount to a refusal to register the petitioners as members.

Issue 2: Whether the Petitioners, Not Being Registered Members, Can File a Petition under Sections 397/398
The court examines several precedents cited by Mr. Menon, including Smt. Bina Barua v. Dalowjan Tea Co. (P.) Ltd., Ved Prakash v. Iron Traders Pvt. Ltd., and Balkrishan Gupta v. Swadeshi Polytex, among others. The court distinguishes these cases based on their specific facts and circumstances, noting that they do not apply to the present case where the board has not refused to register the shares. The court refers to Buckley on the Companies Act, Gore-Browne on Companies, and Halsbury's Laws of England, which support the view that personal representatives of a deceased member can present a petition under Section 397. The court also cites In re Jermyn Street Turkish Baths Ltd., where it was held that personal representatives must be regarded as members for the purpose of Section 210 (equivalent to Section 397 in Indian law).

Issue 3: Whether a Composite Petition under Sections 397, 398, and 433 is Maintainable
Mr. Menon argues that a composite petition is not maintainable, relying on Kilpest Private Ltd. v. Shekhar Mehra. However, the court refers to a contrary view expressed by a Division Bench of the Delhi High Court in Bhaskar Stoneware Pipes (P.) Ltd. v. Rajinder Nath Bhaskar, which held that a petition for winding up can be maintained by heirs of a deceased member/contributory. The court emphasizes that Section 397 requires the court to consider whether it is just and equitable to wind up the company, aligning with the grounds mentioned in Section 433. Thus, the court finds no substance in the contention that the composite petition is not maintainable.

Conclusion
The court rejects the preliminary objection raised by respondent No. 2, affirming that the petition under Sections 397, 398, and 433 is maintainable. The court directs the parties to lead oral evidence, with the petitioners presenting their evidence first. The case is scheduled for recording evidence on November 14, 1988.