1988 (8) TMI 335 - HC - Companies Law

Company Membership of Oppression and Mismanagement Right to apply under section 397 and 398

Summary

Issues Involved:
1. Maintainability of the company petition u/s 397, 398, and 402 of the Companies Act, 1956.
2. Whether the petitioner is a member of the first respondent-company.
3. Whether the petitioner has the necessary qualifications u/s 399 to file the petition.

Summary:

Issue 1: Maintainability of the Company Petition
A preliminary objection was raised by the respondents regarding the maintainability of the company petition u/s 397, 398, and 402 of the Companies Act, 1956, on the grounds that the petitioner is not a member of the first respondent-company. The court referred to a previous decision in "Shri Balaji Textile Mills Pvt. Ltd. v. Ashok Kavle" which concluded that if a person is treated as a member by the company, evidenced by the register of members and statutory returns, it is not open to the company to contend otherwise for the purposes of sections 397 and 398. The court held that the underlying purpose of section 41(2) is that a person must give his consent in unequivocal terms by applying in writing for allotment of shares, but compliance with section 41(2) is not mandatory but directory.

Issue 2: Membership of the Petitioner
The court examined whether the petitioner is a member of the first respondent-company. The petitioner is the son of the late Maharaja of Mysore and claimed to have inherited shares from his parents. The petitioner's right as a shareholder was recognized in various agreements and the company's conduct. The petitioner and his family members held a significant number of shares, and the petitioner was treated as a director of the company, indicating his membership status. The court found that the petitioner was treated as a member by the company, and his right of membership could not be questioned on the ground that he had not complied with section 41(2).

Issue 3: Qualifications u/s 399
The respondents contended that the petitioner did not possess the necessary qualifications u/s 399 to file the petition. The court reviewed the petitioner's shareholding and found that the petitioner, by operation of law, held 1,200 equity shares and his family held additional shares, meeting the requirements of section 399. The court concluded that the petitioner had an indisputable and unchallengeable title to membership, satisfying the requirements to maintain the petition.

Conclusion:
The court overruled the preliminary objection and held that the petition is maintainable. The court emphasized that the petitioner's right as a shareholder was recognized and treated by the company, and he met the necessary qualifications u/s 399. The matter was posted for further proceedings.