1989 (12) TMI 246 - HC - Companies Law

Summary

Issues:
1. Maintainability of the petition by the petitioner
2. Conduct of the company's affairs in a prejudicial manner
3. Relief sought by the petitioner

Issue 1 - Maintainability of the petition:
The petitioner filed a petition under sections 397, 398 read with section 166 of the Companies Act, 1956, alleging certain acts of the respondents as illegal and seeking the constitution of a new managing committee. The respondents contended that the petition was not maintainable as it was not filed by 1/5th of the total number of members of the company, as required by the Act. The court referred to a previous judgment and held that the petition could only be filed by a specific number of members, which the petitioner did not meet. Despite this ground for dismissal, evidence was considered under Issue 2.

Issue 2 - Conduct of the company's affairs:
The petitioner alleged misappropriation of funds by respondent No. 2 and detrimental acts against the company's interest. Witnesses were examined, including PW-1 and PW-2, who reiterated the allegations. However, in cross-examination, it was revealed that the accounts were regularly audited, approved in annual general meetings, and expenditures were accounted for during the petitioner's tenure on the managing committee. The respondents' witness, RW-1, testified that the company's affairs were properly managed, accounts audited, and expenditures approved in meetings. The court found the petitioner's claims unsubstantiated, lacking good faith, and filed for ulterior motives, leading to the dismissal of the petition with costs.

Conclusion:
The court dismissed the petition as the petitioner failed to meet the required number of members to file the petition and failed to substantiate the allegations of mismanagement and misappropriation of funds. The court found the petition lacking in good faith and ordered costs to be paid by the petitioner.