1990 (9) TMI 269 - HC - Companies Law

Summary

Issues Involved
1. Removal of the present board of directors.
2. Appointment of an administrator or regulation of the company's affairs.
3. Termination of agreements with purchase and selling agents.
4. Termination of commission agreements with loan guarantors.
5. Termination of mortgages and debenture arrangements.
6. Restraint on disposal of company assets.
7. Subsequent events affecting the reliefs claimed.
8. Impleading of Hindustan Vegetable Oil Corporation Ltd. and the Commissioner of Payments.
9. Amendment of the main petition to include new allegations.

Detailed Analysis

1. Removal of the Present Board of Directors
The petition filed by the Company Law Board under sections 397 and 398 of the Companies Act, 1956, sought the removal of the present board of directors. However, due to the takeover of Ganesh Flour Mills Co. Ltd. by the Central Government, the reliefs related to the removal of the board of directors became infructuous.

2. Appointment of an Administrator or Regulation of the Company's Affairs
The prayer for appointing an administrator or regulating the company's affairs also became infructuous due to the takeover by the Central Government and the subsequent transfer of management to Hindustan Vegetable Oil Corporation Ltd.

3. Termination of Agreements with Purchase and Selling Agents
The court held that the reliefs sought in paragraphs (c) and (d) of the petition, related to the termination of agreements with purchase and selling agents, could primarily be granted under the Companies Act. The large commissions allowed to concerns controlled by the Murarka group and the accumulation of interest thereon were significant issues that needed proper adjudication.

4. Termination of Commission Agreements with Loan Guarantors
Similarly, the termination of commission agreements with loan guarantors was considered a valid relief that could be granted under the Companies Act. The court emphasized that acts of oppression and mismanagement could still be investigated despite the takeover of the company's management.

5. Termination of Mortgages and Debenture Arrangements
The court noted that the termination of mortgages and debenture arrangements could significantly impact the financial state of the company. If the Company Law Board could establish that these agreements were fraudulent and invalid, it would change the financial complexion of the company, benefiting the shareholders.

6. Restraint on Disposal of Company Assets
The prayer to restrain the company from disposing of its assets and rescinding contracts was also deemed a valid relief under the Companies Act. The court highlighted the importance of investigating whether these actions were oppressive or prejudicial to public interest.

7. Subsequent Events Affecting the Reliefs Claimed
Respondents argued that the petition had become infructuous due to the takeover and subsequent events. However, the court rejected this contention, stating that the reliefs related to termination of agreements and mortgages could still be granted under the Companies Act. The court emphasized that the validity of commission agreements and debentures could not be adequately investigated under the Industries (Development and Regulation) Act.

8. Impleading of Hindustan Vegetable Oil Corporation Ltd. and the Commissioner of Payments
The court permitted the impleading of Hindustan Vegetable Oil Corporation Ltd. as a respondent, recognizing its vested interest in the proceedings. However, the court declined the prayer to implead the Commissioner of Payments, stating that the Commissioner was not a necessary or proper party for the adjudication of the claims.

9. Amendment of the Main Petition to Include New Allegations
The court allowed the amendment of the main petition to include allegations regarding the property at Reay Road, Mazagaon Dock, Bombay. The petitioner sought to incorporate allegations that the Murarka group had fraudulently transferred the property to W. H. Brady and Co. Ltd. The court found the amendments necessary for effectively determining the controversy in the petition and promoting the ends of justice.

Conclusion
The court dismissed C.A. No. 166 of 1987, rejecting the contention that the petition had become infructuous. It allowed C.A. No. 459 of 1984, permitting the amendment of the petition and the impleading of Hindustan Vegetable Oil Corporation Ltd. The court emphasized the need for proper adjudication of the controversies raised, particularly concerning the termination of commission agreements and debentures, to protect the interests of the shareholders and the public.