1990 (7) TMI 297 - HC - Companies Law

Summary

Issues Involved:
1. Conduct of Board Meetings
2. Violation of Company Law
3. Other Allegations

Summary:

Conduct of Board Meetings:
The petitioners alleged that the managing director (MD) did not give adequate notice of meetings, chaired meetings on agenda items related to his own conduct, did not allow board members to participate and vote, wrote minutes according to his liking without reflecting actual deliberations, recorded resolutions not passed as having been passed, wrote minutes himself, and did not circulate minutes to directors. The court found these allegations to be serious but did not find sufficient evidence to grant interim relief.

Violation of Company Law:
The petitioners claimed that the MD violated company law by exercising substantial powers of management without being specifically entrusted with them as required u/s 2(26) of the Companies Act, 1956. They also alleged that the MD directed the company to render free services to relatives, issued advertisements free of cost as political donations, and unlawfully restrained and refused to transfer 1.6% of the shareholding. The court noted these allegations but did not find them sufficient to grant interim relief.

Other Allegations:
The petitioners alleged that the MD interfered in the day-to-day functioning of other whole-time directors, exceeded his authority, caused a deadlock in management, attempted to double the strength of the board to reduce petitioners to a minority, systematically eliminated petitioners from management participation, and declared the second petitioner persona non grata. The court found no prima facie case for oppression or mismanagement u/s 397 and 398 of the Companies Act, 1956, and held that the balance of convenience did not favor granting interim injunctions.

Conclusion:
The court dismissed Company Applications Nos. 342, 343, and 344 of 1990, finding no prima facie case for oppression or mismanagement. The court allowed the MD to continue in his role and suggested that the board of directors could decide on adding more directors. The court refused the petitioners' application for a certificate to appeal to the Supreme Court, stating that no substantial question of law of general importance was involved.