1992 (8) TMI 224 - HC - Companies Law

Summary

Issues Involved:
1. Legality of Board Meetings and Minutes
2. Validity of Directors' Positions
3. Co-option of a New Director
4. Form No. 32 Filing
5. Permanent Injunctions Against Respondents
6. Purchase of Shares
7. Alternative Relief of Winding Up the Company

Summary of Judgment:

1. Legality of Board Meetings and Minutes:
The petitioners sought declarations that the minutes recorded in the board meetings held on November 14, 1987, November 28, 1987, and February 13, 1988, were illegal and improper. The court did not find it necessary to detail the averments in the company petition due to the events during the litigation.

2. Validity of Directors' Positions:
The petitioners requested declarations that they continue to be directors of the first respondent-company. The court noted that the petitioners and respondents had equal shares in the company and that the quorum for a board meeting ensured representation from both family groups.

3. Co-option of a New Director:
The petitioners challenged the co-option of the fourth respondent as a director, asserting it was illegal. The court observed that mutual trust had been lost and that the second respondent, as chairman, had a casting vote, which was significant when the two groups fell apart.

4. Form No. 32 Filing:
The petitioners sought to prevent the fifth respondent from taking on record Form No. 32 filed by the second respondent, which purported to notify that the petitioners had vacated their office as directors. The court found that the exclusion of the petitioners from the management warranted invoking section 398 of the Companies Act.

5. Permanent Injunctions Against Respondents:
The petitioners requested permanent injunctions to restrain respondents Nos. 2 and 3 from interfering with their rights to act as directors and against the fourth respondent from acting as a director. The court acknowledged the deadlock in the management and the loss of mutual trust.

6. Purchase of Shares:
The petitioners sought directions for respondents Nos. 2 and 3 to purchase their shares at Rs. 1,000 per share or to sell their shareholding to the petitioners at the same value. The court valued each share at Rs. 930.85 and directed respondents Nos. 2 and 3 to buy the shares of the petitioners at this rate, failing which the petitioners were permitted to purchase the shares of respondents Nos. 2 and 3 at the same rate.

7. Alternative Relief of Winding Up the Company:
The petitioners alternatively prayed for the winding up of the company u/s 433(f) of the Companies Act if no feasible order could be made u/s 397 and 398. The court noted that the company was a quasi-partnership and that the deadlock justified the application of just and equitable considerations.

Conclusion:
The court modified the order to value each share at Rs. 820, directing respondents Nos. 2 and 3 to pay the petitioners for their shares at this rate, with interest at 10% per annum from October 1, 1988. The contesting respondents were granted six weeks to deposit the amount, failing which the petitioners could purchase the shares of the respondents. The court emphasized the importance of a fair valuation considering the company's worth as a going concern and its goodwill.