1996 (8) TMI 421 - HC - Companies Law

Summary

Issues involved:
1. Regulation of the conduct of the affairs of the company.
2. Holding of a general body meeting to determine the management of the company.
3. Administration of the loan given by the sixth respondent to the first respondent.
4. Allegations of oppression and mismanagement by respondents.

Summary:

1. Regulation of the conduct of the affairs of the company:
The petitioners alleged that the respondents were fraudulently and maliciously endeavoring to take away the assets of the company and secrete the same for their own benefit. They claimed that the respondents, with the connivance of the sixth respondent, were attempting to take control of the loan amounts to be received from the sixth respondent and utilize those funds for their purposes, not for the benefit of the project. The petitioners also stated that the affairs of the company were being conducted in a manner prejudicial to public interest and oppressive to the petitioners.

2. Holding of a general body meeting to determine the management of the company:
The petitioners requested the court to intervene in the administrative affairs of the company and hold a general body meeting to determine the management. They claimed that the respondents were attempting to oust them from the management of the company and appropriate the loan amounts for their benefit.

3. Administration of the loan given by the sixth respondent to the first respondent:
The petitioners submitted that the sixth respondent, though apprised of all the facts, was actively assisting the respondents in taking the loan assistance from the TIIC and utilizing it for purposes not connected with the project. They argued that the conduct of the sixth respondent in siding with the respondents was unethical, especially when it was fully aware that the petitioner was solely responsible for conceiving and bringing out the project.

4. Allegations of oppression and mismanagement by respondents:
The petitioners alleged that the respondents were conducting the affairs of the company in a manner oppressive to the petitioners and prejudicial to public interest. They claimed that the respondents had not made any substantial investment in the company and that the first petitioner and his associates had made significant contributions towards the equity of the company. The respondents, however, denied these allegations and argued that the first petitioner had no financial stake in the company and was only a signatory to the memorandum of association for one share of Rs. 100. They contended that the first petitioner failed to attend three consecutive board meetings and had thereby vacated his office as a director of the company.

Judgment:
The court found that the petitioners had not provided sufficient evidence to support their claims of oppression and mismanagement. It was noted that the company had just been incorporated and was yet to commence its commercial activities. The court held that the allegations of oppression and mismanagement were premature and that the petitioners had not established any continuous acts of oppression by the majority shareholders against the minority. The court also observed that the petitioners had not pleaded all material facts necessary for granting the reliefs sought and that the reliefs requested during the arguments were not claimed in the original company petition. Consequently, the court dismissed the company petition, concluding that it was not sustainable under sections 397 and 398 of the Companies Act, 1956.