1999 (10) TMI 689 - HC - Companies Law

Summary

Issues Involved:

1. Jurisdiction of the High Court.
2. Allegations of oppression and mismanagement.
3. Validity of share transfers.
4. Alleged wrongful sale of company assets.
5. Alleged wrongful surrender of sub-tenancy rights.
6. Reliefs and remedies.

Detailed Analysis:

1. Jurisdiction of the High Court:
The jurisdictional challenge was raised by the respondents, arguing that the High Court at M.P. alone would have jurisdiction over Raigarh Trading Co. Ltd., as its registered office is situated outside the jurisdiction of the Calcutta High Court. However, the Division Bench concluded that the Court has wide powers under sections 397 and 398 of the Companies Act, 1956, to investigate the affairs of the company against whom the proceedings have been initiated, including its holding or subsidiary companies.

2. Allegations of Oppression and Mismanagement:
The petitioner alleged oppression and mismanagement by the MPJ group in the affairs of Raigarh Jute & Textile Mills Ltd., primarily through unauthorized transfer of shares and wrongful sale of assets. The Court found that the petitioners made out a case of oppression by the MPJ group against their interests.

3. Validity of Share Transfers:
The Court scrutinized several share transfers:
- Transfer of 1250 shares by Marut in RTC to Aditya Kanoria was declared non est and set aside.
- Transfer of 1150 shares by Sandeep in RTC to SGS was also declared non est and set aside.
- Transfer of 1250 shares by Akshay in RTC to SGS was set aside following the reasoning of the Division Bench in Bajrang Prasad Jalan v. Mahabir Prasad Jalan.

4. Alleged Wrongful Sale of Company Assets:
The petitioner alleged that the MPJ group wrongfully sold the jute mill to Mohan Jute in violation of an injunction order. The Court noted that any such sale without the leave of the Court was invalid and held that the sale would abide by the result of the order that may be passed by the learned trial judge in the related suit.

5. Alleged Wrongful Surrender of Sub-Tenancy Rights:
The petitioner claimed that sub-tenancy rights were surrendered without proper authorization to facilitate MPJ's personal gains. The Court refrained from making any definitive findings on this issue, as it was already subject to a pending civil suit and interim orders.

6. Reliefs and Remedies:
The Court considered the appropriate reliefs, emphasizing that the majority shareholders should be given the first option to buy out the minority shareholders. The Court appointed Price Waterhouse, Chartered Accountants, as special officers to value the shares of the company and its subsidiaries. The valuation would be as of the date of the petition, and the BPJ group was directed to sell their shares to the MPJ group within 30 days of the valuation.

The application was disposed of with the direction for the valuation and sale of shares, and a prayer for stay of operation was refused. Leave was granted for filing an appeal before the Hon'ble Supreme Court of India, considering similar matters were pending there.