2007 (6) TMI 291 - HC - Companies Law

Summary

Issues Involved:
1. Entitlement of Hungerford to proceed with the appeal after ceasing to be a shareholder.
2. Validity and legality of the auction sale of shares held by Hungerford.
3. Maintainability and relief under section 397 of the Companies Act, 1956.

Summary:

1. Entitlement of Hungerford to Proceed with the Appeal:
The court examined whether Hungerford, having ceased to be a shareholder of Turner Morrison due to the auction sale of its shares by the Income-tax Department, could continue with the appeal. The Division Bench had previously dismissed Hungerford's appeal on the grounds that it was no longer a shareholder. The apex court remitted the matter to the company judge to decide Hungerford's entitlement in the context of subsequent events, but not as a preliminary issue.

2. Validity and Legality of the Auction Sale:
The auction sale of Hungerford's shares was conducted by the Tax Recovery Officer on May 27, 1994. Hungerford's appeal against this sale was initially allowed by the Commissioner, but the order was later set aside by the High Court. Hungerford's subsequent writ petitions were dismissed, and the Division Bench held that the auction sale had attained finality. Hungerford's special leave petition against this decision was dismissed by the apex court. The court found no merit in Hungerford's argument that the auction sale was obtained by fraud, as there was no evidence to support this claim.

3. Maintainability and Relief under Section 397 of the Companies Act, 1956:
The court held that since Hungerford ceased to be a shareholder of Turner Morrison, it could not be granted any relief under section 397. The company petition, which alleged oppression and mismanagement, lost its utility as Hungerford was no longer a member of the company. The court emphasized that an order granting relief under section 397 requires the petitioner to be a current member of the company. Consequently, the company petition was dismissed as it would only result in an academic decision without any practical benefit to Hungerford.

Conclusion:
The application by Turner Morrison to dismiss the company petition was allowed, and the company petition was dismissed. The court found no reason to make any order for costs.