2009 (6) TMI 582 - HC - Companies Law

Oppression and mismanagement - Whether the Company Law Board both on facts and in law erred in allowing the petition though the second respondent has not made out a case and further it committed an error in coming to the wrong conclusion that there was a deadlock in the company without assigning valid reasons for the same? Held that - The learned presiding officer of the Company Law Board came to the right conclusion and held it could not be conclusively stated that the share transfer form, letter of undertaking and the letter of resignation do contain the signature of the second respondent and there is no material to establish the approval of the impugned transfer in favour of the third respondent or acceptance of the resignation of the second respondent from the office of the director. The said findings of fact recorded by the Company Law Board in exercise of its powers in a summary procedure after careful perusal of the same and comparison of the disputed document with that of the admitted document cannot be disputed. The Company Law Board has rightly exercised its power under section 402 of the Companies Act and granted the relief to the second respondent. The third respondent who is the aggrieved person could have come before this Court questioning the correctness of the order but not the appellant and is one more strong circumstance against it for not interfering with the impugned order. Appeal dismissed.

Issues:
- Company appeal questioning the correctness of the order allowing the Company Petition under sections 397 and 398 of the Companies Act, 1956.
- Allegations of oppression and prejudice, nullity of share transfer, appointment of director, share purchase, and division of assets.
- Granting of relief by the company court to rectify the register of members and set aside director appointment.
- Grounds of appeal challenging the Company Law Board's decision.
- Arguments regarding lack of valid reasons for the alleged deadlock in the company.
- Dispute over the status of the second respondent as a shareholder and director.
- Legal contentions on the alleged resignation and signature issues.
- Justification of the impugned order by the second respondent's counsel.
- Examination of findings by the Company Law Board in the absence of framed questions of law.
- Comparison of disputed and admitted signatures by the Company Law Board.
- Applicability of previous legal decisions on signature comparison.
- Power of the Company Law Board under section 402 of the Companies Act.
- Consideration of the appeal's maintainability and lack of interference with the impugned order.

Detailed Analysis:
1. The company appeal challenges the order allowing the Company Petition filed under sections 397 and 398 of the Companies Act, 1956, raising various grounds without framing specific questions of law. The relief granted by the company court includes rectifying the register of members and setting aside the director's appointment based on the alleged oppressive and prejudicial acts.

2. The appeal questions the Company Law Board's decision, alleging errors in finding a deadlock within the company without sufficient reasons and overlooking the removal of the second respondent as a director and shareholder. The appellant argues that the Board should not have entertained the petition without rectification of the register of members by the second respondent as per section 111 of the Companies Act.

3. Legal contentions revolve around the alleged resignation of the second respondent, signature comparisons, and the necessity of expert opinion under the Evidence Act for disputed signatures. The appellant contests the Board's findings on the resignation and signature issues, citing contravention of the Evidence Act and precedents supporting the requirement of expert opinion.

4. The second respondent's counsel justifies the impugned order, emphasizing the third respondent as the aggrieved party and questioning the appellant's standing to file the appeal. Legal references are made to the powers of the Company Law Board under section 402 and previous court decisions on signature comparisons without expert assistance.

5. The High Court examines the Company Law Board's findings without specific questions of law framed by the appellant. Despite the lack of framed questions, the Court reviews the Board's conclusions on the resignation and signature issues, finding them well-supported by the evidence and justifying the relief granted to the second respondent.

6. The Court upholds the Company Law Board's decision, emphasizing the careful examination of evidence, comparison of signatures, and application of legal principles. The Board's exercise of power under section 402 is deemed appropriate, and the impugned order is considered well-reasoned and not warranting interference.

7. The Court dismisses the appeal, noting the lack of standing for the appellant to challenge the order and the absence of grounds for interference. Legal arguments on signature comparisons and the Board's powers are found inapplicable to the case, leading to the affirmation of the impugned order's validity.

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