1996 (2) TMI 571 - Board - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Law Board under Sections 247 and 250 of the Companies Act, 1956.
2. Validity of the petition under Section 250(1) of the Companies Act, 1956.
3. Whether a case has been made out under Sections 250(3) and 250(4) of the Companies Act, 1956.
4. Entitlement of the petitioner to any relief under Section 250(2) of the Companies Act, 1956.
5. Genuineness of the petition and the involvement of the company in the petition.

Detailed Analysis:

1. Jurisdiction of the Company Law Board under Sections 247 and 250 of the Companies Act, 1956:
The respondent No. 10 argued that the Company Law Board (CLB) has no jurisdiction to entertain the petition as the provisions of Section 247 can be invoked only by the Central Government. The CLB concluded that an independent complaint under Section 250(1) is entertainable, thus establishing its jurisdiction. The CLB interpreted that the legislative intent was to confer inquisitorial jurisdiction on the CLB to prevent situations contemplated in Sections 247 to 249, thus allowing it to entertain complaints independently.

2. Validity of the petition under Section 250(1) of the Companies Act, 1956:
The petitioner argued that the provisions of Section 250(1) should be interpreted broadly to include complaints made by any person independently. The CLB agreed with this interpretation, stating that the words "in this behalf" should be read as conferring powers on the CLB to act on complaints independently of a reference from the Central Government. The CLB concluded that the petition is valid under Section 250(1).

3. Whether a case has been made out under Sections 250(3) and 250(4) of the Companies Act, 1956:
The CLB examined whether there has been a transfer of shares or a likely transfer that would result in a change in the management of the company. The CLB found that the impugned shares had already been transferred and that the annual general meetings had been held subsequently. The CLB concluded that no case had been made out under Sections 250(3) and 250(4) as the facts did not indicate a likely change in the management of the company.

4. Entitlement of the petitioner to any relief under Section 250(2) of the Companies Act, 1956:
The CLB examined whether there was good reason to impose restrictions under Section 250(2). The inspection reports provided by the Regional Director (Eastern Region) indicated that the shares were held by the respective respondent companies in their own name and that the necessary funds for the investments were established. The CLB found no prima facie indication of benami holdings or any good reason for investigating the membership of the company under Section 247(1A). Consequently, the CLB concluded that no relief under Section 250(2) was warranted.

5. Genuineness of the petition and the involvement of the company in the petition:
The respondents argued that the petition was not genuine and was instigated by the company. The CLB noted that the petitioner, holding just 200 shares, had detailed knowledge of the various litigations and actions of the respondents, indicating the active involvement of the company. The CLB concluded that the petition lacked genuineness and appeared to be filed by the company itself, thus dismissing the petition.

Conclusion:
The CLB dismissed the petition, concluding that:
- The petition is valid under Section 250(1) but not under Sections 250(3) and 250(4).
- There is no good reason for imposing restrictions under Section 250(2) or ordering an investigation under Section 247(1A).
- The petition lacks genuineness and appears to be instigated by the company.

Consequently, the interim order dated January 27, 1995, was vacated, and no order as to costs was made.