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Issues Involved:
1. Maintainability of the petition under Sections 397 and 398 of the Companies Act. 2. Validity of consent under Section 399(3) after the addition of transferees. 3. Enforceability of the agreement dated 27th July 1954 against the company post its conversion into a public company. 4. Validity of resolutions passed on 29th March 1958. 5. Mala fide intent behind the notice dated 25th August 1960 for increasing share capital. 6. Establishment of a case under Section 397 (oppression). 7. Establishment of a case under Section 398 (mismanagement). 8. Reliefs to be granted if the application is maintainable. Detailed Analysis: Issue I: Maintainability of the Petition The petition was contested on the grounds that it did not make out a case under Sections 397 and 398 of the Companies Act. The court noted that all material facts must be pleaded in the petition itself and subsequent affidavits cannot supplement the original petition. The court found that the subsequent affidavits filed by the petitioner either repeated the material facts already pleaded or supplied fresh materials in reply to the respondents' counter-affidavit. Therefore, the subsequent affidavits were taken into consideration, but facts transpiring after the petition were excluded. Issue II: Validity of Consent under Section 399(3) The petitioner had initially obtained consent from members holding more than one-tenth of the issued share capital. The question arose whether fresh consent was needed after the addition of transferees. The court held that the application remains valid as the nature of the reliefs sought was not altered by the inclusion of the transferees, who merely stepped into the shoes of the transferors. Issue III: Enforceability of the Agreement Dated 27th July 1954 The court examined whether the agreement, which was essentially a partnership agreement, could be enforced against the company after it became a public company. It was found that while the agreement was acted upon to some extent, it was not incorporated into the Articles of Association. The court concluded that the agreement could not be enforced against the public company as it would be contrary to the Articles of Association and the provisions of the Companies Act. The contractual obligations among the parties could no longer be worked out with reference to the theory of partnership. Issue IV: Validity of Resolutions Passed on 29th March 1958 (a) Notice Dated 1st March 1958: The court found that the notice was clear and not misleading. The petitioner was aware of the implications of the notice and did not claim to be misled. The notice was deemed sufficient under Section 172(1) of the Act. (b) Compliance with Section 81: The court held that the allotment of 39,000 shares was not the first allotment after the company became public and thus Section 81 applied. The General Meeting had the authority to give directions contrary to the pre-emptive rights of existing shareholders. (c) Allotment of Shares: The court rejected the argument that the resolutions were infructuous as the allotment could not be made. The resolutions, when read together, allowed for the allotment of shares to a select group of persons, not necessarily the existing shareholders or the public. (d) Mala Fide Intent: The court found no evidence that the allottees were under the control of the majority group. The allotment was not made with indecent haste and was necessary for the company's financial needs. Issue V: Mala Fide Intent Behind the Notice Dated 25th August 1960 The court found that the notice for the Extraordinary General Meeting to increase the share capital was part of a continuing process to oust the petitioner and his group. However, this subsequent conduct was not admissible for determining the validity of the petition filed earlier. Issue VI: Establishment of a Case Under Section 397 The court found that the petitioner failed to establish a case of oppression under Section 397. The actions of the majority group were legal and constitutional, and there was no evidence of fraud, misfeasance, or misconduct towards the minority shareholders. Issue VII: Establishment of a Case Under Section 398 The court found no evidence of gross mismanagement. The allegations of mismanagement were either repetitions of the oppression claims or were not substantiated with sufficient evidence. The petitioner failed to make out a case under Section 398. Issue VIII: Reliefs to be Granted As the petition was not maintainable under Sections 397 and 398, no reliefs were granted. The judgment of the learned Company Judge was set aside, and the appeals were allowed. Conclusion: The court dismissed the petition under Sections 397 and 398 of the Companies Act, finding no evidence of oppression or mismanagement. The resolutions passed on 29th March 1958 were deemed valid, and the subsequent conduct of the majority group did not affect the maintainability of the petition. The appeals were allowed, and the judgment of the learned Company Judge was set aside.
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