2001 (3) TMI 1045 - Board - Companies Law

Summary

Issues Involved:
1. Oppression and Mismanagement u/s 397/398 of the Companies Act, 1956.
2. Rectification of the Register of Members u/s 111(4) of the Companies Act, 1956.
3. Validity of Share Forfeiture and Reissue
4. Issue of Bonus Shares
5. Issue of Additional Shares
6. Cessation of Directorship
7. Leasing of Company Property

Summary:

1. Oppression and Mismanagement u/s 397/398:
The petitioners alleged various acts of oppression and mismanagement, including the issue of further shares excluding the petitioners, issue of bonus shares contrary to law, removal of petitioners as directors, and appointment of new directors. They sought rectification of the register of members and other consequential reliefs.

2. Rectification of the Register of Members u/s 111(4):
The petitioners sought restoration of their names in the register of members. The company had forfeited the shares held by the petitioners and restored them to Gupta Bros. The Board directed the company to rectify the register of members by entering the names of the petitioners within two months.

3. Validity of Share Forfeiture and Reissue:
The petitioners contended that the shares were reissued to them and not held on behalf of Gupta Bros. The Board found that there was no material to show that the shares were held by the petitioners on account of Gupta Bros. The forfeiture of shares by the company was declared invalid due to procedural lapses, and the petitioners were declared to continue as shareholders.

4. Issue of Bonus Shares:
The company issued bonus shares against the revaluation reserve, which was against the provisions of the articles of association. The Board declared the issue of bonus shares as invalid and directed the company to cancel these shares.

5. Issue of Additional Shares:
The company issued 25,000 shares to the respondents' group, excluding the petitioners. The Board found this act to be oppressive and directed that the 2nd respondent should transfer such number of shares to the petitioners' group to maintain the original ratio between the two groups. The petitioners were to remit the consideration for the shares at Rs. 40 per share.

6. Cessation of Directorship:
The petitioners were removed from the Board without proper notice. The Board directed that one of the nominees of the petitioners be inducted into the Board of Directors within a month, with specific protections against removal.

7. Leasing of Company Property:
The company leased its only land to its sister concerns on terms prejudicial to the company. The Board directed the company to convene a general body meeting to reconsider the terms of the lease agreements. Any modifications by the general body would be binding on the lessees.

Conclusion:
The Board found the respondents guilty of oppressing the petitioners by deleting their names from the register of members, issuing bonus shares against the provisions of the articles, issuing additional shares to reduce the petitioners' holding, and disassociating the petitioners' nominees from the Board. The Board provided suitable directions to rectify these acts of oppression.