2004 (7) TMI 668 - Board - Companies Law

Summary

Issues:
Application for substitution of petitioner in a company petition under Sections 397 and 398 of the Companies Act, 1956.

Analysis:
The applicant sought directions to substitute her name in place of the second petitioner in a company petition alleging oppression and mismanagement in M/s Gees Marine Products Private Limited. The second petitioner wished to withdraw, and the applicant, a shareholder aggrieved by the acts, wanted to continue the petition. The respondent argued that a petition's validity is judged at the time of presentation and does not cease to be maintainable due to subsequent events. The respondent highlighted the absence of a provision for shareholder substitution in Sections 397 or 398, unlike Section 405 for adding respondents. The respondent referred to Rules 88 and 101 of the Companies (Court) Rules, 1959, emphasizing the need for all petitioners to withdraw for substitution.

The applicant contended that Rules 88 and 101 were irrelevant, and there was no bar to substitution if the original petitioner withdrew. The judge considered whether the applicant could be substituted to prosecute the petition under Sections 397/398. Section 399 allows individual shareholders to seek relief on behalf of all shareholders, making it a representative proceeding. The judge referenced case law supporting substitution in such cases, emphasizing the court's power to allow others to join as co-petitioners or take over prosecution. The judge cited the Delhi High Court and Madras High Court decisions supporting shareholder substitution if a valid petition was presented.

In conclusion, the judge held that the Company Law Board had the inherent power to substitute the applicant as the petitioner, subject to the petition's validity. The absence of specific enabling provisions like Section 405 or Rule 101 did not bar the substitution in this case. The application was allowed, permitting the applicant to replace the second petitioner who was allowed to withdraw. The company applications in question were disposed of accordingly.