2003 (10) TMI 671 - Board - Indian Laws

Summary

Issues: Shareholding requirement under Section 399 of the Companies Act, 1956; Allegations of oppression and mismanagement in the company's affairs.

Shareholding Requirement under Section 399:
The petitioner, holding 606 equity shares with support from other shareholders, filed a petition under Sections 397/398 alleging oppression and mismanagement. The respondents challenged the maintainability under Section 399, arguing the petitioner's group did not hold 10% of the total shares. The Board clarified that if the shareholding drops below 10% due to further share issuance, the petition remains valid if the issuance is oppressive. However, discrepancies in the petitioner's claimed shares led to a conclusion that the shareholding fell below 10%, rendering the petition non-maintainable.

Allegations of Oppression and Mismanagement:
The petitioner accused the Managing Director of selling factory land below market value and manipulating accounts to reduce profits. The respondents defended the land sale as authorized and the share issuance as approved in meetings where the petitioner was present. The Board found no breach of fiduciary duties in the land sale or share issuance. Further, the petitioner failed to substantiate allegations of fabricated accounts or undue benefits. Consequently, the petition was dismissed for failing to meet Section 399 requirements and lack of evidence supporting oppression or mismanagement allegations.

In conclusion, the Board dismissed the petition due to non-compliance with Section 399 and lack of substantiated allegations of oppression and mismanagement in the company's affairs.