2012 (11) TMI 1227 - Board - Companies Law

Summary

Issues Involved:
1. Alterations of the Articles of Association.
2. Legality of the Annual General Meeting (AGM) held on February 28, 2011, and the Board Meeting held on August 16, 2011.
3. Legality of the allotment of shares made to the trusts.
4. Restoration of directorship for the petitioners.
5. Relief sought by the petitioners.

Summary:

Issue 1: Alterations of the Articles of Association
The petitioners argued for the alteration of the Articles of Association to provide for the election of directors on a proportional representation basis. The court found that the Articles did not mention proportional representation and that directors need not hold qualification shares. The court held that it would not interfere in the internal affairs of the company and that such decisions are for the company and its shareholders to decide.

Issue 2: Legality of the AGM and Board Meeting
The petitioners claimed the AGM held on February 28, 2011, and the Board Meeting on August 16, 2011, were illegal and oppressive. The court noted that the first petitioner was appointed as an additional director and chairman and had participated in meetings where resolutions were passed without dissent. The court found no illegality in increasing the share capital or in the resolutions passed during these meetings, thus holding the meetings valid.

Issue 3: Legality of Share Allotments to Trusts
The petitioners argued that the company allotted shares to various trusts illegally. The court found that the allotments were made within the authorized share capital and that the relevant forms were filed with the Registrar of Companies. The court did not find any illegality in the allotment of shares and dismissed the petitioners' allegations as baseless.

Issue 4: Restoration of Directorship
The petitioners sought restoration of their directorships, claiming their removal was illegal. The court noted that the petitioners retired by rotation in compliance with the Articles of Association and that the removal of the chairman does not fall under sections 397 and 398 of the Companies Act. The court held that managerial and directorial complaints do not come under the purview of these sections, especially since the company is not a family-run or quasi-partnership entity.

Issue 5: Relief Sought
The petitioners sought an investigation into the affairs of the company. The court noted that a similar issue had already been dealt with in an earlier petition related to the same company. The court dismissed the petition, stating that the petitioners had not established any fraud or made out a case of oppression or mismanagement. All interim orders were vacated, and no costs were awarded.

Conclusion:
The court dismissed the petition, finding no merit in the allegations of oppression and mismanagement. The alterations to the Articles of Association, the legality of the AGM and Board Meeting, the allotment of shares, and the restoration of directorships were all addressed, with the court finding in favor of the respondents on all counts.