2012 (7) TMI 1043 - HC - Companies Law

Summary

Issues Involved:
1. Whether the Company Law Board (CLB) had the authority to direct the appellant to purchase the shareholding of respondents No.1 to 6 in the absence of a finding of oppression and mismanagement.
2. The scope of powers of the CLB u/s 402 of the Companies Act, 1956.

Summary:

Issue 1: Authority of CLB to Direct Share Purchase in Absence of Oppression and Mismanagement
The appellant challenged the CLB's order directing it to purchase the shareholding of respondents No.1 to 6, arguing that such a direction was invalid without a finding of oppression and mismanagement. The appellant relied on the Supreme Court judgment in *Incable Net (Andhra) Limited and Others vs. AP Aksh Broadband Limited and Others (2010) 6 SCC 719*, which stated that the CLB could not invoke its jurisdiction u/s 402 without establishing oppression by the majority shareholders.

Issue 2: Scope of Powers of CLB u/s 402
The Court held that the CLB's powers u/s 402 are of extremely wide amplitude, allowing it to regulate the conduct of the company's affairs, purchase shares, and make other orders deemed just and equitable. The judgment cited *Needle Industries (India) Ltd. & Ors. Vs. Needle Industries Newey (India) Holdings Ltd. & Ors. AIR 1981 SC 1298*, which emphasized the court's ability to do substantial justice even if a petition fails on the grounds of oppression.

Further, the Court referenced *M.S.D.C. Radharamanan vs. M.S.D. Chandrasekara Raja and Another (2008) 6 SCC 750*, where the Supreme Court upheld the CLB's jurisdiction to direct a shareholder to sell shares even without a finding of oppression, provided it was in the company's interest. The Court also noted that the same Bench of the Supreme Court in *Chatterjee Petrochem (India) Private Limited vs. Haldia Petrochemicals Limited and Others (2011) 10 SCC 466* supported the CLB's broad powers under Sections 397 and 402.

The Court concluded that the CLB's order was fair and did substantial justice between the parties, considering the lack of confidence and trust among shareholders and the potential impact on the company's affairs. The appeal was dismissed with no order as to costs.