1999 (7) TMI 685 - Board - Companies Law

Summary

Issues Involved:
1. Alleged illegal removal of the petitioner as a director.
2. Allegation of siphoning off funds by the respondents.
3. Determination of whether the company is in the guise of a quasi-partnership.
4. Valuation of shares for the purpose of buyout.

Summary:

1. Alleged Illegal Removal of the Petitioner as a Director:
The petitioner, holding 25% shares in ECL Agrotech Limited, claimed wrongful removal from the directorship, constituting oppression and mismanagement u/s 397/398 of the Companies Act, 1956. The petitioner argued the company was a quasi-partnership, ensuring equal shareholding and management participation. The respondents contended the company was a public entity with no such agreement. The petitioner's removal was claimed under Section 283(1)(i) read with Section 299 for non-disclosure of interest in a rival company and by a resolution in an extraordinary general meeting on December 23, 1996. The Board found the alleged board meeting on September 26, 1996, fabricated and the removal unjustified, yet not oppressive.

2. Allegation of Siphoning Off Funds by the Respondents:
The petitioner alleged siphoning off funds by the respondents. However, the judgment did not find substantial arguments or evidence presented on this issue, focusing primarily on the directorial removal.

3. Determination of Whether the Company is in the Guise of a Quasi-Partnership:
The petitioner argued the company was a quasi-partnership due to mutual trust and equal shareholding among four groups. The Board acknowledged the long association and equal shareholding, indicating mutual trust and confidence, thus allowing the petitioner to challenge the ouster under Section 397.

4. Valuation of Shares for the Purpose of Buyout:
The petitioner sought a buyout of his shares at Rs. 17.5 lakhs plus interest, or valuation as of August 1996, due to substantial profits in 1995-96. The Board determined the valuation should be based on the balance-sheet as on March 31, 1998, considering the petition filed on August 11, 1998. The Board appointed a Chartered Accountant for valuation, directing the respondents to purchase the petitioner's shares based on the valuation report.

Conclusion:
The petition was disposed of with directions for share valuation and buyout, ensuring fair treatment of the petitioner's group, while recognizing the petitioner's breach of fiduciary duties and prejudicial actions against the company.