1999 (3) TMI 648 - Board - Companies Law

Summary

Issues Involved:
1. Shareholding Dispute
2. Transfer of Shares
3. Directorship Dispute
4. Removal of Directors
5. Issuance of Further Shares
6. Management and Operation Control

Summary:

1. Shareholding Dispute:
The petitioners, claiming to hold 50% of the subscribed capital of Shree Anupar Chemicals (India) Pvt. Ltd., filed a petition u/s 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement. They contended that shares were allotted to them, but the respondents disputed this. The respondents argued that petitioners Nos. 2, 3, 4, and 5 were not shareholders, and the shares held by petitioner No. 1 did not entitle him to file the petition as per section 399. The Company Law Board (CLB) decided to hear the petition on merits to determine the maintainability u/s 399.

2. Transfer of Shares:
The petitioners claimed that shares held by respondents Nos. 7, 8, and 9 were transferred without following the provisions of the Act/articles. The CLB found that the transfers were not compliant with the articles, as the board did not follow the required procedures, including giving notice to all directors. Therefore, the transfers were declared invalid.

3. Directorship Dispute:
The petitioners asserted that petitioners Nos. 2 and 3 continued to be directors, but the respondents denied this, stating they were not appointed in the annual general meeting (AGM). The CLB held that petitioners Nos. 2 and 3 were indeed directors, as the respondents failed to provide evidence that they were not appointed in the AGM.

4. Removal of Directors:
Petitioners Nos. 1 and 4 were removed from the board without following the provisions of the Act. The CLB found that the removal was invalid as it did not comply with Sections 284 and 190 of the Act and was done without proper notice. This was deemed an act of oppression.

5. Issuance of Further Shares:
Further shares were issued to certain respondents without the consent and knowledge of the petitioners. The CLB held that the issuance of shares was invalid as it was done without following proper procedures and was aimed at reducing the petitioners' shareholding.

6. Management and Operation Control:
Respondents Nos. 2, 7, 8, and 9 handed over the management and operation of the company to outsiders by appointing them as additional directors. The CLB found this to be a grave act of oppression and invalidated the appointments.

Relief Granted:
1. The board of directors was reconstituted with petitioners Nos. 1 and 4, and respondent No. 2 as directors.
2. The reconstituted board was directed to allot shares to group A against their share application money of Rs. 29 lakhs.
3. Respondents Nos. 7, 8, and 9 were given the option to repurchase the shares they transferred.
4. If the respondents did not repurchase, group A would have the first option to purchase the shares.
5. Petitioner No. 1 and respondent No. 2 would continue as directors, and additional directors would be elected as per the articles.
6. A general body meeting was to be convened to elect additional directors.
7. Group A would have the first option to purchase shares if respondent No. 2 decided to sell his shares.