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Issues involved: Challenge to the order/interim order dated January 11, 2008, passed by the Additional Principal Bench, Company Law Board, Chennai, in C.P. No. 5 of 2008 regarding the operation of the bank account by the managing director u/s Clause 41 of the articles of association.
The dispute involves "Milka Nutrients" company, now known as M/s. New Hope Food Industries P. Ltd., engaged in manufacturing and supplying cakes under the brand name "Milka Wonder Cake". Allegations of mismanagement and oppression led the appellants, who are also directors, to file C.P. No. 5 of 2008 seeking to restrain the respondents from holding an extraordinary general meeting scheduled for January 12, 2008. The Company Law Board allowed the meeting but restricted the implementation of resolutions without its leave, except for bank operations by the managing director. The main contention is the Company Law Board's direction regarding the managing director's operation of the bank account. The appellants argue that allowing the managing director to solely operate the account would grant him complete control, as they had previously operated it jointly. They express concerns about potential manipulation of profits if the managing director is given sole authority over the account. The appellants assert that the managing director, against whom mismanagement allegations exist, should not be permitted to control the bank account. They argue that the Company Law Board should not be bound by the articles of association, especially since the managing director had not previously relied on Clause 41. The appellants highlight the joint signing of cheques as evidence of their previous involvement in bank operations. The respondents justify the interim order as being in the company's best interest under Section 403 of the Companies Act. They argue that the Company Law Board's decision, based on Clause 41 of the articles of association, should not be interfered with, especially since the appellants were also party to those articles. They emphasize that the High Court's jurisdiction in appeal is limited to questions of law. Clause 41 of the articles of association grants the managing director the power to operate the bank accounts, subject to the board's direction. The Company Law Board's order aligns with this clause and its authority under Section 403 to issue interim orders for regulating company affairs. The appellants' concerns about potential misuse of authority by the managing director are deemed unfounded, given the safeguards in place, such as requiring the managing director to provide bank account statements to the appellants. The Court finds no substantial question of law to entertain the appeal, leading to the dismissal of the case and the associated motion. No costs are awarded in this matter.
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