2007 (12) TMI 511 - Board - Companies Law

Issues Involved:
1. Alleged reduction of petitioners into minority in shareholding and management.
2. Non-payment of salary and perquisites to petitioner No. 1.
3. Unilateral decisions regarding company premises without consulting the petitioner.
4. Alleged mismanagement and unauthorized construction leading to litigation.
5. Validity of the appointment of Respondent No. 2 as a director.
6. Alleged improper handling of the company's bank account.
7. Allegations of multifarious litigation by petitioners against the company.

Detailed Analysis:

1. Alleged Reduction of Petitioners into Minority in Shareholding and Management:
The petitioners alleged that Respondent No. 1 manipulated the shareholding to gain a majority for himself and his family, reducing petitioner No. 1 into a minority. The petitioners argued that both parties initially had equal shares, which changed after the death of their father, Sh. D.P. Gupta. The respondents did not deny the change in shareholding but claimed it was as per the will of Sh. D.P. Gupta. The petitioners contended that the will was never probated, thus could not be legally effective. The Board found that the petitioners acquiesced to the shareholding pattern since 1987 and did not challenge it until the petition was filed.

2. Non-payment of Salary and Perquisites to Petitioner No. 1:
The petitioners argued that Respondents stopped paying salary and perks to petitioner No. 1, which he was entitled to. Petitioner No. 1 withdrew Rs. 50,000 from the company account, believing he could operate it, but reimbursed the amount when informed otherwise. The respondents argued that the petitioners' conduct, including writing against the company to the bank and withdrawing securities, was not in the company's interest.

3. Unilateral Decisions Regarding Company Premises:
The petitioners claimed that the respondents vacated and surrendered company premises without consulting them, leading to significant losses. The respondents admitted to surrendering premises but argued it was done with proper consultation and for the company's benefit. The Board found that the petitioners acquiesced to these actions over the years and did not challenge them timely.

4. Alleged Mismanagement and Unauthorized Construction Leading to Litigation:
The petitioners argued that unauthorized construction at the company premises led to litigation, jeopardizing the company's assets. The respondents countered that the construction was authorized by the previous landlord, and the litigation was being prolonged by the current landlord. The Board found the allegations of mismanagement unsubstantiated and noted that the petitioners had acquiesced to these actions.

5. Validity of the Appointment of Respondent No. 2 as a Director:
The petitioners challenged the appointment of Respondent No. 2 as a director, claiming it was done without proper AGM or compliance with the Companies Act. The respondents argued that Respondent No. 2 was appointed by a valid resolution of the Board of Directors. The Board found that the petitioners acquiesced to this appointment since 1986 and did not challenge it until the petition was filed.

6. Alleged Improper Handling of the Company's Bank Account:
The petitioners alleged that the respondents closed the company's account, opened a new one, and excluded them from operating it. The respondents argued that the petitioners' actions, including withdrawing securities and writing against the company to the bank, necessitated the change. The Board found that the petitioners' conduct was not in the company's interest and justified the respondents' actions.

7. Allegations of Multifarious Litigation by Petitioners Against the Company:
The respondents argued that the petitioners were involved in multiple litigations against the company, indicating personal scores rather than genuine grievances. The Board found that the petitioners' involvement in various litigations and their conduct indicated an attempt to settle personal scores, not acts of oppression or mismanagement.

Conclusion:
The Board concluded that the petitioners failed to make out a case of oppression and mismanagement under Sections 397 and 398 of the Companies Act. The petitioners had acquiesced to the alleged actions over the years and did not challenge them timely. The Board dismissed the petition but provided an option for the petitioners to exit the company on a fair valuation of their shares, ensuring they receive all due pay and allowances.

← Previous Next →