2009 (4) TMI 1005 - Board - Companies Law

Summary

Issues Involved:
1. Maintainability of the Company Petition under Sections 397 and 398 of the Companies Act, 1956.
2. Qualification of the petitioners under Section 399 of the Companies Act, 1956.
3. Allegations of oppression and mismanagement.

Summary:

1. Maintainability of the Company Petition:
The applicants (respondent No. 1 company M/s. Desh Cam Technological Resources P. Ltd. and Others) challenged the maintainability of Company Petition No. 118 of 2006 filed by the petitioners (Shri Rajendra Keshwani and Others) u/s 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement. The applicants argued that the petitioners did not fulfill the requisite criteria u/s 399 to maintain the petition as they were not shareholders of the respondent-company and thus had no locus standi.

2. Qualification of the Petitioners under Section 399:
The applicants contended that the petitioners were not holding any shares at the time of filing the petition, as the shares issued to them were canceled by the respondent-company. They argued that the provisions of Section 399 are mandatory, and the jurisdiction u/s 397 and 398 cannot be invoked by shareholders holding less than 10% of the issued shares or one-tenth of the members in the company. The applicants cited several judgments to support their contention that the petitioners lacked the necessary qualification.

3. Allegations of Oppression and Mismanagement:
The petitioners argued that they had acquired 50% of the share capital of the company as per a shareholders' agreement dated January 30, 2006, and that their shares were illegally annulled by the respondents. They contended that the annulment of shares was a serious act of oppression and that the petition could not be dismissed at the threshold. The petitioners cited the decision in Mohinder Singh v. Hoshiarpur Express Transport Co. Ltd. to support their contention that the petition should be examined on merits.

Judgment:
The Board considered the pleadings, arguments, and case law cited by both parties. It was noted that the qualification u/s 399 is mandatory and must be met at the time of filing the petition. However, the Board found that the issue of qualification in this case was a mixed question of fact and law, requiring a hearing on merits. The Board held that the petitioners' stake in the respondent-company was not unarguable and that the petition could not be dismissed at the threshold. Consequently, the Board dismissed C.A. No. 379 of 2008, declaring C.P. No. 118 of 2006 maintainable under Sections 397 and 398 of the Act, and directed the respondents to argue the company petition on merits. No order as to costs was made.