2006 (3) TMI 777 - Board - Companies Law

Summary

Issues Involved:
1. Non-transmission of shares in the name of the second petitioner and her nominees.
2. Allotment of 750 equity shares to the second respondent in exclusion of other shareholders.
3. Allegations of mismanagement.

Detailed Analysis:

1. Non-transmission of Shares:
The petitioners, holding 17% of the paid-up capital, alleged oppression due to the non-transmission of 500 shares held by the deceased Dr. Balaram to the second petitioner. The Company had insisted on a succession certificate, which was eventually obtained and amended to empower the second petitioner to get the shares transferred in her name. The Company initially recorded the transmission but later canceled the entries, leading to accusations of tampering. The Board found that the delay in transmission was partly due to the petitioners' delay in obtaining the succession certificate. The succession certificate, as amended, was binding on the Company, and the second petitioner was entitled to the shares, satisfying the requirements of Section 399 of the Companies Act, 1956.

2. Allotment of 750 Equity Shares:
The petitioners challenged the allotment of 750 shares to the second respondent, alleging it was done to consolidate his control over the Company. The Board found that while the second respondent had significantly contributed to the Company's growth, the allotment was made without offering shares to other shareholders and was not for the benefit of the Company. The second respondent's intention to sell his shares indicated personal aggrandizement. The Board held that the allotment was an act of oppression, as it disturbed the existing shareholding pattern and was done without the consensus of the general body. The allotment was set aside, and the Company was directed to refund the share price to the second respondent.

3. Allegations of Mismanagement:
The petitioners alleged various acts of mismanagement, including misuse of official position, failure to provide adequate services, and negligence in executing contracts. However, the Board found that these allegations were not substantiated with sufficient evidence. The petitioners failed to demonstrate how these acts caused unfair prejudice to their interests. Consequently, the Board did not invoke Section 398 for mismanagement.

Conclusion:
The Company was directed to effect the transmission of 500 shares to the second petitioner, set aside the allotment of 750 shares to the second respondent, refund the share price, and rectify its register of members accordingly. The petition for mismanagement was dismissed due to lack of evidence.