2007 (10) TMI 691 - Board - Companies Law

Summary

Issues Involved:
1. Maintainability of the Company Petition under Section 397/398 of the Companies Act, 1956.
2. Locus standi of the petitioners to file the Company Petition.
3. Allegations of oppression and mismanagement.
4. Compliance with Company Law Board Regulations, 1991.

Summary:

1. Maintainability of the Company Petition:
The respondents filed Company Application No. 357 of 2007 u/s 399 of the Companies Act, 1956, seeking dismissal of C.P. No. 88/07 on grounds of non-maintainability. They argued that the petitioners did not hold the requisite number of shares to maintain a petition u/s 397/398 of the Act. The petitioners had sold their shares during 1989-1991 and were not shareholders of the Respondent No. 1 company till 2002, except for 2 shares held by petitioner No. 2. The petitioners' claim of holding 14500 shares was contradicted by their own admission in the petition that they had not been shareholders since 1993.

2. Locus Standi of the Petitioners:
The respondents contended that the petitioners lacked locus standi to file the petition as they did not hold the requisite 10% of the subscribed capital or constitute 10% of the total membership as required u/s 399 of the Act. The petitioners' shareholding had been transferred long back, and they failed to provide sufficient evidence to prove their current shareholding. The petitioners argued that they had been wrongfully not shown as shareholders and that the annual returns reflecting their shareholding transfer were under challenge.

3. Allegations of Oppression and Mismanagement:
The petitioners alleged acts of oppression and mismanagement against Patwari Exports Pvt. Ltd. and Shri Ishwar Lal Patwari Group. However, the respondents argued that the petition was filed to pressurize and arm-twist them, and that the petitioners had no substantial evidence to support their claims. The respondents also pointed out that the petitioners had not addressed the various actions/deeds of mismanagement and oppression in their reply.

4. Compliance with Company Law Board Regulations, 1991:
The respondents argued that the petitioners had not complied with the Company Law Board Regulations, 1991, which required documentary evidence in proof of eligibility and status of the petitioners. The petitioners countered that the regulations could not override the provisions of the Companies Act, 1956, and that they had the right to approach the Company Law Board against the respondents' wrongful activities.

Judgment:
The Board found the respondents' contentions tenable and concluded that the petitioners did not have the requisite qualification to maintain the petition u/s 397/398 of the Act. The petitioners failed to substantiate their claim of shareholding despite opportunities provided. The Board held that the petitioners lacked locus standi and dismissed C.P. No. 88/07 as not maintainable. The application CA No. 357/07 was allowed, and no order as to cost was made.