2009 (5) TMI 986 - Board - Companies Law

Summary

Issues Involved:
1. Alleged oppression by allotment of additional shares.
2. Appointment of new directors without consent.
3. Removal of petitioner-directors.
4. Appointment of the second respondent as managing director.

Summary:

1. Alleged oppression by allotment of additional shares:
The petitioners alleged that by allotting 1,340 additional shares to his own group, the second respondent converted the petitioners from a majority into a minority. The petitioners sought cancellation of this allotment. The court noted that before the impugned allotments, the petitioners' group held 2,100 shares while the second respondent's group held 1,000 shares. The court found that the allotment of shares worth Rs. 1,34,000 was done to gain a larger shareholding in the company than the petitioners. The court declared the impugned allotment as null and void, restoring the shareholding as it was before March 31, 2007.

2. Appointment of new directors without consent:
The petitioners claimed that the second respondent appointed respondents Nos. 3 and 4 as directors without their knowledge and consent. The court observed that the appointment of the third and fourth respondents as directors was not in compliance with the company's Articles of Association, which required proportional representation and filling of casual vacancies. The court declared the appointment of the third and fourth respondents as directors null and void.

3. Removal of petitioner-directors:
The petitioners sought restoration of their directorship after being removed in an extraordinary general meeting allegedly held on December 18, 2007. The court found that the removal of the first and second petitioners as directors was highly oppressive, especially in a family company where they had been directors for over 25 years. The court declared the removal of the first and second petitioners as directors null and void, restoring the board as it was before March 31, 2007.

4. Appointment of the second respondent as managing director:
The petitioners challenged the appointment of the second respondent as the managing director. The court noted that the company never had a managing director for over 25 years and found the appointment unnecessary and done to concentrate managerial powers. The court ruled that the second respondent shall cease to be the managing director with immediate effect.

Conclusion:
The court declared the impugned allotment of shares and the appointment of the third and fourth respondents as directors null and void. It also restored the first and second petitioners as directors and ordered the refund of the consideration paid for the cancelled shares. The court stipulated that the petitioners should not exclude the second respondent from management and that bank accounts should be operated jointly. The petition was disposed of in these terms.