2001 (3) TMI 1058 - Board - Companies Law

Issues Involved:
1. Allegations of oppression and mismanagement.
2. Validity of AGMs and appointment of directors.
3. Application of partnership principles in family companies.
4. Jurisdiction of the Company Law Board vs. Civil Court.
5. Division of assets and shareholding equality.
6. Allegations of further issue of shares and sale of shares.

Issue-wise Detailed Analysis:

1. Allegations of oppression and mismanagement:
The petitioners alleged that HLS attempted to take over control of nine investment companies by appointing his own family members and associates as directors without notifying SKS. This move was seen as an attempt to marginalize SKS in the management of SPL and STL, which would violate their agreement of equal control and joint management. The petitioners sought equality of directors from both SKS and HLS groups and an independent Chairman.

2. Validity of AGMs and appointment of directors:
The petitioners claimed non-receipt of notices for the AGMs held in 1998, where new directors were appointed. The respondents provided evidence of dispatching notices and publishing them in newspapers. The Board directed the respondent-companies to convene an EOGM within a month to rectify the appointments and resolutions passed in the 1998 AGMs, ensuring notices are sent to the petitioners and SKS.

3. Application of partnership principles in family companies:
The petitioners argued that the respondent-companies, SPL, and STL are family companies, and partnership principles should apply. They cited precedents where the Company Law Board had applied partnership principles to family companies and divided assets between disputing parties. The respondents countered that SPL and STL were not parties to the proceedings and that the Company Law Board should not decide on the division of assets based on family settlement claims.

4. Jurisdiction of the Company Law Board vs. Civil Court:
The respondents argued that the Company Law Board should not decide on the claim of SKS for a partition or equal shareholding, as a suit with similar claims was already pending in the Calcutta High Court. The Board noted that while the pendency of a civil suit does not bar proceedings under Section 397/398, the High Court's involvement and the complexity of shareholdings in the respondent-companies warranted deferring the decision on asset division.

5. Division of assets and shareholding equality:
The petitioners sought a declaration of equal shareholding and joint management in the respondent-companies and an equal division of assets. The Board noted the complicated shareholding patterns and cross-holdings in the respondent-companies, making it difficult to ascertain real shareholding positions. Given the pending civil suit in the Calcutta High Court seeking similar declarations, the Board declined to consider the petitioners' request for asset division but granted liberty to approach the Board if the High Court grants the declaration.

6. Allegations of further issue of shares and sale of shares:
Specific allegations were made regarding the issue of additional shares in Sarvopari and the sale of shares in SPL by Sarvottam. The Board found that SKS had knowledge of the share issues in Sarvopari and had signed the share certificates, thus could not claim oppression. Regarding the sale of shares in SPL, the Board accepted the respondents' explanation that the shares were sold by a pledgee due to non-payment, which did not constitute oppression.

Conclusion:
The Board directed the respondent-companies to convene an EOGM to rectify the appointments and resolutions passed in the 1998 AGMs. It declined to consider the petitioners' request for asset division due to the pending civil suit and complex shareholding patterns but allowed the petitioners to approach the Board if the High Court grants the declaration of equal shareholding and joint management. The petitions were disposed of without any order as to cost.

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