1994 (5) TMI 276 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the application under Sections 391 and 395 read with Section 634 of the Companies Act, 1956.
2. Locus standi of the appellant.
3. Applicability of Sections 397, 398, and 402 of the Companies Act.
4. Amendment of the application.
5. Impleading Murty as co-appellant.
6. Action under Section 634 of the Companies Act.
7. Allegations of oppression and mismanagement.

Detailed Analysis:

1. Maintainability of the Application:
The application filed by the appellant under Sections 391 and 395 read with Section 634 of the Companies Act, 1956, was rejected by the learned Company Judge on the ground that it was not maintainable at the instance of the appellant, as he was neither a shareholder nor a member of the company. The Court noted that the application must be by the company, any creditor, or member of the company to be maintainable under these sections.

2. Locus Standi of the Appellant:
The appellant claimed to be a shareholder by virtue of shares held by his deceased mother, Rukmani Mohapatra. However, the Court found that there was no mention of when the mother died or how the shares were succeeded by the appellant. The document provided by the appellant was not sufficient to establish his status as a shareholder. The Court emphasized that the appellant did not follow the formalities prescribed in the Act to register the transfer of shares, making the application not maintainable.

3. Applicability of Sections 397, 398, and 402:
The appellant sought to amend the application to include Sections 397, 398, and 402 read with Section 634 of the Act. The Court observed that an application under these sections is not entertainable by the High Court but by the Company Law Board. The Court also noted that once an order is passed in a Company Act Case filed under Section 397/398, the Court does not become functus officio and can grant relief in an appropriate case. However, the Court found that the appellant failed to establish his locus standi and did not prove any oppression or mismanagement.

4. Amendment of the Application:
The appellant filed an application for amendment to bring in factual aspects and to implead Murty as a co-appellant. The Court rejected the amendment, stating that it would change the substratum of the dispute and would not be a case of "old wine in new bottle" but "new wine in old bottle." The Court highlighted that amendments are permissible when necessary for the determination of the real controversy, but substitution of one cause of action for another is not permissible.

5. Impleading Murty as Co-appellant:
The appellant sought to implead Murty as a co-appellant. The Court found that Murty had filed a separate Company Act Case and an appeal, which he later withdrew. Since Murty had abandoned his appeal, the prayer for impleading him as a co-appellant was rejected.

6. Action under Section 634 of the Companies Act:
The learned Company Judge dealt with the aspect of action under Section 634 of the Act in another application filed by Murty. The Court found that there was no compromise or arrangement within the meaning of Section 391, and the directions in the earlier judgment did not amount to a compromise or arrangement. The Court concluded that the case did not come within the ambit of Section 391 of the Act.

7. Allegations of Oppression and Mismanagement:
The Court examined the allegations of oppression and mismanagement. It referred to the principles laid down in Shanti Prasad Jain v. Kalinga Tubes Ltd. and other cases, emphasizing that the conduct must be burdensome, harsh, and wrongful to constitute oppression. The Court found that the appellant failed to prove any continuous acts of oppression or mismanagement. The Court also noted that the appellant and his group represented only 0.449% of the share capital, making any meeting of the members futile as they would be outvoted.

Conclusion:
The appeal was dismissed, with the Court concluding that the appellant failed to prove his locus standi and did not establish any case of oppression or mismanagement. The Court emphasized the importance of adhering to procedural formalities and the need for specific pleadings and proof in such cases. The prayer for amendment and impleading Murty as a co-appellant was also rejected.