1970 (6) TMI 46 - HC - Indian Laws

Summary

Issues Involved:

1. Entitlement of the Petitioner to maintain the application or claim any reliefs.
2. Maintainability of the application in the absence of subsidiary companies and their Directors and shareholders.
3. Conduct of affairs of the Respondent company in an oppressive manner, prejudicial to the interest of the company, or public interest.
4. Mismanagement and acts prejudicial to the interest of the Respondent company by Respondents Nos. 2 to 10.
5. Validity of notices for Annual General Meetings held in 1965, 1966, and 1967.
6. Validity of the 52nd, 53rd, and 54th Annual General Meetings in light of the Companies Act provisions.
7. Valid constitution of the Board of Directors in 1966 and 1967 and the present Board.
8. Violations of various sections of the Companies Act and Articles of Association by the Respondents.
9. Responsibility for not recovering certain amounts and the effect of such actions.
10. Validity of the Annual General Meeting held on May 30, 1968, and the resolutions passed thereat.
11. Acts of mismanagement regarding the sale and lease of properties.
12. Lack of probity and fair dealing, and whether acts and conduct were burdensome, harsh, and wrongful.
13. Material change in management or control prejudicial to the interest of the company.
14. Reliance on grounds of oppression or mismanagement after the filing of the petition.
15. Reliefs to which the Petitioner is entitled.

Issue-wise Detailed Analysis:

Issue No. (1): The Petitioner, a company in voluntary liquidation, is not entitled to maintain the application under Sections 397 and 398 of the Companies Act. The liquidator's role is to liquidate the company, not to manage another company. The Petitioner has lost its rights as a member due to a decree for specific performance, which took away its voting rights.

Issue No. (2): The application is not maintainable in the absence of subsidiary companies and their Directors and shareholders. The subsidiaries are separate legal entities, and the Petitioner does not hold shares in many of them. The decision in Life Insurance Corporation of India v. Haridas Mundhra does not apply as the facts differ significantly.

Issue No. (3): The allegations of oppression and prejudicial conduct are not substantiated. Non-delivery of 707 shares and the filing of the lien suit do not constitute oppression. The filing of the lien suit was a legal action, and the Petitioner could have taken other remedies under the Companies Act.

Issue No. (4): The Respondents are not guilty of mismanagement or acts prejudicial to the interest of the Respondent company. Excess remuneration, declining profits, indiscriminate loans, and the fine for violation of Foreign Exchange Regulations do not constitute mismanagement. The withholding of dividends is a matter sub-judice in the lien suit.

Issue No. (5): Notices for the Annual General Meetings in 1965, 1966, and 1967 were given to the Petitioner at the addresses notified. The Petitioner received the accounts passed at these meetings without protest, indicating ratification of the meetings.

Issue No. (6): The 52nd, 53rd, and 54th Annual General Meetings were not held in violation of Sections 166 and 258 of the Companies Act. The delay in holding the meetings was due to valid reasons, and the Petitioner claimed dividends declared at these meetings, indicating acceptance.

Issue No. (7): The Board of Directors was validly constituted in 1966 and 1967 and is currently validly constituted. The appointments were made in accordance with the Articles of Association and the Companies Act.

Issue No. (8): The Respondents did not violate the provisions of the Companies Act or the Articles of Association. The allegations regarding excess remuneration, non-payment of dividends, and refusal of inspection are not substantiated.

Issue No. (9): The Respondents are not responsible for not recovering the amounts of Rs. 5,05,364 and Rs. 1,14,342. The allegations of forgery of shares and non-recovery of advances are not proved.

Issue No. (10): The Annual General Meeting held on May 30, 1968, and the resolutions passed thereat are valid. The meeting had the requisite quorum, and the presence of Haridas Mundhra is established.

Issue No. (11): The sale of the Bombay flat and the giving up of the lease of the house in Dover Park were not acts of mismanagement. The transactions were conducted in the usual course of business and were not irregular or unconscionable.

Issue No. (12): There is no lack of probity or fair dealing on the part of the Respondents. The allegations of imprudent investment, waiver of interest, and purchase of debentures are not substantiated.

Issue No. (13): There has been no material change in the management or control of the company that is prejudicial to its interest. The Court's orders and decrees cannot constitute material change within the meaning of Section 398.

Issue No. (14): The Petitioner is not entitled to rely on any grounds of oppression or mismanagement after the filing of the petition. The post-petition acts have been covered under issues No. (10) and (11).

Issue No. (15): The Petitioner is not entitled to any reliefs claimed. The application is not bona fide and is made with an ulterior purpose. The liquidator's refusal to accept the money offered under the decree for specific performance indicates the motive behind the application.

Conclusion: All applications are dismissed with costs. The costs of the first five applications will be treated as of a hearing of a suit and certified for two counsel. The costs of the sixth application will be treated as a Chamber Summons but certified for counsel. All interim orders are vacated.