1996 (9) TMI 633 - Board - Companies Law

Summary

Issues Involved:
(a) Whether the company is a family company?
(b) Whether there are parallel proceedings?
(c) Whether the complaints are directorial in nature and, therefore, not entertainable?
(d) Whether acts of oppression and mismanagement are established?
(e) Whether the petitioners are entitled to reliefs?

Summary:

(a) Whether the company is a family company?
The petitioners argued that the company should be treated as a family company and partnership principles should be applied. They cited evidence such as the relationship between shareholders, the company's operations from family-owned premises, and a letter from the respondent acknowledging the business as a family business. The respondents refuted this, stating the company was a public company from inception with significant shares held by non-family members. The court concluded that the company is indeed a family company, considering the long-term conduct and mutual understanding between the family members, and thus equitable principles could be applied.

(b) Whether there are parallel proceedings?
The respondents argued that the petitioners should not be allowed to pursue parallel proceedings as they had already filed a suit in Patna. The petitioners countered that the suit was limited to directorship issues, whereas the present petition under sections 397/398 sought broader reliefs. The court agreed with the petitioners, noting that section 397/398 constitutes a separate code and found no parallel proceedings on the matters complained of in the company petition.

(c) Whether the complaints are directorial in nature and, therefore, not entertainable?
The respondents contended that the petitioners' complaints were directorial and should not be entertained under section 397/398. The petitioners argued that the complaints were about the conduct of the company's affairs in an oppressive manner, which affected their rights as members. The court found that the allegations of manipulation of board meeting notices and minutes, and the exclusion of petitioners from directorship, were valid grievances of oppression in a family company context. Thus, the complaints were deemed entertainable.

(d) Whether acts of oppression and mismanagement are established?
The court identified several acts of oppression and mismanagement, including the manipulation of board meeting notices, exclusion from directorship, non-furnishing of minutes, denial of inspection of books, non-transmission of shares, and falsification of accounts. The respondents failed to provide conclusive evidence to counter these allegations. The court found that the respondents' actions were harsh, burdensome, and wrongful, thus establishing oppression and mismanagement.

(e) Whether the petitioners are entitled to reliefs?
The court concluded that the petitioners were entitled to reliefs due to the established acts of oppression and mismanagement. The court ordered the nullification of certain board meetings, reinstated the petitioners as directors, and directed the recasting of accounts. The business and properties of the company were to be divided between the two family groups, with the petitioners taking over the Patna business and the respondents retaining the West Bengal business. The court appointed a retired judge as the Chairman to oversee the implementation of these orders and directed the valuation and settlement of shares accordingly.