2004 (5) TMI 604 - Board - Companies Law

Summary

Issues Involved:
1. Allegations of oppression and mismanagement in SMHPL.
2. Validity of extraordinary general meetings and board meetings.
3. Illegal transfer of shares and removal of directors in SMHPL.
4. Allegations of oppression and mismanagement in ACECPL.
5. Validity of share allotment and appointment of directors in ACECPL.
6. Equitable reliefs and restoration of parity in shareholding and management.

Detailed Analysis:

1. Allegations of Oppression and Mismanagement in SMHPL:
The petitioners alleged acts of oppression and mismanagement in SMHPL, including illegal transfer of shares to the second respondent, removal of petitioners 3 and 4 as directors, and interference in day-to-day affairs despite the lawful removal of the second respondent as Managing Director. The petitioners sought declarations that certain meetings and resolutions were invalid and requested rectification of the register of members to ensure equality of shareholding among family branches.

2. Validity of Extraordinary General Meetings and Board Meetings:
The petitioners challenged the validity of the extraordinary general meeting held on 25.04.2003 and the board meeting on 03.06.2003, alleging that the notices convening these meetings were invalid. The respondents contended that the meetings were properly convened and that the resolutions passed were valid. The court found discrepancies in the notices and minutes, concluding that the meetings and resolutions were not validly conducted.

3. Illegal Transfer of Shares and Removal of Directors in SMHPL:
The petitioners claimed that the transfer of 2,20,000 shares from the second petitioner to the second respondent was fabricated and not approved by the board. The court found that the minutes of the board meeting dated 17.04.2002 did not meet the requirements of Article 13(e) of the Articles of Association and concluded that the transfer was not valid. The removal of petitioners 3 and 4 from the board was also deemed oppressive and set aside.

4. Allegations of Oppression and Mismanagement in ACECPL:
The petitioners alleged similar acts of oppression and mismanagement in ACECPL, including illegal allotment of shares to respondents 2 to 5 and the appointment of respondents 4 and 5 as directors, excluding the petitioners. The petitioners sought declarations that certain board meetings and resolutions were invalid and requested rectification of the register of members to ensure equality of shareholding.

5. Validity of Share Allotment and Appointment of Directors in ACECPL:
The court found discrepancies in the dates and notices of the board meetings where the impugned shares were allotted and directors appointed. The respondents failed to produce original records to support their claims. The court concluded that the allotments and appointments were not valid and constituted acts of oppression.

6. Equitable Reliefs and Restoration of Parity in Shareholding and Management:
The court directed the rectification of the register of members of SMHPL to reflect the correct shareholding and ordered that the petitioners and respondents should have proportional representation on the board. The court also concluded that the parties could not continue to function together due to irreconcilable differences and ordered the division of SMHPL's assets between the two groups. For ACECPL, the court directed the petitioners to transfer their shares to the respondents at a value determined by an independent valuer.

Conclusion:
The court found substantial evidence of oppression and mismanagement in both SMHPL and ACECPL. It ordered the rectification of shareholding and board representation in SMHPL and directed the division of assets to resolve the disputes. In ACECPL, the court ordered the petitioners to transfer their shares to the respondents to bring an end to the oppressive conduct.