2011 (4) TMI 1200 - HC - Companies Law

Rectification of the register of members under section 111A of the Act - family company - appellants are real brothers nephews and nieces of Mr. Brij Mohan Khanna respondent No. 2 and respondent No. 1 is a family company. - allegation of oppression and mismanagement - CLB dismissed the appellants petition on the ground that since the names of appellants no longer appear in the register of members they were lacking in requisite eligibility under section 399 of the Act to maintain such a petition. Held that - though the CLB has painstakingly noted the submissions of both the parties yet it has not adjudicated upon the same. In fact CLB has given no finding/conclusion on the contentions raised by the respondents while opposing the maintainability of the petition except observing that the appellants were at liberty to file a petition under section 111A of the Act and in the event they succeed in the said petition they would be at liberty to file a petition under section 397/398 of the Act. The impugned order to my mind is a non-reasoned one to this extent. Regarding amendment to the application / suit - held that - While considering whether an application for amendment should or should not be allowed the court should not go into the correctness or falsity of the case in the amendment. Likewise it should not record a finding on the merits of the amendment and the merits of the amendment sought to be incorporated by way of amendment are not to be adjudged at the stage of allowing the prayer for amendment. Matter restored before CLB.

Summary

Issues:
Challenge to order of Company Law Board dismissing petition as not maintainable, eligibility under section 399 of the Companies Act, maintainability of a composite petition under sections 397, 398, and 111A of the Act, amendment application, real controversy between parties, liberty to file under section 111A, and non-reasoned order by Company Law Board.

Analysis:

The judgment involves an appeal challenging the Company Law Board's order dismissing a petition as not maintainable under the Companies Act, 1956. The appellants, real brothers and relatives of a respondent, filed a petition under sections 397 and 398 of the Act alleging oppression and mismanagement. The respondents challenged the maintainability, leading to an application for amendment to include relief under section 111A. The CLB dismissed the petition due to the appellants' names not appearing in the register of members, granting them liberty to file under section 111A for rectification. The issue of eligibility under section 399 was raised, emphasizing the importance of the names in the register of members for maintaining the petition.

The argument presented by the appellants' counsel focused on the lack of awareness regarding the removal of their names from the register of members when filing the petition. The appellants sought to amend the petition after learning of this fact, emphasizing that no evidence was provided by the respondents regarding the appellants' prior knowledge. The counsel also contended that a composite petition should be maintainable, citing relevant judgments to support this position.

The respondent's counsel opposed the appeal, stating that the appellants had signed share transfer deeds and handed over share certificates, making the petition not maintainable. The issue of timeliness in filing the amendment application was raised, along with the argument that the remedy available should be under section 111A and not sections 397/398 of the Act.

The judge analyzed the maintainability of a composite petition under sections 397, 398, and 111A of the Act. It was concluded that such a petition can be maintainable, especially in cases where oppression and mismanagement are linked to the register of members' issues. The judgment highlighted the need for a liberal approach in allowing necessary amendments to determine the real controversy between parties, emphasizing the importance of doing justice and considering subsequent events to shorten litigation.

In the final decision, the appeal was allowed, directing the CLB to accept the amended composite petition. The non-reasoned aspects of the CLB's order were noted, and the respondents were granted the liberty to address their issues before the CLB during the disposal of the composite petition. The judgment concluded with no order as to costs, highlighting the importance of maintaining fairness and justice in legal proceedings.