2015 (4) TMI 378 - Board - Companies Law

Application under section 397, 398 and 402 & 403 of the Companies Act, 1956 - No proof that acts committed were oppressive and prejudicial to the interest of company - Held that - In a petition under sections 397 & 398 of the company petition, it does not matter whether the acts are legal or illegal, it matters under these sections when the acts committed by the party reflects that they are oppressive and prejudicial to the interests of the petitioner. This petitioner has not shown even a single act showing that the appointment of R-3 did something causing oppression or prejudicial to the interest of the petitioner. The petitioner asked only three reliefs, one for appointment of R-3 ,ls director as invalid, second for increase of authorised share capital as invalid, third showing him resigned as invalid, Since the petitioner has not placed any material showing appointment of R-3 as director and increase of authorised capital led to cause prejudice to him, then such acts could not become grounds to seek reliefs under sections 397 & 398 of the Companies Act. As to his removal as director, mere removal or appointment of anybody as Director in a company will not become a grievance unless it is coupled with some act prejudicial to the interest of the petitioner. At the most, it could be a directorial complaint. Since the petitioner has not shown anything in the Company Petition filed u/s 397 & 398 of the Companies Act that these were acts caused prejudice to him, the remedy lies elsewhere not under these sections. Even assuming that he was not present in those meetings, the acts said to have committed by R-2 will not be treated as acts oppressive and prejudicial to the interests of the petitioner, when the petitioner does not show oppression and prejudice against him. The respondent counsel reported the company business closed three years ago. As the petitioner failed to attribute any malafide to second respondent with proot this Bench could not assume that second respondent commltted these acts with a malafide to cause prejudice to the petitioners. Since the allegations made in this petition do not fall within the ambit of Sections 397 & 398 of the Companies Act, this petition is hereby dismissed without costs. - Decided against the appellant.

Summary

Issues:
1. Allegations of misuse of power and acting against the interest of the petitioner by the second respondent in a company with 50:50 shareholding.
2. Appointment of the petitioner's husband as Director, increase in authorized share capital, and alleged resignation of the petitioner without his consent.
3. Dispute regarding the presence of the petitioner in crucial meetings and the validity of the actions taken in those meetings.
4. Legal implications of the alleged oppressive and prejudicial acts under Sections 397 & 398 of the Companies Act.

Analysis:

The petitioner filed a Company Petition under sections 397, 398, 402, and 403 of the Companies Act, 1956, against the company and the respondents, alleging that the second respondent misused power for personal gain and acted against the petitioner's interest. The key contentions included the appointment of the petitioner's husband as Director, increase in authorized share capital, and the alleged resignation of the petitioner without his knowledge. The petitioner claimed that no meetings were held for these actions, and he was not present at the alleged meetings due to being in a different location.

In response, the respondents argued that the petitioner was present at the meetings where the actions were taken and that the resignation was accepted by a resolution passed by the company. The Bench noted the dispute arising shortly after the company's incorporation, with both parties investing equally in the company. The petitioner disputed his presence at the crucial meetings and questioned the validity of the actions taken during those meetings.

The Bench emphasized that for relief under sections 397 & 398 of the Companies Act, the alleged acts must be oppressive and prejudicial to the petitioner's interests. It was highlighted that mere legal compliance or appointment/removal of a Director does not constitute oppression unless coupled with actions against the petitioner's interests. The lack of evidence showing oppression or prejudice led to the dismissal of the petition. The Bench also noted the absence of malafide intent on the part of the second respondent and concluded that the allegations did not fall within the scope of Sections 397 & 398, ultimately dismissing the petition without costs.

In conclusion, the judgment highlighted the importance of proving oppressive and prejudicial acts to seek relief under the relevant sections of the Companies Act. The lack of evidence showing harm to the petitioner's interests resulted in the dismissal of the petition, emphasizing the need for clear evidence of wrongdoing to establish a case under sections 397 & 398.