2012 (7) TMI 1065 - HC - Companies Law

Summary

Issues Involved:
1. Whether the Company Law Board (CLB) was justified in dismissing the petition u/s 397/398 of the Companies Act, 1956.
2. Whether the CLB had the power to direct the appellant to purchase the shares of the respondents despite no finding of oppression or mismanagement.
3. Whether the CLB's order was fair and in the interest of the company.

Summary:

1. Dismissal of Petition u/s 397/398:
The appeal was filed u/s 10F of the Companies Act, 1956, challenging the CLB's judgment dated 12th January 2012, which dismissed the appellant company's petition Co. Pet. 95/ND/2010. The CLB observed that directorial complaints cannot be entertained in a petition u/s 397/398 unless it is a composite complaint in the nature of a quasi-partnership. The R-1 Company was not found to be a quasi-partnership as there was no equal shareholding, no equal representation on the Board, nor any oral or written understanding to that effect.

2. CLB's Power to Direct Purchase of Shares:
The appellant argued that in the absence of a finding of oppression and mismanagement, the CLB could not direct the appellant to purchase the shares of respondents No.1 to 6. The Court held that the CLB's power is of extremely wide amplitude u/s 402 of the Act, which allows it to regulate the conduct of the company's affairs, purchase shares, and make any just and equitable provision. The Court cited Supreme Court judgments, including Needle Industries (India) Ltd. and M.S.D.C. Radharamanan, which upheld the CLB's jurisdiction to pass orders in the interest of the company even without a finding of oppression.

3. Fairness and Interest of the Company:
The Court noted that all three groups of shareholders had filed separate petitions alleging oppression and mismanagement, indicating a lack of confidence and trust among shareholders. The Court opined that pending disputes would hinder the respondent company from fully exploiting its valuable land at Karol Bagh. The Court found the CLB's order to be fair, doing substantial justice between the parties, and in the company's interest. Consequently, the appeal was dismissed with no order as to costs.