1990 (4) TMI 297 - HC - Companies Law

Summary

Issues Involved:
1. Whether respondents Nos. 1 to 4 are managing the affairs of the company oppressively against the other shareholders of the company.
2. Whether the resolutions dated May 19, 1981, of the general body of the company are fabricated.
3. Whether the minutes book of the meetings of the general body and of the board of directors of the company were being regularly and properly maintained.
4. Whether respondents Nos. 3 and 4 are directors of the company and whether petitioner No. 2 and respondent No. 2 are validly appointed as directors.
5. Whether respondent No. 1 abused his powers as managing director and misappropriated or secreted the funds of the company.
6. Whether respondent No. 1 mismanaged the affairs and business of the company.
7. Whether there are disputes between the groups of shareholders and directors disrupting the business of the company.
8. Whether the company petition is maintainable.

Issue-wise Detailed Analysis:

Issue No. 1: Oppressive Management
The petitioners alleged that respondents Nos. 1 to 4 managed the company oppressively, excluding other shareholders from management. The court found that petitioners Nos. 1 to 3 and the fifth respondent were actively involved in the company's business activities, contradicting their claims of exclusion. The court concluded that there was no material to support the allegation that respondents Nos. 1 to 4 managed the company oppressively.

Issue No. 2: Fabrication of Resolutions
The petitioners claimed that the resolutions dated May 19, 1981, were fabricated. The court examined the evidence, including the notarized documents and the testimonies of witnesses. It found that the resolutions were not fabricated and were validly passed. The court held that the resolutions dated May 19, 1981, amending the articles of association of the company, were genuine and valid.

Issue No. 3: Maintenance of Minutes Book
The petitioners contended that the minutes book was not regularly and properly maintained. The court reviewed the evidence, including the minutes of the general body meeting held on February 15, 1983, and the complaint in S.T.C. No. 414 of 1984. The court found that the minutes book was regularly and properly maintained, and the meeting on February 15, 1983, was valid.

Issue No. 4: Validity of Directors' Appointments
The court examined the validity of the appointments of respondents Nos. 3 and 4 as directors and the removal of petitioner No. 2 and respondent No. 2 as directors. The court found that respondents Nos. 3 and 4 were validly appointed as directors and that petitioner No. 2 and respondent No. 2 were removed as directors by a resolution passed on February 15, 1983.

Issue No. 5: Abuse of Powers and Misappropriation
The court did not provide findings on this issue due to the demise of the first respondent during the pendency of the petition. Consequently, the reliefs sought against the first respondent personally became infructuous.

Issue No. 6: Mismanagement of Affairs
Similar to Issue No. 5, the court did not provide findings on this issue due to the demise of the first respondent, rendering the reliefs sought against him personally infructuous.

Issue No. 7: Disputes Between Shareholder Groups
The court found that there were disputes between two groups of shareholders and directors, one led by the first respondent and the other by the fifth respondent, which disrupted the business of the company and led to an impasse. The court noted that the business of the company came to a standstill due to these disputes.

Issue No. 8: Maintainability of the Company Petition
The court addressed the objections regarding the maintainability of the company petition. It held that the petition was maintainable despite the death of the first respondent, as respondents Nos. 2 to 4, who were already on record, adequately represented his interests. The court also rejected the objection that the petitioners had availed of an alternate remedy by filing a civil suit, noting that respondents Nos. 1 to 4 had challenged the jurisdiction of the civil court in that suit.

Conclusion:
The court concluded that the petitioners failed to establish that respondents Nos. 1 to 4 conducted themselves in a manner oppressive to the fifth respondent and his group of shareholders. Consequently, the petition filed under section 397 of the Companies Act was not maintainable. However, the court acknowledged the deadlock and stalemate in the company's business due to disputes among the directors and shareholders. The court directed respondents Nos. 2 to 4 to exercise their first choice to purchase the shares of the petitioners and the fifth respondent within two months. If they failed, the petitioners and the fifth respondent would have the choice to purchase the shares of respondents Nos. 1 to 4. If both groups failed to exercise these options, the company would be wound up. The company petition was dismissed without costs.