2007 (6) TMI 561 - Board - Companies Law

Summary

Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956.
2. Letting out company property at a nominal rent.
3. Exclusion of the petitioner from the affairs of the company.
4. Non-receipt of notices for AGMs and Board meetings.
5. Misappropriation of funds and allegations against the petitioner.

Issue-wise Detailed Analysis:

1. Allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956:
The petitioner alleged acts of oppression and mismanagement in the affairs of the company by the respondents. The petitioner, holding 35% shares, claimed that the company's property was let out at a nominal value, causing oppression and prejudice to the petitioner and other shareholders. The respondents argued that the petition is not maintainable as no case of oppression and mismanagement, as defined under Sections 397 and 398, was made out. The court found the respondents' contention correct and noted that the petitioner did not come with clean hands, considering his conduct in other proceedings.

2. Letting out company property at a nominal rent:
The petitioner alleged that the company's asset was let out at a nominal rent of Rs. 12,500/- per month, whereas the market rental value was Rs. 3 lakhs per month, causing damage to the petitioner's interest. The court observed that the property, Teesta House, was built with the funds of the firm K & Co., and a lower rent was agreed upon. The firm was using only a small portion of the building, and the rent was revised to Rs. 30,000/- per month upon increased usage. The court found no case of mismanagement as the rent was fixed with the consultation of the directors, including the petitioner.

3. Exclusion of the petitioner from the affairs of the company:
The petitioner claimed exclusion from the company's affairs and non-receipt of notices for AGMs and Board meetings since 2000-2001. The court noted that directorial complaints cannot be entertained under Sections 397/398. The petitioner's exclusion and non-receipt of notices were not sufficient grounds for invoking these provisions.

4. Non-receipt of notices for AGMs and Board meetings:
The petitioner alleged not receiving any notice of AGMs and Board meetings since 2000-2001. The court held that non-maintenance of statutory records and non-furnishing of statements to the ROC, as pointed out by the petitioner, cannot be termed as oppressive. The court emphasized that illegal acts per se, even if established, cannot be grounds for invoking Section 397 unless they are also unjustified and oppressive.

5. Misappropriation of funds and allegations against the petitioner:
The respondents alleged that the petitioner misappropriated funds worth Rs. 100 crores from the partnership concern, K & Co., and that these allegations were pending adjudication before the Sole Arbitrator. The court considered the petitioner's conduct in other proceedings and found that the petitioner did not come with clean hands, affecting the maintainability of the petition.

Conclusion:
The court dismissed the petition, finding no justification to allow it. The allegations of letting out the property at a nominal rent and exclusion from the company's affairs were not substantiated. The court emphasized that the petitioner failed to establish any acts of oppression or mismanagement as required under Sections 397 and 398 of the Companies Act, 1956. All interim orders were vacated, and the petition was dismissed with no order as to cost.