2016 (4) TMI 1101 - HC - Companies Law

Restoration of names in the register of the members of the company - Held that - CLB has considered the matter in detail with regard to the relief sought by the appellants herein insofar as restoration of their names in the register of the members of the company is concerned as per shareholding pattern as on 31/3/2005. As already noted, the appellants have no grievance with regard to that aspect of the matter. But in the latter portion of the impugned order, we find that the CLB has contradicted itself on the one hand by observing that the appellants appearing before the CLB had no locus standi to seek other reliefs while on the other hand by holding that they had not made out a prima facie case to seek the other reliefs. In our view, that is incorrect as once their names were restored in the shareholding pattern as also on restoration of their names in the register of the members of the company, they also had locus standi to seek other reliefs. So far as other reliefs are concerned, we find from the impugned order of the CLB that it has simply observed that the appellants have not made out any prima facie case, particularly with regard to the oppressive acts purported to have been committed by the respondents, which were prejudicial to the interest of the company. The observations of the CLB while disposing the matter, are, to say the least, without going into the pleadings and also the material brought on record by the parties in that regard. The impugned order is cryptic and unsatisfactory without reference to the said material on record. In the circumstances, we are of the view that the matter has to be remanded to the CLB for reconsideration of the case insofar as the other reliefs sought by the appellants herein before the CLB are concerned. As far as the relief granted by the CLB with regard to restoration of the shareholding pattern as on 31/3/2005 and the consequential reports issued are concerned, they are not interfered with in the appeal.

Summary

Issues:
Appeal against Company Law Board's order granting certain reliefs, locus standi of petitioners for various reliefs, consideration of prayers by CLB, restoration of shareholding pattern, non-consideration of other reliefs sought, contradictory observations by CLB, remand for reconsideration of other reliefs.

Analysis:
The appeal before the Karnataka High Court was directed against the Company Law Board's order in Company Petition No.7/2011. The petitioners sought various reliefs, including declaring certain acts oppressive and prejudicial, setting aside illegal transfers of shares, rectifying the register of members, investigating the company's affairs, and more. The CLB granted some reliefs but held that the petitioners had no locus standi for other prayers and had not made out a prima facie case for certain reliefs. The appellants were aggrieved by this aspect of the order and appealed.

The appellants' counsel argued that once the shareholding pattern was restored, they had the right to seek other reliefs as well. They contended that the CLB should have considered and granted those reliefs instead of dismissing them based on lack of prima facie case. On the other hand, the Senior Counsel for respondents supported the CLB's decision. The High Court noted that while the restoration of shareholding pattern was addressed, the CLB's observations on the other reliefs were contradictory. The CLB held that the petitioners lacked locus standi for other reliefs and had not made out a prima facie case, which the High Court found improper.

The High Court observed that the CLB's order lacked detailed consideration of the material on record regarding the other reliefs sought by the appellants. The order was deemed cryptic and unsatisfactory, failing to reference the pleadings and evidence presented. Therefore, the High Court directed the matter to be remanded to the CLB for a reconsideration of the other reliefs sought by the appellants, emphasizing the need for a thorough review based on the evidence and submissions.

Regarding the relief granted by the CLB for the restoration of the shareholding pattern, the High Court did not interfere with that aspect. The appeal was disposed of by instructing the CLB to reexamine the other prayers sought by the appellants in accordance with the law and after providing an opportunity for both parties to present their case. The parties were directed to bear their respective costs, bringing the matter to a conclusion with a remand for further consideration by the CLB.