1960 (3) TMI 21 - HC - Companies Law

Summary

Issues:
- Locus standi of the petitioners to file the petition under sections 397 and 398 of the Indian Companies Act.
- Whether the petition should be stayed due to pending litigation between the parties.

Analysis:
The petition was filed by sons of Hira Lal and their partnership firm against a company and three individuals described as de facto directors. The petitioners alleged oppression by the company's controllers and sought relief. The company's three respondents challenged the petitioners' locus standi by denying their membership in the company. The preliminary issues framed were whether the petitioners had the standing to file the petition and whether the petition should be stayed due to ongoing litigation.

Today's hearing was scheduled for parties' evidence, but only a witness from the company, an accounts-clerk, was examined. The witness presented the register of members showing the petitioners' names were removed based on a resolution by the directors. The petitioners had previously filed an application for rectification of the register, which was dismissed by the District Judge, advising them to pursue their remedy through a regular suit. The respondents contended that as per the current register, the petitioners were not members, and petitions under sections 397 and 398 could only be maintained by members.

The petitioners argued that the directors' act of removing their names was illegal, but the court emphasized that such issues should be addressed through proper legal proceedings, like a regular suit. Despite the petitioners seeking rectification of the share register in their petition, the court noted they had not pursued the District Judge's advice to file a suit to establish their rights. The court held that a petition under sections 397 and 398 could only be maintained by persons listed as members in the company's register, requiring rectification before filing a petition. Consequently, the court upheld the objection regarding locus standi and dismissed the petition with costs to the respondents.