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Issues Involved:
1. Allegations of mismanagement and oppression under Sections 397 and 398 of the Companies Act, 1956. 2. Interim relief under Section 403 of the Companies Act, 1956. 3. Interpretation and application of Section 256 of the Companies Act, 1956. 4. Validity of the annual general meeting adjournment and reappointment of the 3rd petitioner as a director. 5. Preliminary objection regarding the maintainability of the petition under Sections 397 and 398. Detailed Analysis: 1. Allegations of Mismanagement and Oppression: The petitioners, belonging to the minority group of shareholders, alleged that the majority group conducted the affairs of the 1st respondent-company in a manner prejudicial to its interests and oppressive to the minority shareholders. Specific allegations included clandestine retention of profits earned abroad, altering and fabricating contracts to benefit relatives of the majority shareholders, and fraudulent dealings with Chunilal and Co. These allegations formed the basis for the substantive petition under Sections 397 and 398 of the Companies Act, seeking various reliefs including the removal of certain directors and the appointment of an administrator. 2. Interim Relief under Section 403: Pending the substantive petition, the petitioners sought interim relief under Section 403 of the Companies Act. The Companies Tribunal, on June 1, 1967, issued an ad interim injunction restraining the consideration of item No. 3 on the agenda of the annual general meeting, which pertained to the reappointment of the 3rd petitioner as a director. The Tribunal also appointed joint receivers for the company's books and records. This order was slightly modified on June 3, 1967, but the injunction on item No. 3 was maintained. 3. Interpretation and Application of Section 256: The core issue revolved around the interpretation of Section 256, particularly subsections (3) and (4). The respondents argued that the 3rd petitioner ceased to be a director as the statutory provisions for reappointment were not met due to the Tribunal's injunction. The petitioners contended that the meeting should have been further adjourned, and since the statutory conditions under Section 256(4)(b) were not met, the 3rd petitioner should be "deemed to have been reappointed." The court examined the statutory language and relevant case law, including Grundt v. Great Boulder Proprietary Mines Ltd., and concluded that the plain language of Section 256(4)(b) must be followed. The court held that the 3rd petitioner must be deemed to have been reappointed as a director as the statutory conditions were not met at the adjourned meeting. 4. Validity of the Annual General Meeting Adjournment: The court found that the annual general meeting held on June 2, 1967, stood statutorily adjourned to June 9, 1967, by virtue of Section 256(4)(a). Since the respondents chose to adjourn the meeting to June 8, 1967, the statutory conditions for filling the vacancy of the retiring director were not met. Consequently, the 3rd petitioner must be deemed to have been reappointed as a director at the adjourned meeting of June 9, 1967. 5. Preliminary Objection on Maintainability: The respondents argued that the petition under Sections 397 and 398 was not maintainable as it primarily dealt with the status of the 3rd petitioner as a director. The court rejected this argument, noting that the petitioners alleged mismanagement and oppression affecting the minority shareholders, which fell within the scope of Sections 397 and 398. The court emphasized that the substantive petition was filed by both the 3rd petitioner and other shareholders, making it maintainable. Conclusion: The court made the summons absolute in terms of the prayers sought by the petitioners, including an injunction restraining the respondents from preventing the 3rd petitioner from exercising his rights as a director, and directed the 1st respondent-company to withdraw or cancel the intimation given to the Registrar of Companies. The court certified counsel for the case.
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