1968 (3) TMI 80 - HC - Companies Law

Registers etc. to be Evidence Oppression and mismanagement Oppression and Mismanagement Right to apply under section 397 and 398

Summary

Issues Involved:
1. Right to apply under Section 397 of the Companies Act.
2. Compliance with Section 399 of the Companies Act.
3. Allegations of continuous acts or continuing wrong under Sections 397 and 398 of the Companies Act.
4. Competence to maintain an application under Sections 397 and 398 of the Companies Act if the name is not in the register of members.

Detailed Analysis:

1. Right to Apply Under Section 397 of the Companies Act:
The controversy centers on whether Kshetra Mohan Saha and Sridhar Sikdar have the right to apply under Section 397 of the Companies Act. The provision in Section 399(1)(a) requires that the applicant must have paid all calls and other sums due on their shares. Kshetra Mohan Saha's shares were not fully paid up, and a call was made on 16th May 1966, which was due by 29th June 1966. The petition was filed on 26th May 1966, and the call was not paid by that date. It was held that the call is a debt due when the resolution is passed, making Kshetra Mohan Saha not entitled to apply under Section 397 as he did not pay the calls due on his shares.

2. Compliance with Section 399 of the Companies Act:
The Companies Tribunal considered whether the petitioners represented the required proportion of members. It was found that the total number of members was 11, not 10 as claimed by the petitioners. Since Kshetra Mohan Saha was disqualified, only Sridhar Sikdar was left. It was determined that Sridhar Sikdar alone did not hold 1/10th of the issued share capital, and thus the petition did not meet the requirements of Section 399.

3. Allegations of Continuous Acts or Continuing Wrong Under Sections 397 and 398 of the Companies Act:
The Tribunal examined whether the allegations related to continuous acts of mismanagement or oppression. The Supreme Court's decision in Shanti Prasad Jain v. Kalinga Tubes Ltd. requires continuous acts up to the date of the petition. The allegations in the petition were found to be related to past acts of misappropriation and did not constitute continuous wrongs. Therefore, the petition was not sustainable under Sections 397 and 398.

4. Competence to Maintain an Application Under Sections 397 and 398 if the Name is Not in the Register of Members:
The issue was whether Sridhar Sikdar, whose name was not in the register on the petition date but had a decree for rectification, could maintain the application. The court held that the decree for rectification meant that Sridhar Sikdar should be treated as if his name had never been removed. The decision in Pulbrook v. Richmond Consolidated Mining Co. supported this view, establishing that rectification has the effect of making the entry as if it had always been there. Thus, Sridhar Sikdar was considered a member for the purpose of the application.

Conclusion:
The appeal was allowed, and the decision of the Companies Tribunal was set aside. The Tribunal's failure to recognize the effect of Section 164 of the Companies Act and the incorrect determination of continuous wrongs were errors of law. The appellants were entitled to costs, and all interim orders were vacated.