1969 (9) TMI 64 - HC - Companies Law

Kinds of share capital - Two kinds of share capital, Oppression and Mismanagement Right to apply under section 397 and 398

Summary

Issues Involved:
1. Maintainability of the petition under sections 397 and 398 of the Companies Act.
2. Whether the Yogam is a "company having a share capital" or "a company not having a share capital".
3. Allegations against the general secretary and the management of the Yogam.
4. The legal remedies available to the Yogam to resolve the management stalemate.

Issue-Wise Detailed Analysis:

1. Maintainability of the Petition:
The petition was filed under sections 397 and 398 of the Companies Act by ten members of the Yogam with the written consent of 265 other members. The general secretary opposed the petition, arguing it was not maintainable as the petitioners had not obtained the necessary consent from one-fifth of the total members as required by section 399 of the Companies Act. The court focused on whether the Yogam fell under clause (a) or clause (b) of section 399(1) to determine the maintainability. Since the Yogam has more than 40,000 members, the petition would only be maintainable if it is a "company having a share capital".

2. Company Classification:
The court examined whether the Yogam is a "company having a share capital" or "a company not having a share capital". The term "share capital" was not defined in the Companies Act, so the court referred to authoritative texts like Buckley on the Companies Acts and Palmer's Company Law to understand its meaning. The court concluded that a company having share capital must have an authorised or nominal capital divided into shares of a fixed amount. The Yogam's memorandum did not mention any authorised capital, and its shares were neither transferable nor inheritable, which indicated that the Yogam is not a company having a share capital. Therefore, the Yogam falls under clause (b) of section 399(1), making the petition not maintainable as it did not meet the one-fifth member requirement.

3. Allegations Against the General Secretary:
The petitioners alleged mismanagement and misconduct by the general secretary, including failing to convene meetings and allowing non-members to disrupt meetings. The general secretary denied these allegations and made counter-allegations against the president and others. The court noted that the factional fight between the president and the general secretary had created a calamitous situation, making it impossible to manage the Yogam's affairs according to law. However, the court did not delve into the merits of these allegations, as the primary issue was the maintainability of the petition.

4. Legal Remedies:
The court acknowledged the dire situation of the Yogam and suggested that the institution is not without remedy. Section 399(4) of the Companies Act allows the Central Government to authorize any member or members to apply to the court under sections 397 or 398, even if the requirements of clause (a) or clause (b) of sub-section (1) are not fulfilled. The court expressed hope that the Central Government would take necessary steps to resolve the management stalemate if approached. Additionally, the court urged the general secretary and the board of directors to act in the best interests of the institution and the community it serves.

Conclusion:
The petition was dismissed as it was not maintainable under section 399(1)(b) of the Companies Act. The court highlighted the possibility of seeking authorization from the Central Government under section 399(4) to address the management issues. No order as to costs was made.