1971 (9) TMI 113 - HC - Companies Law

Oppression and mismanagement Power of Tribunal on application under sections 397 and 398, Inherent powers of Court

Summary

Issues:
Jurisdiction of the court to pass orders in the application moved by the company under rule 9 of the Companies (Court) Rules and section 151 of the Code of Civil Procedure, 1908.
Maintainability of the application under any provision of the Companies Act, specifically section 402 in relation to the relief granted under sections 397, 398, and 402 of the Companies Act, 1956.

Jurisdiction Issue:
The judgment pertains to a winding-up petition where the court granted relief under sections 397, 398, and 402 of the Companies Act, 1956. The application in question sought permission for the company to avail of a sub-limit with its bankers, leading to a debate on the court's jurisdiction. The court analyzed rule 9 of the Companies (Court) Rules and section 151 of the Code of Civil Procedure, concluding that these provisions did not confer substantive rights on parties to move the court. The court referenced a previous decision by the Punjab High Court to assert that the application was not maintainable under rule 9 or section 151, Civil Procedure Code.

Maintainability Issue:
Regarding the application's maintainability under the Companies Act, the court delved into section 402, which provides for the regulation of a company's affairs post-relief under sections 397 and 398. The court highlighted that the interim board functions under court supervision until a specified time. Given that relief was granted under relevant sections and the interim management operates under court oversight, the court held it had the authority to provide directions and instructions to resolve the board's problems. The court cited a decision by the Allahabad High Court to support its stance. Ultimately, the court approved the resolution of the board of directors based on the circumstances presented in the application.

Conclusion:
In conclusion, the judgment addressed the jurisdictional aspect of the court's authority to pass orders in a company application and the application's maintainability under the Companies Act, specifically section 402. The court clarified the scope of its supervisory powers in guiding the interim management appointed by the court, emphasizing the protection of shareholders' interests. By approving the resolution of the board of directors, the court resolved the issues raised in the application, highlighting the importance of court supervision in such matters.