1975 (3) TMI 87 - HC - Companies Law

Oppression and Mismanagement Right to apply under section 397 and 398, Amendment to petition

Issues Involved:
1. Applicability of the Civil Procedure Code to proceedings under the Companies Act.
2. Admissibility of objections regarding maintainability of a petition after its admission.
3. Discretion of the court in granting leave to amend pleadings.
4. Allegations against respondent No. 5 and their relevance to the amendment application.
5. Balancing prejudice caused by delay with the interests of justice.

Issue-wise Detailed Analysis:

1. Applicability of the Civil Procedure Code to proceedings under the Companies Act:
The petitioner contended that the Civil Procedure Code (CPC) was not applicable to proceedings under the Companies Act, and thus, the court had no power to grant leave to amend a pleading. However, the court found this argument untenable. Section 643(b) of the Companies Act empowers the Supreme Court to make rules consistent with the CPC. The Companies (Court) Rules, 1959, specifically rule 6, state that the provisions of the CPC apply to all proceedings under the Act and these Rules. Therefore, the court concluded that it has the power to grant leave to amend pleadings based on the principles of the CPC.

2. Admissibility of objections regarding maintainability of a petition after its admission:
The petitioner argued that once a petition is admitted, its maintainability cannot be challenged as a defense. The court disagreed, stating that sections 397 and 398 of the Companies Act allow members to move for appropriate orders only if they fulfill the requirements of section 399. This condition goes to the jurisdiction of the court. The court emphasized that admitting a petition does not involve a final adjudication on any point and respondents can still dispute the facts or show that the requirements of section 399 are not met.

3. Discretion of the court in granting leave to amend pleadings:
The court noted that leave to amend is generally granted unless the party applying is acting mala fide or has caused injury to the opponent that cannot be compensated by costs. The court cited precedents stating that amendments should be allowed to determine the real questions in controversy. The court found that the objection sought to be raised by the amendment was necessary for determining whether the petitioner had the right to apply under section 399. Therefore, the application for leave to amend was allowed.

4. Allegations against respondent No. 5 and their relevance to the amendment application:
The petitioner raised several allegations against respondent No. 5, including contempt of court and making false statements. The court found these allegations irrelevant to the decision on the amendment application. The court emphasized that these matters were collateral and should not influence the decision on whether to grant leave to amend.

5. Balancing prejudice caused by delay with the interests of justice:
The petitioner argued that the delay in raising the objection caused prejudice that could not be compensated by costs. The court acknowledged the delay but noted that costs have always been treated as adequate recompense for such prejudice. The court also considered the interests of the company and concluded that determining whether the petitioner had the right to apply under section 399 was crucial. Therefore, the court granted leave to amend, subject to the payment of Rs. 500 as costs due to the significant delay.

Conclusion:
The court allowed the application for leave to amend the reply, emphasizing the necessity of determining the real questions in controversy and balancing the interests of justice with the prejudice caused by the delay. The leave was granted on the condition of paying Rs. 500 as costs.

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