1975 (6) TMI 39 - HC - Companies Law

Company Membership of, Powers of Court to rectify register of members, Oppression and Mismanagement Right to apply under section 397 and 398

Issues Involved:
1. Composite Petition under Section 155 and Sections 397 and 398 of the Companies Act, 1956.
2. Membership Dispute and Eligibility to Apply under Sections 397 and 398.
3. Non-Resident Indian (NRI) Shareholding and Compliance with Foreign Exchange Regulation Act, 1973.
4. Interim Reliefs Sought by Petitioners.

Detailed Analysis:

1. Composite Petition under Section 155 and Sections 397 and 398 of the Companies Act, 1956:
The petitioners filed a composite petition for reliefs under Section 155 and Sections 397 and 398 of the Companies Act, 1956. The company was not initially joined as a party, which was later rectified. The court considered whether a composite petition was maintainable. It was concluded that a composite petition could be justified if there was no serious dispute regarding the petitioners' title to the shares. However, in this case, the petitioners admitted to signing blank transfer forms, leading to a dispute over their membership. Therefore, the court decided to admit the petition under Section 155 for rectification of the register and deferred the consideration of the petition under Sections 397 and 398 to a later date.

2. Membership Dispute and Eligibility to Apply under Sections 397 and 398:
The court examined whether the petitioners, whose names were removed from the register of members, could maintain a petition under Sections 397 and 398. Section 399(1) specifies that only members can apply under these sections. The court noted that the petitioners must first establish their membership through rectification under Section 155 before seeking relief under Sections 397 and 398. The court emphasized that the prerequisite for invoking jurisdiction under Sections 397 and 398 is that the complaint must come from a member. Since the petitioners' membership was in dispute, it was premature to admit their petition under Sections 397 and 398.

3. Non-Resident Indian (NRI) Shareholding and Compliance with Foreign Exchange Regulation Act, 1973:
The petitioners, being non-resident Indians (NRIs), were required to obtain permission from the Reserve Bank of India (RBI) to continue holding shares in the company as per Section 29(4)(a) of the Foreign Exchange Regulation Act, 1973. The petitioners had not obtained such permission, raising questions about the validity of their shareholding. The court noted that the sale of shares by the petitioners to respondent No. 4 might be of doubtful validity, and respondents Nos. 3 and 8 might not acquire valid title over those shares. The petitioners needed to obtain RBI permission to enforce their rights concerning the shares.

4. Interim Reliefs Sought by Petitioners:
The petitioners sought various interim reliefs through Company Application No. 28 of 1975. The court granted some reliefs and rejected others:
- Relief (i): The court appointed Mr. G. B. Mirani, a chartered accountant, to make an inventory of the company's records in possession of the respondents and the company.
- Relief (ii) and Alternative Relief (iii): Rejected as unnecessary at this stage.
- Relief (iv): The court appointed Mr. Mirani to attend all board meetings and take notes.
- Relief (v): Respondents Nos. 3 and 8 were restrained from transferring 424 shares without court permission.
- Relief (vi): Respondents were restrained from transferring the immovable property of the company without court permission.
- Relief (vii): Petitioners were allowed to move for inspection of records after the inventory was exhibited.
- Relief (viii): Respondents were restrained from returning deposits over Rs. 5,000 without court permission.
- Relief (ix): The company must seek court orders before appointing new directors.

Conclusion:
The court admitted the petition under Section 155 for rectification of the register and deferred the consideration of the petition under Sections 397 and 398 to a later date. The court granted specific interim reliefs to ensure the company's records were preserved and restrained certain actions by the respondents to protect the petitioners' interests pending the resolution of the membership dispute.

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