1978 (1) TMI 137 - HC - Companies Law

Summary

Issues:
1. Application seeking directions for the former managing director to hand over company records, keys, and cash to the present managing director.
2. Dispute regarding the custody of company records and property after a change in managing director.
3. Challenge to the maintainability of the application based on locus standi.
4. Jurisdiction of the company court to issue directions for the return of company records and property.
5. Abuse of process of the court by withholding company records and assets pending a legal challenge.
6. Appointment of a Commissioner to oversee the transfer of company records, property, and cash.

Analysis:
The judgment concerns an application under section 151 of the Civil Procedure Code seeking directions for the former managing director of a company to hand over company records, keys, and cash to the newly elected managing director. The dispute arises from the former managing director's failure to transfer the records and assets despite losing the election. The applicant argues that the company's operations are hindered without access to these essential documents and assets, impacting its ability to fulfill legal obligations and pursue important matters such as income tax appeals.

The former managing director challenges the maintainability of the application, questioning the applicant's locus standi to seek custody of the company's records and property. However, the court rejects this argument, emphasizing that the managing director is entitled to possess and safeguard the company's assets on its behalf. The court also addresses the jurisdictional issue raised by the former managing director, asserting that the company court has the authority to issue directions for the return of company records and property to ensure the effective functioning of the company.

The court highlights the potential abuse of the legal process by the former managing director, who attempts to withhold the records and assets pending a legal challenge to the election proceedings. The court deems this action as obstructive and orders the former managing director to hand over the company's records, keys, and cash to the new managing director. To facilitate this transfer, a Commissioner is appointed to oversee the process and ensure a transparent inventory of the items being transferred. The former managing director is directed to produce the keys, and failure to comply may result in the Commissioner opening the almirahs and safe to complete the inventory and transfer process.