2013 (2) TMI 367 - HC - Companies Law

Oppression and mismanagement - petition filed by minority group shareholders seeking to restrain appellants from holding extraordinary meeting for deletion of article 57 of Articles of Association - That EOGM was not convened but later was conducted and resolution for deletion of article 57 was passed - Respondents sought to amend company petition to introduce a challenge to conduct of EOGM deleting article 57 - CLB by impugned order permitted amendment of company petition - Petition filed by the respondent No. 2 under sections 397 and 398 itself became infructuous as the cause of action had ceased to exist - Whether CLB rightly exercised its direction in allowing amendment to petition filed under sections 397 and 398? Held that - On perusal of the impugned order passed by the CLB allowing company application filed by respondent Nos. 1 to 3 seeking amendment to company petition, it is clear that the CLB has rendered a finding that the application for amendment was allowed for determination of the issues between the parties and for the purpose of framing issues for avoiding multiplicity of litigations. The CLB stated that the proposed amendment will not in any way fundamentally change the nature and character of the applicants case in the company petition and no prejudice would be caused to the appellants if the amendments were allowed for proper, effective and just adjudication of the matter. The CLB has permitted the appellants to file counter affidavits within three weeks on receipt of the amended company petition. The CLB has also rendered a finding that the company petition filed by the respondent Nos. 1 to 3 has not become infructuous. Company petition fairly depicts that the challenge in the said petition was not restricted to the extraordinary general meeting dated 10-11-2010 but was also against any such meeting in future that might be held for same or similar purposes. By application for amendment filed by the respondent Nos. 1 to 3 the applicants had prayed for amendment of the petition under sections 397 and 398 and to bring on record the subsequent events and development during the pendency of the company petition. It is not in dispute that the company petition is pending before CLB. The CLB has exercised its discretionary power to allow the amendment to the petition filed under sections 397 and 398 by permitting the original applicants to place on record subsequent events so as to avoid multiplicity of litigation and has rendered finding that the amendment would not constitutionally or fundamentally change the nature and character of the applicant s case in company petition and that no prejudice would be caused to the appellants.Thus amendment as allowed by the CLB is upheld as no prejudice would be caused to the appellants in any manner.

Summary

Issues Involved:
1. Whether a company petition under Section 397/398 of the Companies Act, 1956, which has become infructuous, can be amended to introduce a new cause of action.
2. Whether subsequent events can be introduced as amendments in a company petition under Section 397/398.
3. Whether an EOGM convened pursuant to a valid requisition by shareholders constitutes a cause of action for a petition under Section 397/398.
4. Applicability of Order I Rule 10 and Order VI Rule 17 of the Code of Civil Procedure, 1908, to proceedings before the Company Law Board.

Detailed Analysis:

1. Infructuous Company Petition and Introduction of New Cause of Action:
The appellants contended that Company Petition No. 87 of 2010 had become infructuous since the cause of action had ceased to exist. They argued that the notice for the EOGM dated 22nd May 2012 constituted a new and different cause of action and that the CLB erred in allowing amendments to introduce such events. The court found that the CLB exercised its discretionary power correctly in allowing the amendment to avoid multiplicity of litigation and stated that the amendments did not fundamentally change the nature and character of the petitioner's case.

2. Introduction of Subsequent Events as Amendments:
The respondents argued that the convening of the requisitioned EOGM was a further act of oppression in continuation of the earlier purpose, and thus, the CLB was right in allowing the amendment. The court upheld the CLB's decision, referencing judgments which supported the inclusion of subsequent events in petitions under Sections 397 and 398 to ensure proper adjudication of issues and avoid multiplicity of proceedings.

3. EOGM Convened by Shareholders as a Cause of Action:
The appellants argued that an EOGM convened by shareholders under Section 169 does not constitute a cause of action under Section 397/398. The court, however, found that the CLB's decision to allow the amendment to include the challenge to the convening of the EOGM was justified, as the acts complained of were in continuation of the oppressive actions previously alleged.

4. Applicability of Civil Procedure Code Provisions:
The court examined whether the principles of Order I Rule 10 and Order VI Rule 17 of the Code of Civil Procedure, 1908, were applicable to proceedings before the CLB. It referenced various judgments to conclude that amendments to pleadings in company law petitions are permissible to bring on record subsequent events necessary for the proper determination of issues between the parties.

Conclusion:
The court dismissed the appeal, upholding the CLB's decision to allow the amendments to Company Petition No. 87 of 2010. The court found that the CLB had rightly exercised its discretionary power to avoid multiplicity of litigation and ensure a comprehensive adjudication of the issues. The amendments were deemed not to fundamentally change the nature and character of the petitioner's case, and no prejudice was found to be caused to the appellants.