9911796707
TMI Blog1965 (4) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ares were not transferred, that dividends of the company have not been paid, that the directors of the respondent-company were paid in excess towards their remuneration, and that no notice was given of the general body meeting held on September 28, 1962. The petitioners allege that they constitute more than 1/10ths of the share-capital, i.e. , out of 2,000 shares, the 1st petitioner is the holder of 580 fully paid up shares; the second petitioner 50 shares, and the third petitioner 40 shares; that in the managing agency firm of Kumaraswamy Co., which consisted of three Partners, A. Kumaraswamy, P.G. Karmarkar and M.R. Patny, of whom Kumaraswamy, according to his own declaration, was only a benamidar of M.R. Patny the husband of the 1st petitioner, and father of the second and third petitioners, that the said Kumaraswamy died on February 20, 1959, leaving 151 shares standing in his name which were purported to be transferred on February 16, 1959, to Jaikumar M. Patny, another son of the late M. R. Patny by his first wife, on the basis of a will of Kumaraswamy, and that after the death of M.R. Patny on September 22, 1960, the said P. G. Karmarkar, purporting to act for the non-e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be under the will of late Kumaraswamy is invalid and his appointment as a director of the company is also invalid. [ His Lordship referred to the evidence and continued :] There is, in my view, sufficient justification in the contention of Mr. Raghavan that the company has, as a result of the disputes between the 1st petitioner and her step-son and his wife, two of the three directors, refused to transfer some shares while transferring others by virtue of the self-same will of M.R. Patny. It is also to be noted that they purported to give effect to a will of Kumaraswamy by transferring some shares under it. It is, therefore, not as if they were transferring the shares only on succession certificate or probate being obtained. I cannot also except on the ground of deliberate high-handedness, understand the stand taken by the directors, the majority of whom are actuated by a spirit of dispute projected into the affairs of the company by adopting unfair conduct towards the petitioners, because they have been crediting the dividends to the 2nd and 3rd petitioners in respect of these very shares which they are refusing to transfer. If shares are not transferred, how could they credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny credible evidence, I do not think, at any rate, in these proceedings that I can go further into that question. Having regard to the above findings, it has to be determined whether action can be taken under sections 397 and 398 of the Indian Companies Act, the scope of which may now be examined. Sections 397 and 398 are as follows: "397. (1) Any members of a company who complain that the affairs of the company are being conducted in a manner oppressive to any member or members (including anyone or more of themselves) may apply to the court for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the court is of opinion ( a ) that the company's affairs are being conducted in a manner oppressive to any member or members ; and ( b ) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up ; the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into consideration the interests of the company and its members as a whole would make an order for its management by the court with a view to its being ultimately salvaged. It has also been held that where the facts alleged and proved do not make out a case for winding up under section 162 of the old Act, no order could be passed under section 153C thereof. As observed in In re H.R. Harmar Ltd. [1959] 29 Comp. Cas. 305; [1958] 3 All. ER 689 , the purpose of the corresponding section in the English Act "is not so much to rake up the past as to redeem the future". See also Rajahmu ndry Electric Supply Corpn. v. ageswara Rao [1956] 26 Comp. Cas. 91 (SC). The true scope of the section in my view is where there is discrimination by the majority of the shareholders or by the majority of the directors to the detriment of the minority, so as to amount to oppressiveness and derogatory to the interests of the company, the powers under the section can be exercised. The court has also power under that section to impose upon the parties whatever settlement the court considers just and equitable to remove the main allegations of oppression and this discretion is unfettered though it sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eris with the matters mentioned in clauses ( i ) to ( v ) and that the question whether mismanagement of directors is a ground for a winding up order under section 162 ( vi ) becomes a question to be decided on the facts of each case. Venkatarama Ayyar J., after referring to the several English and Indian cases and the two different views, viz ., of construing it as ejusdem generis as expounded by Lord Cuttenham L.C. in Spackman's case ( supra ), and the later different view adopted in In re Amalgamated Syndicate and which view was finally settled and approved of by their Lordships of the Judicial Committee of the Privy Council in Loch v. John Blackwood Ltd. [1924] AC 783, 790 observed thus : " When once it is held that the words "just and equitable" are not to be construed ejusdem generis , then whether mis-management of directors is a ground for a winding-up order under section 162( vi ) becomes a question to be decided on the facts of each case. Where nothing more is established than that the directors have misappropriated the funds of the company, an order for winding up would not be just or equitable, because if it is a sound concern, such an order must opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete (exhibits B-3 and B-4), were purported to be dated August 15, 1960. In my view, therefore, the conduct of the directors would amount to oppression, inasmuch as it will involve violation of the conditions of fairplay on which every shareholder who entrusts his money to the company is entitled to rely. The petitioners have certainly suffered from consciousness of unjust, harsh and high-handed treatment. In these circumstances, the proper order to be made in my view is to direct the directors of the company to transfer the shares held by M.R. Patny in terms of his will, which in fact has been given effect to by them by crediting the dividends in accordance therewith. With respect to the other prayers, I do not think there is any justification for their being granted in these proceedings. The petitioners did not lay claim to the shares transferred in the name of Harsha Karmarkar and Padmabai Patny. At any rate, this prayer involves rectification of register. It should be done only in other proceedings. Except for the high-handedness in dealing with the payment of dividend and transfer of shares, there is no justification for appointment of a committee of shareholders to manage ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
