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TMI Blog1969 (3) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... ptember 21, 1962, and hence this appeal. In the court below various allegations against management of respondent No. 1 and also various charges laid in the petition were canvassed, but in this appeal Mr. S.Sen, learned counsel for the appellants, pressed some of the charges only, though he did not abandon or give up the points arising out of the other charges. The first contention urged before us was that the dividend declared on the equity share capital of the company was manipulated in order to depress the market value of the shares to enable the directors of the company to acquire shares at an under-value. It was contended that the assets of the company were secreted and a profit, smaller than what was actually made, was shown in order to reduce the dividend. A chart was handed over to us, in which figures under various heads were collected, and it was argued that, although in the years 1957, 1958 and 1959 the gross boat hire varied within very small limits, there was a large fluctuation in the dividend declared, inasmuch as in 1957 the dividend was 15 per cent., but in 1958 it was reduced to 7 per cent, and in 1959 to 3 per cent. Although this point was canvassed before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholders who participated in the meeting were, besides Om Prakash Mohta, Sri Prakash Mohta. The increase in dividend for the accounting year ending with October 31, 1962, received the fullest support of the appellant's group of shareholders. Yet, they now turn round and say that the increase in dividend was improper and was intended to benefit the Jatias. Then again it appears from the materials before us that the total holding of shares by Mohta Brothers Private Ltd. and Gladstone Lyall and Company Ltd. came to 36,995 shares out of a total of 62,500 shares. Thus, two shareholders held more than 51 per cent, of the shares in the capital of the company and by reason of sections 104, 108 and 109 of the Income-tax Act, 1961, dividend had to be declared at 90 percent, of the profit to avoid imposition of penal tax. This position was made clear to the appellants by the letter dated 27th April, 1964, addressed to Om Prakash Mohta by respondent No. 1. On these facts the charge regarding increase in dividend for the year ending October 31, 1962, is without any substance and is altogether frivolous. In paragraph 26 of the petition there is also another charge that the company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nothing to show that shares were being acquired by the Jatia group with a view to obtain control of the management of the company. The acquisition of the shares by the appellants' group was by no means negligible and they certainly went in the market for acquiring large block of shares in the company, and upon these facts, the charge that a bid was made to gain control of the management of the company can as well be made against the appellants. Then again, acquisition of shares by one or a group of persons in a joint stock company is not one of the matters for which relief can be granted under sections 397 and 398 of the Act to a minority group of shareholders, unless, it is proved, that it is oppressive to the minority group, and so far as section 397 is concerned, it is further shown that such acquisition would justify an order for winding up of the company. We are not satisfied that the mere fact that Jatias had acquired some shares of the company is a ground for winding up of the company nor that the acquisition of shares by the Jatias group has resulted in any oppression to the appellants. The next contention of the learned counsel for the appellants was directed against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were due, firstly, to the closure of the company's workshop which necessitated repairs to be done by outside agencies. Secondly, the strict regulation of the boat licensing authority in renewing licence of boats made thorough overhaul and repairs of boats and launches necessary. Thirdly, it was contended that the company's fleet was very old and therefore thorough repairs were executed in 1962-63. To our mind, these answers of the respondents sufficiently explained the increase in the expenses for the maintenance of the fleet, and at any rate the charges made by the appellants on this head do not, in our view, constitute acts of mismanagement under the Act. The next contention of Mr. Sen was relating to a boat No. 183, which sank. It was contended that the boat was not insured and a loss of Rs. 300 was written off in the profit and loss account for the year ending October 31, 1962, but the compensation of Rs. 22,168 was shown in the year ending 1961. The suggestion of the learned counsel for the appellants was that the assets of the company were under-valued as the market value of the boat was more than Rs. 22,000 whereas the book value was only Rs. 300. In our view, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of rayon cloth from its mill. This was followed by an offer by the respondents to sell their shares in the subsidiary company at a certain price. The nominee directors of the parent company adopted a policy of passive support to the parent company and allowed the subsidiary company's trading activities to vanish. On these facts a petition was filed under section 210 of the Companies Act, 1948, on the ground that the affairs of the company were being conducted in a manner oppressive to some parts of the members and the appellants were directed to purchase the share of the respondents at a price. It is to be noticed also that in that case it was common ground that it was just and equitable that the company should be wound up. This case, in our view, has not the remotest application to the facts with which we are concerned in this appeal, nor does the principles discussed therein in any way uphold the contention of the learned counsel for the appellants. The next case relied upon by the learned counsel for the appellants was In re H. R. Banner Ltd. [1959] 1 WIR 62; [1958] 3 All. ER 689; 29 Comp. Cas. 305. In that case a company was formed to acquire a business. Two of the sons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty was oppressive to the minority must depend upon facts proved, and also that for the purpose of proving oppression it must be shown that events happened not in isolation but as part of a policy and that there were continuous acts on the part of the majority showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. It was further held that such oppression must involve an element of lack of probity or fair dealing and that mere loss of confidence between groups of shareholders was not enough. The principles laid down in that case do not support the contentions raised on behalf of the appellants in this case. Mr. Sankar Ghosh, learned counsel for the respondents, contended that in an application under sections 397 and 398 of the Act, the court dealing with the application should confine itself to the allegations in the petition itself and not embark upon a rambling enquiry into indefinite charges of mismanagement and oppression. He argued that, in considering the question if relief ought to be granted to a petitioner, the court should look into the facts alleged and proved, and must confine itself to events that have happened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of shareholders, who have no access to the books of the company, is by no means a ground for directing an investigation into the affairs of the company or for giving any other relief to a petitioner. The petitioner must set out the facts which constitute acts of mismanagement, misappropriation, fraud or oppression and prove, prima facie , at any rate, that on those facts an investigation is called for. If a petitioner fails to set out the facts and produce satisfactory proof in support of those facts no order for investigation into the affairs of the company can be made, nor can any relief be granted to the petitioner. A shareholder has no right of access to the books of the company, but denial of access to such books is not an act of oppression as has been held by this court in a Bench decision, Kajya Lakshmi ( Lalita ) v. Indian Motor Co. Ltd. [1962] 32 Comp. Cas. 207 ; AIR 1962 Cal. 127. If a petitioner cannot make out a case of mismanagement and oppression, because he was unable to collect materials for the purpose, it is not for the court to direct the directors of the company to offer inspection of the company's books and accounts to enable a petitioner to col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the materials such as they are. In support of this contention Mr. Sen relied upon some of the observations of Lord Denning in his review of a book, namely, The Law of Restitution by Robert Goff, in volume 83 (1967) of The Law Quarterly Review. The passage relied on by Mr. Sen is that "no person should be allowed unjustly to enrich himself at the expense of another". Reliance was also placed on the observations of Jenkins L.J. in Vine v. National Dock Labour Board. [1956] 1 All. ER 1. Such observations, to our mind, are of no assistance to the appellants in this appeal. They are no authority for the proposition that, even though a petitioner fails to make out a case for a statutory relief by setting out material facts in the pleading, yet the court should grant relief to the petitioner by directing an investigation, in the hope that the report of the investigation might disclose materials for further orders against the company, and in favour of the petitioner. In our view, to hold that an investigation should be directed or relief ought to be granted to a petitioner, even though facts relating to mismanagement, oppression, misappropriation and improper conduct have n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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