9911796707
TMI Blog1975 (6) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... company on 29th March, 1967. The company was formed for the principal object of constructing a cinema theatre and to carry on business of cinematograph, film producers, exhibitors, distributors, etc. The initial authorised capital of the company was Rs. 5 lakhs divided into 500 equity shares of Rs. 1,000 each. But, subsequently, by a resolution dated June 23, 1970, the authorised capital of the company was increased from Rs. 5 lakhs to Rs. 10 lakhs divided into 1,000 equity shares of Rs. 1,000 each. The issued, subscribed and paid up capital was Rs. 9,88,000 consisting of 988 shares of Rs. 1,000 each fully paid up. The company erected a cinema theatre named as Vihar Cinema on Pratapnagar Road, Baroda. After it obtained a licence to exhibit films in the theatre, the company gave the theatre on lease to Messrs. Vihar Film Exhibitors, a partnership firm of which all the equity shareholders of the company were partners, on a monthly rent of Rs. 20,000 and the lessee was to bear the expenses of staff salary, electricity charges, machinery, maintenance, etc. Messrs. Vihar Film Exhibitors in turn gave on lease the theatre to Messrs. Vihar Exhibitors, a firm, on a weekly rent of Rs. 8,500. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of respondent No. 4, in whom Messrs. Manubhai and Brothers had immense confidence. Pursuant to this arrangement, it was alleged that it was agreed between the constituted attorney of the petitioners and respondents Nos. 4, 5 and 6 that petitioners Nos. 1 and 3, respondents Nos. 5 and 6, Mr. N. N. Vyas and Mr. A.R. Patel, should execute blank transfer forms in respect of their respective shares and they should hand them over to respondent No. 4, and, if necessary, the shares respectively held by the aforementioned persons should be nominally entered in the name of respondent No. 4 to assure Messrs. Manubhai and Brothers that respondent No. 4 holds the controlling block of shares in the company. And that pursuant to this arrangement, the constituted attorney of the petitioners Nos. 1 and 3, and respondents Nos. 5 and 6 and Mr. N. N. Vyas and Mr. A. R. Patel executed blank transfer forms in respect of the shares respectively held by them and handed them over to respondent No. 4. The petitioners allege that on the strength of the blank transfer forms handed over to respondent No. 4, 424 shares standing in the name of the petitioners, respondent No. 6 and his wife, Mrs. Shardaben P. Pan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of members alleging that the name of the petitioners as well as Mr. N.N. Vyas and Mr. A.R, Patel have been wrongly removed from the register of members. The petitioners also make an allegation, complaining of mismanagement, misapplication of the funds of the company and acts causing oppression to the petitioners and those who consent to the petition as they are minority shareholders and seek relief under sections 397 and 398 of the Companies Act. It is not necessary to set out those allegations at this stage. Simultaneously, the petitioners also took out judge's summons in Company Application No. 28 of 1975 for interim reliefs. When Company Petition No. 36 of 1975 came up for admission before J.B. Mehta J., a notice was ordered to be served upon the company, the respondents and the Central Government. This was a notice prior to admission calling upon the parties to show cause why the petition should not be admitted. Simultaneously, in Company Application No. 28 of 1975, notice was ordered to be issued to the respondents and the company and a very limited ex parte ad interim relief was granted. Thereafter, the petition came up for admission before me. Now, I must confes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nks fit. (3) On an application under this section, the court ( a )may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand; and ( b )generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification...". Prima facie, reading these sections together, it becomes clear that in order to acquire the status of a member of a company, name of the person seeking to be a member must be entered in the register of members, and only then he acquires the status of a member of a company. It is obligatory upon the company to maintain a register of its members. Now, if a person claims to be a member of the company, and either his name is not entered in the register, or having been once entered in the register, is, without sufficient cause, omitted therefrom, then the person aggrieved or any member of the company or the company may apply to the court for rectification of the registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the section, may apply for relief to the court, and it is absolutely well-settled that for relief under sections 397 and 398, the oppression complained of must be in the capacity of members. The language of sections 397 and 398 leaves no room for doubt that the oppression complained of must not only be complained of by a member of the company, but oppression must be of some part of the members (including himself) in their capacity or his capacity as members or member of a company as such (vide In re H. R. Harmer Ltd. [1958] 3 All ER 689; [1959] 29 Comp. Cas. 305 (CA). Therefore, it is crystal clear that complaint must come forth from a member and it must be a complaint to be made to the court by a member. The prerequisite for invoking jurisdiction under sections 397 and 398, which has been statutorily provided for in section 399(1), is that the complaint must come forth from a member. One has to be a member before he can complain of oppression as a member of the company. Now, if the petitioner's title to the membership is in dispute, and he has to seek relief under section 155 for getting his name placed on the register of members to clothe himself with the rights of a membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares unless before the expiry of a period of six months from such commencement or such further period as the Reserve Bank may allow in this behalf such person or company (including its branch) has made an application to the Reserve Bank in such form and containing such particulars as may be specified by the Reserve Bank for permission to continue to hold such shares". Now, apart from anything else, these petitioners who are non-resident Indians, have been holding the shares in India of a company which is specifically covered by clause ( a ) of sub-section (1)of section 29, and, therefore, they would not be entitled to continue to hold such shares unless before expiry of a period of six months from the commencement of the Act or such further period as the Reserve Bank may allow in this behalf to continue to hold such shares. The Foreign Exchange Regulation Act, 1973, came into force on January 1, 1974. Admittedly, the period of six months has long since expired. It is true that the petitioners can ask for extension of time for making an application under section 29(4)( c ). That has still not been done. Now, if they are non-resident Indians, and if they have not been permitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermission. In this connection Mr. G. N. Shah referred to Mahendra Kumar Jain v. Federal Chemical Works Ltd. [1965] 35 Comp. Cas. 651 (All.). A petition under section 155 for rectification of register was not entertained on the ground that there were several disputed questions of fact, requiring determination, and that the remedy under section 155 being of a summary nature, it could not be invoked and the petitioner should pursue his remedy in a civil court. The contention is premature because after the admission of the petition in the case before the Allahabad High Court, the respondents appeared and raised serious questions and the issues were framed and then the court came to the conclusion that the disputed questions of fact cannot be tried in a summary procedure in an application for rectification of the membership register under section 155. The contesting respondents in the case before me have still not filed their affidavit and we do not know what contentions they propose to raise. Therefore, this contention cannot be entertained at this stage. Another case relied upon was Ved Prakash v. Iron Traders ( Private ) Ltd. [1961] 31 Comp. Cas. 122 (Punj.). In this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if he filed a petition under section 155 for rectification of the register of members, where his title to the shares can be adjudicated upon, it would be premature to permit him to maintain a petition under sections 397 and 398. But this decision is not an authority for the proposition that a composite petition is not maintainable. Now, one can conceivably envisage a case where there may not be a serious dispute as to the title of the petitioners to the shares of which he claims ownership and yet his name may not be found in the register of members and incidentally he is required to seek rectification of the register, he would be perfectly justified in filing a composite petition under sections 155, 397 and 398. It is not that in all cases such a composite petition is not maintainable but it would be for the court to decide whether the petition should be rejected on the ground that it is a composite petition unworthy of examination, or to admit the petition in part leaving open the question of admission of the remainder of the petition to a later date. In Company Petition No. 6 of 1970 decided on 28th April, 1971 [ Navnitlal M. Shah v. Atul Drug House Ltd. [1977] 47 Comp. Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the petition to that extent need not be dismissed. The allegations made are grave and serious and if the petitioners are qualified to maintain the petition, it would be necessary for the court to examine these allegations Accordingly, I direct that the petition should be admitted for the relief under section 155 and notice be issued to the respondents. Parties would be at liberty to move at a later stage for consideration whether the circumstances have come into existence which necessitate examining the question of admission or otherwise of petition for the reliefs under sections 397 and 398. Order accordingly. Directions on summons in Company Application No. 28 of 1975. This company application is for interim reliefs. Re :Relief ( i ) . The petitioners seek inventory of the records of the company in possession and custody of respondents Nos. 1, 2, 3, 5 and 9 and its chartered accountants, the officers, servants and agents of the company and request the court to seize the record and take them into custody. But I think at this stage it is only necessary to make the complete inventory of the record of the company in the possession of any of the respondents as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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