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TMI Blog1978 (6) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... of the companies named therein; ( d )to order an investigation into any matter into the affairs of the company as the court may deem fit; ( e )to direct such persons as the court may find responsible for the loss occasioned to the company to make good the same ; ( f )to direct the shifting of the registered office of the company to Erode or to Appakkadal : ( g )to pass such orders on the basis of the result of investigation ; and ( h )to order costs of the petition. The appellant herein purported to file along with the petition, a letter of consent signed by 147 shareholders similar to the appellant herein, in order to satisfy the requirements of section 399 of the Act. One of the objections taken by the company in the nature of preliminary objection was that the present petition under sections 397 and 398 of the Act was not maintainable as it violated one of the conditions precedent prescribed in the statute itself not only for its validity but also for its maintainability. In support of this objection, 73 affidavits sworn to by 73 out of 147 persons whose signatures found a place in the annexure to the petition were filed. The contention in those affidavits was that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; or ( b )that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its board of directors, or of its managing agent or secretaries and treasurers or manager, or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company ; 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 that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted in a manner prejudicial to public interest which will necessarily and naturally involve giving particulars as to how it was prejudicial to public interest. Similarly, an averment or allegation as to the affairs of the company being conducted in a manner oppressive to any member or members must necessarily involve giving of particulars as to what constituted "oppressive manner". Section 398(1) of the Act, in its turn, contemplates a complaint that the affairs of the company were being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interest of the company. In fact, "in a manner prejudicial to public interest" is common to both sections 397(1) and 398(1) of the Act. On the other hand, the second alternative under section 398(1), namely, "in a manner prejudicial to the interest of the company" does not find a place in section 397(1). Section 398(1)( b ) refers to yet another ground, namely, a material change having taken place in the management or control of the company. Thus, section 397(1) contemplates making of two types of complaints, namely : (1)that the affairs of the company are being conducted in a manner prejudicial to public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have consented to a particular action, the said member should have known what was the action to be taken, what was the relief to be prayed for and what was the ground to be urged in support of the relief claimed. It is one thing to say that the member who gives consent should have applied his mind to the question before him before giving consent; it is another thing to say that before a member gives his consent, the actual petition prepared, to be filed, must be before him. It is in this context that a reference to the decision of the Calcutta High Court very strongly relied on by the learned counsel for the appellant becomes relevant. That decision is In re Bengal Luxmi Cotton Mills Ltd. [1965] 35 Comp. Cas. 187. At page 199 of that report, the following passage occurs : "As to the meaning and import of consent by members of a company, a reference should be made to the decision of the Allahabad High Court in Makhan Lal Jain v. Amrit Banasftati Co. Ltd. [1953] 23 Comp. Cas. 100, which was relied upon by Mr. B. Sen in support of his argument that consent in writing meant consent given by the members after the petition was made ready. In that case while dealing with the mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the petition and the nature of the relief sought to be claimed in the petition, cannot be the result of an application of the mind to the question before them and, therefore, such a consent cannot be a valid consent. It is this point that has been stressed by Ramaprasada Rao J., as he then was, in the present case. The learned judge after extracting the relevant provisions of law, has pointed out: " 'consent' used in this Act could be interpreted in the same sense as 'consent' defined in the Indian Contract Act, which means that one or more persons are said to consent when they agree upon the same thing in the same sense. In my view, the consent that is required, which has to be obviously in writing, should be such that there should be prima facie proof that the shareholders who get themselves involved in petitions under sections 397 and 398 should give the impression to a reasonable mind that they applied their minds and gave the consent for the filing of a particular application for a particular relief under section 397 and/or section 398.... To give consent means that there was consensus ad idem between the sponsor or promoter and the other named shareholders in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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