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TMI Blog1995 (2) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... ires to be emphasised. While considering pleas of this type, the CLB and the Court will have to be extremely circumspect because allegations are often false, exaggerated, misconceived, contrived or mischievous and in those of the cases where this appears to be the position such complaints will have to be short down as often times, the genesis of such complaints is motivated. Similarly, the Forum before which such a complaint is made must be on guard and just as in appropriate cases it is necessary to pierce the veil of the company, while dealing with this category of cases, it is equally essential to sift out the chaff from the grain and ascertain the true nature and genuineness of the complaint and more importantly, whether it qualifies for a relief or action under section 397 or 398. In this regard, the real issue posed is as to whether, in a case where a shareholder or for that matter a Director seeks a relief in relation to a dispute and a grievance that is totally and completely extraneous to the fair exercise of his rights under sections 397 and 398, whether at all the CLB would have jurisdiction to entertain such a complaint howsoever adroitly it may be presented or inter-li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the sales are concerned through his company. Sterling Transtel Ltd. ('Sterling') which was the main distributor for the products in question. Mr. Ganesh thereafter pointed out to me, on the basis of figures that the sales through Sterling had increased from 1990 when the figure showed approximately Rs. 9 million to Rs. 93 millions in 1994. He also relied on certain extracts from the records of the respondent-company Krone to indicate that the performance of the appellant and Sterling had been very much appreci- ated by the Board of Directors. According to Mr. Ganesh, in the month of June 1994 he was required to file a composite petition before the CLB asking for certain reliefs. Principally, the appellant had contended that several decisions and acts on the part of the Board of Directors of the company, and the Managing Director individually were not in the interest of the company and that they could be construed as indication of gross mismanagement. The appellant had also contended that the Board of Directors of the company is not correctly constituted and that cones-quently, he as a minority Director was virtually being sidelined. Another charge was that several of the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause he submits that in the background of their impressive record of Sterling, that it is more than crystal clear that the interests of the company are being sacrificed in order to take a revenge against the appellant. A strong plea was made that any such action must be stayed as otherwise, nobody would be able to apply for legal redress. 5. It is unnecessary for this Court to go into the areas of dispute because the petition is pending before the CLB and was scheduled to be heard in the month of May 1995. The appellant made an urgent application to the CLB for interim orders whereupon, after hearing the parties the CLB passed an order dated 1-2-1995 rejecting the prayer of the applicant that the Board of Directors should be restrained from taking a decision in relation to the distributorship agreement between the company and Sterling. The CLB, however, granted the application for inspection, etc., and advanced the hearing of the main petition to 27-3-1995. In sum and substance, the CLB upheld the position that the dispute in relation to the distributorship agreement was outside the ambit and scope of sections 397 and 398 and, therefore, refused to exercise jurisdiction in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the decision were to be taken, the moment it comes to be known in the market, that it would have ruinous consequences to the appellants. Mr. Ganesh places reliance on an earlier Division Bench Decision of the Court in the case of Synchron Machine Tools ( P. ) Ltd. v. U.M. Suresh Rao [1994] 79 Comp. Cas. 868 (Kar.). The principle enunciated in that case were to the effect that in the face of allegations of oppression and mismanagement and a petition filed for reliefs, that the Court had sufficiently wide powers to grant just and equitable reliefs which require to be moulded to suit the circumstances of the case. On an analogy, Mr. Ganesh submitted that this was a most deserving case in which a Director who has complained about gross mismanagement should be protected from oppressive consequences that are sought to be visited on him. He contended that it was wrong on the part of the CLB to have refused an interim order and that this Court, therefore, ought to intervene. He also relied on certain passages from Ramaiah's Commentary on the Compa- nies Act at pages 2229 and 2230 in support of his contention that excluding a joint venture from participating in all major decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be far more beneficial to the financial interests of the company and would effect a saving of as much as Rs. 1.5 crores. This position has been disputed by Mr. Ganesh but I need to record that the Board of Directors of a limited company in particular are required to act in the best interests of a company and it is presumed that they are doing so until the contrary is established. This Court is not even required to adjudicate on that question because the step has so far not been taken and also because the entire dispute is yet to be heard by the CLB. This Court is, however, required to decide as to whether it is required to exercise jurisdiction in a matter of the present type and whether it would be right in doing so. The principles laid down in Indian Oil Corpn. Ltd. 's case ( supra ) , very clearly mandates that it would not be appropriate for a Court to sit in judgment over a decision of this type because there are several aspects of the matter that are involved and which are relevant including the fact as rightly pointed out by Mr. Desai that where parties are at logger head, the inadvisability of one of them distributing the products is an issue of consequence. I am in agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CLB under sections 397 and 398 for this purpose. Since the matter has been fully argued before me, it is incumbent that this Court records a finding on the issue that has been canvassed and I need to observe that even if one were to accept that the appellant has the interest of Krone equally at heart, the fact remains that the relief asked for by him relates exclusively to the anticipated loss, prejudice or damage that may occur to Sterling. On the pleadings before me, on behalf of the Krone it is contended that the termination of the agreement would benefit the company and its shareholders both businesswise and financially. It may be that the appellant does not agree with this appraisal But it is also clear as was more than evident in the course of Mr. Ganesh's submissions, that the appellant is desperately concerned about his business interests in Sterling. That cannot be the subject-matter of an application under sections 397 and 398 because these sections are circumscribed to situations where the interests in relation to that very company are concerned. To my mind, therefore, the CLB was more than fully justified in having refused to exercise jurisdiction in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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