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TMI Blog2008 (4) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... r the appellants against the appellants, holding that there is no error or infirmity in the impugned order passed by the Company Law Board, so as to exercise its power under regulation 44 of the Company Law Board Regulations, 1991. Appeal dismissed. - C.M.A. NO. 258 OF 2008 M.P. NOS. 1 AND 2 OF 2008 - - - Dated:- 30-4-2008 - S. TAMILVANAN, J. H. Karthik Seshadri for the Appellant. S. Parthasarathy for the Respondent. JUDGMENT 1. Aggrieved by the order of the Company Law Board, Additional Principal Bench at Chennai, in C.A. No. 82 of 2007 in C.P. No. 9 of 2005 S. Arunachalam v. Sugavaneswara Spg. Mills (P.) Ltd. [2008] 142 Comp. Cas. 611, this civil miscellaneous appeal has been preferred. 2. It is not in dispute that the respondents herein had originally approached the Company Law Board in C.P. No. 9 of 2005 with allegations of "oppression and mismanagement" by the appellants under sections 397 and 398 of the Companies Act, 1956. As per sections 397 and 398 of the Companies Act, 1956, the shareholders are entitled to approach the Company Law Board, complaining of acts of oppression and mismanagement by the majority shareholders. 3. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g reasons : "( a )The Company Law Board in that case was dealing with the situation where one group after having served an order, viz., to conduct a meeting for election of directors of the company had obstructed the process and did not permit the proper conduct of the meeting. The chairman of the meeting acted in a biased manner and did not allow the conduct of the meeting not acted in a fair and proper manner. Under the circumstances, the parties had to once again approach the Company Law Board and seek directions to implement its orders. In the instant case, that is not the case. The parties had consciously entered into a compromise and permitted the final disposal of the petition based on the compromise. It is not the case of the respondents here that they had approached the Company Law Board again on the ground that the appellants were not implementing the order. On the contrary, the respondents had admittedly come with a request that was not covered by the terms of the compromise order, and, therefore, sought modification of the said order. ( b )The judgment in Shoe Specialities (P.) Ltd. v. Standard Distilleries and Breweries (P.) Ltd. [1997] 90 Comp. Cas. 1 (Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. Taking into consideration the facts that ( a ) the company is a closely held private limited company; and ( b ) the long standing business relationship between the parties, this bench suggested to them for any amicable settlement of the disputes. Towards this end, it has been agreed by both the parties as under : 1.The company will allot shares afresh to the extent of shares held in the name of petitioners Nos. 1 and 6 and forfeited by the company, viz., 9562 equity shares. 2.The parity in shareholding of petitioner Nos. 1 and 6 will be restored back as prevailed prior to 7-4-2005, by allotment of proportional additional shares, viz., 944 equity shares in their favour at Rs. 260 per share. 3.The company will allot shares in terms of clauses 1 and 2 on receipt of the consideration for the shares from petitioner Nos. 1 and 6 within three weeks from the date of receipt of consideration. 4.Petitioner Nos. 1 and 6 will repay the company a sum of Rs. 52 lakhs towards the dues in full and final settlement within 9 months from this date and simple interest will be charged after 6 months at 12 per cent on the outstanding balance. 5.The civil suits filed by the sixth peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, viz., 9562 equity shares. 2.The parity in shareholding of petitioner Nos. 1 and 6 will be restored back as prevailed prior to 7-4-2005, by allotment of proportional additional shares, viz., 944 equity shares in their favour at Rs. 260 per share. 3.The company will allot shares in terms of clauses 1 and 2 on receipt of the consideration for the shares from petitioner Nos. 1 and 6 within three weeks from the date of receipt of consideration. 4.Petitioner Nos. 1 and 6 will repay the company a sum of Rs. 52 lakhs towards the dues in full and final settlement within 9 months from this date and simple interest will be charged after 6 months at 12 per cent on the outstanding balance. 5.The civil suits filed by the sixth petitioner and the company will be withdrawn unconditionally. 6.The allotment of shares on account of forfeiture of shares and the additional shares will be allotted on receipt of consideration from petitioner Nos. 1 and 6. 7.The petitioners are entitled to exercise their rights as shareholders of the company. Liberty to apply." 16. Mr. S. Parthasarathy, learned senior counsel appearing for the respondents drew the attention of this court to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al settlement within nine months with 12 per cent simple interest after six months and the same was complied with. It has not been disputed that the sixth petitioner herein withdrew the civil suits filed by the sixth petitioner therein, pursuant to the compromise order, dated 8-9-2006. It is not in dispute that the respondents herein who were petitioners to the consent order were entitled to exercise their rights as shareholders of the company, as per the said consent order. 22. In the impugned order passed in C.A. No. 82 of 2007 in C.P. No. 9 of 2005, it has been made clear that the right of a shareholder would include the right to participate in the management. The first applicant claims to be a director for the past 24 years and according to him, which remain un-contravened by the respondents, who are the appellants herein. As per the impugned order, the company had convened on 24-8-2005, its annual general body meeting, during the pendency of the company petition. The applicants expressed their concern on the possible removal of the directors, belonging to the petitioners group (the respondents herein) and, therefore, the Bench, by an order, dated 18-8-2005, while permittin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o material to show that the shareholders removed the first respondent from the office of the director for having acted against the interest of the company, by filing any false complaint. 25. The Division Bench of this court in Shoe Specialities (P.) Ltd. ( supra ), has held that when a case of oppression is made out under section 397 of the Companies Act, 1956, it is only within the power of the Company Law Board to end the matter complained of and to make such orders as it thinks fit. The Board is empowered to remove the board of directors so that the affairs of the company can be set right. It is only under the authority of the Company Law Board and also under its supervision, that the board of directors are being removed. The scope of section 284 of the Companies Act is entirely different. For cases coming under that section, there must be some charge against the individual director and it is the company that seeks the removal of that director in such circumstances. Only in such cases, notice contemplated under section 284 of the Companies Act, 1956, is called for. When the petition under section 397 itself is for removal of directors, no special notice is required as cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision that may be taken at the said meeting until further orders. This condition was not complied with during the annual general body meeting on 24-8-2005. 28. As per the impugned order, the consent order, dated 8-9-2006, is subjected to the aforesaid earlier order, dated 18-8-2005, however, the appellants herein taking advantage of the order, dated 8-9-2006, excluded the first respondent herein from the office of the director of the company in an unjustifiable manner and by using similar yardstick, there is a possibility of removing other directors belonging to the respondents group from the post of directors under the guise of the consent order, dated 8-9-2006. The impugned order is clear that the Company Law Board has passed the order with the intention only to prevent the abuse of the process of the Bench and to meet the ends of justice, I am of the considered view that the Company Law Board is empowered with the inherent power under regulation 44 of the Company Law Board Regulations, 1991, to make such order as may be necessary for the ends of justice ought to prevent abuse of process of the Bench. 29. On the above facts and circumstances, it is clear that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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