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TMI Blog2009 (11) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... O. APPEAL NO. 51 OF 2009 - - - Dated:- 12-11-2009 - DR. D.Y. CHANDRACHUD, J. Atul Rajyadhyaksha, Pankaj Vernekar and Ms. Kirtida Chandarana for the Appellant. Aspi Chinoy, Mohit Arora, Ms. Pinky Patel, Mahesh Shukla, Janak Dwarakadas and Sharan Jagtiani for the Respondent. JUDGMENT 1. Admit. 2. With the consent of Counsel, the Appeal is taken up for hearing and final disposal. It has been stated before the Court that, Respondent Nos. 1 to 4 have been duly served. An Affidavit of service shall be filed within a period of one week from today. 3. The Appeal seeks to impugn the correctness of an order passed by the Company Law Board on 10-12-2008, by which, an Application filed by the Appellants for impleadment in proceedings under sections 397 and 398 of the Companies Act, 1956 was dismissed. 4. The Fifth Respondent was incorporated on 9-12-1987. On 18-4-1995, a Memorandum of Understanding (MoU) was entered into between the Appellants and Respondent Nos. 6 to 16, who are shareholders of the Fifth Respondent. Under the MoU, the Appellants agreed to purchase 1200 equity shares of the Fifth Respondent held by Respondent Nos. 6 to 16, representing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up a company would unfairly prejudice the members, it is empowered to make such orders as it thinks fit with a view to bringing to an end the matters complained of. Section 398 entitles a member of a Company who complains of the affairs being conducted in a manner prejudicial to public interest or to the interest of the Company to apply for an order. The Company Law Board is empowered to pass such order as it thinks fit with a view to bringing to an end or preventing the matters complained of or apprehended. Under clause ( b ) of sub-section (1) one of the grounds on which, the Board can be moved is that a material change has taken place in the management or control of the Company, whether by an alteration in its Board of Directors, Manager or in the ownership of the Company s shares, or if it has no share capital, in its membership and that by reason of such change, there should be a likelihood that the affairs of the Company will be conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the Company. These provisions elucidate the basis and foundation of a Petition filed by a member of a Company complaining of mismanagement or oppre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the nature of the reliefs that can be granted in a Petition under sections 397 and 398. Clauses ( a ) to ( g ) of section 402 are not exhaustive of the reliefs that can be granted by the Board but are only illustrative of the wide powers that are granted upon the Board with a view to ameliorating a situation of oppression and mismanagement. 11. Clause ( d ) of section 402 inter alia provides for, the termination or modification of an Agreement between the Company and one of the following persons namely, the Managing Director, Director or Manager. Clause ( e ) similarly provides for the termination or modification of an Agreement between the Company and any person not referred to in clause ( d ). The proviso to clause ( e ) however, stipulates that such relief shall not be granted except after due notice to the party which will be affected. 12. Section 405 then provides as follows : " Addition of respondents to application under section 397 or 398. If the managing director or any other director or the manager, of a company, or any other person, who has not been impleaded as a respondent to any application under section 397 or 398 applies to be added as a responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead the court to adopt such a construction. If Parliament intended to contemplate the addition of only those persons who had Agreements with the Company, there was nothing to prevent the addition of those words. The words "any other person" in section 405 are not restricted by a stipulation that such person must have an Agreement with the Company. Hence, the words "any other person" must be given their plain and natural meaning so as to include any person whose interest would be affected by an order that is sought in the application under sections 397 and 398. The Board misapplied the principle of ejusdem generis. The principle of ejusdem generis is that when particular words pertaining to a class category or genus are followed by general words, the general words are construed as limited to things of the same kind as those specified. The rule applies when ( i ) The Statute contends an enumeration of specific words; ( ii ) The subject of enumeration constitutes a class or category; ( iii ) The class or category is not exhausted by the enumeration; ( iv ) General terms follow upon the enumeration; and ( v ) there is no indication of a different legislative intent. [G.P.Singh on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the entitlement of the Appellants to the shares covered by the MoU is yet to be established and consequently, the Appellants cannot seek any benefits arising out of the shares, until that entitlement is adjudicated upon. The Board was of the view that no dispute has been raised in the Petition relating to any shareholding. 16. On behalf of the Appellants, it has been submitted that the view which has found favour with the Board overlooks the reliefs that have been sought in the Petition under sections 397 and 398. The grievance of the original Petitioners in the Petition under sections 397 and 398 is that the Company has failed to file its balance sheet and returns after April 1990 and the Petitioners have not received any notice for a Board meeting or of the Annual General Meeting. Among the reliefs that have been sought in the Petition, apart from a direction for holding a meeting of the Board of Directors, finalization of the accounts and the holding of the Annual General Meeting, is a restraint on the alienation of the immovable properties of the company. Prayer ( e ) of the Petition reads as follows : "( e )The Respondent be directed to maintain the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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