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TMI Blog2011 (3) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... if it is of the opinion, that the same would protect the interest of the company, it would not be powerless. The jurisdiction of the Company Law Board in that regard must be held to be existing having regard to the aforementioned provisions. Keeping in view the fact that there are only two shareholders and two directors and bitterness having crept in their personal relationship, the same, in our opinion, will have a direct impact on the matter of conduct of the affairs of the company.When there are two directors, non-co-operation by one of them would result in a stalemate and in that view of the matter the Company Law Board and the High Court have rightly exercised their jurisdiction. Appeal dismissed. - CO.A. (SB) No. 10 of 2005 - - - Dated:- 29-3-2011 - MANMOHAN, J. Rohan Thawani and Ms. Ashmia Sehgal for the Appellant. Virender Ganda and Amarjit Singh for the Respondent. JUDGMENT Manmohan, J. The present appeal has been filed challenging the orders dated March 15, 2004 (Capt. Manmohan Singh Kohli v. Venture India Properties (P.) Ltd. [2005] 53 SCL 457 (CLB-N Delhi) and October 4, 2004, passed by the Company Law Board. While by the first order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s power to either grant relief which had not been prayed for or to direct one of the parties unwillingly to enter into a contract for purchase of shares, I am of the opinion that the power of the Company Law Board is of extremely wide amplitude. Sections 397, 398 and 402 of the Companies Act, 1956 (in short "the Act") are reproduced hereinbelow : "397. Application to Tribunal for relief in cases of oppression. (1) Any members of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Tribunal 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 Tribunal is of opinion (a)that the company s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members ; and (b)that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector, (ii)any other director,... (v)the manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in all the circumstances of the case ; (e)the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned ; (f)the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference ; (g)any other matter for which in the opinion of the Tribunal it is just and equitable that provision should be made." 8. In fact, the Bombay High Court in Bennet Coleman Co. v. Union of India [1977] 47 Comp Cas 92 , has, after referring to the entire scheme of the Act, held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public interest or in a manner oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up with a view to bringing to an end the matters complained of . Similarly, under section 398 read with section 402 power has been conferred upon the court to make such orders as it thinks fit if it comes to the conclusion that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company or that a material change has taken place in the management or control of the company by reason of which 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, with a view to bringing to an end or preventing the matters complained of or apprehended . Both the wide nature of the power conferred on the court and the object or objects sought to be achieved by the exercise of such power are clearly indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have power to interfere with the normal corporate management of the company. If under section 398 read with section 402 the court is required by its order to provide for the regulation of the conduct of the company s affairs in future because of oppression or mismanagement that has occurred during the course of normal corporate management, the court must have the power to supplant the entire corporate management, or rather corporate mismanagement by resorting to non-corporate management which may take the form of appointing an administrator or a special officer or a committee of advisers, etc., who could be in charge of the affairs of the company. If the court were to have no such power the very object of the section would be defeated... But what was urged by Mr. Sen was that if while acting under section 398 read with section 402 the court thought fit to have recourse to a mode of corporate type of management, for example, if the court felt proper to have a board of directors for future management, then such corporate mode of management to be provided by the court should conform to other provisions of the Act dealing with corporate management. It is not possible to accept this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in support of the appeal, submitted : 1.The Company Law Board was not justified in issuing the impugned direction in purported exercise of its jurisdiction under section 402 of the Act directing him to purchase the shares of the respondent despite arriving at a finding of fact that no act of oppression has been committed by the appellant. 2.The condition precedent for exercise of such power being oppression on the part of a director of a company being not satisfied, the impugned judgment is wholly unsustainable... Mr. K. Parasaran, learned senior counsel, appearing for the respondents, on the other hand, would contend:... 4.The Company Law Board, in exercise of its jurisdiction under sections 397 and 398 read with section 402 of the Companies Act has the requisite jurisdiction to direct a shareholder to sell his shares to the other, although no case for winding up of the company has been made out or no actual oppression on the part of the director has been proved... Ordinarily, therefore, in a case where a case of oppression has been made a ground for the purpose of invoking the jurisdiction of the Board in terms of sections 397 and 398 of the Act, a finding of fact to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in regard to the affairs of the company. Sections 397 and 398 of the Act empowers the Company Law Board to remove oppression and mismanagement. If the consequences of refusal to exercise jurisdiction would lead to a total chaos or mismanagement of the company, would still the Company Law Board be powerless to pass appropriate orders is the question. If a literal interpretation to the provisions of section 397 or 398 is taken recourse to, may be that would be the consequence. But the jurisdiction of the Company Law Board having been couched in wide terms and as diverse reliefs can be granted by it to keep the company functioning; is it not desirable to pass an order which for all intents and purposes would be beneficial to the company itself and the majority of the members? A court of law can hardly satisfy all the litigants before it. This, however, by itself would not mean that the Company Law Board would refuse to exercise its jurisdiction, although the statute confers such a power on it." (emphasis supplied) 12. In view of the aforesaid settled legal position, the submissions advanced by learned counsel for the appellants are untenable in law. 13. Consequently, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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