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TMI Blog2021 (4) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... C.P.No. 1 of 2001 before the Company Law Board, Branch at New Delhi under Sections 397(2) and 398 of the Companies Act, 1956. The said company petition was adjudicated by the Company Law Board and the Board passed an order providing an option to the applicants/petitioners before the Board to get the shares transferred and the said option is to be exercised before 30.04.2002 by a notice to the Company, together with a Demand Draft for the amount of consideration of these shares. A further direction is issued that once notice is received by the Company along with the consideration as above, the Company will arrange for getting the transfers effected by the respondents 3 to 9 within fifteen days thereafter and register the transfers within fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 1992 and the first petitioner as well as respondents 2 & 3 were subscribers to the Memorandum of Association subscribing to 100 shares by each of them. The first petitioner and respondents 2 and 3 became directors of the Company. Sometime in December,1997, the first petitioner ceased to be a director on the ground of his absence from three consecutive meetings of the board, but subsequently he was re-inducted on the board. The Company allotted 1700 shares on 3.12.97 in favour of the respondents 3 to 6 and 400 shares on 6.1.99 to the respondents 7 to 9, as per the report dated 7.11.2001 of the Regional Director. However, the petitioner's were excluded. At this juncture, Shri Murari's oral assertions assume importance. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been utilized for the business of the Company. We propose to restore parity among three groups. Therefore, out of 2,100 shares newly allotted, the petitioner's group should be entitled to 33.33 per cent of the shares which works out to roughly 700 shares. In case the petitioners are willing to acquire these shares the respondents 3 to 9 should transfer to the petitioners these 700 shares at the consideration paid by the respondents when they were allotted shares by the Company. The option to get the shares transferred should be exercised before 30th April,2002 by a notice to the Company, together with a Demand Draft for the amount of consideration for these shares. Once, this notice is received by the Company along with the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Lord Keith in Meyer, received further and closer consideration in Ebrahimi v Westbourne Galleries Ltd (1973) AC 360 (HL) wherein Lord Wilberforce considered the scope, nature and extent of the 'just and equitable' principle as a ground for winding up a company. The business of the respondent company was a very profitable one and profits used to be distributed among the directors in the shape of fees, no dividends being declared. On being removed as a director by the votes of two other directors, the appellant petitioned for an order under Section 210. Allowing an appeal from the judgment of the Court of Appeal, it was held by the House of Lords that the words 'just and equitable' which occur in Section 222(f) of the Eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in." Finally, it was held that it was wrong to confine the application of the just and equitable clause to proved cases of malafides, because to do so would be to negative the generality of the words. As observed by the learned Law Lord in the same judgment, though in another contest: "Illustrations may be used, but general words should remain general and not to be reduced to the sum of particular instances." 7. Thus, it is a condition precedent that the petitioner, who approaches the Company Law Board, must establish that the Company was in a situation for winding up and only on those circumstances, the power under Section 397 of the Companies Act may be invoked and not otherwise. In the absence of any such circumstances, it is to be h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board in the present case. 10. The Apex Court further proceeded by holding that "if the facts fall short of the case set out for winding up on just and equitable grounds no relief can be granted to the petitioners". This being the categorical finding of the Apex Court, more specifically, with reference to Sections 397 of the Companies Act, 1956, the Company Law Board has committed an error in passing such an order of direction without resorting to the fact about the winding up of the Company or otherwise. 11. This Court is of the opinion that when the provisions of the Statute contemplate certain requirements and ingredients then such requirements are to be established by the parties who approached the Court and in the absence of any proo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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