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TMI Blog2022 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital, or increase in the number of members is done with the sole aim of gaining control over the management of the Board/Company and to defeat the legitimate right of other shareholders, the Court can always set aside such an increase or allotment. The interpretation to be placed on section 41(2) vis-a-vis petitions filed seeking relief from oppression and mismanagement should be governed not strictly by the requirements of the sub-section, so long as in substance and effect the person complaining of acts of oppression and mismanagement has been recognised or treated as shareholder/member by the conduct of the company, and that in giving effect to the remedies against the grievance, considerations of equity and justice should be allowed to prevail. The Respondents merely produced the Register of Members before the learned CLB. It did not even file any application before the learned CLB challenging the maintainability of the Company Petition. The learned CLB placed reliance on the register of members so produced, without giving any opportunity to the Appellant to challenge the entries made therein. In fact, even a copy thereof was not supplied to the Appellant. Once i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had filed the abovementioned Company Petition before the learned CLB, inter alia, contending his locus and claiming to have satisfied the eligibility conditions to file the said Petition under Section 399 of the Act, by stating that the Appellant, along with Consenters No. 1 to 5, collectively held and represent 2.37% of the equity share capital of the Respondent no. 1-Company. It was alleged as per the filings made by the Respondent no. 1-Company with the Registrar of Companies, that there were approximately 36 shareholders in the Respondent no.1-Company and thus, the Appellant along with the five Consenters collectively constitute more than 1/10th of the total number of members of the Respondent no.1-Company and, therefore, are qualified in terms of Section 399 of the Act to institute the said Company Petition under Section 397/398 of the Act. 4. The learned counsel for the Appellant submits, and the same is also reflected from the Impugned Order dated 29.12.2015, that on the date of mentioning of the Company Petition before the learned CLB, an objection was taken by the Respondent no.1-Company that the Appellant along with the five Consenters, did not satisfy the 10% thresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the Appellant s group is that the Respondents manufactured the record to disqualify the Appellant s group for filing this Company Petition, then also, that being a fabrication, the remedy lies before the Civil Court to prove that the record is fabricated. 8. The learned counsel for the Appellant submits that the learned CLB has erred in dismissing the Company Petition filed by the Appellant merely by perusing the register of the shareholders produced by the Respondent no. 1-Company/Respondents. No opportunity to rebut the contents of the register and/or to raise the plea that the transfer of shares to increase the number of members of company was fraudulent, was provided to the Appellant by the learned CLB. Even a copy of the register of the Respondent no.1-Company was not given to the Appellant and the contents thereof were presumed by the learned CLB to be genuine enough to dismiss the Company Petition filed by the Appellant. 9. Placing reliance on the judgment of this Court in M/s DayagenPvt. Ltd. vs. Mr.Rajendra Dorian Punj Anr., 2008 (105) DRJ 29, she submits that the Company Petition could have been dismissed on a demurrer only if the claim put forward by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no dispute to be adjudicated regarding such transfer. 12. I have considered the submissions made by the learned counsels for the parties. Section 399 of the Act reads as under:- Section 399 of Companies Act, 1956 (1) The following members of a company shall have the right to apply under section 397 or 398: (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one- tenth of the total number of its members, whichever is less, or any member or members holding not less than one- tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one- fifth of the total number of its members. (2) For the purposes of sub- section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (3) Where any members of a company are entitled to make an application in virtue of sub- section (1), any one or more of them having obtained the consent in writing of the rest, may make the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h liberty to file a fresh Company Petition on the same cause of action. The learned counsel for the Appellant explains that the same was withdrawn as some lacuna was pointed out by the Respondents in the Consent Letters obtained by the Appellant from the other five shareholders for filing of the said Company Petition. The Appellant filed another Company Petition being CP No. 123/2015, which was also dismissed as withdrawn on 14.12.2015, again with liberty to file a fresh petition and to take back the original consent letters filed along with the additional affidavit of the Appellant. The learned counsel for the Appellant submits that the said Company Petition had to be withdrawn on account of a clerical error, as the Consent Letters were not filed in original along with the said Company Petition. It is thereafter that the Appellant filed the Company Petition, which has been dismissed by the Impugned Order dated 29.12.2015. Therefore, the Appellant has been pursuing this cause of action since January 2015. The Impugned Order dated 29.12.2015 records that no transfer of shares has taken place from 27.3.2015, however, does not state if any transfer of shareholding had taken place afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in World Wide Agencies Pvt. Ltd., vs. Margarat. T. Desor (1990) 1 SCC 536, held that while considering maintainability of the Petition, construction which furthers the purpose intended to be fulfilled by such petitions filed against oppression and mismanagement and would facilitate the solution of problems in the case of oppression, has to be adopted. I may only quote from the said judgment, as under: - 18. In S.V.T. Spinning Mills (P) Ltd. v. M. Palanisami, (2009) 95 SCL 112 , the Madras High Court held as under: - The applicability of sections 397 and 398 of the Companies Act is an equitable jurisdiction which is intended to protect the minority members of the company from any oppression and mismanagement at the hands of majority members. It is in that background, the Supreme Court has held that the wider meaning of the term 'member' should be given in the context of sections 397 and 398 of the Companies Act. On the facts and circumstances of the case, especially in the circumstance that the respondents filed a composite application, viz., the company petition seeking reliefs including the issuance of duplicate share certificates, I am of the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and who claims to be a member or shareholder of the company, need not be entered in the register of members in order to maintain the action. 19. It seems to me in light of the authorities cited above that the interpretation to be placed on section 41(2) vis-a-vis petitions filed seeking relief from oppression and mismanagement should be governed not strictly by the requirements of the sub-section, so long as in substance and effect the person complaining of acts of oppression and mismanagement has been recognised or treated as shareholder/member by the conduct of the company, and that in giving effect to the remedies against the grievance, considerations of equity and justice should be allowed to prevail. 20. Applying the above test to the facts of the present case, the Respondents merely produced the Register of Members before the learned CLB. It did not even file any application before the learned CLB challenging the maintainability of the Company Petition. The learned CLB placed reliance on the register of members so produced, without giving any opportunity to the Appellant to challenge the entries made therein. In fact, even a copy thereof was not supplied to the App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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