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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 ..... onsent to file the Company Petition on their behalf as well (hereinafter referred to as the "Consenters"), had failed to constitute 1/10th of the total number of members of the Respondent no. 1Company as on the date of filing of the Company Petition. Liberty was granted to the Appellant to proceed on the same cause of action before the learned CLB after obtaining approval under Section 399(4) of the Act or before the Civil Court. 3. The Appellant 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 qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o know the actual number of members soon before the filing of the Company Petition, which the Appellant did not do by asking the Respondent no.1-Company, and instead filed the Company Petition relying upon Form SH-11 filed by the Respondent no.1-Company in the year 2014. The learned CLB observed that it was not the case of the Appellant's group that the Respondent no.1-Company manufactured the register. Even if it is presumed that the contention 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent no. 1-Company by seeking inspection of the record of the Respondent no. 1-Company or calling for the details thereof from the Respondent no. 1-Company. In absence of any such effort and there being no challenge to the transfer of shares recorded by the Respondent no. 1-Company, which had resulted in the increase of number of its members, the learned CLB has rightly dismissed the Company Petition as there 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant, including the Balance-Sheet and Profit and Loss Statement. The same, however, had not been supplied by the Respondent no.1-Company. 15. It is also relevant to note that before the filing of the Company Petition in question, the Appellant had earlier filed another Company Petition being CP No. 12/2015, which was, however, dismissed as withdrawn on 10.02.2015, with 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 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany Petition should be decided in detail while hearing the main Company Petition and not as a preliminary issue of an applicant challenging such maintainability. 19. This Court in Umesh Kumar Baveja & Ors. (Supra), placing reliance on the judgments of the Madras High Court in M/s. S.V.T. Spinning Mills (P) Ltd. vs. M. Palanisami (Supra) and of the Supreme 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 397 and 398 are concerned, is that given the facts and circumstances of a particular case, and having regard to the requirements of justice and equity in the background of the facts and circumstances of the case, it would be open to the Court to relax or overlook the condition imposed by section 41(2) and hold that the person bringing the action 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 learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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