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2013 (5) TMI 548 - BOMBAY HIGH COURTAmbit and scope of the powers conferred on the Company Law Board - Company was directed to amend its Memorandum and Articles of Association so as to give Respondents proportional representation on the Board of Directors of the Company - Held that:- The powers of the CLB under Section 402 of the Companies Act, 1956 are wide in nature. However, there must be some nexus between the complaint made and the relief granted. The exercise of the powers by the CLB cannot be divorced from the case for alleged oppression made out by the Petitioner before the CLB and other existing circumstances which may necessitate such directions being issued. It is equally trite law that there must be some basis for the CLB to issue directions in proceedings under Section 397 of the Companies Act. The Appellants are correct in their submission that in the present case, the following circumstances militate against the directions issued in the impugned order as the alleged case of the Respondent as regards 'oppression' was demonstrably false and untenable, there were no other circumstances whatsoever (pleaded or otherwise) which would have necessitated the grant of the said extreme and drastic directions by the CLB and at the hearing before the CLB, all the reliefs sought in the Petition except prayer 'c' were expressly given up by the Respondents. Therefore, once the Respondents expressly gave up all prayers in the Petition except prayer 'c', it was not open to the CLB to pass the drastic and extreme directions which went far beyond the limited relief sought by the Respondents and which would have the effect of creating a deadlock in the affairs of the Company where none existed earlier. In the present case, by issuing unwarranted, drastic and extreme directions in the impugned order, the CLB has without any basis whatsoever placed the control of the Company in the hands of the minority i.e. the Respondent Group, thus enabling the Respondents to achieve indirectly a virtual veto right on all issues and the ability to paralyze the functioning of the Company. In this context, it may be reiterated that the Respondents have never participated in the management of the affairs of the Company and have at all times refused to provide personal guarantees or to pledge their shares in order to raise finances for the Company. Such a position would enable the Respondents to arm twist the Company on every issue and thereby ensure that there is a deadlock on every issue. By the impugned order, the CLB has created a situation for a potential deadlock where none existed earlier. It is once again reiterated that the directions have been passed by the CLB in a case where (I) the allegations of the Respondents as regards alleged 'oppression' are demonstrably false and incorrect; and (ii) all the prayers except prayer 'c' in the Petition were expressly given up by the Respondent. Therefore, far from being in the interest of the Company, the said directions of the CLB are extremely detrimental and prejudicial to the interest of Appellant No.1 Company and are therefore not permissible under Section 402 of the Companies Act, 1956. Respondents’ Petition is based on false and frivolous allegations and is without merit and the Petition deserves to be dismissed. The CLB has, under the garb of doing substantial justice, granted extreme directions under Section 402 which as explained hereinabove places control of the Company in the hands of the minority i.e. the Respondents Group, thus enabling the Respondents to achieve indirectly a virtual veto right on all issues and the ability to paralyze the functioning of the Company. In view thereof the Appeal is allowed and the impugned order is set aside. Respondents be directed to sell their shares to Appellant Nos. 2 to 7 at a value to be ascertained by a Valuer on the basis of the balancesheet for the year ending 31st March, 2006. M/s. V.B. Haribhakti and Company having their office at 42, Free Press House, Nariman Point, Mumbai400 021 are therefore appointed as Valuers to value the shares of the Company.
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