2004 (8) TMI 381 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Law Board to give directions.
2. Chain of events constituting oppression.
3. Validity of resolutions passed by the appellant-companies.

Detailed Analysis:

1. Jurisdiction of the Company Law Board:
The Company Law Board (CLB) has wide powers under sections 397, 398(2), and 402 of the Companies Act, 1956, to pass orders to bring an end to matters complained of. The appellants argued that the CLB should not pass a combined order for two different companies. However, the court clarified that the phrase "the company" in section 397 emphasizes that members of that specific company can complain about its affairs. The CLB's power extends to making orders for the smooth running of companies, including directing the purchase of shares by existing shareholders. The court found that the CLB's order did not permit third parties to purchase shares but directed existing shareholders to manage one company each independently. Thus, the CLB did not exceed its jurisdiction.

2. Chain of Events Constituting Oppression:
The appellants contended that the resolutions passed on April 14, 1997, May 1, 1998, and May 2, 1998, were consequential and not separate acts of oppression. The court referenced the Division Bench of the Calcutta High Court in Tea Brokers (P.) Ltd. v. Hemendra Prosad Barooah, which held that even a single act could constitute oppression if it has a continuing effect. The CLB and the learned judge found that the resolutions were part of a chain of events intended to deprive other shareholders of their rights. The court upheld these findings, confirming that the acts were oppressive.

3. Validity of Resolutions:
The CLB and the learned judge found that the resolutions dated April 14, 1997, May 1, 1998, and May 2, 1998, were invalid. The meeting on April 14, 1997, was not attended by Senthamarai or Munusami, and no notice was issued to them. Consequently, the resolutions passed in subsequent meetings were also invalid. The court noted that the appellants did not mention these resolutions in their counter before the CLB, raising them only in written arguments. The learned judge elaborated on the validity of these resolutions and found no acceptable materials warranting interference with the factual findings. The court confirmed the findings that the resolutions were not validly passed, establishing acts of oppression.

Conclusion:
The court upheld the CLB's order, confirming that the acts of oppression were established and that the CLB acted within its powers. The appeals were dismissed, affirming the judgment dated May 21, 2002.