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2006 (6) TMI 519 - Board - Companies LawOppression Or Mismanagement - Increasing of authorized share capital and allotment of additional shares - manipulating the allotment of shares - removal of Petitioner from the Directorship - violation of the proper and legal procedure prescribed - barred by limitation - HELD THAT:- It is a well settled proposition that the provision of Sections 397 and 398 are to be invoked to get the grievances of oppression and mismanagement redressed. The petitioner has rightly invoked the provisions of these sections. If a member who holds 50% of the shares in a company is reduced to the position of minority shareholder in the company by an act of the company or by its Board of Directors malafide, the said act must ordinarily be considered to be an act of oppression to the said member. I am, therefore, of the view that the allotment of shares impugned in the company petition made for personal gains and with a view to gain advantage against the other shareholders of a closely held company was neither in compliance with the legal requirements (except the allotment on 11.12.2002 though it suffered from on illegality and no proper procedure was followed)nor ensured the fair play and probity in corporate management, resulting in the enhancement of the shareholding of the second respondent, which would constitute an act of oppression, as held in Praful M Patel v. Wonderweld Electrodes P. Ltd [2001 (9) TMI 1154 - COMPANY LAW BOARD, NEW DELHI], Akbarali A Kalvert v. Konkan Chemicals P. Ltd. [1994 (5) TMI 270 - COMPANY LAW BOARD] and M.K. Haridas v. Asal Malabar Beedi Depot P. Ltd. [2002 (2) TMI 1345 - COMPANY LAW BOARD, CHENNAI].The member who holds 50% hares in the company is entitled by virtue of his position control, manage and run the affairs of the company. This is a benefit or advantage which the member enjoys and is entitled to enjoy in accordance with the provisions of company and in the matter of administration of the affairs of the company by electing his own members to the Board of Directors of the company. The facts on record show that holding of meetings, increasing share capital, allotting additional shares and removing the petitioner as directors without following proper procedure were wholly unauthorized and invalid and hence have to be set aside. The facts of the present case are so manifestly against respondents that two opinions are not possible on the aspect of relief. Relief has to be granted in the present case to undo the advantage gained by the respondents through their manipulations and fraud. To do substantial justice between the parties, I order as follows vacating the interim order dated 17.10.2005: I. The issue of 8800 shares on 11.12.2002 is hereby sustained with the directions that 4400 shares out of the total 8800 shares issued on 11.12.2002 be transferred by Respondent No. 2 to the petitioner names -Sh. Rajesh Patil by conversion of his unsecured loans. II. The issue of 2,90,000 shares on 8.1.2003 being totally malfide, only motive being to gain control of company is hereby declared null and void and all allotment are set aside with the directions that the name of 48 persons be struck off from the register of members. III. Since I have held that the stand of the company that the petitioner and his nominees had vacated office of the director u/s 283(1)(g) cannot be sustained for the reasons given above, I declared that the petitioner and his nominees shall continue of directors of the company. Thus, I dispose of this petition. No order as to cost.
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