TMI Blog1980 (1) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... from the competent authority for transferring them to others. Only 161 shares have been issued, and the other shares are now being held by Yakkob Yoosuf Sagar (son of the founder through his Indian wife), Ahammed Yoosuf Sagar (son through a Kuwait wife), K. V. Kunhammed, Mrs. Fathima, Damodaran Nambiar and the petitioner (2 shares). Ahammed Yoosuf is a Kuwaiti citizen and a non-resident. He was appointed as managing director in February, 1973. During the same month, K.V. Kunhammed (2 shares) was appointed as assistant director and he was also authorised to manage the affairs of the company and to carry out the duties and exercise the powers of the managing director. No permission was obtained from the Reserve Bank to appoint the foreign national (Ahammed Yoosuf) as managing director. K. V. Kunhammed, who is now in virtual management, is managing partner of M/s. Haji P.I, Ahammed Koya 8c Sons, a firm carrying on the same business ; and it is this firm that is now actually doing the business of the company. The premises of the firm was raided by officers of the Enforcement Directorate, in July, 1976, and they found out "that Kunhammed had got some unaccounted money in the import, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l resolution ; or ( ii )the Court, by order, declares that the affairs of the company ought to be investigated by an inspector appointed by the Central Government ; and ( b )may do so if, in the opinion of the Central Government, there are circumstances suggesting ( i )that the business of the company is being conducted with intent to defraud its creditors, members or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members, or that the company was formed for any fraudulent or unlawful purpose; ( ii )that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members ; or ( iii )that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, the managing agent, the secretaries and treasurers, or the manager, of the company." The section conceives of three situations where the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise of the court's discretion also. The discretion is certainly a judicial one and is to be exercised only when a minority acts in the interests of the company as a whole. Turning to the first point raised by the petitioner, the answer furnished by the respondent is that in February, 1973, when Ahammed Yoosuf was appointed managing director, there was no prohibition against a foreign national being so appointed. The Foreign Exchange Regulation Act, 1973, was not then in force; and the predecessor enactment of 1947 contained no such restrictions. Mr. Ramanatha Pillai is unable to dispute this position ; and it is also seen from Ex. A-1 that the proposal to appoint Ahammed Yoosuf as managing director was made by the petitioner himself at the 71st meeting of the Board held on February 14, 1973. He cannot certainly complain in 1978 about a lawful decision taken by the Board in 1973 at his own instance, and then seek an investigation on that ground. As regards non-resident equity participation, what section 29 of the FER Act, 1973, lays down is that a company with more than 40 per cent. "nonresident interest" shall not carry on in India, or establish in India a branch, office or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the petitioner, the officers of the Enforcement Directorate raided the business premises of Kunhammed Koya's firm as also the office of the respondent-company in July, 1976. A typed sheet of paper evidencing transactions to the extent of Rs. 6,75,000 was seized from Koya's office and this indicated that Koya had concealed, as unaccounted, the company's income to that extent. The amount was later included in Ex. A-3, balance-sheet for the year ending September 15, 1976 ; but the company had never received this amount. It was forced to pay income-tax for the said amount and to borrow funds for the purpose. Koya also took his commission for the profit. The petitioner signed Ex. A-3 as a director only because he was persuaded to do so by Koya and the auditors. But in cross-examination (as P.W. 1), the petitioner admits that his residence was also raided and some papers seized, including a file of the year 1972. The petitioner himself had brought down this paper from Kuwait. Copies of letters he had sent to Yakkob Yoosuf Sagar were also taken away. An exact copy of the typed sheet seized from Koya's office was found at the petitioner's residence also. The sheet disclosed disbursem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continued in the same fashion till 1977, when the system of "open general licence" was introduced, and it became less attractive. Obviously, therefore, the import business had not suffered because of Koya's induction. As for exports, this line of business had picked up only from 1973, and the maximum amount of business was done in 1974. In 1975 and 1976, the company got some expert orders, and these were executed by using the licence of Koya's firm ; the company itself had no export licence. On the export side also, therefore, the company had not suffered any difficulty because of Koya. The petitioner knew, when Koya was brought in as director with his active participation in February, 1973, that the "rival firm" was doing the same business on a large scale, at least from 1958. The respondent's case that the petitioner's present approach to this court is the result of his annoyance at the board resolutions reducing his remuneration and cancelling his power to operate bank accounts, need not be minutely examined in view of what has been stated above. It must, however, be noticed that the petitioner was a party to Exs.A-1 and A-2, resolutions of 1973, whereunder Ahammed Yoosuff was ..... 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