TMI Blog1991 (7) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be held liable, ( v )to pay the due amount of the petitioner and also pay dividend to the petitioner on his shares with interest. The company was incorporated on October 21, 1982, and has its registered office at Jaipur. As appears from the memorandum of association and articles of association of the company (annexure 1) initially the authorised share capital of the company was Rs. 5,00,000 (Rs. 5 lakhs) divided into 5,000 equity shares of Rs. 100 each. But by a special resolution passed in its extraordinary general meeting in 1983 the articles of association of the company were amended and the share capital of the company was fixed as Rs. 13,00,000 (Rs. 13 lakhs) divided into 5,000 equity shares of Rs. 100 each and 8,000 9% non-cumulative redeemable preference shares of Rs. 100 each. Again, on April 19, 1984, by resolution the share capital of the company was fixed at Rs. 15 lakhs divided into 5,000 equity shares of Rs. 100 each and 10,000 9% non-cumulative redeemable preferential shares of Rs. 100 each. The objects of the company as per its memorandum of association and articles of association are many, including the object to carry on the business of builders, contractors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directors and officers of the company are mismanaging the affairs of the company and are taking undue advantage. Therefore, the aforesaid prayers have been made. The petition is contested by the directors of the company and the case of the non-petitioner is that the petition is mala fide and wholly misconceived and has been filed with ulterior motive. It is denied that any agreement for sale was entered into on September 11, 1982, between the petitioner and Ganesh Narain Agarwal for sale of half of the portion of the petitioner's Haveli Banthia building bearing Municipal No. 2050. As a matter of fact, the property is said to have been sold by the petitioner to the company for a consideration of Rs. 5 lakhs only by registered sale deed and the payment of Rs. 1 lakh towards consideration of sale price was made through cheque. Only an agreement to sell dated November 10, 1982, is admitted wherein it was agreed to purchase the property for Rs. 5 lakhs. It is denied that any sum in excess of Rs. 5 lakhs was agreed to be paid. It is not disputed that the petitioner has been allotted redeemable preferential shares of Rs. 4 lakhs. In accordance with the amendment made in the artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue No. 6012827 drawn on the Union Bank of India, Johri Bazar Branch, Jaipur, against the said payment of Rs. 3,00,001 is concerned, according to the non-petitioner, the true and correct fact is that the petitioner agreed to sell the shares of Rs. 25,000 to Jain Sari Store, a partnership firm having Dharamchand Jain and Smt. Prem Jain as partners. The petitioner agreed to sell the said shares of Rs. 25,000 on January 15, 1986, and since the relations between the parties were cordial, a cheque referred to above was given by Jain Sari Store to the petitioner. It is denied that the aforesaid cheque was paid towards the sum of Rs. 3,00,001 which was to be paid in excess amount of Rs. 5 lakhs over and above the sale consideration entered in the sale deed. Jain Sari Stores filed a suit for recovery of an amount of Rs. 32,500 against the petitioner in the month of July, 1988. The said sum included the sum of Rs. 25,000 as principal amount and Rs. 7,500 towards interest thereon. It is also the case of the non-petitioner that the directors of the company are acting in the interests of the company as well as the shareholders as will be clear from the fact that the building plans have been got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmencement of the meeting, and ( ii ) in the case of non-cumulative preference share, either in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of an aggregate period of not less than three years comprised in the six years ending with the expiry of the financial year aforesaid. It will, therefore, be clear from a bare reading of section 87 that the holder of a preferential share only has the right to vote on the resolution placed before the company which directly affects the rights attached to his preference shares. It is not the case of the petitioner nor has any material been produced that any resolution was placed before the company which directly affects his right. Therefore, the aforesaid section could not be attracted in this case. There can be no dispute that as provided under section 166 of the Act, it is mandatory for every company in each year to hold in addition to any other meetings a general meeting as its annual general meeting and to specify the meeting as such in the notice calling it and not more than fifteen months' time shall elapse between the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e possession of half share of the property which was sold to the company by the petitioner. The petitioner is still in possession of it. The suit was filed some time in the year 1987. No rejoinder to the aforesaid reply was filed and, therefore, it can be said that the petitioner had himself filed a suit and sought injunction in respect of the same property which is said to have been sold by him. This court will not go and should not go into the question whether the agreement to sell was executed for Rs. 8 lakhs and whether the petitioner who was the owner of a half share in the property is entitled to Rs. 3 lakhs over the above sale-consideration entered into the sale deed. This is a matter which it is not for this court to examine. The only question is as to whether the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the company and only if the court is so satisfied, the court has ample power to make such an order as it thinks fit to bring to an end the matter complained of which power includes the power to remove the directors and to make suitable orders so that the affairs of the company are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such non-action results in prejudice being caused to the company, section 398 of the Act may be attracted. In the opinion of the court the expression "the affairs of the company are being conducted in a manner prejudicial to the interests of the company" in section 398(1)( a ) of the Act will take within its ambit the non-conduct of the affairs of the company which non-conduct results in prejudice being caused to the company. In the case of Gajara Bai Patny v. Patny Transport ( Pvt. ) Ltd. [1966] 36 Comp. Cas. 745 (AP), the court was dealing with a case where the directors withheld the transfer of shares in favour of the petitioners whereas some other shares were transferred in the name of managing agency of the firm. Holding that such an action was vindictive, harsh and unreasonable and amounted to oppression, the court ordered the directors to transfer the shares in the terms of the will but it refused to appoint a committee of shareholders in the place of the board of directors. The court also said that the court has power to issue directions to the directors or to make any other order looking to the situation in the interest of the company in case such a case is made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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