TMI Blog2004 (8) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... llant-company. Subsequently, on August 7, 1990, the said first appellant-company allotted 1,470 shares to all the abovesaid three shareholders equally thereby each of them were holding 500 shares. The said Chandrasekaran sold his 500 shares to the other two shareholders equally and he resigned from the post of director of the said first appellant-company. According to the appellants, in the board meeting held on February 24, 1997, the said first appellant-company was authorised to issue 7,500 shares and on April 14, 1997, the said 7,500 shares were allotted to appellant Nos. 3 to 5 who are none other than the wife, brother and father-in-law of the second appellant, and subsequently they were made directors. 3. Similarly, the first appellant-company in L.P.A. No. 108 of 2002 was incorporated on January 13, 1992. Only ten shares each (total 30 shares) were allotted to the second appellant and one Munusamy the husband of the respondent in L.P.A. No. 109 of 2002 and Chandrasekaran. Subsequently, the said Munusamy transferred his ten shares in favour of the respondent, his wife and Mr. Chandrasekaran transferred his ten shares in favour of his wife Nalini. In the meeting held on Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant herein shall take one company each and manage its affairs independently and the same should be done by a lot and the value of the shares of both the companies has to be decided on the basis of the net worth of the companies and monetary adjustments would be made to the extent required. Aggrieved against the same, the appellants have preferred appeals in CMA Nos. 923 and 924 of 2000. The learned judge also confirmed the order passed by the Company Law Board dismissed those appeals. Hence the above Letters Patent Appeals. 6. Learned senior counsel appearing for the appellants submitted that in the board resolutions dated February 24, 1997, and March 20, 1977, the respondents attended the same and the said resolutions were carried out to allot the shares for the benefit of the company and so it cannot be said as oppression. According to him, without even considering the validity of the said resolutions, the Company Law Board was not correct in holding that there is an oppressive action taken on the said resolutions. Learned senior counsel further submitted that the allotment of shares and making the shareholders directors cannot be said to be a chain of events to come to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, the order passed by the Company Law Board which has been confirmed by the learned judge need not be interfered with. 9. From the abovesaid arguments, the following points arise for determination in these appeals : (1)Whether the Company Law Board is having jurisdiction to give direction as it has been given under the order impugned? (2)Whether any chain of events is available to hold that the resolutions passed by the appellants are oppressive in nature? (3)Whether the Company Law Board is justified in holding that the acts of oppression and mismanagement have been established without even considering the resolutions passed by the appellant-companies regarding the acts referred to ? 10. The Company Law Board held that the allotment of shares by the appellant-companies on April 14, 1997, induction of additional directors on May 1, 1998, and removal of the respondents as directors on May 2, 1998, in the respective company constitute a chain of acts of oppression against the concerned respondent. The Company Law Board also found that the said acts of oppression justifies winding up of the companies viz., M/s. Microparticle Engineering Private Ltd. and M/s. Mic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned senior counsel pointed out the phrase "the company" and "a company" as mentioned in the abovesaid provisions. 14. Under section 397 of the Act, the phrase "the company" is used only to emphasise that the members of that company alone can give a complaint with reference to the affairs of that company. It is nothing to do with the powers of the Company Law Board. Even under section 398(2) of the Act, if the Company Law Board on any application filed under section 398(1) of the Act is of the opinion that the affairs of the company are being conducted as mentioned under section 398(1) of the Act or that by reason of any material change mentioned in the said provisions in the management and control of the company, it is likely that the affairs of the company will be conducted as stated under section 398(1) of the Act, the Company Law Board may with a view to bring to an end or preventing the matters complained of, make such order as it thinks fit. The said provision no doubt deals with the power of the Company Law Board with respect to a particular company. Even section 402( b ) of the Act gives special power to the Company Law Board to order providing for the purchase of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineers Private Ltd., to Munusami and Munusami will have the entire shares and management in that company. 17. Without giving option to the parties with reference to a particular company to take, the Company Law Board adopted lot method. Even with respect to the value of the shares, the Company Law Board found that the share value will be computed in the name of original shareholding and monetary adjustments will be made to the extent required. Even with respect to monetary adjustments, one shareholder of the company who purchased the shares is going to pay the differential amount only to the other shareholder of that company and not to the shareholder of the other company. 18. From the above, it is clear that the Company Law Board is not permitting any third parties to purchase the shares and the direction is to sell the shares to the existing shareholder of a particular company, and the above method is also adopted only on the basis of complaint given by the shareholder of a particular company and not on the basis of complaint of third parties. Hence, it cannot be said that the Company Law Board has exceeded its jurisdiction as contemplated under the abovesaid provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whether there is any act of oppression justifying action under this section. It is, however, to be borne in mind that the oppression to the member has to be in its capacity as a member of the company and not otherwise. If a member who holds the majority of the shares in a company is reduced to the position of minority in the company by an act of the company or by its board of directors mala fide the said Act, in my opinion, must ordinarily be considered to be an act of oppression to the said member. The member who holds a majority of the shares in the company is entitled by virtue of his majority to 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 law in the matter of administration of the affairs of the company by electing his own men to the board of directors of the company and by refusing to elect person whom he does not want to be on the board by exercising his majority voting right in the matter of such election and also in other matters where the views of the majority are to prevail in accordance with the provisions of the company law and adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid allotment, as I have already held, is mala fide , improper and invalid. The said allotment, in the facts of the instant case, has an effect which is persistent and persisting as also continuous and continuing and clearly constitutes an oppression on Barooah. The said allotment which constitutes an act of oppression on Barooah establishes that the company s affair are being conducted in a manner oppressive to Barooah." (pp. 521-522) 20. In the present case, as stated already, Soundar and Senthamarai were holding equal shares in one of the companies and Soundar and Munusami were holding equal shares in another company. By a resolution dated April 14, 1997, certain shares were allotted in each company in favour of one Vasanthakumari wife of Soundar, Siddarthan, brother of Soundar, Velayutham, the father-in-law of Soundar. The Company Law Board and the learned Judge factually found that in the said meeting, either Senthamarai or Munusami was not present. The Company Law Board and the learned Judge also factually found that no notice was issued to Senthamarai or Munusami for the meeting alleged to have been held on April 14, 1997, and no such meeting was held on April 14, 1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 193 of the Act does arise only if the original minutes book is produced. In this case, no minutes book was produced. As found by the learned Judge though on March 20, 1997, there was a resolution authorising the company to allot shares, for the meeting dated April 14, 1997, in which shares were allotted to third parties no notice was given to Senthamarai or Munusamy as the case may be. Hence, we are constrained to confirm the findings given by the learned Judge with reference to the resolutions dated April 14, 1997, May 1, 1998 and May 2, 1998. 22. If such findings are confirmed, consequently, the finding regarding the act of oppression has to be confirmed. Even if it is a single act, the above-said act of the appellants creating records as if they passed the said resolutions for the purpose of allotting the shares for the abovesaid three persons and making them additional directors and removing the first respondent in the respective cases as directors clearly establishes the act of oppression, as it has been done only to send the first respondent in each case, out of the management of the said companies. 23. In view of the foregoing discussion, the act of oppressio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
