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TMI Blog2011 (3) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... tive to purchase his shares on the basis of valuation made by an independent valuer. Mr. Thawani stated that the appellants having reinstated respondent No. 1, cannot now be compelled to purchase his shares and that too, on the basis of a balance-sheet dated March 31, 1999. 3. Mr. Thawani further submitted that the Company Law Board cannot compel the appellants to purchase shares of respondent No. 1 especially when the Company Law Board had rejected the allegations of oppression made by respondent No. 1. Mr. Thawani contended that if respondent No.1 wishes to exit the company, he may find a third party purchaser, to which the appellants would transfer the shares. Mr. Thawani lastly submitted that the Company Law Board in the present proceedings had granted relief which had not even been prayed for by respondent No. 1. 4. On the other hand, Mr. Virender Ganda, learned senior counsel for respondent No. 1 submitted that the present appeal is barred by limitation of 120 days qua the order dated March 15, 2004. He further submitted that the order dated October 4, 2004, was a consent order which was passed after receiving proposals to appoint valuer from both the parties. Consequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its board of directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company ;may apply to the Tribunal for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the Tribunal is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the Tribunal may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit. 402. Powers of Tribunal on application under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred upon the court to deal with cases of oppression and mismanagement in a company falling under sections 397 and 398 of the Act while under head B similar powers have been given to the Central Government to deal with cases of oppression and mismanagement in a company but it will be clear that some limitations have been placed on the Government's powers while there are no limitations or restrictions on the court's powers to pass orders that may be required for bringing to an end the oppression or mismanagement complained of and to prevent further oppression or mismanagement in future or to see that the affairs of the company are not being conducted in a manner prejudicial to public interest. In other words, whenever the Legislature wanted to do so it has made a distinction between powers conferred on the Government (vide section 408) and powers conferred on the court (vide section 402) while dealing with similar emergent situations or extraordinary circumstances arising in the management of a company and in the case of the Government it has placed restrictions or limitations on the Government's powers but no restrictions or limitations of anything have been prescribed on the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and directions issued thereunder must be in consonance with the other provisions of the Act. There is another aspect of sections 397, 398 and 402 which also shows that no such limitation as is sought to be suggested by Mr. Sen can be read on the court's power while acting under the sections. Section 397 clearly suggests that the court must come to the conclusion that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members of the company and that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up before any order could be passed by it. In other words, instead of destroying the corporate existence of a company the court has been enabled to continue its corporate existence by passing such orders as it thinks fit in order to achieve the objective of removing the oppression to any member or members of a company or to prevent the company's affairs from being conducted in a manner prejudicial to public interest. Similarly sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith such provisions of the Act... Having regard to the above discussion, we are clearly of the view that the court had jurisdiction to reconstitute the board in the manner done in this case and such board is not violative of section 255 of the Companies Act and we are also of the further view that the learned judge had ample powers to alter the original article 95 of respondent No. 1 company in the manner done by him while acting under section 398 read with section 402 of the Act." (emphasis supplied) 9. In Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 57 SCL 476, the Supreme Court has held that section 402 of the Act provides for reliefs which may be granted without prejudice to the generality of the powers of the court under such provisions. 10. In Manish Mohan Sharma v. Ram Bahadur Thakur Ltd. [2006] 67 SCL 91 SC, the Supreme Court has held that the powers under section 402 are residuary in nature and in addition to the powers available to the Company Law Board under section 397(2) and section 398(2) which permit the Company Law Board to make such order as it thinks fit with a view to bringing an end to the matters complained of under section 397(1) and with a view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view the fact that there are only two shareholders and two directors and bitterness having crept in their personal relationship, the same, in our opinion, will have a direct impact on the matter of conduct of the affairs of the company. When there are two directors, non-co-operation by one of them would result in a stalemate and in that view of the matter the Company Law Board and the High Court have rightly exercised their jurisdiction . . . The provisions of the Act vis-a-vis the jurisdiction of the Company Law Board must be considered having regard to the complex situation(s) which may arise in the cases before it. No hard and fast rule can be laid down. There cannot be any doubt whatsoever that the acts of omission and commission on the part of a member of a company should be qua the management of the company, but it is difficult to accept the proposition that the just and equitable test, which should be held to be applicable in a case for winding up of a company, is totally outside the purview of section 397 of the Act. The function of a Company Law Board in such matters is first to see as to how the interest of the company vis-a-vis its shareholders can be safeguarded. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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