TMI Blog2002 (9) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the Respondents group. On the basis of these allegations, various reliefs have been sought including re-instatement of the petitioner as director of the company and restraining the respondents from committing any act in breach of the partnership principles in the conduct of the affairs of the company being quasi-partnership in nature. 2. It is appropriate to narrate, in brief, the contents of the petition. This company was incorporated on 11.2.1988 as a private limited company consisting of Shri T.N. Bharatharajan, Respondent No. 2 and Shri T.N. Vishwanathan, Respondent No. 4 each holding 100 shares of ₹ 100/-each. The authorised capital of the company as on 31.3.2001 is ₹ 3,00,000/-(Rupees three lacs only) divided into 3000 (three thousand) shares of ₹ 100/- each and the paid up capital is ₹ 3,00,000/-divided into 3,000 shares of ₹ 100/-each. The petitioner is holding 170 shares of ₹ 100/-each and the rest of the shares are held by six members of the Respondents group. Presently, the company is engaged in the business of manufacture of PARA NITRO ANILINE CHEMICALS. The company had taken over the business of the erstwhile proprietary firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company or a company in the guise of a partnership, where there is an agreement, express or implied (as may be established) or the articles so provide, that the shareholders would participate in the management of the company, then exclusion/ouster of one of the shareholder/directors from the management of the company could be considered to be an act of oppression. To urge his point that the company is a family company in the guise of quasi partnership, he traced the relationship between the petitioner and the Respondents for a long period before the incorporation of the company. Respondent No. 2 and 4 are brother-in-law of the petitioner. All other members in the company are also relatives of the Respondents. The petitioner had given a loan of ₹ 17,000/-to M/s. Deogiri Chemicals, a proprietorship firm of the Respondents' group whose business was taken over by this company. The company had allotted 170 shares of ₹ 100/-each to the petitioner as against this amount only in 1989. Before being appointed as director w.e.f. 20.4.88, he was already in the employment of its flagship company of Respondents' group, Vibgyor Chemicals Ltd. at its Mumbai office. The long per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the MPCB was not satisfied with the explanation of the Respondents in this regard, it ordered for closure of the unit of the company at Balapur and cut off the water and electricity supply to the company. The company has neither given any concrete proposal for proper treatment and disposal of its effluent nor it has taken recourse to legal remedies by challenging the order of MPCB in High Court by way of writ petition. The company has become non operational because of mismanagement on the part of the Respondents and the petitioner is not responsible for the same in any manner. 7. Summing up his arguments, Shri Ajay Kumar, Authorised Representative for the petitioner submitted that the petitioner is prepared to go out of the company provided he is given suitable compensation for loss of his office as director and his shares are purchased at a fair price after proper valuation. 8. Shri M.R. Reddy, Council for the Respondents denied all contentions of the petitioner. However, he admitted that the company is a family company with shareholders being closely related. he argued strongly that removal of the petitioner from the Board of Directors is not an act of oppression as being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner relying on Atmaram Modi v. ECL Agrotech Ltd. and Ors. (1999) 4 Comp.LJ 379 (CLB) that in case of a 'family company' or a company in the guise of a partnership, where there is an agreement expressed or implied (as may be established) or the articles so provide that the shareholders would participate in the management of the company then ouster/exclusion of one of the shareholders from the management could be considered to be an act of oppression. In another case of Dipak G. Mehta v. Shree Anupar Chemicals(P) Ltd. (1999) 2 Comp.LJ 539 (CLB): (1999) 33mCLA 393 (CLB) -we held, in facts of that case in which it was established that the company as in the guise of a partnership, removal of the petitioner as director was an act of oppression. In the same way in case of Naresh Trehan v. Hymatic Agro Equipment (P) Ltd. (1999) 4 Comp.L.J. 369 (CLB) where the company being a family company wherein implied agreement relating to participation of all the shareholders in the management was established, CLB held that ouster of one of them as director was an act of oppression warranting winding up of the company on just and equitable grounds. In the present case, the claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived any notice for the said meeting nor any special notice proposing a resolution for is removal as director pursuant to Section 284 of the Act. The Respondents failed to produce any notice with proof of dispatch and minutes of the alleged meeting as evidence. Thus, the petitioner's removal as director is illegal due to noncompliance of the provisions of Companies Act, 1956 in this regard. The facts of the case show that the act of removal of the petitioner as director is unjustified and oppressive to the petitioner who has been excluded from the management of the company. 13. As the petitioner has expressed his desire to go out of the company by selling his shares at a fair value and also after getting suitable compensation for loss of his office as director, we consider it appropriate in the interest of the company and the shareholders that the company should pay suitable compensation to the petitioner for loss of his office as director and his shares are purchased by the company or the Respondents at a fair value. For this purpose the amount of compensation for loss of office and fair value of the shares should be determined. As regards the amount of compensation for l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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