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2004 (1) TMI 706

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..... ng the maintainability of that petition on various grounds, inter-alia including the maintainability in terms of Section 399 of the Act. Since the main objection related to the provisions of Section 399, an order dated 27.1.2003 was passed by this Board indicating that since Section 399 of the Act stipulate that members holding not less than one tenth of the total issued capital of the company alone can file a petition under Section 397/398, petitioners holding only 8.52% shares in the total issued capital, have no locus-standi to file the petition and as such the petition was dismissed as non maintainable. 3. Having failed to pursue their company petition No. 26/2002 under Section 397/398 of the Companies Act, 1956, the petitioners have now filed CP No. 46/2003 alleging oppression and mismanagement. The petitioners prayed for the affairs of the respondent company to be investigated by an inspector and to direct ceasing and taking into custody all books and records of the company to prevent them being destroyed, altered etc. 4. The respondents have filed CA No. 142 of 2003 against the present CP No. 46/2003 challenging the maintainability of the petition. The original respond .....

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..... espondent that the petitioner has disposed of substantial number of shares and currently the petitioner is holding approximately 6.67% of the total voting power of the respondent company. The respondents have further submitted that Section 235(2) read with Section 2(48) and Section 87(2)(a), (b) and (c) of the Companies Act, 1956 are in support of their submissions to dismiss the petition. The respondents also submit that as the petitioner have failed to qualify the requirements under Section 235(2), they have no locus-standi to file a petition before this Board under Section 237(b) of the Companies Act, 1956. 6. The learned counsel for respondent submitted during the arguments that it is an established principal of law that anything which cannot be done directly cannot be done indirectly. The power under Section 237 is meant to be exercised by the Central Govt. and not by its shareholder. According to the learned counsel for respondent any aggrieved shareholder cannot directly file a petition before this Board and have to approach the Central Govt. instead. The Central Govt. may approach the Company Law Board for opinion but is not bound by such opinion. The respondent therefor .....

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..... rongful act of which the company cannot take advantage. The learned counsel for petitioner was of the view that the present petition has been filed under Section 235(2) and the same would be maintainable under Section 237(b) also. 9. The petitioners have also, denied that the present petition is not maintainable as the same is barred by the principles of rest-judicata as the previous petition along with interlocutory application made therein was dismissed on the ground that the petition was not maintainable due to lack of qualification under Section 399 of the Companies Act, and not on merit of the case. 10. The petitioners also submit that the power to investigate the affairs of the company can be exercised at the instance of petitioner shareholder under the provisions of 235(2) and this Board has the power to initiate suo-moto investigation under Section 237(3) of the Act. The petitioner stated that the present application of the respondent is motivated with the purpose of avoiding investigation under Section 235 and 237(b) of the Act. 11. The learned counsel for petitioner relied on the following judgments:- I. Deodatt Purshottam Patel v. Alembic Glass Industries Ltd .....

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..... n some way affected. I think that even in the interpretation of Section 237 this basic limitation should be treated as implicit and the section should not be given an interpretation which would make it possible for persons to start litigation in respect of what does not concern them. The section should be so interpreted as to enable relief to be obtained only by some person whose rights have been affected by the manner in which the affairs of the company have been conducted or accounts maintained and has, therefore, a grievance in the eye of law for which he seeks relief from the court. There is ample scope for the invocation of Section 237 by persons whose rights are infringed or affected and whose interests need to be protected or safeguarded by an investigation - a creditor who is unable to move the Central Govt. under Section 235; member or members who, though, aggrieved, are unwilling to move the Central Govt. or unable to fulfil the requirements of Section 236 and hence unable to move the Central Govt.; members who approach the Central Govt. under Sections 235 and 237(b) and are aggrieved by the rejection of their applications; a company which wants an investigation but is un .....

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..... on to defraud creditors, members or any other persons or oppressive to members; II. persons connected with the management are guilty of fraud, misfeasance or misconduct; and III. members have not been given all relevant information. 13. The learned counsel for the respondent was of the view that the judgments cited by the petitioner in this case are not relevant and the decision of the Company Law Board in the case of Smt. Chandra Prabha and Anr. v. Hotel Sweta Pvt. Ltd and Ors. is not a correct law in view of the scheme of the Companies Act, 1956. 14. I have gone through the pleadings and heard learned counsel for both the parties and it is observed that the petitioner has not fulfilled the conditions laid down for filing petitions under Section 235 as the present petition under Section 235 has not been filed by 200 members or from members holding not less than one tenth of the total voting power. Accordingly, the company petition No. 46/2003 is not maintainable under Section 235(2) and the same is dismissed being not maintainable. 15. However, in the same company petition No. 46/2003, the petitioner has claimed relief under Section 237 (b) for an order of investigati .....

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..... dustries Ltd if the person providing information has a stake or is an interested party in the company 17. Accordingly, the application of respondent is partly allowed in as much as the petition is not maintainable under Section 235 of Companies Act, 1956. However, the company petition No. 46/2003 is maintainable under Section 237(b) of the Companies Act, 1956 as information being provided by the interested party to the CLB. The action to be taken on the petition is the prerogative of CLB after going through the allegations of the informant. The CLB is free to take assistance of any interested party to form an opinion as to whether the investigation in the affairs of the company as suggested, by informant is necessary or not. 18. I direct that the present petition be treated as filed under Section 237(b). The respondents are directed to file their reply to CP No. 46/2003 within a period of four weeks and rejoinder, if any to be filed by the petitioner within two weeks thereafter. The case be listed for further hearing on 14.4.2004. With above directions, the company Application No. 142/03 stands disposed off. 19. There is no order as to cost. - - TaxTMI - TMITax - Corp .....

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