TMI Blog1985 (11) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... o 2,50,000 equity shares of ₹ 10 each. The issued and authorised capital is ₹ 7 lakhs divided into 70,000 equity shares of ₹ 10 each. It is a spinning mill carrying on business in the manufacture of yarn. The petition was filed by the appellant herein praying for the following reliefs :- (a) to set aside the resolution alleged to have been passed at the so-called Board Meeting on 30th July, 1978, (b) to injunct permanently the first respondent from recognising and the respondents 2 to 11 or their agents from exercising or claiming any rights in respect of the allotment allegedly made on 30th July, 1978; (c) to convene the Annual General Meetings for the years 1978 to 1982 to consider the balance sheet and other routine businesses; (d) to permit the petitioner and the consenting trial shareholders who gave a requisition for the ex-ordinary general meeting to convene the meeting for the election of Managing Director; (e) to compel the second respondent and his group of share holders to sell the shares lawfully held by them to the petitioner and his group of shareholders or their nominees at a price to be fixed by this Hon'ble Court. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erally and or any other share holders or persons whom in the opinion of the said Mr. A. Brahmaraj, are necessary parties for obtaining reliefs claimed in the proposed petitions. I also do hereby authorise and empower Mr. A. Brahmaraj to take out any such application as the said Mr. A. Brahmaraj may deem fit and necessary in the above petition and to file any appeal against any order passed by the Hon'ble Court in the said petition or in the application. I further agree and undertake to confirm and ratify all acts, deeds and things done by the said Mr. A. Brahmaraj. 3. The first question for consideration in this appeal, therefore, is whether the statutory requirements prescribed under S. 399 of the Act for filing a petition under S. 397 or S. 398 are satisfied in this case. C1s. (1), (2),and (3) of that Section which alone are relevant for our purpose read as follows:- 399. (1) The following members of a company shall have the right to apply under S. 397 or 398: - (a) in the case of a company having a share capital, not less than one-hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in this (sic) provision definitely will also refer to the first part of C1.(a), so that if one member files a petition with a valid consent letter in writing from 99 other members or such number of other members so as to constitute not less than one-tenth of the total number of members, certainly, the petition would be maintainable under S. 397 or 398 of the Act. C1s.(3) also refers to an application in virtue of sub-S.(1) and it does not restrict its application to the latter part of C1.(a). In fact, it will also include C1.(b) which related to the number of members and not to the share-holding. Therefore if there are valid written consent letters for filing an application under S. 397 or 398 of the Act and the total number of such members including the petitioner satisfied the condition relating to not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, the petition would be clearly maintainable. However, in all the cases, the consent letter should be in writing as contemplated under C1.(3)of S. 399. 5. The learned Judge in the order under appeal with reference to the consent letters, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were only 23 members in the company and a petition can be filed by not less than three members. In this case, the petitioner is a member of the company. As already stated, two of his minor sons are also members holding through their father and guardian separately shares in the company. They will be considered as two separate members. Another minor by name Nagendran was holding 900 shares and the petitioner is shown as a guardian for that minor in the Share Register. Thus, three of the members who have given consent are the two minor sons of the petitioner and minor Nagendran. 6. In respect of these minors, the petitioner himself has signed the consent letters as father and guardian in respect of his of minor sons and as guardian in respect of Nagendran. The argument of the learned counsel for the appellant is that even if the consent could not be stated to be valid in respect of the other members, the consent given by the petitioner as guardian of the minors, could not be questioned as the question of consensus ad idem would not arise in such a case. The three minors represented by the guardian and the petitioner, make a total number of four members as against the total of 23 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one-tenth share of the issued share capital of the company in order to maintain the petition under S. 397 or 396 stated. ''for the present, I am excluding the other alternatives visualised under the said provision. The other alternative visualised under S. 399 (1) is filing of the petition by a member or members without reference to their share-holding. Though he made this reservation in this part, he omitted to consider this question. We are also of the view that in matters like this it is not the pleading that matters, but the factual compliance with the provisions S. 399 that is relevant. Even if the petitioner did not clearly; refer to the filing of the petition or satisfying the earlier part of S. 399 (1) (a), if factually that condition is satisfied we cannot hold that the petition is not maintainable. 8. In fact, the decision of the Supreme Court reported in Rajamundry Electric Supply Corporation Ltd. v. Nageswara Rao A.I.R. 1956 S.C. 213, related to a case of a member applying with the consent in writing of not less than one-tenth of the number of members. If the petition could not have been maintained the learned Judges of the Supreme Court would not have gon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority share-holders would not be enough unless the lack of confidence springs from oppression of a minority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder. It is in the light of these principles that we have to consider the facts in this case with reference to S. 397. There could, therefore, be no doubt that the oppression or the conduct of the affairs of the company in a manner prejudicial to the public interest has to be continuous and shall have persisted upto the date of the filing of the petition under S. 397 and/or 398 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment Trust Ltd., Re's case I.L.R. 1972 Cal. 286, the learned Chief Justice of that Court sitting alone, while dealing with a number of petitions including one under Ss. 397 and 398 of the Act made the following observations in paragraph 82 of the judgment:-- As at present advised, I would hold that Art 137 of the New Limitation Act, 1963, applies to an application under S. 397 or 398 or the Companies Act. I would, therefore, hold that events that happened prior to November, 28, 1964 will be barred by the application of Art. 137 of the Limitation Act of 1963, being more than three years before the date of the filing of this petition on November, 28, 1967, but others are within the limitation. The main contentions so far as the petition under Ss. 397 and 398 of the Act in that case were as set out in paragraphs 50 and 52 of that judgment and they related to events which were outside the grounds that could be brought under S 397 and events that happened after the filing of the petition. A whole reading of the judgment shows not only this observation relating to limitation was unnecessary and it is in the nature of obiter. In fact, the petition was filed by a liquidator a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Shanti Prasad Jain's 35 Company cases 351 case, cited supra, we are unable to share his view that Art. 137 would apply to a petition under Ss. 397 and 398 of the Act. 14. Apart from this legal position, on facts it would appear that even if there was any legal resolution as contended by the respondents, the petitioner was not aware of the same till about August, 1982, In paragraph 25 of the petition the petitioner has specifically stated thus: The so-called minutes of the Meeting Alleged to be held on 30th July, 1978 was never communicated to the petitioner in spite of' specific requisition made by the petitioner's counsel and only from the paper book filed by the respondent's counsel in or about August, 1982, he saw the alleged minutes. It may also be mentioned that the appellant was only a shareholder and not a Director and unless the resolution was communicated to him, there was no way of knowing and he cannot also be imputed with any knowledge of the same. In fact, there is no dispute that the resolution was not communicated to the petitioner. The learned Judge imputed knowledge of P.W. 1, one of the Directors of the Company to the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lemma in the smooth running of the company because of the respondent's group claiming illegal rights in the said illegal resolution. The further allegation is that the rights of the petitioner's group to choose the form of management which they considered beneficial to the company, have been deprived of and were sought to be oppressed in a manner most shocking and by reason of such oppression the affairs of the Company are in imminent danger of being: conducted prejudicially to the interests of the company and the petitioner's group and the public interest so far as it involves the future of 235 employees and their families and the loss of revenue to the Government. These allegations had not been gone into fully by the learned Judge and merely on the view that P.W. 1 is the Managing Director of the company, and therefore there is no material change in the management or control of the company. If the resolutions which are challenged are to be given effect to, certainly, the control of the company would go to the respondents' group and there could also be a material change in the management. In the circumstances, we are unable to share the view of the learned Judge th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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