TMI Blog2012 (7) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... relief and give direction to the R-1 Company to give representation on the Board of the R-1 Company to the Petitioners in C.P. No.95, who of their own had agreed to hold 50% shares without asking for any representation on Board. It is settled law that directorial complaints cannot be entertained in a petition under Sections 397/398 of the Act unless it is a composite complaint and is in the case of a Company in the nature of quasi-partnership. On facts and in law the R-1 Company can in no manner be held to be a Company in the nature of a quasi-partnership, there is no equal shareholding, there is no equal representation on the Board, nor is there any oral or written understanding to that effect. In the Articles of Association and Memorandu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent 5. Until the conduct of the majority shareholders was found to be oppressive in terms of the above description, under Sections 397 and 398 of the Companies Act, 1956, the Company Law Board was not competent to invoke its jurisdiction under Section 402 of the said Act to set right, or put an end to such oppression . 3. As far as the CLB's power to direct one of the unwilling parties to enter into a contract for purchase of shares is concerned, this Court is of the opinion that the power of the CLB is of extremely wide amplitude. Section 402 of the Act is reproduced hereinbelow:- 402. Powers of [Tribunal] on application under section 397 or 398-- Without prejudice to the generality of the powers of the [Tribunal] under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a fraudulent preference; (g) any other matter for which in the opinion of the [Tribunal] it is just and equitable that provision should be made. 4. Supreme Court in Needle Industries ( India) Ltd. Ors. Vs. Needle Industries Newey (India) Holdings Ltd. Ors. AIR 1981 SC 1298 has held as under:- 172. Even though the company petition fails and the appeals succeed on the finding that the Holding Company has failed to make out a case of oppression, the court is not powerless to do substantial justice between the parties and place them, as nearly as it may, in the same position in which they would have been if the meeting of 2nd May were held in accordance with law...... (emphasis supplied) 5. In M.S.D.C. Radharamanan vs. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or has been proved. xxx xxx xxx 15. Ordinarily, therefore, in a case where a case of oppression has been made a ground for the purpose of invoking the jurisdiction of the Board in terms of Sections 397 and 398 of the Act, a finding of fact to that effect would be necessary to be arrived at. But, the jurisdiction of the Company Law Board to pass any other or further order in the interest of the company, if it is of the opinion, that the same would protect the interest of the company, it would not be powerless. The jurisdiction of the Company Law Board in that regard must be held to be existing having regard to the aforementioned provisions. 16. The deadlock in regard to the conduct of the business of the Company has been noticed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 397 and/or Section 398 thereof, an order of winding up may be passed, but as noticed hereinbefore, the Company Law Board in a winding-up application may refuse to do so, if any other remedy is available. The Company Law Board may not shut its doors only on sheer technicality even if it is found as of fact that unless the jurisdiction under Section 402 of the Act is exercised, there will be a complete mismanagement in regard to the affairs of the company. 23. Sections 397 and 398 of the Act empower the Company Law Board to remove oppression and mismanagement. If the consequences of refusal to exercise jurisdiction would lead to a total chaos or mismanagement of the company, would still the Company Law Board be powerless to pass a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- 150. No doubt, in Needle Industries case, this Court had observed that the behavior and conduct complained of must be held to be harsh and wrongful and in arriving at such a finding, the Court ought not to confine itself to a narrow legalistic view and allow technical pleas to defeat the beneficial provisions of the section, and that in certain situations the Court is not powerless to do substantial justice between the parties, the facts of this case do not merit such a course of action to be taken. Such an argument is not available to the Chatterjee Group, since the alleged breach of the agreements referred to hereinabove, was really in the nature of a breach between two members of the Company and not the Company itself. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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