TMI Blog2021 (4) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... judicated nor any finding was given by the Company Law Board. Thus, this Court has no hesitation in arriving a conclusion that the order passed by the Company Law Board is not in consonance with the provisions of Section 397 of the Companies Act, 1956, and further opposed to the principles laid down by the Apex Court in the case of Hanuman Prasad Bagri and Others v. Bagrees cereals Pvt. Ltd and others [ 2001 (3) TMI 931 - SUPREME COURT ]. The Apex Court in an unequivocal terms in the case of Hanuman Prasad Bagri and Others v. Bagrees cereals Pvt. Ltd and others [ 2001 (3) TMI 931 - SUPREME COURT ] held that attention is to be made only with reference to the aspect that the winding up of the Company would unfairly prejudice the members of the company who have a grievance and are the applicants before the court and 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. However, no such circumstances are raised by the parties nor the Company was considered by the Company Law Board in the present case. Appeal allowed - decided in favor of appellant. - C. M. A. No. 666 of 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his personal impediments. However, the first petitioner was re-admitted into the partnership in the year 1991 with equal shareholding, by which time, the partnership had achieved turnover in the range of ₹ 6 crores. Thereafter, the business of the partnership was taken over by the Company in the year 1992 and the first petitioner as well as respondents 2 3 were subscribers to the Memorandum of Association subscribing to 100 shares by each of them. The first petitioner and respondents 2 and 3 became directors of the Company. Sometime in December,1997, the first petitioner ceased to be a director on the ground of his absence from three consecutive meetings of the board, but subsequently he was re-inducted on the board. The Company allotted 1700 shares on 3.12.97 in favour of the respondents 3 to 6 and 400 shares on 6.1.99 to the respondents 7 to 9, as per the report dated 7.11.2001 of the Regional Director. However, the petitioner's were excluded. At this juncture, Shri Murari's oral assertions assume importance. According to him, the profits earned by the Company after meeting the expenses are going to the partnership firm, which are shared by the partners, namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be the responsibility of the Company. 5. On perusal of the above findings, this Court is of the opinion that there is no circumstances established for the purpose of winding up the Company. In the absence of any such compelling circumstances, the Company Law Board, ought not to have passed an order, more specifically, under Section 397 of the Companies Act, 1956, for transfer of shares in favour of the petitioners before the Board. 6. In this regard, the learned counsel for the appellant cited the judgment of Needle Industries (India) Ltd., and others v Needle Industries Newey (India) Holdings Ltd., and others reported in AIR 81 SC 1298, wherein, the three-Judge Bench made an observation as under: 46. In an application under S.210 of the English Companies Act, as under Section 397 of our Companies Act, before granting relief the Court has to satisfy itself that to wind up the company will unfairly prejudice the members complaining of oppression, but that otherwise the facts will justify the making of a winding up order on the ground that it is just and equitable that the company should be would up. The rule as regards the duty of utmost good faith, on which stress w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alafides, because to do so would be to negative the generality of the words. As observed by the learned Law Lord in the same judgment, though in another contest: Illustrations may be used, but general words should remain general and not to be reduced to the sum of particular instances. 7. Thus, it is a condition precedent that the petitioner, who approaches the Company Law Board, must establish that the Company was in a situation for winding up and only on those circumstances, the power under Section 397 of the Companies Act may be invoked and not otherwise. In the absence of any such circumstances, it is to be held that the Company Law Board would be committing an error in ordering transfer of shares which would affect the rights of the shareholders. 8. In yet another case of Hanuman Prasad Bagri and Others v. Bagrees cereals Pvt. Ltd and others reported in (2001) 4 SCC 420, the Apex Court, made the following observation: 3... Therefore, we have to pay our attention only to the aspect that the winding up of the Company would unfairly prejudice the members of the Company who have a grievance and are the applicants before the court and that otherwise the facts would ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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