Court grants relief under section 398 for share sale to resolve deadlock, appoints retired Chief Justice for valuation.

The court dismissed the petition under section 397 due to equal shareholding between the parties. However, relief was granted under section 398, directing the sale of shares to resolve the deadlock and disputes between the groups. The court appointed a retired Chief Justice to value the shares and provided detailed directions for the sale process. Additionally, a retired Judge was appointed as a director to prevent management deadlock until the shares were transferred, aiming to protect the company's interests and ensure its continued operation.

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Issues Involved:
1. Alleged oppression by the Amrit group on the Suresh group.
2. Lack of probity in the management by the Amrit group.
3. Persistent contravention of Company Law provisions by the respondents.
4. Deadlock in the management of the company.
5. Appropriate relief under sections 397, 398, and 402 of the Companies Act, 1956.

Issue-Wise Detailed Analysis:

1. Alleged oppression by the Amrit group on the Suresh group:
The petitioner alleged that the Amrit group acted to benefit itself at the cost of the Suresh group, creating a state of deadlock in the business. It was contended that there was a lack of probity in the conduct of the affairs by the Amrit group. The reliefs prayed for included the appointment of a committee of management, removal of respondent No. 2 from the board of directors, and other ancillary reliefs. However, the court noted that under section 397, the complaint of oppression must be by the minority shareholders. Since the shareholding between the two groups was equal, no group could be considered a minority. Therefore, the allegations did not attract the provisions of section 397.

2. Lack of probity in the management by the Amrit group:
The petitioner pointed out specific instances of alleged contraventions of Company Law by the respondents, including non-receipt of notices for meetings, improper reappointment of respondent No. 2 as managing director, and failure to pass or file the balance-sheet in time. The court observed that these allegations, even if true, did not constitute acts of oppression or show a lack of probity that would entitle the petitioner to relief under section 397. The court cited precedents indicating that past acts which have come to an end cannot be challenged under sections 397 or 398.

3. Persistent contravention of Company Law provisions by the respondents:
The petitioner alleged multiple violations of Company Law, including improper loan resolutions, late filing of annual returns, and non-disclosure of directors' interests. The court held that these violations, while potentially grounds for winding up the company, did not fall within the ambit of sections 397 or 398 unless they resulted in oppression of the minority shareholders. The court emphasized that illegal acts committed by the directors, unless oppressive to the minority shareholders, cannot be challenged in a petition under section 397.

4. Deadlock in the management of the company:
The court acknowledged that the equal shareholding and equal number of directors from both groups could lead to a deadlock in the company's management. The disputes between the two groups had already affected the company's business, including the suspension of bank operations and the threat of termination of the Telco dealership. The court noted that the disputes were not confined to the company but extended to other business concerns in which both groups had interests. The court found that the infighting among the directors had caused serious prejudice to the company, attracting the provisions of section 398.

5. Appropriate relief under sections 397, 398, and 402 of the Companies Act, 1956:
The court concluded that the disputes between the shareholders and the management were prejudicial to the company's interests. To bring an end to these disputes, the court directed the sale of shares by one group to the other. The court gave the first option to purchase the shares to the Amrit group, considering that respondent No. 2 had been the managing director since the company's inception and Telco had declined the petitioner's request for the transfer of the dealership. The court appointed a retired Chief Justice to value the shares and provided detailed directions for the sale process. Additionally, the court appointed a retired Judge as a director to prevent a deadlock in the company's management until the shares were transferred.

Conclusion:
The court dismissed the petition under section 397 but granted relief under section 398, directing the sale of shares to resolve the deadlock and disputes between the two groups. The court's decision aimed to protect the company's interests and ensure its continued operation.

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