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Issues: (i) whether a petition under section 397 of the Companies Act, 1956 was maintainable in relation to a banking company in view of the special scheme of the Banking Regulation Act, 1949 and the bar arising from the inability to seek winding up on the just and equitable ground; (ii) whether the petition satisfied the requirement of section 399 of the Companies Act, 1956 as to the consent in writing of the requisite number of members; and (iii) whether the alleged manipulation of proxies and the conduct of the chairman and directors disclosed oppression warranting relief under sections 397 and 402 of the Companies Act, 1956.
Issue (i): whether a petition under section 397 of the Companies Act, 1956 was maintainable in relation to a banking company in view of the special scheme of the Banking Regulation Act, 1949 and the bar arising from the inability to seek winding up on the just and equitable ground.
Analysis: The special statute governing banking companies was held to be a self-contained code for management and winding up in matters covered by it. The judgment emphasised the overriding control of the Reserve Bank of India, the special provisions concerning constitution and reconstitution of the board, management, lending restrictions, supervision, suspension of business, and winding up. It was held that, after the introduction of the special provisions in the Banking Regulation Act, a banking company could not be wound up on the just and equitable ground under section 433(f) of the Companies Act, 1956. Since section 397 is a remedy designed to avoid winding up on that very ground, the petition could not be invoked in the case of a banking company.
Conclusion: The petition under section 397 was held not maintainable against the banking company.
Issue (ii): whether the petition satisfied the requirement of section 399 of the Companies Act, 1956 as to the consent in writing of the requisite number of members.
Analysis: The statutory condition under section 399 was treated as a condition precedent. The document filed with the petition, though bearing signatures of several shareholders, was found not to establish that the non-petitioning members had given informed consent in writing to the filing of the petition. The evidence also showed that at least one signatory denied having given such consent, and the petitioners failed to prove that the signatures amounted to a valid written consent supporting the petition on behalf of the others.
Conclusion: The requirement of consent in writing under section 399 was not satisfied.
Issue (iii): whether the alleged manipulation of proxies and the conduct of the chairman and directors disclosed oppression warranting relief under sections 397 and 402 of the Companies Act, 1956.
Analysis: The complaint was examined as an alleged isolated act concerning the issue and collection of proxies for the annual general meeting. The judgment held that the articles governing proxies, read with the relevant company law provisions, made a vote valid notwithstanding revocation unless written notice of revocation was received before the meeting. It was further held that the 48-hour period for lodging proxies did not exclude Sunday and that the chairman's note and the secretary's endorsement did not establish oppressive conduct. At best, the incident suggested a single occurrence or a matter of procedural misunderstanding, not a continuing course of oppression up to the date of the petition, which is essential for relief under section 397.
Conclusion: No oppression was proved and no relief under sections 397 and 402 was warranted.
Final Conclusion: The company petition failed on maintainability as well as on merits, and the challenge to the alleged oppressive conduct and proxy arrangements was rejected.
Ratio Decidendi: A petition for oppression and mismanagement under section 397 of the Companies Act, 1956 is not maintainable against a banking company where the special regime of the Banking Regulation Act, 1949 excludes winding up on the just and equitable ground, and, in any event, relief under section 397 requires proof of a continuing course of oppression and compliance with the statutory consent requirement under section 399.
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