Oppression and mismanagement relief requires proof, while binding management agreements and automatic director cessation were upheld.

Relief for oppression or mismanagement under sections 397 and 398 of the Companies Act, 1956 requires proved oppressive conduct or prejudice to the company, and the record here did not show diversion of funds, falsification of accounts, or other material particulars. A voluntarily executed five-year managing director arrangement was treated as binding, and a later resolution could not unilaterally override it. Continuous absence from board meetings attracted automatic cessation of office under section 283(1)(g). The issue of additional directors and fresh share allotment failed because the steps were supported by company needs and no mala fides or illegality was established.

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Issues: (i) Whether the company petition disclosed oppression of the petitioners or mismanagement of the company's affairs so as to warrant relief; (ii) Whether the resolution and agreement dated 8 May 1981 appointing respondent No. 1 as managing director for five years were valid and binding, and whether the later resolution dated 22 September 1981 could supersede them; (iii) Whether the petitioners ceased to be directors under section 283(1)(g) of the Companies Act, 1956 for continuous absence from board meetings; (iv) Whether the induction of additional directors and allotment of fresh shares were illegal and amounted to oppression or mismanagement.

Issue (i): Whether the company petition disclosed oppression of the petitioners or mismanagement of the company's affairs so as to warrant relief.

Analysis: Relief under sections 397 and 398 of the Companies Act, 1956 requires proof of conduct oppressive to a member or prejudicial to the interests of the company, together with facts showing that winding up on just and equitable grounds would otherwise be the proper remedy in the case of oppression, or a prejudicial material change in management in the case of mismanagement. The record did not establish any proved diversion of funds, falsification of accounts, unlawful denial of access, or established prejudice to creditors or the company. The allegations were found unsupported by material particulars, while the company had in fact reduced liabilities and continued as a running concern.

Conclusion: No case of oppression or mismanagement was made out, and relief under sections 397 and 398 was not available.

Issue (ii): Whether the resolution and agreement dated 8 May 1981 appointing respondent No. 1 as managing director for five years were valid and binding, and whether the later resolution dated 22 September 1981 could supersede them.

Analysis: The articles permitted appointment of a managing director for a period subject to contract or agreement between the directors. The resolution and the contemporaneous agreement were voluntarily executed and not shown to have been vitiated by fraud, coercion, or undue influence. On that basis, the five-year arrangement was binding on the parties. The later resolution could not, by itself, unsettle an existing binding agreement of the company unless set aside by competent authority. The contractual and corporate arrangements therefore supported respondent No. 1's continuance in management.

Conclusion: The resolution and agreement dated 8 May 1981 were valid and binding, and the later resolution dated 22 September 1981 was not enforceable against respondent No. 1.

Issue (iii): Whether the petitioners ceased to be directors under section 283(1)(g) of the Companies Act, 1956 for continuous absence from board meetings.

Analysis: Section 283(1)(g) applies where a director is absent from all meetings of the board for a continuous period of three months, and the provision applies to private companies and to permanent directors as well. The evidence, including notices sent by post and the petitioners' conduct after receiving the letter informing them that they had ceased to be directors, supported the conclusion that they had notice of the meetings and deliberately abstained from attending. Their cessation from office was therefore automatic under the statute.

Conclusion: The petitioners ceased to be directors under section 283(1)(g) of the Companies Act, 1956.

Issue (iv): Whether the induction of additional directors and allotment of fresh shares were illegal and amounted to oppression or mismanagement.

Analysis: The appointment of additional directors was made in the company's management context and the fresh issue of shares was made to augment the paid-up capital. The petitioners were offered the opportunity to subscribe but declined. No material showed that the allotment was mala fide, contrary to the articles, or unsupported by the company's needs. The challenge to these steps therefore failed to establish oppression or mismanagement.

Conclusion: The appointment of additional directors and allotment of shares were not shown to be illegal or oppressive.

Final Conclusion: The appeal failed in substance, the dismissal of the company petition was upheld, and the challenged corporate actions were sustained.

Ratio Decidendi: In a private company, a voluntarily executed and binding management arrangement cannot be displaced unilaterally, and continuous absence from board meetings attracts automatic cessation of office under section 283(1)(g); absent proved oppression or mismanagement, relief under sections 397 and 398 is not justified.

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