Representative company petition can continue after original petitioners withdraw; transposition and refusal of withdrawal protect member interests.

A validly instituted representative company petition is judged by the facts existing at presentation, so later sale of shares by the original petitioners did not defeat maintainability. Because proceedings under sections 397 and 398 of the Companies Act, 1956 are representative in character, the HC held that a supporting shareholder could be transposed and brought on record under section 399(3) and the court's inherent powers under rule 9 to prevent injustice. Leave to withdraw was also refused, as the original petitioners could not terminate the proceeding as of right where another member had a subsisting interest in continuing it.

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Issues: (i) Whether a shareholder who supported the original company petition could be substituted in place of the original petitioners after they sought to withdraw, even though he could not independently satisfy the shareholding requirement under the Companies Act. (ii) Whether leave to withdraw the company petition should be refused in order to prevent prejudice to the supporting shareholder and other members.

Issue (i): Whether a shareholder who supported the original company petition could be substituted in place of the original petitioners after they sought to withdraw, even though he could not independently satisfy the shareholding requirement under the Companies Act.

Analysis: The company petition had been validly instituted with the requisite consent at the time of presentation. The later desire of the original petitioners to withdraw, after they had sold their shares, did not alter the maintainability of the petition. A petition under sections 397 and 398 of the Companies Act, 1956 is a representative proceeding, and section 399(3) permits an application to be made on behalf and for the benefit of all entitled members. The court also retained inherent power under rule 9 of the Companies (Court) Rules, 1959 to make orders necessary to secure justice. On that basis, substitution and continuation by the supporting shareholder was permissible.

Conclusion: The substitution application was allowed and L. RM. K. Narayanan was brought on record in place of the original petitioners.

Issue (ii): Whether leave to withdraw the company petition should be refused in order to prevent prejudice to the supporting shareholder and other members.

Analysis: Since the petition had already been validly presented and the supporting shareholder had shown a subsisting interest in prosecuting it, withdrawal by the original petitioners could not be permitted as of right. Rule 88(2) of the Companies (Court) Rules, 1959 required leave of the court for withdrawal, and the court was not bound to terminate representative proceedings merely because the original petitioners no longer wished to proceed. The court could instead continue to examine the matter on its merits where justice so required.

Conclusion: Leave to withdraw the company petition was refused.

Final Conclusion: The court protected the continuation of a validly instituted representative company petition by permitting transposition of the supporting shareholder and refusing withdrawal by the original petitioners.

Ratio Decidendi: The maintainability of a company petition must be judged on the facts existing at its presentation, and in a validly instituted representative proceeding the court may, under its inherent powers, permit substitution or transposition to prevent injustice notwithstanding the original petitioners' later withdrawal.

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