1991 (7) TMI 287 - HC - Companies Law

Petition dismissed due to lack of merit in claims of mismanagement and non-payment of dues.

The court dismissed the petition, finding no merit in the petitioner's claims regarding mismanagement, non-payment of dues, and improper conduct of ... Oppression and mismanagement – Right to apply under sections 397 and 398 Issues Involved:1. Appointment and removal of directors.2. Validity of meetings and decisions taken by the directors.3. Payment of due amount and dividends to the petitioner.4. Conduct of the company's affairs and alleged mismanagement.5. Petitioner's voting rights and notice of meetings.Issue-wise Detailed Analysis:1. Appointment and Removal of Directors:The petitioner sought an order for the change of management of the company and his appointment as a director, along with the removal of Shri Dharam Chand Jain and Shri Suresh Chand Jain from their posts. The court found no merit in the petitioner's claims as there was no evidence to suggest that the directors' actions were prejudicial to the interests of the company. The directors were found to be acting in the best interest of the company, and their actions were not deemed to be oppressive or unfair.2. Validity of Meetings and Decisions Taken by the Directors:The petitioner alleged that no proper meetings were held as per the provisions of the Companies Act, and he was not given notice of any meetings. The court examined the evidence, including notices of annual general meetings and the auditor's reports, and concluded that the company had been holding meetings and maintaining proper accounts as required by law. The court noted that the annual general meetings were held with due notice to the members, and the accounts were audited and maintained properly.3. Payment of Due Amount and Dividends to the Petitioner:The petitioner claimed that the company owed him Rs. 3 lakhs as part of the sale consideration for a property and that dividends on his shares had not been paid. The court found that the petitioner had not provided sufficient evidence to support his claim for the additional Rs. 3 lakhs. The company's records indicated that the property was sold for Rs. 5 lakhs, and there was no agreement for any additional payment. The court also noted that the petitioner had filed a separate suit for the recovery of this amount, indicating that the issue was already being addressed in another legal forum.4. Conduct of the Company's Affairs and Alleged Mismanagement:The petitioner accused the directors of mismanaging the company's affairs and taking undue advantage. The court found no evidence to support these allegations. The company had been maintaining proper books of account, holding annual general meetings, and acting in the best interests of the company. The court referenced the Supreme Court's decision in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., emphasizing that an isolated act contrary to law does not necessarily indicate mala fide intention or oppression. The court concluded that the directors' actions did not amount to mismanagement or conduct prejudicial to the company's interests.5. Petitioner's Voting Rights and Notice of Meetings:The petitioner argued that as a holder of 4,000 redeemable preferential shares, he had voting rights under section 87 of the Companies Act, which were not honored as he was not given notice of meetings. The court clarified that under section 87, preferential shareholders have voting rights only on resolutions directly affecting their rights. Since no such resolution was placed before the company, the petitioner's voting rights were not violated. The court also noted that the company's amended articles of association limited the voting rights of preferential shareholders, and the petitioner had not demonstrated that any resolution affecting his rights was passed without his knowledge.Conclusion:The court dismissed the petition, finding no merit in the petitioner's claims. The allegations of mismanagement, non-payment of dues, and improper conduct of meetings were not substantiated by the evidence. The court concluded that the company's affairs were being conducted in compliance with the Companies Act and in the best interests of the company and its shareholders. The petition was deemed not bona fide and was dismissed without any order as to costs.