1992 (7) TMI 276 - HC - Companies Law

Court dismisses petitioners' application under Companies Act due to share qualifications, invalid consent, and directors' exceeding powers.

The court dismissed the petitioners' application under sections 397 and 398 of the Companies Act, 1956, as they lacked the necessary share qualifications. ... Oppression and mismanagement Issues: Share qualifications of petitioners, Validity of consent for filing the main petition, Authority of directors to rectify share registerIn this case, the main issue revolved around the share qualifications of the petitioners initiating proceedings under sections 397 and 398 of the Companies Act, 1956. The respondents argued that the petitioners lacked the necessary share qualifications as the company had rectified the registration of shares transferred to respondents, removing them as shareholders due to improper transfer deed stamps. The directors unilaterally took this action without following the procedure under section 155 of the Companies Act, prompting a legal challenge by the petitioners regarding the authority of the directors to alter the share register without court intervention.The second issue pertained to the validity of the consent obtained from shareholders supporting the main petition. The petitioners contended that certain shareholders had signed blank documents without understanding the purpose, while the respondents argued that the shareholders had been informed of the petition's content and had given their consent after due consideration. The court referred to previous judgments emphasizing that valid consent must involve a clear understanding of the petition's allegations, relief sought, and grounds presented, highlighting the importance of informed consent in such matters.Regarding the authority of the directors to rectify the share register, the petitioners argued that the directors acted beyond their powers by unilaterally deleting names from the register without following the prescribed legal procedure. They cited legal precedents emphasizing that any alteration to the register should be done through a court application rather than by the company's internal decision-making process. The court referred to relevant case law to support the argument that the validity of a petition should be judged based on the facts at the time of its presentation, and subsequent events like withdrawal of consent should not impact the petition's maintainability.Ultimately, the court held that the petitioners were not entitled to the relief sought, leading to the dismissal of the application. The judgment underscored that costs would be determined as costs in the cause, concluding the legal proceedings in this matter.