Board reconstitution upheld where non-cooperation and long-standing corporate mismanagement left the arrangement as the workable remedy.

Non-cooperation by a shareholder and prolonged corporate mismanagement justified the Company Law Board's refusal to order investigation and its reconstitution of the board under section 402 of the Companies Act, 1956. The record showed failure to appear, file a counter-affidavit, assist in valuation of shares, finalise accounts, or cooperate with the administrator appointed under an earlier order, together with long delays in holding annual general meetings and finalising accounts. In these circumstances, the reconstituted board was treated as a workable arrangement and no legal infirmity was found warranting appellate interference.

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Issues: Whether the order of the Company Law Board refusing investigation and reconstituting the board of directors under section 402 of the Companies Act, 1956, suffered from any legal infirmity warranting interference in appeal.

Analysis: The appellant had not appeared before the Board or filed any counter-affidavit, had not co-operated in fixing the share value through the appointed valuer, had not helped in finalising the company accounts, and had not co-operated with the administrator appointed under an earlier order. The record also showed prolonged non-holding of annual general meetings, non-finalisation of accounts since 1987, and a management situation in which only one director was in place. In these circumstances, the Board's order reconstituting the board was treated as a workable arrangement and no legal infirmity was found in the refusal to interfere.

Conclusion: The impugned order was upheld and no interference was called for.

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