2002 (6) TMI 438 - HC - Companies Law

CLB's Discretion Upheld, Appeal Dismissed | Proper Exercise of Powers | Merits and Evidence Consideration

The appeal was dismissed, upholding the CLB's discretion and directions. The court found that the CLB had properly exercised its powers, and the issues ... Oppression and mismanagement Issues Involved:1. Preliminary objections regarding maintainability of the company petition under sections 397 and 398 of the Companies Act, 1956.2. Directions given by the CLB to the appellant-company to file its reply on allegations made in the company petition.3. Allegations of waiver, estoppel, and acquiescence by the respondent.4. Allegations of misuse of majority power and personal aggrandizement by respondents 2 and 3.5. The right of the respondent to file a petition under section 214(2) read with section 235 of the Companies Act, 1956.Detailed Analysis:1. Preliminary Objections Regarding Maintainability:The appellant raised preliminary objections against the maintainability of the company petition under sections 397 and 398, arguing that no relief can be granted in respect of the management of subsidiary companies. The CLB directed the deletion of the names of subsidiaries and directors from the array of parties, which was contested by the respondent. The court held that the order of the CLB directing deletion was not legally sustainable, and the directions given by the CLB to the appellant to file its reply on the allegations made in respect of its dealings with the subsidiaries were within its power and jurisdiction.2. Directions to File Reply:The appellant contested the CLB's directions to file a reply on the allegations made in the company petition, including those concerning subsidiary companies. The court held that since the deletion of the names of subsidiaries and directors was not legally sustainable, the directions given by the CLB were within its power and jurisdiction, and no interference was called for in respect of that part of the order.3. Allegations of Waiver, Estoppel, and Acquiescence:The appellant argued that the company petition was not maintainable due to waiver, estoppel, or acquiescence, as the respondent had participated in various resolutions and meetings without protest. The court held that the questions of waiver, estoppel, or acquiescence involved serious questions of fact that required evidence and could not be decided as preliminary issues. The respondent had the right to explain the circumstances under which certain letters were written and resolutions were supported. The CLB was justified in rejecting the preliminary objections and deciding these issues on merits after considering the evidence.4. Allegations of Misuse of Majority Power:The respondent alleged that respondents 2 and 3 were using their majority power for personal aggrandizement, sidelining and victimizing the respondent. The court noted that the respondent had raised serious allegations of mismanagement and lack of probity, which required consideration on merits. The CLB was justified in not deciding these allegations as preliminary issues and allowing the respondent to lead evidence.5. Right to File Petition Under Section 214(2) Read with Section 235:The appellant contested the CLB's direction giving liberty to the respondent to file a separate petition under section 214(2) read with section 235. The court held that the CLB did not commit any error in recognizing the statutory right of the respondent to file such a petition, and there was no error in that part of the order.Conclusion:The appeal was dismissed, and the court upheld the CLB's discretion and directions. The court found that the CLB had exercised its powers properly and that the issues raised by the appellant required consideration on merits with evidence, rather than as preliminary issues. The connected C.M.P. No. 19597 of 2000 was also closed with no order as to costs.