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of <h1>Improper Procedure Led to Miscarriage of Justice in Shareholder Dispute</h1> <h3>Sri Ramdas Motor Transport Ltd. Versus Karedla Suryanarayana</h3> The court found that the Company Law Board (CLB) did not follow proper legal procedures in handling the case, leading to a miscarriage of justice. It held ... Oppression and mismanagement Issues Involved:1. Procedure followed by the Company Law Board (CLB) in disposing of C.P. No. 15 of 1994.2. Allegations of mismanagement in the company.3. Allegations of oppression of minority shareholders.4. Validity of the removal of petitioner No. 9 as a director.5. Non-furnishing of information to shareholders.6. Withdrawal of some petitioners from the company petition.7. Whether the will of the majority should prevail over the law.Summary:1. Procedure Followed by the CLB:The court found that the CLB did not follow proper legal procedures in handling C.P. No. 15 of 1994. The CLB failed to summon original records and relied on xerox copies of documents, which are not admissible in evidence. The court held that the CLB's procedure was arbitrary and whimsical, leading to a miscarriage of justice.2. Allegations of Mismanagement:- Closure of Parcel Offices: The court held that the minutes of the Board meeting dated 7-8-1992 were fabricated to cover up the unauthorized closure of parcel offices. The resolution dated 7-8-1992 was found to be a managerial act, not a Board decision.- Sale of Lorries: The court found that the auction slips for the sale of lorries were fabricated and the vehicles were sold at a throwaway price, leading to misappropriation of funds by respondents 2 and 3.- Payment of Hire Charges: The court held that the payment of hire charges to private lorries was a means to misappropriate company funds.- Diversion of Funds: The court found that the appointment of sole selling agents for North and South India was a make-believe process to divert funds through benami agencies.- Donation to a Non-Existing Trust: The court held that the donation of &8377; 10 lakhs to a non-existing trust was a means to divert company funds for personal benefits.- Discrepancies in Stock: The court found large-scale discrepancies in the stock of finished products, leading to misappropriation of funds.3. Allegations of Oppression:- Rights Issue: The court held that the rights issue was made with the intention to reduce the shareholding of the petitioners below 10% to preempt them from approaching the CLB.- Removal of Petitioner No. 9 as Director: The court found that the removal of petitioner No. 9 as a director was in contravention of section 284 of the Companies Act and was intended to oppress the minority shareholders.- Non-Furnishing of Information: The court held that the refusal to furnish information to the petitioners was an act of oppression.4. Validity of Removal of Petitioner No. 9 as Director:The court found that the removal of petitioner No. 9 as a director was not in compliance with the statutory provisions of section 284 of the Companies Act. The petitioner was not allowed to be heard at the meeting, and the resolution was passed in bad faith.5. Non-Furnishing of Information:The court held that the refusal to furnish information to the petitioners was intended to oppress the minority shareholders and withhold information to prove their case.6. Withdrawal of Some Petitioners from Company Petition:The court found that respondents 2 and 3 pressurized some petitioners to withdraw from the proceedings, intending to isolate petitioner No. 9 in his fight against the misdeeds of respondents 2 and 3.7. Whether the Will of the Majority Should Prevail:The court held that if the decisions taken by the Board or general body are in contravention of the laws of the country and prejudicial to public interest, the will of the majority cannot prevail over the law of the land.Conclusion:The court set aside the findings recorded by the CLB on the issues in controversy and held that the allegations of mismanagement and oppression by the petitioners were proved. The court directed the respondent-company or any one of the shareholders, including respondents 2 and 3, to purchase the shares of the minority shareholders. The court also emphasized the need for the CLB to follow proper legal procedures to maintain public trust in the institution.
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