Oppression and mismanagement petition survives threshold challenge; defective share nomination cannot override succession rights.

A petition alleging oppression and mismanagement could not be rejected at the threshold on a bare locus objection where the pleaded facts raised a substantial dispute over refusal to transmit a deceased member's majority shareholding, alleged irregular allotments, and reduction of the petitioner's holding, all matters requiring evidence. The court also held that a share nomination under the statutory scheme is effective only if made in the prescribed manner, including attestation; an -compliant nomination does not override succession rights under ordinary law. The preliminary objection failed, the nomination was invalid, and the matter was directed to proceed on merits.

---

---

Issues: (i) whether the company petition under sections 397 and 398 of the Companies Act, 1956 could be rejected at the threshold for want of maintainability under section 399, and (ii) whether the purported nomination of shares under section 109A was valid and effective to displace the testamentary claim of the deceased member's heir.

Issue (i): whether the company petition under sections 397 and 398 of the Companies Act, 1956 could be rejected at the threshold for want of maintainability under section 399.

Analysis: The pleadings disclosed a substantial challenge to the company's refusal to transmit the majority shareholding of the deceased member and to the fresh allotment of shares allegedly made in violation of the articles. The question of locus under section 399 could not be decided on a bare threshold objection because the petition, if the pleaded facts were accepted, alleged acts of oppression and reduction of shareholding to a minority. The dispute involved matters intertwined with the validity of the alleged nomination, the transmission of shares, and the legitimacy of the additional allotments, all of which required adjudication on evidence and could not be finally resolved as a pure preliminary issue.

Conclusion: The objection to maintainability under section 399 was rightly not accepted at the threshold and the petition was held capable of being heard on merits.

Issue (ii): whether the purported nomination of shares under section 109A was valid and effective to displace the testamentary claim of the deceased member's heir.

Analysis: Section 109A confers overriding effect only where the nomination is made in the prescribed manner. The prescribed form requires compliance with the statutory procedure, including attestation. On the facts, the alleged nomination was not executed in the prescribed manner and lacked the necessary attestation. Since the statutory requirements were mandatory, the nomination could not be treated as valid or as defeating the ordinary law of succession. The legal effect claimed for the nominee therefore failed.

Conclusion: The purported nomination was held invalid and ineffective to override the claim of the deceased member's legal heir.

Final Conclusion: The appeal failed, the company's preliminary objection was rejected, and the dispute was directed to proceed before the Company Law Board for decision on merits.

Ratio Decidendi: A petition alleging oppression and mismanagement cannot be rejected at the threshold where the pleaded facts disclose a substantial controversy requiring evidence, and a nomination of shares has overriding effect only when made in strict compliance with the statutory prescribed manner.

---