Derivative action and patent ownership claims failed where minority shareholder lacked bona fide basis and no trust over inventions was shown.

A minority shareholder may bring a derivative action only in exceptional circumstances, where the suit is bona fide for the company's benefit, the claimant comes with clean hands, and the company cannot act because wrongdoers control it; on the facts, those conditions were not met and interim restraint over the patents was refused. Patents standing in the managing director's name were also not shown to be company assets or trust property, because the employment contract did not impose a duty to invent, the pleadings did not establish creation of the inventions in the course of company duties, and the materials relied on did not bring the case within fiduciary or trust principles; the claim for interlocutory relief failed.

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Issues: (i) whether the plaintiff, as a minority shareholder, could maintain a derivative action and obtain interlocutory restraint against dealing with the patents; (ii) whether the patents claimed in the managing director's name could be treated as company assets or trust property on the basis of fiduciary duty and the pleadings regarding use of company resources.

Issue (i): whether the plaintiff, as a minority shareholder, could maintain a derivative action and obtain interlocutory restraint against dealing with the patents.

Analysis: A derivative action is an exceptional equitable remedy available only where the shareholder sues bona fide for the company's benefit, comes with clean hands, acts as a proper person, and shows that the company cannot itself act because the wrongdoers control it. The plaintiff alone pursued the action, while other minority shareholders in his family disassociated themselves and supported the defendants. The plaintiff's earlier litigation history, the undisclosed arrangement with a competitor, and the family dispute surrounding the litigation showed that the action was not brought purely for the company's benefit. The Court also held that granting the injunction would effectively determine the final relief and, on the facts, the plaintiff had not shown a proper basis for representative relief.

Conclusion: The plaintiff could not maintain the derivative action or obtain interim relief; this issue was decided against the plaintiff.

Issue (ii): whether the patents claimed in the managing director's name could be treated as company assets or trust property on the basis of fiduciary duty and the pleadings regarding use of company resources.

Analysis: The Court held that the managing director's contract did not require him to invent or carry on research as part of his employment. On the evidence, the patents were not shown to have been created in the course of a duty to invent, and the materials relied on by the plaintiff did not establish that the inventions were company property or that Section 88 of the Indian Trust Act, 1882 applied. The Court further noted that the company had been given a royalty-free licence to use the patents, while the plaintiff's case that company R&D expenditure made the patents company assets was not established at the interlocutory stage. The plaintiff's reliance on revocation and trust principles was therefore rejected.

Conclusion: The patents were not treated as company assets or trust property on the material before the Court, and the plaintiff failed on this issue.

Final Conclusion: The notice of motion was dismissed with costs because the plaintiff failed to establish both maintainability of the derivative action and a prima facie entitlement to injunctive relief.

Ratio Decidendi: A minority shareholder can maintain a derivative action only if the suit is bona fide for the company's benefit, brought by a proper person with clean hands, and supported by facts showing that the company cannot act on its own; absent those requirements, interim relief and representative enforcement will be refused.

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