Registered share transfers and membership rights cannot be undone on doubtful defects; contractual space disputes fall outside oppression jurisdiction.

A company that has already registered share transfers and long recognised the transferees as members cannot later remove their names from the register on the basis of alleged defects in the original transfer instruments, especially where the cancellation rests on doubtful photocopies and the company's own earlier conduct. Disputes over allotment of commercial space, licence cancellation and rental claims were treated as contractual matters, not membership rights, and therefore fell outside oppression and mismanagement jurisdiction. The appointment of a managing director was not oppressive where the person was already performing management functions and had been acquiesced in. As a consequence, membership and board participation were protected, while the petitioners were also given an option to have their shares purchased at fair valuation.

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Issues: (i) whether the petitioners continued to be members of the company and could not be removed from the register of members on the basis of alleged defects in the original transfer instruments; (ii) whether the dispute regarding allotment, licence and rental rights in the commercial space was a matter of membership rights or a purely contractual dispute outside the scope of sections 397 and 398; (iii) whether the appointment of the second respondent as managing director amounted to oppression; and (iv) what consequential reliefs were warranted, including protection of directorship and an option for purchase of the petitioners' shares on fair valuation.

Issue (i): whether the petitioners continued to be members of the company and could not be removed from the register of members on the basis of alleged defects in the original transfer instruments.

Analysis: The removal was based only on photocopies of transfer instruments produced with the rejoinder, which were said to be blank and unstamped. The original transfer documents were not relied upon, and the petitioners had been treated as members for more than 20 years. Once the company had registered the transfers and recognised the petitioners as members, it could not later invoke section 108 on the basis of its own alleged irregularity. The board's action in cancelling the transfers during the pendency of the petition, without dependable primary material, was found to be mala fide and oppressive. The articles also indicated that registration of transfer was conclusive evidence of board approval.

Conclusion: The petitioners were held to continue as members of the company, and the company was directed to restore their names in the register of members.

Issue (ii): whether the dispute regarding allotment, licence and rental rights in the commercial space was a matter of membership rights or a purely contractual dispute outside the scope of sections 397 and 398.

Analysis: The asserted nexus between shareholding and entitlement to specific commercial space was not established. The allocation of space differed substantially between the groups despite equal shareholding, which showed that space allotment did not flow as an incident of membership. The grievance relating to cancellation of the licence and consequential rent claims therefore concerned contractual arrangements, not oppression in the capacity of a member. Such disputes could not be enforced in a petition under sections 397 and 398 and had to be pursued before the civil court or appropriate forum.

Conclusion: The claims relating to the premises, cancellation of licence and payment of rent from the bank were held to be contractual and not maintainable in the oppression and mismanagement proceeding.

Issue (iii): whether the appointment of the second respondent as managing director amounted to oppression.

Analysis: The evidence showed that the second respondent had been performing the functions of management in any event, and the record also indicated acquiescence in his position. In these circumstances, the change in designation to managing director did not, by itself, constitute oppressive conduct or mismanagement warranting interference under sections 397 and 398.

Conclusion: The challenge to the appointment of the second respondent as managing director was rejected.

Issue (iv): what consequential reliefs were warranted, including protection of directorship and an option for purchase of the petitioners' shares on fair valuation.

Analysis: Since the petitioners were held to continue as members, their status on the board had to be protected. The court also recognised a complete breakdown of trust between the two groups in a closely held company. While an outsider purchase was not appropriate, the petitioners were given an opportunity to offer their shares to the company, which would then be obliged to purchase them on a fair valuation to be fixed by an independent valuer, if the petitioners so elected within the stipulated time.

Conclusion: The petitioners were protected in their directorship, joint operation of bank accounts was directed, and they were given an option to have their shares purchased by the company on fair valuation.

Final Conclusion: The petition succeeded only in part: the petitioners retained their membership and board participation rights, but the dispute over the commercial space remained contractual and the challenge to the managing director's appointment was not sustained.

Ratio Decidendi: A company that has already registered and long recognised share transfers cannot later cancel a member's status on a doubtful plea of defective transfer instruments, and disputes over independently contractual allotment rights do not fall within oppression and mismanagement jurisdiction unless they arise from membership rights.

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