Corporate oppression and AGM rights remain reviewable outside rehabilitation scheme constraints under company law.

Acts of corporate management not compelled by a sick company's sanctioned rehabilitation scheme remained reviewable under sections 397 and 398 of the Companies Act, 1956, while matters reserved to the rehabilitation process stayed outside that review. Withdrawal of cheque-signing powers, a belated demand for unpaid call money with interest, and appointment of additional directors were treated as oppressive on the facts because they lacked sufficient justification in the corporate record and circumstances. The company was also required to convene annual general meetings, since that statutory obligation was independent of account adoption and could not be displaced absent a lawful bar, preserving shareholders' participation rights.

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Issues: (i) Whether the Board had jurisdiction under sections 397 and 398 of the Companies Act, 1956 to entertain complaints not directly referable to the sanctioned rehabilitation scheme of the sick company under SICA; (ii) whether withdrawal of cheque-signing powers from the petitioners' nominee, demand for unpaid call money with interest, and appointment of four additional directors amounted to oppression; (iii) whether the company could be directed to convene annual general meetings despite the pending rehabilitation-related proceedings and the absence of adopted accounts.

Issue (i): Whether the Board had jurisdiction under sections 397 and 398 of the Companies Act, 1956 to entertain complaints not directly referable to the sanctioned rehabilitation scheme of the sick company under SICA.

Analysis: The jurisdictional objection was rejected to the extent the complaints concerned matters independent of the sanctioned scheme. The Board held that oppression and mismanagement allegations may still be examined where they do not arise from or affect implementation of the rehabilitation scheme. The exclusive domain of BIFR was confined to matters connected with the sanctioned scheme, while independent grievances relating to internal corporate management could be entertained by the Board.

Conclusion: The Board had jurisdiction to examine the petition insofar as the grievances were unconnected with the sanctioned scheme.

Issue (ii): Whether withdrawal of cheque-signing powers from the petitioners' nominee, demand for unpaid call money with interest, and appointment of four additional directors amounted to oppression.

Analysis: The withdrawal of long-held cheque-signing powers was held oppressive because the stated reason in the board minutes did not justify the step and later allegations of misuse could not be used to validate the decision. The call for unpaid money was found oppressive in the circumstances because the amount had remained uncalled for since allotment, the board had earlier decided not to charge interest, and the subsequent demand with interest arose only after disputes had escalated. The appointment of four additional directors was also held unjustified in the circumstances, as the appointments were made when there was board parity, there was no demonstrated necessity for all four appointments, and the presence of a special director appointed by BIFR further reduced the need for them.

Conclusion: These acts were held to be oppressive and were interfered with to the extent indicated by the operative directions.

Issue (iii): Whether the company could be directed to convene annual general meetings despite the pending rehabilitation-related proceedings and the absence of adopted accounts.

Analysis: The Board held that holding of an annual general meeting is a mandatory statutory requirement and does not depend on prior adoption of accounts, because other statutory business, including election of directors and appointment of auditors, must also be transacted. The absence of a valid impediment after the earlier restraint order ceased and the distinction between holding the meeting and adopting accounts justified a direction to convene the meetings. The possibility that the petitioners might seek removal of the managing director did not justify denial of shareholders' statutory rights.

Conclusion: The company was directed to convene annual general meetings for the relevant years.

Final Conclusion: The petition succeeded in part: the Board granted protective and convening reliefs, preserved the petitioners' participation rights, and directed reconsideration of the call-money issue, while leaving untouched questions reserved to the rehabilitation authority.

Ratio Decidendi: Acts of corporate management that are not compelled by the rehabilitation scheme of a sick company remain amenable to scrutiny under sections 397 and 398 of the Companies Act, 1956, and mandatory statutory rights of shareholders, including the right to an annual general meeting, cannot be defeated by invoking internal management exigencies absent a lawful bar.

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