2013 (10) TMI 801 - HC - Companies Law

Court upholds Company Law Board decision on oppression & mismanagement case under Companies Act, 1956.

The High Court upheld the Company Law Board's decision in a case involving allegations of oppression and mismanagement in a company under the Companies ... Increased in authorized capital - Change in registered office - CLB has declared the action the company as illegal - Held that:- share-holding of the rival factions is not in dispute. An attempt is made by the respondents, who were in management of the company to increase their share by increasing the authorized share capital of the company and allotting the shares in their favour. When an opportunity was given to them in the proceedings to explain their conduct, except filing the statement denying all the allegations, they were not able to justify their action. On the contrary, neither did they co-operate with the Chartered Accountant appointed by the Company Law Board nor did they appear before the Board and contested the claim in spite of several opportunities being given. This conduct clearly demonstrates, who is the cause for break-down in the administration of the Company. Therefore, the Company Law Board had no option except to pass an ex parte order which is passed in accordance with law. Therefore, no case for interference is made out - If the conduct of the appellant before the Board was fair and if they had any respect to the law and to the Company Law Board and they had co-operated in conducting the proceedings, the Company Law Board could have exercised its discretion in the order - Appeal dismissed. Issues:1. Allegations of oppression and mismanagement in a company under the Companies Act, 1956.2. Relief sought by petitioners under Sections 397 & 398 of the Companies Act, 1956.3. Ex parte order passed by the Company Law Board.4. Appeal against the Company Law Board's order.Detailed Analysis:Allegations of Oppression and Mismanagement:The case involved allegations of oppression and mismanagement in a company incorporated under the Companies Act, 1956, named M/s. Krishna Hydel Power Private Limited. Disputes arose between the shareholders, leading to a petition filed under Sections 397 & 398 of the Companies Act, 1956, alleging various acts of oppression and mismanagement by certain shareholders.Relief Sought by Petitioners:The petitioners sought various reliefs, including the supercession of certain respondents and the appointment of an administrator to manage the company. They also requested the declaration of certain actions as illegal, such as resolutions passed for amending the Memorandum of Association and Articles of Association, change of registered office, and creation of charges over company properties. Additionally, the petitioners sought damages and injunctions against the respondents.Ex Parte Order by Company Law Board:After the respondents failed to cooperate and appear before the Company Law Board, an ex parte order was passed. The order declared certain actions as illegal and void, such as resolutions related to share capital increase and change of registered office. The Board also clarified the status of directors and disallowed several prayers made by the petitioners.Appeal Against Company Law Board's Order:The appeal was filed against the Company Law Board's order, challenging the decision and seeking intervention from the High Court. The appellants argued that due to the prevailing atmosphere in the company, a resolution regarding share purchase was necessary, which the Board failed to address. However, the respondents supported the impugned order, leading to the dismissal of the appeal by the High Court.In conclusion, the High Court upheld the Company Law Board's decision, emphasizing the lack of cooperation from the respondents and the failure to justify their actions. The Court found no merit in the appeal and ordered the appellants to pay costs to the respondents. All pending Interlocutory Applications were also dismissed.