Corporate authority controls share allotments and management changes; private agreements cannot override the company's articles or law.

Corporate authority controls management changes and share allotments: a private agreement executed without board or shareholder approval cannot bind the company or create enforceable rights over its affairs. The text also notes that maintainability of a petition under sections 397 and 398 depends on satisfaction of the statutory shareholding requirement at filing, and later events such as a shareholder's death do not necessarily defeat it. Board resolutions, appointments and share issues made without lawful authority or contrary to the articles are treated as invalid and inoperative, with consequential restraint against interference and restoration of lawful management.

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Issues: (i) whether the company petition under sections 397 and 398 of the Companies Act, 1956 was maintainable in view of the objection under section 399 and the alleged defects in authorisation; (ii) whether the agreement dated 09.10.2003 could bind the company or confer rights on respondent Nos. 3 to 5; (iii) whether the board meetings, resolutions, appointment of respondent Nos. 3 to 5, and the issue and allotment of 1,13,00,000 equity shares were valid; and (iv) what consequential reliefs were warranted.

Issue (i): whether the company petition under sections 397 and 398 of the Companies Act, 1956 was maintainable in view of the objection under section 399 and the alleged defects in authorisation.

Analysis: The Tribunal found that the petitioners satisfied the statutory shareholding requirement at the time of filing and that the powers of attorney were duly executed. Subsequent developments such as death of a shareholder did not defeat maintainability. The company was a closely held company and the objection that the petition was not properly instituted was rejected.

Conclusion: The petition was held maintainable and the objection based on section 399 failed.

Issue (ii): whether the agreement dated 09.10.2003 could bind the company or confer rights on respondent Nos. 3 to 5.

Analysis: The agreement was executed only between respondent Nos. 2 and 3 without company approval or authority from the board or shareholders. The shares referred to were also pledged and could not be transferred without compliance with the company's articles and the requirements of law. A private arrangement between individuals could not bind the company or alter corporate rights.

Conclusion: The agreement was not binding on the company and did not confer enforceable rights on respondent Nos. 3 to 5.

Issue (iii): whether the board meetings, resolutions, appointment of respondent Nos. 3 to 5, and the issue and allotment of 1,13,00,000 equity shares were valid.

Analysis: The Tribunal held that the impugned board resolutions and share allotments were based on an unenforceable arrangement and were unsupported by lawful authority. Respondent Nos. 3 to 5 were found to have no subsisting authority to manage the company, and the purported issue of shares was treated as illegal. The later EGM and the civil court decrees reinforced the conclusion that respondent Nos. 3 to 5 could not continue to act as directors or manage the company.

Conclusion: The board meetings, resolutions, appointments and share allotments were declared invalid and inoperative against the company.

Issue (iv): what consequential reliefs were warranted.

Analysis: Since respondent Nos. 3 to 5 were found to have no lawful entitlement to continue in management or to rely on the impugned transactions, the Tribunal considered it appropriate to protect the company and its shareholders by restraining their interference and restoring management to the duly constituted board.

Conclusion: Respondent Nos. 3 to 5 were restrained from interfering in the affairs of the company, and costs were awarded against them.

Final Conclusion: The petition succeeded substantially, the challenged transactions and management actions were invalidated, and the company's affairs were directed to be managed by the restored lawful board.

Ratio Decidendi: A private agreement executed without corporate authority cannot bind the company or validate management changes and share allotments made on its basis; transactions affecting corporate control must conform to the Act, the articles, and shareholder approval.

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