2009 (2) TMI 899 - Board - Companies Law

Petitioner's Allegations Dismissed, Company Actions Justified

The court found that the petitioner failed to establish allegations of oppression and mismanagement. The appointment of the fourth respondent, increase in ... - Issues Involved:1. Alleged oppression by the second respondent.2. Appointment of the fourth respondent as an additional director.3. Increase in authorized share capital and issuance of rights shares.4. Shifting of registered office without proper procedure.Issue-wise Detailed Analysis:1. Alleged Oppression by the Second Respondent:The petitioner alleged that the second respondent acted oppressively by excluding her from the management and decision-making processes, contrary to the quasi-partnership understanding that she would hold 50% shares without further financial contribution. The petitioner claimed that the second respondent breached this understanding by offering rights shares, knowing she could not afford them, thus diluting her shareholding.2. Appointment of the Fourth Respondent as an Additional Director:The petitioner contested the appointment of the fourth respondent, alleging it was fabricated and violated the company's articles of association. She argued that the appointment disturbed the board's equality and was done without her consent. The respondents countered that the fourth respondent was appointed as a nominee of the third respondent, which had provided substantial funds to the company. Evidence showed that the petitioner had attended several board meetings with the fourth respondent, indicating her knowledge and implicit consent.3. Increase in Authorized Share Capital and Issuance of Rights Shares:The petitioner challenged the validity of the extraordinary general meetings that increased the authorized share capital and issued rights shares, claiming she did not receive proper notice. The respondents provided courier receipts and acknowledgments signed by the petitioner's employee, proving notice was given. The court found the increase in share capital and rights issue justified due to the company's financial needs and liquidity crunch. The petitioner's failure to subscribe to the rights shares, despite being offered, negated her claim of oppression.4. Shifting of Registered Office Without Proper Procedure:The petitioner argued that the registered office was shifted without her knowledge or consent and without following the proper procedure under Section 17A of the Act. The respondents claimed the shift was done with her consent due to the illness of her husband, where the original registered office was located. The court noted procedural lapses but did not find the act oppressive as it was in the company's interest.Conclusion:The court found that the petitioner failed to establish her allegations of oppression and mismanagement. The appointment of the fourth respondent, the increase in authorized share capital, and the issuance of rights shares were all justified and in the company's interest. The petitioner was given the option to invest in rights shares to maintain her 50% shareholding or accept compensation for her shares and unsecured loan. The petitions were disposed of with no order as to costs.