2009 (10) TMI 977 - Board - Companies Law

Dismissal of Company Petition for Lack of Evidence on Oppression Allegations and Civil Suit Pending

Indowind Energy Ltd. Versus ICICI Bank Ltd. and Ors.

The court dismissed the company petition as not maintainable due to the pending civil suit regarding disputed shares and the failure of the ... - Issues Involved:1. Maintainability of the company petition under Section 397 of the Companies Act, 1956.2. Non-payment of dividends and delivery of bonus shares.3. Alleged oppression and mismanagement by the applicant-company.4. Jurisdiction of the Company Law Board versus civil courts.Detailed Analysis:1. Maintainability of the Company Petition:The primary issue was whether the company petition filed under Section 397 of the Companies Act, 1956, was maintainable. The applicant argued that the petition was not maintainable because the shareholder status of the respondent/petitioner was pending adjudication in the High Court of Madras. The applicant emphasized that the respondent/petitioner failed to state in the petition that the circumstances warranted winding up the company, a necessary condition for invoking Section 397. The court referenced the decision in Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad and Maharani Lalita Rajya Lakshmi v. Indian Motor Co. (Hazaribagh) Ltd., which stressed that allegations of oppression must be substantiated with sufficient particulars and evidence.2. Non-payment of Dividends and Delivery of Bonus Shares:The respondent/petitioner sought payment of outstanding dividends and delivery of bonus shares. The applicant-company had not declared any dividends since 2004, arguing that non-declaration of dividends does not amount to oppression. The court upheld this view, referencing Jaladhar Chakraborty v. Power Tools and Appliances Co. Ltd., which held that non-declaration of dividends does not constitute mismanagement. Additionally, the court noted that the applicant-company had declared bonus shares in 2004, and if the respondent/petitioner was entitled to them, they would be received automatically, provided there was no dispute over the title to the shares.3. Alleged Oppression and Mismanagement:The respondent/petitioner alleged oppressive acts by the applicant-company, including the non-payment of dividends and withholding of bonus shares. The court noted that for a petition under Section 397 to be maintainable, it must be demonstrated that the company's affairs are conducted oppressively and that winding up the company would unfairly prejudice the petitioners. The court found that the respondent/petitioner did not adequately plead these conditions. The court cited V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd., which clarified that oppression involves conduct that is harsh, burdensome, and wrong, and that the Company Law Board has wide discretionary powers under Section 402 to remedy such oppression.4. Jurisdiction of the Company Law Board versus Civil Courts:The applicant argued that the issues raised by the respondent/petitioner were already pending before the High Court of Madras in a civil suit (C.S. No. 454 of 2008). The court agreed, referencing Raghbir Singh v. Sikri Multiplex Cinema P. Ltd., which held that the Company Law Board should not adjudicate matters where there are disputed questions of fact already pending in civil courts. The court concluded that since the title to the shares was under dispute in the High Court, the company petition was not maintainable.Conclusion:The court dismissed the company petition as not maintainable, primarily due to the pending civil suit regarding the disputed shares and the failure of the respondent/petitioner to substantiate allegations of oppression with sufficient particulars and evidence. The court emphasized that non-declaration of dividends does not amount to oppression and that the jurisdiction of the Company Law Board does not extend to matters already under adjudication in civil courts.