Oppression and mismanagement remedy survives private arbitration; invalid share transfer set aside, with limited relief on later allotments.

The statutory remedy for oppression and mismanagement was not displaced by the alleged arbitration agreement or award, because the private arrangement did not validly substitute the special jurisdiction under the Companies Act. The transfer of 14,96,000 shares was held invalid for want of reliable corporate authorisation and compliance with share-transfer requirements, so the shares were restored and respondent No. 2 was removed from the register for those shares. The later allotments of 3,50,000 and 4,00,000 shares were not wholly set aside; instead, the petitioners were given a proportionate opportunity to subscribe at the same rates, with the remaining allotments left undisturbed if not taken up.

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Issues: (i) Whether the company petition under the oppression and mismanagement jurisdiction could be defeated on the basis of the alleged arbitration agreement and award; (ii) whether the transfer of 14,96,000 shares from the first petitioner company to respondent No. 2 was valid; (iii) whether the further allotments of 3,50,000 shares and 4,00,000 shares required interference and what consequential relief should follow.

Issue (i): Whether the company petition under the oppression and mismanagement jurisdiction could be defeated on the basis of the alleged arbitration agreement and award.

Analysis: The statutory jurisdiction under sections 397, 398, 402 and 403 of the Companies Act, 1956 is a special remedial jurisdiction that cannot be ousted merely because parties have entered into an alleged arbitration arrangement. The alleged documents did not clearly define the disputes or validly substitute the statutory remedy, and the proceedings could not be treated as a binding arbitral reference for the pending company petition. The objection based on arbitration was therefore unsustainable.

Conclusion: The plea based on arbitration and the alleged award failed, and the company petition remained maintainable.

Issue (ii): Whether the transfer of 14,96,000 shares from the first petitioner company to respondent No. 2 was valid.

Analysis: The transfer was examined against the requirements of corporate authorization and proper compliance for transfer of shares. The record did not satisfactorily establish a valid board resolution of the transferor, the transferee, and the company effecting registration of transfer in the manner asserted by the respondents. The unexplained delay in payment, the doubtful supporting record, and the absence of reliable contemporaneous corporate approvals led to the conclusion that the transfer was not legally effected.

Conclusion: The transfer of 14,96,000 shares was held illegal and was set aside, with direction to restore the shares to the first petitioner company and remove respondent No. 2 from the register in respect of those shares.

Issue (iii): Whether the further allotments of 3,50,000 shares and 4,00,000 shares required interference and what consequential relief should follow.

Analysis: The allotments were challenged as dilutive and oppressive, but the Tribunal confined relief to a corrective and proportionate adjustment. The company was directed to offer the petitioners proportionate shares from the additional allotments at the same rates as the respondents, leaving the remaining allotments undisturbed if the petitioners did not subscribe within the time fixed.

Conclusion: The additional allotments were not wholly invalidated, but the petitioners were granted a proportional opportunity to subscribe, with the remaining shares continuing with the respondents if the offer was not taken up.

Final Conclusion: The petition succeeded only in part: the impugned transfer of shares was annulled, the arbitral objection was rejected, and limited corrective relief was granted in relation to the later share allotments, while the remaining allegations were declined.

Ratio Decidendi: The statutory remedy for oppression and mismanagement cannot be displaced by an alleged private arbitration arrangement, and a share transfer affecting company membership must be supported by reliable corporate authorization and compliance with the governing company law requirements.

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