Oppression and mismanagement claims failed where sale consideration, director disqualification rules, and articles supported the company's actions.

In oppression and mismanagement proceedings, allegations that company properties were sold below value failed because the registered sale deed consideration was treated as the relevant benchmark and the comparison sales were found unreliable. A challenge based on section 274(1)(g) of the Companies Act, 1956 also failed, as that provision was treated as disqualifying a person from becoming a director in another public company, not as removing existing directors where compliance records were shown. The appointment of the second respondent as director and managing director was treated as valid and, under the articles, she was competent to execute property sales for the company's real estate business. No oppression or mismanagement was established.

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Issues: (i) Whether the prime property and the Pudukkudi South Village property were sold for a lesser value than their purchase value or comparable market value; (ii) Whether the directors were disqualified under section 274(1)(g) of the Companies Act, 1956; (iii) Whether the appointment of the second respondent as director and managing director was valid and whether she was empowered to sell the company property.

Issue (i): Whether the prime property and the Pudukkudi South Village property were sold for a lesser value than their purchase value or comparable market value.

Analysis: The sale consideration recorded in the registered sale deed was treated as the relevant value for comparison. The petitioners did not substantiate the plea that the properties were sold below value, and the comparison with other lands was held to be unreliable because of differing location and survey particulars. The registered consideration was also higher in the later sale, and the allegation of undervaluation was not proved.

Conclusion: The issue was answered against the petitioners.

Issue (ii): Whether the directors were disqualified under section 274(1)(g) of the Companies Act, 1956.

Analysis: The provision was held to operate only as a disqualification for becoming a director in another public company and not as a basis to disqualify the existing directors in the company itself. Since the company had filed balance sheets and AGM-related compliance was shown on record, the petitioners could not successfully invoke the provision against the respondents.

Conclusion: The issue was answered against the petitioners.

Issue (iii): Whether the appointment of the second respondent as director and managing director was valid and whether she was empowered to sell the company property.

Analysis: The appointment of the second respondent was treated as regularised, and her appointment as managing director was held to imply appointment as a director as well. The articles empowered the managing director to act for the company, and in the absence of any restraint by the board, she was found competent to execute the sale transactions for the company's real estate business.

Conclusion: The issue was answered in favour of the respondents.

Final Conclusion: No case of oppression or mismanagement was established, and the petition failed in entirety.

Ratio Decidendi: In oppression and mismanagement proceedings, the challenge must be supported by proof of actionable misconduct, and where the registered consideration, the company's articles, and the statutory scheme do not support the alleged illegality, relief will be refused.

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