TaxTMI 
TaxTMI 
2005 (8) TMI 401
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....the company. 2. The appellants, who admittedly own less than 0.16 per cent of the shares of the company, filed an application in the Company Law Board under section 247(1A) read with section 250 of the Companies Act, inter alia praying for the following orders : "(a)The relevant facts in relation to the shares in the company particularly the ones held by the respondent Nos. 1 to 28 be enquired into; (b)An investigation be directed on such terms and on such conditions as to this Hon'ble Board may seem fit and proper for obtaining information and ascertaining the true identity of person or persons who are financially interested in the success or failure, whether real or apparent, of Birla Corporation Limited and, further, to ascertain the true identity of the person or persons who are able to control or to materially influence the policy and affairs of the company; (c)An investigation be directed to ascertain as to whether the provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 have been complied with by the persons now seeking to control or to materially influence the policy and affairs of the company." 3.....
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....r. Sarkar "determining of true persons" under section 247 of the Companies Act, 1956 requires identification of the ultimate human agencies who are financially interested in the success or failure of the company and who are able to control or influence the policy of the company. 9. Mr. Sarkar further submitted that proceedings under sections 247 and 259 of the Companies Act are fact-finding proceedings and not adversarial in nature. However, whether and to what extent authority under section 247 or 250 should be exercised in any particular case, gives rise to questions of law. 10. Mr. Sarkar submitted that the respondent-companies were all controlled by Smt. Priyamvada Birla, who has died. With the death of Smt. Priyamvada Birla, it is necessary to ascertain who is in control of the respondent Nos. 1 to 28. 11. Mr. Sarkar argued that the Company Law Board erred in law in considering it relevant that the appellants had not demonstrated any change in shareholding of the company or any change in the Board of Directors of the company. 12. Mr. Sarkar further argued that the Company Law Board had erred in law in recording, as a fact, that the estate of the said deceased was controlli....
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....old 11.20 per cent, mutual funds 7.76 per cent and foreign financial institutions 5.79 per cent which totals to 89 per cent of the total shares. 18. Mr. Jayanta Mitra submitted that the appellants have obviously been set up by members of the Birla family and their associates with the ulterior intent of preventing the respondent Nos. 1 to 28 from exercising their rights as shareholders of the company and in particular from exercising their right to vote, for it is unbelievable that a group of shareholders with a minuscule per centage of shares would get themselves involved in expensive litigation. 19. Mr. Jayanta Mitra argued that the fact that the Annexure 'P-2' to the petition before the Company Law Board is a reproduction of Anneuxre 'A' of the plaint filed by the Birlas in the Calcutta High Court, leads to the inference that the appellants were set up by the Birlas. Mr. Mitra further submitted that the spokesperson of the Birlas had issued statements to the Press stating that they were taking steps for moving the Company Law Board with regard to the company. The Advocates engaged on behalf of the Birlas were also present when interim orders were obtained from the Company Law B....
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....f Smt. Priyamvada Birla. 27. It is not necessary for this Court to delve into the question of whether the appellants in the instant case have been set up by the Birlas or any of their associates. This Court need only examine whether the appellants were competent to approach the Company Law Board under sections 247(1A) and 250 of the Companies Act, whether their application disclosed any legally sustainable reason for seeking investigation under section 247(1A) and whether the instant appeal filed by them is otherwise maintainable. 28. As rightly pointed out by Mr. Sanjib Banerjee, learned Junior Counsel appearing with Mr. Sarkar, in his reply to the submission that the appellants held a minuscule percentage of the shares of the company, there is no prequalification required for making an application under section 247 or 250 of the Companies Act. Unlike section 399 which prescribes a qualification for making an application under sections 397 and 398 of the Companies Act, there are no qualifications for initiating an application under section 247 and/or section 250 of the said Act. 29. There is also nothing in the language of section 247(1A) to warrant the construction that a pers....
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....fferent from the persons who appear to be in the control of the company, and (iv) a probe into the company's affairs is desirable in the interest of the company itself, and/or in public interest. 36. The sine qua non for passing an order for investigation by appointment of Inspectors is formation of opinion of necessity of such an investigation. There can be no doubt that the opinion might be subjective, but existence of circumstances and/or material that justify formation by the Company Law Board of prima facie opinion of the necessity of an investigation in the interest of the company and/or in public interest must be demonstrable. 37. The Company Law Board should not direct a roving fishing investigation at the behest of persons who have some ulterior intent in seeking investigation, for example, to stop the shareholders from exercising their rights as shareholders, including their right to vote as attempted in the instant case. The power to direct investigation under section 247(1A) is to be invoked bona fide and in public interest. 38. The application before the Company Law Board does not disclose the public interest which necessitated an investigation. As observed above, n....