TaxTMI 
TaxTMI 
2017 (6) TMI 693
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....3.29% i.e. 40,000 shares and the respondent(s) hold 36.71% i.e. 23,23,200 of and in the Company. The total issued, subscribed and paid-up share capital of the Company is Rs. 6,32,000 comprising of 63,200 equity shares of Rs. 10/- each. There is no dispute with regard to the share holding pattern. Of late, the Company has no business except the rental income generated from one flat situated at 180, Block-G, New Alipore, Kolkata - 700 053. 2. The petitioner alleged that on enquiry he found that the Respondent Nos.2 and 3 has taken various illegal steps in respect of the Company to prejudice the petitioner. Then he started making search in the MCA Portal of the Company. On enquiry he came to know that there was illegalities in the company from the year 2011 and on inspection he found that the Annual Return and Balance sheet were signed by the Respondent No.3 as a Director, whose appointment as Director is illegal. He further alleged that there was no Board meeting held for convening the AGM for the year ended 31-03-2012 and no AGM could be held without the Board meeting as for any Board meeting, the petitioner has not received any notice. The petitioner further alleged tha....
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.... in Kolkata and his family is based in Chennai, as such, whenever he come to Kolkata he used to stay with his wife's brother at Camac Street, Kolkata which was closed to the Office. He further submitted that the petitioner's furniture and belongings were there at the flat and he further alleged that the same has been stolen by the Respondent Nos.2 and 3. The petitioner further alleged that some time on 15-06-2014, when he went to the flat he found the same is in occupation of the third parties allegedly on tenancy which made him surprise as the flat was made for the use of petitioner's occupation, whenever he would visit at Kolkata. He further alleged that the premises is let out and was not under the possession of the Company. As such, the said tenancy is illegal, null and void. 4. The petitioner alleged that there is oppression and mismanagement and the illegalities committed in respect of the affairs of the Company and the Respondent No.2 and 3 are acting for vested interest and are attempting to exclude the petitioner from all the matter concerning Respondent No. 1, Company. The petitioner also alleged that the valuable property of the company is also in th....
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....d exist for the making of a winding up order.... but in which the alternative remedy' provided by Section 210 by way of an appropriate order might well be open to the minority shareholders with a view to bringing to an end the oppressive conduct of the majority." (ii) AIR 1981 SC 1298-Para 46, para 49, para - 53. '46. Coming to the law as to the concept of oppression' Section 397 of our Companies Act follows closely the language of Section 210 of the English Companies Act of 1948. Since the decisions on Section 210 have been followed by our Court, the English decisions may be considered first. The leading case on oppression' under Section 210 is the decision of the House of Lords in Scottish Co-op. Wholesale Society Ltd. v. Meyer [1959] AC. 324. Taking the dictionary meaning of the word oppression', Viscount Simonds said at page 342 that the appellant society could justify be described as having behaved towards the minority shareholders in an oppressive' manner, that is to say, in a manner "burdensome, harsh and wrongful". The learned Law Lord adopted, as difficult of being bettered, the words of Lord President Cooper at the first hearing of the case t....
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....as oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity of fair dealing to a member in the manner of his proprietary rights as a shareholder. It is in the light of these principles that we have to consider the facts... with reference to Section 397.' At pages 734-735 of the judgment in Kalinga Tubes Ltd. (supra), Wanchoo J. has reproduced from the judgment in Meyer, the five points which were stressed in Elder. The fifth point reads thus: The power conferred on the Court to grant a remedy in an appropria....
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....13) para 46 46. CLB has in minute detail discussed with regard to all the resolutions which we have already adverted to. No proper notice was served on Appellant 1 who is a major shareholder of the Company or on Appellant 2. If the Board meeting had been convened without proper service of notice on the appellants by Respondent 2, then such Board meeting cannot be said to be valid. Mr. Nariman, however, tried to explain various meetings and their subsequent confirmation by the next Board meeting to show that once the resolution of the subsequent meeting has confirmed the resolution of earlier meetings then those minutes stand confirmed irrespective of the fact that the appellants had been served or not. We shall highlight some of the instances. We would show that how a subtle attempt was made to sow that several notices were given to the major shareholders of the company at their local addresses in India knowing fully well that both the appellants are NRIs. The outstanding feature is that Appellant 2, Dr. Binod Prasad Sinha has been shown as an NRI but notice to him was sent at the address PO., Hirapur, District. Dhanbad, Bihar and those notices have been sent with very short int....
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.... was not included in the meeting of 16-02-1996. However, Mr. Nariman tried to persuade us to show that there was some defect in drafting of minutes of the resolution and, therefore, it was not reflected in the meeting dated 16-2-1996. It does not appeal to us. Be that as it may, when such an important decision was taken in the absence of the main promoter of the Company, to oust him from the Managing Directorship and to install Sajal Dutta in his place, it is the grossest act of oppression by the Board of Directors. Sometime, after dispatching Dr. Dutta from the Managing Directorship most of the shares were cornered by the subsidiary companies of Sajal Dutta so as to acquire the management of the Company. What can be more unfortunate than this ? When a material change is brought about in the management to the detriment of the interest of the main promoter, it is squarely covered under Section 398(1)(b) of the Act. The Company which is floated by the elder brother and which has been run by the younger brother in the absence of the elder brother, the younger brother manages the whole Company and that the Managing Director is totally ousted and shares are being cornered substantially ....
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....in occupation and in possession as on the date ( i.e. on the date of filing the reply) and all the rental agreement are being signed by the Respondent No.2 and Respondent No. 3 and the rental receipts are being issued by the Respondent No. 1, Company signed by Respondent Nos.2 or 3. 9. The Respondent(s) further submitted that the petitioner and the Respondent No. 4, permanently shifted to Chennai in 2005, which fact is reflected from the balance sheet, wherein the signature of the Respondent No. 4 was last obtained. After their shifting to Chennai, they did not participate in any Board meeting or any General Meeting of the Company as it is not always feasible for them to come from Chennai to Kolkata only for this purposes. More particularly, when the Company effectively had no business and had no significant income; which fact the petitioner also admitted in his petition and since then the Company is obtaining the consent of the Respondent No. 4 over telephone in respect of the Board meetings as well as for the AGM, which signifies their presence in the Board meeting and the AGM. The respondent(s) further submitted that there were altogether 33 Board meetings held between 2006 t....
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....ess. In view of the above, the allegation made by the petitioner, with regard to oppression and mismanagement perpetrated on him as a shareholder of the Respondent No. l Company, is totally made up story and it does not make out any case of mismanagement and oppression. Hence, the same is required to be dismissed. 11. In support of their contention, the Respondent filed certain citations: Mrs. Grimolyn Kagoo v. Geesmarine Products (P.) Ltd. [2013] 34 taxmann.com 290 (CLB - Chennai) in the matter with regard to the issuance of notice, it was observed that non-issuance of notice shall not invalidate the proceeding held at the meetings of the Company, unless material substantial prejudice is suffered by the petitioner by any resolution passed at any such meeting, and in this instant case, it may have lessen the operational inconvenience but no material or any material substantial prejudice suffered by the petitioner as such. Maharashtra Power (P) Development Corpn Ltd. v. Dabhol Power Co. [2004] 52 SCL 224 (Bom.) About the reappointment of one of the Respondents was made in the interest of the Company, did not result In Company and did not result in some prejudice or de....
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....erson whom it should be given, shall not invalidate the proceeding at the meeting" as mentioned in page 50 of the CP. The Memorandum of Association and the Articles of Association are the mandate of the shareholders in the Company having the nature of quasi-partnership. They are supposed to abide by their own Memorandum of Association and the Articles of Association. The said document is also relied upon by the petitioner in his petition. The very intention to incorporate the said Clause was to waive the technicality of issuance of notice when the Company is not carrying any business. Further, when the petitioner admitted in his petition that in 2005 he shifted to Chennai as his family is based at Chennai and every now and then, it is difficult for him to come to Kolkata. Moreover, when the practice of obtaining telephonic consent was prevailing, till the filing of the case, and the petitioner never challenged all the previous 33 Board meetings as well as 8 AGMs since 2006. In view of the said fact, as also when the Respondent No.4 having not actively participated in the affair of the Company and the Company since then could not carry on any active business due to dysfunct....
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....ithin the scope of Sections 397 and 398 of the Act, mere proof of those allegations would not entitle the petitioner to get the relief sought for when these reliefs are discretionary relief and they will be granted only to persons who approach this Court in good faith and the parties who approach the Court for equitable reliefs must come with clean record. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the Court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in the dealing with the party against whom he was seeking relief. His conduct should be fair and honest. 14. Furthermore, the Respondent No. 4 is the wife of the petitioner, who never appeared and contested the case. Nor she ever alleged the respondent for non-issuance of any notice being the Director of the Company. Non-challenging of previous 33 Board meetings and 8 Annual general Meetings itself waived the right of the petitioners to make out any case albeit the appointment of the Respondent No.3, was irregular but justified in the line of the fact tha....
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.... I do not find that there is any act of oppression against the petitioner or that there is any lack of probity on the part of the Respondents. Thus, there is no scope to declare the appointment of the Respondent No.3 as invalid and/or to declare any Board meeting and the Annual General Meeting as illegal and void on the ground that it was an act of oppression. Conclusion : Relief sought for is declined observing that for around 8 years, the petitioners, being the majority shareholders and the Respondent No.4, being the Director of the Respondent No. 1, Company did not bother to enquire about holding of any Board meeting and/or Annual General Meeting. In fact, both of them exhibited their lacklustre approach towards the functioning of the Company, knowing very well that the Company has no business except the rental revenue generated from one flat owned by the Company. Both of them cannot express their ignorance that a company cannot function without having minimum quorum of the Directors to take decision with respect to letting of the Flat and maintenance as well as the incidental charges to be paid to the local authority. Moreover, the petitioner, never operated the Ban....