K. SHIVASHANKAR BHAT, J.

( 1 ) THE respondents in the Company petition are the appellants before us. The respondent herein filed the Company petition under Sections 397 and 398 of the companies Act, 1956 ('the Act' for short; the respondent before us is referred hereinafter as the 'petitioner' for the sake of convenience ). The petitioner alleged, inter alia, that he held 38 equity shares of Rs. 1,000/- each fully paid though he is entitled to hold 50 equity shares. The nominal capital of the Company is Rs. 5,00,000/- divided into 500 shares. The Company was incorporated in the year 1975 when there were only three Directors, out of whom the second respondent N. V. Rao (for short referred as 'n. V. Rao' throughout) was one of the Directors, the other two initial Directors are not in the picture now.

( 2 ) THE petitioner joined the Company by becoming its shareholder in the year 1976. According to him there was an understanding between himself and N. V. Rao that they would jointly set up a small scale industry with equal participation. However, after mutual discussion, another person B. S. N. Rao was also taken as a Director and shareholder on the suggestion of the petitioner. Since petitioner's nominee was B. S. N. Rao, N. V. Rao nominated his father -in-law, B. K. P. Rao, who was also allotted 25 shares. Thus, the petitioner, N. V. Rao, B. S. N. Rao and B. K. P. Rao were allotted 25 shares each. Subsequently, B. S. N. Rao left the Company in the year 1978 and 12 shares belonging to him were transferred to N. V. Rao and the remaining 13 shares were transferred to the petitioner. The shares of B. K. P. Rao actually stood in the name of Mrs. B. K. P. Rao (third appellant ). After the resignation of B. S. N. Rao the Company continued to have only two Directors, viz. , the petitioner and N. V. Rao. The petitioner further alleged that though there were two outsiders other than the petitioner and N. V. Rao as members of the Company, all the affairs of the company were being managed and looked after only by petitioner and N. V. Rao and they executed all the documents on behalf of the Company; it was only the petitioner and n. V. Rao who gave personal guarantees for the repayments of the monies borrowed by the Company. The business of the Company proposed after the petitioner entered the Company. In the year 1985 the shares held in the name of Mrs. B. K. P. Rao were offered for sale to the petitioner and N. V. Rao. According to the petitioner 12 shares were offered to the petitioner and the other 13,were offered to N. V. Rao, in order to maintain parity in the shareholding between petitioner and N. V. Rao. However, the transaction did not go through because B. K. P. Rao demanded Rs. 7,000/- per share which according to the petitioner was a very high rate. The petitioner states that the withdrawal of the offer by B. K. P. Rao was not in conformity with the provisions of the Company's Articles of Association. There are a few other allegations in the company petition which we need not repeat here because the material facts will be referred in the course of our Judgment once again. Ultimately some dispute arose between the petitioner and N. V. Rao and according to the petitioner N. V. Rao managed to oust the petitioner from the management of the Company; N. V. Rao saw to it that the petitioner was not elected as a Director at the meeting of the general body held on 12th November, 1987. Hitherto the petitioner was also being paid remuneration similar to the remuneration that was being paid to N. V. Rao. This was also stopped. All facilities given to the petitioner were withdrawn. The petitioner, in the circumstances, stated that the intention of N. V. Rao was to bring about a material change in the management and control of the Company by an alteration in its Board of Directors and that it is likely that the affairs of the Company will be conducted in a manner prejudicial to the interest of the Company and its members. The petitioner assert

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