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High Court Of Calcutta
Dipak Kumar Sen
COMBUST TECHNIC P.LTD. - Appellant
Versus
STATE - Respondent
Company Petition 243 Of 1983
Decided On : 06/18/1984
COMPANIES ACT, 1956 - SECTIONS 397, 398 - OPPRESSION AND MISMANAGEMENT - WINDING UP - OPTION TO PURCHASE SHARES - JUST AND EQUITABLE GROUNDS - MAJORITY SHAREHOLDER - WORKERS' INTEREST - SPECIAL OFFICER.
Fact of the Case:
The petitioner, a minority shareholder and director of a private limited company, filed an application under Sections 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement by the respondent, the majority shareholder and director. The petitioner sought various reliefs, including the appointment of a special officer, an investigation into the company's affairs, an injunction restraining the respondent from interfering with the company's affairs, and a direction on the respondent to sell her shares to the petitioner.
Finding of the Court:
The court held that there was a deadlock in the management of the company and that the petitioner had been subjected to oppression by the respondent's non-action and non-co-operation. However, the court also held that the petitioner had not made out a case for winding up the company on just and equitable grounds. The court further held that the majority shareholder could not be forced to sell her shares to the minority shareholder.
Issues: 1. Whether the petitioner had been subjected to oppression by the respondent? 2. Whether the petitioner had made out a case for winding up the company on just and equitable grounds? 3. Whether the majority shareholder could be forced to sell her shares to the minority shareholder?
Ratio Decidendi: 1. The court held that the petitioner had been subjected to oppression by the respondent's non-action and non-co-operation. The court noted that the respondent had ceased to attend the board meetings and had stopped the operation of the bank account of the company. The court also noted that the respondent had not taken any steps to resolve the deadlock in the management of the company. 2. The court held that the petitioner had not made out a case for winding up the company on just and equitable grounds. The court noted that the company was a private limited company with two shareholders who were also the two directors. The court also noted that there was mutual lack of confidence in the conduct and management of the company's affairs. However, the court held that this was not sufficient to justify winding up the company. 3. The court held that the majority shareholder could not be forced to sell her shares to the minority shareholder. The court noted that the majority shareholder had a right to manage the company and that this right could not be taken away from her simply because the minority shareholder was unhappy with the way the company was being managed.
Final Decision: The court appointed a special officer to oversee the management of the company and directed the special officer to arrange for directors' meetings once every month. The court also directed the special officer to call a general meeting of the company to elect a new board of directors after the disposal of a pending suit in the Alipore Court.
( 1 ) THE material facts on record leading up to this application under Sections 397 and 398 of the Companies Act, 1956, are as follows: combust Technic P. Ltd. (hereafter referred to as"the company") was incorporated on or about November 30, 1977, with the object, inter alia, to acquire the existing business of"combust Technic", a partnership firm of Sukhendu Blkash Sarkar and Sourendra Nath Pal, as a going concern and to take over its assets and liabilities.
( 2 ) AFTER its incorporation, the company has been carrying on the business of the said partnership, being designing and manufacturing for fabrication and repair of engineering equipments. The company owns and runs a factory at the Kidderpbre Industrial Estate, Hide Road Extension, Calcutta,
( 3 ) THE authorised capital of the company is Rs. 1,00,000 divided into 100 equity shares of the face value of Rs. 1,000 each. The amount of share capital paid up or credited as paid up is Rs. 30,000.
( 4 ) AJIT Kumar Roy, the petitioner in this application, was one of the subscribers of the company. Fourteen shares, of the face value of Rs. 1,000 each, had been allotted to the petitioner who still holds the same. Eighty per cent, of the face value of the said shares have been paid up and no call is presently outstanding on the same. The petitioner has been all along a director and is still a director of the company.
( 5 ) NELI Poddar, respondent No. 2, is the wife of respondent No. 3. She holds 16 shares of the company of the face value of Rs. 1,000 each. She is also a director of the company.
( 6 ) APART from the petitioner and respondent No. 2, the company has no other shareholder or director at present. Eighty per cent, of the face value of the shares held by the petitioner and respondent No. 2 have been paid up or credited as paid up.
( 7 ) SUDHIR Chandra Poddar, respondent No. 3, is a chartered accountant. He was appointed as the auditor of the company at its inception and he has continued as the auditor.
( 8 ) RESPONDENT No. 2 was appointed as a director of the company under a resolution of its board passed in a meeting held on December 4, 1978. The petitioner was present at the said meeting. The board unanimously resolved that respondent No. 2 would be appointed as a wholetime additional director of the company at a consolidated remuneration of Rs. 1,000 per month with effect from December 4, 1978, and that under the superintendence and control of the board, respondent No. 2 would look after the administration and finance of the company and perform such other duties as may be assigned to her by the board.
( 9 ) ON October 13, 1978, a letter was addressed to respondent No. 3 signed by the petitioner by order of the board as follows:"with reference to the meeting of the board of directors of the above company and the subsequent discussion the writer had with you, we are pleased to give you appointment for performing all the secretarial functions of the company for a period of three years from this day. You shall have free access to all our board meetings and yon will be allowed to keep all books of the company relating to secretarial work in your safe custody at your office. You are also appointed to perform the day-to-day accounts, sales tax and income-tax and central excise duty matters, if any, for the next three accounting years from this day. "
( 10 ) DISPUTES arose between the parties in November, 1982, when respondent No. 2 issued a show-cause notice dated November 26, 1982, to an employee of the company alleging that the employee had failed to attend an income-tax proceeding as instructed by respondent No. 2 and had failed to collect papers from the office of respondent No. 3.
( 11 ) FOLLOWING the said notice, correspondence passed, amongst the petitioner, respondent No. 2, respondent No. 3, as also the employees of the company, in which various allegations and counter-allegations were" made and recorded. It was alleged by the petitioner a
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