The maintainability of a petition under Sections 397 and 398 of the Companies Act, 1956 in a proceeding where a case for winding up of the company was not made out or even in cases where no case for mismanagement or oppression was made out.

Aniruddha Bose, J.

1. This appeal arises out of an order passed by the Company Law Board (CLB) presided over by its Chairman on 9th February, 2011. By the said order, the CLB has disposed of six interlocutory applications being C.A. Nos. 62, 97, 401, 606, 759 and 760 filed in connection with a petition registered as C.P. No. 1 of 2010 (the said petition).

This petition has been instituted by the appellants before the CLB alleging mismanagement of the affairs of the respondent No. 1, Birla Corporation Ltd.,(the company). In the said petition, oppression of the members of the said company by its present management has also been alleged. The appellant no. 1 is a charitable trust whereas the appellant nos. 2 to 6 are companies incorporated under the provisions of the Companies Act, 1956. The appellants, brought the said action of oppression and mismanagement before the CLB along with another group of shareholders who, it is claimed, have given written consent for institution of the said action. The appellants in combination with the said consenting shareholders hold more that 10% of the shares of total issued capital of the company.

2. The main relief prayed for in the said petition in substance is for supersession of Board of Directors of the company. Direction has also been prayed for on the Securities Exchange Board of India (SEBI) requiring them to cause enquiry in regard to the allegations of violations of the provisions of different regulations guiding management of a company by the present management of the company. Permanent injunction has also been asked for in the petition for restraining the respondents therein from exercising any voting right or any other right in the company till final decision is taken by the appropriate Judicial forum in relation to succession to the estate of Priyamvada Devi Birla (since deceased). Various other ancillary reliefs have been prayed for in the main petition. So far as the interlocutory proceedings are concerned in relation to which the impugned order was passed, one set of proceedings related to shifting the office of the respondent No. 1 or its officers from Birla building at 9/1 R. N. Mukherjee Road Kolkata – 700 001 to premises No. 1 Shakespeare Sarani. The company has its registered office at the former address and in the past it appears to have been carrying on its administrative activities primarily from that office only.

There is also allegation of siphoning of funds of the company to certain individuals or commercial entities and restraint order has been prayed for over dealing of the company with those entities. In addition, it has been urged before me on behalf of the appellants to prevent the respondent No. 1 from making any further donation to a charitable trust, being Madhav Prasad Priyamvada Birla Apex Charitable Trust (MPPB Trust). In the application taken out in connection with the appeal, there is prayer for restraining the respondent no. 2 from dealing with a sum of Rs.19 crores which has been donated to the said trust. Prayer had also been made for a direction that the main petition ought to be heard by any member barring the Chairman, who has passed the impugned order.

This submission was made alleging that the Chairman was biased against the appellants. Learned counsel appearing for the parties, however, submitted before me on the date of delivery of this judgment that the Chairman of the CLB had recused himself from hearing that proceeding. Thus this aspect of the controversy does not survive any further.

3. The company in question was originally promoted by Late G.D. Birla, which subsequently came under the control of M.P. Birla group of companies, headed by Late M.P. Birla. On death of M.P. Birla, his widow Priyamvada Devi Birla (PDB) came to exercise control over 62.9 per cent of the shares of the company, which was held by different entities, over which, it appears to me at this stage, PDB had control. On her death, there is dispute over successi