The limited jurisdiction of the Company Law Board in cases of oppression and mismanagement, and the duty of courts to recognize corporate democracy in managing company affairs.

N.Kannadasan, J.

Appellants are respondents in C.M.A. and the petitioners before the Company Law Board. The respondents 1 and 2 in L.P.A.No.127 of 2000 and the respondents 10 and 11 in LPA 128 of 2000 are the appellants in the C.M.A.No.1312 of 1998 and the respondents 1 and 2 before the Company Law Board. The respondents 10 and 11 in L.P.A.No.127 of 2000 and respondents 1 and 2 in L.P.A.No.128 of 2000 are the appellants in C.M.A.No.1391 of 1998. The other respondents are the respondents in the above CMA and the respondents in the Company Petition.

2. The appellants herein have filed a petition under Sections 397, 398, 402 and 403 of the Companies Act, 1956, before the Company Law Board Chennai for prevention of oppression and mismanagement in the affairs of the Company viz., M/s. Anugraha Jewellers Limited, Coimbatore. It is alleged that there has been irregularity in the allotment of shares to them that the funds of the company have been siphoned off in the form of loans and advances to certain fictitious companies, that the appointment of the Managing Director is neither legal nor proper, that the appellants were removed from the Board in a irregular manner, that the Annual General Body meeting was not conducted in an orderly manner and alleged the Annual General Body meeting held on 4.9.1996 was invalid and illegal and that in order to prevent the oppression and management of the company, the relief prayed for in the petition should be ordered.

3. The said petition was opposed by the respondents before the Company Law Board that the petition is not maintainable in view of the fact that the petitioners have approached the Civil Court in respect of the same relief as claimed in the said petition and a criminal complaint was also lodged and the petitioners have initiated parallel proceedings and their act is nothing but to harass the respondents and the the General Body Meeting was conducted in accordance with law and none of the allegations are based on true facts. The Company Law Board has passed an order dated 23.9.1998 to the effect that it would be appropriate to entrust the management of the company to an independent person so that the inter dispute between the promoters do not affect the business of the company and accordingly one Aghoramurthy, former Regional Director of the Department of Company Affairs, was appointed as the Administrator. Aggrieved against the same, the above C.M.A. was filed and the learned Judge of this Court by considering various relevant facts and circumstances of the case, with reference to the legal provisions has allowed the said appeal on 17.12.1999 and set aside the order of appointment of Administrator. Aggrieved against the said order, the above appeals are filed by the appellants herein.

4. The learned counsel for the appellants contended that the learned Judge has without adducing any valid reason by merely relying upon the legal provisions, has set aside the order of the Company Law Board, which is not permissible in law. Learned counsel further contended that inasmuch as a specific plea was raised with regard to the manner in which the Annual General Meeting was held on 4.9.1996 and extensive arguments were advanced before the Company Law Board and by considering all the facts and circumstances of the case, the order was passed by the Company Law Board, which has also gone into all the details and finally appointed an administrator, and as such the said order ought not to have been set aside. The learned counsel further submitted that during the pendency of the appeal a Commissioner was appointed who has submitted a report which substantiates the plea made by the appellants. It is also contended that inasmuch as the resolution which was passed in the Annual General Body meeting is not valid, the learned Judge ought not to have set aside the order of the Company Law Board.

5. Per contra, the learned counsel for the respondents has contended the appellants have not substantiated