Shareholder having shareholding less than 10 percent can ask for substituting himself as a petitioning creditor.

LAKSHMANAN J.

Company Application No. 266 of 1991 was filed by one L. RM. K. Narayanan to substitute him as the petitioner in Company Petition No. 21 of 1990 in the place of respondents Nos. 8 to 15 (company petitioners.) Company Application No. 392 of 1991 was filed by respondents Nos. 8 to 15 in Company Application No. 266 of 1991 to grant leave to them to withdraw the main company petition from the file of this court for the reasons stated in the affidavit filed in support of the said company application.

Company Petition No. 21 of 1990 was filed by respondents Nos. 8 to 15 in Company Application No. 266 of 1991 against Puthuthottam Estates (1943) Ltd., under sections 397, 398, 402 and 403 of the Companies Act to regulate the conduct of the affairs of the company and for various other reliefs. The petitioner in Company Application No. 266 of 1991 is the son of the first petitioner in Company Petition No. 21 of 1990 and other petitioners are his mother, brothers and sisters and brother-in-law. The petitioners have filed the company petition against the company and its board of directors seeking for relief to regulate the conduct of the company's affairs and for appointment of an administrator to take charge of the company. Very serious allegations of malpractice have been alleged against the company and its directors.

It is relevant at this stage to notice certain averments made by the petitioners in the main company petition. Relevant passages are reproduced hereunder

"The petitioners together hold substantial interest in the first respondent company and they hold together 18.37 per cent. of the paidup capital of the first respondent company. The break-up figures of shares held by the petitioners respectively are as follows :

Names Shares1. L. Ramakrishnan 2, 730

2. L. RMK. Valliammai Achi 3, 890

3. L. RMK. Valliappan 930

4. RM. Kannammai 2, 878

5. L. Meyammai 2, 976

6. SP. Nachammai 3, 182

7. V. Vasantha 2, 630

8. ST. Annamalai 70

19, 286

As such, the petitioners are qualified to file this petition under section 399(1) of the Companies Act.

The petitioners state that the affairs of the company are conducted in a manner detrimental to the interest of the company and oppressive to the minority shareholders and the respondents who are in management of the first respondent-company are in the management only to carry out their illegal and unlawful acts to appropriate assets of the company for their personal purposes. Respondents Nos. 2 to 6 have been acting in a manner oppressive to the minority shareholders and prejudicial to the interest of the company and its shareholders. Respondents Nos. 2 to 6 who are in management and in control of the company affairs did not disclose the real facts to the members of the company and their acts amount to mismanagement, misappropriation, misconduct and oppression on the minority shareholders and it affects the interest of the company as a whole." *

The board of directors who hold majority shares in the respondent-company, realising that the petitioners along with one L. RM. K. Narayanan, son of the first petitioner, hold 23.26% of the equity capital and are an obstacle for carrying out their unlawful acts which are beneficial and advantageous to them, are now contemplating to increase their shareholding in the respondent company by violating the provisions of the Companies Act. To remove the obstacle in passing any special resolution, the board of directors have now decided to issue right shares. As on date, the petitioners and the said L. RM. K. Narayanan, son of the first petitioner, hold more than 23% of the equity capital, while the persons in management hold 55 per cent. of the equity capital and, therefore, the present management is unable to pass any special resolutions without the concurrence of the petitioners and the said L. RM. K. Narayanan. The petitioners can vote against any special resolution if it is detrimental and prejudicial to the interest of the company and its shareholde