In cases of oppression of minority shareholders and mismanagement of a company's affairs, the court may order the purchase of minority shares by majority shareholders as a just and equitable solution.

JUDGMENT :- This is an application preferred under the new Ss. 397 and 398 of the Indian Companies Act, 1956 corresponding to S. 210 of the English Companies Act of 1948. The case law both under the English and Indian Sections of the Companies Act is very sparse.

2. Sri Rangaraja Talkies (Private) Limited has been incorporated under the Indian Companies Act, 1913, and is now governed by the Indian Companies Act, 1956. Its registered office is at Ammamandapam Road, Srirangam. It owns a theatre known as Sri Rangaraja Talkies. It is stated to be screening second class pictures, for profit. Out of 74 shares of Rs. 500/- each, petitioners 1 to 4 own 8 shares and the 5th petitioner has subsequent to the filing of this petition sold his 2 shares to the first respondent. Respondents 1 to 4 own 62 shares.

3. The first respondent was elected as Director on or about 31-3-1952 and as Managing Director on 6-8-1952. Respondents 2 and 3 were elected as Directors of the Company on 7-12-1952.

4. By 1954 the petitioners 1 to 4 on the one hand and respondents on the other hand fell out and the management reached an impasse.

5. Thereupon these petitioners filed O. S. No. 451 of 1954 on the file of the District Munsifs Court, Tiruchirapalli, for a declaration that the first respondent T. A. Mani had been validly removed from the office of the Managing Director and for an injunction restraining the first respondent from interfering with the management and administration thereof on the ground that a meeting was convened on 31-10-1954 (in the absence of T. A. Mani) and a resolution was passed removing him from the office of the Managing Director and one K. Narasimha Ayyangar was appointed as Managing Director and making other allegations which have been repudiated in the present application and the earlier applications 678 to 681 of 1959 in this Court.

6. The first respondent filed a written statement in O. S. No. 451 of 1954 questioning the validity of the alleged meeting and contending that under the Articles of Association he (first respondent) alone could convene the meeting of the company and that he had convened a meeting to take place on 21-11-1954 and that the alleged resolution said to have been passed by the applicants removing him from the office of Managing Director was invalid etc.

7. The petitioners thereupon realising that they were not likely to succeed in the suit entered into a compromise in the following terms :

"The parties to the suit have compromised the matter in the following terms and pray the Court may be pleased to record this compromise and dismiss the suit without costs.

(1) The first defendant agrees to pay Rs. 6000/- to the plaintiffs for the price of their shares in the capital of the company Sri Rangaraja Talkies. The first defendant further agrees to discharge the debt due to the Srirangam Janopakara Bank Limited.

(2) The first defendant will pay Rs. 6000/- on or before 16-4-1955 to the Janopakara Bank Limited., Srirangam, in partial discharge of the decree in O. S. No. 46 of 1952 on the file of the Sub Court, Tiruchirapalli.

(3) The first defendant will pay Rs. 250/-every month to the Janopakara Bank Ltd., commencing from 25-5-1955 in discharge of the said decree debt and thereafter till the share value of the plaintiffs namely Rs. 6000/- is paid out in full.

(4) On such payment as set out in paragraphs 2 and 3 plaintiffs agree to transfer their share holding to the first defendant.

(5) Till such payments are made the first defendant will be the Managing Director of the Company and will not be liable to be removed. The plaintiffs will continue to be Directors.

(6) In case the first defendant commits default in payment of any one instalment on the due date, the first defendant may be removed from the Managing Directorship and he will be liable to render an account of the collections made by him. In that event the sum of Rs. 6000/- paid by him shall be treated as a loan by him to the company and the accounts will be adjus