Judgement

MISRA, J. : AHO. 13/61- This appeal arises out of an application by Sri Shanti Prasad Jain under Sections 397, 398, 402 and 403 of the Companies Act, 1956 (hereinafter called the Act). As there are large number of appeals and the descriptions of the parties as appellants and respondents may lead to confusion, the parties would be described in this judgment as petitioner and respondents in terms of the petition dated 14th September, 1960. The petitioners case is as follows :-

(A) Kalinga Tubes Limited (hereinafter to be referred to as the Company) is a Company incorporated under the Indian Companies Act having its registered office at Chodwar in Cuttack district. The petitioner is a holder of 3000 shares of the value of Rs. 100.0.0 each. Those shares are fully paid up and all calls due have been duly paid. The petitioner obtained consent in writing under Section 399 of the Act of the shareholders holding 13,083 shares. The holdings of the petitioner and of the consenting share-holders constitute more than one-tenth of the issued share capital of the Company. The application is made for the petitioner on behalf of and for the benefit of the consenting shareholders and the petitioner. The authorised capital of the Company is Rs. 1 Crore consisting of shares of Rs. 100.0.0 each. All the shares are Equity shares.

The subscribed capital is 61,000 shares of Rs. 100.0.0 each fully called. Prior to 1954, the Company was exclusively controlled and managed by Sri B. Patnaik (respondent-2) and Sri C. S. Loganathan (respondent-4) who between themselves held the majority shares. Sometime in 1954, Dr. H.B. Mohanty, the then Seretary of the industries Department, Government of Orissa, informed the petitioner that the Company was in financial and administrative difficulties and requested him to help the Company by providing finance, arranging loan from Banks and other sources and further by providing necessary administrative guidance. The petitioner agreed to the proposal.

The shares in the Company were held originally by Sri Narayan Swami, respondents 2 and 4, Sri J. S. Taraporewala and a Company called the Kalinga Industrial Development Corporation Ltd., which was controlled by respondents 2 and 4. Subsequently an Agreement was entered into amongst the petitioner, respondents 2 and 4, Sri Narayan Swami and Sri Taraporewala, the terms whereof were recorded in writing on 27th July 1954. In terms of the agreement, shares were being held in equal proportion amongst the petitioner and respondents 2 and 4, and the agreement was duly acted upon in all respects. The 250 shares held by Sri Narsing Rath were purchased from him and were equally distributed amongst them. The one excess share was registered in joint names of the three parties. The petitioner was appointed as the Chairman and one of his nominees was appointed as the Director of the Company.

Sri Narayan Swami agreed to act as the Managing Director of the Company on condition that he would obtain prior concurrence and approval of the Chairman in all matters of administrative policy. As a result of misunderstanding between Sri Narayanswami and respondents 2 and 4, the former resigned and therefore respondent 2 was appointed as the Managing Director on the same understanding that he would act in consultation with the petitioner in all matters of administrative and business policy and obtain the petitioners prior concurrence and approval. Through the efforts of the petitioner and primarily upon his guarantee, the Chartered Bank agreed to grant over-draft facilities to the Company to the extent of Rs. 60 lacs and the Indian Bank agreed to grant similar facilities to the extent of another Rs. 50 lacs, and limits for Letters of Credit to the extent of Rs. 1.15 crores from the Chartered Bank and Rs. 1 Crore from the Indian Bank were also obtained and the Company was able to meet its need for working capital and for capital expenditure.

The Company started functioning smoothly and efficiently a