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IN THE HIGH COURT OF ALLAHABAD
K. C. Agrawal and O. P. Saxena, JJ.
K.K.SOMANI - Appellant
Versus
D.K.SOMANI - Respondents
Special Appeal 2 Of 1983
Decided On : 04/27/1983
COMPANIES ACT - SECTION 155 - RECTIFICATION OF REGISTER OF MEMBERS - TEMPORARY INJUNCTION - BALANCE OF CONVENIENCE - SHAREHOLDERS' RIGHTS - SUPERVISORY JURISDICTION OF COURT - INTERPRETATION AND APPLICATION.
Fact of the Case:
The petitioner, a shareholder in Somani Steels Ltd., filed an application under Section 155 of the Companies Act, 1956, for rectification of the register of members, alleging that the opposite parties had illegally transferred shares to themselves and were fraudulently trying to usurp the management and control of the company. The opposite parties contested the application, claiming that the transfers were valid and that the petitioner had been duly ousted from the board of directors.
Finding of the Court:
The court held that the petition was maintainable and within time, but disagreed with the learned single judge's finding that the court had supervisory jurisdiction over the management of the company. The court also held that the balance of convenience did not lie in favor of the petitioner, as he had not shown that he would suffer irreparable injury if the temporary injunction was refused.
Issues: 1. Whether the petition under Section 155 of the Companies Act, 1956, was maintainable and within time? 2. Whether the court had supervisory jurisdiction over the management of the company? 3. Whether the balance of convenience lay in favor of the petitioner?
Ratio Decidendi: 1. The court held that the petition was maintainable and within time, as the learned single judge had recorded only tentative findings on the arguments advanced before him during the hearing of the application for temporary injunction. 2. The court held that the court did not have supervisory jurisdiction over the management of the company, as the provisions of the Companies Act, 1956, referred to by the learned single judge were specific provisions for specific situations and the court's jurisdiction was limited to those provisions. 3. The court held that the balance of convenience did not lie in favor of the petitioner, as he had not shown that he would suffer irreparable injury if the temporary injunction was refused.
Final Decision: The court partly allowed the appeals and modified the judgment of the learned single judge by restraining the opposite parties from transferring the disputed shares during the pendency of the petition, while rejecting the application for injunction in other respects.
( 1 ) THESE are three connected special appeals under Chapter VIII, Rule 5 of the High Court Rules against the order dated 22nd December, 1982, passed by a learned single judge in Company petition No. 12 of 1982, on an application for temporary injunction.
( 2 ) AFTER the conclusion of arguments on April 27, 1983, we passed a brief order allowing the appeals partly and we are giving the detailed reasons.
( 3 ) THE facts giving rise to these appeals are that O. P. No. 1, Somani Steels Ltd. , is a company incorporated under the provisions of the Companies Act, 1956. The issued capital of the company is Rs. 50,00,000 in 5 lakhs equity shares of Rs. 10 each. The paid up capital is Rs. 49,63,000. O. P. No. 2, R. K. Somani, is the managing director. The following pedigree gives the details of Somani family which holds more than 50 per cent. of shares.
H. K. Somani (died on 4-5-77)
= Smt. Ratan Devi Somani (Died on 24-3-1978)
R. K. Somani
S. K. Somani
N. K. Somani
M. K. Somani
D. K. Somani (O. P. No. 2)
= Smt. Premlata
= Smt. Saroj
( petitioner )
= Smt. Phool Somani Somani
= Smt. Sarojlata Somani (O. P. No. 5 )
K. K. Somani Smt. Pushpa Somani ( O. P. No. 3)
D. K. Somani, petitioner, gave an application under Section 155 of the Companies Act, 1956 (to be referred hereafter as "the Act"), for the rectification of the register of opposite party No. 1, Somani Steels Ltd. The application was contested by opposite parties Nos. 1, 2, 3 and 5.
( 4 ) THE dispute is between the families of two brothers, R. K. Somani and D. K. Somani. The grievance of the petitioner is that he has been ousted from the board of directors and the opposite parties want to fraudulently usurp the management and control of Somani Steels Ltd. for their own ends.
( 5 ) THE petitioners case is that opposite parties Nos. 2 and 3 illegally transferred the following shares in their favour.
1.
Steel Enterprises (P.)Ltd. shares
36,900
2.
Late Sri H. K. Somani shares
44,800
3.
Late Smt. Ratan Devi Somanishares
19,900
For the sake of clarity we will give the respective versions in respect of each 6f the three lots separately. Steel Enterprises (P.) Ltd. : late H. K. Somani, R. K. Somani (O. P. No. 2) and D. K. Somani (P.) Ltd. had 15,000 shares. On november 16, 1974, these shares were sold to Steel Enterprises (P.) Ltd. , vide annexure CA-1, to the counter-affidavit of R. K. Somani in April, 1975. D. K. Somani (P.) Ltd. filed title suit No. 67 of 1976, against Seth Nanakchand Shadiram and five others in the Court of Second Subordinate judge, Alipur. H. K. Somani, R. K. Somani (O. P. No. 2), Somani Steels Ltd. (O. P. No, 1) and steel Enterprises (P.) Ltd. (O. P. No. 4) were defendants Nos. 2 to 5 for a declaration that the transfer is void, illegal and not binding on the plaintiff. Annexure CA-2 is a copy of the plaint.
( 6 ) LATE H. K. Somani and Smt. Saroj Somani, wife of the petitioner, held 19,900 shares. On november 16, 1974, these shares were transferred to Steel Enterprises (P.) Ltd. , vide appendix ca-10. Smt. Saroj Somani filed representative suit No. 146 of 1975, in the Court of Second subordinate Judge, Alipore, and also gave an application for appointment of an administrator.
( 7 ) ON September 15, 1975, a meeting of the board of directors of Steel Enterprises (P.) Ltd. passed a resolution approving transfer of 34,900 shares of Somani Steels Ltd. to K. K. Somani (O. P. No. 4) for valuable consideration. Directors, H. K. Somani, R. K. Somani (O. P. No. 2)and Smt. Phoollata Somani (O. P. No. 5), were present in the meeting. On 20th September, 1975, three transfer deeds were executed in favour of K. K. Somani (O. P. No. 4), vide appendices ca-13, CA-14 and CA-15.
( 8 ) ON September 26, 1975, the court appointed Sarvasri P. N. Mathur and Ranadeb Chaudhury as administrators in the suit filed by Smt. Saroj Somani.
( 9 ) THE petitioners case is that the resolution dated September 15, 1975, was fabricated and ante-dated after the appointment of administrat
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