1. The petitioners collectively holding 59.92% of the paid up capital of M/s Neela Spinning Mills Private Limited ("the Company"), before further issue of shares impugned in the Company Petition and constituting in excess of the one-tenth of the total members of the Company, aggrieved on account of, inter alia, the alleged illegal (a) issue of unissued capital of the Company to the respondents 2 to 4, without any consideration or need for such issue of further shares, thereby reducing the petitioners to a minority status; (b) appointment of the respondents 3 & 4 as directors; (c) cessation of the petitioners as directors; (d) fictious borrowing from the fifth respondent by the Company and creation of charge over the property of the Company in favour of the fifth respondent and (e) creation of records, as if the annual general meeting of the Company was held on 03.08.2001, have invoked the equitable jurisdiction of the Company Law Board under section 397 of the Companies Act, 1956, ("the Act"), seeking the following reliefs:

(a)to declare that the alleged appointment of the fourth respondent as a director of the Company in the board meeting said to have been held on 29.09.2001 is non est and not binding on the Company and declare that any action taken pursuant to the said alleged meeting should be illegal and in contravention of the provisions of the Act;

(b)to declare that the alleged appointment of the third respondent as a director of the Company in the board meeting said to have been held on 08.03.2002 is non est and not binding on the Company and declare that any action taken pursuant to the said alleged meeting should be illegal and in contravention of the provisions of the Act;

(c)to declare that the alleged issue of shares of the Company to the third respondent on 08.03.2002 is void and not binding on the Company;

(d)to direct the Company to rectify its register of members correcting the particulars of shares held by the third respondent as a member of the Company;

(e)to declare that the removal of the petitioners 1 & 3 from directorship of the Company is void, illegal and not binding on the Company;

(f) to declare that the petitioners 3 & 4 (should be 1 & 3) continue to be directors of the Company;

(g) to declare that the alleged borrowing made by the respondents 2 to 4 from the fifth respondent is not binding on the Company;

(h) to declare that the alleged charge created in favour of the fifth respondent is void ab initio and not binding on the Company; and

(i) to remove the second respondent from the board of directors of the Company and consequently from the post of the Managing Director of the Company.

2. Shri T.K. Seshadri, learned Senior Counsel, while initiating his arguments in support of the petitioners, submitted:

mThe Company incorporated in June 1963, with the main object of carrying on the business of cotton spinners, woollen spinners, cotton ginners etc, mainly manufactured cotton yarn and owns valuable immovable property in the town of Tiruppur, in which its factory is situated. Palanisamy Naidu, lather of the petitioners 1 & 3 and the second respondent was one of the signatories of the memorandum of association and one of the first directors of the Company. Palanisamy Naidu had transferred his shares to the petitioners and the respondents, and thereby all the shares of the Company came to be held by the petitioners and the respondents. As at March 2001. the petitioners collectively held 59.92% of the shares, while the respondents 2 & 3 together 40.08% of the shares of the Company. The petitioners 1 & 3 and the second respondent are brothers. The second petitioner is the wife of the first petitioner. The fourth petitioner is the wife of the third petitioner. The third respondent is the wife of the second respondent. Thus, the Company is a family owned company with only members of the family of Palanisamy Naidu, being shareholders of the Company.

m The petitioners 1 & 3 and the second respondent have been the