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26. The above averments, according to Mr.Chidambram show that the plaintiff is not only initiating his action in its individual capacity but also a s a derivative action i.e. on its behalf and on behalf of other shareholders to protect the interests of the Company and for its welfare as the allegations are against the Managing Director of the Company. It is alleged that he is siphoning off the funds of the Company to grind hi own axe and to enrich himself and his family members unjustly. According to Mr.Chidambram for the success of such an action the initial onus upon the Court is to firstly find out whether the person ha the power to initiate such an action and secondly to inquire into his conduct and bonafides that is whether he has come with clean hands or not.

(1) The proper plaintiff is prima facie the Company.
(2) Where the wrong or irregularity might be made binding on the company by a simple majority of its members, no individual shareholder is allowed to maintain an action in respect of that matter.
(3) There are however recognized exceptions, one of which is where the wrongdoer has control which is or would be exercised to prevent a proper action being brought against the wrongdoer: in such a case the shareholder may bring a derivative action (his rights being derived from the company) on behalf of the company.

80. Moreover Section 402 of the Companies Act vests the right to apply under Section 397 or 398 in a person who has 10% equity but according to the defendants the plaintiff holds less than 2% of the issued and paid up equity share capital of the company and is, therefore, even otherwise debarred to take any action under these provisions. Thus Civil Court does possess the jurisdiction to adjudicate upon the controversy in question.

81. Though no objection as to the form of the action was taken by the defendant-SPGL but during the arguments Mr. Chidambram dwelt at little length on the doctrine that if any of the shareholders wants to sue the company for the wrongs of the Managing Director or Directors of the Company it has to be in form of 'derivative action' which in other words is a representative action and, therefore, a shareholder in his individual capacity as well as on behalf of other shareholders has to sue in the name of the Company and in that case leave of the Court under Order 1 Rule 8 CPC has to be obtained by the individual on behalf of the other shareholders of the Company and the allegations have to fulfill the condition that he is bringing the action bona fide and for the benefit of the Company and if the action is brought for an ulterior purpose or if another adequate remedy is available, the court will not allow the derivative action to proceed.

90. Next, fulfillment of condition no.6 as referred above is required if an action is taken under Section 397 or 398 of the Companies Act. Even if the instant action is deemed in the form of a 'derivative action' which concept is still unknown to Indian law, the non-fulfilment of condition no.6 is of no importance. Even otherwise it is only a procedural matter which is of technical rather hyper technical nature and has no bearing on the substance of the relief.

91. Mr. Ashwini Kumar, senior counsel for IDBI as the intervener showed his concern as according to him without takin the consent of the IDBI such an agreement could not have been entered as the agreement frustrates the conditions of the Lendgers Agreement vide which a loan of more than Rs. 123 crores has been advanced to the Company by the IDBI. According to Mr. Kumar if the payment is allowed to be transmitted or made in terms of the impugned agreement it would further alter adversely the debt equity ratio which originally was 70:30 and without accounting for the payment of Rs. 47.5 crores to the NTPC the current debt equity ratio of the company is 84.16.