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1 - 10 of 38 (0.43 seconds)Section 398 in The Companies Act, 1956 [Entire Act]
Shanti Prasad Jain vs Kalinga Tubes Ltd. on 14 January, 1965
FINDINGS: The charges of misappropriation of funds of the Company by the ninth respondent are many fold, out of which an amount of Rs. 1,10,000 said to be misappropriated from Dhanji Street premises was admittedly returned by him. There is no loss on this account sustained by the Company, in which case, it would not amount to an act of mismanagement. Moreover, the past acts do not fall within the ambit of Sections 397 and 398, as held in Shanti Prasad Jain v. Kalinga Tubes Ltd. There is, therefore, no need to go into this contentious issue. The other act of misappropriation pertains to maintenance of huge cash of Rs. 15,000 and Rs. 3,30,000 kept at Dhanji Street premises without consent of any two directors is in violation of the decision of the Board of Directors taken on 12.03.1999. Though the trading in precious metals would involve huge cash transactions, yet this act of the ninth respondent no doubt is in breach of the understanding reached among the directors. However, it is not the case of the petitioners that these cash sere misappropriated by the ninth respondent or any loss was sustained by the Company on this account.
Mohanlal Ganpatram vs Shri Sayaji Jubilee Cotton And Jute ... on 18 February, 1964
397 and 398 is essentially preventive in character and is not intended to enable the aggrieved shareholders to set at naught what has already been done by controlling shareholders in the management of affairs of the Company as held in Sheth Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton And Jute Mills Co. Ltd. When the Company was raided during the year 1999, the Board of Directors of the Company including the first petitioner at its meeting held on 07.01.2000 unanimously resolved to declare an additional income of Rs. 1.21 crores for the block assessment of the Company for the period of last 10 years. However, the Board of Directors subsequently at its Board meeting held on 12.05.2000 declaring additional income, which was opposed by the first petitioner. In the mean while, the first petitioner had made the statement before the Income Tax authorities as early as on 29.11.1999 about, inter-alia, suppression of income to the tune of Rs. 54 lakhs during refining process of the precious metals, particulars of which were not disclosed, to the Board of Directors, without any justification. At the relevant point of time, the first petitioner was looking after the work of development, production, marketing and sales as seen from para 7 at page 12 of the petition. The plea of the petitioners that respondent Nos. 2, 4 and 9 were in charge of finance, accounts, sales, marketing, commerce and administration at the time of the second raid conducted by the Income Tax authorities in the year 1999 is contradictory to the work allocation in favour of various directors as seen from para 7 at page 12 of the petition, according to which, the second respondent was looking after and managing the day-to-day working of the company's factory at Jogeshwari and the sixth respondent was looking after the Company's finance. Therefore, the respondents cannot wholly be held responsible for the income tax raid made on the Company, in the year 1999. Moreover, the income tax raids by themselves cannot constitute acts of oppression and mismanagement in the affairs of the Company.
V.M. Rao And Ors. vs Rajeswari Ramakrishnan And Ors. on 2 August, 1985
FINDINGS: The admitted position is the M/s Lakhani and Co., the statutory auditors were not reappointed by the shareholders at the annual general meeting held on 30.09.2000, but appointed M/s Hiten & Jiten as the statutory auditors. It is not the case of the petitioners that M/s Hiten & Jiten was appointed in the place of M/s Lakhani & Co, as the statutory auditors of the company in violation of the relevant provisions of the Act. The shareholders' inherent rights to elect their auditors cannot constitute an act of mismanagement. If it is a lawful exercise of power by the majority, the minority shareholders are bound by the same as held in V.M. Rao v. Rajeswari Ramakrishnan . Similarly, non-appointment of M/s U.G. Devi & Co. as the internal auditors well within the powers of the management can neither amount to an act of mismanagement in the affairs of the Company. The allegations made against M/s Lakhani & Co., in my view, fall outside the scope of the present proceeding. The auditor's report dated 13.09.2000 for the year ended 31.03.2000 containing a number of qualifications in regard to non-provisioning for doubtful debts and shortage of stock; outstanding from directors/others; shortfall of gold and silver received on job work basis, shortage of materials, cash on hand, search made by the Income Tax Department on the Company are explained in the Director's Report dated 14.09.2000. With adoption of the annual accounts by the majority shareholders at the annual general meeting held on 30.09.2000, the petitioners are bound by the same. For statutory violations, if any, the Regulatory authority is at liberty to proceed against the Company as well as the officers in default and take such actions as may be deemed fit.
P.S. Offshore Inter Land Services Pvt. ... vs Bombay Offshore Suppliers And Services ... on 21 March, 1991
FINDINGS: There is no doubt that the shareholders are entitled for copies of the Chairman's speech made at the annual general meetings of the Company and of the annual accounts adopted at such meeting. The Company is bound to discharge its statutory duties towards its shareholders. While it is the contention of the petitioners that the respondents have not complied with any of these requirements, it is stoutly denied by the respondents. In the event of failure of the Company to comply with the statutory requirements, it is always open for the regulatory authority to initiate appropriate action for the such non-compliance. The grievance of the petitioners on account of non-supply of copies of the balance sheet, profit and loss account with Auditor's Report and Directors Report can be remedied by invoking the provisions of the section 219. It is observed from the letter dated 19.11.1998 of petitioner Nos. 5, 7 & 9 that they had raised 23 queries arising out of the accounts of the Company for the year 1997-98. Though these queries were admittedly explained in writing, the complaint of petitioners that the explanation offered by the Company at the annual general meeting was not satisfactory is bald and uncertain. Though vague and uncertain allegations may constitute grounds for suspicion, they do not entitle the petitioners to ask for an investigation into the affairs of the Company as held in Mohta Brothers (P) Ltd. v. Calcutta Landing And Shipping Co. Ltd. and P.S. Offshore Suppliers and Services Pvt. Ltd. v. Bombay Offshore Suppliers and Services Ltd. Similarly by a letter dated 21.09.2000 petitioners Nos. 5, 7 & 9, raised as many as 16 queries arising out of the accounts of the Company for the year 1999-2000, calling for the details of material purchased miscellaneous expenses; legal and professional fees incurred by the Company; non-closure of secured loan; details of insurance account; Bank charges and commission paid, use of the Company's premises and vehicles by certain directors and employees for their personal use, unused plant and machinery, foreign trip undertaken by ninth respondent; actual recovery made from metal dross in the refining process; change of the statutory auditors, appointment of the fourth respondent as director and purchase of car for the Company. Most of the queries neither appear to be serious in nature nor substantiated. The letter dated 18.11.1999 of petitioner Nos. 3, 5, 7 and 9 raising as many as 25 queries in regard to the accounts of the company for the year 1998-99 addressed to the Company is not on record. There is neither any material to show that the Company suffered to show that the Company suffered any loss on this account. Whether the Chairman did clarify or not the queries raised by the petitioners at the time of the annual general meetings held for the years 1998, 1999 and 2000, being matters of fact cannot be proved by either of the parties. In regard to the claim of the petitioners that the respondents with absolute majority brushing aside the queries of the petitioners had adopted the accounts and passed the resolutions in such meetings preventing the petitioners' group from participation in the management of the affairs of the Company, the petitioners have not made out any case of loss sustained by the Company on account of such conduct of affairs of the company. In regard to removal of the statutory auditors, the petitioners could not be aggrieved, instead only the statutory auditors. It is not appropriate for me to interfere with the collective wisdom exercised by the members at the annual general body meetings of the Company, in the absence of anything contrary to Articles of Association of the Company.
Mohta Bros. (P.) Ltd. And Ors. vs Calcutta Landing And Shipping Co. Ltd. ... on 7 March, 1969
FINDINGS: There is no doubt that the shareholders are entitled for copies of the Chairman's speech made at the annual general meetings of the Company and of the annual accounts adopted at such meeting. The Company is bound to discharge its statutory duties towards its shareholders. While it is the contention of the petitioners that the respondents have not complied with any of these requirements, it is stoutly denied by the respondents. In the event of failure of the Company to comply with the statutory requirements, it is always open for the regulatory authority to initiate appropriate action for the such non-compliance. The grievance of the petitioners on account of non-supply of copies of the balance sheet, profit and loss account with Auditor's Report and Directors Report can be remedied by invoking the provisions of the section 219. It is observed from the letter dated 19.11.1998 of petitioner Nos. 5, 7 & 9 that they had raised 23 queries arising out of the accounts of the Company for the year 1997-98. Though these queries were admittedly explained in writing, the complaint of petitioners that the explanation offered by the Company at the annual general meeting was not satisfactory is bald and uncertain. Though vague and uncertain allegations may constitute grounds for suspicion, they do not entitle the petitioners to ask for an investigation into the affairs of the Company as held in Mohta Brothers (P) Ltd. v. Calcutta Landing And Shipping Co. Ltd. and P.S. Offshore Suppliers and Services Pvt. Ltd. v. Bombay Offshore Suppliers and Services Ltd. Similarly by a letter dated 21.09.2000 petitioners Nos. 5, 7 & 9, raised as many as 16 queries arising out of the accounts of the Company for the year 1999-2000, calling for the details of material purchased miscellaneous expenses; legal and professional fees incurred by the Company; non-closure of secured loan; details of insurance account; Bank charges and commission paid, use of the Company's premises and vehicles by certain directors and employees for their personal use, unused plant and machinery, foreign trip undertaken by ninth respondent; actual recovery made from metal dross in the refining process; change of the statutory auditors, appointment of the fourth respondent as director and purchase of car for the Company. Most of the queries neither appear to be serious in nature nor substantiated. The letter dated 18.11.1999 of petitioner Nos. 3, 5, 7 and 9 raising as many as 25 queries in regard to the accounts of the company for the year 1998-99 addressed to the Company is not on record. There is neither any material to show that the Company suffered to show that the Company suffered any loss on this account. Whether the Chairman did clarify or not the queries raised by the petitioners at the time of the annual general meetings held for the years 1998, 1999 and 2000, being matters of fact cannot be proved by either of the parties. In regard to the claim of the petitioners that the respondents with absolute majority brushing aside the queries of the petitioners had adopted the accounts and passed the resolutions in such meetings preventing the petitioners' group from participation in the management of the affairs of the Company, the petitioners have not made out any case of loss sustained by the Company on account of such conduct of affairs of the company. In regard to removal of the statutory auditors, the petitioners could not be aggrieved, instead only the statutory auditors. It is not appropriate for me to interfere with the collective wisdom exercised by the members at the annual general body meetings of the Company, in the absence of anything contrary to Articles of Association of the Company.
Hind Overseas Private Limited vs Raghunath Prasad Jhunjhunwalla And Anr on 10 October, 1975
In Hind Overseas (P) Ltd.'s case (supra), the apex court has only cautioned that the principles of partnership cannot be liberally invoked. Therefore, once the facts and circumstances of a case indicate that on piercing the corporate veil, the real structure is found to be not that of a company, equitable consideration applicable to a partnership could be applied to that company.
Vinod Kumar Mittal vs Kaveri Lime Industries Ltd. And Ors. on 11 October, 1999
On the other hand if a director breaches his fiduciary responsibilities, due to which his executive powers are removed, then, he cannot complain of the same. In the present case, since the first petitioner failed to act in the interest of the Company, there is no scope to find fault with the decision of the Board of Directors to strip of all executive powers of the first petitioner. While doing so, the first petitioner's salary and other perquisites were not curtailed. Moreover, there is nothing on record to show that the same was done by the Company with a malafide intention or some ulterior motive, in which case, such removal of powers of the first petitioner would not amount to an act of oppression as held in Vinod Kumar Mittal v. Kaveri Lime Industries Ltd. Admittedly, the first petitioner was not removed from the office of director. However, it is on record that when the term of the first petitioner as director came to an end he was not re-appointed on the Board at the Board meeting held on 13.03.2003, subsequent to filing of the petition. When the Company Petition was heard on 26.03.2003, this Bench on the representation made by the petitioners directorate the Company to consider name of the first petitioner for being reappointed as director at the extraordinary general body meeting proposed on 31.03.2003. At the said meeting held on 31.03.2003, the resolution to reappoint the first petitioner as a director was defeated by the majority shareholders. Having held that the principles of partnership could be applied in the present case, whether non-appointment of the first petitioner as a director could be considered to be an act of oppression in view of the allegations of the respondents as already enumerated against him, has to be considered. The allegation in regard to the suit claim of the Company against M/s. National Refinery Private Limited, a partnership firm, wherein the first petitioner is one of the partners, is under dispute before the High Court of Bombay and as such in my view, there is no need to deal with the same. The complaint of the respondents in relation to the landed property at Khari District of Thane and the disputed transaction with M/s. Kamalesh Metal Corporation are nothing to do with the conduct of affairs of the Company and cannot be oppressive of the minority shareholders. The other charges against the first petitioner are that huge sums of money due to the Company remain unpaid and that the first petitioner failed to ensure return of gold taken on his responsibility by the third petitioner on approval basis are to my mind are the commercial transactions of the first petitioner with the Company, for which the Company is at liberty to enforce its lawful claim against the first petitioner. Similarly, there are lawful ways and means to realise the amounts due to the Company from Petitioner Nos. 2, 3, 5, 7, 9 and 13. The grievance of the petitioners on account of the alleged theft of gold by the ninth respondent does not serve any move, in view of the return of gold by him. The plea that petitioner Nos. 1 & 3 had engineered the raid on the company is not supported by any material excepting the statement of petitioner Nos. 1 & 3 before the Income Tax Authorities. These acts of the commission or omission attributed to the petitioners cannot cause any impediment in appointing the first petitioner or any other petitioner or shareholder belonging to the petitioners' group without any charge, on the Board of directors of the Company, especially when the principles of partnership have been applied in this case. Against this background, the claim of the respondents that the inherent right of the shareholders in electing a director of their choice cannot constitute an act of oppression that directorial complaints cannot be the subject of a Section 397/398 proceeding and that the minority shareholders are bound by the decision of the majority shareholders do not hold good and the decisions cited by Shri Seerai, learned Counsel in support of these proportions have no application to the facts of the case on hand. Anyway this issue becomes irrelevant in view of the final order that I propose to pass.