Balasubramanian - (1.) THE petitioner holding 49 per cent shares in Motherson Triplex Tools (P.) Ltd. ('the company') has filed this petition under section 397/398 of the Companies Act, 1956 ('the Act') alleging acts of oppression and mismanagement in the affairs of the company.
(2.) The facts of the case are: The company is a joint venture between Motherson Sumi Systems Ltd. which is under the control of the 2nd respondent and Triplex India (P.) Ltd., which is under the control of the petitioner. This company was incorporated in July 1992. The petitioner and the 2nd respondent are the signatories to the memorandum of association and were also the first directors and the board consisted of only these two directors till the appointment of a third director in September 2000, which is under challenge in this petition. The petitioner holds 49 per cent shares, the 2nd respondent 10.16 per cent and the 3rd respondent 40.84 per cent. In the articles, the petitioner is styled as Triplex and the 2nd and 3rd respondents forming a single group are styled as MSSL. As per article 6, further shares arc to be issued only in the proportion of 49 per cent and 51 per cent to the petitioners and the respondents respectively. According to article ISA, there are certain items which have to be approved by 3/4th majority by shareholders in general meetings. Article 26 provides that the two groups shall be entitled to appoint directors proportionate to their shareholding, however, subject to a maximum of 12. As per article 27A, concurrence of the directors of MSSL is required in the board approving resolutions relating to the businesses indicated in that article. The main complaints of the petitioner are: The 2nd respondent, without the approval of the board of directors consisting of only the petitioner and the 2nd respondent and in violation of the provisions of the article 18A which requires general body approval for issue of shares, decided to issue further shares which was later on given up in view of the objections raised by the petitioner. The 2nd respondent had allegedly held a board meeting on 24-2-2000 without the presence of the petitioner and transacted certain important businesses including the appointment of one Shri P. Srinivasan as the new President of the company with effect from 25-2-2000. When the minutes of the alleged meeting on 24-2-2000 came up for confirmation in the meeting held on 28-6-2000, the petitioner protested that no meeting could have been held without the petitioner in as much as there would have been no quorum in the absence of the petitioner and as such all the resolutions passed in the meeting were bad in law. The respondents circulated an agenda for the Board meeting to be held on 2-8-2000 in which it was proposed to fix a date for convening EOGM in respect of a requisition made by the 2nd respondent under section 169 of the Act to appoint Shri P. Srinivasan, President, as a director and also as the managing director for 3 years. The motive of appointing him as a director is only to create a new majority on the Board and with a view to oust the petitioner from the management. Further, even the salary proposed for him is twice that of the salary paid to his predecessor. Further, in terms of article 26, a director could be co-opted only with the concurrence of both the directors on the Board and the general body is not vested with the powers to appoint a director. The 2nd respondent is also guilty of financial mismanagement. On the basis of these allegations, the petitioner has sought for a declaration that all the decisions taken in the alleged Board meeting on 24-2-2000 as null and void and for a declaration that the appointment of Shri P. Srinivasan as the President as null and void and also to set aside the decisions taken there in the EOGM on 1-9-2000 to appoint him as a director/MD.
(3.) SHRI Choudhary, Senior advocate appearing for the petitioner argued as follows: The company is in the nature of a quasi-partnership between the petitioner and the 2nd respondent. The shareholding of both of them is practically equal. The shares cannot be transferred by one without the consent of the other. There are only two directors on the Board with one representative from each group. All these facts would clearly indicate that the company is nothing but a quasi-partnership. Between 1992 and 1998, the petitioner was looking after the day-to-day affairs of the company. Only in 1998, the petitioner started looking after the marketing in as much as he is a marketing expert. Once the petitioner gave up the day-to-day management, the 2nd respondent started sidelining the petitioner. First, without consulting the petitioner, the 2nd respondent issued offer letters for right shares knowing fully well that the company was not in need of funds. The purpose was to increase his shareholding as the 2nd respondent was aware that the petitioner did not have necessary financial resources to subscribe to the shares. However, at the protest of the petitioner, the issue of further shares was abandoned. Having failed in his attempt to gain majority shares, the 2nd respondent decided to grab control of the management by proposing the appointment of SHRI Srinivasan as a director. Once it is done, the petitioner having practically equal percentage of shares will lose his equal representation on the Board. Further, as an individual shareholder, the petitioner holding 49% shares is the single largest shareholder in the company. In these circumstances, a partnership firm wouldhave been dissolved onjust and equitable grounds.;