(1.) THIS is an interim application pending the disposal of an application under section 403 of the Companies Act, 1956, which is itself for an interim order on a substantive petition by the petitioners under sections 397 and 398 of the said Act.
(2.) THE facts necessary for the purpose of this application are that the shares in the 1st respondent-company are held by two groups, namely, the Bhogilal group and his associates who hold the majority of as much as about 69 per cent. of the paid up capital of the company which stands at present at the figure of Rs. 99,60,000, and the Menghraj group and his associates who constitute the minority group holding the remaining shares. The three petitioners and the 8th respondent belong to the said minority group of shareholders, the respondents Nos. 2 to 5 to the majority group of shareholders. It may be mentioned that the 3rd petitioner and the 8th respondent were, at the material time, directors of the 1st respondent-company along with respondents Nos. 1 to 7 and though it is a matter in controversy between the parties whether the 3rd petitioner still continues to be a director of that company, it is an admitted position that respondents Nos. 1 to 8 are even now the directors of the said company. It is the case of the petitioners that though respondents Nos. 6 and 7 do not belong to the majority group of shareholders, they are supporting them in excluding the minority group of shareholders from the control and management of the company. The annual general meeting of the shareholders of the 1st respondent-company for the year ending 31st December, 1966, was to be held on the 2nd of June, 1967, and at that meeting the 3rd petitioner was due to retire as a director by rotation, but, being eligible for reappointment, he offered himself for re-election as such. The appointment of a director in place of the 3rd petitioner, who, however, offered himself for reappointment was, in fact, one of the items on the agenda (item No. 3) of the said meeting. It is the case of the petitioners that, in view of the threatening attitude of the majority group and their attempts to exclude the minority group from having any voice in the control and management of the last respondent-company, the petitioners apprehended that the majority group of shareholders of the company would defeat the resolution for the reappointment of the 3rd petitioner as a director of the said company at the said meeting. The petitioners filed a petition before the Companies Tribunal at New Delhi, which has now been abolished, for reliefs under sections 397 and 398 of the Companies Act on the ground that the affairs of the 1st respondent company were being conducted in a manner prejudicial to the interests of the said company, and in a manner oppressive to the minority group of shareholders who were represented on the board of directors by the 3rd petitioner and the 8th respondent, as already stated above. The petitioners' case is that gross improperities in the conduct of the affairs of the 1st respondent-company, in the form of clandestinely retaining the profits earned in foreign countries for their own benefit, altering and fabricating contracts with a view to benefit certain relatives of the majority group of shareholders, and certain fraudulent dealings with a firm named Chunilal and Co. in respect of cotton waste, have been committed by respondents Nos. 2, 3, and 5 which compelled the petitioners to present a substantive petition under sections 397 and 398 of the Companies Act.
(3.) IN the said petition the petitioners have prayed for the removal of respondents Nos. 2 to 5 as directors and respondents No. 3 as managing director of the said company, for a permanent injunction restraining them from functioning as such, for the appointment of an administrator or special officer with all powers of the board of directors for a period of five years for managing the affairs of the company, and for other ancillary as well as interlocutory reliefs.