NAMITA GUPTA Vs. CACHAR NATIVE JOINT STOCK CO LTD

JUDGEMENT

(1.) THIS petition is in sequence to an earlier petition CP No. 8 of 1998 filed by the petitioners alleging acts of oppression and mismanagement in the affairs Cachar Native Joint Stock Co. Ltd. (the company) filed under Section 397/398 of the Companies Act, 1956 ('the Act'). The main issue involved in that petition was to decide as to which group of shareholders - whether the petitioners or the respondents - controlled the majority voting power in the company. Considering the nature of the shareholding, this Bench by an order dated 1-6-1999 directed that the company should convene an EOGM to elect directors. THIS order was challenged by both the parties before the Gauhati High Court which upheld the order of this Bench. THIS Bench also appointed Shri Justice J.M. Srivastava (Retired) to preside over the meeting that was convened on 29-11-1999. In the EOGM, the respondents had proposed the election of the then 7 directors while the petitioners had proposed election of 6 directors in place of 6 existing directors. In that meeting, according to the report of the Chairman, 6 of the existing directors had been elected. Thereafter, the petitioners filed CA No. 302 of 1999 challenging the result of the election on various grounds. Considering the grounds of challenge, this Bench passed an order on 10-4-2000 setting aside the results of the election and declaring that the directors proposed by the petitioners had been elected as directors of the company. It was also directed that the board of directors of the company should hand over the Board to the directors whom this Bench had declared as elected, within a period of 10 days from the date of receipt of that order. The said order was challenged on an appeal before the Gauhati High Court which passed an interim order on 5-5-2000 directing that the status quo as on that date should be maintained.

(2.) In the present petition, the petitioners have raised mainly two issues -one relating to the sale and transfer of 2000 shares held by the company in one Surma Valley Stock Ltd. (9th respondent) and increase in the paid up capital of the company by accepting unpaid amount on the of 400 shares held by Surma in the company. In addition, they have also sought for handing over of the assets and properties of the company to the Board consisting the petitioners' group as directors in terms of the order of this Bench dated 4-4-2000.

(3.) ELABORATING the initial submissions, Shri Sarkar submitted : Surma held 400 shares in the company which were partly paid of Rs. 10 per share right from 1936. No call was ever made on these shares to pay the balance of Rs. 40 due on these shares. Since as per the decision of this Bench in CP No. 8 of 1998, voting rights in respect of partly paid shares would be restricted only to the extent of its share in the paid up capital of the company in terms of Section 87(1)(6) of the Act. During the proceedings in CP No. 8 of 1998, the respondents had disclosed that Surma had already remitted the balance of unpaid money of Rs. 40 per share. The company could not have accepted this amount without any call and even otherwise, by an order dated 26-6-1998, this Bench had restrained the company from increasing its paid up capital. The very purpose of accepting the money, when the restraint order was in force was to increase the voting power of the shares held by Surma. The CLB in its order dated 1 -8-1999 has clearly recorded that the company had not adduced evidence to show that the company was in need of funds and it had also observed that if the paid up capital was increased with a view to gain voting rights, then, such an act is an act of oppression. In view of this, the CLB had restrained the company from increasing the paid up capital till the EOGM as ordered was held. Further it is also doubtful whether the company had received the money from Surma before the restraint order was passed by this Bench on 23-6-1998 since in the affidavit sworn on 21-1-1999 by the respondents as at Page 188 of the petition, this amount is not reflected. It now transpires that on 30-11-1999, i.e., a day after the EOGM was held on 29-11-1999, the company had accepted the unpaid portion of Rs. 16,000, i.e., Rs. 40 per share on 400 shares held by Surma. This was done by the Board comprising of the respondents allegedly elected on 29-11-1999 only with a view to increase the total voting power in the company. The mala fide intention of the respondents would be evident from the subsequent events as elaborated later. This decision of the Board is not only oppressive to the petitioners but also illegal and void inasmuch as this Board could not have taken any decision in respect of the affairs of the company in view of the order of this Bench holding that they were not validly elected and only the persons should be from petitioners' group were validly elected in the EOGM on 29-11-1999. Therefore, the increase in the paid up capital on these 400 shares should be declared as null and void.