VIJAYAN RAJES Vs. M S P PLANTATIONS PRIVATE LTD

JUDGEMENT

(1.) THE petitioners hereinabove have filed this petition under Section 397/ 398 of the Companies Act alleging various acts of oppression and mismanagement in the affairs of M. S. P. Plantations Private Limited (hereinafter referred to as "the company"). While the petitioners claim to be entitled to hold 200--4 per cent. cumulative preference shares of Rs. 1,000 each and thus qualified to apply under Section 397/398, the contention of the company is that these shares have already been redeemed and as such the petitioners are not shareholders. Since the petitioners have questioned the legality of the redemption of the preference shares in this petition and have also sought for appropriate relief on this issue, which if decided in favour of the petitioners would qualify them to file a petition under these sections, we shall be considering this issue along with other allegations.

(2.) According to the petitioners, they were originally holding 200 equity shares of Rs. 1,000 each in the share capital of the company of 2,500 equity shares of Rs. 1,000 each, and 200--4 per cent. preference shares of Rs. 1,000 each. Later, these equity shares were converted into 4 per cent. redeemable preference shares of Rs. 1,000 each at the extraordinary general meeting held on March 30, 1992. According to the petitioners, the business of the company was to be carried on on the principles of partnership between the first petitioner and his father, respondent No. 2 and that the former was appointed as the executive director of the company and was looking after the entire business, operation. Later he became the managing director, when the second respondent resigned from the office of managing director in December, 1991. According to the petitioners, there was a family settlement by which certain properties were divided among the family members sometime in 1993. Later, certain disputes arose between the petitioners and respondent No. 2 due to which respondent No. 2 decided to take control of the company by removing the first petitioner from the position of director at an extraordinary general meeting requisitioned by respondent No. 2. This notice of requisition was never placed before the board, but by virtue of Section 169 respondent No. 2 being the requisitionist, himself convened the said extraordinary general meeting on December 20, 1995, in which the proposals to remove the first petitioner from the board and appointing respondents Nos. 3 and 4 as directors were to be considered. The petitioners filed a civil suit before the City Civil Judge at Bangalore, challenging the purported extraordinary general meeting which was later on dismissed by that court on technical grounds. Even though the petitioners attended the extraordinary general meeting, resolutions were passed removing the first petitioner as a director and appointing respondents Nos. 3 and 4 as directors. It is also further alleged in the petition that the company, in a board meeting on March 9, 1996, decided to redeem all the preference shares held by the petitioners as well as respondents Nos. 2 and 3 and accordingly, cheques for the redemption value of the shares were sent to the petitioners which they refused to accept and returned the same to the company as according to the petitioners, the redemption was in violation of the provisions of law and was done only to oust the petitioners from the company. It is further stated in the petition that the estates of the company had been sold as they had not been managed economically and that certain investments held by the company had also been sold. Out of the consideration received on the sale of estates and the investments all the liabilities of the company were discharged and the remaining surplus amount of Rs. 22.6 lakhs were deposited in two fixed deposits of Rs. 10 lakhs each in Tamil Nadu Mercantile Bank. Later, without the knowledge of the petitioners these deposits were encashed and a sum of Rs. 20 lakhs has been withdrawn by the second respondent.

(3.) ACCORDING to the respondents, the question of principles of partnership does not arise inasmuch as the company was incorporated in 1981, at which time the first petitioner was studying in the United States and only in 1987, the first petitioner was inducted into the board. It is further averred by the respondents that the first petitioner has obtained whatever he was entitled to out of the family properties by a family settlement and his only interest is to obtain the ownership of a building in Madras owned by the company and that the petition is a motivated one to put pressure on respondent No. 2 to settle the Madras building in favour of the petitioners. Further, according to the respondents, the business of the company has already been sold and after discharging all the liabilities, the funds available with the company have been profitably invested. As far as redemption of the preference shares and removal of the first petitioner as a director are concerned it is the stand of the respondents that the same has been done as per the provisions of law.