RAMDAS MOTOR TRANSPORT LIMITED Vs. TADI ADHINARAYANA REDDY

JUDGEMENT

(1.) Leave granted.

(2.) The first appellant company was established in 1944 as a private limited company under the Companies Act, 1913. It continued as a private limited company under the Companies Act, 1956. However, with effect from 1-2-1975, by virtue of Section 43-A of the Companies Act, 1956, it became a public limited company in view of the fact that the annual turn over of the company was above the prescribed limit. The first appellant company, however, continues to be a closely held company consisting of only 61 shareholders including 11 employees and ex-employees. The second appellant is the Chairman and Managing Director of the first appellant company. The third appellant is the Joint Managing Director of the first appellant company. The main object of the company is to carry on the business of parcel lorry service, manufacture of automobile components and dealership of Telco.

(3.) It is the case of the appellants that there were disputes between the Managing Director i.e. second appellant, and his son-in-law, Srihari Rao, who was a former Director of the first appellant company and a former Member of Parliament. The disputes started some time in 1993. In 1994, (according to the appellants, at the instigation of Srihari Rao) eight shareholders of the company filed before the Company Law Board, Principal Bench, New Delhi, a company petition bearing C. P.No. 7 of 1994 under Sections 397 and 398 of the Companies Act, 1956, on the ground of oppression of minority shareholders and mismanagement of the affairs of the company by the second and third appellants. In the said petition an injunction was sought to restrain the first appellant company from proceeding with the Rights Issue of its shares. After hearing both the parties, however, the Company Law Board declined to grant any interim order to the effect. The Company Law Board directed the company to file an affidavit with regard to the Rights Issue and to follow the procedure which it had followed earlier for the Rights Issue.