V. SEBASTIAN Vs. CITY HOSPITAL P. LTD.

JUDGEMENT

(1.) THIS is a petition against oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956. The four petitioners are members of the City Hospital Private Ltd. incorporated in 1971. The first respondent is the company and respondents Nos. 2 to 7 are some of the directors including the chairman and the managing director. The authorised capital was originally Rs. 5 lakhs. It was raised to Rs. 10 lakhs (1,000 equity shares of Rs. 1,000 each) in March, 1976. A decision was taken in 1977 to issue some preference shares also. Paid -up capital is now Rs. 10,28,000. The petitioners hold 166 fully paid -up equity shares. The eighth respondent was impleaded subsequently in Application No. 482 of 1981. The Central Govt. has not made any representations in pursuance of notice under Section 400.

(2.) THE company was formed with the object of establishing hospitals and clinics. The City Hospital at Ernakulam belongs to it. Dr. V.K. Thomas, Dr. T.M. Paul, Dr. Roselin Sebastian and managing director, Mr. Albert, were associated with the company from the very beginning. Dr. Paul left for the U.S.A. in 1980 ; and shorn of details, this petition is the result of a fight between two groups for control over the company. The first petitioner is the husband of Dr. Roselin Sebastian. The second petitioner is a brother of Dr. Paul. The third petitioner is his brother -in -law and the fourth his wife. The rival group, which now controls a majority in the board of directors, is led by Dr. V.K. Thomas, the chairman, and Sri Albert.

(3.) ALL the respondents have filed counter -affidavits. Respondents Nos. 1 to 7 not only deny the allegations regarding the misappropriation, falsification of accounts and the like, but allege that it was Dr. Paul, as superintendent of the hospital till 1980, who was misappropriating the company's funds and falsifying its records. The circumstances relating to the removal of M.V. Poulose, the cancellation of the appointment of Dr. Susheel Cleitus, diversion of the cement quota/etc., are all explained in detail. As for the notices issued by petitioners Nos. 1 to 3 on March 7, 1981, the stand is that they were not in accordance with law. The demand for poll was rejected because there was no provision for taking poll. A suggestion has also been made that the allotment of equity shares Nos. 501 to 1,000, after raising the capital to Rs. 10 lakhs in 1976 was irregular. The eighth respondent's counter -affidavit is mainly devoted to this question. According to him, the additional 500 shares were cornered by Dr. Paul and his group in an illegitimate manner. Allotments were made against the provisions of the articles of association and without the knowledge of the general body. Shares were not offered to the existing members but were given to close relatives of Dr. Paul and his group, on the basis of lists prepared by the then secretary, M.V. Poulose. There were no board resolutions ' allotting the shares to persons '.