M G AMIRTHALINGAM Vs. GUDIYATHAM TEXTILES PRIVATE LIMITED

JUDGEMENT

(1.) THIS petition is filed under section 155 of the Companies act, 1956, for rectification of the register of the members of the Gudiyatham textiles Private Ltd. , the first respondent herein. Respondents Nos. 2 and 3 are the surviving directors of the company. To start with, there were four directors of whom one subsequently transferred his shares in favour of the other three directors, namely, Govindaraja Mudaliar (father of the petitioner), and respondents Nos. 2 and 3. Govindaraja Mudaliar died on September 6, 1964, leaving a will, under which he bequeathed his shares in the company in favour of the petitioner. The petitioner obtained succession certificate in O. P. No. 38 of 1968 on the file of the District Court, Vellore , in respect of the amount due by the first respondent-company to his deceased father. He has obtained on extension of the succession to cover the shares of his deceased father in the first respondent company. On October 5, 1964, the petitioner applied to the company to transmit the shares of his father to his name. He made another application on February 23, 1968, for the same purpose. A third and final application was made on November 4, 1968. He was called upon to produce the necessary secession certificate and other documents to show his right, and on his producing the same on January 10, 1969, the directors, respondents Nos. 2 and 3, informed the petitioner by a letter dated March 31, 1969, declining to effect the transfer. The reason given was that in the opinion of the directors the activities of the petitioner were against the interest of the company, and that it was, therefore, not desirable or feasible, in the interest of the company, to permit the transmission of the shares to the name of the petitioner as requested by him. The petitioner was also informed that the company was agreeable to purchase the shares in question according to the prevailing value. It is in these circumstances that the petitioner has come forward with this petition praying for rectification of the register of the company, by the substitution of his name in the place of his father. The respondents have filed a counter-affidavit reiterating the objections put forward in the communication sent to the petitioner declining to accede to his request for substitution of his name. Their contention is that under the articles of association of the company, they have got discretion to decide whether it would be proper, in the interest of the company, to recognise the transmission, that having regard to the conduct of the petitioner which was detrimental to the interest of the company, it was decided that the transmission should not be accepted. It is their contention that if the petitioner is admitted, it would be the beginning of the end of the company.

(2.) THE first respondent-company was floated with certain objects, the chief of which were : (i) to manage the affairs of Messers. Rajeswari Mills ltd. , as managing agents, that company being a public limited company; (ii) to promote limited companies, mills, factories, cinema studios, etc; (iii) to buy or sell cotton, yarn, silk or cloth and to deal in the same; and (iv) to construct, build factories or godowns, etc. In the first respondent-company, out of the total of 20 shares, the petitioner's father has 6 2/3rd shares; the remaining 13 1/3rd shares belong to equal moieties to respondents Nos. 2 and 3.

(3.) MR. Gopalarathnam next contended that under the compromise arrived at between the petitioner on the one hand and the first respondent on the other in C. P. No. 49 of 1966 it was expressly stipulated that the petitioner's right as a shareholder was left open. On the basis of that stipulation it is contended that it should be deemed that the petitioner's right as a shareholder was accepted. There is no merit in this argument. The fact that his right was left open does not mean that his right was recognised. It is obvious that the question of the petitioner's right as a shareholder was not decided, but it was merely left open. The compromise does not in any way advance the petitioner's claim. Lastly, MR. Gopalarathnam contended that, after all, the petitioner is only a minority shareholder having 6 2/3rd shares, and that recognition of his share as a shareholder would not in any way affect the working of the company inasmuch as the two majority shareholders are going together. On this aspect also I find no substance. From the mere fact that the petitioner is only a minority shareholder it does not mean that the decision of the board rejecting his request for transmission is in any way vitiated. It is rightly contended on behalf of the respondents that the petitioner, even though a minority shareholder, can give trouble to the working of the company, if he wants to do, as there are adequate provisions in the Companies Act under which the petitioner can come up to this court. It is undoubtedly so. The petitioner, as a minority shareholder, can approach this court under sections 397 and 398 alleging that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to him. By this way, he can drag the company to court. Therefore, the fact that the petitioner is a minority shareholder does not mean that he cannot take any action against the company. In the result, the petition fails and is dismissed. There will be no order as to costs.