HARIKUMAR RAJAH Vs. SOVEREIGN DAIRY INDUSTRIES LIMITED

JUDGEMENT

(1.) THIS petition under sections 397 and 398 of the companies Act, 1956 (hereinafter'the Act') is by a shareholder holding 20, 000 shares of Rs. 10 each in the capital of the respondent-company. The authorised capital is Rs. 25 lakh divided into 2, 50, 000 shares of Rs. 10 each. The paid-up capital, according to the respondents, is Rs. 11, 91, 150. According to the petitioner, the paid-up capital is only Rs. 5, 91, 050. The allotment of 50, 000 shares of the face value of Rs. 5, 00, 000 to the respondent No. 6-Smt. R. Sivakamasundari and 10, 000 shares of value of Rs. 1, 00, 000 to the respondent no. 2-Udaya Kumar Rajah, the husband of Smt. Sivakamasundari and 100 shares registered in the name of the respondent No. 7-Nalinikanth Rajah, are being disputed by the petitioner. Udaya Kumar Rajah and Nalinikanth Rajah are brothers of the petitioner herein.

(2.) RESPONDENT No. 1-company was incorporated in July 1974 with the object of running a dairy and carrying on business in milk and milk products. It purchased 58. 36 acres of land in Noonbal Village of Chengleput district on 19th November, 1974. Though it installed pasteurising equipment, it is undisputed that the company could not utilise the land for the purpose of growing fodder for the cattle and that the business of the company was closed by the year 1979. All the lands owned by the company had been mortgaged to Bank of Madura from which bank it had obtained loan of about Rs. 35, 00, 000. That loan was guaranteed by Udaya kumar Rajah and V. K. Sundaram, both of whom were signatories to the memorandum of association. Sundaram having also been a director all along, while Udaya kumar Rajah, according to his claim, was the Chief Administrative Officer till the year 1986 when he became a director and continued thereafter as a director in charge, there being no managing director in the company after 1979. One of the other signatories to the memorandum of association, one Gupta, was the managing director till 12th August, 1976 and, thereafter, G. P. Sukumaran, the respondent No. 5 herein, has been designated as managing director. It is the petitioner's case that sukumaran was removed from the directorship at an extraordinary general meeting ('the EGM') held in the year 1979, which EGM was requisitioned by the petitioner and his brother, the respondent No. 2-Udaya Kumar Rajah.

(3.) PETITIONER had attended the EGM that was held on 31st March, 1986 at which Udaya Kumar rajah was elected as a director. Though he claims in his testimony in this proceeding that he had objected to the election, the minutes of the meeting do not show any such opposition; nor had the petitioner disputed the election of udaya Kumar Rajah, earlier. PETITIONER, on the other hand, gave notice for convening the EGM for the purpose of removing the respondent No. 2 and the respondent No. 3 from the position of directors, that notice having been given only in July 1986. The petitioner thereafter filed OS No. 1402 of 1986 for injunction to prevent the respondents from alienating the company's properties on the ground that the EGM had not been convened. It was the plea of the petitioner in that case that EGM that had been held on 30th March, 1986 had passed a resolution authorising respondent No. 2 to sell the company's lands to the extent of 45 acres at a price of not less than Rs. 45, 00, 000 and to pay the sale proceeds to the Bank of Madura. PETITIONER chose to withdraw the suit on 1st April, 1987. This petition under sections 397 and 398 of the Act was filed thereafter on 2nd April, 1987.