DARIUS RUTTON KAVASMANECK Vs. GHARDA CHEMICALS LIMITED

JUDGEMENT

(1.) This is a derivative action filed by the Plaintiff exercising his right as a minority shareholder. It is the Plaintiff's case that the claim made in the suit is not for his personal or individual benefit but for the benefit of Defendant No.1. Though there are five Defendants, the quarrel basically is between the Plaintiff and the Defendant No.2. Defendant No.2 is the Chairman and Managing Director of Defendant No.1. Defendant No.3 is the wife of Defendant No.2 and Defendant Nos. 4 and 5 are the Directors of Defendant No.1. Defendant No.2 is the uncle of the Plaintiff (mother's brother). The relationship between the uncle and the nephew has been estranged from what is seen from the pleadings for couple of decades. The Plaintiff has filed many legal proceedings against Defendant Nos. 2 and 3 including proceedings in Company Law Board under Sections 397 and 398 of the Companies Act, 1956 with regard to Defendant No.1. The present suit is one such proceeding filed by the Plaintiff.

(2.) The grievance of the Plaintiff briefly put is that Defendant No.2 has obtained and/or applied for several patents in his own name whereas the patents ought to have been obtained and/or applied for in the name of Defendant No.1. The Plaintiff, in this derivative action, is seeking to make a claim on behalf of Defendant No.1. The supporting layer put-forth is the suit cannot be filed in the name of the Company Defendant No.1 and Defendant No.1 is not in a position to make such claim in its own name because the Plaintiff does not hold majority shares and the management of the Company is in the control of Defendant No.2/Defendant No.3. The Plaintiff also states that Defendant No.2 was in a fiduciary relationship as the promoter, director, majority shareholder and the Research Head of Defendant No.1 and by registering the patents in his individual name and not in the name of Defendant No.1, Defendant No.2 was in breach of his fiduciary duties. The Plaintiff, therefore, states that as the minority shareholder the Plaintiff became entitled to file and has filed the present suit.

(3.) The right of a minority shareholder to file a derivative action is recognised in law. It is open for a minority shareholder to take action against the wrong doers for the benefit of the Company if majority shareholders are preventing the Company itself from taking any such action as they are the people committing the wrong. Recognising a right does not mean that the action is correct or has merits. It also does not mean that in every case a minority shareholder can bring out a derivative action.