LAWS(CAL)-2007-5-51

LINKMEN SERVICES PRIVATE LIMITED Vs. TAPAS SINHA

Decided On May 14, 2007
LINKMEN SERVICES PRIVATE LIMITED Appellant
V/S
TAPAS SINHA Respondents

JUDGEMENT

(1.) THE principal challenge in this appeal under Section 10f of the companies Act from an order disposing of a petition under Sections 397 and 398 of the Act, is as to the finding that the Articles of a company cannot empower it to forfeit shares on account of dues other than unpaid calls. The appellants assert that the view taken by the Company Law Board is clearly at variance with the law laid down by the Supreme Court in the judgment reported at (1971)1 SCC 50 (Naresh Chandra Sanyal v. Calcutta stock Exchange Association Ltd.) which was cited before the Board.

(2.) THE company is engaged in the business of distribution of satellite signals, as a master control room, to the cable television operators. Its members are the cable operators each of whom has a dual relationship with the company. Members of the company are also its only clients. Amid charges of mismanagement brought by the respondents, the amendment of two Articles of the company and the forfeiture of their shares pursuant to the amended Articles were cited as grounds of oppression. The subsequent re-allotment of the forfeited shares were also challenged by the respondents, though some of them acquired such forfeited shares.

(3.) CHARGES of defalcation and misappropriation of funds were brought against those in management by some members. It is claimed in the petition before the Company Law Board, that as a retaliation those in management sought to amend the Articles of the company to include oppressive provisions to arm themselves with the ammunition for silencing the complaining members by banishing them from the company altogether. The respondents in this appeal, some of whom had made a belated and failed attempt to carry their independent appeal from the same order on the ground that their charges of mismanagement were not adequately addressed, appear to have cited the amendments as grounds of oppression rather than challenge the same as to the legality thereof. After all, it is recognised that an illegal act may not perse be oppressive, but a perfectly legal act can be challenged as being oppressive. That is not to say that the illegality of an action cannot be tested in proceedings under Section 397 or 398 of the Act, but only to emphasise that such provisions require a case of oppression or mismanagement to be made out which may or may not involve any overtly illegal conduct.