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N.M. Pimpalkar v/s Shree Narkesari Prakashan Ltd.

    CP NO. 7 OF 1998 & CA NOS. 94 & 155 OF 1998

    Decided On, 22 June 1998

    At, Company Law Board Principal Bench New Delhi

    By, MEMBER

    N.M. Pimpalkar for the Petitioner. Dr. N.M. Ghatate, S.V. Deshpande and Pramit Saxena for the Respondent.

Judgment Text

1. Shri Madhav Pimpalkar of Nagpur has filed this petition under section 237 of the Companies Act, 1956 (?the Act?) seeking an order for investiga-tion into the administrative affairs of Narkesari Prakashan Limited, Nagpur (the Company). The justification provided by the petitioner is that he is a shareholder, holding 20 shares, alongwith other shareholders passed a resolution at the annual general meeting held on 29-9-1997 unanimously approving the appointment of one Dr. R.H. Tupkari as the managing director of the company for a period of one year. This resolution even though originally was proposed by the company for appointment for a term of three years to Dr. R.H. Tupkari was reduced to one year term as the meeting was told that it was at the request of Dr. Tupkari himself. After the appointment in September, 1997, Dr. Tupkari was relieved of his post within two months. According to the applicant, he has reasons to believe that the Chairman of the company hurriedly demanded the resignation from Dr. Tupkari for unknown reasons. Though it was reported in the newspapers that Dr. Tupkari has resigned on 15-12-1997 he was not relieved immediately. According to the petitioner, the resignation letter indicates that pressure was brought on Dr. Tupkari since the resignation letter starts with the statement ?as suggested by you?. It is further alleged that the Chairman and the board of director were interested in another individual who was appointed as OSD on 4-9-1997 on almost same terms as the managing director and this individual not only was given enormous powers but was also made to take charge, the managing director with effect from 15-1-1998. He was virtually, vested with substantial powers when Dr. Tupkari was functioning as the managing director which according to the petitioner is not only mala fide but is also a contravention under section 197A of the Act.

2. The reply to the petition filed on behalf of the company states that the petition is not maintainable as the petitioner does not satisfy the test under section 399 of the Act. Further, the circumstances prescribed under section 237 have not been satisfied. With regard to the merits, it is stated that Dr. Tupkari voluntarily submitted a letter that he is not interested to be appointed for a term of three years. Further Dr. Tupkari voluntarily resigned thereafter. A board meeting was convened on 15-12-1997 at which he himself expressed satisfaction that he is being relieved. However, he was requested to continue till alternate arrangements are made. All other allegations were denied.

3. While disposing of this petition, we have taken into account the submission made by the petitioner in his rejoinder which relates to the maintainability of the petition as well as the justifiability of the grounds in the petition. As regards maintainability we are satisfied that it is maintain-able but as regards the grounds, we are dealing with the same hereinafter. After the hearing, the petitioner had also filed C.A. No. 155 of 1998 seeking further time for arguments through his counsel. In the facts and circum-stances of this case, we do not find any necessity for further hearing on the same matter as the case is clearly put across by the petitioner himself. While disposing of this petition, we have also taken into consideration the minutes of the board meeting dated 15-12-1997, wherein the resignation of Dr. Tupkari was accepted and a new incumbent was appointed.

4. We have considered the facts and the prayers as contained in the petition.

5. Section 237(b) specifies three circumstances which warrant investigation namely:?

(1) Business of the company is being conducted with the intention to defraud creditors, members or any other persons or otherwise for a fraudulent or unlawful purposes or in any manner oppressive of any of the members;

(2) The persons concerned with the formation of the company or management have been guilty of fraud, misconduct;

(3) That the members have not been given all information with respect to the affairs of the company.

6. Admittedly, according to the petitioner, the case falls under the first circumstance. In the present case of petitioner however, has not been able even prima facie to prove, which is a requirement under section 237(b) as to how a fraud or oppression of members had been committed based on the instances cited by him. The company on the other hand has been able to establish that the managing director insisted on an appointment for only one year and has also shown that the incumbent felt satisfied that he is being relieved even before the completion of one year. It is also necessary to note that it is a requirement under section 237(b) to show that the business is being conducted in the manner described therein. What the petitioner has pointed out is a single instance of alleged oppression. Even here as pointed out by the company eventhough the incumbent is

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a shareholder, he did not join the petitioner and his cause is espoused by the petitioner. 7. In the circumstances, we do not find any merit in granting the prayers and ordering the investigation which is an extraordinary power to be used carefully. The Act provides for adequate forum for shareholders to ventilate their grievances. Since such alternative remedies are already provided in the Act, on a single instance of alleged oppression the extra-ordinary powers cannot be invoked. We, therefore, dismiss this petition. No order as to cost.