Tag Archives: Governing Members

Petition for Oppression and Mismanagement – Object of Qualifying Percentage of Shares

 In J.P. Srivastava & Sons Pvt. Ltd. and Ors. v. M/s. Gwalior Sugar Co. Ltd. and Ors. AIR 2005 SC 83, the Hon’ble Supreme Court considered the object of prescribing a qualifying percentage of shares to entertain petition under sections 397 and 398 of the Companies Act, 1956. It was held that the object is to ensure that frivolous litigation is not indulged in by persons, who have no legal stake in the company. If the Court is satisfied that the petitioners represents the body of shareholders holding the requisite percentage, the Court may proceed with the matter. It was held as under:

“The object of prescribing a qualifying percentage of shares in petitioners and their supporters to file petitions under sections 397 and 398 of the Companies Act, 1956 is clearly to ensure that frivolous litigation is not indulged in by persons who have no real stake in the company. However, it is of interest that the English Companies Act contains no such limitation. What is required in these matters is a broad commonsense approach. If the Court is satisfied that the petitioners represent a body of shareholders holding the requisite percentage, it can assume that the involvement of the company in litigation is not lightly done and that it should pass orders to bring to an end the matters complained of and not reject it on a technical requirement. Substance must take precedence over form. Of course, there are some rules which are vital and go to the root of the matter which cannot be broken. There are others where non-compliance may be condoned or dispensed with. In the latter case, the rule is merely directory provided there is substantial compliance with the rules read as a whole and no prejudice is caused. (See Pratap Singh v. Shri Krishna Gupta (AIR 1956 SC 140). Aruna Oswal v. Pankaj Oswal, (2020) SCC Online SC 570.

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Dispute – Pertaining to Valid Members of Governing Body

In A.P. Aboobaker Musaliar v. District. Registrar, (2004) 11 SCC 247 the Hon’ble Supreme Court has accepted the Division Bench judgment of the High Court, in which it was held as under:

“Thus, in the case of a dispute when more than one return is filed, the Registrar has got the power to find out as to which one he should accept. There may not be an elaborate enquiry. Prima facie he has to satisfy as to which return is to be accepted. In this case, we find that the list given by the appellant was accepted, because it had the support of court orders and also it was being followed for a large number of years. No doubt, such an enquiry made by the Registrar and the decision taken from it does not become final. The party can take up the matter before a competent court as to who are the members of the governing body.” It was observed by the Hon’ble Supreme Court that the Division Bench had rightly decided the issue as to whether the Registrar had power under Section 4 of the Societies Registration Act to take a decision with regard to the annual list submitted by the Committee of Management of the Society. Moreover, the enquiry made by the Registrar and the decision taken did not become final and the party could take up the matter before the competent court as to who were the valid members of the Governing Body. Madarsa Arabiya Ahle Sunnat Nurul Ullom v. State of U.P., 2020 (138) ALR 44.

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