LexINCABLE NET (ANDHRA) LIMITED & ORS. versus AP AKSH BROADBAND LTD. & ORS.
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[2010] 6 S.C.R. 444 A INCABLE NET (ANDHRA) LIMITED & ORS. B v. AP AKSH BROADBAND LTD. & ORS. (SLP (Civil) No. 9110 of 2008) MAY 7, 2010 [ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.] Companies Act, 1956 - ss. 397, 398, 402 and 403 - Companies forming joint venture company for a project - C Companies entering into Share-holder agreement - Majority share-holder company granted turnkey contract - At the relevant time Managing Director of the minority share-holder company was at the helm of affairs of the joint venture company - Company petition by minority share-holder D company against majority share-holder company - Alleging oppression and mismanagement - Dismissed by Company Law Board - Appeal uls.10F dismissed by High Court - Special Leave Petition - Held: No case of oppression or mismanagement made out - The lapse alleged against the E majority share-holder company would not constitute the ingredients of complaint u/ss.397, 398, 402 and 403 - Such breach at the most would amount to breach of contract uls. 73 of Contract Act - Contract Act, 1872 - s. 73. Words and Phrases - 'oppression' - Meaning of in the F context of ss. 397, 398 and 402 of Companies Act, 1956. A consortium of Companies (respondent No.1) was formed which included petitioner No. 1 and respondent No. 5 for a special purpose to undertake and complete a G project. Respondent No. 5-Company was the majority share-holder of the respondent No. 1-Company. Respondent No. 1 granted Engineering, Procurement and Construction (EPC) Contract to respondent No. 5. H 444 INCABLE NET (ANDHRA) LIMITED & ORS. v. AP 445 AKSH BROADBAND LTD. Petitioner No. 1 filed a petition before Company Law A Board u/ss. 397, 398, 402 and 403 of Companies Act, 1956, alleging that respondent No. 5 company (EPC Contractor) had mismanaged the funds and operations of the respondent No. 1-company and oppressed petitioner No.1-company. Company Law Board B dismissed the petition. Appeal u/s. 1 OF of the Act was also dismissed by High Court. Hence the present Special Leave Petition. Dismissing the Special Leave Petition, the Court HELD: 1. On an overall analysis of the facts involved and the part played by the petitioner No.2 (the Director · on the Board of petitioner No. 1), in the affairs of the respondent No. 1 Company at the relevant time, the Court c is not inclined to interfere with the orders of the. High D Court or the Company Law Board, since the Court is not satisfied that any act of oppression or mismanagement within the meaning of Sections 397, 398, 402 and 403 of the Companies Act, 1956, has been made out by the petitioners against the majority shareholders of the E respondent No.1 Company which would justify the making of a winding up order on the ground that it would be just and equitable to do so and to pass appropriate orders to bring to an end the matters complained of. [Para 40] [465-C-E] F 2. Admittedly, respondent No. 5 is a majority shareholder in respondent No.1 Company and at the same time the EPC Contract has also been given by respondent No.1 Company to respondent No.5, to which transaction petitioner No.2 was also a party in his G capacity as Vice-Chairman of respondent No.1 Company. Besides being a party to the decision to give the EPC Contract to the respondent No.5, petitioner No.2 was also instrumental in payment of large sums of money being made to respondent No.5 which stops him from alleging H 446 SUPREME COURT REPORTS (2010] 6 S.C.R. A that respondent No.2 Company had been siphoning off the funds of respondent No.1 Company without diligently performing its part of the contract. The EPC Contract given to respondent No.5 by respondent No.1 was a commercial contract and stands outside the ambit of B Sections 397 and 398 of the Companies Act. Failure to act in terms of the contract cannot be said to have amounted to either oppression or mismanagement by respondent No.1. At best it can be said that respondent No.1 had been used as a tool or mechanism by respondent No.5 to c acquire benefits for itself, which in the instant case, does not appear to be so, having regard to the fact that one of the petitioners in the Company Petition was himself responsible for such payments being made. [Para 33] [462-B-F] D 3. From the facts as revealed, the only conclusion that can be arrived at is that respondent No.5 had committed a breach of contract in regard to supply of materials to re
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