M.S.D.C RADHARAMANAN versus M.S.D. CHANDRASEKARA RAJA AND ANOTHER

Citation: [2008] 5 S.C.R. 182 · Decided: 14-03-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

[2008] 5 S.C.R. 182 
,, 
A 
M.S.D.C. RADHARAMANAN 
~ 
v. 
M.S.D. CHANDRASEKARA RAJA AND ANOTHER 
CIVIL APPEAL NO. 2006 OF 2008 
B 
MARCH 14, 2008 
[S.B. SINHA AND V.S. SIRPURKAR, JJ.] 
-,..-
Companies Act, 1956 - ss. 397, 398 and 402 - Power of 
Company court to grant relief uls 402 when no case for 
c oppression made out - Application u/ss 397 and 398 by 
Managing Director of Company alleging oppression on the 
part of Director - Company Law Board holding no act of 
malafide or oppression on part of Director - On account of 
deadlock in affairs of Company, directions to Director to 
D purchase shares of MD - Upheld by High Court - On appeal 
held: There being two Directors, non-cooperation by one of 
them would affect thei smooth management of the affairs of 
r 
the company, thus, CL.B and High Court rightly exercised their 
;urisdiction - Conclusion regarding the dead lock in the affairs 
E of the company cannot be faulted with - Company being a 
private limited company, which is in nature of quasi partnership 
concern, the court should take a holistic view - Interest of 
sharnholders of company as a whole is important - Also, 
appointment of additional Director not a sufficient relief- Thus, 
on facts, interference under Article 136 not called for -
F Constitution of India, 1950 -Article 136. 
The first respondent and his son-appellant held 
-4 
2,83,999 equity shares of the SBC Company and the 
remaining one sham was held by VB Company. The first 
G respondent and the appellant also equally held shares in 
VB Co. The first respondent is the Managing Director of 
the Company and the appellant is the Director. They are 
not on good terms. The respondent No.1 filed application 
before the Company Law Board under ss. 397 and 398 of 
..,. ... 
H 
182 
.... 
M.S.D.C. RADHARAMANAN v. M.S.D. 
183 
CHANDRASEKARA RAJA AND ANR. 
4 
the Companies Act, 1956 alleging several acts of A 
oppression on the part of appellant. The Company Law 
Board held there was no act of mala fide or oppression 
on the part of the appellant; and that there exists a 
deadlock in the affairs of the company. It directed the 
appellant to purchase 2,84,000 shares held by the first B 
·-.,.-
respondent. Appellant filed an appeal. The Division Bench 
of the High Court held that the CLB could very well look 
into the justifiability of the situation and was thus, right in 
.... 
arriving at its conclusion that there existed a deadlock 
• 
situation in which it was impossible for both of them to c 
pull on together as there was incompatibility between 
them. It directed the parties to approach the Company Law 
Board for getting the valuation finalised. Hence the 
present appeal. 
Dismissing the appeal, the Court 
D 
_., -
HELD: 1.1 The provisions of the Companies Act, 1956 
vis-a-vis the jurisdiction of the Company Law Board must 
be considered having regard to the complex situation(s) 
which may arise in the cases before it. No hard and fast 
E 
rule can be laid down. There cannot be any doubt 
whatsoever that the acts of omission and commission on 
the part of a member of a company should be qua the 
management of the company, but it is difficult to accept 
the proposition that the just and equitable test, which 
should be held to be applicable in a case for winding up F 
of a company, is totally outside the purview of Section 
~ 
397 of the Act. The function of a Company Law Board in 
such matters is first to see as to how the interest of the 
company vis-a-vis its shareholders can be safeguarded. 
The Company Law Board must also make an endeavour G 
to find out as to whether an order of winding up will serve 
the interest of the company or subvert the same. Further, 
...... 
if an application is filed under Section 433 of the Act or 
Section 397 and/or 398 thereof, an order of winding up 
may be passed, but the Company Law Board in a winding H 
184 
SUPREME COURT REPORTS 
[2008) 5 S.C.R. 
A up application may refuse to do so, if any other remedy is 
available. The Compainy Law Board may not shut its doors 
only on sheer technicality even if it is found as of fact that 
unless the jurisdicticm under Section 402 of the Act is 
exercised, there will be a complete mismanagement in 
8 regard to the affairs of the company. (Para 19) [196-H; 
197-A, B, C, D & E] 
1.2 Sections 397 and 398 of the Act empower the 
Company Law Boc:ird to remove oppression and 
mismanagement. If the consequences of refusal to 
c exercise jurisdiction would lead to a total chaos 

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