M/S. DALE AND CARRINGTON INVT. P. LTD. AND ANOTHER versus P.K. PRATHAPAN AND OTHERS

Citation: [2004] SUPP. 4 S.C.R. 334 · Decided: 13-09-2004 · Supreme Court of India · Bench: RUMA PAL · Disposal: Dismissed
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Judgment (excerpt)

A 
M/S. DALE AND CARRINGTON INVT. P. LTD. AND ANOTHER 
B 
c 
v. 
P.K. PRATHAPAN AND OTHERS 
SEPTEMBER 13, 2004 
[RUMA PAL AND ARUN KUMAR, JJ.] 
Company law: 
Company affairs-Duties and power of Directors-Fiduciary capacity 
within which they have to act-"Proper-purpose doctrine" regarding duties-
Discussed. 
Private limited company-Act of oppression-Allotment of additional 
shares in favour of Managing Director resulting in majority shareholder 
being reduced to minority shareholder-Neither found in the interest of the 
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company nor a proper and legal procedure followed-Motive for allotment 
found malafide, only motive being to gain control of the company-Clear 
case of oppression against majority shareholder-Hence, the allotment set 
aside. 
E 
F 
Companies Act, 1956 : 
Section 81-Private limited company-Issuance of additional shares-
Power of Directors-Non-applicability of S.81 in case of private limited 
companies-Helri, casts a heavier burden on its Directors-Does not mean 
that the Directors have absolute freedom in the matter of management of 
affairs of the company. 
Sections 397 & 398-Petition under-Maintainability-Locus standi-
Private limited company-Petitioners were registered as shareholders of the 
company on the date of filing of the petition and held requisite number of 
shares in the company-Hence, they could maintain the petition. 
G 
Section l OF-Power of High Court in appeal under-Scope of-Held, 
the judgment of Company law Board having been given in a very cursory 
and cavalier manner and it not having gone into rear issues germane for 
decision of the controversy involved, High Court rightly went into depth of 
the matter-It did not exceed its jurisdiction under S. I OF while deciding the 
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appeal. 
334 
DALE & CARRINGTON INVT. P. LTD. v. P.K. PRA THAPAN 
335 
R(Appellant 2) and P and his wife (Respondents I and 2), are the 
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contesting parties in this litigation. Appellant 1 is the private limited 
company in which they are all shareholders and the litigation is about 
is control and management, with both parties making claims to the right 
to control and manage the company. 
In this appeal· directed against the judgment of the High Court, the 
following issues arose for consideration: 
I. Validity of allotment of equity shares of the Company in favour 
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of R whereby he becomes a majority shareholder and P and his wife are 
reduced to minority shareholders. This issue gives rise to the following 
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questions: (a) Was a meeting of the Board of Directors of the Company 
held on 24th October, 1994 when the first allotment of additional shares 
in favour of R is said to have been made? (b) Was it valid meeting of 
the Board of Directors of the Company? (c) Did the Company require 
funds so as to necessitate raising of share capital of the company by 
issuing equity shares? (d) Was the alleged allotment of equity shares in 
favour of R a bona.fide act on the part of Board of Directors in the 
interest of the Company? In other words does the act of raising share 
capital by allotment of additional equity shares in favour of R, the 
Managing Director, amount to an act of oppression on his part towards 
the then majority shareholders? 
2. What is the effect of not obtaining permission of the Reserve 
Bank of India under the Foreign Exchange Regulation Act (FERA) by 
P regarding transfer of shares in his and his wife's favour? Did P and 
his wife have no locus standi to file the petition under Sections 397 and 
398 of the Companies Act before the Company Law Board? 
3. Scope of power of the High Court in an appeal under Section 
IOF of the Companies Act. 
D 
E 
F 
4. Relief to be granted to a majority shareholder who by an act of G 
oppression 011 the part of management of the company is converted into 
a minority shareholder. 
Dismissing the appeals, the Court 
HELD: l. A company is a juristic person and it acts through its 
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336 
SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R. 
A 
Directors who are collectively referred to as the Board of Directors. An 
individual Director has no power to act on behalf of a company of which 
he is a Director unless by some resolution of the Board of Directors of 
the company _specific power is given to him/her. Whatever decisions are 
B 
c 
taken regarding running the affai~s of the company, are taken by the 
Board of Directors. The Directors of companies have been variously 
described as agents, trustees or representatives, but one thing is certain 
that the Di
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