SANGRAMSINH P. GAEKWAD AND ORS. versus SHANTADEVI P. GAEKWAD (I) THR. LRS. AND ORS.

Citation: [2005] 1 S.C.R. 624 · Decided: 20-01-2005 · Supreme Court of India · Bench: N. SANTOSH HEGDE · Disposal: Case Partly allowed

Cited by 4 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
SANGRAMSINH P. GAEKWAD AND ORS. 
v. 
SHANTADEVI P. GAEKWAD (I) THR. LRS. AND ORS. 
JANUARY 20, 2005 
B 
(N. SANTOSH HEGDE AND S.B. SINHA, JJ.] 
Companies Act, 1956-Sections 397 and 398 : 
Private Company-Decision to increase shares and issue some of those 
C to the members of the Company-Out of the shares to be given to the members, 
some were earmarked for the Chairman of the Company-Out of the remaining, 
few shares were allotted to two members and to the new Chairman-Out of 
the earmarked shares some were allotted to a member and to the family 
members of the new Chairman and rest of the issues were closed as the 
D earmarked shares were renounced by the former Chairman-New Chairman 
transferred the shares owned by him and his family members to another 
Company owned by them-Company Petition filed by heir of former Chairman 
claiming allotment of the earmarked shares to her being his sole heir and 
questioning transfer of the shares of new Chairman and his family to their 
Company-Another petition by member before Company law Board alleging 
E oppression and mismanagement-Single Judge of High Court held the 
allotments and transfer valid while the Division Bench held the same as 
invalid-On appeal, held: Heir of the Chairman was not entitled to allotment 
of earmarked shares in her favour having admitted the fact of issuance of 
additional shares and allotment of shares to the new Chairman-she had not 
F proved the act of oppression against the new Chairman-Earmarked shares 
being provisionally allotted no legal rights in the shares were created-The 
claim of title as heir is not adjudicable under Company petition-Oppression 
and fraud not having been pleaded in the petition no relief can be granted on 
that count-Allotment of earmarked shares was bad in law-Transfer of the 
shares to the Company of the New Chairman was not an act of oppression-
G Code of Civil Procedure-Order 6, Rules 4 and 17-Evidence Act, 1872-
Section IOI-Trusts Act, 1882-Section 88. 
Sections 397 and 398-Jurisdiction under-nature and scope of-It is 
of wide amplitude and not of ordinary nature-The court while exercising its 
discretion not bound by the terms contained in Section 402-But the remedy 
H 
624 
"" 
' 
S.P. GAEKWADv. SHANTADEVI P. GAEKWAD 
625 
not to be granted for every act of omission or commission-Reliefs to be A 
granted on satisfaction of the court that the majority of the members had 
oppressed the minority shareholders-Interest of the company vis-a-vis the 
shareholders must be uppermost-The acts of oppression must be harsh and 
wrongful. 
Words and Phrases : 
B 
'Oppression '-meaning of in the context of Companies Act. 
The company in question (GIC) was started by FRG. Its equity capital 
consisting of 425 shares were mainly held by family members. Respondent 
No.12 was Managing Director of its subsidiary company. Board of Directors C 
of GIC decided to broad-base the company by increasing the capital by issuing 
25000 equity shares and to issue 15000 equity shares therefrom to the 
members of the company. The resolution was confirmed in a meeting chaired 
by FRG. No one was interested in purchasing the issues. It was decided to 
keep 8000 shares out of the 15000 shares apart for FRG for the time being D 
and to keep balance 7000 shares apart for other existing members. Respondent 
No.12 and one member subscribed for 500 and 25 shares respectively and 
thus remaining 6475 shares out of7000'shares were allotted to appellant No.1 
and his family members. 500 shares out of the 8000 shares were allotted to 
respondent No.12. As per the appellants, the remaining 7500 shares were 
renounced by FRG in favour of appellants. After death of FRG, appellant E 
No.1 became Managing Director of the Company. 3000 shares were allotted 
to the family members of appellant No.1. The remaining 4500 shares out of 
the 8000 shares remained unallotted and the issue was later closed. 
Respondent No.12 issued to herself 1500 shares without allegedly issuing 
any notice to shareholders. GIC filed a civil Suit No.675/90 against the F 
subsidiary company questioning 1500 equity shares. In Written Statement 
thereof respondent No.12 took the stand that the 8000 shares kept for FRG 
devolved on respondent No.1 (mother of FRG) as class I heir. 
Appellants transferred 9415 shares in favour of a Company which was G 
wholly owned by them. Questioning the said transfer three suits were filed 
by different shareholders which are pending. 
Respondent No. 1

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