LexSHRI V.S. KRISHNAN AND ORS. versus M/S. WESTFORT HI-TECH HOSPITAL LTD. AND ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
(2008] 3 S.C.R. 184
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A
SHRI V.S. KRISHNAN AND ORS.
V.
M/S. WESTFORT HI-TECH HOSPITAL LTD. AND ORS.
(Civil Appeal No. 1473 of 2008)
B
FEBRUARY 21, 2008
[TARUN CHATTERJEE AND P. SATHASIVAM, JJ.]
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Company Law:
Companies Act, 1956 - s. 172 rlw s. 53 -- Meeting --
c Annual General Meeting (AGM) -
Service of notice -
Complaint by Appellant Director that he did not receive notice
of the AGM - Tenability of - Held: Not tenable - Appellant
was party to Board meeting, wherein date, place and agenda
of AGM was fixed -Also, Respondents produced "Certificates
D of Posting" to establish service of notice of AGM on Directors ...
and other shareholders.
Companies Act, 1956 - s.397 rlw s.398 - Oppression
and mismanagement -Plea of Appellants that they invested
E
huge sum in Respondent-company on promise that they would
be made permanent directors of company but they were
illegally removed from Directorship in AGM -
Whether
removal of Appellants from directorship was an act of
oppression - Held, No - Material on record revealed that there
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was no specific promise that Appellants would be given
F Directorship permanently - Provision for retirement of one- -
third directors in a year by rotation had been also disclosed -
Theory of 'legitimate expectation' had no application.
Companies Act, 1956 -- s.397 - Oppression -- Mere
G unfairness does not constitute oppression -
On facts,
Appellants were given right to subscribe to 'right issue' along
with all others in same proportion - Hence, no prejudice had
been caused to them on account of issue of "right shares".
Share capital-Allotment of "right shares" to public - Held:
H
184
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f
SHRI V.S. KRISHNAN & ORS. v. MIS. WESTFORT
HI-TECH HOSPITAL LTD. & ORS.
185
Right shares cannot be offered to outsiders without special A
resolution by 2/3rd majority shareholders.
Appellants filed Company Petition before the
Company Law Board (CLB) under ss.397 and 398 r/w ss.
402, 403 and Schedule XI of the Companies Act, 1956
alleging various acts of oppression and mismanagement 8
in the affairs of Respondent No.1 company. It was alleged
that the Appellants invested 'huge sum of money in
Respondent No.1 -company on the promise of
Respondent No. 2, the Chairman of said company, that
they would continue in the company as permanent C
directors but that promise was not kept and the Appellants
were removed from directorship in a Annual General
Meeting held without any notice to them. Besides, the
Appellants also challenged issuance of "right shares".
The question which arose for consideration in the D
present appeal is whether the conduct of Respondent
Nos.1 and 2 was harsh, burdensome and wrong or ma/a
fide or for collateral purposes or against probity and good
conduct and prejudicial to the interest of the Appellants E
and hence the Appellants were entitled for reliefs claimed
in the Company Petition.
Dismissing the appeal, the Court
HELD: 1.1. Chapter VI of the Companies Act, 1956
deals with prevention of oppression and mismanagement.
F
s.397 deals with relief in cases of oppression and s.398
deals with relief in cases of mismanagement. [Para 10)
[197-F]
1.2. The oppression would be made out: (a) where G
the conduct is harsh, burdensome and wrong; (b) where
the conduct is mala fide and is for a collateral purpose
where although the ultimate objective may be in the
interest of the company, the immediate purpose would
result in an advantage for some shareholders vis-a-vis H
186
SUPREME COURT REPORTS
[2008] 3 S.C.R.
A the others; (c) the action is against probity and good
conduct; (d) the oppressive act complained of may be fully
permissible under law but may yet be oppressive and,
therefore, the test as to whether an action is oppressive
or not is not based on whether it is legally permissible or
B not since even if legally permissible, if the action is
otherwise against probity, good conduct or is
burdensome, harsh or wrong or is mala fide or for a
collateral purpose, it would amount to oppression under
ss.397 and 398; (e) once conduct is found to be
C oppressive under ss. 397 and 398, the discretionary power
given to the CLB under s.402 to set right, remedy or put
an end to such oppression is very wide; (f) as to what are
facts which would give rise to or constitute oppression is
basically a question of fact and, therefore, whether an act
is oppressive or not is fundamentally/basically a question
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