Case Note & Summary
The dispute arose from a petition filed by the Respondent No. 1 before the Company Law Board alleging diversion of corporate opportunity by the appellant. The Company Law Board, in its order dated 09.06.2005, found prima facie evidence of such diversion and directed the appointment of three Directors from the Respondent No. 1 on the Board of Respondent No. 10, while maintaining status quo. The appellant challenged this order in the High Court, which set aside the Company Law Board's order on 05.12.2005, allowing the appellant to resign as a Director but imposing certain conditions, including the provision of security. The appellant resigned on 12.01.2006, but the High Court clarified that the resignation would take effect only upon acceptance of the security by the CLB. The appellant contended that these conditions violated his freedom of employment under Section 27 of the Indian Contract Act, 1872, and sought relief from the Supreme Court. The Supreme Court, after hearing the parties, directed the CLB to decide the matters afresh within three months and stated that the High Court's directions regarding security would be subject to the CLB's decision. The court did not express any opinion on the merits of the case, and the appeal was disposed of accordingly.
Headnote
A) Company Law - Corporate Opportunity - Diversion of Corporate Opportunity - Companies Act, 1956, Sections 398, 402, 403, 235, 237 - The Company Law Board found prima facie evidence of diversion of corporate opportunity and imposed conditions on the appellant's resignation as a Director. The Supreme Court directed the CLB to reconsider the matter afresh and clarified that the High Court's conditions would be subject to CLB's decision. Held that the appeal was disposed of with directions for fresh consideration (Paras 2-6).
Issue of Consideration
Whether the imposition of conditions by the High Court on the appellant's resignation as a Director was lawful.
Final Decision
The Supreme Court disposed of the appeal with directions for the Company Law Board to reconsider the matters afresh within three months and clarified that the High Court's conditions regarding security would be subject to the CLB's decision.
Law Points
- Company Law
- Corporate Opportunity
- Employment Freedom
- Security Provision
- Appeal Disposal
