Case Note & Summary
The case involves an appeal against the order of the Company Law Board (CLB) dismissing Company Petition No.4 of 2007 filed by the appellants under Sections 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement in the affairs of M/s. OFS Industries (P) Ltd. The CLB dismissed the petition on the ground that it was not maintainable for want of proper consent under Section 399 of the Act. The appellants, who are shareholders of the company, contended that they had obtained the consent of the requisite number of members before filing the petition. However, the respondents argued that the consent letters were obtained after the filing of the petition and were not in compliance with the statutory requirements. The court examined the provisions of Section 399, which requires that a petition under Sections 397 or 398 must be accompanied by the consent in writing of at least 100 members or members holding not less than one-tenth of the total voting power. The court noted that the consent must be obtained prior to the filing of the petition and that the consent letters must be specific to the petition. The court found that in the present case, the consent letters were obtained after the filing of the petition and were not in proper form. The court further held that the CLB was justified in deciding the issue of maintainability as a preliminary issue and that the defect in consent could not be cured retrospectively. The court dismissed the appeal and upheld the order of the CLB.
Headnote
A) Company Law - Oppression and Mismanagement - Maintainability of Petition - Sections 397, 398, 399 of Companies Act, 1956 - Consent of Members - The appeal challenged the order of the Company Law Board dismissing Company Petition No.4 of 2007 on the ground that the petition was not maintainable for want of proper consent under Section 399 of the Companies Act, 1956. The appellants contended that the consent of members was obtained prior to filing and that the defect, if any, could be cured. The court held that the requirement of consent under Section 399 is mandatory and must be obtained before filing the petition; consent given after filing cannot cure the defect. The court further held that the Company Law Board was justified in deciding the maintainability as a preliminary issue. The appeal was dismissed. (Paras 1-30) B) Company Law - Consent - Section 399 of Companies Act, 1956 - Requirement of Written Consent - The court examined the provisions of Section 399 which requires that a petition under Sections 397 or 398 must be filed with the consent in writing of at least 100 members or members holding not less than one-tenth of the total voting power. The court noted that the consent must be obtained prior to the filing of the petition and that the consent letters must be specific to the petition. The court found that in the present case, the consent letters were obtained after the filing of the petition and were not in proper form. Therefore, the petition was not maintainable. (Paras 15-25) C) Company Law - Preliminary Issue - Jurisdiction of Company Law Board - The court held that the Company Law Board has the jurisdiction to decide the issue of maintainability as a preliminary issue. The Board is not required to hear the petition on merits before deciding the question of maintainability. The court upheld the order of the Company Law Board dismissing the petition on the ground of lack of maintainability. (Paras 26-30)
Issue of Consideration
Whether the Company Petition under Sections 397 and 398 of the Companies Act, 1956 was maintainable in the absence of proper consent under Section 399 of the Act, and whether the Company Law Board was correct in dismissing the petition on the ground of lack of maintainability.
Final Decision
The appeal is dismissed. The order of the Company Law Board dismissing Company Petition No.4 of 2007 is upheld.
Law Points
- Maintainability of petition under Sections 397 and 398 of Companies Act
- 1956 requires strict compliance with Section 399 regarding consent of requisite number of members
- Consent in writing must be obtained prior to filing of petition
- Consent cannot be given after filing of petition
- Defect in consent cannot be cured retrospectively
- Company Law Board has jurisdiction to decide maintainability as preliminary issue
