Summary
The Court upheld cancellation of disputed share allotments and transfers in Hotel Queen Road, finding notice failures, interested-director participation and non-compliance with mandatory share-transfer requirements. The conduct was unfair and oppressive in the overall circumstances, beyond merely technical illegality. Earlier injunction findings on the company’s status and preference-shareholder voting rights remained prima facie; those issues were left for the pending suits. The direction to prosecute Ram Parshotam Mittal was separately set aside.
Issues
- Whether the disputed board resolutions and share transactions were invalid and oppressive.
- Whether earlier interim findings finally determined company status or preference-shareholder voting rights.
- Whether the prosecution direction should stand.
Provisions considered
- Section 286, Companies Act, 1956Failure to notify the director invalidated the disputed resolutions; unfairness and prejudice were also established on these facts. (¶¶ 74–76, 81)
- Section 300, Companies Act, 1956Interested directors could not use their fiduciary position to participate in decisions allotting shares to themselves and their group in the circumstances. (¶ 77–81)
- Section 108(1), Companies Act, 1956Registration of transfer without the required share certificates and duly executed transfer forms violated mandatory requirements independently of the other defects. (¶ 85–87)
Held
- Not every illegality establishes oppression. Conduct must be examined for unfairness, prejudice and lack of probity. Here the disputed resolutions were unfair to Ashok Mittal, and absence of notice also invalidated them. (¶ 68–76)
- Directors act in a fiduciary capacity and must exercise share-allotment powers for proper purposes. Their exclusion of Ashok Mittal while allotting shares to themselves without notice was improper on the facts. (¶ 77–81)
- The relevant share certificates were delivered by the bank after the transfer resolution, not before it as claimed. Section 108 was violated independently of Sections 286 and 300. (¶ 85–87)
- The earlier injunction ruling was provisional and could not conclusively determine the present issues. Company status and associated voting-right questions remained for the pending suits; the EOGM resolution was not at issue here. (¶¶ 62–65, 83–84)
- The overall circumstances justified maintaining the High Court’s substantive order, but its direction to prosecute Ram Parshotam Mittal was set aside. (¶ 88–90)
Result
Appeals disposed of. High Court’s substantive order cancelling the disputed allotments and transfers left undisturbed; direction to prosecute Ram Parshotam Mittal set aside. Parties to bear their own costs. Pending company-status issues left for determination in the separate proceedings.