A group of shareholders holding more than 15% of the paid-up capital

the company have withdrawn their consent by stating that they were misled by the group to sign the petition and after coming to know of the true facts they have disassociated themselves with the petition and they along with the other majority shareholders have submitted that the petition should be dismissed on the ground of non-maintainability. Examine their contention having regard to the provisions of the
Companies Act. fC.A. (Final) November, 1999J

Ylns. The contention of the majority shareholders is not correct and the Company Law Board will continue to proceed with the petition filed against oppression and mismanagement by minority shareholders. It has been held by the Supreme Court in Rajahmundry Electric Corporation Vs. A. Nageshwara Rao that if some of the consenting members have, subsequent to the presentation of the application, withdrawn their consent, it would not affect the right of the applicant to proceed with the application. Thus, the validity of the petition must be judged on the facts as they were at the time of its presentation. Neither the right of the applicant to proceed with the application, nor the jurisdiction of the Company Law Board to dispose it off on its own merits can be affected by events happening subsequent to the presentation.
P. 3. A group of shareholders holding more than 15% of the paid-up capital of MIs. Fraudulent Traders Ltd. have filed a petition before the Company Law Board alleging various acts of illegal, invalid and irregular transactions entered into in the name of the company. Examine the merits of the petition in the light of judicial pronouncements
made in this regard. fC.A. (Final) Nov. 2001J

Ylns. The group of shareholders of M/ s. Fradulent Traders Ltd. must hold more than 10% of the issued share capital of the company or satisfy other requirements under Section 399(1). They are entitled to file a petition before the Company Law Board under Sections 397 and 398 of the Companies Act, 1956, alleging that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members of the company. Tl\.ere ax:~,)1Q~~V~ several judicial pronouncements according to which a mere allegation of illegal, invalid or irregula~ acts bY Itself does -not constitute a ground for invoking the provisi~ of Section 397 unless itis proved that they are oppressive to any slJareholde.r p.!.£!.ejudicial to the interest of the company or to public interest [Sheth Mohan Lai Ganpatram vs. Sayaji Jur-flee Cotton and Jute Mills Company Ltd.]. Thus, in the present case, if the petition filed b) dle group of shareholders is to succeed, they will have to prove to the satisfaction of the Company Law Board that the acts complained of in the.,pet!!i0n are oppressive to the members i~c1ud~_the complainants or are prejudicial to the
interests of the company ortO the public interest. -