Rai Saheb Vishwamitra & Ors.

vs.
Amar Nath Mehrotra & Ors.
1986 SCC OnLine All 698

Shwet Kamal
CUSB2113125111
 Facts

Case is mainly related to Electricity Company:

Jhansi Electric Supply Co. Ltd.
• Jhansi Electric Supply Co. Ltd. is a public limited company which was
incorporated on August 19, 1937. The business of the company was the
supply of electricity to the cities of Jhansi and Gorakhpur in the State of
U.P. Both the power houses of the company were taken over by the
Government.
• It has been stated in the petition that compensation in respect of the
taking-over of the power house in Jhansi City has already been paid while
proceedings are going on before the arbitrators for assessment of the
compensation for taking over of the power house in Gorakhpur City.
• The last annual general meeting of the company was held on December 26, 1981. All the items in
the agenda had been taken for consideration in the said meeting, but the last item in the agenda
regarding the appointment of Sri Amar Nath Mehrotra as a new director of the company could not
be taken. It has consequently been alleged that since the last item in the agenda could not be taken
and Amar Nath Mehrotra could not be appointed as a director of the company, he along with other
shareholders of the company requisitioned a meeting at a place other than the registered office of
the company and, as such, it was alleged that this court should stay the holding of the meeting
summoned for December 30, 1982. This petition was filed in this court on December 21, 1982. It
was admitted on December 23, 1982. On an application made for grant of an ad interim order, it
was directed that the meeting scheduled to be held on December 30, 1982, shall be held, but the
resolution passed in the meeting shall not be given effect to until further orders of this court.
• Section 397 of the Companies Act empowers any members of a company,
who complain 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 (including any one or more of themselves) may
apply to the court for an order under this section, provided such members
have a right so to apply in virtue of section 399.
• Shanti Prasad Jain v. Kalinga Tubes Ltd., [1965] 35 Comp Cas 351
(SC), the hon'ble Supreme Court has opined, after examining the
provisions of section 397 of the Companies Act, as under (at p. 366): “It
must further be shown that the conduct of the majority shareholders was
oppressive to the minority as members and this requires that events have
to be considered not in isolation but as a art of a consecutive story.
 Judgement of Division Bench
• This special appeal has been preferred against the judgment dated May 9, 1983, of the then company judge
dismissing two applications made under sections 397 and 398 of the Companies Act, 1956, (hereinafter referred to
as “the Act”) by the appellants. One such application was made on December 21, 1982, and the other on March 8,
1983. By the first application moved on December 21, 1982, it was prayed that a meeting convened by the
respondents to be held on December 30, 1982, be stayed. An interim order was passed on December 23, 1982,
directing that the meeting scheduled to be held on December 30, 1982, shall be held, but the resolution passed in
the meeting shall not be given effect to until further orders of this court. Consequently, the meeting was held on
December 30, 1982, as scheduled. The subsequent application dated March 8, 1983, was filed for quashing the
proceedings of the meeting held on December 30, 1982. These applications have been dismissed by the learned
company judge on the ground that on the own case of the appellants, they themselves were in effective control
and, as such, it could not be said that any of the ingredients of section 397 or section 398 were made out. In so far
as the quashing of the proceedings of the meeting held on December 30, 1982, was concerned, it was held by the
learned company judge that it was premature to pass any order either under section 397 or section 398
• As regards the resolutions passed on December 30, 1982, we are in
agreement with the view taken by the learned company judge that unless
the new directors take over charge and conduct the affairs of the company,
it cannot possibly be concluded that their conduct in any manner has
affected the company or the conduct of the directors is prejudicial to the
public interest or the interest of the company.
Thank You!