Gupta Traders Private Ltd. had 5 shareholders, who were brothers holding 2500 shares each. Total share capital of the Company is ₹ 12500 of ₹ 10 each. Their names were AK Gupta, BK Gupta, CK Gupta, DK Gupta and HK Gupta.

CS Professional · Resolution of Corporate Disputes, Non-Compliances & Remedies · PYQS · December 2023
Gupta Traders Private Ltd. had 5 shareholders, who were brothers holding 2500 shares each. Total share capital of the Company is ₹ 12500 of ₹ 10 each. Their names were AK Gupta, BK Gupta, CK Gupta, DK Gupta and HK Gupta. Articles of the Company provided that they shall be permanent directors and will not be liable to retire by rotation. After 3 years, RK Gupta, son of AK Gupta was inducted into the company. Except BK Gupta, all 4 brothers parted with 500 shares each in favor of RK Gupta. RK Gupta thereby became, along with his father and uncles, holder of 2000 shares. BK Gupta continued to hold 2500 shares. After one year, CK Gupta died and by this time dispute amongst the brothers had gathered full momentum. BK Gupta filed a petition against AK Gupta and RK Gupta that control of the Company has been assumed by both of AK Gupta and RK Gupta and Company's affairs are being mismanaged and are being conducted in a manner which is prejudicial to the company's interests. He also alleged that company is not maintaining statutory books at registered office and there is no maintenance of asset register or records in the Company. Company is not holding board meetings thereby suppressing minority shareholders' rights. In light of judicial pronouncement, comment whether BK Gupta's arguments are tenable.

Answer & Explanation:

In the case Chandra Krishna Gupta v. Pannalal Girdhari Lal Pvt. Ltd , it was held that "The non- maintaining of the assets' register or records cannot amount to acts of oppression being committed on minority shareholders. Similarly, non-maintaining of statutory books at the registered office may attract evil consequences to the directors and may also, in certain circumstances amount to an act of mismanagement but under no circumstances, can it be regarded as an act of oppression". "The non-holding of the meetings of the Board would not amount to oppression of minority shareholders. The rights of the petitioner as a director might have been affected but his rights as a minority shareholder have not been affected thereby." The given situation is similar to the above mentioned case, applying this milestone decision to the case, it can be concluded that BK Gupta's argument for oppression of minority rights may not be correct, though point relating to mismanagement may be tenable.

Topics: Resolution of Corporate Disputes

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