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M.S.D.C. RADHARAMANAN V. M.S.D. CHANDRASEKARA RAQJA (2008) 6 SCC 750

 M.S.D.C. RADHARAMANAN V. M.S.D. CHANDRASEKARA RAQJA (2008) 6 SCC 750

 

FACTS

  • M/s. Shree Bhaarathi Cotton Mills Private Limited was a company with 2,84,000 equity shares, the majority held by the first respondent and his son (the appellant).
    • The first respondent was the Managing Director, and the appellant was a director, but they are not on good terms.
  • The first respondent filed an application under Sections 397 and 398 of the Companies Act, 1956 alleging oppression by the appellant, leading to a deadlock in the company's affairs.
  • The Company Law Board initially found no mala fide or oppression but acknowledged the deadlock and directed the appellant to purchase the first respondent's shares.
  • The appellant appealed to the High Court, challenging the decision.
  • The application was based on several grounds of oppression, including non-cooperation, non-clearance of stocks, and deadlock.
  • Both the Company Law Board and the High Court found a lack of mutual trust and confidence between the parties, leading to mismanagement.

 

ISSUE

  • Whether there was oppression by the appellant towards the first respondent in the management of the company's affairs?
  • Whether the deadlock in the company's affairs warranted intervention by the Company Law Board?
  • Whether the appointment of an additional director could resolve the deadlock?
  • Whether the lack of mutual trust and confidence between the parties justified the finding of mismanagement?

 

HELD

After reviewing the decision of the High Court, the Supreme Court held that no reasons prevailed for interference with the order and thus dismissed the appeal.

  • The Court held that the ground of lack of mutual trust and confidence cannot be taken into consideration in isolation and therefore, a conclusion as regards the deadlock in the affairs of the Company cannot be faulted with.
  • The Court also held that the appointment of an additional Director could not be a sufficient relief which the court may grant.
  • The Court further held that once the Company Law Board gives a finding that acts of oppression have been established, winding up of the company on just and equitable grounds becomes automatic.
  • The Supreme Court, after considering the FACTS and circumstances of the case, declined to interfere with the judgement of the High Court. The appeal was dismissed with costs.

 

COMMENTARY
“H.S.D.C. Radharamanam v. M.S.D. Chandra Sekara Raja [2007] 80 SCL 254 (Mad.). In this case, though oppres- sion was not proved but to remove the deadlock in the management, the father was asked to sell his shares to his son at an independently obtained value. In this case, father and son were the only shareholders and directors.
An order requiring one party to sell the shares to others should be an appropriate order spelling out the person who should sell and who should purchase and at what price. There could be no final order under this section unless these very pertinent matters are appropriately decided. Thus, an order referring the disputes between parties to an arbitrator should show that the court contemplated passing of final or appropriate order after receiving the award of the arbitrator. Such an order cannot be considered as a final order under this section.”