Page 218 - DCOM106_COMPANY_LAW

Unit 13: Borrowing and Debentures

Investigation Notes

Besides the aforesaid provisions, to prevent oppression or mis-management by those who
control the affairs of the company, the Act contains certain provisions under the head
‘Investigation’.
Self Assessment

State whether the following statements are true or false:
9. A resolution passed by the shareholders empowering the directors to borrow beyond the
aggregate of paid-up capital and free reserves is void.
10. An entry has to be made in the register of investments within seven days of making the
inter-corporate investment.

11. A public company has paid up capital and free reserves of 250 crores and 50 crores
respectively. For making the inter-corporate investment, it must pass a special resolution
and obtain approval of the central government.

12. Investments made by a company on its own behalf must be held by it in its own name.
13. An investment company need not hold its investments in its own name.

Case Study Patents

closely held private company consists of family members as its shareholders.
One Mr. A held some 50% of the shareholding while his brother and his group
Aheld the remaining 50% shareholding in the Company. Mr. A was not concentrating
on the affairs of the Company thinking that his rights and interest are secured to mandatory
corporate regulations to be followed. Mr. A was living abroad and had to travel abroad
very frequently due to health problems. Suddenly, Mr. A has found that the very valuable
property of the Company is sold for a throw away price to a third party. Mr. A challenged
the sale transaction, but, the third party who has purchased the property has started even
developmental activity as there was no restraint from the Board or as Mr. A could not
convince the Board for getting a restraint order like injunction. The case is pending before
the Board for years and the majority group engages competent and costly lawyers and
they keep on filing applications and now it is really difficult for the Hon’ble Company
Law Board to read all the papers, find-out all the proceedings and passing final orders in
the matter. Mr. A has a clear case to prove that the property is sold illegally and in
violation of Articles of Association and the provisions of Law, but, still he could not get
his rights secured and is hoping that his rights will be preserved and protected when the
Company Petition under section 397/398 is finally disposed of.

Question
What is the nature of remedy available under the provisions meant to prevent the continuing
oppression and mismanagement? Give your own views in detail.

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