LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

rajiv (director)     31 August 2011

Company mismanagement

Dear all,

What proceeding do I start for mismanagement of company affairs? Facts follow –


Company X formed in Mumbai has three shareholders Mr A, Mr B and Mrs B.

Mr A has 50%, Mr B has 47.5% and Mrs B has 2.5%.  Mr B and Mrs B are directors.

(Mr A is a nephew of Mr B). Only a plot and factory is owned by the company which is let out on 99 month licence agreement.


Mr B falls ill and the company decides to appoint Mr A as a director. Resolution is passed and signed by both the directors ( Mr & Mrs B). The company accountant is instructed to carry out the formalities ( PAN card, DIN number and form 32 etc.). While the PAN & DIN applications are progressing, sadly Mr B expires in Jan. 2007.

From hereon Mrs B stops co-operating with Mr A. All requests for information are ignored by Mrs B. No notification of AGM is given to Mr A. She also ignores my directorship. Mr A lives away from Mumbai.


Mr A was advised to starts a civil suit. No CLB proceeding was started.


While civil suit is continuing, Mr A obtained ROC documents. Documents show –


Statement of shareholding of March 2007 shows Mr. A 50% shareholder, Mr. B 48% shareholder and Mrs. B 1% shareholder.


Form 32 shows (after death of Mr B) Mrs. B appointed her sister as a director without

Mr. A’s knowledge.


March 2007 shareholding changed – Mrs. B transferred her husband’s shares to herself without obtaining a probate. Now Mr A has 50% and Mrs B has 50%.


Special Resolution passed March 2009 to increase authorised share capital.

This decreases the shareholding of Mr A to less than 10%.

Form no. 5 filed in December 2009.


Resolution & Form 32 show another director is added in 2010.


I have given you rough picture of what is being done by Mrs B without Mr A’s knowledge.


I want to know exactly what proceeding I can start.


Your assistance will be greatly appreciated and the person who gives the best and most accurate answer gets a lovely gift.



 2 Replies

Nu.Delhi.Law.Fora. (Advocate-on-Record Supreme Court of India)     01 September 2011

Dear Querist,


Facts lead to suggest that a proceeding under Section 397/398 of the Companies Act, 1956 for oppresson and mismanagement may be filed before Company Law Board. For a detailed advice, please furnish correct facts.

klass (america)     01 September 2011

We can say mismanagement is a inefficient or careless management may be carried out by the majority shareholders, who work towards their personal interests rather than the interests of the company . So the periodic report help can easily sort out

Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Popular Discussion

view more »

Post a Suggestion for LCI Team
Post a Legal Query