Sale of midc land

Dear querist,

1.      It is common to know that in companies often rights and proposals made by the shareholder who is a minority is often overruled by those in the majority and for that purpose, but it is also necessary on one hand to get affirmative votes by the minority shareholders when a resolution on a decision cannot be passed smoothly.

2.      The shareholder’s Agreement is the way for offering legal protection to the minority shareholder, you should check if certain contractual provisions compel the other shareholders to properly evaluate the proposal made by the minority shareholders and use those provisions mentioned in the agreement to put forth the necessity and future prospect of going with the proposal.

3.      Although the shareholder's agreement is not directly enforceable, some necessary clauses can be included to make it enforceable against the majority shareholders, simultaneously the same can be incorporated in the bye-laws of the company for effective enforcement.

4.      Also, if there is a certain clause in the Article of Associations that talks about obligations on the part of the shareholders then those can also be used for considering the proposal made by the minority shareholders.

5.      Furthermore, to protect the rights of minorities in a case of mismanagement and decisions detrimental to the prejudicial interest of the people and partners, there exists a right to apply to the Company Law board in case of oppression or mismanagement is provided under section 399 of the minority shareholders, also the Central Government was also provided with discretionary power u/s 397 and 398 in case relief was not provide to the minority shareholder under section 399.

6.      Case reference – Lalita Rajya Lakshmi v. Indian Motor Co. AIR 1962 CAL 127, the petitioner alleged that the board of directors were guilty of certain detrimental acts done to the minority shareholders, the particular allegations were that income of the company was deliberately shown less due to excessive expenditure made by the majority shareholder in that year.

7.      Additionally, applications can be made to Tribunals under sections 241(1), any member of the company shall apply to the Tribunal if he who complins that –

(a)    the affairs of the company have been or are being conducted in a manner prejudicial to the public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or

(b)   the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company’s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members.

Hope this helps.

Respected Sir,

I have received your reply, I am very much thankful.

Points I have to clear

MIDC had transferd MIDC land owned by private limited company, with 51% shareholding in favour of land sale to one of the shareholder of the same company and MIDC had approved the same. and balance share holders were in oppose of the above transcation, but MIDC had replied that 51% share holding in favour of land sale to share holder and we would process the same. 

And they have trasnfered the land in favour of one of the share holder of the company who had passed resolution with 51% share holding in favour of him.

So kindly help in the matter.

Regards