Corporate Dispute Resolution: Supreme Court Verdict on Family Feud Over Company Control

The case at hand revolves around a family dispute concerning the control of Biological E. Ltd., a pharmaceutical company established in 1953. The legal battle was primarily between Dr. Renuka Datla, the widow of Dr. Vijay Kumar Datla, and their daughters, who contested the ownership and management of the company.

Background of the Case

The dispute originated when Dr. Vijay Kumar Datla passed away, leaving behind a will dated 14.02.2005 that bequeathed his shares in the company to his daughter, Mahima Datla. The shareholding pattern of the company at the time of his demise was as follows:

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• Dr. Vijay Kumar Datla: 81% shares
• Mahima Datla: 2.26% shares
• Other family members held smaller stakes

Following his death, a series of board meetings were held between 09.04.2013 and 11.04.2013, which resulted in the appointment of Mahima Datla as the Managing Director and the transfer of her father’s shares to her.

Legal Proceedings

Dr. Renuka Datla challenged these decisions, claiming that she was neither informed nor consented to the meetings. She filed a company petition before the Company Law Board (CLB), alleging acts of oppression and mismanagement.

The CLB ruled in favor of Mahima Datla, dismissing Dr. Renuka Datla’s petition. However, the High Court overturned this decision, declaring the board meetings and resolutions null and void and directing the reconstitution of the board.

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Supreme Court Judgment

The Supreme Court reinstated the CLB’s decision, emphasizing the following points:

• The High Court overstepped its jurisdiction under Section 10-F of the Companies Act by re-evaluating factual evidence.
• The principle of acquiescence applied, as Dr. Renuka Datla had earlier acknowledged the board’s decisions.
• The transmission of shares to Mahima Datla was valid, as it was based on a legally executed will.
• The board meetings and subsequent resolutions were legally binding.

The Court also mandated a financial settlement for Dr. Renuka Datla, including a monthly payment and a lump sum amount.

Conclusion

The judgment underscores the importance of corporate governance, legal standing in family-run businesses, and adherence to procedural requirements in corporate disputes. It also highlights the significance of recognizing formal resolutions and legal wills in corporate shareholding.

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Petitioner Name: Mahima Datla.
Respondent Name: Dr. Renuka Datla & Ors..
Judgment By: Justice Vineet Saran, Justice J.K. Maheshwari.
Place Of Incident: Hyderabad.
Judgment Date: 06-04-2022.

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