JUDGMENT : ( 1. ) THIS is a petition by a private limited company holding shares in the first respondent-the Hukumchand Mills Ltd-which gives it a controlling interest for all practical purposes but not sufficient for getting a special resolution passed on its own strength in an extraordinary meeting of the general body of the shareholders. The respondent No. 2 Sir Sarupchand private Ltd. retains 25 per cent of the shares in the Hukumchand Mills Ltd. though apparently it is not represented in the Board of Directors. The background is that Sir Sarupchand Hukumchand Private Ltd. had originally full controlling interest over respondent No. 1,-the latter in fact named after the senior member of the Sir Sarupchand Hukamchand Private Ltd. However, in course of time the present petitioner and their associates-names of some of whom have been set out in the petition had been acquiring more and more shares so that at present the respondent No 2 has been reduced to the status of the holder of a minority of shares though not such minority as it cannot block the passing of a special resolution in an extraordinary meeting of the shareholders. This is mentioned because it goes a long way to explain the attitude of respondent No. 2 in the dispute that has arisen. The real grievance of the petitioner is that the respondent No. 2 has been blocking the passing of a special resolution for the amendment of the Articles of Association which is necessary to enable the National Industrial Development Corporation ltd. (a Government of India owned undertaking) getting one or two of its nominees in the Board of Directors so as to guarantee that its stake as a creditor is not jeopardized. The petitioners assert that it had been agreed before the taking of a big loan from the National Industrial Development corporation that it should have one or two directors of its own in the Board of directors without share holding qualification, who, further will not be liable to retirement after the prescribed period. A special resolution sought to be passed in a meeting for this purpose was voted against by the representative of the respondent No 2 and that has created a deadlock. A special resolution sought to be passed in a meeting for this purpose was voted against by the representative of the respondent No 2 and that has created a deadlock. To be sure, the petitioners have been for the time satisfying the Development Corporation by managing to allot some of their own shares to its nominees; but this is not a very satisfactory arrangement from the view-point of the Corporation because such shareholders are not there as of right as its nominees but by the sufferance of the petitioners group and their membership in the Board of Directors is precarious. ( 2. ) THE events that have led to the present impasse are the following: as long ago as 1958 the Hukumchand Mills Ltd. decided to take a loan at that time working out as thirty lakhs from the National Industrial Development corporation for the modernization of its plant, machinery etc. and bring it up-to-date. In those days the day to day conduct of affairs were in charge of a managing agency which had been coming on from before entitled hukumchand Mannalals (a partnership.) In those days it appears also that the Hukumchand group whose shares were owned by the respondent No. 2 had more shares and were represented in the Board. In a meeting of the board a resolution was passed authorising the taking of the loan and further deputing Shri Mannalal Onkarmal to conduct the negotiations on behalf of the Company with the Corporation and give them all the guarantees wanted. Accordingly the loan was incurred and applied to the purpose for which it had been raised. It appears also that some more loans have already been raised or happen to be under proposal either from this Corporation or similar financing agencies owned by the Central or the State Government. Accordingly the loan was incurred and applied to the purpose for which it had been raised. It appears also that some more loans have already been raised or happen to be under proposal either from this Corporation or similar financing agencies owned by the Central or the State Government. As usual the factory was mortgaged to the creditor the clause being- "that the borrower company shall, as and when required by the mortgagee corporation, appoint two directors nominated by the mortgagee corporation on its Board of Directors, with right to the mortgagee corporation to remove such Director or directors and appoint other or others in his or their places, and such directors shall not be liable to retire by rotation or hold any qualification shares and the borrower company shall, if necessary and also from time to time when required by the mortgagee corporation, make alteration in its articles of association as may be considered necessary by the mortgagee corporation with a view to conform to the terms and conditions of the loan as also in the opinion of the mortgagee corporation are likely to be prejudicial to its interest subject, however, where necessary, to the approval of the central Government being obtained which approval shall be duly and promptly applied for by the borrower company. " ( 3. ) ACCORDINGLY in time the Board of Directors proposed that the articles should be amended. The election of Directors is now governed by article 113. The proposed Article is 113 (a) to be inserted immediately after the present Article 113. It has been set out at page 10 of the Petition being already part of the resolution of the Boards wanting on 1-5-1962. There is nothing in it which has not been called for by the conditions of the loan from the Corporation which have already been set out above. Since this is an amendment of the Articles of Association an extra ordinary meeting was called. In that meeting the Sir Sarupchand Hukumchand Private Ltd. were represented by one of its members who had proxies authorising him to act on behalf of all these particular share-holders holding as already noted a total of 35 per cent shares. When the special resolution was put to vote the respondent No. 2 voted against it and as already noted the holding of the petitioners group not being sufficiently large it was voted out. When the special resolution was put to vote the respondent No. 2 voted against it and as already noted the holding of the petitioners group not being sufficiently large it was voted out. The company accordingly found itself in a difficult situation viz a viz the Corporation from whom it had taken a large loan on a distinct understanding that two of its nominees would be taken on the Board of Directors without share qualification and liability to retire on rotation. For the time being the petitioners group who have the controlling interest in the Board have met this requirement halfway in the manner already set out. Accordingly the creditor Corporation is not asking for repayment or creating any other difficulty, but obviously it would very much like that in time the agreement is implemented in its own terms giving more permanency and better status to its nominee directors than is possible under the present arrangement which in any event is on the sufferance of the petitioner group in the Board. ( 4. ) THEREFORE, the petitioners have prayed that this Court itself may direct by its order the amendment in the Articles of Association which is set out as-"113 (a): The Company may borrow money or secure guarantees from the Industrial financial Corporation Ltd. . the Industrial Credit and Investment Corporation of India Ltd. , state Finance Corporation, International Monetary Fund. Refinance Corporation of India and or any other Financing body or Corporation, Banker or Government or semi-Government bodies. The lenders shall have the right to appoint and from time to time to remove and reappoint one or more Directors in accordance with the terms and provisions of the agreements of borrowing money or securing guarantees from such Corporation or bodies. The Directors so appointed under this article shall hold office and be subject to such obligations for duties as are defined in the agreements, or contracts entered into by the Company with the said Corporations or bodies. Further, the Directors appointed by virtue of this article shall not be liable to retire by rotation and are not to bold qualifying shares. " The prayer is that in the alternative and as an extreme measure this Court may direct the purchase by the other members of the company which virtually means the petitioners group-of the shares and interests held by respondent no. " The prayer is that in the alternative and as an extreme measure this Court may direct the purchase by the other members of the company which virtually means the petitioners group-of the shares and interests held by respondent no. 2 and in the event of any dispute, itself fix the price at which the respondent No. 2 may be compelled to sell its shares to the other members. ( 5. ) THE prayer for the purchase has not been seriously pressed and in fact an occasion for it would come only when the other remedies open in this case are exhausted. The petitioners averment is that even if they call an extra-ordinary meeting of the general body again there is no indication that the respondent No. 2 will change its mind and vote in support of the proposed amendment. ( 6. ) THE respondent No. 2 has appeared to contest this petition. Its basic contention is that it is not in charge of the management of the company and accordingly there is no occasion for a petition under section 397 of the indian Companies Act. Another point sought to be made is that the situation is not one in which a winding-up order would be justified by the facts. The respondent No. 2 further avers that it is doing nothing which can be described as "oppression" of the petitioners group and in fact the petitioners group is so strong both in the holding of shares and in the representation on the Board of Directors-that no such oppression is possible. ( 7. ) SECTION 397 comes into operation only in certain circumstances. One or more of the members of a company should be complaining that the affairs of the company are being conducted either in a manner prejudicial to public interest or in a manner oppressive to one or more members. Another requirement is that the facts should be such as theoretically would justify an order of winding up though in actual situation such an order would unfairly prejudice the interest of the company. The section does not mention precisely who should be conducting the affairs of the company in the manner already described. Normally, the affairs of a company are conducted by different agencies at different levels. The section does not mention precisely who should be conducting the affairs of the company in the manner already described. Normally, the affairs of a company are conducted by different agencies at different levels. For the most part they are conducted by a Board of Directors though the carrying oat of the decisions of the Board it in the handi of the companys officers. But crucial matters involving the interests of the company are conducted by the members themselves acting in the general body and giving instructions to the Directors or the officers by their resolution ordinary or special,-as the case may be. So it is quite understandable that in certain situations, which are bound to be rare, the companys affairs may in certain particulars be conducted by the members themselves; and when a part of the membership does something which reduces the companys affairs to a condition prejudicial to the public interest or oppressive to some other members, the requirement of clause (1) may be fulfilled. A point to note is that section 397 (1) does not speak either of a minority of the members complaining against such prejudice or oppression or a majority doing so; but in a very large proportion of cases it would be the minority that would make the complaint. Yet the section itself does not mention any minority or majority. ( 8. ) IN the case reported in Shanti Prasad Jain v. Kalings Tubes Ltd. ( AIR 1965 SC 1535 .), the petitioners under section 397 had certainly been referred to be the minority,-this because they happened to be the minority. Nowhere has that Court suggested that a majority of the members of the company will in no event be able to complain either of a conduct of the affair of the company being prejudicial to public interest or of oppression. ( 9. ) IN the case reported in Ramashankar Prasad v. Sindri Iron Foundry (P) Ltd ( AIR 1966 Cal. 512 .), this question has been answered : "a majority of shareholders who qualify under section 399 can apply for relief against oppression under section 397. " In fact section 399 makes a back reference to sections 397 and 398 also. ( 10. 512 .), this question has been answered : "a majority of shareholders who qualify under section 399 can apply for relief against oppression under section 397. " In fact section 399 makes a back reference to sections 397 and 398 also. ( 10. ) THE result of the foregoing discussion is that for one thing in certain circumstances a majority of the members of a company can apply under section 397 and further, the "conduct of the companys affairs" spoken of may be the conduct brought about by any of the several agencies which have a voice in conducting the affairs of the company; that includes the shareholders as well. Where a batch of the shareholders acts in a manner calculated to shape the affairs of the company in a particular way, that group is conducting the affairs of the company to that extent. The question only is whether it is in a manner prejudicial to public interest or in a manner oppressive to any other members. ( 11. ) THE summary of the facts noted above makes it clear that by blocking this amendment in the Articles of Association the respondent No. 2 is preventing the implementation of the agreement under which a large loan has been incurred and applied to the purpose of renovating the plant. Using the word "oppressive" in the sense it has been interpreted in cases, the creating of an impasse of this kind is also oppressive because it seriously hampers the functioning of the company and reduces its credit with the public in general and the financing agencies in particular. ( 12. ) THEN there is another compulsory requirement. The affairs of the company should by this "prejudice or oppression" reach a condition in which in theory a winding-up order would be justifiable. In the instant case the situation is that an express agreement under which the loan has been incurred is not being implemented. To be sure, the Corporation which really a Government-owned concern and which is not likely to do anything in haste calculated to ruin any companys business, still has the grievance that the condition under which it has advanced money is not being implemented. If the Corporation as lender insists upon having its rights vindicated it can ask for repayment, or in the extreme measure for a sale of the plant which has been mortgaged to it. If the Corporation as lender insists upon having its rights vindicated it can ask for repayment, or in the extreme measure for a sale of the plant which has been mortgaged to it. Such a situation would render the functioning of the company impossible and would in theory justify the making of a winding-up order. Whether or not the immediate occasion for a winding-up order is reached would depend upon the forbearance of the Corporation. For the time it is satisfied with the present arrangement and is waiting to see what happens in this case. Such a situation at all events makes the functioning of the company at least precarious and at any time the Corporation may lose patience and take drastic steps. Thus, in the special circumstances of this case I would hold that the matters have reached a stage where theoretically speaking a winding-up order may be called for. ( 13. ) THUS all the requirements of section 397 are fulfilled. ( 14. ) THE question now is whether the company should be given a chance of calling another general body extra ordinary meeting and putting the proposed amendment to vote. If in that meeting the shareholders in the respondent No. 2 also vote for the amendment there would be the end of the matter. I have put it to the learned counsel appearing for respondent No. 2 whether in the event of a fresh extra-ordinary general matting his clients attitude would be different from that shown in the previous meeting. He frankly stated that he would not be able to say anything about it. Thus the situation is that even if time is given to call another meeting of the general body of the shareholders it would not solve the impasse. The only alternative is for this Court itself to see whether it can under the law direct that this amendment be made in the Articles of Association, and whether the instant case is such as to call for the exercise of these powers. ( 15. ) SECTIONS 397 to 399 speak only of the right of the member or members to make the application. The first two sections refer to the circumstances in which the applications can be made. Section 399 sets out the minimum requirement in the number of members to make such application. ( 15. ) SECTIONS 397 to 399 speak only of the right of the member or members to make the application. The first two sections refer to the circumstances in which the applications can be made. Section 399 sets out the minimum requirement in the number of members to make such application. It is to be noted that this is only the minimum and there is no indication in section 399 about a maximum. Otherwise sections 397 and 398 only state that the Court may with a view to bringing an end to the matters complained of make such orders as it thinks fit. The exact scope of the orders that the Court can make are not defined in those two sections. Either they are absolute or they are governed by what is contained in sections 402 and 404, section 403 itself only referring to interim orders. Section 402 runs-Without prejudice to the generality of the power of the Court under section 397 or 898 an order under either section may provide for. . . . . . . . . . . " then follow seven headings (a) to (g) in none of which is the amendment of the Articles of Association spoken of in terms. But this is of no consequence because the list in section 402 is only illustrative and not exhaustive. Though the Courts power of amending by order any Articles of Association is not set out in section 402, section 404 starts with this- "where an order under section 397 or 398 makes any alteration in the Articles of a company. . . . . . " Then follows a safeguard against the company making an alteration inconsistent with the order; in other words, a Court can direct an alteration of any of the Articles of Memorandum of the Company. Further, once a Court has altered such an article by its order, the Company cannot in its own turn make another alteration which is calculated to reduce the effect of the alteration made by the Court. Obviously, without such a provision a situation is imaginable in which the Court goes on ordering alterations in the Memorandum of the Articles and the company goes on in its own turn making counter alterations calculated to neutralise the effect of the Courts order. Obviously, without such a provision a situation is imaginable in which the Court goes on ordering alterations in the Memorandum of the Articles and the company goes on in its own turn making counter alterations calculated to neutralise the effect of the Courts order. Whatever it is, this is clear statement if any such was necessary in view of the generality of section 402 that the Court can itself by its order direct the amendment of any of the Articles of Association. ( 16. ) IN the result, it is ordered for the better conduct of this companys affairs that Article 113 of the Articles of Association be amended by the addition of the proposed Article 113 (a) in the form in which it has been already quoted. The petition is allowed in these terms but there will no order for costs. Copies of this order shall be sent to the Registrar of Companies as also to the Head Office of the company respondent No. 1. Petition allowed.