Judgment :- Koshy, J. These appeals are filed questioning the correctness of the order of the Company Law Board dated 5.6.2006 under section 397, 398, read with 402 and 403 and Schedule XI of the Companies Act, 1956 (hereinafter referred to as 'the Act'). Both sides relied on various decisions in support of their arguments. Whether and how the ratio of those decisions will be applicable in this case can be considered only after considering the facts of this case. The Apex Court in Uttaranchal Road Transport Corporation and others v. Mansaram Nainwal ((2006) 6 SCC 366) observed as follows at paragraph 13: "A decision is a precedent on its own facts. Each case presents its own features. It is not everything said by a judge while giving judgment that constitutes a precedent. The only thing a judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well-settled theory of precedents, every decision contains three basic postulates: (i) findings of material facts, direct and inferential. An inferential finding of fact is the inference which the judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. (See: State of Orissa v. Sudhansu Sekhar Misra - (1968) 2 SCR 154 and Union of India v. Dhanwanti Devi - ((1996) 6 SCC 44). A case is a precedent and binding for what it explicitly decides and no more. The words used by judges in their judgments are not to be read as if they are words in an Act of Parliament. A case is a precedent and binding for what it explicitly decides and no more. The words used by judges in their judgments are not to be read as if they are words in an Act of Parliament. In Quinn v. Leathem (1901 AC 495), Earl of Halsbury, L.C. observed that every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which are found there are not intended to be exposition of the whole law but governed and qualified by the particular facts of the case in which such expressions are found and a case is only an authority for what it actually decides." Therefore, facts of the case are considered first. 2. The second respondent in the company application Dr. K.M. Mohandas, (hereinafter referred to as the 'Chairman') his wife (third respondent) and their hildren established and were carrying on the business of a hospital under partnership called "West Fort Hospitals". It was incorporated as a company in the name of "Westfort Hospitals Private Limited" on 6.4.1994. Subsequently, it changed its name as Westfort Hi-Tech Hospital Private Limited on 1.5.1997. Thereafter, it was converted as a public limited company and the word "private" was deleted and new certificate of incorporation was issued on 18.6.1997. The issued, subscribed and paid-up capital of the company was Rs.9,18,41,000/- divided into 91,84,100 equity shares of Rs.10/- each full paid-up as per the balance sheet as on 31.3.2005. It is the case of the petitioners that they joined the company when the company was in need of finance and Chairman of the Company lured doctors and other non-resident Indians to invest money when the company was being converted as public limited company on the promise that the doctors who contribute more than Rupees Ten lakhs and other persons who contribute more than Rupees Twenty lakhs would be given the office of director so that they can ensure proper management of the company. Petitioner No.1 has contributed Rupees Fifteen lakhs and petitioner Nos.2 to 4 and respondent Nos.5 and 14 also accordingly contributed Rupees Twenty lakhs and they were made directors from the inception as a public limited company and they were continuing as directors. As per the Articles of Association, total number of directors are 20. Two promotee directors (Chairman and his wife)were permanent and 18 directors were to be elected. As per the Articles of Association, total number of directors are 20. Two promotee directors (Chairman and his wife)were permanent and 18 directors were to be elected. There were two vacancies in the board due to resignation of two directors. One M.N.Purushothaman, who is not a relative of second respondent Chairman, applied to issue duplicate share certificates stating that his shares were missing and also requested to transfer the shares. The above request was approved by the Board of directors in its meeting held on 24.8.2005. It was decided to issue duplicate share certificates as provided under section 84 of the Act and also to transfer the shares. Accordingly, shares were transferred. The above board meeting was also attended by the first petitioner. As decided by the board meeting on 24.8.2005, annual general body meeting was fixed to be held on 29.9.2005. Draft notice of the meeting was also approved in the board meeting. Notices were issued under certificate of posting as provided under section 53 (1) (2) of the Act. Since one-third of the directors have to retire in every annual general meeting, six directors have to retire and those vacancies are to be filled. (See: sections 255 and 256), one of the agenda in the annual general body meeting was the same. Hence, following agenda was included in the notice as ordinary business: "7. To consider, and if thought fit, to appoint directors in the place of those retiring by rotation." In the Explanatory Statement as last item it is stated as follows: "DIRECTORS Sri.A.P.Sadanandan,Sri.T.M.Balan, Sri.C.M.Sathiadevan,Sri.V.S.Krishnan, Sri.K.R.Sreenivasan and Sri.K.J.Jayasurya are the directors who retire by rotation Com.Appeal Nos.14, 15, 17 & 18/2006 7 and are eligible for re-appointment." After sending the notice for annual general body meeting, those retiring directors opted for re-appointment. The company also received notice from eight other eligible shareholders to stand for election as provided under section 257 (1). Since their names were not included in the notice for annual general body meeting as their nominations were subsequently, it was advertised in Indian ress and Deepika which are having circulation in the place where the registered office of the company is situated was given as provided under section 256 (1A) of the Act. In the above eting, petitioners 1 to 4 and respondents 5 and 14 were not re-elected. In the above eting, petitioners 1 to 4 and respondents 5 and 14 were not re-elected. Instead, eight other directors were elected in their place in the six vacancies caused by retirement by rotation and two vacancies caused by resignation. In the annual general body meeting it was decided to increase the share capital of the company from Rs.9,20,00,000/- to Rs.12,00,00,000/-. A special resolution as provided under section 81 (1A) was moved in the annual general body meeting for issuing shares to public, but, that was not passed. It is mentioned in the report of the annual general body meeting as follows: "The Chairman briefed the meeting as to raising of funds by offering shares of the company to outsiders other than existing members of the company. Members raised their voices against this proposal and they were of the opinion that the shares should be first offered to them at par and then only to outsiders and only at a premium. They were also of the opinion that at least three months' time should be given for them to subscribe the shares offered to them. After having agreed to proposal of the members, the chairman put the business for voting on a show of hands and it was passed by a majority of votes as follows: Resolved that consent of the company be and is hereby accorded under section 81 (1A) of the Companies Act, 1956 to offer or issue any number of shares in the authorized capital of the company to any person (s) whether or not those person (s) include the members of the company or not, in such manner and subject to such terms and conditions as the Board may in the absolute interest of the company deem fit." To pass a special resolution two-third majority was equired. It is only stated that majority shareholders passed the resolution. That is not enough. Here, only conclusion possible in the special resolution to offer share to persons other than shareholders were not passed in view of section 81 (1A). Thereafter, board decided to issue right shares to all existing shareholders on the ratio of 1:4 without any discrimination. 3. Contending oppression and mismanagement, petitioners approached the Company Law Board alleging that they have invested huge sum of money on the promise that they will be continued as directors, but, that promise was not honoured. Thereafter, board decided to issue right shares to all existing shareholders on the ratio of 1:4 without any discrimination. 3. Contending oppression and mismanagement, petitioners approached the Company Law Board alleging that they have invested huge sum of money on the promise that they will be continued as directors, but, that promise was not honoured. It was further contended that notice to the annual general body meeting was not properly given. Special resolution was not passed regarding issue of shares. Issue of right shares was incorrect and removal of petitioners 1 to 4 and respondents 5 and 14 from the directorship and other acts done by the majority shareholders will amount to "oppression and mismanagement". It is also submitted that a special investigation center run by Chairman which was functioning in the Westfort Hi-tech Hospital on rent and profit, did not make due payment and since that was questioned, the Chairman was awaiting an opportunity to remove them from the directorship. It is also submitted that a special investigation center run by Chairman which was functioning in the Westfort Hi-tech Hospital on rent and profit, did not make due payment and since that was questioned, the Chairman was awaiting an opportunity to remove them from the directorship. In the petition, following reliefs were sought for: "(a) to appoint an Administrator to regulate the affairs of the company in future; (b) to direct the Administrator to lease/license the area earmarked for Investigation Center to such third party as may be selected to enter into a contract with the company by making a public auction on such terms and conditions as maybe approved by the Administrator; (c) to direct the Administrator to institute proceeding in the name of the company against the respondents 2 to 4, 22 and 23 who are partners of Westfort Hospital, for recovery of the amounts due ever since the date of the agreement till the date of regularization and a sum of Rs.50,000/- per month and such profits as are accrued to the firm by use of the area occupied by the partnership firm in pursuance to the agreement dated 29.12.2001 and to claim damages for use and occupation; (d) to declare that respondents 2 to 4 vacated office as Directors of the Company under section 283 of the Companies Act, and to pass a consequential order of injunction restraining them from acting as Directors; (e) to declare that the AGM purported to be held on 29.9.2005 is invalid and consequently all the resolutions purported to have been passed thereat including the election of directors is illegal and invalid; (f) to declare that the petitioners 1 to 4 and the 14th respondent shall be deemed to have been re-elected as directors of the company and restrain the first respondent company and its directors and persons claiming under them from interfering with the petitioners 1 to 4 and 14th respondent from acting as directors of the company; (g) to declare that any purported decision to issue shares on rights basis or otherwise after 29.9.2005 as illegal and void; (h) to pass such further and other orders to regulate the affairs of the first respondent company in future." 4. Single Member (Vice-Chairman) Bench of the Company Law Board, Chennai held that there is oppression and mismanagement mainly because annual general body meeting held on 29.9.2005 was without proper notice. Single Member (Vice-Chairman) Bench of the Company Law Board, Chennai held that there is oppression and mismanagement mainly because annual general body meeting held on 29.9.2005 was without proper notice. But, all decisions of the annual general body meeting were not set aside. Main reliefs granted by the impugned order are the following: "7. In view of my foregoing conclusions and (a) in exercise of the powers under section 402; (b) to regulate the conduct of the hospital's affairs in future; and (c) in public interest, the following order is passed: (I) It is hereby declared that -- a) the further issue of shares impugned in the company petition is illegal and void; b) the election of the respondent Nos.16 to 23 as directors is set aside; c) the retiring directors namely, the petitioner Nos.1 to 4 and the respondent Nos.5 and 14 shall be deemed to have been automatically re-appointed as directors at the eleventh annual general meeting and shall continue till the date of the twelfth annual general meeting for the year 2006; and d) the transfer of shares by Purushothaman in favour of the respondent Nos.16 to 21 and others is invalid. However, Purushothaman is free to transfer his shares in accordance with the law. (II) The Company will convene and hold the twelfth annual general meeting in accordance with law to transact, inter-alia, the following business: a) consideration of accounts, balance sheet and the reports of the board of directors and auditors for the year 2005-2006; b) appointment of directors in the place of those retiring and in the existing vacancies; c) appointment of, and the fixing of the remuneration of, the auditors; and d) further issue of shares. (III) The petitioners as well as the respondent Nos.2 to 15 are at liberty, with a view to meet financial requirements, if any, for running the hospital, to contribute any amount by way of unsecured loans carrying interest at the prevailing bank rate to be repaid from and out of the future share application money which may be subscribed by the members, on approving the resolution for further issue of shares at the twelfth annual general meeting." Following decision taken were not interfered with: "In view of the gross irregularities pointed out by me in convening, holding and conducting the annual general meeting, all items of business transacted at the impugned meeting ought to be set aside. However, considering the facts that (a) the petitioners have not challenged the adoption of accounts; the appointment of auditors; the increase in borrowing powers of the directors; (b) the adoption of accounts and the appointment of auditors are statutory businesses; and (c) the increase of authorised share capital and other items of business stated herein are in no way prejudicial to the interests of the Company or its shareholders. I do not propose to set aside any of these resolutions approved at the eleventh annual general meeting, save the resolutions pertaining to (a) the further issue of shares; and (b) the election of directors of the company." In none of the appeals, the decision of the general body as approved by the Company Law Board were challenged and that part has become final. 5. Before dealing with grounds urged in the appeal and correctness of the order of the Board, we will consider the scope of section 397. Section 397 of the Companies Act reads as follows: "397. Application to Tribunal for relief in cases of oppression:- (1) Any members of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members including any one or more of themselves may apply to the Tribunal for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub- section (1), the Tribunal is of opinion – (a) that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind-up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding- up order on the grou8nd that it was just and equitable that the company should be wound-up; the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit." To attract section 397, the persons complaining should prove that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to shareholders. The court can grant the remedy only if proved facts would justify passing of winding up order on the ground that it is just and equitable, but, instead of winding up, remedies can be granted as winding up unfairly prejudice the members. While interpreting similar provision in section 210 of the English Companies Act, 1948 and House of Lords in Scottish Wholesale Co-operative Society Ltd. v. Meyer ((1959) AC 324) taking the dictionary meaning of the word 'oppression', Viscount Simonds held that "be described as having behaved towards the minority shareholders in an 'oppressive' manner, that is to say, in a manner 'burdensome, harsh and wrongful'." After considering the above decision and Meyer ((1959) AC 324) and In Re Associated Tool Industries Ltd. ((1964) Argus LR 73), Jermyn Steel Turkish Baths Ltd. ((1971) 3 All ER 184) etc. the Apex Court in Shanti Prasad Jain v. Kalinga Tubes Ltd. ((1965) 35 Com Cases 351) held as follows: %