High Court upholds company mismanagement and oppression

Sarath Malalasekera

Colombo Commercial High Court Judge K. T. Chitrasiri, Exercising Civil Jurisdiction, in a judgement stated that it is the Court opinion that the second, third and fourth respondents by their acts have mismanaged the company.

They also have acted in a manner oppressive of the petitioner as a shareholder. In the circumstances, “I order that the ORDERS NISI that had been issued be made absolute.

The Judge also ordered that the petitioner is entitled to recover the cost of the action from the second, third and fourth respondents.

The Petitioner Lee Theng Jeok of Sims Avenue, Singapore, presently at Walpola Road, Ragama cited T.M.I. Embroidery Solutions (Private) Limited of Kotte Road, Etul Kotte, presently at Kadawatha Road, Dehiwela and three others as respondents.

The Judge Chitrasiri in his lengthy judgement stated in the objections of the respondents, they have stated that the petitioner is liable for latches since an unexplained delay has occurred when filing this action.

However, the acts such as mismanagement and oppression on the minority shareholders are considered as matters that have a continuing effect. Therefore, the delay should not be a criterion that should be considered in respect of the applications of this nature.

The judgment also stated that petitioner filed this action seeking for Orders Nisi, as prayed for, in the petition.

The petitioner had been the owner of one share out of the two issued shares. The petitioner is holding more than 5% of the issued share capital in the first respondent company.

Accordingly, he falls well within the pre requisite that is necessary to file an application. However, the respondents in their objections have stated that the petitioner though had more than 5% shareholding cannot be treated as a minority shareholder when he holds 50% of shares which would constitute half of the shareholding.

The respondents therefore have argued that the petitioner is not entitled to make this application in the capacity of a minority shareholder.

It must be noted that no maximum limit of the shareholding is fixed in the Companies Act limiting the shareholders to make applications to prevent oppression and mismanagement. Dr. Harsha Cabral, PC with Shivan Kanag-Isvaran instructed by Julius and Creasy appeared for the Petitioner - Lee Theng Jeok.