N. Kumar, J.This appeal is preferred against the order passed by the Company Law Board dismissing the petition filed under sections 397 and 398 of the Companies Act, 1956. The appellant-petitioner is the first joint shareholder of respondent No. 1 company holding 244 equity shares of Rs. 10 each in the paid-up share capital of respondent No. 1 company (for short hereinafter referred to as the holding company). 98.54 per cent of equity share capital of the company is held by two entities belonging to the parent company (holding company), i.e., Hewlett-Packard group and remaining 1.46 per cent of the equity share capital are held by 7,200 small shareholders, which also includes the appellant-petitioner. The company was originally incorporated under the provisions of the Companies Act, 1956 on January 20, 1988, under the name and Style of Digital Equipments (India) Ltd. It was a 51 per cent, subsidiary of Digital Equipments Inc., a United States based multinational company. With the worldwide amalgamation of Digital Equipment and Compaq and later, on the amalgamation of Compaq and Hewlett-Packard, respondent No. 1 company acquired its present name as M/s. Hewlett-Packard Global Soft Ltd. The registered office of the company is situated at 39/40, Electronics City, Hosur Road, Bangalore, Karnataka. The company was listed till the year 2004 with the stock exchanges, i.e., the National Stock Exchange and the Bombay Stock Exchange. Thereafter, it was delisted from the stock exchanges. In the year 2004 an open offer (first open offer) was made by Hewlett-Packard Leiden BV, the parent company of the respondent-company for purchase of shares of the shareholders of respondent No. 1 in accordance with the Delisting Guidelines. After the first open offer, HP Leiden BV became the 98 per cent shareholder of the respondent-company. After the first open offer, the remaining shareholders of the company were provided a second opportunity (second open offer) to tender their shares at a price of Rs. 850 per share, which the second opportunity ended on July 1, 2005. Since the shares of the company had been delisted, request was received by the company from some shareholders after July 1, 2005, expressing their willingness to sell their shares to HP Leiden BV. Thereafter steps were taken under the provisions of section 94(1)(b) of the Act and article 62(b) of the articles of association. By article 62(b) of the articles of association of the company, title holders and consolidation of share capital was introduced by way of an amendment. In view of the continuous requests from numerous shareholders, the company decided to consolidate and reorganise the companys share capital by way of a share consolidation by increasing the nominal value of the shares of the company from Rs. 10 to Rs. 2,50,000 so that 25,000 equity shares with a nominal value of Rs. 10 each were consolidated into one equity share with a nominal value of Rs. 2,50,000. Prior to the proposed consolidation, a valuation report was obtained from an independent and reputed valuer in India M/s. Bansi Mehta and Co. As per the report of the valuer, each shareholder was offered a sum of Rs. 1,626 per share, which is 163 times the face value of each share. Notice of consolidation was sent to all the shareholders as part of the notice of the 19th annual general meeting of the company. The annual general meeting of the company was held on July 28, 2006. The decision to consolidate the shares was approved by an overwhelming majority of the shareholders on July 28, 2006. The petitioner was accordingly offered a sum of Rs. 3,97,720 for 224 shares calculated at Rs. 1,630 per share, which, in view of the consolidation had been fractionalised. A cheque drawn on Citibank in favour of the petitioner for the said sum towards payment for the fractional entitlement was also forwarded to the petitioner. However, the petitioner has chosen not to accept the sum of Rs. 3,97,720 for the said shares.

2. The trustees appointed by the company are still ready and willing to pay the petitioner, the aforesaid amount. The trustees, pursuant to the powers available under article 62A of the articles of association of the company, sold the fractional entitlements. Therefore, the petitioner has ceased to be shareholder of the company. It is in this background, the petitioner filed a petition under sections 397 and 398 of the Act for declaration that the special resolution for consolidation of equity share capital passed in the annual general meeting is ultra vires, illegal and void and that all consequent actions thereon is void and they are not binding on the company, to restore the name of the petitioner along with Sri Damjishah on the register of members of the company and for other consequential reliefs.

3. The main ground urged was the consolidation of share capital into shares of an exceptionally huge value of Rs. 2,50,000 per share is not only uncommon but also has the effect of driving out and wiping out the minority shareholders completely. The effect of the proposed resolution takes away the membership of the petitioner unfairly, which would be ultra vires of the memorandum and articles of association of the company as well as it is in contravention of the provisions of the Act. It is a mala fide action, the sole object being to drive out the petitioner from the company.

4. The company also has filed a detailed statement of objections to substantiate their action. The Company Law Board after hearing both the parties, looking into the pleadings of the parties and the documents produced, on which reliance is placed, held that "evidently and admittedly, the notice of consolidation was sent to all shareholders as part of the notice of the 19th annual general meeting to be held on July 28, 2006. In the annual general meeting held on July 28, 2006, the resolution on consolidation was approved by majority shareholders, i.e., shareholders/proxies holding 34,25,789 shares in favour of the resolution and three shareholders holding 338 shares against it. Prior to the proposed consolidation, the shares were got valued through M/s. Bansi Mehta and Co., which valued the shares at Rs. 1,623. The consolidation was done as per the Act and the articles of association of the company. There are no materials to hold that the sole purpose was to drive out the minority shareholders. The exit offer is prima facie just and equitable. The price of Rs. 1,630 per share is higher than that prevailed at the relevant time and it is 163 times the face value of the shares. The resolution was passed with overwhelming majority and hence, the logical conclusion is that it is for the best interest of the company and shareholders. In the facts and circumstances of the case the offer of exit does not amount to illegal termination of the membership of the petitioner. As per the provisions of the Act and the articles of association, the company is entitled to consolidate and divide its share capital into shares of larger amount than its existing shares.

5. In the case of Sandvik Asia Limited Vs. Bharat Kumar Padamsi and Others, , the Bombay High Court has held as under (page 258):

Perusal of section 100 further shows that a company can reduce its share capital in any way. In the present case, it is nobodys case that the special resolution passed by the company is invalid or has not been passed by following the procedure laid down by the Companies Act. It is also nobodys case that in the articles of association of the company there is no provision authorising the company to reduce its share capital. It is also nobodys case that the amount that is being offered to the non-promoters shareholders is not just or fair. The only objection raised is that the scheme for the reduction of share capital proposed by the special resolution wipes out a class of shareholders namely the non-promoter shareholders and this, according to the objectors, is unfair and inequitable.

6. In the event of the consolidation of the share capital, any fractional entitlements, which arise from such consolidation should be aggregated and transferred to a trustee and the resultant shares sold to the person determined by the board of the company. The company had strictly complied with the provisions of the Act and the articles of association. When consolidation is legally permissible, all the consequences that flows from it are legally protected. There is no unfairness in the impugned consolidation, in order to invoke the provisions of section 397 of the Act. Out of 7,200 independent shareholders, only 13 shareholders were present in the general meeting out of which 9 voted in favour of the resolution. The process of consolidation approved by the majority shareholders at the extraordinary general meeting is legally sustainable and not liable to be declared as illegal and therefore, the Company Law Board was of the view that the petitioner is not entitled to any of the relief sought by the petitioner. Aggrieved by the said order, the petitioner has preferred this appeal.

7. Learned counsel appearing for the petitioner-appellant assailing the impugned order contended that the proposed amended article in the articles of association is not only contrary to the provisions contained in Table A of Schedule-I of the Companies Act, but it is also contrary to the provisions of the Act. As such, it is ultra vires and liable to be set aside. The proposed action is not done in good faith and it is a mala fide act. The sole object is to drive away the petitioner from the company. It is unfair and therefore, it cannot be said to be countenanced. Unless, a shareholder executes a transfer deed, there cannot be a transfer of share. By the proposed amendment, even without such transfer deed being executed, the right of the shareholder is sought to be taken away, which is not permissible in law and therefore, he submits that the Company Law Board has not properly appreciated these aspects and has committed a serious error in dismissing the petition filed by the petitioner.

8. Per contra, Sri Naganand, learned senior counsel appearing for the company submitted that the law provides for amendment of the articles of association. The law also provides for consolidation of the shares by prescribing a higher value. Such an amendment is to be passed by majority of the shareholders. Once the majority approves the amendment, it is binding on the minority shareholders. By giving effect to the said amended provision, if a fraction is created, the amendment provides for dealing with the sanction, which is also affirmed in the general body meeting. Therefore, every act on the part of the company is in accordance with law and the consequence of such an act results in depriving of membership to the petitioner. It cannot be found fault with and therefore, he submits that there is no case for interference with the order passed by the Company Law Board.

9. The entire case runs on the legality of the amended article 62A of the articles of association. It reads as under:

Whenever as a result of any bonus issue of shares or as a result of consolidation of shares, any members would become entitled to fractions of a share, such fractions shall be consolidated (to the extent possible) and the shares resulting therefrom shall be held by the directors of the company (or by any person nominated by the board in this behalf), in trust for the members so entitled to the said fractions in proportion to their respective entitlements. The directors (or such person or persons, as the case may be) may, on behalf of those members, sell the shares resulting from the consolidation of the fractions at such price and on such terms as the Board may deem fit to any person as the Board may deem fit and distribute the net proceeds of the sale in due proportion among those members, and the directors may authorise such or some person to execute the instrument of transfer of the shares to, or in accordance with the directions of, the purchaser. The transferee shall not be bound to see the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale.

This amendment to the articles of association was made on September 19, 2005. Subsequently, in the annual general body meeting held on July 28, 2006, the overwhelming majority resolved that pursuant to the provisions of section 94(1)(b) of the Act and other applicable provisions thereof, if any, consent of the company be and is hereby accorded to the consolidation of the subscribed issue and fully paid-up equity share capital of the company. By increasing the nominal value of the equity shares from Rs. 10 each to Rs. 2,50,000 each so that for every 25,000 equity shares with a nominal value of Rs. 10 each held by a shareholder are consolidated and re-designated into one equity share with a nominal value of Rs. 2,50,000 provided that no shareholder shall be entitled, who have fraction of a share and such portion of shares so arising shall be aggregated into whole shares and such number of whole shares so arising shall be held by a trustee appointed by the company and the end proceeds of sale distributed in due proportion among such shareholders, who were otherwise entitled for such fractional entitlement.

10. The consent of the members is accorded to the sale of shares resulting from the consolidation of the fractional entitlement, at a price of not less than Rs. 1,630 per equity share of Rs. 10 being the value of the shares as recommended by the board of directors of the company. The shareholders/proxies holding 34,25,789 shares voted in favour of the resolution relating to the amendment in the memorandum and articles of association. Three shareholders/proxies holding 338 shares voted against the resolution and five shareholder/proxies holding 530 shares, voted against the resolution and 10 votes are against the resolution as the votes cast in favour of the resolution are more than three types. The votes cast against the resolution was passed by the requisite majority. Section 94(1)(b) of the Act provides for consolidation and division of all or any of the share capital into shares of larger amount than its existing shares. Therefore, the consolidation of shares is in accordance with law. It was contended that relying on regulations 96 and 97(1) and (2), which applies to bonus shares and fraction of a share, the company has resorted to reduce the shares held by the petitioner, which is contrary to the said provisions. As stated above, section 94(1)(b) empowers the company to alter its share capital. In the process, it empowers the company to consolidate and divide all or any of the share capital into shares of larger amount than its existing shares. It has no obligation to issue of bonus shares. The provisions contained in regulations 96 and 97 to Schedule-I of the Companies Act deals with capitalisation of profits and issue of bonus shares and if the bonus shares allotted is fractional, how it should be dealt with. It has no application with consolidation of a share capital. Therefore, it cannot be said that article 62A is contrary to law.

11. Learned counsel relied on section 9 of the Companies Act and contended that the provisions of the Act shall have effect, notwithstanding anything to the contrary contained in the memorandum or articles of association of the company or in any agreement executed by or in any resolution passed by the company in general body meeting or by its board of directors. The provisions contained in the memorandum and articles of association, agreement or resolution to the extent, to which these provisions of the Act apply are all void as the case may be and therefore, he contended that the said amendment being contrary to the Companies Act is void. However, he failed to point out the specific provision of the Companies Act, which is contrary to the aforesaid articles of association. On the contrary, section 94(1)(b) expressly provides for consolidation of shares and for increase in the value of the shares and therefore, it is not possible to accept the contention that the aforesaid article or the resolution passed in the general body meeting is contrary to any statutory provisions under the Act, In that view of the matter, there is no substance in the said contention. Lastly, it was contended that the effect of the said amendment is, the petitioner who holds 244 shares in the company is ousted even without his signing the transfer deed, which is again contrary to law. If he has to transfer the shares, his signature is required to the transfer deed. In this case, it is not a transfer as contemplated under the Act. It is a case where because of the consolidation process, the shares held by him became a fraction and how the fraction is to be dealt with is again provided in the amended provisions of the articles of association and accordingly, it is dealt with. Therefore, the procedure adopted to take over this fractional share under the aforesaid articles of association being legal, the same also cannot be found fault with.

12. Learned counsel relied on several judgments of the courts in support of his contention. In the case of Astbury Brown v. British Abrasive Wheel Co. Ltd. reported in [1919] 1 Ch D 290, dealing with the amended article 15A, it was held that the question which arose for consideration was whether the enforcement of the proposed alteration of the minority is within the ordinary principles of justice and whether it is for the benefit of the company as a whole. It was held that it is very difficult to follow how it can be just and equitable that a majority, on failing to purchase the shares of a minority by agreement, can take power to do so compulsorily. In the circumstances of the said case, it was held article 15A is not an article when the majority are entitled to enforce with the minority and accordingly, injunction was granted. The said decision has no application. In the facts of this case, because as the said article was printed, it was a compulsion for minority shareholders to sell the shares for majority shareholders. It is not the case herein.

13. In the case of Ramakrishna Industries (P.) Ltd. and Others Vs. P.R. Ramakrishnan and Others, , it was held as under (page 437):

It is well-settled that the articles of association will have a contractual force between the company and its members as also between members inter se in relation to their rights as such members. Therefore, the parties are bound by such contractual obligations. Section 9 of the Companies Act provides that save as otherwise expressly provided in the Act, the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company and that any provision contained in the memorandum and articles shall, to the extent to which it is repugnant to the provisions of the Act, become void.

14. There was no quarrel with the said proposition. As point out earlier, the action of the company in fact is in accordance with the provisions of the Act or section 94(1)(b) and not contrary to any of the statutory provisions.

15. In the case of Cricket Club of India Ltd. and Others Vs. Madhav L. Apte and Others, , dealing with the similar situation at paragraph No. 23 has held as under (page 586):

It is impossible to read the expression provisions of this Act in section 9 as indicative merely of the express provisions and exclude the meanings which have to be read in the provisions of the Act by the rule of necessary implication. In my view, any meaning which has to be read in any section of the Act by the rule or principle of necessary implication is as much a provision of the Act as something expressly provided. In this view of the matter any provision contained in the memorandum, articles, agreement or resolution of a company which is repugnant to any provision of the Act, whether such provision be expressly found in any section or is to be read in the said section by necessary implication, would be clearly void.

16. In the instant case, the amended article is in terms of the expressed provision contained in the Act. Even by implication, the said provision do not run counter to any of the said statutory provisions and therefore the said judgments have no application.

17. The apex court in the case of Shri V.S. Krishnan and Others Vs. Westfort Hi-tech Hospital Ltd. and Others, , dealing with the case of oppression, it was held as under (page 246):

(d) The oppressive act complained of may be fully permissible under law but may yet be oppressive and, therefore, the test as to whether an action is oppressive or not is not based on whether it is legally permissible or not since even if legally permissible, if the action is otherwise against probity, good conduct or is burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would amount to oppression under sections 397 and 398.

18. if the act complained it could be held oppressive. Having regard to the facts of the case, except 244 shares as the company holds the remaining shares, the only order that could be passed is to get shares of the petitioner valued and permitting the company to purchase the said shares. In the instant case, the face value of the share is Rs. 10 per share. In the first public offer made by the company to purchase shares, the price fixed was Rs. 850 per share. Now, when there being a decision to consolidate the shares and increasing the value of the shares, they got a valuation done by approved valuer who has given the value of the shares at Rs. 1,630 per share. The bona fides can be gathered from the fact that after consolidating process, they have tendered a cheque to the petitioner for a sum of Rs. 3,97,720 at the rate of Rs. 1,630 per share. Therefore, it cannot be said that the act on the part of the company is mala fide.

19. In the case of Mr. Vijayan Rajes and Mrs. Madhumathi, V. Rajes Vs. M.S.P. Plantations Private Limited, , dealing with the act of removal of the appellant from the board of directors. They went into the question as under (page 430):

... though is an act permitted in law, and in consonance with the provisions of the Act followed by a resolution of the reconstituted board to redeem all preference shares and for the very purpose allotting equity shares of an equal number in favour of only two of the preference shareholders and utilising the very amount for redeeming the shareholding of the petitioners, all necessarily leading to an inference that the transaction are being used as a device to throw out the appellants-petitioners from the membership of the company. To constitute an act of oppression, the question is not so much as to whether the affairs of the company, are being conducted in consonance with the provisions of the Act or not, but even while so doing, the power and advantage of holding majority shares in the company is used by the majority shareholders for the purpose of causing prejudice to the minority shareholders.

20. In the instant case, having regard to the fact that the petitioner holds only 244 shares, the said judgment has no application. For the aforesaid reasons, we do not see any merit in the appeal. Hence, the appeal is dismissed.