A Division Bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe has held that an investor whose name was never entered in a company's register of members can nonetheless maintain a petition alleging oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956, so long as the company's own conduct consistently recognised him as a stakeholder.
On the facts, the respondent had invested substantial funds in the company and was treated throughout as Managing Director and 'co-owner,' even though share certificates were never formally issued in his name. The Court held that formal non-entry in the statutory register could not defeat his substantive rights as a member, where the company's own conduct — accepting his investment, allotting him a managerial role, and treating him as a stakeholder — showed he was in substance a member.
The ruling closes off a common preliminary-objection strategy in oppression and mismanagement litigation: companies can no longer defeat a minority-oppression petition purely on the technical ground that the petitioner's name does not appear in the register of members, where the company's own dealings with that person tell a different story.