1993 (4) TMI 240 - HC - Companies Law

Meetings and Proceedings - Representation of Corporation at Meetings of Companies & Creditors, Directors - Power of

Issues Involved:
1. Validity of Board Meetings and Resolutions
2. Appointment of Additional Directors
3. Transfer of Shares
4. Allegations of Fraud and Conspiracy
5. Requests for Injunctions and Interim Reliefs

Detailed Analysis:

1. Validity of Board Meetings and Resolutions:
The plaintiff challenged the validity of board meetings held on January 5, 1991, and January 23, 1991, alleging no notice was given, and the meetings were conducted clandestinely. The resolutions passed in these meetings were filed with the Registrar of Companies through Sundaram Clayton Limited, allegedly to suppress the fact of illegal share transfer from the plaintiff and his mother.

The court found that the plaintiff had participated in several subsequent board meetings without objecting to the presence of the newly appointed directors. The plaintiff's participation in these meetings and the lack of immediate challenge to the resolutions indicated acquiescence. The court held that the plaintiff could not claim equity in his favor due to his active participation in subsequent meetings.

2. Appointment of Additional Directors:
The plaintiff sought to restrain defendants Nos. 7 to 12 from exercising powers as directors, alleging their appointments were part of a fraudulent conspiracy. The court noted that the plaintiff had attended multiple board meetings where these directors were present and did not object to their appointments or presence.

The court emphasized the principle of corporate democracy, stating it is not for the court to interfere with the day-to-day management of a company unless the board's decisions are ultra vires the Act or the company's articles of association. The court found no prima facie evidence of fraud in the appointment of the additional directors and dismissed the applications for injunctions.

3. Transfer of Shares:
The plaintiff challenged the transfer of shares, claiming they were held in trust and not intended to be transferred. The court noted that the plaintiff had executed transfer deeds and sent them to RNG, acknowledging a loss of confidence from RNG. The court found no evidence to support the plaintiff's claim that the transfers were part of a conspiracy.

The court held that the plaintiff's participation in the board meetings and his acknowledgment of the transfer deeds indicated that the transfers were valid. The court dismissed the plaintiff's application for the restoration of powers vested in him.

4. Allegations of Fraud and Conspiracy:
The plaintiff alleged a conspiracy to divest him of his shares and management powers. The court found that the plaintiff's claims were not supported by the evidence. The court noted that the plaintiff had participated in the appointment of the additional directors and had not objected to their presence in subsequent meetings.

The court held that the allegations of fraud and conspiracy could only be established after a full trial and could not be presumed at the interlocutory stage. The court dismissed the applications for injunctions based on these allegations.

5. Requests for Injunctions and Interim Reliefs:
The plaintiff filed multiple applications seeking temporary injunctions to restrain the defendants from exercising their powers as directors and from interfering with the plaintiff's powers as joint managing director. The court found that the plaintiff had not made out a prima facie case for the grant of injunctions and that the balance of convenience was not in his favor.

The court emphasized that it is not for the court to manage the affairs of the company and that the board of directors is entitled to exercise its powers unless their decisions are ultra vires the Act or the company's articles of association. The court dismissed all the applications for injunctions and interim reliefs.

Conclusion:
The court dismissed all the applications filed by the plaintiff, holding that there was no prima facie evidence of fraud or conspiracy, and the plaintiff's participation in subsequent board meetings indicated acquiescence. The court emphasized the principle of corporate democracy and the board's authority to manage the company's affairs.

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