2000 (5) TMI 965 - SC - Companies Law

Appellants notice of motion dismissed - Held that - Appeal allowed. Neither appellant No. 1 nor respondent No. 1 shall preside in any of the meetings of the board of directors.The appointment of 12 additional directors cannot be sustained. Hence resolutions dated 8-11-1997 and 29-3-1997 and 17-4-1997 stand obliterated in view of the consent order dated 30-6-1997/ 2-7-1997. So far resolution dated 17-4-1997 for the induction of 57 life members, in view of our findings, they not be deemed to have been inducted on that date as member but their induction as such would be placed for consideration before the annual general meeting to be held later. Annual general meeting shall be held under the chairmanship of Mr. A.P. Kothari, Company Registrar, who shall expedite the holding of annual general meeting at a very early date, possibly within three months of this order being communicated to him.

Issues Involved:
1. Validity of the resolution dated 8th November 1995.
2. Validity of the resolution dated 29th March 1997.
3. Validity of the resolution dated 17th April 1997.
4. Authority to preside over board meetings.
5. Induction of 57 life members.
6. Holding of the annual general meeting.

Issue-Wise Detailed Analysis:

1. Validity of the Resolution Dated 8th November 1995:
The appellants challenged the resolution dated 8th November 1995, which included the removal of appellant No. 1 as chairman, the appointment of respondent No. 1 as chairman, and the appointment of 12 additional directors. The appellants argued that the consent order dated 30th June 1997 wiped off this resolution. The Supreme Court held that the consent order implicitly voided the resolution of 8th November 1995, as the agenda was to be reconsidered afresh. Thus, the resolution dated 8th November 1995 became non-est.

2. Validity of the Resolution Dated 29th March 1997:
The resolution dated 29th March 1997, which appointed another set of 12 additional directors, was also challenged. The Court concluded that this resolution was consequential to the resolution dated 8th November 1995 and was wiped off by the consent order dated 30th June 1997. The meeting held on 4th July 1997 under the chairmanship of Mr. Satish Shah resolved not to appoint 12 additional directors, thus nullifying the resolution dated 29th March 1997.

3. Validity of the Resolution Dated 17th April 1997:
The resolution dated 17th April 1997, which included the induction of 57 life members, was challenged on the grounds of procedural irregularities and improper presiding by respondent No. 1. The Court noted that the meeting was held in haste to overreach the Court's order. The resolution was not conducted properly and was part of the ongoing tussle between the two groups. The Court directed that the induction of life members be placed for consideration in the next annual general meeting.

4. Authority to Preside Over Board Meetings:
The Court held that neither appellant No. 1 nor respondent No. 1 should preside over any board meetings. The consent order dated 30th June 1997, which appointed Mr. Satish Shah to preside over the meeting, indicated that both appellant No. 1 and respondent No. 1 could not be treated as the chairman of the Board. The Court emphasized the importance of having an impartial chairman to ensure fair conduct of meetings.

5. Induction of 57 Life Members:
The induction of 57 life members through the resolution dated 17th April 1997 was contested. The Court found procedural irregularities in the meeting and noted that the induction was part of the tussle between the two groups. However, the Court did not reject the life members' applications outright. Instead, it directed that their cases be placed before the next annual general meeting for consideration.

6. Holding of the Annual General Meeting:
The Court upheld the High Court's direction to hold the annual general meeting under the chairmanship of Mr. A.P. Kothari, the Company Registrar. The Court emphasized the need for an impartial chairman to conduct the meeting and directed that the annual general meeting be held at the earliest, possibly within three months of the order being communicated to Mr. Kothari.

Conclusion:
The Supreme Court allowed the appeal, set aside the judgments of the High Court and the trial court, and directed the holding of the annual general meeting under the chairmanship of Mr. A.P. Kothari. The Court concluded that the resolutions dated 8th November 1995, 29th March 1997, and 17th April 1997 were obliterated by the consent order dated 30th June 1997. The induction of 57 life members would be considered in the next annual general meeting. Neither appellant No. 1 nor respondent No. 1 would preside over any board meetings.

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