2001 (3) TMI 932 - HC - Companies Law

Issues Involved:
1. Legality of convening an extraordinary general meeting (EGM) at a location other than the registered office.
2. Applicability of Section 166(2) of the Companies Act to EGMs.
3. Validity of Articles of Association in context to Sections 166 and 169 of the Companies Act.
4. Alleged hardship to shareholders due to the location of the EGM.
5. Prima facie case for granting an injunction.
6. Request for initiation of criminal contempt proceedings against the plaintiff.
7. Awarding of exemplary costs to the respondent.

Detailed Analysis:

1. Legality of Convening an EGM at a Location Other Than the Registered Office:
The plaintiff contended that the EGM should be held at the registered office or within the city where the registered office is situated, as per Section 166(2) of the Companies Act. The defendant argued that Article 74 of the Articles of Association allows the Board of Directors to convene meetings at any place. The court found that the plaintiff was aware of the distinction between annual general meetings (AGMs) and EGMs and that the EGM in question was not an AGM. Therefore, Section 166(2) did not apply, and the Board had the authority to decide the meeting's location.

2. Applicability of Section 166(2) of the Companies Act to EGMs:
The plaintiff argued that Section 166(2) applies to all meetings, including EGMs. The court clarified that Section 166(2) specifically pertains to AGMs, not EGMs. The court also noted that the plaintiff's pleadings did not support the claim that the meeting was an AGM. Consequently, the statutory provision of Section 166(2) was not applicable to the EGM.

3. Validity of Articles of Association in Context to Sections 166 and 169 of the Companies Act:
The plaintiff challenged Articles 73 and 74 of the Articles of Association, claiming they were void under Sections 166 and 169. The court held that Section 169 provides for EGMs on requisition by shareholders but does not exclude the Board's power to convene EGMs. Article 74, which allows the Board to convene EGMs, was found consistent with the law. Section 291 of the Companies Act empowers the Board to exercise all powers of the company, including convening EGMs.

4. Alleged Hardship to Shareholders Due to the Location of the EGM:
The plaintiff argued that holding the EGM in Mumbai would cause hardship to shareholders, especially those from Rajasthan. The court found that the majority of shareholders resided in Mumbai, making it a reasonable location for the meeting. The court also noted that the plaintiff's hardship was not sufficient to outweigh the convenience of the majority.

5. Prima Facie Case for Granting an Injunction:
The court evaluated whether the plaintiff had a prima facie case for an injunction. It concluded that the plaintiff failed to prove any irreparable injury or balance of convenience in his favor. The plaintiff's stake was negligible, and no other shareholders joined the suit. Therefore, the court found no grounds to grant an injunction.

6. Request for Initiation of Criminal Contempt Proceedings Against the Plaintiff:
The defendant requested criminal contempt proceedings against the plaintiff, alleging abuse of the court process. The court found no sufficient material to hold the plaintiff in contempt and declined the request.

7. Awarding of Exemplary Costs to the Respondent:
The defendant sought exemplary costs, arguing that the plaintiff's litigation was frivolous and caused harm to the company. The court did not find sufficient evidence of mala fide intent by the plaintiff and declined to award exemplary costs.

Conclusion:
The court dismissed the appeal, finding no prima facie case for the plaintiff and no irreparable injury. The balance of convenience was not in the plaintiff's favor, and the statutory provisions did not support his claims. The request for criminal contempt and exemplary costs was also denied. The appeal was dismissed with no order as to costs.

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