2011 (5) TMI 848 - Board - Companies Law

Issues Involved:
1. Oppression and Mismanagement
2. Board Resolution and Extraordinary General Meeting (EGM)
3. Editorial Succession and Corporate Governance
4. Appointment of Non-Family Editor
5. Role of Family in Company Management

Detailed Analysis:

Oppression and Mismanagement:
The petitioners allege that the respondents engaged in acts of oppression, manipulating the affairs of the company to ensure that no qualified family shareholder would succeed the second respondent as editor-in-chief or editor of The Hindu. The petitioners argue that the respondents' actions convert corporate democracy into a "tin pot democracy," aiming to perpetuate the second respondent's position as editor-in-chief indefinitely.

Board Resolution and Extraordinary General Meeting (EGM):
The petitioners seek to set aside the board resolution of April 18, 2011, and the notice dated April 21, 2011, convening an EGM on May 20, 2011, as oppressive. They also request the appointment of an independent chairman to conduct future board meetings. The board meeting held on April 18, 2011, approved several resolutions, including the appointment of Mr. Siddarth Varadarajan as editor of The Hindu and the stepping down of Mr. N. Ram, Mr. N. Ravi, Ms. Nirmala Lakshman, and Ms. Malini Parthasarathy from their editorial positions. The petitioners argue that these resolutions are against the basic structure of the company and the practice followed for the past 132 years.

Editorial Succession and Corporate Governance:
The petitioners argue that the recent elimination and termination of director-editors belonging to the family were facilitated by directors who constituted a majority. They contend that the proposals made by the respondents are part of a hidden agenda to sack family editors and eliminate the family's participation in the management of editorial functions. The petitioners emphasize that such changes would require the consensus of all shareholders and should be implemented through an amendment of the articles rather than by a majority vote.

Appointment of Non-Family Editor:
The respondents justify the appointment of a non-family editor as being in line with the Code of Editorial Values and the principles of separating ownership from the day-to-day functioning and management on both the business and editorial sides. The petitioners, however, argue that this proposal is unprecedented in the company's history and contrary to the tradition and practice followed since its inception. They claim that the proposal targets only the family directors on the editorial side and is not based on any merit assessment or consultation among other family members.

Role of Family in Company Management:
The petitioners argue that Kasturi and Sons Ltd., being a family-owned, family-funded, and family-managed entity since its inception, has always had qualified family members holding important operational roles. The proposed changes, which would result in the ouster of family members from editorial positions, are seen as contrary to the company's tradition and practice. The petitioners contend that the board has not addressed the aspects of retirement, entry, and exit norms as directed in the earlier order, and the proposal to appoint a non-family editor is not in the interest of the company.

Conclusion:
The Board finds that the wholesale removal of family editors is contrary to the tradition and practice followed by the company since its inception. It is doubtful whether the proposed advisory board, consisting of members from rival groups, would effectively guide the non-family editor. While the holding of the EGM is not stayed, the implementation of the resolutions proposed as special business in the EGM is restrained until further orders. The decisions taken in the EGM shall be subject to the result of the company petition. The respondents are directed to file a counter within four weeks, and the company petition is adjourned to August 23, 2011.

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