1998 (12) TMI 626 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the board meetings held on August 18, 1992, and August 29, 1992.
2. Validity of the co-option of additional directors.
3. Validity of the decision to lease the hospital and purchase equipment.
4. Validity of the forfeiture and sale of shares held by the first plaintiff.
5. Validity of the general body meeting held on November 6, 1992.
6. Jurisdiction of the civil court to entertain the suits.

Summary:

1. Validity of the board meetings held on August 18, 1992, and August 29, 1992:
The court found that the board meetings held on August 18, 1992, and August 29, 1992, were illegal and void. The meeting on August 18, 1992, was convened without proper notice to the second plaintiff, and the resolutions passed were not included in the agenda, amounting to fraud. The resolutions passed on August 29, 1992, to forfeit and sell the first plaintiff's shares were also found to be invalid.

2. Validity of the co-option of additional directors:
The co-option of defendants Nos. 5, 6, and 7 as directors was invalid as it was not included in the agenda and was done to create a majority for the managing director, which was not bona fide. The board of directors had no authority to co-opt additional directors without proper notice and agenda.

3. Validity of the decision to lease the hospital and purchase equipment:
The decision to lease the hospital and purchase equipment from defendants Nos. 2 and 3 was found to be detrimental to the interests of the company and was passed without proper notice and agenda. The resolutions were invalid due to lack of bona fides and fraudulent conduct.

4. Validity of the forfeiture and sale of shares held by the first plaintiff:
The resolution to forfeit and sell the first plaintiff's shares was invalid as there was no proper notice issued to her, and the amounts drawn by her were actually due to her brother and the second plaintiff. The sale of shares to the plaintiff in O. S. No. 901 of 1992 was also invalid as there was no proper sale procedure followed.

5. Validity of the general body meeting held on November 6, 1992:
The general body meeting held on November 6, 1992, was valid as the requisitionists were entitled to call the meeting due to the failure of the board of directors to call the meeting. The decisions taken in the meeting were upheld.

6. Jurisdiction of the civil court to entertain the suits:
The court held that the civil courts have jurisdiction to entertain the suits as the remedies sought by the plaintiffs were of a civil nature and not exclusively within the purview of the Company Law Board u/s 397 and 398 of the Companies Act. The provisions in the Companies Act do not exclude the jurisdiction of the civil courts to grant reliefs such as declaration and injunction.

Conclusion:
The appeals challenging the dismissal of O. S. No. 897 of 1992 and O. S. No. 901 of 1992 were dismissed. The decrees in O. S. No. 723 of 1992 and O. S. No. 41 of 1993 declaring the meetings held on August 18, 1992, and August 29, 1992, as illegal and void, and upholding the validity of the general body meeting held on November 6, 1992, were upheld. The appeals were dismissed with costs to the contesting respondents.