2000 (11) TMI 1241 - Board - Companies Law

Summary

Issues Involved:
1. Removal of the 1st petitioner as director/managing director.
2. Appointment of the 2nd respondent as managing director.
3. Legality of the Extraordinary General Meeting (EOGM) held on 30-1-1997.
4. Compliance with sections 169 and 284 of the Companies Act, 1956.
5. Petitioners' winding up petition and its impact on the current petition under section 397/398.

Detailed Analysis:

1. Removal of the 1st petitioner as director/managing director:
The petitioners, holding 35% shares in the company, challenged the removal of the 1st petitioner as director/managing director in an EOGM held on 30-1-1997. The petitioners argued that the removal was illegal due to non-compliance with the provisions of the Companies Act, 1956, specifically sections 169 and 284. They contended that no proper notice was given for the EOGM and that the 1st petitioner was not given special notice as required under section 284.

2. Appointment of the 2nd respondent as managing director:
The petitioners also challenged the appointment of the 2nd respondent as managing director in the same EOGM. They argued that this appointment was not included in the agenda of the notice for the EOGM, violating section 169 of the Act. The respondents claimed that the appointment was valid as it was carried through in the EOGM.

3. Legality of the Extraordinary General Meeting (EOGM) held on 30-1-1997:
The petitioners argued that the EOGM was convened illegally, as they did not receive notice of the meeting. The respondents countered that proper notice was given and that the petitioners' challenge in civil court indicated their awareness of the meeting. The Board found discrepancies in the notices issued for the EOGM and AGM, questioning the validity of the EOGM notice.

4. Compliance with sections 169 and 284 of the Companies Act, 1956:
The Board noted that the notice for the EOGM did not comply with section 169, as it was not issued in the company's name and did not specify the business to be transacted. Additionally, there was no evidence of a special notice under section 284 being given to the 1st petitioner. The Board concluded that the notice convening the EOGM suffered from various legal infirmities, rendering the business transacted in the meeting invalid.

5. Petitioners' winding up petition and its impact on the current petition under section 397/398:
The respondents argued that the petitioners' winding up petition, admitted by the Kerala High Court, precluded them from seeking relief under section 397. The Board acknowledged the winding up petition but decided to address the grievances under section 397/398, given the specific circumstances of the case.

Conclusion:
The Board held that the removal of the 1st petitioner and the appointment of the 2nd respondent as managing director in the EOGM were invalid due to non-compliance with sections 169 and 284 of the Act. However, considering the petitioners' minority shareholding and the subsequent ratification of the 2nd respondent's appointment, the Board did not order reinstatement of the 1st petitioner. Instead, it provided an option for the petitioners to sell their shares to the respondents at a fair price determined by the statutory auditors. The petition was disposed of with these directions, and no order as to costs was made.