2013 (5) TMI 976 - Board - Companies Law

Summary

Issues Involved:
1. Restraining the Company from convening and holding the proposed Extraordinary General Meeting (EGM).
2. Applicant's legitimate expectation to be part of the management.
3. Compliance with statutory provisions for calling EGM.
4. Allegations of mismanagement and mala fide actions by the Applicant.
5. Democratic rights of shareholders to call for EGM and remove a director.

Summary:

Issue 1: Restraining the Company from convening and holding the proposed EGM
The Applicant sought to restrain the Company from holding the proposed EGM on 26.04.2013, arguing that the meeting aimed to remove him from the board, which he claimed was unjustified. The Respondents countered that the EGM was convened in accordance with the Act and that the Applicant had engaged in several mala fide actions, including filing multiple complaints to various authorities.

Issue 2: Applicant's legitimate expectation to be part of the management
The Applicant, holding 20% of the equity shareholding along with his wife, claimed a legitimate expectation to be part of the Company's management. However, the Respondents highlighted that the Applicant had not participated in several board meetings and Annual General Meetings over the years, despite receiving notices.

Issue 3: Compliance with statutory provisions for calling EGM
The court examined whether a shareholder had the right to requisition an EGM and move a resolution to remove a director. It was found that the requisitionist, a shareholder holding 7,000 fully paid-up equity shares, had complied with Section 169 and Section 284 of the Act. The Company followed the due procedure by issuing notices and convening the EGM as per the statutory requirements.

Issue 4: Allegations of mismanagement and mala fide actions by the Applicant
The Applicant alleged that the Respondents committed gross mismanagement and that the notice for the EGM was issued by a person whose appointment was under challenge. The Respondents argued that the Applicant's actions had caused significant disruption to the Company's operations and that his removal was justified. The court noted that the Applicant had addressed several complaints to various authorities, which had hampered the Company's day-to-day functioning.

Issue 5: Democratic rights of shareholders to call for EGM and remove a director
The court emphasized that every shareholder has the right to call an EGM and move resolutions, as per the statutory provisions. The Applicant could not preemptively seek to restrain the Company from holding the EGM on the grounds that he might be removed. The court referred to the Supreme Court's decision, which upheld the democratic rights of shareholders to call and hold EGMs.

Conclusion:
The court concluded that the Applicant had not made out a case to grant the reliefs sought. The requisitionist had the right to call for the EGM, and the Company had followed the due procedure. The Applicant's claim of legitimate expectation did not entitle him to prevent the democratic process of the shareholders. The application to restrain the Company from holding the EGM was dismissed, and no orders as to costs were made.