1995 (5) TMI 285 - Board - Companies Law

Issues Involved:
1. Restraint on implementing the resolution passed at the extraordinary general meeting.
2. Compliance with Section 173 of the Companies Act regarding the explanatory statement.
3. Inspection of documents.
4. Amendments to the main petition.

Issue-wise Detailed Analysis:

1. Restraint on Implementing the Resolution Passed at the Extraordinary General Meeting:
The petitioners sought to restrain the respondent-company from implementing the resolution passed at the extraordinary general meeting held on June 20, 1994, which removed the petitioners as directors. They argued that the explanatory statement annexed with the notice did not fulfill the requirements of Section 173 of the Companies Act. The Company Law Board's interim order dated June 15, 1994, restraining the company from transacting the business relating to the removal of the petitioners, was set aside by the High Court of Bombay. However, the High Court allowed the petitioners to participate in board meetings without representing themselves as directors. The Division Bench upheld this decision but continued the interim order for two weeks. The petitioners argued that the extraordinary general meeting was vitiated by non-compliance with Section 173, as the explanatory statement did not set out all material facts. The respondents countered that the material facts were different from full particulars and that the explanatory statement did not suffer from want of particulars.

2. Compliance with Section 173 of the Companies Act Regarding the Explanatory Statement:
Section 173(2) mandates that a statement setting out all material facts concerning each item of business should be annexed to the notice convening the meeting. The petitioners contended that the explanatory statement did not disclose material particulars, such as the petitioners' offer to withdraw their letter to the State Bank of India and the fact that their personal guarantee to other financial institutions was still in force. The respondents argued that the explanatory statement was sufficient and that the petitioners' letter to the bank was anti-company. The Company Law Board noted that in a requisitioned meeting, the company acts only as a medium to convene the meeting and is not bound to attach an explanatory statement. The Board concluded that the notice calling for the meeting did not suffer from any legal infirmity.

3. Inspection of Documents:
The petitioners sought inspection of documents, arguing that the company had not complied with the Company Law Board's order dated June 15, 1994. The respondents contended that the petitioners had been given inspection of all documents they were entitled to as shareholders and that the petitioners, having been removed as directors, were not entitled to further inspection. The Company Law Board directed the company to offer the petitioners inspection of all documents they are entitled to as members and those relied on by the respondents in their replies, within one month from the date of receipt of the order.

4. Amendments to the Main Petition:
The petitioners sought to incorporate amendments to the main petition. The Company Law Board allowed the amendments except for the portion relating to the extraordinary general meeting held on June 20, 1994, as it had already been considered in this order. The respondents were directed to file their replies to the amended application by July 15, and rejoinders, if any, by August 15, 1995. The petitioners were also directed to file their replies on the maintainability of the petition by July 15, and rejoinders by August 15, 1995. The petition was scheduled for a final hearing from September 25 to September 27, 1995.

Conclusion:
The Company Law Board vacated the interim order restraining the implementation of the extraordinary general meeting resolution, directed the company to offer inspection of documents to the petitioners, and allowed amendments to the main petition except for the portion relating to the extraordinary general meeting. The petition was scheduled for a final hearing in September 1995.

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