2012 (4) TMI 47 - HC - Companies Law

Annual general meeting - the 7th to 12th annual general meetings of the company could not be held. On 28th May, 2008 the company issued notices for holding these annual general meetings on 27th and 28th June, 2008 at diverse timings specified in the notices. - Sajal was aggrieved by issuance of these notices and approached the Company Law Board by filing an application to restrain holding these meetings. The Company Law Board allowed that application on 25th June, 2008. The company and Kamal and his group were restrained from holding these meetings on 27th and 28th June, 2008 further to the notice dated 28th May, 2008. Held that - Board of directors to be constituted as per the direction - in view of the Supreme Court order read with the Company Law Board order and the Companies Act, 1956 Mr. Sajal Dutta would retire by rotation but would be deemed to be re-elected at the general meeting. - Board of directors will issue fesh notice holding all the 7th to 12th AGM. The Company Law Board (CLB) fell into great error in altogether preventing holding meetings as mentioned in the above notices. It ought to have permitted them to be held

Summary

Issues Involved:
1. Oppression and mismanagement under Sections 397-399 of the Companies Act, 1956.
2. Validity of Board and General Meetings and resolutions passed post-19th April 1995.
3. Compliance with Supreme Court and Company Law Board (CLB) orders.
4. Authority to convene Annual General Meetings (AGMs) beyond statutory time limits.
5. Accounting treatment of share application money and medical equipment supplied.

Detailed Analysis:

1. Oppression and Mismanagement:
The disputes began with allegations of oppression and mismanagement by one brother against the other, leading to proceedings under Sections 397-399 of the Companies Act, 1956. The Supreme Court found a "full proof case of oppression" but did not order the winding up of the company, deeming it not in the interest of the parties or the company. The Supreme Court set aside several resolutions that adversely affected the appellants and restored the status quo ante 19th April 1995.

2. Validity of Board and General Meetings:
The Supreme Court's judgment invalidated all resolutions passed post-19th April 1995, including those related to raising funds, removal of directors, and allotment of shares. The Court directed that a fresh Board meeting be convened with Dr. Kamal Kumar Dutta as Managing Director, and proper resolutions be passed in the interest of the company. The CLB had also stipulated that notices for Board meetings be sent with 21 days' notice to the directors' NRI addresses.

3. Compliance with Supreme Court and CLB Orders:
The Supreme Court confirmed the CLB's order, which included maintaining the status quo regarding the Board's composition and the non-allotment of further shares until the High Court proceedings were resolved. The CLB's order also required that notices for Board meetings be issued by registered post and allowed NRI directors to appoint alternate directors.

4. Authority to Convene AGMs Beyond Statutory Time Limits:
The appellants argued that the AGMs for the years 1997-98 to 2002-03 could be convened based on the Supreme Court's order. The respondents contended that the Board had no authority to convene AGMs beyond the statutory time limits without specific permission from the CLB. The High Court, however, held that a company could convene an AGM beyond time subject to penalty and that the civil court had the power to extend the time for holding AGMs.

5. Accounting Treatment of Share Application Money and Medical Equipment:
The respondents challenged the accounting treatment of the medical equipment supplied by Dr. Kamal Kumar Dutta as fixed assets and the share application money provided by the respondents being shown as a disputed liability. The Supreme Court recognized the respondents' investment, and the High Court directed that acceptable accounting methods be followed, ensuring no defamatory remarks against any party.

Conclusions:
The High Court concluded that the Board of Directors must be reconstituted as per the status quo ante 19th April 1995, and fresh notices for the 7th to 12th AGMs should be issued within six weeks of the Board meeting. The Court condoned the delay in convening these meetings and directed that the accounts and reports be prepared without defamatory remarks and in accordance with acceptable accounting practices. The appeal was allowed to the extent that the meetings could be held subject to these terms.