2017 (12) TMI 1598 - Tri - Companies Law

Violation of the provisions of the Companies Act, 2013 - Offer and allotment of share - Respondents had increased their personal shareholding on 30-09-2015 and 26-11-2016 in a manner prejudicial to the interest of the petitioner and the 1st Respondent Company - Removal of directors - Held that - As not given effect to till date due the case is pending before this Tribunal and then before Hon ble NCLAT. Again a notice dated 10th April, 2017 was issued proposing to conduct a meeting of Board of Directors of the Company to be held on 22nd April, 2017 at 10.00. The petitioner, while accepting the receipt of said notice on 13.4.17, has addressed a letter dated 15th April, 17 by interalia requesting to defer it to a later date since the matter is sub-judice. It is stated by the Company that proceedings for removal of petitioner are kept pending since the matter is sub-judice. Since the Hon ble NCLAT, vide its order dated 6.11.17 has interalia directed as not to give effect to resolution on the issue till the disposal of case, now the Company is free to take appropriate decision in accordance with law duly following principles of natural justice. It is also relevant to point out here that the petitioner being whole time Director, and in receipt of remuneration from the Company along with other directors, cannot plead ignorance of affairs of the Company. The petitioner is yet to be removed from the position of Director. As per section 166 of Companies Act, 2013, a Director of a Company, subject to provisions of the Act, shall act in accordance with articles of the Company and shall act in good faith in order to promote the objects of Company for the benefit of its members as a whole and in the best interest of Company, its employees, shareholders, shall exercise her duties with due and reasonable care, skill and diligence etc. The conduct of petitioner being promoter Director, Whole Time Director taking huge remuneration as stated supra, not only failed in her statutory duties as assigned to her but also resorting to all sorts of baseless allegations against the Company and filing cases before the Tribunal - petitioner has failed to make out any case so as to interfere in the matter by the Tribunal, and thus it is liable to be dismissed

Summary

Issues Involved:

1. Validity of Board Meetings dated 30.09.2015 and 31.10.2016.
2. Validity of share allotments made on 26.11.2016.
3. Legality of the appointment of Respondent No. 4 as Additional Director on 26.11.2016.
4. Validity of the removal of the petitioner as Director.
5. Reliefs entitled to the petitioner.

Detailed Analysis:

1. Validity of Board Meetings dated 30.09.2015 and 31.10.2016:

The tribunal examined whether the Board meetings were conducted in accordance with the law. The records showed that the petitioner participated in the meetings and signed the minutes. The tribunal found no evidence to support the petitioner's claim that her signatures were forged. It was noted that the petitioner accepted the additional shares allotted during these meetings, indicating her consent to the proceedings. Therefore, the tribunal concluded that the Board meetings were conducted legally.

2. Validity of Share Allotments made on 26.11.2016:

The tribunal scrutinized the share allotments made on 26.11.2016. The petitioner claimed that the allotments were made without proper notice and were intended to reduce her stake in the company. However, the tribunal found that the share application money was pending and that the allotments were made proportionately to the petitioner and the respondents. The tribunal also noted that the petitioner had accepted the shares allotted to her, which undermined her claim. Consequently, the tribunal declared the share allotments valid.

3. Legality of the Appointment of Respondent No. 4 as Additional Director on 26.11.2016:

The tribunal examined the appointment of Respondent No. 4 as an Additional Director. The petitioner contended that no notice was issued for the Board meeting where the appointment was made. However, the tribunal found that the petitioner had participated in the meeting and had not raised any objections at that time. The tribunal concluded that the appointment was made in accordance with the law and was valid.

4. Validity of the Removal of the Petitioner as Director:

The tribunal addressed the petitioner's claim that she could not be removed as a Director because she was a lifetime Director as per the Articles of Association. The tribunal clarified that the company is ultimately governed by the provisions of the Companies Act, 2013, which allows for the removal of a Director by an ordinary resolution. The tribunal noted that a special notice for the petitioner's removal was given, and an Extraordinary General Meeting (EGM) was convened, but the resolution was not given effect due to the pending case. The tribunal held that the company could proceed with the removal in accordance with the law.

5. Reliefs Entitled to the Petitioner:

The tribunal found that the petitioner failed to substantiate her claims with credible evidence. The tribunal noted that the petitioner, being a whole-time Director and in receipt of remuneration, could not plead ignorance of the company's affairs. The tribunal concluded that the petitioner had not acted in good faith and had resorted to baseless allegations. Therefore, the tribunal dismissed the petition and did not grant any reliefs to the petitioner.

Conclusion:

The tribunal dismissed the company petition bearing C.P.No.36/241/HDB/2017, finding no merit in the petitioner's claims. The Board meetings, share allotments, and the appointment of the Additional Director were declared valid. The company was allowed to proceed with the removal of the petitioner as Director in accordance with the law.