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2017 (11) TMI 1883 - Tri - Companies LawOppression and Mismanagement - Validity of EoGM - removal of Respondent No.8 from the office of the Director - forfeiture of shares. Whether the EoGM purportedly held on 27.07.2015 is in accordance with the law and legally tenable? - HELD THAT - The Respondent Nos. 2 to 11 seem to have made efforts to usurp the office of the Directors and to gain the control over the Board of Directors of the 1st Respondent Company. Therefore, the removal of the 1st Petitioner and R12 to R22 from the office of the Directors of the 1st Respondent Company in the EoGM purportedly held on 27.07.2015 amounts to acts of oppression by the Respondent Nos. 2 to 11. Moreover, it is on record that the appointment of Respondent Nos. 2 to 11 as Directors of 1st Respondent Company was made by a single resolution which is in violation of the provisions of Section 162 of the Companies Act, 2013. Therefore, the election dated 27.07.2015 per se is void ab initio. Whether the forfeiture of 5415 equity shares of ₹ 100 each fully paid up held by the Petitioners and another shareholder in the 1st Respondent company, on 27.07.2015 is in accordance with the law and legally tenable? - HELD THAT - Assuming that the Respondent Nos. 2 to 11 were Directors at the time of forfeiture of the said shares on 27.07.2015, and were authorised to cancel the shares. But legally, the Directors of the Company cannot utilise their fiduciary powers over the shares purely for the purpose of cancellation of the shares of the minority shareholders to improve their voting power. The court cannot allow to exercise such powers which might have been delegated by the company to the Board of Directors. Therefore, there was no authority with Respondent Nos. 2 to 11 to forfeit the shares of the Petitioners and another shareholder. The whole action is patently illegal, perverse and is hereby declared as null and void. Relief - HELD THAT - The EoGM purportedly held on 27.07.2015 was illegal, and is declared as null and void - The Petitioners and another shareholder continue to be the members of the 1 st Respondent Company. We also hold that the election of the Respondent Nos. 2 to 11 as Directors of the 1st Respondent company in EoGM purportedly held on 27.07.2015 is illegal and is declared as null and void. Although the prayer has not been made by the Petitioners for rectification of the Register of Members under the provisions of Sections 111 and 11 IA of the Companies Act, 1956, yet the Tribunal is all empowered to mould and add the relief in view of the facts and circumstances of the case. Therefore, the 1 st Respondent Company is directed to enter the names of the Petitioner Nos. 1, 2 and another shareholder in the Register of Members as shareholders, if their names happened to be removed/ omitted from the Register of Members of the 1 st Respondent Company. Petition disposed off.
Issues Involved:
1. Legality of the EoGM held on 27.07.2015. 2. Legality of the forfeiture of 5415 equity shares on 27.07.2015. 3. Relief sought by the petitioners. Detailed Analysis: Issue (a): Legality of the EoGM held on 27.07.2015 The EoGM held on 18.06.2015, supervised by an independent chairman appointed by the CLB, resulted in the election of Petitioner No.1 and Respondents 12 to 22 as Directors. The CLB recognized this election on 07.07.2015. Respondents 2 to 11 did not object to this EoGM before the CLB, making their subsequent objections an afterthought. The EoGM on 27.07.2015, convened by Respondents 2 to 11, disregarded established procedures and was a betrayal of legal protocols. The respondents' participation in the 18.06.2015 election without raising objections amounts to acquiescence, barring them from contesting it later. The respondents' claim that the petitioners did not disclose their residential status is legally untenable. It was the competent authority's responsibility to verify the DIN numbers. The respondents had no authority to remove the petitioners and Respondents 12 to 22, who were duly elected. The alleged understanding between Petitioner No.1 and Respondent No.2 lacks credibility, as no rational person would agree to their own removal and forfeiture of shares. The petitioner's travel records further disprove the respondents' claims about the 01.07.2015 notice. The respondents failed to comply with Section 284 of the Companies Act, 1956, before removing the petitioners and Respondents 12 to 22. The absence of a 'special notice' invalidates the removal resolution. The appointment of Respondents 2 to 11 violated Section 162 of the Companies Act, 2013, making the 27.07.2015 election void ab initio. Issue (b): Legality of the forfeiture of 5415 equity shares on 27.07.2015 The Companies Act, 1956, does not provide for share forfeiture. The respondents failed to show any Articles of Association provisions authorizing share forfeiture for non-disclosure of residential status. Even if authorized, directors cannot use their powers to cancel minority shareholders' shares to increase their voting power. The respondents' action was illegal and is declared null and void, supported by the ruling in Rashmi Seth Vs. Chemon (I) Private Limited & Ors., Re. 1995. Relief The EoGM held on 27.07.2015 is declared illegal and void. The removal of Petitioner No.1 and Respondents 12 to 22 as Directors and the forfeiture of 5415 shares are declared null and void. The petitioners and another shareholder continue as members of the 1st Respondent Company. The election of Respondents 2 to 11 as Directors is also null and void. The 1st Respondent Company is directed to restore the names of the petitioners and another shareholder in the Register of Members. Respondents 2 to 11 are ordered to pay costs of ?50,000 to the petitioners within three weeks. Conclusion The tribunal ruled in favor of the petitioners, declaring the EoGM and subsequent actions by Respondents 2 to 11 illegal, null, and void. The petitioners and Respondents 12 to 22 are reinstated as Directors, and the forfeited shares are restored. Respondents 2 to 11 are required to bear the costs.
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