2019 (6) TMI 1554 - Tri - Companies Law

Maintenance of status quo in relation to shareholding and directorship of Respondent No. 1 Company - HELD THAT - We are not persuaded to accept the submissions made by Mr. Virendra Ganda, learned Senior Counsel for the applicant-respondents that the prevailing arrangements be permitted to continue i.e. to allow the applicant-respondents to run the hotel and to permit the non applicant-petitioners to run the restaurant in the basement. There is nothing on the record brought to our notice to that effect either in form of a resolution of the Respondent No. 1 Company or any such statutory arrangements. The other submission based on the Settlement Agreement dated 18.12.2014 has also failed to impress us because firstly, the Settlement Agreement dated 18.12.2014 has not been signed by non applicant-petitioner No. 1 and more importantly it is a transaction between two individuals which does not involve the body corporate- Respondent No. 1 Company. There are detailed provisions made under Sections 56 to 59 of the Act for transfer of share before alteration in the shareholding in a body corporate could be accepted. It requires a resolution of the Board of Directors, Transfer deed and due intimation to Registrar of Companies by uploading of MCA Website. There is nothing on the record to show that any steps were taken to enter the names of transferee shareholder in the place of non applicant-petitioners. EOGM may be convened as per the requisition and it may proceed according to the agenda. Any decision taken in the EOGM shall not be given effect as the main matter is posted for hearing on 03.09.2019. In the meanwhile, the decision taken in the EOGM be also placed on record. Application disposed off.

Summary

Issues:
1. Application for direction to maintain status quo in shareholding and directorship.
2. Prayer to stay convening of Extra Ordinary General Meeting (EOGM) and appoint observer/chairman on the board of directors.
3. Dispute over shareholding and directorship based on Settlement Agreement.
4. Non-holding of Annual General Meeting (AGM) by Respondent No. 1 Company.

Issue 1: Application for direction to maintain status quo in shareholding and directorship:
The Applicant-Respondents filed an application seeking a direction to maintain status quo in relation to the shareholding and directorship of Respondent No. 1 Company. They also requested a stay on convening the Extra Ordinary General Meeting (EOGM) and appointment of an observer/chairman on the board of directors. The main petition by non-applicant-petitioners also included a similar prayer. The Tribunal considered the interim order passed earlier and the subsequent developments in the case.

Issue 2: Prayer to stay convening of Extra Ordinary General Meeting (EOGM) and appoint observer/chairman on the board of directors:
After the interim order, non-applicant-petitioners sent a requisition to convene a meeting of the Board of Directors, which was postponed due to the pending application. Allegations were made regarding shareholding based on a Settlement Agreement. The Respondent No. 1 Company contested these allegations in their reply, citing the annual return filed with the Registrar of Companies. The Tribunal noted the importance of holding the EOGM for the flow of information to shareholders and the democratization process in the corporate sector. They permitted the holding of the EOGM despite the ongoing dispute.

Issue 3: Dispute over shareholding and directorship based on Settlement Agreement:
The Tribunal analyzed the contentions regarding shareholding and directorship arising from the Settlement Agreement dated 18.12.2014. They found that the Settlement Agreement was not signed by one of the parties and did not involve the corporate entity of Respondent No. 1 Company. The Tribunal emphasized the statutory provisions for share transfer and the lack of evidence regarding the transfer of shares as per the Agreement. They held that the EOGM could proceed as per requisition but any decisions taken would not be implemented until the main matter was heard.

Issue 4: Non-holding of Annual General Meeting (AGM) by Respondent No. 1 Company:
The Tribunal noted that Respondent No. 1 Company had not held an Annual General Meeting for over three years, which raised concerns about shareholder interests. Despite this, the Tribunal allowed the EOGM to proceed as it would provide information to shareholders and members, aligning with the principles of corporate governance. The Tribunal dismissed the request to maintain the prevailing arrangements and emphasized the need for proper corporate procedures in share transfers and decision-making processes.

In conclusion, the Tribunal disposed of the application, permitting the convening of the EOGM as per requisition but stipulating that decisions made in the meeting would not be enforced until the main matter was heard. The judgment underscored the importance of corporate governance, statutory compliance in share transfers, and the democratic process within the corporate sector.