2019 (5) TMI 1820 - Tri - Companies Law

Restraint Order on calling of EOGM - temporary injunction sought in any manner introducing, considering or passing the proposed resolution mentioned at Item No.1 of the notice dated 12.4.2019 at the proposed Extra Ordinary General Meeting convened on 8.5.2019 or any other subsequent date - HELD THAT - Calling of the EOGM may be done and EOGM cannot be restrained by any shareholder of the Company. In this case, the applicant as a minority shareholder has sought to restrain on the EOGM which is not permissible, given the law laid down by Hon'ble Supreme Court - Since the applicant has raised a point that the proposed amendment will affect the minority shareholder's right and if the company is converted into a full-fledged public limited company, then its character of HYBRID company within the company is distinguished and the right of preemption which is available to the applicant, will not be available to the applicant. However, at this stage, we cannot give any finding regarding the right of the preemption about the validity of the said meeting regarding the permissibility of such amendment and EOGM cannot be stayed since the matter is sub-judice. List on 3.6.2019 for hearing.

Summary

Issues:
1. Application for temporary injunction to restrain passing of proposed resolution at Extra Ordinary General Meeting.
2. Dispute between minority shareholder and majority shareholder regarding alteration of Articles of Association.
3. Validity of proposed amendment to convert private limited company into full-fledged public limited company.
4. Minority shareholder's right of preemption and protection against oppression by majority shareholders.

Analysis:
1. The applicant filed an application seeking a temporary injunction to restrain the respondent from passing a proposed resolution at an Extra Ordinary General Meeting. The applicant, a minority shareholder of the company, raised concerns regarding the proposed alteration of the company's Articles of Association, specifically related to the right of preemption. The applicant highlighted the continuous attempts by the majority shareholder to invalidate the right of preemption, leading to a dispute between the parties.

2. The dispute stemmed from the minority shareholder's claim that the majority shareholder sought to alter the company's status and structure by deleting key Articles from the Articles of Association. The applicant alleged that such actions were oppressive and aimed at denying the minority shareholders, particularly the applicant, their valuable rights. The legal battle between the parties revolved around the interpretation and enforcement of Article 57 and the attempts to protect the minority shareholder's interests against the majority's actions.

3. The proposed amendment aimed to convert the company from a private limited to a full-fledged public limited company. The applicant argued that such a conversion would impact the minority shareholder's rights, especially the right of preemption. The respondent contended that the law, as laid down by the Supreme Court in previous cases, did not permit restraining the calling of an Extra Ordinary General Meeting. The legal arguments centered around the statutory provisions and the implications of the proposed conversion on the rights of the minority shareholder.

4. The Tribunal acknowledged the concerns raised by the minority shareholder regarding the potential impact of the proposed amendment on their rights. However, the Tribunal refrained from making a definitive ruling at that stage, considering the matter sub-judice. The Tribunal directed the respondents to file their objections within a specified timeframe, allowing for further legal arguments and clarifications to be presented before a final decision could be made. The Tribunal scheduled a hearing for a later date to continue the proceedings and address the issues raised comprehensively.