2016 (7) TMI 785 - Board - Companies Law

Holding a Board meeting and passing resolutions by preventing the applicant and his mother participate in the Board - video conferencing not provided - Held that - As gone through the entire rules 3, as understood that this rule is meant for providing video conferencing, indeed it is the duty of the directors convening the Board meeting to inform the other directors regarding the options available to them to participate in the video conferencing mode or other audio video mode or other options available to them to participate through video conferencing or other audio video means. In fact it is the obligation upon the directors convening the meeting to provide every facility to the directors asking video conference and enable them to participate in the Board meeting. Sub-rule 3(e) only says that if intimations is given at the beginning of the calendar year that will remain valid for the entire calendar year, it is not said anywhere that if it is not given at the beginning of the year, video conference is not to be provided in that calendar year, therefore, it does not mean that the directors are not entitled for video conferencing if intimation is not given at the beginning of the calendar year. It is needless to say when a provision is read, it has to be read wholly and not in pieces, therefore, no merit in the argument of the respondents counsel saying that video conferencing is not provided because no intimation is given at the beginning of the calendar year. It is no doubt true that upon demise of the one of the directors from B group, the Board equation has been changed, for which R2(e) has already filed an application and the same is pending before this Bench. R2(e) should have pursued for hearing instead of adopting this method to balance the equation in the Board. In view of the same, hereby believe that holding a Board meeting and passing resolutions by preventing the applicant and his mother participate in the Board is not fair, therefore, as hereby stay the operation of the resolutions passed in the Board meeting held on 4-6-2016 and also to withhold passing resolutions in respect to Item 2 and Item 3 of the Board meeting scheduled to be held at 3 p.m. on 22-6-2016 until further orders in this CP.

Summary

Issues Involved:
1. Urgent stay order for a Board Meeting scheduled on 22-6-2016 and resolutions passed on 4-6-2016.
2. Denial of video conferencing for participation in the Board Meeting.
3. Allegations of fraudulent conduct during the Board Meeting on 4-6-2016.
4. Dispute over the appointment of an additional independent Director.
5. Compliance with Company Meeting Rules and relevant legal provisions.
6. Impact of a court order on maintaining status quo in family companies.
7. Doctrine of estoppel in case of backing out from assurances.
8. Interpretation of rules regarding video conferencing for Board Meetings.
9. Change in Board dynamics due to the demise of a director from a specific group.

Detailed Analysis:

1. The Applicant sought an urgent stay order to prevent a Board Meeting scheduled for 22-6-2016 and to halt the resolutions passed on 4-6-2016. The Applicant, a joint managing director, and his mother were absent during the meeting, where decisions were made without their presence.

2. The denial of video conferencing for the Applicant and his mother to participate in the Board Meeting raised concerns. The Respondent cited Company Meeting Rules, specifically Rule 3, as a reason for denying video conferencing, alleging non-compliance with the rules.

3. Allegations of fraudulent conduct during the Board Meeting on 4-6-2016 were raised, including the appointment of an additional independent Director without proper agenda items and the selection of a Company Secretary in the absence of key directors.

4. Dispute arose over the appointment of an additional independent Director, with objections raised regarding the lack of agenda items and proper procedure for such appointments.

5. The interpretation of Company Meeting Rules and legal provisions regarding video conferencing was crucial. The Board's obligation to provide facilities for directors to participate in meetings, regardless of prior intimation at the beginning of the calendar year, was emphasized.

6. The impact of a court order maintaining status quo in family companies was discussed, highlighting the need for compliance and the appointment of an independent director to ensure statutory requirements are met.

7. The doctrine of estoppel was invoked concerning assurances given for video conferencing and the subsequent denial, emphasizing the importance of honoring commitments made during business dealings.

8. The Judge's ruling emphasized the need for fair play, leading to a stay on the resolutions passed during the Board Meeting on 4-6-2016 and withholding of resolutions for subsequent meetings until further orders.

9. The change in Board dynamics due to the demise of a director from a specific group was noted, with pending applications to address the altered Board composition. The importance of resolving disputes and maintaining balance within the Board was highlighted for future proceedings.