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2017 (3) TMI 2 - Tri - Companies LawViolation of principles of natural justice - removal of director - Entitled to be continued as Director for life on the contention that the Company is quasi partnership firm - Held that - The petitioner was aware of both the board meeting dated 11.3.2011 and shareholders ordinary general meeting dated 5.4.2011 and, he was also physically present in both the meetings. However, for the reasons best known to petitioner, he has submitted a letter dated 4/5th April, 2011, which was received by the company on 5.4.2011 at 11.40 am i.e. after the meeting removing him as Director was over. The letter is an afterthought and, it would not have bearing on the issue in question. We are convinced that he board meeting as well as ordinary general meeting were conducted strictly in accordance with law and, there is no violation of principles of natural justice. Moreover, admittedly, the company is a private limited company and, cannot be called a quasi-partnership firm as contended by the Petitioner. And, the Petitioner can be removed by adopting proper course of action in Accordance with articles of Association and relevant provisions of Companies Act, 1956. Hence, the removal of Petitioner as director is held to be in order. The fifth Respondent issued a notice/complaint dated 08.03.2011 to remove the Petitioner as a Director. This issue of the removal of the Petitioner was discussed in the Board Meeting held on 11.03.2011 under the caption any other Business . Further she also did not attend the EGM in person in which the Petitioner s removal was to be discussed. It is surprising that a person who made a complaint/notice to remove a Director, chose not to attend the EGM in person. Further, from the available records, it is also not clear as to when the 5th Respondent became shareholder of the 1st Respondent Company. Whether the Petitioner has come to this Tribunal with clean hands in order to claim equitable relief under Section 397/398 of Companies Act, 1956 - Held that - In this context, it is necessary to refer the legal notices dated 8th April, 2013 got issued by the petitioner through his Advocate Shri Govind Reddy Mandadi to D. Nitin Kumar Reddy and Ravikanth Gajula, who are purchasers of plots of the Company. The petitioner through the said notices has threatened them with legal consequences if they proceed with purchasing of the plots of the Company since a suit bearing OS No. 832 of 2010 and the present petition were pending. As stated above, OS No. 832 of 2010 was filed before IInd Addl. District Judge, RR District by seeking a judgement and Decree against the Defendants (against the Company and its Directors) permitting his to participate in day to day affairs of Company and to direct the defendants not to take any decision without participation of plaintiff( the petitioner herein). He has also filed IA No. 90 of 2011 in OS No. 832 of 2010 by seeking to grant an ad-interim injunction restraining the respondents/defendants from alienating, creating any charge or any 3rd party interest in the suit schedule property pending disposal of the suit. However, the said IA was dismissed by the Court by an order dated 20th September, 2011, by holding that the petitioner failed to make out prima-facie case, balance of convenience and irreparable loss in his favour. The above circumstances clearly show that the petitioner is bent upon to disturb the functioning of the Company by abusing the process of law by filing cases on baseless grounds for his selfish ends without any legal basis. We held that the petitioner has not come to the Tribunal with clean hands to claim any benefits as prayed for in the present petition and therefore he is not entitled for any relief as prayed for. We further held that the ratio as held in the judgements, relied upon by the respondents, as discussed supra is applicable to the present facts and circumstances of the case. Petitioner has failed to make out any case so as to grant any relief as prayed for.
Issues Involved:
1. Entitlement of the petitioner to be continued as Director for life based on the contention that the Company is a quasi-partnership firm. 2. Whether the petitioner was given due notices for meetings which culminated in passing the impugned resolutions dated 11.03.2011 and 05.04.2011. 3. Whether the petitioner approached the Tribunal with clean hands. 4. Whether the removal of the petitioner from the Directorship was illegal. Issue-wise Detailed Analysis: 1. Entitlement to be Continued as Director for Life: The petitioner contended that the Company was a quasi-partnership concern and thus, his directorship should be linked with his shareholding. However, the Tribunal noted that Breezy Farms and Resorts Limited was registered as a Private Limited Company under the Companies Act, 1956. As per Article 3 of the Articles of Association, the Company is a Private Limited Company within the meaning of Section 3(1)(iii) of the Companies Act, 1956. Therefore, it cannot be called a quasi-partnership concern. Consequently, the petitioner is not entitled to be continued as a Director for life. 2. Due Notices for Meetings: The Tribunal examined whether the petitioner was given due notices for the meetings held on 11.03.2011 and 05.04.2011. The Company had issued a notice dated 28.02.2011 for a Board Meeting on 11.03.2011, which included "Any other business with the permission of the Chair" as an agenda item. All Directors, including the petitioner, attended this meeting. During this meeting, a notice dated 08.03.2011 from Respondent No. 5 proposing the removal of the petitioner as Director was discussed. Subsequently, a notice dated 22.03.2011 was issued for an Extraordinary General Meeting (EGM) on 05.04.2011 to consider the petitioner's removal. The petitioner attended both meetings and was aware of the agenda. Therefore, the Tribunal found that the petitioner was given proper notice and the meetings were conducted in accordance with the law. 3. Clean Hands: The Tribunal assessed whether the petitioner approached the Tribunal with clean hands. It was noted that the petitioner had issued legal notices to prospective buyers of the Company's plots, threatening them with legal consequences due to pending litigation. Additionally, the petitioner had filed an IA No. 90 of 2011 seeking an interim injunction to restrain the respondents from alienating or creating third-party interests in the Company's properties, which was dismissed by the Civil Court. These actions indicated that the petitioner was attempting to disturb the Company's functioning for selfish ends without a legal basis. Therefore, the Tribunal concluded that the petitioner did not approach the Tribunal with clean hands. 4. Legality of Removal from Directorship: The Tribunal examined whether the removal of the petitioner from the Directorship was illegal. The removal was based on a notice/complaint dated 08.03.2011 from Respondent No. 5 and was discussed in the Board Meeting on 11.03.2011. The EGM held on 05.04.2011 approved the resolution to remove the petitioner with 80% shareholder approval. The Tribunal found that the removal process followed the relevant provisions of the Companies Act, 1956, and the Articles of Association. The petitioner was given proper notice, had the opportunity to respond, and attended the meetings. Therefore, the removal was held to be in order. Conclusion: The Tribunal dismissed the Company Petition No. 59 of 2011, finding that the petitioner failed to make out a case for relief. However, considering the petitioner's 20% shareholding and his financial investment in the Company, the Tribunal directed the Company to invite the petitioner as a Special Invitee for all Board Meetings discussing financial implications to protect his interests. No order as to costs was made.
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