2017 (5) TMI 1226 - Tri - Companies Law

Validity of notices of the Board meetings and the EOGM - oppression and mismanagement - appointment of directors - Held that - For vacation of office of Director under section 283(g), notices of the meetings which the director is alleged to have not attended is must. Vacation on the ground that the director failed to attend three consecutive meetings is invalid, if the meetings were not validly held. Since the meetings held without notice, those are not valid. The appointment of Ms. Mridula Gupta, respondent No. 3, as Additional Director vide Board meeting dated 11-04-2013 and resolution thereat are illegal and void; The removal of Mr. Rajnandini Pachisia, (Petitioner No. 2) vide Board meeting dated 21-05-2013 and the resolution thereat, are illegal and void; The appointment of the respondent No. 4, Mrs. Priyanka Gupta and the respondent No. 5, Miss Kashmira Gupta as additional Directors vide Board meeting dated 20-04-2013 and the resolution thereat, are illegal and void; and The removal of the petitioner No. 1, Shri Shyam Saran Gupta by way of EOGM dated 03-09-2013 and 03-10-2013 and the resolution thereat, are illegal and void; and Any other act/acts done by the respondent(s) in pursuance of the Board meeting and EOGM dated 11-04-2013, 20-04-2013, 24-04-2013, 21-05-2013, 03-09-2013, and 03-10-2013 respectively are bad in the eye of law and hence, hereby declared null and void. Further, the respondent No. 2 is hereby directed not to cause any hinderance in restoration of original position of the petitioner Nos. l and petitioner No. 2. This order is hereby concluded directing the respondent Nos. 1 and 2 to give effect to the cancellation of the appointment of the Respondent No. 3 to 5 as Additional Directors and to restore the petitioners as Directors of the company and the same shall continue till either of the parties will have fair exit from the company.

Summary

Issues Involved:
1. Validity of service of notices for Board meetings and Extraordinary General Meetings (EOGM).
2. Legality of the removal of petitioners from the Board of Directors.
3. Legality of the appointment of respondent Nos. 3 to 5 as additional Directors.
4. Whether petitioner No. 2 remained absent from three consecutive Board meetings.

Detailed Analysis:

1. Validity of Service of Notices:
The Tribunal examined whether the notices for Board meetings and EOGM were validly served. It was found that notices were purportedly issued by respondent No. 2 to the petitioners and other respondents, but the service of these notices was questionable. The notices were allegedly received by the same individuals on multiple occasions, raising doubts about their authenticity. The Tribunal concluded that the service of notices was improper and invalid, thereby making the meetings conducted based on these notices invalid.

2. Legality of Removal of Petitioners:
The petitioners were removed from the Board of Directors under Section 283(1)(g) of the Companies Act, 1956, which concerns the vacation of office by a director who fails to attend three consecutive meetings without obtaining leave of absence. The Tribunal found that the petitioners did not receive proper notices for the meetings they were alleged to have missed. Consequently, the removal of petitioner No. 2 on the grounds of non-attendance was deemed invalid. Similarly, the removal of petitioner No. 1 through an EOGM without proper notice was also declared illegal and void.

3. Legality of Appointment of Additional Directors:
The Tribunal scrutinized the appointment of respondent Nos. 3 to 5 as additional Directors. It was found that the appointments were made without proper notice and were not confirmed as required under Section 260 of the Companies Act, 1956. The Tribunal held that the appointments were fabricated and made without the knowledge of the petitioners. Therefore, the appointments of respondent Nos. 3 to 5 were declared invalid and void.

4. Absence from Consecutive Meetings:
The Tribunal examined whether petitioner No. 2 remained absent from three consecutive Board meetings, as claimed by the respondents. It was found that the notices for the meetings were not properly served on petitioner No. 2, and there was no evidence to show that she voluntarily remained absent. The Tribunal concluded that the claim of petitioner No. 2's absence was not substantiated, making her removal on these grounds invalid.

Conclusion:
The Tribunal set aside the removal of petitioner Nos. 1 and 2 from the Board of Directors and declared the appointments of respondent Nos. 3 to 5 as additional Directors illegal and void. The Tribunal directed the respondents to restore the petitioners to their original positions as Directors of the company and to cancel the appointments of respondent Nos. 3 to 5. The Company Petition No. 63/2014 was allowed and disposed of, with no order as to costs.