2020 (9) TMI 602 - AT - Insolvency and Bankruptcy

Removal of original Petitioner No.4 from the directorship of 1st Respondent - HELD THAT - It was decided to convene the said Meeting on 29.6.2020 and the same was duly served upon original petitioner No.4. The intimation for the same was given to original petitioner No.4 vide dated 26th May, 2020 (Page 1799 of appeal). The meeting was ultimately held on 7.7.2020 and the original petitioner No.4 was removed. We observe that proper notice was issued to convene EGM and the same was received by the appellants including the nominee director but they did not make any representation and the EGM voted for removal of nominee director with majority - also, 8 th Respondent is also nominee director of 1st appellant in 1st respondent company. We find no illegality in this process. There are no merits to interfere in the impugned order - appeal dismissed.

Summary

Issues Involved:
1. Interim reliefs for maintaining status quo and declaring Board decisions void.
2. Validity of Board meeting and resolutions.
3. Removal of nominee director.
4. Allegations of oppression and mismanagement.
5. Quasi-partnership and rights of shareholders.
6. Procedural propriety of Extraordinary General Meeting (EGM).

Detailed Analysis:

1. Interim Reliefs for Maintaining Status Quo and Declaring Board Decisions Void:
The appellants sought interim reliefs to maintain the status quo regarding the shareholding and Board constitution of the 1st respondent company. They also sought declarations that the Board meetings and resolutions passed on February 8, 2020, and June 2, 2020, were illegal and void. The National Company Law Tribunal (NCLT), Kolkata, dismissed the application, stating it was not a fit case for interim relief.

2. Validity of Board Meeting and Resolutions:
The appellants argued that the Board meetings held on February 8, 2020, and June 2, 2020, were conducted without proper agenda circulation and aimed at removing the nominee director of the appellants. The respondents countered that the meetings were validly convened and the resolutions passed were in accordance with the law. The Tribunal found no irregularity in the convening and conduct of the meetings.

3. Removal of Nominee Director:
The appellants contended that the removal of their nominee director was an act of oppression and was done without giving her a fair opportunity to represent herself. The respondents argued that the removal was done following the legal provisions under Section 169 of the Companies Act, 2013. The Tribunal noted that proper notice was issued, and the EGM voted for the removal with a majority, finding no illegality in the process.

4. Allegations of Oppression and Mismanagement:
The appellants alleged that the 2nd respondent was trying to oust them from the business and had harassed their nominee director. The respondents denied these allegations, stating that the appellants had embezzled funds and engaged in related party transactions. The Tribunal did not delve into these allegations in detail, noting that the main company petition under Sections 241, 242, and 244 of the Companies Act, 2013, was still pending.

5. Quasi-Partnership and Rights of Shareholders:
The appellants claimed that the 1st respondent company was a quasi-partnership, and their nominee director could not be removed without reason. The respondents argued that the company was not a quasi-partnership and that the appellants had no significant stake in the company. The Tribunal observed that the resolution plan did not specify any involvement rights for either party in the company's management.

6. Procedural Propriety of Extraordinary General Meeting (EGM):
The appellants argued that the EGM held on July 7, 2020, was procedurally improper and aimed at removing their nominee director without due process. The respondents maintained that all legal procedures were followed, and the appellants did not attend the EGM despite receiving notice. The Tribunal found that the EGM was properly convened, and the removal of the nominee director was lawful.

Conclusion:
The Tribunal dismissed the appeals, finding no merit to interfere with the impugned order. It observed that the appellants had not demonstrated any procedural irregularities or illegalities in the removal of their nominee director. The main company petition would continue to be decided by the NCLT, Kolkata. The appeals were dismissed with no order as to costs, and any interim orders stood vacated.