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2021 (1) TMI 107 - Tri - Insolvency and BankruptcySeeking grant of injunction on the holding of the EGM - power to appoint Directors and the power to regulate them by passing a resolution for removal - HELD THAT - There were several prayers by the applicants in this matter. Representation was made by the counsels on behalf of Respondents 07 and 09. Accordingly, this Bench makes the following observations 1. The prayer of the applicants that this bench should grant injunction on the holding of the EGM cannot be granted because it is not in the jurisdiction of the courts to grant such relief. Therefore, we do not intend to stop the EGM which is going to be held tomorrow i.e. on 07.08.2020. 2. Also, the prayer sought by the applicant that the director should not be removed can also not be granted as the Companies Act itself makes it clear that the power to remove the director is inherent and is a corporate decision which is correctly stated by the counsel for the Respondent No. 07. The applicants also mention their fear that they may be removed in the meeting scheduled for tomorrow. But we would like to mention here that even if this happens, they can at any time make representation for restoration to that effect according to the provisions of law. Application dismissed.
Issues Involved:
1. Interim relief to protect resources and manage affairs of Respondent No. 09. 2. Allegations of oppressive acts and mismanagement by the Sirur family. 3. Legality and propriety of convening the Extraordinary General Meeting (EGM). 4. Right to remove directors and the role of the judiciary in corporate governance. 5. Representation and participation in the EGM by the applicants. Detailed Analysis: 1. Interim Relief to Protect Resources and Manage Affairs of Respondent No. 09 The applicants sought interim reliefs to protect the resources of Cotmac Electronics Private Limited (Respondent No. 09) and ensure its affairs are managed without prejudice to their interests. They alleged that the Sirur family, who are in control, were acting in a manner detrimental to the company and its minority shareholders. 2. Allegations of Oppressive Acts and Mismanagement by the Sirur Family The applicants, holding 36.07% of the equity share capital, claimed that the Sirur family was managing the company without involving them, leading to acts of oppression and mismanagement. They alleged that the Sirur family was booking personal expenses in the company’s accounts and making major decisions without consultation. The applicants also contended that the Sirur family aimed to shut down or shift the company’s operations for personal gain, thereby affecting the livelihoods of 600 employees and their dependents. 3. Legality and Propriety of Convening the Extraordinary General Meeting (EGM) The applicants sought to declare the convening of the EGM on 07.08.2020 as illegal and void. They argued that the EGM was called improperly and against their interests. The counsel for the respondents cited the Supreme Court judgment in Life Insurance Corporation of India v. Escorts Limited, emphasizing that courts should not interfere with the holding of a general meeting, as it is a fundamental right of the shareholders to convene such meetings. 4. Right to Remove Directors and the Role of the Judiciary in Corporate Governance The respondents argued that the power to remove directors is inherent to corporate governance and is protected under Sections 100 and 169 of the Companies Act, 2013. The tribunal agreed, stating that it is not within the jurisdiction of the courts to grant an injunction against holding an EGM or removing directors. The tribunal referenced the Delhi High Court judgment in Ravindra Sabharwal v. XAD Inc., which held that judicial review of the reasons for passing resolutions in an EGM is not permissible. 5. Representation and Participation in the EGM by the Applicants The tribunal noted that the applicants have the right to make representations and participate in the EGM. The respondents expressed willingness to facilitate the applicants' participation through audiovisual means due to health concerns. The tribunal found the applicants' contention that the EGM was improper to be an afterthought and emphasized that the applicants should present their grievances at the EGM. Findings: 1. Injunction on EGM: The tribunal denied the injunction to stop the EGM, citing lack of jurisdiction and the precedent set by the Delhi High Court and Supreme Court. 2. Removal of Directors: The tribunal upheld the corporate right to remove directors, stating that such decisions are inherent to corporate governance and cannot be judicially reviewed. 3. Applicants’ Participation: The tribunal encouraged the applicants to present their grievances at the EGM and directed the respondents to facilitate their participation. Conclusion: The application for interim relief was dismissed. The tribunal emphasized the importance of corporate governance principles and the limited role of judicial intervention in corporate affairs, urging the applicants to utilize the EGM to address their concerns.
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