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2021 (1) TMI 448 - Tri - Companies LawSeeking an order, declaring the resolution dated 21.11.2015 passed in the EGM of the First Respondent Company removing the Petitioner from being a Director of the 1st Respondent Company as null and void and not binding on the Petitioner - Seeking to declare that the actions of the Respondent Nos.2 to 4, which are detrimental to the interest of the First Respondent Company are not binding on the Petitioner and the First Respondent Company - seeking to re-induct the Petitioner as the Director of the 1st Respondent Company - seeking a Permanent Injunction restraining the Respondent Nos.2 to 4 from interfering with the day to day management and administration of the first Respondent Company etc. Whether the Petitioner has come to the Tribunal with clean hands by disclosing complete material facts of the issue in question so as to seek equitable relief(s) provided under sections 241, 242, and 244 of the Companies Act, 2013? - HELD THAT - The Petitioner has not brought forth all material facts before this Tribunal, like the pendency of criminal cases filed by the Respondents against the Petitioner. The Petitioner, admittedly, has filed several civil and Criminal cases against the Company and its Directors. In fact, as per Law, the Petitioner, being Shareholder holding substantial shares in the Company and also being a Permanent Director, has fiduciary duties towards the Company and its stakeholders, and he cannot, himself be a litigant, unless, he was arbitrarly not permitted to get involved in the affairs of Company by removing him even from the position of Director by the use of brute majority by other Directors and Shareholders. So far as various allegtions of fraud, misrepresentation on the part of Respondents in taking his signature, taking loan, mismanaging the affairs of Company etc are concerned, these are totally unsubstantiated. Similarly several charges of financial irregularities have been levelled against him. Though the Petitioner is well aware that Civil Court/Criminal Courts, do not have juridisdiciton over Company matters, he has approached those courts. Having not succeeded there, he is now before this Tribunal. Cases with regard to his dealings with the company's assets have been filed against him as well. Therefore, he has not come to the Tribunal with clean hands to seek equitable relief(s) from the Tribunal. Whether due procedure was followed by the Company in removing the Petitioner from position of Director of the Company? - HELD THAT - It is settled law that such a Director can be removed, duly following the extant provisions of the Articles of Associaiton and the Company Law - It is observed that section 9 of the Companies Act, 1956 provides that the provisions of the Act would have effect, notwithstanding anything to the contrary contained in the Articles of the Company, and that in the instant case the Permanent Director could be removed if the requirements of Section 284 and of a valid meeting had been satisfied. Further, in the light of the conduct of the Petitioner, breach of fiduciary duties towards the 1st Respondent and the stakeholders involved, the 1st Respondent has found that the Petitioner is not a fit and proper person to be a Director of the 1st Respondent, and that the 1st Respondent has followed the due procedure established to remove him. The Petitioner cannot claim Directorship as a matter of right. In determining whether the Petitioner's removal from the Board of the 1st Respondent company, the most relevant factor is whether the removal was in accordance with the relevant provisions. On perusal of the documents produced before us, it is seen that on 16.10.2015, the 4th Respondent Company, being the 50% shareholder in the 1st Respondent Company duly served on the 1st Respondent Company notice seeking removal of the Petitioner as required under section 169 read with section 115 of the Act, 2013 and a requisition for convening an EGM under section 100 of the Act for such removal, hence the process of removal of the Petitioner from the board of the 1st Respondent was duly initiated as per section 169 of the Companies Act, 2013. Section 169(2) of the Act, 2013 requires special notice of the resolution to remove a Director from the Company. As per the requirements of section 169(3) of the Act, the 1st Respondent Company dispatched to the Petitioner's addresses, as contained in the register of Directors of the 1st Respondent, the notice dated 16.10.2015 issued by the 4th Respondent to the Petitioner along with a notice convening Board meeting to be held on 28.10.2015 to consider such removal. Further, the said Notice was also sent to the e-mail address of the Petitioner on 20.10.2015. The draft resolution on the subject of removal of the Petitioner was also communicated. It is however noticed that the Petitioner remained absent at the Board meeting held on 28.10.2015. It is also seen from the minutes of the meeting dated 28.10.2015, that it was resolved to convene an EGM on 21.11.2015 to consider the Petitioner's removal from Directorship. For this also the 1st Respondent served a notice dated 28.10.2015 convening an EGM on 21.11.2015 on the Petitioner - However, the Petitioner did not issue any confirmation of attendance till the date of the EGM. Further, the Petitioner failed to issue a written representation providing the reason as to why he should not be removed from the Directorship as provided under section 169(4) of the Act, 2013. It is further seen that the Petitioner through his advocate submitted a letter requesting for adjournment of the EGM only at the commencement of the EGM on 21.11.2015, on health grounds but without substantiating the same. He could have sent a proxy, but could not have prevented a meeting. On a perusal of the records, it is seen that the 3 members representing 79.50% of the paid up capital of the 1st Respondent were present at the meeting and that after considering the letter dated 21.11.2015 of the Petitioner, seeking adjournment of the meeting, the members unanimously voted for removal of the Petitioner from Directorship. The meeting was conducted as per law, and the relevant Form DIR-12 was filed with the Ministry of Corporate Affairs. The 1st Respondent has acted in accordance with the provisions of the Companies Act, 2013. Infact it is the Petitioner who has time and again lost the opportunity provided to him under the Act to safeguard his interests. By not attending the board meeting dated 28.10.2015 and not making any written representation before the commencement of EGM dated 21.11.2015 and then by remaining absent at the EGM, the Petitioner has foregone his right. It is clear, therefore, that the Petitioner was afforded reasonable opportunity before being removed as a Director, which he failed to avail. Thus the procedure followed by the Respondent Company cannot be found fault with, and hence no case is made for any intereference by this Tribunal. The allegations that the impugned procedure was concocted is not borne out by facts brought out. The Petitioner has failed to make out a case for any intervention by this Tribunal - Petition dismissed.
Issues Involved:
1. Whether the Petitioner has come to the Tribunal with clean hands by disclosing complete material facts. 2. Whether the Petitioner being appointed as Lifetime Director of the Company can be removed as per Law. 3. Whether due procedure was followed by the Company in removing the Petitioner from the position of Director of the Company. 4. Whether the Petitioner is entitled to any relief. Issue-wise Detailed Analysis: 1. Clean Hands and Disclosure of Material Facts: The Tribunal noted that the Petitioner failed to disclose significant material facts, such as the pendency of criminal cases filed by the Respondents against him. The Petitioner, being a substantial shareholder and a Permanent Director, has fiduciary duties towards the Company and its stakeholders. However, he engaged in litigation against the Company and its Directors, which undermines his position. The allegations of fraud and mismanagement by the Respondents were found to be unsubstantiated. The Petitioner approached other forums before coming to the Tribunal, indicating a lack of clean hands in seeking equitable relief. 2. Removal of Lifetime Director: The Tribunal referred to established legal precedents which state that even a permanent or lifetime Director can be removed by following due process. The decision of the High Court of Delhi in Tarlok Chand Khanna v. Raj Kumar Kapoor clarified that a life Director could be removed if the requirements of Section 284 of the Companies Act, 1956, and a valid meeting were satisfied. Similarly, the High Court of Karnataka in Karnataka Bank Limited v. A.B. Datar held that no person has an inherent right to be a Director and can be removed if the majority of shareholders so decide. 3. Due Procedure for Removal: The Tribunal scrutinized the procedure followed by the Company in removing the Petitioner. It was found that the 4th Respondent, holding 50% shareholding, issued a special notice under Section 169 read with Section 115 of the Companies Act, 2013, for the removal of the Petitioner. The Company duly sent notices for Board and Extraordinary General Meetings (EGM) to the Petitioner, who failed to attend these meetings or provide a written representation. The EGM was conducted as per law, and the resolution for the removal of the Petitioner was passed unanimously. The Tribunal concluded that the Company followed due procedure, and the Petitioner was given reasonable opportunity to defend his position, which he did not avail. 4. Entitlement to Relief: Given the findings on the above issues, the Tribunal determined that the Petitioner was not entitled to any relief. The removal process was conducted in accordance with the Companies Act, 2013, and the Petitioner failed to make a case for intervention by the Tribunal. Consequently, the Petition was dismissed. Conclusion: The Tribunal dismissed C.P. No. 98/BB/2017, concluding that the Petitioner did not come with clean hands, the removal of a lifetime Director is permissible by law if due process is followed, the Company adhered to the required procedure in removing the Petitioner, and the Petitioner is not entitled to any relief. No order as to costs was made.
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