9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (5) TMI 39 - HC - Companies LawExtra-Ordinary General Meeting with the objective of appointing four new directors and removal and replacement of one director on the Board of TFCI - Whether law prescribes any particular form of requisition under section 169(3)? - Appellant-company (IFCI), holding 37.85 per cent shares in respondent company (TFCI), on 26-11-2010, sent a requisition to respondent for convening an EOGM with objective of reconstitution of board of respondent - invalidity of requisition by the respondent on ground that though it was signed by company secretary of IFCI, but specific authorization/board resolution to file such requisition had not been annexed - Subsequently, on not getting any information, TFCI, through its board meeting held on 14-12-2010, decided not to convene EOGM of TFCI & on receiving that information, IFCI, on 15-12-2010, initiated process under section 169(6) for convening an EOGM on 17-1-2011 and on same day filed petition under sections 398 and 402 against respondent - on 22-3-2011 CLB passed final order wherein it held requisition dated 26-11-2010 issued by IFCI as invalid on ground that it did not bear signature of requisitionist - Held that - The mere fact that IFCI did not reply to TFCI s letter dated 2-12-2010 did not mean that any legal presumption could be drawn that the requisition dated 26-11-2010 was not authorised by the board and/or the company secretary of IFCI did not have the authority to requisition the EOGM. The fact was that the board of IFCI had, vide its resolution dated 29 -11-2001, given specific authority to its company secretary to sign all legal documents. IFCI s subsequent board resolution dated 31-3-2011 passed in favour of its company secretary as a measure of abundant precaution did not prove that there was no prior authorisation in favour of IFCI s company secretary when requisition dated 26-11-2010 was issued. Moreover, the board of IFCI vide its resolution dated 27-10-2010 had taken a conscious decision to reconstitute the board of TFCI. As far as the finding of the CLB that the requisition dated 26-11-2010 was not signed as required under section 169(3) was concerned, the law prescribes no particular form of the requisition. If all the documents served by IFCI was taken as a composite document, there was no iota of doubt that requisition was signed by the company secretary of IFCI. In fact, from a bare reading of TFCI s own letter dated 2-12-2010 as well as minutes of board meeting of TFCI dated 14-12-2010, it was apparent that even TFCI had no doubt that the requisition dated 26-11-2010 was signed by the company secretary of IFCI. Thus in view of the admission by the board of TFCI that the requisition had been duly signed by the company secretary of IFCI, the finding of CLB to the contrary in the impugned order was unsustainable and was to be set aside. The CLB s finding, that IFCI had played fraud upon it, was a finding based on presumptions and surmises. Consequently, the finding of fraud given by the CLB was based on no evidence, thus the impugned order was to be set aside and the requisition dated 26-11-2010 as well as the EOGM dated 17-1-2011 were to be held to be legal and valid. Consequently, subsequent appointment of five directors by TFCI s board on 22-3-2011 was to be set aside, as on the said date there were no vacancies on the board. In the instant case, the subsequent requisition dated 1-4-2011 seeking removal of three directors including CMD whose tenure expired on 19-1-2012 was an act of takeover of management of TFCI by its largest shareholder who only owned about 37.85 per cent shares. At that stage, it could not be ruled out that the intent of the EOGM scheduled for 18-5-2011 was to remove the directors who had not supported the earlier requisitions and resolutions moved by IFCI. Though it was correct that the CMD was not a shareholder of TFCI but she was a professional who had been appointed for a specific tenure to run a financial institution. If their tenure were not protected, it would not only amount to takeover of TFCI s management by IFCI but it would also constitute an act of mismanagement by IFCI. It was pertinent to mention that out of total TFCI s board strength of 15, 2 were to be nominated by the Reserve Bank of India and debenture holders. With the passing of the instant order, 7 out of 13 appointments on the board of TFCI would have been at the instance/recommendation of IFCI. Consequently, if the resolutions in the EOGM scheduled for 18-5-2011 were passed, then it would virtually amount to making TFCI a subsidiary of IFCI. The protection should be granted to all the three directors for their remaining tenures consequently, it was to be directed that EOGM requisitioned by the IFCI for 18-5-2011 would be held on the scheduled date but if the resolution removing the three directors of TFCI was passed therein, then it would not be given effect to till permission for the same was granted by the CLB. For that purpose, IFCI was to be granted liberty to file an application before the CLB in the disposed of petition seeking permission of CLB to give effect to the said resolutions. The instant petition was to be disposed of with the directions that the impugned order dated 22-3-2011 passed by the CLB was to be set aside.The requisition dated 26-11-2010 and EOGM dated 17-1-2011 were legal and valid.Appointment of five directors by TFCI s Board on 22-3-2011 was to be set aside. EOGM scheduled for 18-5-2011 was allowed to be held on the said date but if resolution removing the three directors including CMD, TFCI was passed therein, the same would not be given effect to till permission of the CLB was obtained by IFCI by filing an application in company petition. A retired Judge of the Court was appointed as chairman of the board of TFCI. He would only attend and chair board meetings of TFCI till the term of the CMD would expire.
Issues Involved:
1. Validity of the requisition dated 26-11-2010 under Section 169 of the Companies Act, 1956. 2. Validity of the Extra-Ordinary General Meeting (EOGM) held on 17-1-2011. 3. Allegations of fraud by IFCI in issuing notices for the EOGM. 4. Appointment of five additional Directors by TFCI on 22-3-2011. 5. Subsequent requisition dated 1-4-2011 by IFCI for convening another EOGM on 18-5-2011. Issue-wise Detailed Analysis: 1. Validity of the Requisition Dated 26-11-2010: The court examined whether the requisition dated 26-11-2010 issued by IFCI was valid under Section 169 of the Companies Act, 1956. The requisition was challenged on the grounds that it was not signed by an authorized person. The court found that the Company Secretary of IFCI had the authority to sign legal documents, including the requisition, based on a Board resolution dated 29-11-2001. The court stated, "The Board of IFCI has vide its resolution dated 29-11-2001 given specific authority to its Company Secretary to sign all legal documents." Thus, the requisition was deemed valid. 2. Validity of the EOGM Held on 17-1-2011: The court analyzed whether the EOGM held on 17-1-2011 was valid. The Company Law Board (CLB) had earlier declared the EOGM null and void, stating that the requisition was invalid. However, the court overturned this decision, stating, "The requisition dated 26-11-2010 as well as the EOGM dated 17-1-2011 are held to be legal and valid." Consequently, the subsequent appointment of five Directors by TFCI's Board on 22-3-2011 was set aside. 3. Allegations of Fraud by IFCI: The court addressed the CLB's finding that IFCI had committed fraud by issuing notices for the EOGM after the interim order dated 16-12-2010. The court found that the notices were printed and dispatched before the interim order was passed. The court stated, "The finding of fraud given by the CLB is based on no evidence." Therefore, the allegation of fraud was dismissed. 4. Appointment of Five Additional Directors by TFCI on 22-3-2011: The court examined the validity of the appointment of five additional Directors by TFCI on 22-3-2011. Since the EOGM held on 17-1-2011 was declared valid, the court set aside the appointment of these Directors, stating, "The appointment of five Directors by TFCI's Board on 22-3-2011 is set aside." 5. Subsequent Requisition Dated 1-4-2011 by IFCI: The court addressed the subsequent requisition by IFCI for convening another EOGM on 18-5-2011, which sought the removal of three Directors, including the CMD. The court allowed the EOGM to be held but directed that any resolution passed for the removal of the Directors would not be given effect without CLB's permission. The court stated, "EOGM scheduled for 18-5-2011 is allowed to be held on the said date but if resolution removing the three Directors including CMD, TFCI is passed therein, the same shall not be given effect to till permission of CLB is obtained." Conclusion: The court set aside the CLB's impugned order and declared the requisition dated 26-11-2010 and the EOGM held on 17-1-2011 as legal and valid. The appointment of five additional Directors by TFCI on 22-3-2011 was invalidated. The EOGM scheduled for 18-5-2011 was allowed to proceed, but any resolutions passed regarding the removal of Directors would require CLB's approval. Justice R.C. Chopra was appointed as Chairman of the Board of TFCI to oversee the board meetings until the term of the current CMD expired.
|
