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2013 (5) TMI 574 - HC - Companies LawAppeal u/s 10F Appeal against order of CLB Declaration of Board meeting of WPIPL, as null and void - CLB held that, since there were only three shareholders and all of them were also Directors, the holding of the Board meeting in the absence of a party who had an affirmative vote was in violation of the JVA. Consequently, the Board meeting was held null and void and a direction was issued to hold a fresh Board meeting. There were two grounds on which the CLB proceeded to interfere with the decision of the Board meeting. First ground was that the decision could not have been taken without the affirmative vote of WPIGI. The other ground was that the notices of the Board meeting were issued at a time when the Respondent was not in the country and was stuck in New Jersey, USA, which was admittedly hit by a hurricane. While the notice was properly delivered to the Respondent, its request for adjournment of the meeting could have been easily accommodated by the Appellants. Nevertheless, they went ahead and held the meeting. Respondent/WIPGI also filed petition before the CLB u/s 397 and 398 of the Act read with Sections 402, 403, 406 & 408 thereof was that the AGM of the company for the financial year ended 31st March 2010, which ought to have been held on or before 30th September 2010, was not so held. Held that - The Board meeting was held pending the decision of the CLB on the main petition u/s 397 of the Act filed by the Respondent. Therefore, the validity of any of the decisions taken subsequent to the transfer will depend on the outcome of the final decision in the petition u/s 397 of the Act filed by the Respondent/WPIGI. It is considered appropriate to direct that the interim order passed by this Court on 12th December 2012 to the effect that the resolution passed in the fresh Board meeting shall not be given effect is directed to continue for another period of eight weeks or till such time the CLB passes a final order in the petition filed by the Respondent, which decision, in any event, should not be later than 12 weeks from today. If for some reason, the CLB is unable to pronounce its final order in the petition within twelve weeks then, it will be open to either party to approach this Court. In that event, the interim order passed by this Court will continue till further orders are passed by this Court. It is clarified that this Court has not expressed any opinion on the principal contentions of the parties on the other issues which will be examined by the CLB on merits.
Issues Involved:
1. Legality of the Board meeting held on 31st October 2012. 2. Applicability of Clause 6.2 of the Joint Venture Agreement (JVA) in the context of the Articles of Association (AoA). 3. Interpretation of Section 9 of the Companies Act, 1956. 4. Validity of the transfer of shares and its impact on the shareholding pattern. 5. Just and equitable relief under Sections 397 and 398 of the Companies Act, 1956. Detailed Analysis: 1. Legality of the Board Meeting Held on 31st October 2012: The appeal challenges the order of the Company Law Board (CLB) which declared the Board meeting of World Phone India Pvt. Ltd. (WPIPL) held on 31st October 2012 as null and void. The CLB found that the meeting was held without the presence of Mr. Aditya Ahluwalia, who had an affirmative vote under the JVA, and directed that a fresh Board meeting be held in compliance with Clause 6.2 of the JVA. The High Court upheld the CLB's direction to hold a fresh Board meeting but set aside the requirement to give effect to Clause 6.2 of the JVA. 2. Applicability of Clause 6.2 of the Joint Venture Agreement (JVA): The central issue was whether Clause 6.2 of the JVA, which provided for an affirmative vote by Mr. Ahluwalia, was binding on the company in the absence of a corresponding amendment to the AoA. The CLB held that the JVA terms were not inconsistent with the AoA and thus should be applied. However, the High Court disagreed, stating that without an amendment to the AoA, the provisions of the JVA could not be enforced against the company. The court emphasized that the AoA must explicitly incorporate such provisions for them to be binding. 3. Interpretation of Section 9 of the Companies Act, 1956: The High Court examined the applicability of Section 9, which provides that the Act overrides any contrary provisions in the MoA, AoA, or any agreements. The court clarified that Section 9 applies to both public and private companies, and any agreement or provision in the AoA that is repugnant to the Act would be void. The court concluded that the JVA could not override the AoA unless the AoA was amended to include the JVA's provisions. 4. Validity of the Transfer of Shares and Its Impact on the Shareholding Pattern: The transfer of shares from Mr. Pankaj Patel to Mr. Vivek Dhir and Ms. Malini Dhir, which resulted in WPIGI becoming a minority shareholder, was a significant issue. The CLB was to decide on the validity of this transfer in the main petition under Section 397 of the Act. The High Court noted that the legality of any decisions taken after the transfer would depend on the final outcome of the petition. 5. Just and Equitable Relief Under Sections 397 and 398 of the Companies Act, 1956: The High Court acknowledged that even if the Board meeting was technically legal, the CLB could grant relief under the 'just and equitable' jurisdiction if the conduct was found to be oppressive or unfair. The court upheld the CLB's direction for a fresh Board meeting but did not agree that Clause 6.2 of the JVA should be enforced without an amendment to the AoA. Conclusion: The High Court set aside the CLB's finding that Clause 6.2 of the JVA must be given effect in the Board meeting but upheld the direction to hold a fresh Board meeting. The court emphasized the necessity of amending the AoA to incorporate provisions of the JVA for them to be binding. The interim order restraining the implementation of the resolutions passed in the fresh Board meeting was extended, pending the final decision of the CLB on the main petition. The court did not express any opinion on the other issues, which were to be examined by the CLB on merits.
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