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2017 (6) TMI 1130 - Tri - Companies LawScheme for rehabilitation of the Company - Held that - In view of the facts and circumstances of the case, simply because, the Promoters have filed civil suit or that two of the promoters may be representing their group have now filed the instant petition, it would not be appropriate to order exit to the petitioners especially when the main contention raised by learned petitioners counsel during arguments was basically confined to putting the appointment of R-9 as an Executive Director to test and approval of the remunerations to him. The present is not a case, where functioning of the company has come to a standstill as it is noticed that various decisions were taken by the company from time to time though the said decisions may be subject matter of challenge before this Tribunal. I am also of the view that simply because minority has been voted out on certain decisions, that cannot be considered to be the ground to order exit. Even the Investor cannot shirk from the responsibility of making all out efforts to make the business of the Company profitable. It was with this objective that the Investor was inducted in the company s affairs by executing SHA. Thus, the Investor cannot be permitted to wholly replace the original shareholders/Promoters. In view of the above observations, I hold that the exit is not the appropriate course in this case. In view of above findings on various issues, the instant petition is partly allowed to the extent that agenda of continuation of L.K. Singh respondent No.9 as Director/Executive Director be placed in the meeting of the shareholders for approval along with his pay/emoluments/perks. For rest of the prayers, the instant petition is dismissed. It is directed that further continuation of Mr. L.K. Singh R-9 as Director/Executive Director/Whole time Director shall be subject to the approval of the shareholders meeting to be convened in terms of Section 152 of the Companies Act, 2013 and other applicable provisions of law.
Issues Involved:
1. Maintainability of the petition due to pending BIFR proceedings. 2. Validity of the Deed of Adherence dated 05.06.2015. 3. Legality of the continuation of R-9 as Executive Director. 4. Challenge to the appointment of R-5 to R-8 as Directors. 5. Allegations of oppression and mismanagement. 6. Consideration of exit for the petitioners. Issue-wise Analysis: 1. Maintainability of the Petition: The petition was filed while R-1 company was undergoing proceedings before the BIFR. The Tribunal noted that the BIFR had primacy over the Companies Act in cases of sick companies, as established in Tata Motors Ltd. v. Pharmaceutical Products of India Ltd. and Pasupati Fabrics Ltd. v. Priyanka Overseas (P.) Ltd. The BIFR's role is to see the practicability of a company's revival, which takes precedence over shareholders' interests. However, since the SICA Repeal Act came into force, the Tribunal decided to proceed with the petition. 2. Validity of the Deed of Adherence: The petitioners challenged the Deed of Adherence (DOA) executed between R-2 and R-3, arguing it violated the Articles of Association and the status-quo order by AAIFR. The Tribunal found that the petitioners, being part of the promoter group, were bound by the actions taken in the civil suit challenging the DOA. The Tribunal also noted that the SHA allowed the Investor's equity shares to be freely transferable, and the transfer to R-3 did not violate the SHA. Thus, the challenge to the DOA was dismissed. 3. Legality of the Continuation of R-9 as Executive Director: R-9's continuation as Executive Director was based on an AAIFR order. The Tribunal held that R-9's tenure required shareholders' approval, especially since the SICA was repealed. The Tribunal directed that the agenda for R-9's continuation as Director/Executive Director, along with his remuneration, be placed before a shareholders' meeting for approval. 4. Challenge to the Appointment of R-5 to R-8 as Directors: The petitioners challenged the Board meeting dated 08.10.2015, where R-5 to R-8 were appointed as Directors, on grounds of insufficient notice and lack of detailed agenda. The Tribunal found that the meeting notice complied with Section 173 of the Companies Act, 2013, which requires a seven-day notice. The appointment of Directors was subject to shareholders' approval, which was obtained in the EOGM held on 10.12.2015. The Tribunal dismissed the challenge, noting that any procedural flaw did not invalidate the decisions taken in the meeting. 5. Allegations of Oppression and Mismanagement: The petitioners alleged acts of oppression and mismanagement, including being barred from factory premises and financial discrepancies. The Tribunal found no substantial evidence of oppression or mismanagement. The petitioners' participation in subsequent meetings indicated their grievances were addressed. The Tribunal noted that financial discrepancies, if any, could be raised in future meetings. 6. Consideration of Exit for the Petitioners: The respondents suggested that the petitioners exit the company due to ongoing litigation and distrust. The Tribunal, referencing M.S.D.C. Radharamanan v. M.S.D. Chandrasekara Raja, held that exit should not be ordered in every case. The Tribunal noted that the company continued to function and that the Investor's role was to revive the company. The Tribunal did not find it appropriate to order the petitioners' exit. Relief Granted: The Tribunal partly allowed the petition, directing that the agenda for R-9's continuation as Director/Executive Director be placed before a shareholders' meeting for approval. The meeting was to be chaired by Mr. Suvir Sehgal, Advocate, with Ms. Meenakshi Gupta as the Scrutinizer. The rest of the petition was dismissed.
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