2021 (1) TMI 815 - Tri - Companies Law

Oppression and Mismanagement - Legality of notice - holding of EGM within 3 months of date of requisition - holding of EGM - dissenting members - difference of opinion - HELD THAT - The orders were reserved on 20.11.2020 by this bench, the order was pronounced today, the lead judgement was rendered by Shri Chandra Bhan Singh, Member, Technical and the dissenting judgement is passed by Member Judicial. The members are divided on the following legal issues a) Whether the notice dated 06.01.2020 and 05.02.2020 amounts to valid requisition as defined under section 100 of the Companies Act, 2013? b) Whether the law mandates holding of EGM within 3 months of date of requisition as prescribed under section 100(4) of the Companies Act, 2013? c) Whether issuing of notice on 13.07.2020 can be considered as requisition under section 100(2) of the Companies Act, 2013? d) Whether the EGM held on 10.08.2020 and the resolution passed there under are bad in law? e) Whether there are any acts of oppression and mismanagement by majority shareholders? The Registry is directed to place the record before the Hon ble Acting President for constituting appropriate 3rd member for his opinion, so that the order in IA is rendered in accordance with the opinion of majority.

Issues Involved:
1. Validity of the requisition notices dated 06.01.2020 and 05.02.2020 under Section 100 of the Companies Act, 2013.
2. Requirement to hold an Extraordinary General Meeting (EGM) within three months of the date of requisition as per Section 100(4) of the Companies Act, 2013.
3. Legality of issuing a notice on 13.07.2020 as a requisition under Section 100(2) of the Companies Act, 2013.
4. Validity of the EGM held on 10.08.2020 and the resolutions passed therein.
5. Allegations of oppression and mismanagement by the majority shareholders.

Issue-wise Detailed Analysis:

1. Validity of the Requisition Notices Dated 06.01.2020 and 05.02.2020:
The petitioners argued that the notices dated 06.01.2020 and 05.02.2020 issued by the respondents did not constitute valid requisition notices under Section 100(2) of the Companies Act, 2013. They contended that a valid requisition notice must be issued as per Section 100(2) and the special notices under Sections 169 and 115 do not meet this requirement. The respondents, however, maintained that their notices were valid and complied with the provisions of Section 100(3) of the Companies Act, 2013, which requires the requisition to set out the matters for consideration, be signed by the requisitionists, and sent to the registered office of the company. The Tribunal held that the requisition notices met the requirements of Section 100(3) and were therefore valid.

2. Requirement to Hold an EGM within Three Months of the Date of Requisition:
The petitioners claimed that the EGM held on 10.08.2020 was illegal as it was convened more than three months after the requisition dated 05.02.2020, violating Section 100(4) of the Companies Act, 2013. The respondents argued that the delay was due to the COVID-19 pandemic and the subsequent lockdown, which made it impossible to hold the EGM within the stipulated time. The Tribunal noted that Section 100(4) of the Companies Act, 2013, states that the meeting "may be" held within three months, implying that the provision is directory and not mandatory. The Tribunal also referred to the Supreme Court's judgment in State of Bihar v. Bihar Rajya Bhumi Vikas Bank Samiti (2018) 9 SCC 472, which held that where a statute does not provide a penalty for non-compliance with a stipulated timeline, the provision should be considered directory. Therefore, the Tribunal concluded that the failure to hold the EGM within three months did not invalidate the resolutions passed at the EGM.

3. Legality of Issuing a Notice on 13.07.2020 as a Requisition:
The petitioners argued that the notice issued on 13.07.2020 to convene the EGM on 10.08.2020 was not a valid requisition under Section 100(2) of the Companies Act, 2013. The Tribunal held that the requisition dated 05.02.2020 complied with all the requirements of Section 100(3) and that there was no prescribed format for a requisition notice. Therefore, the notice issued on 13.07.2020 was valid.

4. Validity of the EGM Held on 10.08.2020 and the Resolutions Passed Therein:
The petitioners contended that the EGM held on 10.08.2020 and the resolutions passed therein were illegal and invalid as the meeting was convened based on an invalid requisition notice and was held beyond the three-month period stipulated in Section 100(4). The Tribunal, however, concluded that the requisition notices were valid and that the three-month period was directory and not mandatory. Therefore, the EGM held on 10.08.2020 and the resolutions passed therein were valid.

5. Allegations of Oppression and Mismanagement by the Majority Shareholders:
The petitioners alleged various acts of oppression and mismanagement by the respondents, including the illegal opening of bank accounts, unauthorized transfer of funds, and the removal of the petitioners as directors. The Tribunal found that the allegations were unsubstantiated and that the petitioners, who held a majority in the Board of Directors until 10.08.2020, had full control over the company's affairs. The Tribunal concluded that the charges of oppression and mismanagement were frivolous and unsubstantiated.

Separate Judgments:
The Tribunal delivered separate judgments. The Member (Technical) dismissed the petition, holding that the requisition notices were valid, the three-month period was directory, and the EGM and resolutions were valid. The Member (Judicial), however, disagreed and held that the requisition notices were invalid, the three-month period was mandatory, and the EGM and resolutions were illegal and void. The Member (Judicial) also found that the acts of the respondents constituted oppression and mismanagement.

Conclusion:
The Tribunal was divided on the legal issues, and the matter was referred to the Hon'ble Acting President for constituting an appropriate third member to provide an opinion and render a final order in accordance with the majority opinion.

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