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2022 (5) TMI 928 - SC - Companies LawOppression and Mismanagement - validity of Board Meetings - validity of withdrawal of resignation from the post of Directorship - Invocation of jurisdiction of this Bench under Section 397/398 and other provisions of the Companies Act, 1956 - requisite qualification as contemplated under Section 399 of the Companies Act, 1956 - any case has been made out even under Section 111 A of the Companies Act, 1956 or not - validity of Board Meetings - transmission of Equity Shares - validity of AGM conducted - failure to adhere to the request of the petitioner regarding furnishing the documents and inspection of bock s and accounts of the R 1 Company - HELD THAT - There is no doubt that on 06.04.2013, G.V. Rao addressed a letter to the Board resigning from the post of Directorship. The letter explicitly indicated that his resignation should be acknowledged and Form 32 be filed with the Registrar of Companies. Further, on 09.04.2013, G.V. Rao himself wrote a letter seeking withdrawal of his resignation, which was placed in the meeting of the Board on 09.04.2013. In the resolution passed therein, there is no protest by the respondent No.1 regarding attendance of Mr. G.V. Rao. Moreover, Dr. Renuka Datla, by letter dated 15.04.2013, which was addressed to the employees of the Company, welcomed the appointment of appellant Mahima Datla as its Managing Director and appointment of others as Directors. In the case at hand, the respondent No. 1 has not proved that the transfer of shares based on the Will dated 14.02.2005 was a fraud played on her as well as the Company. From the narration of the circumstances, wherein appellant Mahima Datla was groomed by her father to carry the operations of the Company clearly points out to his intention to make such Will. In light of the fact that no allegation of fraud or dishonesty is noticeable in this case, there is no way to ignore the application of this well settled principle - the thrust of the Duomatic Principle is that strict adherence to a statutory requirement may be dispensed with if it is demonstrated otherwise on facts, if the same is consented by all members. In this case at hand, there is overwhelming evidence to show that respondent No. 1 had accepted Mr. G.V. Rao back into the Board and her conduct clearly shows that the resignation dated 06.04.2013 was clearly not accepted. The impugned order passed by the High Court on 17.11.2017 is hereby set aside being contrary to the provisions of the 1956 and 2013 Acts and the order of the CLB dated 30.05.2016 is restored with modifications and by adding the following conditions (1) Dr. Renuka Datla shall be appointed as Emeritus Consultant of the Company. (2) Dr. Renuka Datla will be paid a sum of Rs.65 lakhs per month w.e.f. 01.04.2022 regularly month by month on or before 7th of each month. The payment for current month (April, 2022) may be made by 30th of this month. (3) A further lump sum payment of Rs.10 Crore shall be made to Dr. Renuka Datla by 31.05.2022, which shall be in lieu of all payments, if any, that may be due to her till date and also in lieu of any further increase in monthly payments. (4) Other facilities to Dr. Renuka Datla will also be provided to her, which include her medical expenses, security, residence, maintenance of cars, club memberships etc., the expenses for which shall also be borne by the Company. (5) The learned counsel for the appellants in these three appeals have undertaken that they shall get a resolution passed to the above effect by the Board of Directors of the Company and the General Body of shareholders, within one month. (6) Ms. Sarada Devi, learned counsel for the respondent no.1 Dr. Renuka Datla has stated that Dr. Renuka Datla is present today whom she has consulted, and in lieu of the aforesaid payments to be made and facilities to be provided by the Company, Dr. Renuka Datla as well as the appellants, undertake to put a quietus to the entire litigation between them, which is pending and also undertake not to initiate any further civil or criminal proceedings against each other. Appeal disposed off.
Issues Involved:
1. Requisite qualification under Section 399 of the Companies Act, 1956. 2. Legality and validity of Board Meetings held on 09.04.2013, 10.04.2013, and 11.04.2013. 3. Validity of transmission of 4,00,961 equity shares. 4. Legality and validity of the AGM conducted on 18.12.2013. 5. Acts of oppression and mismanagement. 6. Family relationship in the company and adherence to requests for documents and inspection of books. Detailed Analysis: Issue 1: Requisite Qualification under Section 399 of the Companies Act, 1956 The Company Law Board (CLB) observed that respondent No. 1 filed a civil suit to declare ownership of shares before filing the Company Petition. CLB rejected relief under Sections 111-A, 58, and 59 of the 1956 Act, holding that the petition would be treated under Sections 397/398, 402, 403, 404, and 406. It was concluded that respondent No. 1 had no locus standi to file the petition on behalf of two trusts and did not have the support of 1/10 of the total shareholders to maintain a petition under Section 397, thus dismissing the petition as not maintainable. Issue 2: Legality and Validity of Board Meetings The CLB validated the Board Meetings dated 09.04.2013, 10.04.2013, and 11.04.2013, noting that appellant Mahima Datla was appointed Managing Director under Article 145 of the Articles of Association and Section 269 of the 1956 Act. Respondent No. 1's acquiescence was evident from her announcement letter dated 15.04.2013, indicating her approval of the appointments made in these meetings. Issue 3: Validity of Transmission of Shares The CLB noted that the transfer of 4,00,961 shares to Mahima Datla took place in the Board Meeting dated 10.04.2013. Respondent No. 1 had already challenged this transmission in a civil suit. The CLB held that the issue of inheritance of shares was of a civil nature and beyond its jurisdiction. Issue 4: Legality and Validity of the AGM Conducted on 18.12.2013 The CLB found that the AGM held on 18.12.2013 ratified decisions from the Board Meetings dated 09.04.2013, 10.04.2013, and 11.04.2013. Respondent No. 1's participation and approval of her remuneration in the AGM indicated that the appointments of Mahima Datla, Purnima Manthena, and Indira Pusapati as Directors were final and binding. Issue 5: Acts of Oppression and Mismanagement The CLB observed that the company was profitable, and no evidence indicated that its affairs were being conducted prejudicially to shareholders or public interest. The balance sheets showed no mismanagement, and the situation did not warrant winding up under Sections 397 and 398 of the 1956 Act. Issue 6: Family Relationship and Adherence to Requests The CLB held that no acts of oppression or mismanagement were made out by respondent No. 1. The complaints were directorial and did not justify winding up the company. High Court Judgment: The High Court allowed the appeal, declaring acts of respondents oppressive, nullifying the Board Meetings and AGM, removing the current Board of Directors, and setting aside the transmission of shares. The High Court also directed amendments to the Articles of Association and authorized respondent No. 1 to appoint additional directors and advisors. Supreme Court Analysis: The Supreme Court found the High Court's approach contrary to Section 10-F of the 1956 Act, noting that the High Court re-appreciated evidence beyond its appellate purview. The Supreme Court upheld the validity of G.V. Rao's withdrawal of resignation based on the Duomatic Principle, which allows informal assent by all members to be as binding as a formal resolution. The Court held that the Board Meetings and AGM were valid and ratified. The directions by the High Court regarding the appointment and tenure of directors were found to be contrary to the Companies Act, 2013. Conclusion: The Supreme Court set aside the High Court's order and restored the CLB's order with modifications, appointing Dr. Renuka Datla as Emeritus Consultant with a monthly payment and additional lump sum, ensuring no further litigation between the parties. The appeals were disposed of accordingly.
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