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2023 (12) TMI 1013 - AT - Companies LawOppression and mismanagement - Application for continuation of interim stay dismissed - appointment of a Chief Operating Officer - Article 69 of the Articles of Association of the Respondent No. 1 Company requiring unanimous consent of all directors - appointment of more than 1 (one) director on the board of Respondent No. 1 Company - Appointing an independent director on the board - Removing Respondent Nos. 4 to 6 from the Board of Directors of the Respondent No.1 Company and directing Respondent No. 2 Company to nominate 1 (one) person after providing and obtaining approvals of the credentials of such person - restraint from interfering with the day-to-day functioning and management of the affairs of the Respondent No. 1 Company - ensuring clear separation between the persons nominated on the board of the Respondent No. 1 Company or any other person having access to Respondent No. 1 Company and its information - Restraining Respondent Nos. 2 to 9, their principals/directors, their promoters, managers, assigns, successors-in-interest, licensees, franchisees, sister concerns, representatives, servants, distributors, agents, etc. and/or any person or entity acting for them from entering into any contract of supply/ services or otherwise with the Respondent No.1 Company - Section 241 242 of the Companies Act, 2013. HELD THAT - It is needless to mention that the main petition filed under Section 241 and 242 of the Act is pending for hearing on 01.02.2024. It is also borne out from the record that initially when stay was granted on 04.09.2023 it was observed that if the board of directors takes a decision to appoint Shri MSM Mujeebur Rahuman as COO, the said decision shall be kept in abeyance till 12.09.2023 and then the Appellant chose to file the application bearing I.A. No. 263 of 2023 in which the only prayer made is for extension of the order dated 04.09.2023. It is pertinent to mention that this order was extended by the Tribunal up to 28.11.2023 but by that time the appeal was filed not only the order became inoperative but also the Respondents appointed Dr. MSM Mujeebur Rahuman as COO who is working as such and no application has been filed until now about his act and conduct. It is also a matter of fact that the Tribunal fixed the case for hearing on 05.12.2023 i.e one after the order dated 28.11.2023 was passed for the purposes of hearing the main petition in terms of the observation made in para 49 which is mentioned hereinabove, however, instead of arguing the case on merit itself on 05.12.2023 the Appellant got the main petition adjourned for 01.02.2024 on the pretext that the appeal has been filed which was only against an interim order. In such a situation, where the court has to thoroughly scan voluminous record and also interpret various articles of the AoA, it would be just and expedient if the main petition itself is heard and decided, as proposed by the Tribunal who has rightly not made any observation about the interpretation of Article 69 which is the main plank of the argument of the Appellant in the interim application and the main petition, therefore, this appeal is disposed off with liberty to the Appellant to file an appropriate application before the Tribunal for preponement of the hearing from 01.02.2024 to an early date by making reference to Para 49 of the impugned order and in case any such application is filed, the Tribunal shall consider the said request and prepone the date of hearing and decide the main petition filed by the Appellant as early as possible.
Issues Involved:
1. Whether the role of the Respondents is only passive and no involvement in the day-to-day management? 2. Whether the word 'both directors' in Article 69 of the AoA now means 'all directors' and if so, is the impugned board resolution passed only by the majority directors sustainable? 3. Whether the appointment of Dr. MSM Mujbur Rehuman as COO is mala fide, unwarranted, unsustainable, and oppressive? 4. Whether Respondent Nos. 4 to 6 have actively involved themselves in the affairs of the 1st Respondent Company to the extent that the nominee directors and their various appointees have proactively siphoned off the business of the 1st Respondent Company to Primopus? Summary: Issue 1: Passive Role of Respondents The Tribunal considered whether the Respondents' role was merely passive with no involvement in day-to-day management. It was concluded that the affairs of the 1st Respondent Company were being conducted normally and there was no immediate urgency to empower the COO with the power to conduct the affairs of the company. The Tribunal found no specific allegations that due procedure in calling for the Board Meeting was not followed, hence, granting a stay on the Board Meeting was unwarranted. Issue 2: Interpretation of Article 69 of AoA The Tribunal examined whether the term 'both directors' in Article 69 of the AoA now means 'all directors' and if the impugned board resolution passed only by the majority directors is sustainable. The Tribunal did not embark on an exercise to interpret Article 69 at the interim stage but accepted the Petitioners' submission that Article 69 does not exist in its present form for the purpose of the interlocutory application. The Tribunal found that prima facie, the Petitioners failed to establish a violation of any article or provision in the Companies Act, 2013, in appointing Dr. Mujbur Rehuman as COO. Issue 3: Appointment of COO The Tribunal considered whether the appointment of Dr. MSM Mujbur Rehuman as COO was mala fide, unwarranted, unsustainable, and oppressive. The Tribunal observed that the Petitioners had no objection to the appointment of any person as COO but objected to the appointment of Dr. Mujbur Rehuman by the majority rule. The Tribunal held that the appointment was not in violation of any article or provision in the Companies Act, 2013, and thus dismissed the application for extension of the interim stay. Issue 4: Involvement of Respondent Nos. 4 to 6 The Tribunal examined whether Respondent Nos. 4 to 6 had actively involved themselves in the affairs of the 1st Respondent Company to the extent that the nominee directors and their various appointees had proactively siphoned off the business of the 1st Respondent Company to Primopus. The Tribunal dismissed the application but recorded that the observations were subject to the final outcome of the Company Petition. Conclusion: The Tribunal dismissed the application for continuation of interim stay and directed both sides to be ready for the final hearing of the main petition. The Tribunal also granted the Appellant three days to keep the order in abeyance, which expired on 30.11.2023. The Appellant was granted liberty to file an appropriate application for preponement of the hearing date from 01.02.2024 to an earlier date.
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