2024 (9) TMI 252 - HC - Companies Law

Grant of extension of three months to hold 40th Annual General Meeting for the financial year ending 31.03.2024 - no special reasons were provided by respondent No. 1 for allowing a three-month extension to the respondent No. 2 - HELD THAT - The impugned order dated 22.08.2024 does not spell out 'special reasons' and appears not to have been issued in accordance with the mandate of Section 96 of the Act. However, there is more to the content of the impugned order than initially apparent. The reasons for seeking an extension are outlined in the request letter dated 21.08.2024 submitted by respondent No. 2. There is merit in the submissions made by the learned counsel for respondent No. 1 that the sufficiency or insufficiency of the reasons for an extension cannot be assessed by respondent No. 1. Such orders are routine unless and until tangible evidence is presented showing that the extension was sought for ulterior motives or to the detriment of stakeholders. The petitioners have not demonstrated any exception grounds, either publicly or otherwise, that could have warranted the rejection of the extension. Evidently, the issues highlighted by the learned counsel for the petitioners regarding the management of respondent No. 2's affairs are not recent developments, but obviously have a history. Therefore, the petitioners could have sought remedies under Section 241 of the Act by approaching the Tribunal for mismanagement or oppression by directors or shareholders, or for removal of any director or person in charge of regulating the company's affairs. This course of action would have been available in cases of mismanagement or oppression. It cannot be that the petitioners are suddenly caught unaware by the extension of time granted by respondent No. 1 to hold the AGM. The Act does not mandate that shareholders be heard before respondent No. 1 considers and decides on an application for an extension. Petition dismissed.

Summary

Issues:
Challenge to extension of time granted for holding Annual General Meeting under Companies Act, 2013.

Analysis:
The petitioners, as shareholders, challenged the extension of three months granted to the respondent company for holding its 40th Annual General Meeting. The petitioners argued that the extension lacked "special reasons" as required by the Act, and the management of the company was under scrutiny by various governmental agencies. They claimed irreparable prejudice due to the lack of reasons provided for the extension.

The respondents contended that no fundamental rights of the petitioners were violated, and the writ jurisdiction could not be invoked. They argued that the system was computerized, and decisions were made in a routine manner due to a large number of applications received. The respondent No. 1 shared the application containing reasons for the extension and stated that they were not required to conduct a mini-trial to assess the sufficiency of the grounds.

The Court observed that the impugned order did not specify "special reasons" as mandated by the Act. However, the reasons for the extension were outlined in the request letter submitted by the respondent company. The Court agreed with the respondents that the sufficiency of reasons for an extension could not be assessed by respondent No. 1 unless tangible evidence of ulterior motives was presented. The petitioners failed to demonstrate any exceptional grounds warranting rejection of the extension.

The Court noted that the dispute among shareholders could not be adjudicated in writ jurisdiction unless there was a palpable infringement of fundamental or legal rights, which was absent in this case. The petitioners were advised to seek remedies under Section 241 of the Act for mismanagement or oppression by directors or shareholders, which could have been pursued earlier given the history of issues with the management of the company.

In conclusion, the Court dismissed the writ petition as the petitioners did not show any larger public interest at stake, and the issues raised regarding the management of the company were not recent developments. The Court emphasized that shareholders were not mandated to be heard before decisions on extensions were made by respondent No. 1.

Decision:
The Court dismissed the writ petition and disposed of the pending application.