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TMI Blog2009 (2) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in his favour. The decision in Dalpat Kumar’s case (supra) does not persuade us to refuse injunction since we are convinced that the plaintiff has succeeded in satisfying the recognised factors based whereon an injunction ought to follow. While allowing the appeals preferred by the plaintiff and dismissing the appeal filed by Teji Mandi, we direct that the order passed by the Trial Court on 6-11-2006 shall continue till disposal of the suit. - G.A. NOS. 2267, 2268 & 2317 OF 2006 A.P.O.T. NOS. 266, 267 & 275 OF 2008 C.S. NO. 274 OF 2006 - - - Dated:- 19-2-2009 - SURINDER SINGH NIJJAR AND DIPANKAR DATTA, JJ. Pratap Chatterjee, S.N. Mukherjee, R.R. Sen, R. Chowdhury, P. Sarawgi, Reetobrato Mitra and Ms. Aruna Ghosh for the Appellant. Anindya Kumar Mitra, Abhrajit Mitra, Anirban Roy, A.K. Jhunjhunwala and Ratnanko Banerjee for the Respondent. JUDGMENT Dipankar Datta, J. - All the three appeals being directed against the judgment and order dated 4-7-2008 passed by a learned Single Judge of this Court, they were heard together and shall be governed by this common judgment. 2. The appellant in APOT Nos. 266 and 267 of 2008 (hereafter the plaintiff) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectively and the said issue and allotment of shares on preferential basis in their favour was intended to repay the loans; that according to the plaintiff, the reason for issue and allotment of shares on a preferential basis in favour of the defendants 2 and 3, as mentioned in the Explanatory Statement, is intended to deceive and perpetrate fraud upon the plaintiff and other shareholders of the company except those who are defendants in the suit; that surprisingly on 25-9-2006, when the plaintiff attended the Annual General Meeting with an expectation that resolution No. 6 would not be pressed and considered in view of decision arrived at in the meeting as aforesaid between the plaintiff, defendant No. 5 and representatives of defendant No. 3, the resolution for issue and allotment of 1,32,000 shares of the company in favour of respondents 2 and 3 on a preferential basis was proposed at the said meeting which was opposed by him; that other shareholders present in the said meeting were neither given opportunity to debate nor were the representatives of shareholders present thereat intending to speak against the said resolution allowed to speak on the ground that they did not have pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly passed at the Annual General Meeting held on 25-9-2006 would abide by the result of the application. 5. The company had intimated the Bombay Stock Exchange that a meeting of its Board of Directors was scheduled to be held on 7-11-2006 to allot the said 1,32,000 shares to the promoters of the company in terms of the special resolution passed at the Annual General Meeting held on 25-9-2006. A second interlocutory application being G.A. No. 3509 of 2006 was then taken out by the plaintiff on which the Trial Court by its order dated 6-11-2006 directed that in the event any step is taken for allotment of shares in pursuance of the resolution, or allotment is effected, the allotted shall not be entitled to exercise any right in respect of such shares until further order of the Court. In a meeting of the Board of Directors of the company held on 7-11-2006, allotment of 1,32,000 equity shares to its promoters being defendants 2 and 3 was approved and a corporate announcement to this effect was posted on the website of the Bombay Stock Exchange. 6. A third interlocutory application being G.A. No. 2973 of 2007 was taken out by the plaintiff wherein it was prayed that the Annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defendants on 18-9-2006, as averred in the first interlocutory application. Money did not matter at all and by devising the scheme the defendants intended to increase their stranglehold over the company. Material facts which had a bearing on the proposal of allotment of preferential shares to the group of promoters were not set out thereby disabling the shareholders to form their judgment. Failure to comply with section 172 of the Act could make a meeting invalid and in this connection reliance was placed on the decision of this Court reported in Maharani Lalita Rajyalakshmi M.P. v. Indian Motor Co. (Hazaribagh) Ltd. AIR 1962 Cal 127. Additionally, the Trial Court had not consi-dered the contradiction between the explanatory statement and the Director s report and, therefore, had failed to dispense justice. ( ii )In course of the Annual General Meeting held on 25-9-2006, polling demanded by the plaintiff was unlawfully postponed by the Chairman of the meeting till the following day between 11.00 a.m. and 12.00 noon. By shifting the venue of such meeting to the registered office of the company which was unequipped to accommodate 365 members who were present on date of the ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders namely Teji Mandi Securities (P.) Ltd. (appellant in A.P.O.T. No. 275 of 2008) (hereafter Teji Mandi) and Jemco Vanijya (P.) Ltd. (hereafter Jemco) by resolutions of their respective Board of Directors had appointed representatives to attend the Annual General Meeting and to vote. The total shareholding of Teji Mandi and Jemco is 2.7 per cent. However, the respective representatives of the said two corporate shareholders had been prevented unlawfully from exercising right to vote. Though Teji Mandi and Jemco had made two separate, though identical, applications to be added as parties to the suit wherein they had averred that their respective representatives had attended the Annual General Meeting and the adjourned Annual General Meeting armed with two separate resolutions dated 25-9-2006 and 26-9-2006 of the Board of Directors of the respective companies authorizing them to attend the Annual General Meeting and to vote, the Trial Court disbelieved the version of Teji Mandi and came to an erroneous finding that there was no averment of the second resolution of the Board of Directors. Had the votes of the aforesaid six corporate shareholders been taken into account, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraphs 11 and 12 of the interlocutory application being G.A. No. 3253 of 2006, he submitted that the same contains vague allegations which cannot be decided at the interim stage. He contended that while the plaintiff holds 1,29,677 shares in the company representing approximately 7.2 per cent of the total issued share capital, the promoting group then held 50.69 per cent and by reason of the proposed issues, shareholding of the promoting group would be increased to 54.06 per cent of the issued share capital thereby reducing the plaintiffs shareholding to 6.71 per cent. Question of strengthening control over the company as a result of proposed issues, therefore, is thoroughly misconceived. According to him since the resolution was passed and action taken thereon has resulted in receipt of money from the defendants 2 and 3 and shares have been allotted in their favour, continuing the injunction granted earlier would work out immense prejudice to the company for it would not be in a position to utilize the money received and thereby pay off its debts. 14. Regarding the proceedings of the Annual General Meeting conducted on 25-9-2006, he argued that the Chairman has the authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o him, to grant or not to grant interim order being discretionary, the Court of Appeal may not interfere with non-exercise of discretion in favour of the plaintiff unless such non-exercise can be demonstrated to be perverse. Since the plaintiff had utterly failed on this count, he urged that the appeals were without merit and deserves outright dismissal. 18. Mr. Ratnanko Bannerjee, learned Counsel for the respondents 2 and 3 echoed the submissions of Mr. Mitra. According to him, no case for injunction has been made out as to why his clients should be restrained from exercising rights in respect of shares held by them. He referred to the first interlocutory application filed by the plaintiff and contended that an impression was sought to be created, as a consequence of resolution No. 6 being passed, that the plaintiff has been converted into a hopeless and insignificant minority having very little say in the affairs of the company. According to him, the plaintiff even before the resolution in dispute being passed belonged to the minority and, thus, cannot have any reason to feel aggrieved. He relied on the decision reported in Dalpat Kumar v. Prahlad Singh AIR 1993 SC 276 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the plaintiff and Teji Mandi that Teji Mandi and Jemco had wrongly been prevented to cast vote in the poll and had their votes being counted, the resolution would have been defeated. The latter position has been noticed and accepted by the Trial Court. However, the Trial Court on consideration of the materials on record before it disbelieved the version of Teji Mandi and in our opinion rightly. From paragraph 8 of the application filed by Teji Mandi seeking leave to intervene, it appears that it had authorized one Mr. K.K. Bhartia as authorized representative and Mr. Raj Kumar More (Director) to act as its representatives and to attend the Annual General Meeting of the company to be held on 25-9-2006. Although Bhartia attended on 25-9-2006, he was unable to attend the meeting on the following day. More attended the meeting on the following day. However, he was not permitted to cast vote on the ground that he was not authorized to represent Bhartia. The Trial Court was sought to be impressed for and on behalf of Teji Mandi that there was a second board resolution whereby More was authorized to represent it on the date of poll. The Trial Court disbelieved the stand of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Teji Mandi by a resolution had authorized More to represent it at the polling scheduled on 26-9-2006, it is incomprehensible as to why such resolution was neither pleaded in the petition nor annexed thereto. Evidence of the second resolution was not considered good and sufficient on its face by the Trial Court. The Trial Court having found on examination of records that there was no second authorization in favour of More, an altogether different case appears to have been made out in the stay application to overcome the finding of the Trial Court. We do not find any reason to differ and thus hold that in preventing More to vote for Teji Mandi, no illegality was committed warranting our interference. 24. Sofaras Jemco is concerned, it was not argued alike Teji Mandi that there was a second authorization in favour of Mr. Ravi Agarwal though the contents of the application filed by Teji Mandi and Jemco in substance appears to be similar with the exception of the person authorized to represent the company on 26-9-2006. The Trial Court held that Jemco did not assert that in addition to Bhartia it had authorized Agarwal to represent it and vote on 26-9-2006. Not allowing Agarwal to v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction between the explanatory statement and the Director s report urged on behalf of the plaintiff, we have perused the Director s report also. It is clear that such report does not present a rosy picture and no apparent contradiction is discernible. 29. Having considered the point raised, we share the view expressed by the Trial Court that "as of now it does not appear that there was anything untoward or sinister that was attempted by the explanatory statement". 30. The contention raised by Mr. Chatterjee that polling was postponed illegally and improperly to 26-9-2006 to preclude a large number of members from taking part in the polling is now taken up for consideration. According to the Trial Court, this was the core issue. Mr. Chatterjee invited our attention to the judgment of the Trial Court wherein it had observed that there was "an element of unfairness in how the company went about adjourning the voting on the contentious resolution to the following day" and that "the company s off-the-cuff response that it may not have been prepared with ballot papers is unconvincing". On the other hand, it was the contention of Mr. Mitra that the plaintiff or any other sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Keeping these well settled principles in mind, we shall proceed to decide the contentious issue. 32. A decision on this point would require reference to the pleadings of the parties. From the counter-affidavit filed on behalf of the company in response to G.A. 3256 of 2006 it appears that the plaintiff had informed the Vice-chairperson of the company, when he met her on 18-9-2006, that he was controlling over 21 per cent shares in the company and unless his entire shareholding was bought over by the promoters of the company for about Rs. 800 per share, he would use his voting power to defeat resolution No. 6 for proposed preferential allotment of shares to the promoters group of the company. The said affidavit is, however, silent regarding the reaction of the Vice-chairperson on hearing the plaintiff. But it appears to be an admitted position that the plaintiff had openly threatened to the knowledge of some of those at the helm of the company to defeat resolution No. 6 by using his voting power unless his entire shareholding is bought over. 33. That the plaintiff may demand a poll if preferential allotment of shares to the promoter group of the company is pressed at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Meeting that he had control over 21 per cent shareholding. Whether this 21 per cent included the shares of the six corporate shareholders referred to above need not be ascertained at this stage but fact remains, more than 21 per cent had voted against the resolution even on 26-9-2006 and had the votes of these six corporate shareholders been counted the resolution would have been defeated. None has disputed that these corporate shareholders were duly represented on the day of original meeting. Turning a blind eye to these facts would result in miscarriage of injustice. 34. Having accepted that there was an element of unfairness in conducting the meeting insofar as Item No. 6 is concerned, that the company s off-the-cuff response was unconvincing and that the conduct of postponing the voting was undesirable, in our opinion, the Trial Court erred in not continuing the injunction granted by it earlier on the premise that positive material had not been placed by the plaintiff to show that the resolution would have failed if poll had been conducted on the date originally fixed. Grant or refusal to grant injunction must be based on exercise of sound judicial discretion. We w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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