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TMI Blog2015 (3) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... ard by the Company (Amendment) Act, 1988 (with effect from 31-5-1991). Therefore, in the circumstances of the case the petition is not maintainable and ought to be rejected. But the peculiar circumstance that has been created by the parties of their volition, is in inviting this court to dispose of the application in CA 1886/2013, where by mutual consent - an Extraordinary General Meeting of the company was convened under the Chairmanship of an independent member of the Bar, in whom both the sides had reposed confidence. The contesting respondents having found that the tables were turned on them at the said meeting, whether they would be in a position to refuse to abide by the result of the meeting, dehors the merits of the petition, is a question that looms up for consideration. The contesting respondent shareholders have sought to place reliance on Article 12 (iii) of the Articles of Association in holding that the result of the Extraordinary General Meeting was inconclusive and was not binding on them. Section 284 of the Act provides for the manner of removal of a Director of the company, and notwithstanding anything to the contrary in its Articles, would be removable by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions while the petitioner was working in the field. The petitioner along with Shankar and Venkatesh were authorised signatories on behalf of the company. It is emphasized that though apparently it was structured as a company, in reality, and in essence was a partnership firm and was a company only to appeal to its clients. 2. While matters stood thus, Shankar is said to have taken ill and died all of a sudden in February, 2013. It then transpires that the elder brother of Shankar, namely, Umesh along with Rangappa Divakar and Mudduraju Rangappa along with other family members and friends - Chetan Bhaskar Shetty, Kodialbail Bhaskar Shetty and Budari Dasappa Basavaraj, had expressed their desire to join the company as its Directors. The shareholding of late Shankar is said to have been transferred in the name of Umesh. On the reconstitution of the Board of Directors, it is alleged that the newcomers started to function erratically and even though they had no expertise or knowledge of the business, had started to interfere in the functioning of the petitioner and impeded the smooth functioning of the business. It is alleged that Lokamata had also started colluding with h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive vote of Umesh and Lokamata, any resolution passed by the shareholders would not be valid. It is further stated that Lokamata had issued letters to the several bankers of the company to freeze the accounts of the company on the accusation that the petitioner was responsible for several financial irregularities. Public notices in that regard were also said to have been issued in daily newspapers. 4. The petitioner is said to have opposed the actions of the respondents, which lead to the petitioner being completely prevented from entering the office premises of the company. It is stated that on 16.4.2013, the petitioner was summoned to the Chandra Layout police station, on the ground of an enquiry, where Umesh, Lokamata and Diwakar Rangappa were present. It was revealed that Lokamata had filed a complaint against the petitioner making several allegations. It transpires that the police, in a totally one-sided approach and acting without authority of law had demanded that the petitioner accede to the demands of the aforesaid respondents. The first demand was that the petitioner resign from the post of Director of the company. When the petitioner resisted, the police are said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of the brother of the petitioner and late Shankar were offered as collateral security for securing loans from bank, along with the property of respondent No.6. The respondent No.2 was the Chief Operating Officer of the company and she along with late Shankar were instrumental in getting projects from various clients for the respondent-company. Though all the directors were given cheque signing authority, since the petitioner was the Chief Financial Officer, the accounts and the financial aspects of the respondent-company were handled by the petitioner and he was signing the cheques and drawing up accounts and presenting them to the Board of Directors. He was interacting with the bankers of the respondent-company, and hence was familiar with the officials of the bankers of the respondent-company. After the death of late Shankar on 8.2.2013, the petitioner, with a mala fide intention of taking over the respondent-company entirely, demanded the resignation of the respondent No.2. The petitioner and respondent No.6, through a Company Secretary, caused the issuance of a notice dated 28.3.2013 for holding a Board meeting on 2.4.2013, where one of the items on the Agenda was the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly withdrawn cash from the account of the respondent-company to the tune of ₹ 65 lakh for his personal use within a span of 13 days apparently with an intention of defrauding the respondent-company. Cash was withdrawn by the petitioner by purportedly borrowing loans from various financial institutions while having produced a fake shareholding pattern, an inaccurate list of the board of directors and a fabricated board resolution, evidently in connivance with the statutory auditor of the respondent-company and respondent No.6 and with the forged signature of respondent No.2. The petitioner had borrowed the amounts from the financial institutions even though there was no necessity for any funds. The amounts unauthorisedly borrowed by the petitioner are said to be as follows: i Bajaj Finance Limited - ₹ 29,15,930/- (Rupees twenty nine lakh fifteen thousand nine hundred and thirty) ii Kotak Mahindra Bank Limited - ₹ 34,04,000/-(Rupees Thirty four lakh and four thousand) iii Tata Capital Financial Services Limited - ₹ 33,90,080/- (Rupees Thirty three lakh ninety thousand and eighty) and iv Religare Finvest Limited - ₹ 34,16,056/- (Rupees Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash from the bank and had jeopardised the reputation of the respondent-company and had committed grave fraudulent acts. It is claimed that when the respondents became aware of the fraud and misappropriation committed by the petitioner, the petitioner is said to have resigned from the Board on 20.4.2013 and had written a letter, to the bankers of the respondent, requesting them to release the security provided for the loans borrowed by the respondent-company. The banks are said to have refused to defreeze the accounts, relying on the letter issued by the petitioner, and insisted that the respondent provide a cash margin equivalent to the value of the collateral security provided by the petitioner. It is claimed that since the respondent was caught in a situation where its funds were in danger of being siphoned off, the respondent had no option but to furnish an amount of ₹ 2.19 crore meant for payment of provident fund and ESI dues as cash margin as required by HDFC Bank. HDFC Bank has created a lien on the said amount of ₹ 2.19 crore in order to facilitate the release of properties belonging to the petitioner and respondent No.6 as collateral. It is stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the following terms : ORDER In this case, the applicant has sought for a direction for convening of the extraordinary general meeting of the Company, either on 25.09.2013 or on 03.10.2013 and to appoint an independent Chairman to preside over the said meeting. Learned counsel for the parties submit that the extraordinary general meeting of the Company may be convened on 25.09.2013. It is also submitted that the special notice for the removal of Directors has been complied with. They have also no objection to appoint Sri Shreyas Jayasimha, learned advocate, to preside over the said meeting as the independent Chairman and to fix his remuneration at ₹ 1,00,000/- Submission of the learned counsel for the parties is placed on record. C.A.1886/2013 is allowed. The extraordinary general meeting of the Company shall be convened on 25.09.2013 at 10.30 a.m. under the Chairmanship of Sri Shreyas Jayasimha, learned advocate, for consideration of the subject-matter in the notice which has been sent to the shareholders of the Company. The remuneration of the Chairman is fixed at ₹ 1,00,000/-. The undertaking given on behalf of the first respondent-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he permanent member of the Board of Directors of the Company and any Resolutions passed at the Board meeting and shareholders meeting are not valid unless affirmative vote is cast by Mrs. Lokamata Rangappa or Mr. Umesh R. The preliminary objection to the vote was overruled in view of the fact that the said Article would not come in the way of a vote being held as the Article itself contemplates the validity of resolutions passed at meetings. 3. The following Resolution No.1 was then proposed by Mr. Khathim Kunnummi, shareholder No.3 and seconded by Mr. Venkateshachar Krishnachar, shareholder No.2: RESOLUTION No.1: RESOLVED THAT Mrs. Kharunnisa Khathim, bearing approved Director Identification Number 06540328 be and hereby is appointed as director in the board of directors of the Company. The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956, I ordered voting by a show of hands on the said resolution. The result of the same was two for the resolution and two against . 4. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be appointed. However, out of the persons present, shareholder Nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder No.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practising Company Secretaries were appointed scrutineers and they accepted their appointment. 7. The following Resolution No.3 was then proposed by Mr. Venkateshachar Krishnachar, shareholder No.2 and seconded by Mr. Khathim Kunnummi, shareholder No.3: RESOLUTION NO.3: RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Umesh Rangappa, Managing Director, be and is hereby removed from the office of director of the Company. The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956, I ordered voting by a show of hands on the said resolution. The result of the same was two for the resolution and two against . 8. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under: Article 9 (ii) Upon a poll one vote in respect of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also Directors of the Applicant Company and shareholder No.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practising Company Secretaries were appointed scrutineers and they accepted their appointment. 11. The following Resolution No.5 was then proposed by Mr. Venkateshachar Krishnachar, shareholder No.2 and seconded by Mr. Khathim Kunnummi, shareholder No.3: RESOLUTION NO.5: RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Chethan Bhaskar Shetty, a Director, be and is hereby removed from the office of director of the Company. The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956, I ordered voting by a show of hands on the said resolution. The result of the same was two for the resolution and two against . 12. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under: Article 9 (ii) Upon a poll one vote in respect of each share held by him. As per Section 180 (2) I informed the persons present tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practising Company Secretaries were appointed scrutineers and they accepted their appointment. 15. The following Resolution No.7 was then proposed by Mr. Venkateshachar Krishnachar, shareholder No.2 and seconded by Mr. Khathim Kunnummi, shareholder No.3: RESOLUTION NO.7: RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Budari Dasappa Basavaraj, a Director, be and is hereby removed from the office of director of the Company. The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956, I ordered voting by a show of hands on the said resolution. The result of the same was two for the resolution and two against . 16. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under: Article 9 (ii) Upon a poll one vote in respect of each share held by him. As per Section 180 (2) I informed the persons present that the poll would be taken within 48 hours of the demand and stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising Company Secretaries were appointed scrutineers and they accepted their appointment. 19. The following Resolution No.9 was then proposed by Mr. Venkateshachar Krishnachar, shareholder No.2 and seconded by Mr. Khathim Kunnummi, shareholder No.3: RESOLUTION NO.9: RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Mudduraju Rangappa, a Director, be and is hereby removed from the office of director of the Company. The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956, I ordered voting by a show of hands on the said resolution. The result of the same was two for the resolution and two against . 20. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under: Article 9 (ii) Upon a poll one vote in respect of each share held by him. As per Section 180 (2) I informed the persons present that the poll would be taken within 48 hours of the demand and stated that the details about when the poll would be taken would be informed by me on the same day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on upon conclusion of the poll without commenting further on the validity of proposed resolutions so that the parties may work out their remedies before appropriate fora. 27. On scrutiny of the poll papers by the appointed Scrutineers and as per their report, 4 shareholders present in person representing 50,000 shares had cast their votes validly. Copies of the poll papers are produced as annexures C to F. The factual position upon conclusion of the poll on Resolution Nos. 1 to 9 are as under:- POLL PAPER NO. NAME OF SHAREHOLDER NO. OF EQUITY SHARES HELD MANNER OFVOTING 1 KHATHIM .K 16,500 FOR 2 VENKATESHACHAR .K. 16,500 FOR 3 UMESH .R 16,500 AGAINST 4 LOKAMATHA .R 500 AGAINST 25. I submit that the present Report clearly sets out the result of the meeting and the voing thereat. Dated this 8th day of October, 2013 Sd/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em at the said meeting, whether they would be in a position to refuse to abide by the result of the meeting, dehors the merits of the petition, is a question that looms up for consideration. The contesting respondent shareholders have sought to place reliance on Article 12 (iii) of the Articles of Association in holding that the result of the Extraordinary General Meeting was inconclusive and was not binding on them. The said Article reads as follows : Article 12 (iii) : Mr. Umesh R. to be the permanent member of the Board of Directors of the company and any Resolutions passed at the Board Meeting and shareholders meetings are not valid unless affirmative vote is cast by Mrs. Lokamata Rangappa or Mr. Umesh R. Section 284 of the Act provides for the manner of removal of a Director of the company, and notwithstanding anything to the contrary in its Articles, would be removable by an ordinary resolution of which special notice has been given. The Section is general and applies to all Directors and includes all those not retiring by rotation. It applies to permanent Directors or Life Directors and Directors appointed for a fixed term even though they may have been appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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