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TMI Blog2014 (3) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... own as '00'. This all support the case of the Petitioner that the said documents are cooked-up documents and cannot be relied upon. We therefore come to the conclusion that the Respondents have made an unsuccessful attempt to rely upon false and concocted evidence which is the result of an afterthought. The Respondents 3 has no convincing answer to the Petitioner's contention that any valid Board Meeting could he held as she was the only other Director of the Company to approve the notice to convene the impugned EOGM, therefore, find the appointments of the Respondent Nos. 2 and 3 as Directors of Respondent No. l Company as non-est, illegal and liable to be set aside. Act of oppression - Held that:- Upon a critical analysis of the facts stated and the documents filed in support thereof by the Answering Respondents, they do not seem worthy to relay upon. Therefore, inclined to accept the contention of the Petitioner that the Board Meeting held on 22/02/2010 whereat the resolution for shifting of the registered office of the company was passed at the back of the petition is null and void and amounts to an act of oppression as defined in the provisions contained in Section 397 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the charges levelled by the Petitioner against the answering Respondents alleging them to be acts of oppression and mismanagement clearly prove that the affairs of the company are being conducted in a manner oppressive to its members but it would not be just and equitable to wind up the company, would unfairly prejudice such member, but that otherwise the facts would justify the making up of winding up order on the order it was just and equitable that the company should be wound up. The sequence of events narrated above, thus go to prove that the conduct of the Respondents towards the Petitioner has been consistently harsh, burdensome, unfair and lacks in probity. The Petitioner has therefore, succeeded to prove the allegations relating to acts of oppression and mismanagement in the affairs of the Respondent No.l Company as defined under section 397/398 of the Act, and the petition therefore, deserve to be allowed. - C.P No. 80 of 2011 - - - Dated:- 28-3-2014 - Shri Ashok Kumar Tripathi, J. For The Petitioner : Mr. R.T. Rajguroo, PCS a/w Ms. C.S Bindi Vaishnav PCS i/b M/s R.T.Rajguroo and Associates For The Respondent : Mr. J.I. Vyas JUDGMENT 1. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d liable to be quashed for the following two fold reasons. a. Because, at the time of appointment of the said two Directors, there were only two Directors on the Board of the Respondent No. l Company i.e. Respondent No.4 and the Petitioner. It is alleged that since no notice of meeting was received from the Board of Directors of the Company by the Petitioner for holding the Board Meeting purportedly held on 20/02/2010 and since she was not present in the alleged Board Meeting purportedly held on 20/02/2010, therefore, there was no quorum as required in the articles of association. b. Because, a Director can be appointed only by Shareholders of a company in an EOGM and not by the Board of Directors. In fact, the Board has limited powers to appoint an additional Director under Section 260 of the Act to fill up casual vacancy under Section 262 of the Act and alternate Director under Section 313 of the Act. Second Charge : Shifting of Registered office without following due process of law 2.6 It Is next alleged that, thereafter the illegally constituted Board of Directors thereafter without any authority and adopting any due course of law shifted the Registered office of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment as Directors itself is null and void and illegal. f. Any other relief as this Hon'ble Bench may deem fit in the interest of justice and equity. 3. The Respondents appeared and filed their Reply denying all the charges. 4. It is pertinent to mention that after exchange of pleadings by the parties, this petition came up for final hearing before the then ld. Member Mrs. Vimla Yadav who after conclusion of final hearing on 9/04/2013, disposed of the petition vide a Judgment and Order dated 26/06/2013 and thereby granted certain reliefs to the Petitioner. 5. Being aggrieved by the said Judgment and Order an Appeal was preferred being Appeal O.J. Appeal No.27 of 2013, by the Respondents before the Hon'ble High Court of Gujarat at Ahmedabad. The said appeal came to be disposed off on 25/11/2013. The Hon'ble High Court set aside the Judgment and Order passed by the then ld. Member and remanded the Company Petition with the direction to hear and decide the C.P de novo. The Hon'ble High Court Further directed the parties to maintain status quo with respect to the affairs of the company until the matter is considered and decided by the CLB. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. PCS then invited my attention to the provisions contained under Sections 260, 262 and 313 of the Indian Companies Act, 1956, and submitted that assuming for the sake of arguments that any such Board Meeting was held validly, but in that case, the Board of Directors of a company is not empowered under Jaw to appoint a Regular Director on its Board. The ld. PCS further submits that by virtue of the aforesaid provisions, only additional director or alternate director can be appointed to fill the casual vacancy by the Board of Directors of the Company. According to the ld. Counsel, under law appointment of a Director can only be made by Shareholders in an EOGM which in fact was not held on 20/02/2010 as contended by the Respondents, It is, therefore, contended that the appointment being made in contravention of the provisions of the Indian Companies Act is ultra vires, void, ab initio and thus liable to be quashed and set aside. 12. On the other side, the Respondent No.3 who appeared in person, pointed out that the Company had received a requisition dated 25/11/2009 under Section 169 of the Indian Companies Act, 1956, from the Respondent No.3 in the capacity of being a shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... msinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 11 SCC 314 (e) Kamal Kumar Dutta v. Ruby General Hospital Ltd. [2006] 7 SCC 613 15. From the above decisions, it is clear that oppression would be made out: (a) Where the conduct is harsh, burdensome and wrong. (b) Where the conduct is mala fide and is for a collateral purpose where although the ultimate objective may be in the interest of the company, the immediate purpose would result in an advantage for some shareholders vis-a-vis the others, (c) The action is against probity and good conduct. (d) The oppressive act complained of may be fully permissible under law but may yet be oppressive and, therefore, the test as to whether an action is oppressive or not is not based on whether it is legally permissible or not since even if legally permissible, if the action is otherwise against probity, good conduct or is burdensome, harsh or wrong or is mala fide or for a collateral purpose, it would amount to oppression under Sections 397 and 398. (e) Once conduct is found to be oppressive under Sections 397 and 398, the discretionary power given to the Company Law Board under Section 402 to set right, remedy or put an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-of evidence which attempt to assist the judicial mind in the matter of weighing the probative or persuasive force of certain facts proved in relation to other facts presumed or inferred. Sometimes a discretion is left with the court either to raise presumption or not as in Section 114 of the Evidence Act. On other occasions, no such discretion is given to the court so that when a certain set of facts is proved, the court is bound to raise the prescribed presumption. But that is all. The presumption may be rebutted. Raising of a presumption, therefore, does not by itself amount to proof. The result of a mandatory requirement for raising a presumption cast on the court, as there is under Section 53(2) of the Companies Act, is that the burden of proof is placed on the person against whom the presumption operates for disproving it it is only if such person is unable to discharge the burden that the court with act on the presumed fact. c. In the case of Dankha Devi Agarwal v. Tara Properties (P.) Ltd. 2006 SC 3068, it has been held by the Supreme Court that a decision taken in a meeting without due notice of such meeting for removal or induction would be instance of oppression and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f every General Meeting of its Board of Directors or of every committee of the board to be kept by making within 30 days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered. It is further held that if the presumption under is not available under Section 193 of the said Act, presumption under Section 195 of the said Act is also not available. 19. In the case of Parmeshwari Prasad Gupta v. Union of India [1974] 44 Comp. Cas. 1 (SC) it has been held that by virtue of Section 286 of the Act, notice of every meeting of the Board of Directors of a company shall be given in writing to every Director in prescribed manner failing which every officer of the company shall be punishable as specified therein. It has been further observed that requirements of Section 286 of the Act, being mandatory, notice to all the directors of meeting is essential for the validity of resolution passed at the Board Meeting. When no notice is given to any one of the Directors of the company, the Resolution passed at the meeting of the Board of Directors, becomes invalid. 20. Now, I proceed to evaluate the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2nd February, 2010 Dear Sir/Madam. Sub: Convening the Extraordinary General Meeting under Section 169 of the Companies Act, 1956 for appointment of Mr. Janak 1 Vyas end Mr. Upendra I Vyas as a Directors under section 255 of the Companies Act, 1956 We the undersigned members of Shree Sadguru Switchgears Private Limited had served on the Company on 24.11.2009, a requisition dated 24.11.2009 under section 169 of Companies Act, 1956 calling upon the Board of Directors to convene. an Extraordinary General Meeting of members of the company to transact the business as mentioned therein The Board of Directors of the Company have failed to proceed within twenty one days of the deposit of the said requisition to duly call a meeting for the consideration of those matters on a day not later than forty five days from the date of deposit of the requisition. The undersigned requisitionists, are therefore, entitled under section 169 (6) and (7) of the Companies Act, 1956 to call an Extraordinary General Meeting of members of the company to transact the business narrated in the Requisition. Accordingly Notice is hereby given that an Extraordinary General Meeting of members of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Smt Jay Shree J Vyas 14920 nos 2. Shri Janakkumar 1 Vyas 04 nos 3. Shri Upendra I Vyas 02 nos 4. Shri Uday Vyas 02 nos There was thus, due quorum The members present unanimously appointed Smt. Javshree J. Vyas as the Chairman of the meeting. The Chairman then proceeded to conduct the meeting further. The Chairman pointed out that the meeting had been called and convened by Requisitionist pursuant to powers conferred on them by Section 169 (6) and (7) of the Companies Act, 1956. The Chairman informed at the meeting that 4 members holding amongst them 14928 equity shares in the paid-up capital of the Company had served on the company on 24-11-2009 a requisition dated 24-11-2009 under Section 169 of the Companies Act, 1956 to transact the business mentioned therein. The Chairman further informed at the meeting that since the Board of Directors of the Company had failed to proceed within twenty one days of the deposit of the said requisition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it is rejected. Furthermore, from the perusal of the Form No.32 relating to appointment of the Respondent Nos. 2 and 3, it is noted that it does not contain their Consent Letters and the Resolutions etc. Even Sr. No. of Board Resolution is shown as '00'. This all support the case of the Petitioner that the said documents are cooked-up documents and cannot be relied upon. 25. I have therefore come to the conclusion that the Respondents have made an unsuccessful attempt to rely upon false and concocted evidence which is the result of an afterthought. The Respondents 3 has no convincing answer to the Petitioner's contention that any valid Board Meeting could he held as she was the only other Director of the Company to approve the notice to convene the impugned EOGM, I, therefore, find the appointments of the Respondent Nos. 2 and 3 as Directors of Respondent No. l Company as non-est, illegal and liable to be set aside. 26. Next charge relating to the alleged acts of oppression levelled by the Petitioner upon the Answering Respondents is with respect to passing an invalid and ultra vires resolution by circulation in the evening of 20/2/2010 whereby the regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Director. It was contended that she was a majority shareholder and founder Director of the Company and therefore, her removal without giving any cogent and convincing reason is improper illegal and against the principles of justice. It is further submitted that the Petitioner was given a threat to her life and she was prevented to attend the EOGM to submit any representation, In addition to the above, it is contended that the primary procedure of approving notice for convening and holding the EOGM necessary was required to be considered at a Board Meeting only, it was submitted that no such Board Meeting was conducted as the Petitioner never attended the Board Meeting nor any notice was served upon her for attending any such Board Meeting. Further, no Board Meeting under law could be possible in her absence being a Director of the Company. 31. Justifying the removal of the Petitioner as a Director of the Company, it is argued by the Respondent No.3 that upon receiving the requisition on 7/04/2010, a Resolution by circulation was passed by the Board of Directors of the Company for convening an Extraordinary Meeting on 24/4/2010, for removal of the Petitioner from the office of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tue of the provisions contained in Section 284 of the Act upon a Director is a statutory right which cannot be taken away by the private contract either in the form of Articles of Association or any other document. It has also been held in catena of decision that removal of Director of Company which is in the nature of partnership such removal must be declared as an oppressive act, if the shareholders are found instrumental in proposing a resolution to have acted in a malafide manner for the removal. In all case where the majority of shareholders are determined to remove a Director, they can very easily do so through the mechanism of Section 284 of the Act, by making compliance of the procedural requirements stipulated in the said Section. In such cases, it is the duty of the Board to test the fairness rather than legality which is fundamental law in a petition under Section 397 and 398 of the Indian Companies Act, 1956. Having examined the removal of the Petitioner from the said angle, I find the Petitioner has succeeded in making out a case of illegal removal from the Directorship of the Company, with malafide motive to gain entire control over the management and affairs of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company to get the accounts of the Company audited to ascertain the siphoned of alleged diverted funds and on the basis of such report the company will be entitled to get back such amounts to its own account from the person responsible for it. 38. The Respondent No.3 has challenged the maintainability of the petition contending that in order to succeed a party to obtain reliefs in a petition filed under Sections 397 and 398 of the Indian Companies Act, 1956, it is necessary for such a party to establish that the facts of the case justify the making of winding up order of the Company, but such an order would unfairly prejudice the interest of the Petitioner's member and therefore, it is not advisable to wind up the Company. The Respondent No.3 submitted that since the Petitioner in the present case has failed to plead and prove the essential element, hence the petition is liable to be dismissed on this ground alone. 39. I have considered the above submission. Though, it is apparent that the Petitioner in her petition has not specifically pleaded that the affairs of the Company are being conducted in a manner oppressive to any member and that to wind up the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application came to be dismissed on merits, No appeal was preferred against the said order. Therefore, in my considered view, this order has become final and binding upon the Parties and the Respondents are estopped from challenging the maintainability of the petition on the same grounds in the same proceedings on the principles of constructive res judicata. I, therefore, reject the contention of the Respondent No.3 that the petition is liable to be dismissed for want of the above stated ingredients, necessary to maintain the petition. 43. The Respondent No.3 has drawn my attention to the alleged illegal allotment of shares made by the Petitioner in their favour. It is submitted that Petitioner holds only 9,830 equity shares of the Company and not 24,880 as contended by her. 44. Elaborating his submission, the Respondent No.3 submitted that the Petitioner in collusion with the statutory auditors of the company illegally increased the paid-up capital of the company and allotted 15,000 shares in her favour on the basis of a Board Resolution dated 5/12/2007 purportedly passed in the Board Meeting held on the said date, without any payment of share application money and with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultra vires, null and void and the same are hereby set aside. The appointments of Respondent Nos. 2 and 3 as Directors of the Respondent No. l Company are quashed. The Company is directed to file appropriate forms showing cessation of the Respondent Nos.2 and 3 as Directors of the Company. 3. The Resolution for shifting of the Registered office of the Respondent No.l Company is also set aside and status quo ante is restored. Necessary form shall be filed accordingly by the Company. 4. The Resolution passed in the EOGM dated 24/04/2010 thereby removing the Petitioner as a Director is set aside being non-est, ultra vires, and illegal. The Petitioner is reinstated with all benefits to the office of the Director of the Company. Necessary statutory forms relating to her appointment as a Director may be filed with RoC, 5. The newly constituted Board under this Order may take a decision for appointment of Chartered Accountant for conduct of special audit to assess any loss caused to the company on account of siphoning of funds of the company by any of the directors of the company and such director will be liable to make good the loss, 6. No order as to costs. 7. Interim ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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