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TMI Blog2017 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in Accordance with articles of Association and relevant provisions of Companies Act, 1956. Hence, the removal of Petitioner as director is held to be in order. The fifth Respondent issued a notice/complaint dated 08.03.2011 to remove the Petitioner as a Director. This issue of the removal of the Petitioner was discussed in the Board Meeting held on 11.03.2011 under the caption "any other Business". Further she also did not attend the EGM in person in which the Petitioner's removal was to be discussed. It is surprising that a person who made a complaint/notice to remove a Director, chose not to attend the EGM in person. Further, from the available records, it is also not clear as to when the 5th Respondent became shareholder of the 1st Respondent Company. Whether the Petitioner has come to this Tribunal with clean hands in order to claim equitable relief under Section 397/398 of Companies Act, 1956 - Held that:- In this context, it is necessary to refer the legal notices dated 8th April, 2013 got issued by the petitioner through his Advocate Shri Govind Reddy Mandadi to D. Nitin Kumar Reddy and Ravikanth Gajula, who are purchasers of plots of the Company. The petitioner t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction of this Bench, The case is numbered as TP No.56/HDB/2016 and thus deciding the case. 2. The learned counsels for both the parties submit that the case can be decided basing on the various averments made in the Company Petition, Counter Reply, Addl. Reply etc. and have also filed written submissions on behalf of Petitioner as well as Respondents. We have perused all the pleadings including written submissions made by both the parties and thus we are deciding the case. 3. The Company Petition No. 59 of 2011 (which is referred to as 'Petition' hereunder) was filed by Mr. Vangala Niranjan Reddy under Sections 397, 398, 402, 409 of the Companies Act, 1956, by inter-alia seeking a declaration to declare the resolutions passed on 11.03.2011 and 05.04.2011 as null and void; to direct the respondents to issue due notice of the meetings of the first respondent-company to the petitioner and, he should be permitted to run the business affairs of the Company etc. 4. The brief facts leading to the filing of present petition, as set out in the petition, are as follows:- a. Breezy Farms and Resorts Limited was incorporated on 24.06.2005 as a Private Limited Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing plot holders. In the above circumstance, he was forced to file a Civil Suit bearing O.S. No. 832 of 2010 on the file of 2nd Additional District Judge, R.R. District, L.B. Nagar. The Suit was filed seeking mandatory injunction permitting him to participate in the day-to-day affairs of the 1st respondent Company. However, the suit was stated to be still pending without any further orders. g. The petitioner submits that the Board Meeting was held on 11.03.2011 in which, the petitioner along with other directors have attended. The discussed agenda in this meeting is as follows:- i. To grant leave of absence ii. Confirmation of minutes of previous meeting held on 08.11.2011 iii. To consider on progress report for the quarter iv. To review the financial position of the company v. To discuss about the case filed by Mr. V. Niranjan Reddy, Director against the company and its other Directors vi. Any other business with the permission of the Chair. Hence, it is contended there was no other issue except the above was discussed in the above meeting. h. The petitioner states that he received the minutes of the board meeting dated 11.03.2011 along with copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at to disrupt the smooth running of the Company, under the guise of oppression and mismanagement with ulterior motives. The petition has been filed with unclean hands and, it is nothing but to abuse the process of law. They have stated that the Company was promoted by Jaipal Reddy, Venugopal Reddy and P. Sudheer (Respondents No. 2 to 4) and they are the first Directors of the company. ii. The Board of Directors of the Company has engaged the petitioner to do and provide liaison services required for conducting business of the company and he was being paid ₹ 7,000/- p.m. for such service since November, 2010. He became the shareholder of the Company only on 20.03.2006; subsequently he was appointed as Non- Executive Director during the board meeting held on 26.11.2007. The remuneration being paid to the petitioner was also continued even after becoming a Director. iii. They further stated the Company has authorised the 2nd and 3rd Respondents to undertake all activities of the Company and, they have also purchased lands for the company even before the petitioner became shareholder of the Company. All the properties were purchased in the name of the company represented b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 832 of 2010 before IInd Addl. District Judge, Ranga Reddy District, Hyderabad for mandatory injunction against the respondents from interfering with his participation in day to day affairs of the Company. It is also stated that IA No.90 of 2011 was also filed for interim injunction. And the company has leased out its property to M/s Royala Rivirera Resorts and Clubs for a period of 5 years and received a sum of rupees two lakhs as advance and Rupees twenty thousand as monthly rent by executing unregistered deed dated 01.02.2012. And it is alleged that he was not informed about it, even though the Board passed an interim order dated 05.08.2011 directing the respondents to intimate the decisions of the board during the interregnum. It is also alleged that the said lease was given for far lower than the market value. When the lease was made, it is necessary for the company to conduct a Board Meeting as decision was taken with ulterior motives. 7. The petitioner has filed his rejoinder dated 02.02.2013 to the counter filed by respondents to the Company Petition. The petitioner has denied all the allegation of the respondents. He has stated that the administrative office of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director of the Company in April, 2011. (b) The learned counsel has further stated that the petitioner had totally invested a sum of ₹ 41,50,000/- in 2005-06 through banking channels alone. The company had shareholders each holding 20% of the entire shareholding of the Company. (c) The Learned counsel contended that the petitioner was taken as shareholder into the company and he was made a Whole Time Director. It is contended that the Company was Quasi-partnership concern and thus, the Directorship of the company goes with shareholding of the members. Since, he is still shareholder of the company; he is entitled to be continued as Director of the company. In support of this contention, he relied upon judgment of Apex Court in Sangramsinh P. Gaekwad v. Shanta Devi P. Gaekwad [2005] 57 SCL 476 and Dinesh Sharma v. Vardaan Agrotech (P.) Ltd. [2007] 73 SCL 338 (CLB - New Delhi) (d) Even when O.S No. 832 of 2010 was pending, petitioner was removed as Director of the company. He was served with a notice for an EGM to be held on 05.04.2011 on the requisition of a shareholder (Respondent No.5). Along with the notice of EGM, a special notice from 5th Respondent and alleged mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the Company engaged the petitioner to do and provide liaison services in the conduct of business operation of the 1st Respondent Company, for which he was paid ₹ 7,000/- per month since, Nov. 2005. (3) The petitioner became shareholder of the company only on 23.03.2006 and later he was appointed as Non-Executive Director during the meeting of Board of Directors held on 26.11.2007. And the Company had bought over 95 acres of and sold nearly 54 acres of land before the petitioner became the Director of the Company. (4) They further contended only 2nd and 3rd Respondent undertook all activities of the Company. The Company never raised finances borrowing from the creditors except raising unsecured loans from directors and shareholders to acquire various properties in the name of the Company. The petitioner was never involved in the purchase and selling of the properties. (5) They further contended that on various occasions, the Board requested the Directors to invest ₹ 5 lakhs each in the initial stage but the petitioner expressed his inability to raise funds. In addition, the petitioner withdrew ₹ 2.20 Lakhs from the Company, which he has given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 95 Acres of land before the petitioner became Director of the company in November 2007 and sold nearly 54 Acres of land including the lands earmarked for Open Space Reservation and Roads before November 2007. The business of the company has come down due to the protest of separate State of Telangana. They further stated that the petitioner threatened the prospective lessors and buyers with legal consequences and in support they filed two legal notices dated 08.04.2013 to Mr. D Nitin Kumar Reddy and Mr. Ravikanth Gajula by threatening with legal consequences if they proceed with disputed land of the company. They have also filed a copy of the order dated 20.09.2011 passed in IA No. 90 of 2011 in OS 832 of 2010, in which the IA was dismissed against the plaintiff (petitioner here in) by holding that the petitioner failed to make out any case, balance of convenience. 12. We will examine the judgements/decisions relied upon by both parties in support of their respective cases. 13. The learned counsel for petitioner has relied upon the following judgements in support of his case: (a) M.S.D.C Radharamanan's case (supra). In this case, it is inter alia held that the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and whether decisions taken by the Company is correct or not cannot be gone into by Tribunal and it is paramount duty of the Tribunal to see whether the Company has followed principles of natural justice in taking decisions of the Company by protecting paramount interest of majority of share holders and the survival of Company itself. 14. The learned counsel for respondents relied upon the following judgments in support of his case. (a) Rahul Shah v. Avi Sales (P.) Ltd. [2010] 1 taxmann.com 137 (CLB - New Delhi) It is inter alia held equitable relief cannot be granted where a petitioner has not come with un- clean hands, that too after a delay of 3 years, without sufficient reasons given for delay in a case where petition was filed u/s 397, 398. In this case, the petitioner was removed from the post of Director, after giving him a proper notice. The allegation of petitioner therein was that he was not given proper notice as the notice was stated to be sent 'under the certificate of posting'. However, the Board, after taking into consideration of facts and circumstances of the case, has held that the petitioner was fully aware of his removal as Director. Ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h clean hand and good conduct, failing which the petition would constitute gross abuse of the process of the Court and thus, the petitioner is not entitled for relief u/s 397, 398. As stated above, the petitioner is trying to interfere in the affairs of the company by making several baseless allegations against the respondents. In fact, the allegations made by the petitioner in IA No. 90 of 2011 were rejected by the Civil Court. Hence, this case is also applicable to the present case. 15. In the light of above discussion of the case, the main issues to be decided in the present case are: a. Whether he is entitled to be continued as Director for life on the contention that the Company is quasi partnership firm; b. Whether the petitioner was given due notices for meetings, which culminated into passing the impugned resolutions dated 11.03.2011 and 5.4.2011; c. Whether the petitioner has approached the Tribunal with clean hand; d. Whether removal of the petitioner from the Directorship is illegal. 15.1 Breezy Farms and Resorts was registered as Private Limited Company under the provisions of Companies Act, 1956 on 24th June, 2005. As per Article 3 of Articles of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company namely M. Jaipal Reddy, Venugopal Reddy and P. Sudhir. The Company has already given sufficient notice to all the share holders including the Petitioner and, it is an admitted position that the petitioner too was present during the two meetings in question. 17.1 The Company has also furnished a copy of the notice dated 08.03.2011 of Ms A.S. Laxmi to the Petitioner asking him to give his explanation/response to the notice. It is not in dispute that the Petitioner has received the said notice and submitted his explanation dated 4th April, 2011 by inter alia contending as follows: (i) that he was appointed as a Director for life and as such he cannot be removed; (ii) though the company is named as private limited company, it is being run as a quasi-partnership with equal shareholders; (iii) a suit bearing OS No. 832/2010 was still pending; (iv) that A.S. Laxmi has never raised any objection against him as a Director and she was not aware of what was going on in the Company etc. (v) Therefore, he has submitted that removing him from directorship would be disrespect to the court proceedings. 18. A notice dated 22.3.2011 was issued by the company to all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a Director. This issue of the removal of the Petitioner was discussed in the Board Meeting held on 11.03.2011 under the caption any other Business . Further she also did not attend the EGM in person in which the Petitioner's removal was to be discussed. It is surprising that a person who made a complaint/notice to remove a Director, chose not to attend the EGM in person. Further, from the available records, it is also not clear as to when the 5th Respondent became shareholder of the 1st Respondent Company. 20. The next question is whether the Petitioner has come to this Tribunal with clean hands in order to claim equitable relief under Section 397/398 of Companies Act, 1956. In this context, it is necessary to refer the legal notices dated 8th April, 2013 got issued by the petitioner through his Advocate Shri Govind Reddy Mandadi to D. Nitin Kumar Reddy and Ravikanth Gajula, who are purchasers of plots of the Company. The petitioner through the said notices has threatened them with legal consequences if they proceed with purchasing of the plots of the Company since a suit bearing OS No. 832 of 2010 and the present petition were pending. As stated above, OS No. 832 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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