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TMI Blog2015 (4) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... arrayed as per their rank in Company Petition. 4. The brief facts of the case are as follows:- a. The 1st Respondent Company was incorporated on 30.10.2007, under the provisions of the Indian Companies Act, 1956. The main object of the Company is to develop properties. The Petitioners, being six in number, together hold 18.98% of the shares in the 1st Respondent Company. The first five Petitioners are Private Limited Companies, the shares of which are completely owned by the 7th Respondent and his family members. The 6th Petitioner is the wife of the 7th Respondent. The 7th Respondent, who is a Chartered Accountant, by virtue of his services to the Udayar Group, comprising of the 2nd Respondent and his brother, became their close and confidential associate. In the year 1987, the 7th Respondent obtained an opportunity to acquire controlling interest in M/s.Binny Limited. The 7th Respondent along with late N.P.V.Ramasamy Udayar, M.Nandagopal and M.Ethiraj, decided to have equal share in M/s.Binny Limited and acquired the shares of the Company. The shares of the Company were allotted to the Petitioners, at the behest of the 7th Respondent, who was made as Promoter and Director of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of quasi-partnership was defeated by the 2nd Respondent; that the Respondents 2 and 3 have acted against the Board Resolution to remove the 7th Respondent to take control of the 1st Respondent Company and to divert funds to their associate Companies and to misuse the funds and property of the Company for personal use, the Petitioners have filed the above Company Petition, by invoking the provisions of the Companies Act, 1956, for oppression and mismanagement in the affairs of the Company, seeking various main reliefs and interim reliefs as stated under:- Final Reliefs:- 1. To declare that the 7th Respondent is not liable to retire by rotation as a Director at the Annual General Body Meeting of the Company held on 26.09.2014. 2. To declare that the 7th Respondent continuing as a Director of the 1st Respondent Company as the resolution not reappointing the 7th Respondent in the Annual General Meeting held on 26.09.2014 is an act of oppression. 3. To declare the votes cast by paper ballot by the Respondents 2 and 3 in the Annual General Meeting held on 26.09.2014 as null, void and invalid. 4. To declare the results of all businesses transacted in the notice calling the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company. 5. To appoint a Management Committee consisting of Independent Chairman and members representing SN Group and ME Group, equally, to manage the affairs of the 1st Respondent Company. 6. To direct the 1st Respondent Company to convene Board Meetings or General Meeting only after obtaining the approval of the Honourable Bench. 7. To restrain the 3rd Respondent from occupying or making use of any of the property of the 1st Respondent Company as his residence forthwith. 8. Not to enter into or carry out any transaction with any of the related party pursuant to the resolution carried out by postal ballot vide notice dated 28.3.2014. 9. To appoint a Commissioner to authenticate all statutory documents required to be maintained and being maintained by the 1st Respondent Company under the provisions of the Companies Act, 1956/2013 and the Rules made thereunder and the SEBI Act and Rules and Regulations made thereunder. 5. After hearing the parties, the Company Law Board refused to grant the interim reliefs by the order impugned. Aggrieved, the Petitioners and the 7th Respondent have filed above independent appeals. 6. Assailing the impugned order of the Company Law Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Company Law Board has failed to consider that prima facie, the documents produced by the Petitioners would reveal that the functioning of the 7th Respondent in the Board has been on the principles of quasi-partnership with equal participation from all the groups for over a period of 20 years. i. As the partnership was only oral, the 7th respondent demanded a confirmation in writing from the 2nd respondent who assured that the earlier understanding would continue. However, the 2nd respondent had been forcing the 7th respondent to sell away the shares in the 1st respondent company and upon refusal, the 7th respondent has been ousted from the company only to swindle the property in boat club and to illegally sanction loan to the companies in which they are interested. j. The Company Law Board has erroneously placed reliance on Article 97 to hold that the 7th Respondent was not one of the first Directors of the Company and not a subscriber to the Memorandum and completely ignored the factual position that the 7th Respondent was recognised as one of the promoters. k. The Company Law Board has failed to consider that a prima facie case for the grant of interim reliefs was ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uasi-partnership, the Petitioners have an inherent right in the management of the Company and the removal of the petitioners representative would amount to oppression. vi. The Company Law Board has failed to consider that the 7th Respondent and his family members own 100% share capital in the Petitioner Companies and therefore, effectively the 7th Respondent is holding the shares of the 1st Respondent Company through the Petitioners. vii. The Company Law Board erred in holding that the Petitioners are espousing the cause of the 7th Respondent as if the 7th Respondent has no nexus to the 1st Respondent Company. The Company Law Board failed to take into account the letter dated 01.10.2014. viii. The Company Law Board failed to see that the procedure, followed during the election to oust the 7th Respondent and to deny any representation to the Petitioner, is contrary to Sections 107,108 and 109 of the Companies Act, 2013, Rule 20 of the Companies (Management and Administration) Rules 2014 and circular dated 17.04.2014 of SEBI, 35B of notification dated 23.06.2014 which contemplate only for e-voting and postal ballot and voting cannot be partially by e-voting and paper ballot. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defeated. 8. The learned Senior Counsel appearing for the appellants/Petitioners has also relied upon numerous documents from the date of taking over M/s.Binny Limited, its demerger on various dates and steps taken by the 7th Respondent for revival, to support his contentions that management is done on quasi-partnership and also upon the following judgments:- 1. AIR 1990 SC 867 (Dorab Cawasji Warden Vs. Coomi Sorab Warden and others) 2. 1965 35 CC 351 (SP.Jain Vs. Kalinga Tubes) 3. AIR 1981 SC 743 (Needle Industries and another Vs. Needle Industries Newey Holdings Limited) 4. 1973 AC 360 House of Lords (Ebrahimi Vs. Westbourne Galleries) 5. AIR 1976 SC 91 (Hind Overseas Pvt Limited Vs. Raghunath Prasad Jhunjhunwala and another) 6. AIR 1965 GUJ 96 (Mohanlal Ganapatram Vs. Shri Sayaji Jubilee Cotton and Jute Mills Company Limited) 7. AIR 1999 SC 3105 (Colgate Palmolive (India) Limited Vs. Hindustan Lever Limited) 8. 1994 (4) SCC 225 (Morgan Stanley Mutual Fund Vs. Karthick Das) 9. 1997 (90) CC 205 (Mad) (Saroj Goenka and others Vs. Nariman Point Building Services) 10. 1977 47 CC 503 Bom (Khandelwal Udyog Limited and Acme Mfg. Limited) 11. 2011 161 CC 454 (Mad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant in Criminal Appeal.No.14/2014, assailed the impugned order of the Company Law Board, by contending that the 6th Petitioner is the wife of the 7th Respondent and that the 7th Respondent has been representing all the Petitioners at every stage for the last two decades. The learned senior counsel also contended that the decision of the Company Law Board to deny the interim relief contending that the relief is similar to main relief is unsustainable, in view of the settled proposition of law that interim relief and main relief can be similar and that the interim relief is only an arrangement, till the disposal of the main case. The learned senior counsel also contended that the Company Law Board considered irrelevant materials and failed to consider the relevant materials for the purpose of deciding the interim application and hence, sought for setting aside the impugned order. 10. Per contra, Mr.R.Venkatavaradhan, the learned counsel for the 1st Respondent, relied upon the Notification dated 19.03.2015 amending Rule 20 and the judgement reported in 1990 1 LW 495 (Wander Limited and another Vs. Antox India (P) Limited) and contended that no questions of law have been raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to contend that as per Part-A of the circular, containing Clause 35B of the revised equity listing agreement, postal ballot has been permitted to enable the shareholders who have no access to e-voting to vote and therefore, e-voting is not the only method and paper ballot can also be resorted to. The learned senior counsel also referred to the general circular No.20/2014 of the Ministry of Corporate Affairs, dated 17.06.2014 to contend that the relevant provisions for e-voting under the Companies (Management and Administration) Rules 2014 were not mandatory till 31.12.2014 and therefore the paper ballots have to be accepted. The learned senior counsel also contended that proportionate representation is not contemplated in the articles and the 7th respondent cannot be permitted to be appointed as a permanent director against the wishes of the shareholders.The shareholders are well within their right to accept or reject the candidature of the 7th respondent as per the corporate democaracy and the question of re-appointing the 7th respondent on the basis of quasi partnership does not arise. Pursuant to the meeting, the cessation of the Directorship of the 7th Respondent has been intim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that no prima facie case of oppression and mismanagement has been made out. In support of his contentions, the learned senior counsel Learned Senior counsel relied upon the following judgments and sought for dismissal of the appeals:- 1. 116 CC 465 (Micromeritics Engineers Pvt. Limited and others Vs. S.Munusamy) 2. 421 ITR 589 (CIT Vs. Scindia Steam Navigation Company Limited) 3. 1995 82 CC 836 (Mad) (Malleswara Finance Investments) 4. AIR 1956 SC1535 (Shanti Prasad Jain Vs. Kalinga Tubes) 5. AIR 1992 SC 453 (V.B.Rangaraj Vs. V.B.Gopalakrishnan) 6. 2004 121 CC 335 (Bom) (IL and FS Trust Co. Limited Vs. Birla Perucchini Limited) 7. AIR 1971 SC 422 (Naresh Chandra Vs. Calcutta Stock Exchange) 8. 1992 74 CC 661 (Mad) (G.Kasthuri and another Vs. N.Murali and others) 9. 2006 129 CC 1 (cal) (Ruby General Hospital Limited Vs. Dr.Kamal Kumar Dutta) 10. AIR 1971 SC 206 (H.P.Gupta Vs. Hiralal) 11. 2004 (3) CTC 348 (KRS.Mani and 3 others Vs. Anugraha Jewellers Limited) 12. 2014 120 CLA 62 (Bom) (In Re: Godrej Industries Limited) 13. 2002 (5) SCC 738 (Shashikant Singh Vs. Tarkeshwar Singh) 13. This court heard learned counsel on either side and perused the docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings have been rendered on materials on record and they are supported by evidence. Though the appeal is liable to be rejected on the very short ground, however, considering the elaborate arguments advanced by Mr.T.V.Ramanujam, learned senior counsel for the appellants, this Court is inclined to go into the merits of the submissions." 2. In 421 ITR 589 (CIT Vs. Scindia Steam Navigation Company Limited), it has been held as follows:- "10. On these provisions, the question that arises for decision is whether in a reference under section 66, the High Court can consider a question which had not been raised before the Tribunal and/or dealt with by it in its order even though it be one of law. On the answer to be given to it there has been a difference of opinion among the High Courts and that turns on the meaning to be given to the words, "any question of law arising out of" the order of the Tribunal. There is no pronouncement of this court which concludes this question, though there are decisions which afford guidance in the determination thereof. These decision will now be considered. 11. In Commissioner of Income-tax v. Arunachalam Chettiar an order of assessment made by the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the above said provision, regarding the scope of our jurisdiction while dealing with the order of the CLB, dated 5.7.2004. Even according to the learned Senior Counsel appearing for the appellant, the CLB is only exercising its inherent and discretionary power either to grant or reject the prayer for injunction. Only if it is established that the CLB exercised such power arbitrarily or capriciously or perversely or contrary to the settled principles of law regulating grant or refusal of interlocutory injunction, this Court can interfere with the said order. But if such power was exercised reasonably and in a judicial manner by the CLB, the appellate court is not justified in interfering with the said order by taking a different view." 4. In 1999 97 CC 582 (Mad) (Gordon Woodroffe and Company Limited Vs. Gorden Woodroffe Limited), it has been held as follows:- "54. The jurisdiction of this Court under Section 10(f) of the Act is limited. It can go into the question of law arising out of such an order. When the Board has not discussed the issue in detail and given a decision on the transfer, this Court acting as an appellate authority under Section 10(f) of the Act, having li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with the discretion exercised by the Company Law Board, No doubt it is ordinarily not open to the appellate court to substitute its own discretion for that of the trial Judge. However it is equally established that if the trial court had acted unreasonably or capaciously or had ignored relevant facts or has adopted an approach which is incorrect, as we have found in this case, the appellate court not only is empowered but is under a duty to interfere that the exercise of discretion by the trial court." 3. In AIR 1957 SC 49 (Meenakshi Mills, Madurai Vs. Commissioner of Income Tax), it has been held thus:- "44. We have discussed the authorities at great length, as some of the observations contained therein appear, at first sight, to render plausible the contention of the appellant, and it seems desirable that the true meaning of those observations Should be clarified, lest error and misconception should embarrass and fog the administration of law. The position that emerges on the authorities may thus be summed up: (1) When the point -for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opositions. The first is a misdirection in regard to the very scope and nature of the appeals before it and the limitations on the powers of the Appellate Court to substitute its own discretion in an appeal preferred against a discretionary order. The second pertains to the infirmities in the ratiocinations as to the quality of Antox's alleged user of the Trade-Mark on which the passing-off action is founded. We shall deal with these two separately. 9. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the Appellate Court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by the court was reasonably pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right and privilege which a member enjoys in his capacity as a member of the company. It will ordinarily be an act of oppression on the member if he is deprived of a privilege and right. Such an act will undoubtedly be harsh, burdensome and wrongful and will necessarily be an act oppression to the member concerned. Such an act may be even a single act done on one particular occasion, if the effect of such an act will be of a continuing nature and the member concerned is deprived of his rights and privileges for all time to come in future". 22. In Ramashankar Prosad vs. Sindri Iron Foundry (P) Ltd., AIR 1966 Cal. 512, it was held by a Division Bench of the Calcutta High Court that if the oppression was of a short duration but is of such a lasting character that redress is impossible by calling board meetings or general meetings of the company, a case for intervention under section 397 is made out. It was further held that it was not necessary that the petitioner who comes to Court for redressal under Section 397 should have submitted himself to oppression over a period before he can invoke the powers of the Court. If the effects of the single act which is burdensome, wrongful and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er month towards interest to the first appellant and his wife, on the ground that they could not take possession of the property; (iv) that the rental income of Rs. 22,000/- per month from RPG Cellular Company was received by the first appellant's son, though it was payable to the company; (v) that the first appellant and another person by name Gomathy Nayagam were drawing salary, despite objections; and (vi) that the advances and rents received from tenants are not accounted for. 28. Continuous acts of oppression and mismanagement, carried out upto the date of filing of the petition under Sections 397 and 398, are similar to conventional warfare. Nevertheless, acts of terror, unleashed at different places and at different points of time, as part of a larger design, could also be construed as a war. If isolated acts, performed at some intervals of time, are found to be part of a larger design, they would certainly come within the parameters of the expression "affairs are being conducted". 29. Moreover, an act could be an act of omission or commission. The gravity of an act, may at times depend upon the act itself. At times, it would depend also upon the consequences t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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