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TMI Blog2017 (12) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... ition with the following directions: (a) The Resolution No. 1 passed on 10.4.2017 in EOGM with regard to the removal of the [Petitioner is set aside. (b) Respondent No. 1 Company is given liberty to conduct fresh EOGM within a period of two months from date of the receipt of copy of the order. (c) If company still wants to remove the petitioner as Director of the company, the Company is directed to give proper notice by assigning reasons for her removal and also grant proper time for her response. (d) Company is directed to follow all applicable provisions of the Companies Act, Articles of Association, Memorandum of Association and principles of natural justice in taking decisions. (e) The petitioner is at liberty to approach this Tribunal, if she is aggrieved. (f) With the above directions, CP No. 36/241/HDB/2017 is disposed of." 2. Aggrieved by the said order dated 27.4.2017 the appellant has filed the present appeal and sought for the following relief inter alia: (a) That this Hon'ble Tribunal be pleased to set aside the impugned order, being Order dated 27.4.2017 passed by the NCLT at Hyderabad. (b) That this Hon'ble Tribunal be pleased to call for records from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (150000 of 10 each) Board Resolution was passed whereby the paid up capital of the 1st Respondent was increased from Rs. 5,00,000/- to Rs. 15,00,000/- & allotted increased 1,00,000 shares. With allotment of those shares the shareholding pattern changed and shareholding of Appellant reduced from 49.99% to 28.58%. III. During the Board Meeting dated 21.10.2015 a Notice was issued to convene EOGM on 25.11.2016 for further increasing the share capital of the 1st Respondent and on the said date the share capital was further increased to Rs. 40,00,000. On 26.11.2016 a General Meeting and Board Meeting was conducted for further allotment which further reduced shareholding of Appellant to 14.29%, 4th Respondent was also inducted into the 1st Respondent as Additional Director. IV. A Notice for conducting an Extra-Ordinary General Meeting on 10.04.2017 was served with an agenda to remove the Appellant as a Director of the Company and to regularize 4th Respondent as the Director. Aggrieved by the Notice and the acts of the 1st Respondent, the appellant approached Tribunal. The Tribunal passed an interim order. "It is not in dispute that 1st Respondent has a right to remove a Director unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es against which allotment was pending as on 31st March, 2015 was 1st June, 2015 as per the Notification dated 31st March, 2015 issued by the Ministry of Corporation Affairs. It was categorical submission of the appellant that no notice for the said increase of share capital along with the said allotment was issued to the appellant. 9. In response the respondents while denying the allegations has submitted that the share allotments on 30.09.2015 were made with due notice and complete knowledge of the appellant. Shares were allotted to the appellant to the extent of share application money pending and received from the appellant. This allotment of shares was done with the consent and presence of all the three directors of the company who were also 100% shareholders of the company. Therefore, appellant's allegations qua Section 62 of the Companies Act, 2013 are meritless. It was further argued that Appellant does not dispute that she was a participant and signatory to this Board Meeting and she had full knowledge of the allotments of shares that were made on 30.09.2015. The appellant also attended the Board Meeting dated 31.10.2016. The appellant herself attended EGM dated 25.11.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispatched through registered post or speed post or through electronic mode to all the existing shareholders at least three days before the opening of the issue. (3) Nothing in this section shall apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loans into shares in the company: Provided that the terms of issue of such debentures or loan containing such an option have been approved before the issue of such debentures or the raising of loan by a special resolution passed by the company in general meeting. xxxx 11. On perusal of the Section 62 read with its corresponding Section 81 of Companies Act, 1956 brings out the notable change in the applicability of the Provision of further issue of shares in private companies. Section 81 of the Companies Act, 1956 was not applicable to private companies even though Apex Court in various cases has caste heavier duty on the Directors to act bona fide in the interest of the company. Hon'ble Supreme Court in Dale & Carrington Invt. (P.) Ltd. v. P.K. Prathapan [2004] 54 SCL 601 at page 224 has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a private limited company are expected to make a disclosure to the. shareholders of such a company when further shares are being issued. This requirement flows from their duty to act in good faith and make full disclosure to the shareholders regarding affairs of a company. The acts of Directors in a private limited company are required to be tested on a much finer scale in order to rule out any misuse of power for personal gains or ulterior motives. Non-applicability of Section 81 of the Companies Act in case of private limited companies casts a heavier burden on its Directors. Private limited companies are normally closely held i.e. the share capital is held within members of a family or within a close-knit group of friends. This brings in considerations akin to those applied in cases of partnership where the partners owe a duty to act with utmost good faith towards each other. Non-applicability of Section 81 of the Act to private companies does not mean that the Directors have absolute freedom in the matter of management of affairs of the company. In the present case Article 4(iii) of the Articles of Association prohibits any invitation to the public for subscription of shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stions of, the acts of the respondent which have not been dealt with in the impugned order the Tribunal. Here reference is required to be made on the clause 2(4) of Articles of Association of respondent no. 1 which says that "the shares shall be under the control of the Directors who may allot or otherwise dispose of the same or any of them to such persons, either at premium or at par or discount and at times as the directors may think fit...". The above provision shows the discretion of the Directors to allot shares but such discretion can be exercised by the Board of Directors in a duly conducted meeting in absence of which there is no allotment. The Appellant has challenged the board meetings held; the tribunal should have reached to some finding to such challenge. Further, the averment raised by the appellant as to whether company has complied with notification G.S.R. 241(E) issued by Ministry of Corporate Affairs dated 31.03.2015 also requires due consideration of the Tribunal. 14. It is worth noticing from the impugned order itself that the Appellant approached the Tribunal and put its grievances under sections 59, 241, 242, 244 of the Companies Act with prayers of transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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