9911796707
TMI Blog2018 (5) TMI 1571X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, non-disclosure of such information is certainly one more testimony of the petitioners not coming to the Bench with clean hands - in coming to the tribunal by the way of present petition seeking various reliefs, the petitioners, more particularly petitioner No. 1 and petitioner No.10 never came with clean hands. The infirmities, so pointed out by the respondents running in the petitioners’ case get slips to total insignificance when one compares such infirmities with the illegalities committed by the respondents in running the affairs of the company. Therefore, such infirmities on their own could cause no serious harm to the case of the petitioners. However, most of the decisions, relied on from the side of respondents, could hardly advance the cause which respondents tried to propound in the present proceeding case. Therefore, in the facts and circumstances of the present case, in my considered opinion, such decisions could not turn the table in favor of the respondents. The respondents are also guilty of coming to the court with dirty hands. However, when one compares the illegalities committed by the parties hereto, he would find that the hands of the respondents are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the company was ₹ 300720/- of 3072 nos. of equity shares of ₹ 100/- each as per annual report of the company as on 31-03-2009. Out of the aforesaid equity shares, 600 nos. of equity shares were held by the Government of Assam, the same being 20% of the total shareholding and the remaining 2472 nos. of equity shares were held by the shareholders and the employees of the company. 5. Though, the registered office of the company was initially at A. K. Azad Road, Gopinath Nagar, Guwahati 781 016 however, due to some ongoing disputes between the shareholders and the then Managing Director of the company, D. N. Singh, the registered office of the company was shifted to Shantipur Road, House No.16, near Pragjyotish College, Guwahati 781 009, vide board resolution dated 05-01-2010. 6. The company - which was incorporated in 1946 with the objects, specified in the Memorandum of Association (in short, MOA) - has been doing its business with great reputation over a very long period of time. The products, manufactured by the company, had always been sold like hot cakes which indicate the goodwill and popularity which the company enjoyed over the years 7. However, in the mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Managing Director of the company, issued notice dated 21-10-2009 convening the EOGM of the shareholders on 14-11-2009 in the registered office of the company. Accordingly, the EOGM was held on 14-11-2009 which was attended to by all the shareholders. However, R-5 did not attend the same, and that too, without seeking any permission therefor from the authorized authority. 13. Said meeting was convened under the supervision of the District Administration -since ---- the conveners of the meeting apprehended that some of the shareholders, close to R-5, might cause serious law and order situation on the aforesaid date. The said meeting was, thereafter, conducted under the chairmanship of Mr. H. K. Das (petitioner No.4 and P-4 in short). The shareholders discussed the agenda in the notice and took resolution to remove the then MD, D. N. Singh from the office of MD as well as director of the company with immediate effect. 14. The shareholders by majority decision had also appointed Mr. Deba Kumar Hazarika (petitioner No.1 and P-l in short) as director of the company with effect from 14-11-2009, in place of D. N. Singh (R- 5). A copy of the resolution of the EOGM held on 14-11-2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MD of the company as well as the appointment of Deba Kumar Hazarika (petitioner No.1) in the Board of Directors, in compliance of the directions in the resolution passed by the shareholders in the EOGM held on 14-11-2009. 20. On 25-11-2009, the newly constituted Board of Director by majority vote adopted a resolution under the chairmanship of the Government Nominee Director, Shri Bipul Das, in which Deba Kumar Hazarika was appointed as MD of the company with effect from 25-11-2009. In the meantime, Sri Bhupen Chandra Kalita (P-2) was also appointed as director of the company on following the prescriptions of law and mandate in the charters of the company. The appointment of P-l as MD and P- 2 as director of the company had also been communicated to the ROC, Shillong by submitting Form No.32. 21. Although R-5, DN Singh was duly conveyed all those decisions, he instead of handing over his charge of the offices and rendering necessary assistance to the newly constituted Board of Directors, started creating hurdles and obstacles in running the affairs of the company smoothly. Since R-5 was creating all hurdles and difficulties in running the affairs of the company, the shareholders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent No.5 himself and to his associates without consent of all the existing shareholders of the company as required under the Article of Association (AOA, for short) Such fact was immediately referred to the Bureau of Investigation of Economic Offences for taking necessary action against R-5. 27. Even thereafter, R-5 without approval of the majority shareholders fraudulently removed the petitioner Deba Kumar Hazarika from the office of Managing Director of the company and equally illegally got himself appointed as Managing Director of the company. Thereafter, he illegally altered all the relevant records in contravention of the provisions of the Companies Act, 1956. 28. During the pendency of the Company Petition No.972/2010, before the Company Law Board (CLB), Kolkata, the authorized capital of the company was increased from ₹ 5.00 lacs to ₹ 10.00 lacs of ₹ 100/- each and the relevant provisions in MOA and AOA were altered. What is, however, surprising and astonishing as well is that all these were done in total violation of rules and procedures framed in that regard and also in keeping majority shareholders in complete dark since at no point of time, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts incorporated in the petition were not incorrect, false and misleading. They also contended that the petition suffers from enough legal infirmities and lacuna which invariably required the CLB to dismiss the same. Initially on hearing the parties, learned CLB, Kolkata came to the conclusion that the petition is maintainable, despite the defects pointed out in the frame-up of the petition. 35. In due course, the parties have exchanged their pleadings and thereafter, the learned CLB, Kolkata came to the conclusion that the petition is not maintainable since it suffers from serious infirmities in the frame-up of the petition. It also held that the petition was structured on falsehood and fabrication and its main aim was to put the respondents in trouble. On such ground, the learned CLB, Kolkata dismissed the petition. 36. Against such dismissal order dated 20-03-2014, the petitioners preferred an appeal under Section 10F of the Companies Act, 1956 before the Hon'ble Gauhati High Court. The Hon'ble High Court on receipt of the appeal filed under section 10F of the Companies Act, 1956 issued notice to the respondents and on hearing both the parties, was pleased to allow the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remanded to the learned CLB, Kolkata for taking decision thereon in accordance with prescription of law. 39. The Hon'ble Gauhati High Court also found that the allottees of 6715 equity shares were not made parties to such a proceeding, although their interest is likely to be affected by any orders passed by the learned CLB, Kolkata in the aforesaid proceeding and in such circumstance, the Hon'ble High Court had directed the appellants/petitioners to issue newspaper advertisement to bring to the notice of the allottees of 6715 equity shares about the pendency of the company petition under consideration, requiring them to respond to the allegations in such petition. The relevant part of the aforesaid order of the Hon'ble High Court is reproduced below: - "27. In the light of the above discussion, impugned order of the Company Law Board dated 20.03.2014 cannot be sustained and is accordingly set aside and quashed. Matter is remanded back to the Company Law Board, Kolkata Bench for fresh decision on merit in Company Petition No.992/2011. As a measure of abundant caution, appellants may be permitted to issue newspaper advertisement to bring it to the notice of the allottees of 6715 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition under consideration is required to be dismissed on this count alone. 45. The respondents did not dispute that the petitioners made a requisition to the respondent Company on 03-10-2009 seeking calling of EOGM purportedly for removal of the respondent No.5 from the offices of director and Managing Director of the respondent Company. On receipt of such requisition, the respondent No.5 issued notice dated 21.10.2009 calling an EOGM on 14-11-2009. 46. However, since such EOGM was aimed at removing the respondent No.5 from the posts aforesaid most illegally, the respondent No.5 on invoking a arbitration clause in a connected agreement, approached the Civil Court and also secured an order restraining the petitioners, their men, servants, agents from deliberating on agenda item No.2 in the notice dated 21-10-2009. More importantly, such injunction order was duly communicated to the petitioners in time. 47. Despite such injunction order having been served on the petitioners well in time, the petitioners in total disregard to the directions rendered in the injunction order dated 13-11-2009 in T. S.(Arb.) No 571 of 2009, not only made deliberation on agenda item No.2 of the notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from their offices and Form 32 in regard to cessation of the petitioners No.1 and 2 as being directors of the company had been duly sent to the ROC, copy of which was attached with the company petition as Annexure Z. Quite importantly, said meeting was conducted strictly in accordance with the requirements of law and, therefore, the allegation that the petitioners were wrongly removed from their offices as well as the allegation that the documents in the office of the ROC were illegally tampered is without any basis whatsoever. 53. According to R-3 and R-4, all the allegations in the petition are based on past acts or actions. In other words, the petition is founded on all stale and dead claims. It is a settled position of law that the petition under Section 397/398 of the Act cannot be premised on past acts or actions. As the petitioners have based their petition only on past acts/ actions, this bench ought to have thrown the petition at the very threshold. 54. It has been submitted that in a petition under Section 397/398, the petitioner needs to make out a case for winding up of a company on just and equitable reason. But then, the petitioners must also establish that windi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious claims, he canvasses before the Bench during the course of arguments: - 1. S.P. Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535 2. Palghat Exports Pvt. Ltd. v. T.V. Chandran [1994] 79 comp Cas 213 (Ker.) 3. Bagree Cereals (P) Ltd. v. Hanuman Prasad Bagri 2001 105 comp LJ 397 Cal 4. Hind Overseas Pvt. Ltd. (supra) 5. Hon'ble High Court of Delhi decision in CO. A(SB) 39/2012 (Reivera Builders (P.) Ltd. v. Vijay Kumar Sekhri) decided on 02/07/2012 6. Charanjit Khanna v. Khanna Paper Mills Ltd.[2011] 107 SCL 187 (Delhi) 7. Hon'ble Andhra High Court decision in Manoj Kumar Kanuga v. Marudhar Power (P.) Ltd. and 18 Ors. Decided on 23/04/2013. 8. Hanuman Prasad Bagri v. Bagrees Cereals (P.) Ltd. [2009] 90 SCL 209 (Cal.) 9. Supreme Court of India decision in M.S.D..C Radharaman v. M.S.D. Chandrasekara Raja [2008] 83 SCL 451 (SC) 10. Supreme Court of India decision in Hanuman Prasad Bagri v. Bagress Cereals (P.) Ltd. [2001] 33 SCL 78 (SC) 11. (CLB) Kolkata in C P. No. 136 of 2014 decision in Jyoti Kumar Arya v. Prabhat Zarda Factory (India) (P.) Ltd. decided on 18/11/2014 60. The respondents No.11 and 12 having filed joint reply in the form of affidavit have chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 12 that the disputes in question are in the nature of dictatorial disputes and it is repeatedly held that dictatorial dispute cannot be made a subject matter of a proceeding under section 397/398 of the Act of 1956. 63. These two respondents also contended that the petitioners No.1 and 2 were dismissed from their services of the respondent No.3 Company under the resolution adopted by the Board Meeting held on 18-10-2008 which was attended to by the petitioner No.2 who duly consented to the said resolution. Therefore, the petitioners No.2 is estopped from disputing the removal of the petitioners No. 1 and 2 from the service of the respondent No.3 Company. The minutes of the Board Meeting held on 18-10-2008 annexed as Exhibit-21 to their reply. 64. It is again contended that the petitioner No.1 was also subsequently removed from the office of the directorship of the company under the resolution adopted in the EOGM held on 24-01-2009, which was chaired by the petitioner No.4. Said EOGM was also attended by the petitioner No. 4 and the petitioner 7 and they had accorded their consent for removal of the petitioners No.1 from the - directorship of the respondents No.3 Company. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Calcutta High Court in Babulal Madhavji Varma v. New Standard Coal Co. (P.) Ltd. [1967] 37 Comp Cas 446 (Cal) 4. Rajasthan State Industrial Development and Investment Corpn. v. Diamond & Gem Development Corpn. Ltd. [2013] 5 SCC 470 5. Chatterjee Petrochem (India) (P.) Ltd. v. Haldia Petrochemical Ltd. [2011] 14 Haldia Petrochemical Limited and ors, reported in 2011 10 Supreme Court Cases 466.) 6. Ravindra Kumar Sharma v. State of Assam [1999] 7SCC 434 7. Subash Hastimal Lodha v. Manikchand Promoters and Developers (P.) Ltd. [2007] 140 Comp Cas 512 (CLB) 8. Hanuman Prasad Bagri v. Bagress Cereals (P.) Ltd., [2001] 33 SCL 78 (SC) 9. Shanti Prasad Jain v. kalinga Tubes Ltd. in AIR 1965 SC 1535 10. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333. 69. The respondent No. 6/7/8/9/10/13/14 too contested the case projected through the petition under consideration having filed reply but I have noticed that the reply, they submitted, is, in fact, the repetition of the replies, already filed by other sets of respondents. Therefore, I find it not necessary to reproduce the reply in this order. However, 1 would also addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the party/parties, they represent. It may be stated here that the Hon'ble High Court while rendering the judgment in Comp. Appeal No.3/2014 had decided as many 3 questions of law while leaving the rest to be decided by the learned CLB. Further, Hon'ble High Court also directed the CLB to hear the matter afresh after giving concerned, an opportunity of hearing. Since as many as 6 issues of law are left to be decided by this Tribunal, before deciding the rival controversies herein, I propose to address the question of law, already framed by Hon'ble High Court. Issue No 1 75. In a long chain of judgments, it has been held that Section 397/398 of the Act is a Code in itself. Therefore, it excludes the jurisdiction of all other Courts or Tribunals in respect of the matters, covered there under. More importantly, under Section 402 of the Act of 1956 the CLB statutory authority, has been given wide amplitude of powers to address any grievance, established in accordance with law in a proceeding under section 397/398 of the Act of 1956 76. Therefore, in respect of matters, covered by 397/398 of the Act of 1956 there cannot be any arbitration agreement. Neither is it possible to confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve such a director, such shareholders constitute majority of the voters who are competent to vote. In other words, the majority shareholders who are competent to vote in a particular meeting can remove any director-although such person was appointed by the voters whose aggregate shareholdings were much more than the shareholdings of the majority voters who remove such a director from the office in a particular meeting subsequently This issue is answered accordingly. Issue No 8 82. This issue relates to the question whether the outsiders other than the existing shareholders of the Company, who were allotted shares on 20-02-2010 and 15-09-2010, were entitled to members of the Company given the prohibition of allotment and transfer of shares to outsiders as per Article 28 of the Articles of Association of the Company. In view of rival submissions on this question, I propose to discuss this issue at appropriate time and place. Issue No.9 83. In this issue we are to consider whether allotment of shares on 20-02-2010 and 15-09-2010 to the minority shareholders holding 28% of shares of the paid-up capital of the Company to the exclusion of majority shareholders including the State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such newspaper reports could subsequently be made foundation of a proceeding under Section 397/398. Therefore, the very allegation that the petitioners including petitioners No. 1 and 10, came to know about the alleged misdeeds of the respondents only from the reports in the newspaper is nothing but a pack of lies only. 88. I have considered such submissions in the light of the materials available on records, more particularly, the averments made in the written statements and the documents annexed therewith and found reason to conclude that the news items which were circulated in various newspapers, referred to above, were, in fact, manufactured by the petitioner Nos.1 and 10. Since those two petitioners had manufactured those information and also communicated such information to those newspapers, therefore, the allegation to the fact that the petitioners, at least the P-1 and P-10, came to know about the various allegations, incorporated in the petition, from various newspapers only, is found to be statements, laced with profound lies. 88A. However, it needs to be stated here that there is no concrete evidence on record to show that all other petitioners were aware of the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommunicated to the petitioners. 94. In spite of that, they have taken a resolution on item No.2 in total violation of directions of the Civil, Judge, Guwahati rendered in order dated 13-11-2009 in Misc. (Arb.) No 571/2009. Such episodes were never made known to this Tribunal by the petitioners incorporating such information in the petition under consideration. Since the injunction order in Misc. (Arb.) No 571/2009 has some bearing on the dispute in the present proceeding and since it was not made known to this Tribunal by the petitioner, such conduct on the part of petitioners now requires me conclude that in approaching this Tribunal, the petitioners never came with clean hands. 95. The respondents again claimed that in the notice dated 21-10-2009, there were only two matters to be discussed in the EOGM convened on 14-11-2009. More importantly, the notice did not indicate any possibility of discussion on any third item in the aforesaid EOGM, convened on 14-11-2009. However, despite there being no agenda on appointment of the petitioner No.1 in the resultant vacancy, caused for removal of the respondent No.5 as director of the company, in the said meeting, the petitioner No.1 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 101. The respondents strenuously contended that the petitioner No.1 and 10 were employees of the company -but they were dismissed from services for their resorting to conduct as an employee of the company, which was against the interest of the company in general and against the shareholders in particular. Such an episode assumes great importance in ascertaining the bona fide of the petitioners in preferring the present petition since the materials on record firmly demonstrate that the petitioners, more particularly petitioners No.1 and 10, wanted to be directors/MD of the company. 102. The directors of the company occupy a fiduciary position in relation to management of the affairs of the company. In other words, directors are the trustees of the company and, therefore, they are to conduct themselves in such a way that trust, reposed on them, does not get eroded at any point of time. However, the petitioners No.1 and 10 despites being punished for their resorting to illegalities as being employees of the company, aspired to be the director/MD of the company. Such conduct is unacceptable, more so, when they chose to withhold such vital information in the petition under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in law unless such reports get graduated to the status of primary evidence. 108. It is not in dispute that the petitioners did make no effort to convert those secondary evidences to primary one. Nor did the petitioners produce any other material to justify non-payment of PF Contribution to the concerned authority or evasion of taxes. In other words, in order to substantiate the allegation of misappropriation of fund and evasion of taxes, the petitioners completely relied on newspaper reports which, as stated above, are found to be secondary evidence only and therefore, cannot laid the foundation of the allegations, aforementioned. 109. The respondent had also questioned the legality of the allegations aforesaid contending that they have already questioned the correctness of slapping of notice on the respondent company by the concerned department demanding VAT etc. from the former. In that regard, they have initiated a proceeding as well which are awaiting adjudication. Such assertions from the side of the respondents are not denied by the petitioners. 110. Since the challenging of the notice demanding taxes etc. from the respondent company has not been disputed, it can safely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledge of the other existing Shareholders of the Company. Sri Madhav Das, the stranger, forcible occupying the office of the Managing Director of the Company and Misusing Company's property and funds by illegal means for which he has no right in the company. Presently, Sri Madhav Das continuing the office of the Managing Director forcibly using goons and filing malicious petitions and illegal litigations including contempt of court before the courts against the new board of Directors having no jurisdiction to try company matter and that to only to harass the present Board of Directors so that they might be out of the company's day-to-day affairs. The petitioners are not in a position to manage the affairs of the company smoothly due to the ongoing restraints and the company sustaining irreparable financial losses caused by the illegal acts of respondent No. 5 and Sri Madhav das. Further, respondent No. 5 is still continuing to be the Director in the Board of Directors of the Company and missing the company's funds and property by illegal means. Besides, news was published in "The Assam Tribunal" dated 24th May, 2011 statina the stranger naming Sri Madhav das to be the Managing Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent No. 5 are vicariously liable for the alleged illegal acts/conducts of the MD of the company who was admittedly the R-5 during the time relevant. 118. In this connection it would be apposite to understand the inter se relationship between the company, Board and MD. The position, status and authority of the MD qua company and BOD depend upon the authority which appoints him and so also the powers which were conferred on him at the time of appointment as such. Since section 2 (26) of the Act of 1956 speaks about mode of appointment of MD as well as his power, I find it necessary to have a look into the aforesaid provision of law. For ready reference section 2(26) of the Act of 1956 is reproduced below: - (26) "managing director" means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with substantial powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called: Provided that the power to do adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illegalities committed by R- 5. Quite interestingly, they supported each and every conduct of R-5 which is alleged to be illegal. That being the position, there cannot be any escape from the conclusion that all the members of the BOD, headed by R-5, are equally responsible for such irregularities/ illegalities allegedly committed by such a respondent in discharging the affairs of the company. In the teeth of such revelations, it needs to be concluded that the contention that all the allegations in the petition were directed only against the only R-5 is found to be totally untenable in law and on facts. 123. It is in those backdrops; let me consider if the other allegations, hurled at the respondents could make out the charge of oppression and mismanagement in running the affairs of the company. In that connection, I find it necessary to ascertain if the petitioners are succesful in establishing the allegations that the respondents had conducted the affairs of the company in violation of various laws holding the field as well as the mandates in MOA/AOA 124. It may be stated here that the petitioners have claimed that in running the affairs of the company, the respondents had comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any discussion on the item No. 2 in the Notice dated 21-10-2009. Since the very removal of the R-5 from the office of the director and MD of the company was profoundly illegal and non-est in law, one can very well conclude that legally and technically, the R-5 continued to be the MD of the company even after 14-11-2009. 129. Since the R-5 continued to hold the office of the director and MD of the respondent company for all purposes even after 14-11-2009, one cannot but conclude that no casual vacancy ever occurred in the office of the director of the company on 14-11-2009 requiring the shareholders in the EOGM, to fill such post by the petitioner No. 1 immediately. Since the removal of the R-5 was found to be illegal and non-est in law, all subsequent appointments including the appointment of P-1 as director of the company on 14-11-2009, his appointment as MD of the company on 25-11-2009 as well as the subsequent appointment of P-2 as director of the company were all illegal and equally non-est in law. 130. In that view of the matter, the removal of the petitioner No.1 from the post of the director as well as MD of the company on 02-03-2010 and the removal of the petitioner No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves the job of correcting the aforesaid alleged illegalities by adopting reverse resolutions on 02-03-2010 which, as stated above, are found to be as good or worse as the removal of R-5 from the office of the director and MD of the company on 14-11-2009 by the petitioners in violation of the court order. 135. Once it is found that the actions of the respondents in removing the petitioner No.1 from the offices of the director and MD on 02-03-2010 and the petitioner No.2 from the office of the director on 02-03-2010 are illegal, there cannot be any escape from the conclusion that the correcting the records of ROC by sending fresh Form 32 in favour of the respondent No 5 from the side of the respondents is equally bad and unsustainable in law. 136. However, more and more materials on record relied behind the above conclusion of mine In that connection, it may be stated that if one carefully reads the pleadings of the respondents he would find that the R-5 got extremely upset and disturbed on receiving the requisition from the shareholders of the company seeking the convening of an EOGM to discuss his removal from the post of director and MD of the company and that is why he rushed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India v. Escorts Ltd. AIR 1986 SC 1370 the learned CLB, Chennai, in case of N. Thirumurthy v. Sree Pavithra Steel (P) Ltd., reported in (2014) 123 SCL 70 (CLB) held that convening, holding and conducting a proposed extraordinary general meeting cannot be restrained just because of the fact that the applicant may be removed from the directorship of the Company. 141. Such restraint, if allowed, would hit the very concept of the corporate democracy which is the guiding factor in running the affairs of the company. Sadly, in approaching the civil court by way of Mise (Arb.) 571/2009, the R-5 resorted to a conduct which is strongly condemned by the CLB in N. Thirumurthy (supra) which further demolishes the case of R-5 which was, as stated above, primarily structured on the alleged illegality in adopting the resolution dated 14-11-2009 in violation of the order of the court under which the R-5 stood removed from the posts aforesaid. The Hon'ble Apex Court in Life Insurance Corporation of India (supra) held as follows: - "Thus, we see that every shareholder of a company has the right subject to statutorily prescribed procedural and numerical requirements to call an EGM in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents paid no respect whatsoever to the laws/rules and procedures dealing with appointment and removal of the directors and therefore, such removals are found to be totally untenable in law. The removal of the P-l and P-2, in the facts and circumstances of the case in hand, further demonstrate that they were so removed from their posts with the sole object of gaining control in the management of the company. 146. In a long chain of judgments including the judgment in Arun Kumar Mehta v. Ganesh Commercial Co. Ltd. [2006] 134 Com Cas 500(LB) it has also been held that removal of the director in violation of Rules and procedures framed in that regard tantamount to denial of natural justice and therefore, such removal is to be declared null and void. Further, when such removal is made with the object of gaining control in the management, such removal became proof of oppression being perpetuated upon the persons targeted by such removal. In that connection, one may look into the decision in Ms. Varshaben S. Trivedi v. Shree Sadguru Switch Gears (P.) Ltd. [2013] 116 CLA 153 (CLB). 147. Now, let us see how far the alleged illegal increase of authorized share Capital of the Company as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital of the company and so also the issuance of further shares on 20-02-2010 and 15-09-2010 most illegally and most unlawfully. 152. The claim of increase of authorized share capital of the company or the issuance of fresh shares on 20-02-2010 and 15-09-2010 are found unsustainable for another very valid reason too. Since the respondents persistently claimed that the company fell into a deathtrap following the freezing of the all the accounts in the name of the company, it became a bounden duty on the part of the respondents to establish such dire financial position of the company by bringing on record the relevant financial documents of the company during the period under consideration. 153. But then, the respondents did not do anything in that direction to establish its financial position during the time under consideration. Their failure to do so, and that too without assigning any reason therefor is fatal---more so---when it was the specific and explicit case of the respondents that they had to increase the authorized share capital of the company and also to issue fresh shares on 20-02-2010 and 15-09-2010 reeling under enormous financial difficulties. 154. In the teeth of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage and reapprobate the same thing at another stage. 159. It is true that a person cannot be allowed to approbate and reapprobate same thing at different points of time --but then--such a principle has no application to the problem, now, we are seized with--- since---the question here is not what had been the practice of the company in issuance of shares but the question is whether MOA and AOA can be flouted. In that connection, I also find it necessary to look into provisions of Section 36 of the Act of 1956 which has huge bearing in understanding the dispute under consideration and also in finding a solution thereof. For ready reference, Section 36 of the Act of 1956 is reproduced below: - "36. EFFECT OF MEMORANDUM AND ARTICLES (1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles. (2) All money payable by any member to the company under memorandum or articles shall be a debt due from him to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the elapse of such a long period, and that too, in a proceeding which was initiated- not by the respondents -but- by the petitioners instead. This is, in my opinion, another compelling reason as to why challenge to the issuance of shares to petitioners, made in distant past, is required to be turned down. 165. Our foregoing discussions now very firmly reveal that in conducting the affairs of the company, the respondents, more particularly the BOD, headed by the R-5, had ruthlessly violated both the fundamental documents of the company, such documents, being MOA and AOA. In ABP (P.) Ltd. v. United News India [2008] 142 Com Cases 688, it has been held that issuance of shares in violation of the AOA itself is an act of oppression. 166. In S.M. Ramakrishna Rao v. Bangalore Race Club Ltd. [1970] 40 Comp Cas 674 (Mys), it has also been held that violation of MOA too is an act of mismanagement. Such revelations leave no manner of doubt that the allegation from the side of the petitioners that the affairs of the company are being run in a manner which is quite burdensome, harsh and wrongful has been established beyond any shadow of doubt. 167. One may note here that ordinarily; the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders and new persons on 20-02-2010 and 15-09-2010, was to gain majority, albeit, illegally. In Archana Gupta v. Suntech Infratech Pvt. Ltd., [2012] 106 CLA 283 (CLB), it was held that when main object of allotment of shares was to gain majority, such allotment unmistakably constitutes a clear case of oppression. 171. The conducts of the respondents in running the affairs of the respondent company is found untenable for some other reasons as well. In that connection, one may look into several letters, written by Govt, of Assam (which held 25% shareholding in the company before the company besets by a series of disputes aforesaid), more particularly the letter dated 11-05-2011 and letter dated 31-03-2011. Said letters show the degree of oppression and mismanagement committed by the respondents in running the affairs of the respondent company. For ready reference, the letter dated 11-05-2011 is reproduced below: "GOVERNMNENT OF ASSAM OFFICE OF THE COMMISIONER OF INDUSTRIES & COMMERCE, ASSAM UDYOGBHAWAN: GUWAHATI-21 Dated Guwahati the 11th May/2011 No. CI &C (VJ) 191/2010/173 To The Principal Secretary to the Govt of Assam Industries & Commerce Department, Dispur Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Assam, being the shareholder, of the company, took active interest in the affairs of company and also demanded correction of some of the alleged illegalities, committed by the management, headed by the R-5 in running the affairs of the company. 173. Further, one must not be oblivious to the fact that the respondents did not dispute the fact that the State of Assam was holding 20% shareholding in the company till the outbreak of the disputes under consideration. There is no quarrel over the fact that the shareholding of the State of Assam was reduced to 6% after the allotments of shares on 20-02-2010 and on 15-09-2010. However, the respondents did not find it necessary to bring on record something to show that there was no wrong whatsoever in reducing the shareholding of the state of Assam from 20% to 6% on 15-09-2010 - although- the petitioners all along claimed that such lowering in the shareholding of State of Assam was done in profound violation of the prescription of law and mandates in MOA and AOA and that such illegalities were done only with the object of illegally gaining the control of the management of the company. 174. In view of such revelations, I feel inclined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect and as such, the argument to the effect that all the allegations in the petition are nothing but stale claims are patently incorrect. In that connection, the issuances of shares on 20-02-2010 and 15-09-2010 in total violation of Article 28 of the AOA are referred to. 180. On considering the submissions, advanced on this score, I have found that the contention from the side of the respondents that the present proceeding is based on past acts and past acts alone is not correct and true. One may note here that CLB has consistently taken the view that in matter of illegal allotment of shares, a single act carries continuing effect. This is because of the fact that the shareholder, aggrieved, continues to suffer from illegal allotment of shares till such wrong is rectified. 181. Since in our case in hand, the petitioners have established without any shadow of doubt that the issuances of shares on 20-02-2010 as well as on 15-09-2010 were done in total violation of the mandate in Article 28 of the AOA, in view of the law laid down in ABI (P.) Ltd. (supra), it needs to be concluded that this proceeding is not bad for being based on all stale and past claims as alleged by the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of directors---nay---two sets of shareholders or for that matter, the company itself to various courts / tribunals since the eruption of such disputes in 2009 which, in turn, threatened to bring the company itself to a grinding halt. Situations being such, it needs to be concluded that all the conditions, so, enumerated in section 397, necessary for initiation/continuance of a proceeding u/s 397, stand fully established. 187. In the case of Needle Industries (India) Ltd. (supra), the Hon'ble Supreme Court held that in a proceeding under section 397 of the Act of 1956, the learned CLB has power to grant relief, even if, the oppression is not made out. However, the discussions which I have indulged in hereinbefore unmistakably evince that the petitioners have proved oppression and mismanagement in running the affairs of the company under consideration. 188. Referring to the provisions in the Specific Reliefs Act, it has been submitted on behalf of the respondents that in a proceeding u/s 397/398, it is the bounden duty of the petitioners to describe appropriately and accurately the reliefs, sought for, in a proceeding. Unless the reliefs, sought for, are accurately and appropriatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y true that there are some shortcomings in describing the reliefs, sought for, in the proceeding under consideration. 193. However, a deeper and closer scrutiny of the petition in the light of statements, made in documents, annexed with the petition, would, also reveal that the present petition is, in fact, a petition under Section 397/398 read with section 111 of the Act of 1956. Such a perusal of the petition again shows that the petitioners herein have also prayed for reliefs not only under Section 397/398 but also under Section 111 of the Act of 1956. Therefore, the allegation that the present proceeding is liable to be dismissed allegedly for suffering from the defects aforesaid cannot be upheld. 194. It is worth noting that in a catena of judgments, various courts of the country including the Hon'ble Apex Court repeatedly held that a proceeding cannot be dismissed only for failure of the petitioner to quote/misquote the provision of law in the petition. Similarly, such a proceeding cannot be rejected only for the inability of the petitioner to seek appropriate relief in such a petition. If necessary, the court would rise to the occasion and would mould the relief(s) dependi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n EOGM held on 14-11-2009 under which the R-5 was removed from the post of director and MD of the company and petitioner No.1 was appointed as Director of the company in place of R-5. But then, the resolution dated 14-11-2009 too, to a great extent forms the subject matter of T.S.No.302/2010 as well. Therefore, this Bench must not engage itself to adjudicate the matter which is also subject matter of Civil Court, more so, when such a suit was instituted well before the institution of present proceeding. 200. The above being the claims and counter-claims, let us first see if the subject matter in the present proceeding and the subject matter in T.S.No.302/2010 are one and the same. My desire to find a reply to the query above caused me to go through the petition under consideration which, in turn, reveals that in the petition, the petitioners had alleged that R-5 in league with his cahoots committed a series of serious irregularities and illegalities in running the affairs of the company. 201. Such illegalities and irregularities range from evasion of tax, defalcation of company's contribution to the Provident Fund authorities--to -- unauthorized increase of authorized capital of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the same parties, overlap a little. For instance, before the Civil Court, the son is seeking a partition, apart from other reliefs. Before the Company Law Board, the father is seeking a partition of the land, building and machinery in the company. Therefore, on the surface of it, it may appear that the parties are seeking identical reliefs before different forums. 75. But, I cannot lose sight of one important thing. The power of the Company Law Board under Sections 397 and 398. are very wide. The reliefs that would be granted by the Company Law Board under Section 402 of the Companies Act, 1956, are very wide. As a matter of fact, what a Civil Court could do after a very long journey in the form of a preliminary decree for partition, a final decree and the actual division of properties, is something that the Company Law Board cannot do. But, what the Company Law Board can do under Section 402. is something that may even put an end to the civil dispute, on completely different terms. For instance, the Company Law Board can always pass an order giving an exit option to any one of the two warring parties, namely, the father or the son. In such an event, at least the company wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners alleging that argument on this score was structured more on surmise than on law----since ---neither the facts on record nor the law holding the field supports the arguments, so advanced from the side of respondents. Let us see how far above contention from the side of respondents is found tenable in view of facts on records and law holding the field. But before addressing such a question, we are to ascertain if all the allegations in the present proceeding are only against R-5. 208. It is found evident from my foregoing discussion that the contention to the effect that all the allegations in the present proceeding, are directed against the R-5 and R-5 only, and none else, has already been scrutinized in great detail and it was found that such a contention was far from the truth and therefore, said contention deserves no further reiteration here. Suffice it to say that the allegations herein are directed against other persons as well who have been facing trial in the present proceeding. 209. So situated, let us see if on the death of respondent No.5, the present proceeding stood abated as alleged by the respondents. Such a question arose before the Hon'ble Allahabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sections it is not possible under the general powers of Section 398 to enforce that liability. We are, therefore, thrown back to the provisions of Sections 539 to 544 and it is only by the application of those provisions that the liability of the respondent No. 5 as a director could be enforced in the present proceedings. So far as those sections are concerned, as we have stated above, it is settled that the liability can be enforced only against a living director and not against his heirs or legal representatives after his death. It is, therefore, not possible to accept the argument of the learned counsel for the applicant that the heirs of the deceased Sri Hari Shanker Bagla can be brought on record and proceeded against in these proceedings without having recourse to Section 406 or the provisions of the sections mentioned therein". 212. Similar question has also come up before the High Court of Delhi in Rajender Nath Bhaskar v. Bhaskar Stone Ware Pipe (P.) Ltd. [1990] 68 Com Case 256 (Delhi). The Hon'ble Delhi High Court too concurred with the finding of the Hon'ble Allahabad High Court in the case of J.K. Investment Trust Ltd. (supra). Such decisions leave no manner of doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l disputes -since -there are enough materials on record to show that such disputes had gone to such a pass when two sets of directors of the company did everything possible to annihilate the other including the initiation of series of legal proceedings before various legal fora which even threatened to bring the entire affairs of the company to a grinding halt. 217. The fact that during the period under consideration, there were two sets BODs, each set of which claimed itself to be the only legally constituted BOD of the company, the fact that each set of such BOD was found functioning from two different locations taking contradictory decisions thereby causing extremely awkward situation in running the affairs of the company and the fact that one set of BOD had taken steps even to freeze the accounts in the name of the company overwhelmingly show the magnitude of disharmony between two sets of shareholders or for that matter two sets of BODs. 218. In this connection, one may look into the decision of CLB, New Delhi in Suresh Kumar Sanghi v. Supreme Motors Ltd, [1983] 54 Comp.cas 235 (Delhi). In Suresh Kumar Sanghi (supra), CLB, Delhi held that where serious infighting among the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invalid in law--- since--- the Board did not have the requisite quorum to appoint P-l as MD of the company inasmuch as on that date, only 2 directors, entitled to participate in the board meeting, they being P-l and P-2, remained present although Article 64 requires that quorum of the board meeting is three (3). In this connection, my attention has been drawn to Article 64 of the AOA. For ready reference, Article 64 of the AOA is reproduced below: - "64 Any of the three Directors including the Managing Director present in the meeting shall constitute a quorum." 223. However on a careful perusal of the record, it is found that the Board Meeting, held on 25-11-2009, was attended to by Mr. Bipul Das (purported to be Govt. Nominee), Mr. D. K. Hazarika (P-l), Mr. Bhupen Ch. Kalita (P-2), and one Mr. Sarat Ch. Kalita. According to the learned representative appearing for the respondent Nos. 3 and 4, Mr. Bipul Das and Mr. Sarat Ch. Kalita, had no locus standi to remain present in the Board Meeting as director of the company. In that connection, my attention has been drawn to the Article 51 which says that the Government of Assam as long as holds not less than 25 % of the paid-up cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince such appointment was done in complete violation of direction in 284(5) read with 284(2) of the Act of 1956 and on the basis such allegation, it was submitted that the appointment of petitioner as the director of the company needs to held as illegal and untenable in law. Such a plea, in my opinion, is not acceptable. 229. I have found that the petitioner No.1 was appointed as director of the company on 14.11.2009. But despite elapse of several years in-between, the respondents choose not to initiate any proceeding questioning such appointment till date. Since the respondents did not initiate appropriate proceeding seeking removal of the petitioner No.1 from the post of director of the company well in time, such a claim became a stale one long back and therefore same cannot be allowed to rake up in a proceeding which was initiated not by the respondents but by the petitioners. 230. We have found that learned counsel/learned legal representatives appearing for the respondents have relied on series of judgments in support of their respective case. I have considered such decisions in the light of materials on record and found that some of the decisions, relied on by the respenden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal exercise of powers, the respondents had changed the composition of BOD in such a way that the voice of shareholders who together held 64% of the shareholding in the company on 14.11.2009 got muzzled forever. 234. In the result, this petition is allowed with the following conditions: - (a) The resolutions, adopted in the EOGM held on 02.03.2010 under which the petitioner No.1 was removed from the post of Director and MD and petitioner No.2 was removed from the post of Director of the respondent company, are declared illegal, null and void. (b) The resolution, adopted in the Board meeting held on 14.11.2011 under which the respondent No.5 was appointed as MD of the respondent company, is declared illegal null and void. (c) The issuances of further shares on 20.02.2010 to some existing shareholders and outsiders are declared illegal, null and void. (d) The resolution adopted in EOGM held on 06.09.2010 enhancing authorized capital of respondent company from 5000 to 10000 is declared illegal, null and void. (e) Issuances of further shares to some existing shareholders and outsiders on 15.09.2010 and on any other dates, if any, subsequent thereto, are also declared illega ..... 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