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TMI Blog2018 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... irector as well as Director and the appointment of R-4 as Director of the R-1 company are also declared illegal and bad in law (d) Petitioner No.1 and Petitioner No.2 are restored to the position which they occupied as on 09th March, 2016. (e) The BOD of the R-1 company is restored to the position as it was on 9th March, 2016. (f) All the acts and deeds done by the company after 10-03-2016 including all the communications done by the R-1 company with ROC and other authorities are also declared null and void. (g) All the acts and deeds done by the company after 10-03-2016 with 3rd Parties are protected from becoming illegal and void for their dealing with an illegally constituted Board of Directors of the Company. (h) The parties hereto are left to bear their own cost. (i) The Board, so restored to the position as it was on 09-03-2016, is directed to resume its business immediately and that too in accordance with prescriptions of law and Rules framed thereunder.business immediately and that too in accordance with prescriptions of law and Rules framed thereunder. - CP NO. 14/241/242/GB/2017 - - - Dated:- 4-5-2018 - MR. P. K. SAIKIA, J. For The Petitioner : M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors or any other competent person or persons as inspectors to investigate the affairs of the Company under Section 206 of the Companies Act, 2013 and to report thereon; xii. A Special Officer/Administrator be appointed to take charge, custody and control of all books, records, Demat accounts and documents as also assets and properties of the Company with a direction to make an inventory of the same with further direction to initial all such books, records and documents. xiii. Injunction restraining the Respondent Nos. 2, 3 4 and each of them from dealing with or disposing of, encumbering or alienating and/or transferring the assets and properties of the Company in any manner whatsoever without the concurrence of the Petitioner No.1 2; xiv. Injunction restraining the Respondents from using the funds of the Company for the purpose of the instant litigation in any manner whatsoever; xv. Injunction restraining the Company from dealing with the assets of the Company in any manner whatsoever without the concurrence of the Petitioner No.1 2; xvi. Injunction restraining the Respondents from holding any annual General Meeting of the Company or meeting of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner No.1 (P-l, in short), petitioner No.2 (P-2, in short) and Respondent No.2 (R-2 in short), would also hold 2% equity shares in the Respondent No.1 company (in short, R-1 company). 5. However, at the instance of their mother, it was decided that all the brothers would always hold equal numbers of equity shares in/of the respondent No.1 Company. These apart, some shares were also given to their mother and Ramkrisna Goel Sons HUF. Thus, the respondent No.1 Company came into being as a closely held family company in 2006. The petitioner No.1 and the petitioner No.2 along with the respondent No.2 became the first directors of the company. As per Article 97 of the Articles of Association (AO), Mr. Rajesh Goel (R-2) was designated as Managing Director since inception of the company. 6. According to the petitioners, on 10-03-2016, the total paid-up capital of the P-l, P-2 and their immediate family members in the company was 53%, whereas, on the same date, the total paid-up capital of the respondent No.2 and his other immediate family members was 41.652%. There are 15 other individual shareholders, each of whom held ten shares on the date aforesaid and thus, they together hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 500000 12 12 Mr. Pawan Kumar Agarwal 10 100 13 13 Mr. Sanjay Kumar Agarwal 10 100 14 17 Mrs. Prabhawati Devi Agarwalla 10 100 15 18 Mr. Sajjan Agarwal 10 100 16 19 Mrs. Sanju Devi Agarwal 10 100 17 20 Mr. Umesh Agarwalla 10 100 18 21 Mr. Tarachand Agarwalla 10 100 19 22 Mr. Suresh Kumar Agarwalla 10 100 20 23 Mr. Rajesh Agarwalla 10 100 21 24 Mr. Binod Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was also fully utilised by his brother, petitioner No.1 in running the affairs of the company effectively and appropriately. According to the petitioners, the respondent No.2 was looking after manufacturing and production units of the company. However, he did not dedicate his time, energy and other resources for the advancement of family business since he utilised all those resources in advancing his own trading activities. 10. Moreover, he had a lot of social commitments to attend which further tightened his already constricted time at his disposal and for all those factors, the respondent No.2 did not have enough time and energy to remain stuck to the manufacturing and production units of the company. Most importantly, the respondent No.2 is also a short-tempered person and keeps on quarrelling with one and all- which- in fact- -caused lots of problems to the other two brothers in running the affairs of the company. But, somehow, the petitioners managed to run the business of the respondent company without facing much trouble. 11. In 2015, the respondent No.2 was diagnosed to have been suffering from brain tumour and as such, he had to be hospitalized at Fortis hospital, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent No.2 to convene the AGM of the company immediately since the statutory period for convening such AGM had already expired in the meantime. However, this time, P-l and P-2 were informed that the concerned ROC was approached to extend the period for convening the AGM. Though P-l and P-2 was amazed to know that such a request for extension of time to convene AGM was made without their knowledge but considering the welfare and interest of the company, they chose not to rake up such matters before any authority. 16. In the month of December, 2016, a meeting of the Goel brothers were summoned which was attended to by elderly people connected to the Goel brothers. Mother of P-l and P-12 and R-2 had also attended the meeting. Said meeting was summoned since R-2 never convened the AGM despite there being repeated requests there-for from the side of the petitioners over a long period of time and in spite of there being an assurance from the side of R-2 to convene the same on getting necessary permission from the concerned ROC. However, instead of addressing the grievances of P-l and P-2, the respondent No.2 being encouraged by respondent No.5, threatened to cause all kinds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is count alone said Board Meeting needs to be declared null and void. 21. The petitioners further came to know that the respondent No.2 also convened an Extra Ordinary General Meeting (in short, EOGM) on 23-03-2016. In the EOGM, held on 23-03-2016, as many as four resolutions were adopted. For ready reference, extract of the said resolutions adopted in the EOGM held on 23-03-2018 are reproduced below: - EXTRACTS FROM THE MINUTES OF THE 1ST (2015-16) EXTRA ORDINARY GENERAL MEETIING OF THE COMPANY HELD AT ITS REGISTERED OFFICE ON 23-03-2016 AT 10 A.M . APPOINTMENT OF MR. ROCHAK GOEL Members present discussed regarding appointment of Mr. Rochak Goel as the Director and Whole Time Director of the company. After brief discussion the following resolution was duly proposed by Mr. Mukesh Goel and seconded by Mr. Ritesh Goel as an Ordinary Resolution. RESOLVED THAT pursuant to provision of section 152 of the Companies Act 2013, read with Companies (Appointment and Qualification of Directors) Rules, 2014, Mr. Rochak Goel, who has consented to act as the Director of the Company, be and is hereby appointed as the Director of the Company with immediate effect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g cessation of P-l and P-2 from the offices of the director of the respondent No.1 company were sent to the concerned ROC for its information and doing needful. Since Board meeting, held on 10-03-2016 as well as the EOGM, held on 23-03-2016, are held to be illegal, therefore, all the actions taken thereunder including the purported filing of DIRs, aforesaid, became equally illegal and against the law. 24. Subsequently on 30-09-2016, another EOGM was held wherein several resolutions were adopted. However, such an EOGM too suffers from infirmities which afflicted the EOGM, held on 23-03-2016 which, in turn, makes such an EOGM indefensible in law. These apart, since the Board Meeting held on 10-03-2016 and EOGM, held on 23-03-2016 are convened and conducted illegally and since those meetings have enormous implications on the EOGM, held on 30-09-2016, on that count too, the EOGM on 30-09-2016 is required to be held illegal. 25. Once the respondents illegally usurped the management of the company, they keep on doing very many other illegalities as well. The misadventure of the respondents had gone to the extent of their illegally acquiring the properties of the R-1 Company. In cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposition of law that one who seeks equity, must come with clean hands. However, the present proceeding is structured on lies, falsehood and fiction instead of it being based on facts and law and logic. This is because of the fact that most of the allegations incorporated in the present petition are blatant lies. 30. It has also been contended that some very vital facts which have huge bearing on the outcome of the present proceeding and which were all well-known to the petitioners, were not made part of the record and the same was done intentionally so that this Bench could not see what the truth is in the dispute in the proceeding under consideration. 31. The respondents further submit that it is not true to say that the company which was established in Guwahati under the name and style of Goel Marketing Distribution Co. Ltd. was conceptualised and made functional by the petitioner No.1. Rather, it was conceptualised and brought into existence by the respondent No.2, who took world of pains in establishment of the company concerned, in Guwahati which is well evident from the letter dated 19-12-2011. Said letter was written by the P-l as director of the R-1 Company and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector- and- not from the offices of Director of the company. But such a claim of the petitioners was denied by the respondents stating that under the aforesaid letter, P-l and P-2 had actually resigned from the both the posts aforesaid. 36. Such argument from the side of the petitioners-claim respondents- is quite far from the truth. In fact, in the months, preceding March, 2016, on seeing the miserable state of affairs of the respondent No.1 Company, P-l and P-2 wanted to exit from the R-1 Company at the earliest possible opportunity since P-l and P-2 was sure that the company was fast rushing toward its natural death in the form of winding up. The fact that the various incentives, provided under Industrial Policy, adopted by the Govt, of Assam, were about to come to an end in May, 2017 had hasten such decision on the part of P-l and P-2. 37. According to the respondents, though the letter dated 23-03-2016 apparently demonstrates that the petitioners opted to resign only from the post of whole time director of the company-yet- there are enough materials on record to show that P-l and P-2 wholeheartedly intended to resign not only from the posts of Whole Time Director but als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout seeking leave of absence of the Board, his office shall become vacant. 41. Though the Directors of the company are to attend all the Board Meetings, convened and conducted during a period of 12 months, there is absolutely nothing on record to show that P-l and P-2 had attended any Board Meeting, conducted after 23-03-2016. Nor was there any evidence to show that they ever made any attempt to enquire as to how the affairs of the company were being conducted after 23-03-2016. Such a conduct on the part of PI and P2 do not auger well to advance their claim that they were always interested in the affairs of the company but could not do so due to alleged hostile behaviour of R2 towards them. Such episodes further advance the claim of the respondents that having resigned from all the posts of the company on 23-03-2016, P-l and P-2 completely withdrew from the affairs of R-1 Company. 42. The R-2 did not dispute the claim that he had misfortune of having brain tumour for which he was operated upon at a hospital in Delhi. But he claims that it is not true that the petitioners had managed the funds necessary for his treatment. Rather he was given what the company owed to him in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the answering respondents, though the petitioner nos. 1 and 2 took away all the statutory records of the respondent No.1 company, the details of which would be indicated later on, the consent letter of the petitioners, somehow were left behind in the office which would have a vital bearing on the stand of the petitioners. Perhaps the petitioner nos. 1 and 2 would have guessed that some of the documents might have been left behind by them and therefore, they had tried to create their defense by stating that some of their blank signed papers would have remained with the respondent no.2 who might misuse the same to create fake documents, interestingly, the consent letters are original and it also contained consent letters of petitioner nos.3 and 4, which clearly prove that contrary to their stand, the petitioners were aware about the Board of Directors meeting held on 23.02.2016 as well as EOGM to be held on 23.03.2016. it is also submitted that the petitioner nos.1 and 2 have admitted that they have submitted their resignation letter on 23.03.2016, which cannot be a mere coincidence but the same was a part of the entire scheme of exit of the petitioners from the respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als on record as well as the law holding the field. However, before addressing the other controversies in this proceeding, it needs to be known if the Whole Time Director and Director of the company are two different posts/jobs, as alleged by the petitioners. Such a question creeps up inasmuch as P-l and P-2 claim that under the letter dated 23-03-2016, they expressed their desire to resign from the posts of the Whole Time Director of the R-1 company --and --not from the posts of Director of the company. In order to address the above query, I find it necessary to have a look at the definition of the Whole Time Director of the company. 48. The definition of the Whole Time Director can be found in section 2(94) of the Act of 2013. The definition of whole time director as given in Section 2(94) of the Act of 2013 is an inclusive definition. For ready reference, same is reproduced below: - 2(94) - whole-time director includes a director in the whole-time employment of the company; 49. On looking at the various provisions of the Act, it is found that when a person who is already appointed as a Director of a company, is also conferred with the powers/post of Whole Time Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eful reading of the letter dated 10-03-2016 as well as the letter dated 23-03-2016 in juxtaposition with various other facts and circumstances, incorporated in the reply, would firmly show that there was a board understanding among the Goel brothers over the manner in which the affairs of R-1 company were to be run in days to come. More importantly, such an understanding was arrived at well before 10th March, 2016. As per such understanding, the petitioners were to resign -not only from the posts of Whole Time Director -but --from the posts of Director of the company as well. 54. But then, the parties to such agreements also agreed upon the fact that R-3 and R-4 would be appointed as above even before the resignation of P-l and P-2 from the Board so that at no point of time, the number of the Directors of the company fell below the minimum number, so prescribed in the AOA. The respondents also claim that said agreement/arrangement became a need of the hour since the Goel brothers got involved in a series of irritating and nagging but continuous disputes over a long period of time regarding running of the affairs of R-1 company. 55. According to the respondents, as per above a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided that the Central Government may, by notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification. (2) The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time: Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means. (3 ) A meeting of the Board shall be called by diving not less than seven days notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means : Provided that a meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de directors whose places are vacant. 60. It may also be stated here that the Secretarial Standards (SS-1 - Board Meeting), issued by the Institute of Company Secretaries of India (in short, ICSI), prescribes in great detail as to the contents of notice to be served on the Directors of the Board. The relevant provision can be found in SS 1.3.7 and S Sl.3.8. For ready reference, said provisions are reproduced below: - 1.3.7 The agenda, setting out the business to be transacted at the Meeting, and notes on agenda shall be given to the directors at least seven days before the date of meeting, unless the Articles prescribe a longer period. 1.3.8 Each item of business requiring approval of the Meeting shall be supported by a note setting out the details of the proposal, relevant material fact that enable the Directors to understand the meaning, scope and implication of the proposal and nature of concern or interest, if any, of any Director in the proposal, which the Director had earlier discussed. 61. One may also look into the Secretarial Standards (SS-1 - Board Meeting), issued by the Institute of ICSI which prescribes the manner in which Board Meeting is to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by ICSI including in 1.3.7 and SSI.3.8 in SS-1, were complied with in convening and conducting the Board Meeting, held on 10-03-2016. In order to address such a query, let me first scrutinise the claims, advanced from the side of respondents. The respondents, I find, claim that the letter, dated 10.03.2016 (which were written by the petitioners agreeing to the convening of the EOGM on 23-03-2016 under a shorter notice) very firmly establish that the respondent No. 2 had duly informed P-l and P-2 of the Board Meeting, convened on 10.03.2016. They also claim that having been so informed, P-l and P-2 had personally participated the Board meeting on 10-03-2016. 66. On a very careful perusal of the materials on record, the letter dated 10-03-2016 in particular, I have found that such contention is far too away from the truth - for- the letter dated 10-03-2016, no way gives an impression that P-l and P-2 were ever informed of about the purported Board meeting held on 10-03-2016- much less- they being informed of the convening of a Board Meeting on 10-03-2016 in the way prescribed in section 173 of the Act of 2013 and so also in various guide lines, issued by the ICSI. The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Being so; the alleged illegal removal of those documents from the office of the company appeared to have been made a ground for non-production of documents, indicated by the respondents. 71. However, such an effort from the side of the respondents hardly carries any conviction. If the petitioners had illegally taken away very many valuable documents from the office of the respondent No.1 company as alleged by the respondents-then-it would have been quite but natural for them to report such alleged illegalities of extremely serious nature to the authorities concerned so that necessary penal proceedings could be initiated against the wrong doers/offenders and also to set the record of the respondent No.1 company right. But then, there was no proof whatsoever of respondents taking recourse to the law to get wrong, done to the company, rectified. 72. Such state of affairs speaks loud and clear that the contention of the respondents that the petitioners had stealthily and illegally removed some very significant documents from the office of the respondent No. 1 which, in turn, seemingly prevented the respondents from producing some very important documents before this Bench dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the conclusion that all the resolutions, adopted in Board Meeting, held on 10-03-2016 are void and illegal- since- such a Board Meeting was conducted in total disregard to mandate of law in section 173/174 of the Act of 2013. Therefore, on this count alone, all the resolutions, adopted in the said Board Meeting, are required to be declared bad in law. 77. The resolutions, adopted in the Board Meeting held on 10-03-2016, are found void and illegal for other reasons too. Our foregoing discussion, now, makes it abundantly clear that the Board Meeting, held on 10.03.2016, was attended to only by one director- although on such a date there were as many as three directors in the Board. Article 116 of the AOA says that the quorum for Board Meeting is two. Since on 10.03.2016, only one of those directors had participated in such Board Meeting--- therefore- for want of quorum, said Board meeting could not have legally taken up any of matter, slated for discussion therein. 78. Despite above being the situation, the lone legally appointed director, present in such Board Meeting held discussion on as many as three agenda and also adopted resolutions thereon in profound violation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o confirm the resolutions, adopted in the Board Meeting, held on 10-03-2016. A perusal of agenda in the Notice dated 10-03-2016 summoning EOGM on 23-03-2016, together with resolutions, adopted in purported Board Meeting, held on 10-03-2016 make such position very clear. But then, since all the resolutions, adopted in the Board meeting on 10.03.2016, are found to be void and non-est. in law, all the resolutions, adopted in the EOGM, held on 23.03.2016 too became equally void and untenable in law. 83. However, EOGM held on 23-03-2016 is also found to be illegal for violation of the mandate of law in Section 101 of the Act of 2013. Section 101 of the Act of 2013 speaks about the procedures qua issuance of notice of meeting in respect of General Meeting. However, before I proceed further, I find it necessary to reproduce the relevant provisions of Section 101 of the Companies Act, 2013. 101. Notice of meeting . - (1) A general meeting of a company may be called by giving not less than clear twenty-one days notice either in writing or through electronic mode in such manner as may be prescribed: Provided that a general meeting may be called after giving a shorter notice if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. Such an event took place when the company, in the instant case, purported to pass a resolution which was not at all notified in gross violation of the mandatory obligations under the statute. The resolution impugned in the suit is accordingly void and ultra vires and has no existence in low. The plaintiff accordingly became entitled to a declaration prayed for in prayer (a) of the plaint. As consequential reliefs the plaintiff is also entitled to further reliefs as decreed by the courts below. 86. Coming back to our case, it is found that as on 31st March, 2016, the total number of shareholders of the R-1 company was 30. Though it appears from the record that the respondents had reportedly taken steps in matter of sending notice to large number of shareholders of the company yet it is also apparent there-from that some of the shareholders, their number not being sizeable though, were not favoured with notice of such meeting. Since notice of EOGM were not sent to all the shareholders of the company, therefore, in terms of law, laid down in section 101 of the Act of 2013 as well as in Asansol Electric Supply Co (supra), the resolutions dated 23.03.2016 cannot escape being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escape being found void and illegal and therefore, all the resolutions, adopted in the meetings of Board of Directors or for that matter, in the General Meeting of the Company any time after 10-03-2016 become indefensible and unenforceable in law. 91. Since all the agenda in EOGM, convened on 23-03-2016, including the agendum in respect of the resignation of P-l and P-2 from the Board of Directors could not have been validly discussed in the EOGM aforesaid for the same being constituted in a manner not authorised by law, the resignation of P-l and P-2 too could not have legally been accepted by the members present in such a Meeting. Consequently, it needs to be concluded that P-l and P-2 continue to be Whole Time Directors of the R-1 Company on 23-03-2016 and beyond. 92. The respondents claimed that the present proceeding is liable to be dismissed for it being filed with enormous delay and also it not being initiated against all the parties against whom the petitioners have sought for some reliefs. However, I have found that such allegation is totally devoid of substance since there are unquestionable materials on record to show that the proceeding in hand was initiated well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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