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TMI Blog2018 (9) TMI 1609X X X X Extracts X X X X X X X X Extracts X X X X ..... o premature. The injunction in respect of the EGM does not deserve to be granted. No other relief is pressed or arises. Thus, the present suit is not maintainable and is therefore dismissed. - CS (COMM) 1057/2018 & CAVs 697/2018, 698/2018, I.As. 10222/2018, 10223/2018, 10224/2018, 10225/2018 - - - Dated:- 24-9-2018 - PRATHIBA M. SINGH J. Plaintiffs Through: Mr. Rajshekhar Rao, Mr. Anuj Berry, Mr. Abhay J.V., Mr. Malak Bhatt, Ms. Apoorva Murali Ms. Kruttika Vijay, Advocates. Defendants Through: Mr. Sandeep Sethi, Senior Advocate with Ms. Aananya Kumar, Mr. Manish Jha, Ms. Pragya Chuahan, Ms. Megha Kapoor, Advocates for D1 to 3. JUDGMENT Prathiba M. Singh, J. 1. The Plaintiffs have filed the present suit seeking permanent injunction against the Defendants from conducting an Extraordinary General Meeting (hereinafter EGM ) for removing the Plaintiffs. Plaintiff No.1 Sh. Ravinder Sabharwal is a Director of XAD Software Pvt. Ltd. and was also the nominee share holder of 50% of the shares in the Defendant No.4. Plaintiff No.1 was one of the initial promoters and founders of Defendant No.4. 2. Defendant No.1 XAD Inc. is a US based company which is the 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector of Defendant No.4 and therefore no termination also could have been issued against them. 6. On 3rd August, 2018, when the matter was listed before this Court, the same was adjourned to 7th August, 2018 to be heard along with CS (COMM) 1048/2018. On the said date, the counsel for the Caveators appeared and addressed their arguments. Accordingly, submissions have been heard from both sides. 7. The submission of Ld. Counsel for the Plaintiff Mr. Rajshekhar Rao is that the notice issued calling for the EGM was not as per the law. The notice dated 30th June, 2018 sought to call for the EGM on 24th July, 2018. This notice was only received by the Plaintiffs on 13th July, 2018, and hence the requisite notice period of 14 days, for calling of the EGM was not provided. This according to the Ld. Counsel is not in accordance with Section 115 of the Companies Act, 2013 (hereinafter, Companies Act ) read with Rule 23 of the Companies (Management and Administration) Rules, 2014. The notice dated 30th June, 2018 was duly replied to by the Plaintiffs on 17th July, 2018. Moreover, it was argued by Mr. Rao that the Articles of Association of Defendant No.4 governed the appointment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the 100% beneficial share holder of Defendant No.4. The EGM has been called as per Section 100 and such a meeting is to be governed under the provisions of the Companies Act and the Rules thereunder. There is no doubt that Plaintiff No.1 was one of the promoters of Defendant No.4 and was to be a nonrotational Director till he voluntarily resigns. Articles 17 and 18 of the Article of Association of the Defendant No.4 are set out herein below: 17. Subject to the provisions of the Companies Act, 1956, the following shall be first Directors of the Company who shall be non-rotational Directors till they voluntarily resign:- 1. Ravinder Pal Singh Sabharwal 2. Pradeep Kholia 18. (a) The Company in general meeting shall have power at any time to appoint one or more persons as non-rotational Directors for such time and on such terms as they may be determined. (b) The remaining Directors shall be appointed by the company in General Meeting and shall hold office till they resign or are removed from office or are otherwise to be deemed to have vacated their office by virtue of any provision of law or these Articles, casual vacancies being filled up in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral meeting. But in practice (again like the Government), they will exercise as much control over the Parliament as that exercises over them. Although it would be constitutionally possible for the company in general meeting to exercise all the powers of the company, it clearly would not be practicable (except in the case of one or two-man companies) for day-to-day administration to be undertaken by such a cumbersome piece of machinery. So the modern practice is to confer on the Directors the right to exercise all the company's powers except such as general law expressly provides must be exercised in general meeting. Of course, powers which are strictly legislative are not affected by the conferment of powers on the Directors as Section 31 of the Companies Act provides that an alteration of an article would require a special resolution of the company in general meeting. But a perusal of the provisions of the Companies Act itself makes it clear that in many ways the position of the directorate vis-a-vis the company is more powerful than that of the Government vis-a-vis the Parliament. The strict theory of Parliamentary sovereignty would not apply by analogy to a company s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managing agent if any, the secretaries and treasurers, if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Limited, has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some Directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions. 13. As per this binding dictum, there can be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d appealed to the High Court. The learned Trial Judge held that the case was not one that deserved grant of ad interim orders stopping the meeting from taking place. In revision therefrom, the High Court opined that the act of removal of a director, from office, was one with serious repercussions, and that, therefore, the notice calling for the meeting had necessarily to set out the specifics of the allegations against the said directors, so that the shareholders at the meeting would be able to impartially adjudicate thereon. Significantly, the High Court found particular fault with the fact that a letter, dated 7th January 1995, which actually set out being a chance against the directors and was the catalyst in prompting the decision to remove them from office, was not circulated with the notice proposing the meeting. This decision substantially echoes the submission of Mr Sapra in the present case. However, the Supreme Court, in appeal therefrom [ P. Rajan Rao v B. G. Somayaji, (1995) 83 Comp Cas 662 (SC)], ruled as under: 2. We are satisfied that there was no ground available to the High Court for setting aside the trial court's order refusing to grant the injunction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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