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TMI Blog2019 (2) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... 011, we have already referred to Notices being sent to the representatives of the original Petitioner. The pleadings of the original Petitioner itself showed receipt of Notices and added that the Petitioner had informed its inability to attend the meeting on 29.12.2010 and had sent its comments/submissions. Even regarding the Meetings of 31.03.2011, the Petitioner had informed by communication dated 24.03.2011 claiming that there was no need to hold the meeting. As regards the letter of protest dated 14.06.2011, original Respondent No.7 accepted receipt of letter dated 06.06.2011 proposing to hold meeting on 29.06.2011 in Malaysia. This Respondent claimed that he was travelling abroad and could not attend the Meeting at Malaysia and sought leave of absence. He noted that he could participate by teleconferencing and wanted to know the procedure. He wanted the Company to inform the policy regarding payment of to and fro air fare, hotel and other dues, etc. Alternately, he suggested holding of the Meeting at Hyderabad. With regard to the Agenda which had been proposed, he offered his comments Agenda-wise. With regard to the Agenda No.5, he mentioned that he was interested as Managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a scheme of management framed by this Hon ble Board which would be, in supersession of the Articles of Association of the 1st Respondent and in supersession of all Agreements which purport to vest parties with rights in affairs of the 1st Respondent, and of all books, papers, records and documents of the Company as well as its assets and properties. b) All decisions, including but not limited to managerial, administrative, and legal decisions taken by the Board of Directors of the 1st Respondent at its Board Meetings held on 16th August 2010, and 2nd September 2010 be declared and set aside as null and void. c) Direct the 2nd, 9th, 10th and 11th Respondents and their affiliates/associates not to carry on any commercial activity in India directly in their own names or indirectly in any other name/s, other than through the 1st Respondent, which is similar to those objects of the 1st Respondent as stated in the Memorandum of Association of the 1st Respondent. d) Appropriate reliefs be passed under and in accordance with sections 402 of the Companies Act, 1956; e) Costs of and incidental to this Petition be paid by the Respondents; f) Such further order or orders and/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only shareholders of Respondent No.1 Company. g) Respondents 3 to 5 were nominee Directors of Respondent No.2 on the Board of Respondent No.1. Respondent No.6 is nominee Director of Respondent No.2 on the Board of Respondent No.1. (Respondent No.6 has controlling interest of 22% in Respondent No.10) Respondents 7 and 8 were nominee Directors of the original Petitioner on the Board of Respondent No.1. 5. Reference now needs to be made to the following facts emerging from record:- a) It appears that one M/s. Telangana Spinning and Weaving Mills Limited (later on name changed to M/s. Starlite Global Enterprises (India) Ltd.) (hereafter referred as Telangana Spinning ) had become sick industrial company and was owner of a piece of land in RR District of Andhra Pradesh and BIFR had sanctioned rehabilitation scheme. There was need to raise funds to pay secured creditors. Original Petitioner submitted bid dated 13th August, 2003 for purchase of the land which was accepted by Asset Sale Committee and approved by BIFR. The Petitioner then authorized from time to time several persons for purpose of executing sale agreements/sale deeds, in respect of portion of the said land i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Deed of Novation cum Joint Development Agreement cum General Power of Attorney (Page 77 Diary No.5224) ( Deed of Novation , in short). In this Deed of Novation, one of the recitals marked E read the plot is currently free from all encumbrances has become cause of dispute (which we will refer later). f) Copy of CP 22/2007 (Diary No.5224 Page 194) shows that present Respondent No.8 - Ramgopal Patwari and Respondent No.7 - Sanjay Patwari with other members of the family were Directors in Telangana Spinning. Respondent - Ramgopal Patwari has been referred in that Company Petition as Managing Director of Telangana Spinning. 6. In NCLT, original Petitioner, inter alia, raised one dispute relating to issue of 8,00,000 11% convertible preference shares of first Respondent to the second Respondent. Regarding this, no more dispute is raised in Appeal or at the time of arguments and thus, we will not enter into details. 7. The original Petitioner claimed in NCLT that Respondent No.11, the ultimate holding Company of Respondents 1 and 2 and its nominee Directors without the knowledge of nominee Directors of the Petitioners, unilaterally and illegally issued legal Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominee Directors received Notice dated 3rd December, 2010 for a Board Meeting convened on 29th December, 2010 in Malaysia. It was objected to by the Petitioner by communication dated 22nd December, 2010. Yet another Notice dated 9th March, 2011 was received for Board Meeting at Malaysia on 31.03.2011 and Petitioner objected vide communication dated 24th March, 2011 claiming that there was no need to call such Board Meeting when commercial operations had yet not started. The Respondent No.1 replied vide Notice dated 7th April 2011 denying the contentions raised by the original Petitioner. Further contentions were raised regarding other meeting similarly called for on 29th June, 2011 for which Notice dated 06.06.2011 had been received. Petitioner claimed that Respondents 3 to 6 - nominees of Respondent No.2 on the Board of Respondent No.1 were acting against the interest of Respondent No.1. Petitioner further claimed that Respondents 1 and 2 had commenced arbitration proceedings against Telangana Spinning and had also initiated proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 ( Arbitration Act , in brief). It claimed that Respondent No.1 was being used as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phasis supplied] 27. It is also not in dispute that the quorum for conducing said board meeting is maintained and the Board is also fully empowered by Articles of Association of R1 Company and the same is also in consonance with provisions of the Companies Act, 1956/2013. As stated supra, the Respondent No.7 8 who are nominee directors of the Company, are given due notice for conducting of impugned board meeting. They have also expressed their inability to attend the board meeting due to their pre-occupation with activities in Hyderabad. It is settled position of law by various judgements rendered by various courts that Tribunal cannot interfere with wisdom of a Company to take decision(s) in the best interest of Company unless there is an arbitrary exercise of powers contrary to extant Articles of Association of a Company and taken contrary to principles of natural justice. Share holders and their Board of Directors of a Company are best judges to take decisions and run the affairs of a company. Tribunal/Court cannot interfere in the policy matters of a Company, which are taken by duly constituted Board of Directors by following articles and memorandum of Association of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trator namely, Shri K. Gopinathan, and petitioner also appointed its nominee namely Justice Usha Mehta (Retd.) Judge of Delhi High Court. The contentions of the petitioner that they are not concerned with the Starlite Global Enterprises (India) Limited, it is not a party to arbitration proceedings are not all tenable and baseless. Admittedly, Starlite Global Enterprises Limited formerly known as TSWM and which is stated in the Company petition itself. And all the Agreements in question are interlinked with petitioner, TSWM, and respondents and the cause of action for the impugned action in the present petition and arbitration proceedings as mentioned supra, arise out of various agreement executing among the same parties. Moreover, the Respondent No.7 8 are nominee Directors in R-1 Company and also Directors in Starlite Global Enterprises Limited. When the issue in question in the present company and in arbitration proceedings arise out of same cause of action, principles of natural justice demands that court/Tribunal should not entertain cases, which leads multiplicity of litigation. It is also not in dispute, as discussed supra, in all the agreements in question, there is an arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, 2010. Telangana Spinning/Starlite Global had already filed Counter claim in the arbitration proceedings and for the same cause of action, the Company Petition was sought to be maintained. The Respondents have defended the termination of the agreement. According to the learned Counsel for Respondents, the Appellant No.1 and Respondent No.2 are the only shareholders and it would not make any difference whether the decision relating to termination is taken or ratified by the Board Meeting or the General Body Meeting. Counsel for Respondents defended the decision taken by learned NCLT. 13. Having gone through the matter and the various disputes raised by the Petitioner themselves relating to the termination of the Agreement of Deed of Novation with Telangana Spinning, the reference had been laid by the Petitioner itself and in that context, the learned NCLT was bound to discuss the material placed before it in order to consider whether oppression and mismanagement was made out. Thus, the disputed observation in para 24 appears to be there. If the Board Resolution dated 2nd September, 2010 is seen, and is read with Notice for rectification dated 17th May, 2010 and Notice of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther case of oppression and mismanagement has been made out. 15. Although the prayers in the Appeal raised grievances regarding para 24 and 28 of the Impugned Order, at the time of arguments, learned Counsel for the Appellants raised further contentions and submitted that the Company Petitioner had raised grievances making allegations regarding 4 Board Meetings, i.e. Board Meetings dated 02.09.2010, 29.12.2010, 31.03.2011 and 29.06.2011, but NCLT dealt with only the meeting dated 02.09.2010. It has been argued that NCLT did not consider the grievances raised by the Petitioner in its letter dated 11th August, 2010 (Diary No.3521 Page 3) objecting to holding meetings at Malaysia; NCLT did not also consider that the matter concerned deserved to be taken up in General Body Meeting as termination of Development Agreement would destroy the substratum of the Company; holding Meeting at Malaysia could be exception but it had become routine; the Petitioner had sent even letter dated 14.06.2011 (Diary No.3521 Page 19) raising protest to the Meeting called on 29.06.2011; in the Meeting dated 2nd September, 2010, the registered office of the company was shifted without there being Age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Counsel for Respondents that the Petitioner is holding brief for its sister concerns - Telangana Spinning/Starlite Global against which the Respondents 1 and 2 have initiated arbitration proceedings and only because the Petitioner has some shares in Respondent No.1 Company, it is trying to create difficulties inside the working of the Company. It is argued that the Respondents 1 and 2 had taken steps for protection of the interest of Respondent No.1 Company. 17. With regard to meeting dated 02.09.2010, the learned NCLT observed in para 20 and 21 as under:- 20. The Petitioner has got issued a reply dated 11.08.2010 (Page 165) and 18.06.2010 (page 149 to 153) by denying all the contentions raised by respondents. Subsequently, the R-1 Company issued a notice dated 12.08.2010 to Board of Directors proposing to conduct Board meeting on 02.09.2010, by inter alia notifying agenda to ratify the notice for rectifying breach notice dated 17.05.2010, to rectify the notice of termination of the deed dated 03.08.2010, among other agenda mentioned therein. In pursuant to the above notice R.G. Patwari (R-8) Sanjay Patwari (R-7) the nominee Directors of petitioner, have addressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to call the said agreement entered and its termination to be substratum would not be appropriate in our view. Nothing is shown that there is any restriction on the place where Board of Directors should hold their meetings. Learned Counsel for the Respondents has rightly pointed out even earlier meetings which were being held in Malaysia and which were held without any grievances. The disputes now being raised regarding travelling and other allowances, we find, are only for the purpose of raising grievances. The point, which is pinching the original Petitioner, is the termination of the agreement and rest of the disputes, it appears to us, are being raised to drag the matter to the NCLT. Even regarding the meetings dated 29.12.2010 and 31.03.2011, we have already referred to Notices being sent to the representatives of the original Petitioner. The pleadings of the original Petitioner itself showed receipt of Notices and added that the Petitioner had informed its inability to attend the meeting on 29.12.2010 and had sent its comments/submissions. Even regarding the Meetings of 31.03.2011, the Petitioner had informed by communication dated 24.03.2011 claiming that there was no need ..... X X X X Extracts X X X X X X X X Extracts X X X X
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