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TMI Blog2018 (7) TMI 1985X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of the Company. * That a Financial collaboration Agreement (FCA) was entered into by the petitioner, R2 and R7 with regard to the incorporation of the new company as proposed by them. * That the RI company was incorporated in the year 1996 and 10%, 39% and 51% shares of the RI company are held by the petitioner, R2 and R7 respectively. * That the petitioner is the Managing Director, R2 is the Executive Chairrnan of the Conupany. * That the petitioner was promised allotment of 25% of the shares of the Company, but was allotted only 10% and that his request for allotment of 15% was never heeded to. * That the Respondents used to visit to India once in a year that too at the time of AGM and the Petitioner was managing the affairs of the company solely and the Petitioner's tireless contribution since 1996 was huge in making the RI company a successful enterprise. * That the petitioner during the year 2011 learnt that the cornpany was violating the transfer pricing norrns since incorporation and R2 accepted the violation by his email dated 13.11.2011 and this act of R2 was protested by the petitioner. * That the Petitioner came to know that R2 had made hug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice dated 08.05.2015 of the Board Meeting had a different Agenda. In the minutes of the Board Meeting dated 15.05.2015, Respondent 2 and Respondent 5 have falsely recorded that the Petitioner has been sought to be removed from the Office of the Managing Director. It is also mentioned in the notice dated 15.05.2015 issued for the EGM to be convened on 07.08.2015 for removing the Petitioner from the Office Of the Managing Director. The R2 also filed a Form MGT 14 on 17.08.2015 with ROC wherein at Column 1 mentioned that the Petitioner was removed from the Office of the Managing Director and not from the Office of the Director. * That the Petitioner could not attend EGM held on 07.082015 in tirne as he got stuck in a traffic jam. The petitioner's request through SMs to postpone the meeting was recorded in the minutes of EGM held on 07.08.2015. * That the said meeting was commenced at 11.30 a.m. and ended at 11.33 a.m. and according to Clause 1 of Section V of FCA, the presence of the Petitioner is must to from a quorunl. Since he was not present in the said EGM the same is illegal, non est and void. Subsequently, R2 has filed a DIR12 with RÖC falsely recording that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the Petitioner was the Managing Director of the company and he has failed to comply with the provisions of many laws. The KPMG (audit firm) report shows that the Petitioner has not complied to the statutory provisions such as Income Tax, Wealth Tax, EST, Gratuity Act, Bonus Act, Service Tax Act Tamilnadu VAT. o The Item 1 of the minutes of the Board Meeting held on 15.052015 relates to the Petitioner position as Managing Director and his participation in the said meeting is recorded properly. The other directors exercised their right under Clause 108 of the AOA to revoke the Petitioner's appointment as Managing Director. The removal of the Petitioner from the Office of the Director has to be decided in an EGM. There is nothing in the minutes of the meeting to show that it has been falsified as claimed by the Petitioner. The minutes are the evidence as per the provisions of Section 118 (7) and (8) of the act. o That R2 and R3, the other directors, have filed a counter denying the allegations of the falsification of the minutes made by the Petitioner. o That the Petitioner was not appointed as Managing Director of the company for life time and his appointment does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 provides for a cap of three years compensation. Therefore, the compensation can never be Rs. 10 Crores. Further, the company is not a wholly owned subsidiary of R7 and R7 holds only 51% of the share capital. The R7 company is in existence for over 40 years long before the incorporation of the company. Therefore, it is false to state that the entire turnover of R7 is contributed by the activities of the company and the software business of R7 in India is insignificant to the sales of R7. 4. The Learned Counsel for the Respondents while reiterating the above averments prayed that the Petitioner's shareholding be valued by an Independent Valuer and the Respondents could be directed to purchase the same. The Learned Counsel for the Respondents relied on the following judgements in support of his submissions: (i) Shanthi Prasad Jain Vs Kalinga Tubes - wherein it is held that non performance of an agreement to which the company was not a party will not constitute oppression and any Change in the management which has not caused any prejudice to the company cannot be an act of oppression. (ii) V B Rangaraj V B Gopalakrishnan - wherein it is held that an agreement between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce would not come within Section 397 unless it be shown that his lack of confidence sprang from a desire to oppress the minority in the management Of the company's affairs and that there was at least an element Of lack Of probity and fair dealing to a member in the matter of proprietary right as a shareholder. (b) Superintendent Company Of India (P) Limited Vs. Sh Krishan Mugalr - Manu/SC/0457/1980 - wherein it is held that to determine whether agreement is void one has to be see reasonableness of restraint and onus being upon covenanter to show it to be unreasonable. (c) Needle Industries (India) Limited and others Vs. Needle Industries Newey (India) Holding Limited and others - wherein it is held that an act which is perfectly legal may yet to be oppressive. (d) Sanramsinh P Gaekwad and others Vs. Shantadevi P Gaekwad Manu/SC/0052/2005 wherein it is held that special circumstances that directors shall have fiduciary duty towards shareholders. (e) Alexander Brault Vs Indrakrishna Kaul http://lndia Kanoon.org/doc/977383 - wherein it is held that the injury which the defendant has done to the Plaintif Ps character and reputation, both in life and in his business, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is in our considered view, the FCA is binding on the company. The first issue is answered in favour of the Petitioner. 8. In view of the above disc us s ions relating to the first issue, the Board Meetings and Shareholders Meeting in the company were not held without quorum. Further, the respondents themselves admitted that there is a typographical error in the notice as well as in the minutes of the EGM. It is a fact that the Agenda of the Board Meeting do not disclose the intention of other directors / shareholders with regard to the removal of the Petitioner from the post of Director also. Further to the above, we are of the opinion that the removal of the Petitioner from the post of office of the Director has not been done in consonance with the provisions Of the Companies Act and, therefore, it is held that the removal of the Petitioner as a Director is not valid. 9. No doubt, the Petitioner was the Managing Director right from the incorporation of the company and he was removed only in the year 2015. i.e. 1996 There is no fixed term for continuation as Managing Director. The R2 was residing at England and dealing with the operations of the company. The submissions o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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