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TMI Blog2017 (11) TMI 1883X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and another shareholder in the 1st Respondent company, on 27.07.2015 is in accordance with the law and legally tenable? - HELD THAT:- Assuming that the Respondent Nos. 2 to 11 were Directors at the time of forfeiture of the said shares on 27.07.2015, and were authorised to cancel the shares. But legally, the Directors of the Company cannot utilise their fiduciary powers over the shares purely for the purpose of cancellation of the shares of the minority shareholders to improve their voting power. The court cannot allow to exercise such powers which might have been delegated by the company to the Board of Directors. Therefore, there was no authority with Respondent Nos. 2 to 11 to forfeit the shares of the Petitioners and another shareholder. The whole action is patently illegal, perverse and is hereby declared as null and void. Relief - HELD THAT:- The EoGM purportedly held on 27.07.2015 was illegal, and is declared as null and void - The Petitioners and another shareholder continue to be the members of the 1 st Respondent Company. We also hold that the election of the Respondent Nos. 2 to 11 as Directors of the 1st Respondent company in EoGM purportedly held on 27.07.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents 2 to 11, at an EoGM purportedly convened on 27.07.2015, removed Petitioner No.l and Respondents 12 to 22 from the office of the Director and forfeited the shareholdings of the petitioners along with the shareholdings of another member/shareholder and the same is challenged in this petition. 2. There are 13 members including the holding company in the 1st Respondent company and the petitioners being two in number constitutes not less than 1/5th of the total number of members of the 1st Respondent company. Therefore they are qualified to file the petition under section 399 of the Companies Act, 1956. It is also on record that Respondents No.2, 3, 8 and Mr. A.C. Premanandan had filed C.P.No.35 of 2015 before the then CLB under Sections 397 and 398 of the Companies Act, 1956 seeking prayer that the removal of Respondent No.8 from the office of the Director on 1.4.2015 was invalid. However, it has been stated by the Petitioner that Respondent No.8 was not removed from the office of the Director but he vacated the office of the Directors by operation of law. 3. Based on the consent of the Petitioner and Respondents the then CLB vide its order dated 11.5.2015 appointed an ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N12 shows that the same relates to the removal of the 1st petitioner and Respondents No. 12 to 22 from the office of the Directors. Thus, the notice of EoGM attached with DIN12 in relation to the appointment of Respondents No.2 to 11 to the Office of the Board of Directors would reveal that the so-called meeting was nothing but a fraud committed on the shareholders of the company. In the notice of removal, the agenda in relation to the appointment of Directors is missing and in the notice in relation to the appointment of Directors, the agenda in relation to the removal of Directors and forfeiture of shares is missing. 5. It is also alleged that Respondent No.8 and Mr.A.P.Premanandan have their pharmaceutical shops opposite to Ashwini Hospitals, named as Sushil Pharma owned by Mr.A.C.Premanandan and M/s. Gautham Pharma found by Respondent No.8. This confirms supplying medicines and equipment to Ashwini Hospitals Pvt. Ltd without the knowledge of the Directors. While they procured the medicines and equipment well below the market rate from the dealers and suppliers, they supply the same to Ashwini Hospital on a high price and the hospital was selling medicine only at a maximum re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally acquired the shares of the 1st Respondent company and in the EoGM held on 27.7.2015 the 1st petitioner and Respondents 12 to 22 were removed from the office of the Directors of the 1st Respondent company and their shares were also forfeited. The reason given for holding EoGM on 27.7.2015 is that the petitioner acquired shares by concealing the fact about their residential status, so the petitioner and other NRIs ought not to have been elected as Directors of 1st respondent company on 18.6.2015 in the EGM convened under the supervision of the independent Chairman as has been directed by the then CLB. It has been stated in the reply that Respondent Nos.2, 3 and 8 (Dr.A.C.Velayuthan, Dr.B.G.Suresha and I.N.Rajesh) approached the then CLB by filing CP No.35/2015 in which the Bench vide order dated 11.5.2015 appointed an independent Chairman for the election of Board of Directors to the 1st Respondent company and also authorised the independent Chairman to take the assistance of the Practising Company Secretary in convening and holding EoGM on 18.6.2015 and during the course of three meetings, the 2nd and 3rd Respondents raised the issue of residential status of the petitioners and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegations levelled against Respondents 2 to 11 have been denied and it has also been mentioned by the answering respondents that a criminal complaint has been filed on 17.7.2015 before the CJM, Trissur against the 1st petitioner, his daughters and R12 to 22 u/s 420, 468, 471, 120(B) of the IPC and sections 447, 448, 449 and 452 of the Companies Act, 1956 and the matter is under investigation. 9. It has further been alleged by the Respondents that the petitioner after declaration of the result of election on 18.06.2015 had announced and given the complete free of cost treatment to the shareholders in the hospital and had offered job to the son of one of the shareholders to influence the shareholders for voting in his favour. It is also alleged that on 29.7.2015 without any provocation and with a planned agenda, the 1st petitioner using criminal force trespassed into the Board of Directors room with their henchmen and took away all the statutory documents kept at the registered office of the company and the police was called for help which directed the petitioner and his henchmen to leave. There is a narration of some of the other factual aspects in the reply filed by the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n are as follows:- (a) Whether the EoGM purportedly held on 27.07.2015 is in accordance with the law and legally tenable? (b) Whether the forfeiture of 5415 equity shares of ₹ 100 each fully paid up held by the Petitioners and another shareholder in the 1st Respondent company, on 27.07.2015 is in accordance with the law and legally tenable ? (c) Relief. 13. In relation to the issue No. (a), it is on record that an EoGM was held and conducted for the purpose of election of the Directors on 18.06.2015 under the supervision of an independent chairman appointed by the then CLB. After fulfilment of the legal requirements, the Petitioner No.1 along with the Respondent Nos. 12 to 22 were elected as Directors of the 1st Respondent Company in the said EoGM. The detailed report of the chairman was submitted to the then CLB. The CLB on 07.07.2015 disposed of the Petition No. 35/2015 by recognising the Petitioner No.1 and the Respondent Nos. 12 to 22 as Directors of the 1st Respondent Company pursuant to which the Petitioners have filed e-forms, DIN 12 with the Registrar of Companies, Kerala, Ernakulam. If Respondent Nos. 2 to 11 had any legal objection in relation to the EoG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors who were removed earlier and wanted back his investment in the 1st Respondent Company and the holding company, based on which the purported EoGM was got conducted on 27.07.2015, and the DIN 12 were filed by the Petitioner with his signature to the ROC, which the Petitioner subsequently have denied stating that his signature was forged. Thus, there are serious contradictions in the counter filed. On one hand, it is stated that due to the non-disclosure of the residential status, the shares of the Petitioners and other shareholder were forfeited on 27.07.2015. On the other hand, it has been stated that an oral understanding between the Petitioner and R2 was reached on the basis of which the EoGM was held on 27.07.2015 and the shares of the Petitioners and another shareholder were forfeited. Now, the question arises if such understanding was between the Petitioner and R2, then, why the shares of Petitioner and another shareholder were forfeited instead of purchasing the same and giving consideration to them. However, this defence is highly improbable for the reason that no person will act against the self-interest by agreeing that he may be removed from the Directorship and his sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the election dated 27.07.2015 per se is void ab initio. 18. The above view is fortified by rulings given in the following cases i) S. Vardarajan Vs. Udhyem Leasings and Investment Ltd., (2005) 125 Com. Cases 853; In this case, it was held that the Directors are in a fiduciary position vis-a-vis the company must exercise their powers with utmost good faith for the benefit as well as interest of the company. ii) Manmohan Singh Koli Vs. Venture India Properties Private Limited, 2005, 123 Comp. Case 198 CLB; In this case, it was held that a meeting of the Board of Directors held without sending notice to the Director was invalid and the resolutions passed therein are also not valid. iii) M. Moorthy Vs. Drivers Conductors Bus Service (P) Ltd., (1991) 71 Comp. Cases 136 (Mad); In this case, it was observed that where there has been a usurpation of the office of Director and Managing Director by a person then, the acts done by such person as director will have no validity under the provisions of Section 290 of Companies Act 1956, iv) M/s. Varshaben S. Trivedi Vs. Shree Sadguru Switch Gears Private limited, (2013) 116 CLA 153 CLB; It has been laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is declared as null and void. 22. We also hold that the removal of the 1st Petitioner and the Respondent Nos. 12 to 22 from the office of the Directors of the 1 st Respondent Company in the EoGM purportedly held on 27.07.2015, is illegal, and is declared as null and void. We further declare that the 1st Petitioner and Respondent Nos. 12 to 22 continue to be the Directors of the 1 st Respondent Company, and also declare that the forfeiture of 5415 shares of ₹ 100 each fully paid-up held by the Petitioners and another shareholder in the EoGM purportedly held on 27.07.2015 is illegal and is declared as null and void. The Petitioners and another shareholder continue to be the members of the 1 st Respondent Company. We also hold that the election of the Respondent Nos. 2 to 11 as Directors of the 1st Respondent company in EoGM purportedly held on 27.07.2015 is illegal and is declared as null and void. Although the prayer has not been made by the Petitioners for rectification of the Register of Members under the provisions of Sections 111 and 11 IA of the Companies Act, 1956, yet the Tribunal is all empowered to mould and add the relief in view of the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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