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TMI Blog2020 (9) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... interim relief. Considerations for grant of interim relief are well settled. Existence of a prima facie case besides balance of convenience and irreparable injury being suffered by a Member of Company alleging acts of oppression and mismanagement prejudicial to its interest and those of the Company, if there is no judicial intervention to protect the interests of such Member or the Company from alleged acts of oppression and mismanagement pending probe into allegations of oppression and mismanagement in the affairs of the Company, are the relevant considerations at the stage of grant of interim relief and Section 242(4) of the Act vests ample powers in the Tribunal to pass such interim directions as may be necessary for regulating the affairs of the Company. In the instant case, it can be seen that the Appellant has made specific allegations of oppression and mismanagement against Respondents and made strenuous efforts to demonstrate that the affairs of the Company have been conducted in a manner which seriously jeopardize his interests. While it is not permissible to return findings of fact qua such allegations of oppression and mismanagement across the ambit of interlocutory appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a decision in a General Meeting of the Shareholders - On the strength of these relevant facts, it is contended on behalf of Appellant that the ouster of Appellant as Director is entirely illegal. Since the foundation is bad, it is contended, the entire superstructure is bound to collapse. The Appellant has demonstrated all these circumstances to show that it has raised a fair question which requires probe in the Company Petition. The arguments raised on this score cannot be dismissed offhand. Given the status of Appellant, it can be safely stated that with existence of prima facie case in his favour, balance of convenience lies to the side of Appellant who is faced with the prospect of his interests and legal rights being seriously jeopardized in the wake of impugned order. The impugned order suffers from grave legal infirmity besides factual frailty. Same cannot be supported - Appointment of Respondents No. 4 to 6 as Directors of the Company and removal of Appellant as the Director of the Company is stayed till the decision of Company Petition by the Tribunal - Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject matter of inquiry in the Company Petition which is pending. It is during the pendency of the Company Petition that the Appellant sought interim relief alleging that Respondents No. 2 to 6 in collusion and connivance with each other illegally appointed Respondent No. 4 to 6 in the Company as Directors in the Annual General Meeting dated 24th September, 2019 and ousted that Appellant from Directorship in the EoGM dated 4th January, 2020. All these acts of commission attributed to Respondents 2 to 6 are alleged to have been done without giving notice to the Appellant. Interim Relief was sought on the strength of these allegations claiming that the resolutions passed in such meetings were bad in law and void ab initio. Appellant further alleged that the acts of the Respondents, being oppressive in nature, are prejudicial to his interest in the Company. Respondents have refuted the allegations and pleaded that notice of the meetings in which the resolutions inducting Respondents No. 4 to 6 in the Company as Directors and removing Appellant from the post of Director were passed, were given well in advance to the Appellant. It was further pleaded that the majority shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same is a manufactured document. The notice was never served on Appellant or any other shareholder of the Company. Even service was not effected through the prevalent mode of service. It is further submitted that Annual Returns were filed without holding an AGM and that on the date of alleged meeting Respondent No. 3 was not even in India. Subsequently, efforts were made to whitewash the concoction by claiming it to be a clerical error and stating that the AGM was attended by Mr. Parimal Ajmera - an employee of Respondent No.2 though he was neither a Director nor an employee of the Company. It is therefore submitted that Mr. Parimal Ajmera could not have substituted Respondent No. 3 who was the only Director at the alleged AGM of the Company. It is submitted that since Appellant did not attend any meeting purportedly held on 24th September, 2019, the minimum required quorum of General Meeting as per Section 103(1)(b) of the Act was not present. Such meeting would therefore have no meaning and cannot be said to exist in law. Thus, it is contended that AGM dated 24th September, 2019 is non-est and the resolutions passed on that date deserve to be stayed. Learned counsel for Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant or any person authorized by him. Same is the case with alleged Board Meeting held on 12th December, 2019. Genuineness of alleged notice for EoGM dated 12th December, 2019 is disputed. The variation in address is also highlighted. It is submitted that the very foundation of removal of Appellant from the Board of Directors is nothing but fraudulent which is sought to be supported by fabricated documents. Lastly, it is submitted that the Respondents will hijack the affairs of the Company unless there is intervention by the Court. The Appellant seeks protection of the interests of the Appellant and also that of the Company pending adjudicating of the Company Petition. 4. Per contra it is submitted by Mr. Harish Salve, learned senior counsel appearing on behalf of the Company that the decision to convene AGM on 24th September, 2019 was taken at the Board Meeting held on 22nd June, 2019, which was duly attended by the Appellant. Even Annual Accounts for 2018-19 were signed by the Appellant at this Board Meeting. It is further submitted that the Appellant holding barely 12.5% shares cannot deny the 87.5% shareholder (Respondent No. 2) nominating three more Directors on the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. It is submitted that the Courts do not interfere under Section 241/242 of the Act with any statutory lapse by a Company in removing/ appointing a Director when the majority shareholder is in favour of such removal/ appointment. It is further submitted that Respondent No. 2 apart from being the majority shareholder had also made direct investment in IDPL so as to enable it to develop its project called ALTAIR. It is submitted that the Appellant was attempting to withdraw the securities earlier furnished by him. A false impression was created by Appellant by stating that he had given a personal guarantee worth ₹ 300 Crore for availing loan facility for IDPL. It is submitted that the illegal acts of Appellant have caused substantial loss to the Company and prejudice to Respondent No. 2. Appellant had tried to take away Respondent No. 2's right of control and management over the Colombo Project which is being developed by Respondent No. 1's wholly owned subsidiary IDPL. Thus, Appellant has left Respondent No. 2 financially exposed to the extent of ₹ 788 Crore in the said Company. It is submitted that in these circumstances no interim relief could be granted to Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company's affairs. The ambit and scope of these provisions fell for consideration of this Appellate Tribunal in 'Smt. Smruti Shreyans Shah Vs. The Lok Prakashan Limited & Ors.' in Company Appeal (AT) No. 25 of 2018 decided on 5th September, 2019, para 15 whereof relevant for our purpose is reproduced hereinbelow: "15. Now coming to the issue of grant of interim relief, be it noticed that Section 241 of the Act dealing with grant of relief in cases of oppression and mismanagement provides that any member of a company, eligible in terms of Section 244 of the Act, may apply before the Tribunal for an order under Chapter XIV dealing with prevention of oppression and mismanagement. Such member's complaint must be in regard to the affairs of the Company that have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company or that any material change has taken place in the management or control of the company and because of such change it is likely that the affairs of the company will be conducted in a manner prejudicial to its inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elates to regulating the conduct of company's affairs. It is therefore imperative that the member complaining of oppression or mismanagement makes out a prima facie case warranting grant of relief in the nature of an interim order. The making of an interim order by the Tribunal across the ambit of Section 242 (4) postulates a situation where the affairs of the company have not been or are not being conducted in accordance with the provisions of law and the Articles of Association. For carving out a prima facie case, the member alleging oppression and mismanagement has to demonstrate that he has raised fair questions in the Company Petition which require probe. Fairness of questions depends on the nature of allegations which, if proved, would entitle the member complaining of oppression and mismanagement to final relief in terms of provisions of Section 242." 8. This appeal has a limited scope as it has been preferred against an order passed under Section 242(4) of the Act declining to grant interim relief. Considerations for grant of interim relief are well settled. Existence of a prima facie case besides balance of convenience and irreparable injury being suffered by a Member of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his ouster. The Tribunal has noticed the allegation emanating from the Appellant that he did not get notice of both the meetings and the documents relied upon by Respondents in this regard are fake and fabricated. It is queer that the Tribunal, while being of the view that there was factual controversy inter se the parties in regard to service of notices upon the Appellant for aforesaid meetings and showing its consciousness that issue in this regard was required to be determined in the main petition on the basis of evidence tendered by parties, proceeded to observe that there was prima facie evidence on record indicating that the notices of both the meetings were given to the petitioner. It further appears that the Tribunal, apart from treating the notices in regard to the meetings challenged by the Appellant, did not rely on any other substantive, circumstantial or corroborative proof to come to a prima facie finding that such notices were given to the Appellant. The approach adopted by the Tribunal is fundamentally flawed as it could not solely rely upon documents - Notices herein, service whereof to Appellant was seriously disputed. The Tribunal ought to have been more careful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pointed out that that Mr. Parimal Ajmera was not an employee of the Company and admittedly not a Director. Thus, he could not have substituted Respondent No. 3, who was the only other Director on the date of alleged AGM dated 24th September, 2019. No authorization in this regard has been produced by the Respondents to demonstrate that Mr. Parimal Ajmera had attended as representative of Respondent No.2 in the alleged AGM. It is submitted on behalf of Appellant that since the Appellant did not attend any purported meeting on 24th September, 2019, the minimum required quorum of General Meeting not being present any resolutions said to have been passed on such date are required to be stayed. As regards the EoGM dated 4th January, 2020, it is pointed out on behalf of Appellant that the only ground for removal of Appellant as a Director from the Board of the Respondent No. 1 Company was in relation to the affairs of M/s Indocean Developers Pvt. Ltd. Incorporated in Sri Lanka which is a foreign company and the Act does not permit affairs of a foreign company to be taken into consideration for any such decision to be taken by the shareholders of the Company. Reference in this regard is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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