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TMI Blog2020 (9) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... filed their consent in writing along with their share certificates. From this it necessarily follows that the said 31 shareholders know what exactly the Petitioners were doing and that they were acting for the benefit of the minority shareholders. It also requires that the consent should be obtained prior to the filing of the petition. If this was proved as a fact, the requirement of filing the consents in writing along with the petition should not render the petition itself not maintainable. We therefore, cannot agree with the Respondent's contention that the consent given was of general nature without applying mind. Therefore, we are of the view that the consent made by the 31 shareholders are an intelligent consent, in the sense, a consent given for the purpose of making allegations in the petition and for the purpose of claiming reliefs therein and therefore it cannot be considered as a blanket consent, but a valid one as contemplated under Section 399(3) of the Old Act - the petition is maintainable. Whether there was any case of oppression of the member or attempt to materially change in the management or control over the company to the detriment of the company? - H E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciary duties of directors was largely silent on the said aspect, except for Section 291 which contained the provision dealing with general powers of the board of directors. Duties of directors, hitherto, were largely laid down by courts by looking at common law principles - A close reading of the present section lead us to conclude that it is motley of easily identifiable elements like shareholders and employees along with vague groups like the community. Thus, it would provide a cause of action to any person from the society giving rise to a problematic and absurd scenario. Whether the director is expected to act in 'good faith' for the promotion of the objects of the company or should it also encompass other groups in the sub-section? - HELD THAT:- While acting in the best interest, a director must carefully weigh commercial interests of the company on one hand while also taking into account the safeguarding of the interests of the stakeholders, on the other. While doing so, the director must ensure that his actions conform to the standards of those of a reasonably prudent person. The duty of good faith sets a higher standard than the best interest criterion. Harmony ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance of discussions on the discrepancies pointed out - The request for poll was refused and the AGM was conducted with scant regard for law and Articles of Association. We are not willing to go with the argument submitted by Respondents in this regard. Further, we are also convinced with the averments made by the Petitioners that the entire acts of the Respondents are mala fide and with ulterior motives. Section 397 gives a right to members of the Company who comply with the conditions of Section 399 to apply to the court for relief under Section 402 of the act or such other relief as may be suitable in the facts and circumstances of the case. In the instant case, it cannot be disputed that the conditions of Section 399 are complied with. There is no substance in the contention that the Petitioners are not entitled to make the application, as the Petitioners do not constitute 10% shareholding in total. However, the tribunal can exercise its powers, the tribunal must be satisfied that the requirements of the Section 397 are fulfilled and the said requirements are that on an application under Section 397 of a member who has right to apply in virtue of Section 399. There was an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, the duly reconstituted Board as per point No. iii, should hold an Extra Ordinary General Meeting within a period of 12 weeks from the date of this order for electing new Board of Directors by following due process as laid down in the Companies Act, 2013. The proceedings of the said EoGM should be video graphed. v. We hereby declare that all the Board Meetings as well as the Annual General Meetings of the 1st Respondent Company held after 29.09.2012 as null and void and consequently the resolutions passed and decisions taken therein are set aside. vi. At this juncture, we also propose to give an exit option to the Respondents by considering the proposal made by the Petitioners to purchase their shareholdings at a fair value as decided by an independent valuer appointed by the reconstituted Board as per point No. (iii). vii. An Independent Auditor shall be appointed by the reconstituted Board as per point No. iii, within a month from the date of this order, to audit the accounts of the 1st Respondent Company along with its subsidiary companies for the Financial Years 2012-2013 and 2013-2014 and submit a report to the Respondent Company within 60 days from the date of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, on creation of NCLT, Kochi, the case was again transferred to Kochi Bench (hereinafter referred as 'Tribunal'). We have renumbered the case record as TCP No. 57 of 2019 and considering it under the Companies Act, 2013 (hereinafter referred as the 'New Act'). BRIEF BACKGROUND 2. The Company, M/s. Jeevan Telecasting Corporation Limited (hereinafter referred as the 'Company/JTCL) was incorporated to provide a medium for disseminating spiritual and human values, especially in view of the nature of Television programmes which were being telecast. In order to improve the quality of the Television programmes which were widely viewed by impressionable minds and to inculcate spiritual values, some of visionaries of the Church conceived of a vision to run a holistic TV Channel to cater to the requirements of spiritually and humanely inclined viewers and would be a family channel. Under the leadership of the 1st Petitioner, who was then the Arch Bishop of Trichur, a group of likeminded persons from the church sought to realize such a vision. On 27.01.1999, this proposal was discussed with the Chairman of the Media Commission of the Kerala Catholic Bishop Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were co-opted as shareholders who were capable of mobilizing funds. Then Sri. Joy Alukkas, Padmashree Dr. Sri. C. K. Menon, NRI Businessman, Mr. Dinesh Nambiar and prominent businessman Mr. Baby Mathew were prepared to assist the Company by mobilizing required fund to start its programme after approving the condition to keep the democratic set up in its entire policy and future functions. The logo was also changed thereafter to meet the requirements of policy guidelines of Government of India. After obtaining the MIB approval, it was only as late as 01.08.2002 that the Company began telecasting operations. PETITIONERS' RIGHT TO APPLY: 7. The 1st Petitioner is the Honorary Chairman/Director of the Company and holding 10 Equity shares of ' 1,000/- each of the Company and was the First Director/Chairman of the Company from the date of incorporation. The Second Petitioner is the Chairman (appointed on 27.10.2005)/Director of the Company and holds 90 Equity Shares of the Company. He was the First Director from the date of incorporation and was appointed as the 1st Managing Director in accordance with clause 120 of the Articles of Association. The 3rd Petitioner is the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the Company are held by Institutions, which are affiliated to the Arch Diocese of Thrissur, including the 3rd and 4th Petitioners. The Third Petitioner was established in 2001, and which was registered under a Deed of Trust by the Arch Diocese of Trichur. The Patron of the Trust was the Arch Bishop of Trichur. Further, the 4th Petitioner was formed under a Deed of Trust in the year 2001 by the 2nd Petitioner and the 2nd Petitioner is the first sole Trustee of the 4th Petitioner. Some of the Share Certificates are issued in the name of the Trusts but the Trustees are registered as the Shareholders in the Register of Members. 11. The learned counsel for the Petitioners in his submission stated that a large number of Shareholders in the Company are the persons who subscribed to the shares taking into account the involvement of the Church and the appeals made by the Church and the First and Second Petitioners, for the investment. Most of such Shareholders have held shares from the inception of the Company. The shares are widely held and more than 95% of the Shareholders are small shareholders, each holding less than 100 shares. These shareholders were the initial stakeholders i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invest in the shares, Respondents 5 to 8 made investments, on various dates being fully aware of the unique circumstances relating to the formation of the Company and the pre-dominant role of the Church and its members. On 29.11.2011, Mr. P.J. Antony, Mr. N.S. Jose and Mr. Davis Edakulathur Ittoop were appointed as the Additional Directors. They were elected as directors at the Annual General Meeting held on 29.09.2012. Mr. N. S Jose was appointed as Whole-time Director/CEO by the Board on 01.07.2012. The Petitioner Nos. 1 and 2, Respondent Nos. 2 to 4 were the Directors of the Company as of September 2012. 15. The Learned counsel appearing for the Petitioners submitted that being aware of the fact that the 2nd Petitioner is out of India, the Respondent No. 3 by taking advantage of his absence, issued a notice on 03.10.2012 purporting to convene a Board Meeting on 11.10.2012 at Trivandrum. This notice was issued in contravention of Article 107 of the Article of Association which empowered the Managing Director or the Company Secretary to issue notice for convening Board Meetings, at the request of at least 2 Directors to convene a Meeting. 16. The Second Petitioner on 08.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioners are given to understand that the officers of the Company were prohibited from attending the Board Meeting. The Board, therefore, sought the assistance of a Practicing Company Secretary and conducted the Board Meeting. The Company has also filed the Board Resolutions dated 03.11.2012 with the Registrar of Companies, Kerala, on 5.11.2012. 19. The learned counsel submitted that as the Company had already received the consent from MIB for the appointment of Fr. Biju Alappat, as a Director of the Company, at the Board Meeting held on 03.11.2012, Fr. Biju Alappat has been appointed as an Additional Director and also designated as Wholetime Director, to take care of the affairs of the Company in the absence of CEO, the 3rd Respondent herein. As the termination of the Company Secretary was done hastily and would not stand scrutiny of the law, the Board decided to revoke the termination. As no particulars of the requisitionists who allegedly sought for the Extraordinary General Body Meeting were provided, the Board decided to instruct Dr. Fr. Biju Alappat to investigate and verify whether such requisitions have been made to enable the Board to take a decision on the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 06.02.2013 and Board's order dated 28.05.2013. In the circumstances, the Petitioners harped that the said actions of the Respondents are ex facie oppressive of the Petitioners' rights and any decisions taken/Resolutions passed at the said Board Meetings are invalid. The learned counsel further submitted that these are not mere directorial complaints but also gross acts of mismanagement by the Respondent Nos. 2 to 4 as Directors, and are oppressive actions against the shareholders who are in a minority though they are the original promoters of the Company. 23. The Petitioners stated that on 20.06.2013, the Company issued notice convening a Board Meeting on 29.06.2013. The notice of the said Meeting did not contain any agenda nor was any papers/Board notes circulated to the 1st and 2nd Petitioners. The Notice issued by 3rd Respondent was not addressed to the 1st and 2nd Petitioners, but they were only forwarded copies for information. The 2nd Petitioner on 27.06.2013 informed the Respondents No. 2 to 4 of his inability to attend and requested that the Minutes of the Meetings be provided to him. Fr. Biju Alappat, who was an Additional Director, sought an explanation as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions arising from the export of service in respective party's account on actual settlement in variation with the Accounting Standard-11 on 'The Effects of Changes in Foreign Exchange Rates' issued by the Institute of Chartered Accountants of India (ICAI) not quantified. iv. We are unable to comment on the compliance with AS 26 on Intangible Assets' and AS 28 on Impairment of Assets issued by the ICAI in the case of programme software under other non-current assets, in the absence of appropriate details. v. Non-provision of diminution in value of ₹ 122 lacs on investment in shares and the recoverability of dues of ₹ 130 lakhs in subsidiary companies. vi. Non-provision of liability of ₹ 224 lacs against a decreed creditor, the recoverability of which is stayed against bank guarantee and court fee of ₹ 5 lacs paid against the appeal pending for write off. vii. Non-renewal of cash credit of ₹ 202 lacs from a bank which is overdue and withdrawal of the collateral security provided by a third party not accepted by the bank against the credit facility and the implications thereof. viii. We have relied on the long outstanding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rudely and unceremoniously turned down by the Respondent Nos. 2 to 5. Some of the important clarifications sought on the Annual Report for 2013-14 and which has been raised by Shareholders prior to and at the AGM held on 07.08.2014 are as follows: i. The difference of ₹ 32.58 lakhs, which was shown as Share Application Money in Annual Report of Financial Year (FY) 2012-13, has been now shown as a unsecured loan from Directors and categorised under Short Term Borrowing in Annual Report FY 2013-14. The Annual Report of 2012-13, has not disclosed/mentioned any loan from Directors, whereas, in the Annual Report of 2013-14, an entry is made as if a loan of ₹ 32,58,000/- has been taken from Directors in the previous FY 2012-13. There is a balance of ₹ 32.58 lakhs as loan repayable to a Director. ii. The difference of ₹ 1, 15,590/- is the interest on TDS. However, the interest on TDS of FY 2012-13 is shown as Miscellaneous Expenses, regrouped under Other Expenses. Such regrouping is not as per Revised Schedule VI to the Companies Act, 1956. iii. As per Annual Report of FY 2011-12, Mar Jacob Thoomkuzhy/Jeeva Trust was disclosed as holding 26,990 Equity Shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than doubled as compared to last year. In FY 2012-13, it was only ₹ 124.76 lakhs whereas for FY 2013-14, it is ₹ 270.42 lakhs. This appears to be an indication of bogus billing to inflate revenue during the current/earlier year. x. There is an increase of ₹ 67 lakhs in the Channel Carriage Fee and Channel Placement Charges in FY 2013-14 from expenses in FY 2012-13. Details are not provided known. There is an increase of ₹ 22 lakhs in Legal, Professional and consultancy charges when compared to previous year. No clarification on the payments made and the proceedings have been disclosed despite request by shareholders. There is an increase of ₹ 13.5 lakhs in rent paid as compared to previous year. 29. The Petitioners further stated that on 05.08.2014, the proxy forms for the Petitioners were duly lodged with the Company. During AGM held on 07.08.2014, the Item No. 1, the Audited Accounts, being taken up for discussion, a shareholder, who had submitted his objections to the Annual Report on 02.08.2014, wanted a discussion, his objections and request was summarily dismissed and the Respondent No. 4, stated that as a shareholder holding 1 share, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olders holding 8840 equity shares (or 2.95% of the Company's paid up share capital) have filed consent affidavits in support of the Petitioners. However, the said Consent Affidavits are not in compliance with the requirements of Section 399 of the Companies Act 1956. The Consent Affidavits have : a. not set out the propositions they are supporting with sufficient specificity or detail as required; b. the consents have not been given after applying their minds to the allegations and the reliefs sought in the Petition since a number of the Consent Affidavits appear to have been executed in support of the Petition many days prior to the date of the Petition and merely contain a mechanical statement that they are aware of the Petition. It is not known how a statement could be made in the Consent Affidavit that the consent givers have read the Petition . When the Consent Affidavits are dated in the end of October 2012 and the Petition was finalized on 05.11.2012 and filed; and c. the Consent Affidavits also appear to have been signed and notarized in Thrissur. It is not known how the consent givers could have physically seen or verified the Petition which was finalized muc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Archbishop of Thrissur or his nominee to be the Chairman of the Company. These were subsequently amended. Further, the TRAI Recommendations on the 'issues Relating to Media Ownership' state that religious bodies or offices should not be in broadcasting and channel distributing activities. Thus, it cannot be said that without any substantive role, the Archbishop of Thrissur should continue as a Chairman of the Company. 37. In relation to the substantial holding in the company held by the institutions related to the Thrissur Diocese (i.e., Petitioner Nos. 3 4) the Respondents stated that the shareholding level is approximately 13-14% only. However, the Petitioners in acting on behalf of the Petitioner No. 3 Trust have acted without the authority of its Council of Trustees. 38. Further in relation to the stakeholder's investment in the company, the shareholders did not invest their shares for commercial purposes. It was denied by the Respondents that more than 95% of shareholders are small shareholders holding less than 100 shares. On the contrary, a substantial portion of the shares have come due to the collective involvement initiated by Respondent No. 5 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board Meeting of 11.10.2012 was held in contravention of clause 107 of the Articles of Association. In this meeting the services of the Secretary Ms. Daijarita were dispensed with. It is incorrect to say that this meeting was invalid, or to say that the Company Secretary was unilaterally dismissed for convening a Board Meeting on 20.11.2012. Thereafter, the Respondents filed Form 32, as it was the statutory responsibility of the Directors to inform RoC when there is a change in the office of Directors or Company Secretary and this responsibility was complied with. 43. The Respondents further stated that two letters were issued to Petitioners respectively on 15.10.2012 and not on 13.10.2012 as stated by the Petitioners, containing the notice required under Section of the 284 Companies Act 1956, and informing them of a proposed resolution at an upcoming EoGM removing them as Directors. Therefore, the Respondents denies that the said act is contrary to Clause 108 of the Articles of Association. Further it is stated that the Article 108 provides that the Archbishop of Thrissur shall be the Chairman of the Company but not provide that he shall be a permanent Director of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the year 2012-2013 have been approved by the shareholders. It is further submitted that no change in accounting practice has been adopted for the year 2012-2013. The policy followed in earlier years have been followed for the year concerned as well. Also, for a considerable part of the year 2012-2013 the management was under the control of the Petitioners which makes them also liable for explanation if there is a need to give one. The proceedings of the AGM on 28.02.2014 was video recorded which shows that allegations of the Petitioners are baseless and contrary to facts. 48. In relation to the removal of the Petitioner No. 1 2 result in the shareholders being unrepresented is not right since there is no evidence put forward by the Petitioners showing that they represent large number of small shareholders from the Christian community and connection with the Trissur Diocese. It is also mentioned that all the present Directors are elected unanimously and represent the interest of all the shareholders. 49. The counsel for the Respondents submitted that upon the direction of the Hon'ble High Court and Company Law Board, the proceedings of the 15th AGM dated 07.08.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affairs of the company are being conducted not in a manner prejudicial to the public interest and the members of the Company. 54. To fortify the above arguments, the counsel for the Respondents quoted the following citations in their written submission: Mazda Theatres Pvt. Ltd. and Ors. v. New Bank of India Ltd. and Ors. -Delhi High Court.- According to section 9, the provisions of the Act override the provisions of the Memorandum and the Articles of Association insofar as the latter are repugnant to the former. Tarlok Chand Khanna and Ors. v. Raj Kumar Kapoor and Ors- Delhi High Court- Section 9 of the act provides that the provisions of the Act would have effect, notwithstanding anything to the contrary contained in the articles of the company . Sanjay Parlikar and Ors. vs. Ajit Scanning and Diagnostic Centre Pvt. Ltd. and Ors. (08.12.2016 - NCLT - Mumbai) : MANU/NC/0133/2016 : - NCLT Mumbai- the right of removal of any director of the company as per articles is still with the shareholders of the company . Bagree Cereals (P.) Ltd. and Ors. vs. Hanuman Prasad Bagri and Ors. (18.08.2000-CALHC) : MANU/WB/0256/2000 : . Bagree Cereals (P.) Ltd. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to ensure that the Objects of the Company are achieved. Such investments were accepted with the understanding and on the trust that they would not deviate from the Objects of the Company but the Respondents 2 to 8 after deceiving the original promoters and deceptively acquiring shares, are acting contrary to and compromising on the vision and Objects of the Company. The very fact that several investors have invested significant sums only due to the involvement of the Archdiocese and the Church, would establish the falsity of the Respondents' contention. The continuing role of the Arch Diocese in the affairs of the Company is obvious from the fact that its property has been provided as security for the financial facilities availed by the Company from Federal Bank, Palarivattom and which security still continues to be retained. The Respondents have recently sought to deliberately and vindictively sabotage the security by stopping servicing of the debt. These Respondents are driven by self-interest and would destroy the Company and its Objects in pursuit of their personal Agenda. The provisions of the Articles of Association are never been abused/misused by the Petitioners but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolutions at the invalid EoGM are clearly oppressive of the minority shareholders. The Petitioners state that the EoGM has been held in violation of the orders of the Ld. Munsiff, Thrissur and many of the shareholders, including the Petitioners, did not attend the EoGM, as the same would be a contempt/violation of the orders of the Court. The Respondents have, with impunity, violated the orders of the Court. 63. The counsel for the Petitioners submitted that 31 shareholders holding 8840 equity shares have filed consent affidavits after having read through the Petition. These shareholders are fully aware of the averments in the Petition and have consciously supported the Petitioners. The counsel for the Petitioners denied the allegations regarding the Petitioners are no longer Directors and the 2nd Petitioner has not been a Director since 2010. The validity of the EoGM where such alleged removal was affected, is challenged before this Bench. 64. It is further stated that the 2nd Petitioner was appointed as a Director and by virtue of his office as Archbishop, continued as Chairman of the Company so long as he remains the Archbishop. Accordingly, the Company had not sought f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondents submitted that the Company is ready to release the Archdiocese's land provided as security to the Federal Bank, Palarivattom, as per the decision of the director board. The Respondent No. 5 has also pledged substantial personal property for the benefit of the Company, in the same bank for the same loan. In addition to this, 5th Respondent have pledged his valuable land property in another bank (The Catholic Syrian Bank Ltd., Market Road, Ernakulam) as a security for the bank guarantee issued for Jeevan Telecasting Corporation Ltd. 68. The learned counsel for the Respondents further submitted that 5th Respondent is Vice Chairman and Managing Director of a separate company called Jeevan Satellite Communications Ltd. and not of the Respondent Company. The 5th Respondent has not been a Director of the Company since he stepped down on 21.05.2012 and he has not held himself out as Managing Director of the Company, since he ceased to be the M.D. The document filed with the Rejoinder on which the Petitioners rely in support of their contention is the result of misreading the true and correct position, which is reflected in all official communications and on record wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 399. (2) If, on any application under sub-section (1), the [Tribunal] is of opinion- (a) that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up; the [Tribunal] may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. The provisions laid down under Section 398 are as under: 398. APPLICATION TO [TRIBUNAL] FOR RELIEF IN CASES OF MISMANAGEMENT (1) Any members of a company who complain - (a) that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; or (b) that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more persons jointly, they shall be counted only as one member. (3) Where any members of a company are entitled to make an application in virtue of sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them. (4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the [Tribunal] under section 397 or 398, notwithstanding that the requirements of clause (a) or clause (b), as the case may be, of sub-section (1) are not fulfilled. (5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable for the payment of any costs which the 1 [Tribunal] dealing with the application may order such member or members to pay to any other person or persons who are parties to the application. A diligent reading of Section 399 tells us that to file a petition under Section 397 and 398, the member/members have to satisfy the conditions prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned by the Indian Trusts Act or is a public charitable or religious trust, a trustee cannot delegate any of his duties, functions and powers to a co-trustee or to any other person unless the instrument of trust so provides or the delegation is necessary or the beneficiaries competent to contract consent to the delegation or the delegation is in the regular course of business. These are the only four exceptional cases in which delegation is permissible . 76. The above judgement gives four exceptional cases where a Trustee can delegate his authority to represent the Trust. To satisfy ourselves that any of the four exceptional cases is satisfied in the instant petition, we have gone through the Trust Deed dated 16.02.2005 of Matha Jeevan Trust, which is the Petitioner No. 3 herein. Clause No. 16 in the Trust Deed reads as follows: 16. Legal Proceedings: In all proceedings by or against Matha Jeevan Trust in any Court of law or revenue authorities or before any competent authorities, Matha Jeevan Trust shall be represented in its Corporate name by the Secretary or some other person holding power of attorney from the secretary. We have also gone through the Trust De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .P. Srivastava and Sons Pvt. Ltd. and Ors. v Gwalior Sugar Co. Ltd. and Ors. in Appeal (civil) 6951 of 2004 on 26 October, 2004, to substantiate their contention that the Petitioners Nos. 3 and 4 do not have a locus standi to file this petition as it was not supported by a valid authorization by the respective Trusts. The judgement in the above case is as under: trustees must execute their duties of their office jointly, this general principle is subject to the following exceptions when one trustee may act for all (1) where the Trust Deed allows the trusts to be executed by one or more or by majority of trustees (2) where there is express sanction or approval of the act by the co-trustees; (3) where the delegation of power is necessary; (4) where the beneficiaries competent to contract consent to the delegation; (5) where the delegation to a co-trustee is in the regular course of the business; (6) where the co-trustee merely gives effect to a decision taken by the trustees jointly . Reading the above-mentioned judgement, we find that the item no (2) in the exceptions talk about where there is an express sanction or approval of the act by the co-trustees, these authorised rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Old Act. Even assuming that the consent given by these 31 shareholders is not valid, even then, the petition satisfies the conditions under Section 399 as the percentage of shareholding has already crossed the 10% threshold laid down in the Section. 81. After going through the aforesaid facts and circumstances of the instant case, and also in the light of Sections 397, 398 and 399 of the Companies Act, 1956 (Corresponding to Sections 241, 242 and 244 of the Companies Act, 2013), prima facie, we are of the view that the petition is maintainable. 82. We have considered the request of the Respondents who raised the maintainability issue as the preliminary one in the argument and also considered the case law cited by them in V.L. Sridharan and Ors. vs. Econo Valves P. Ltd. and Ors. (19.07.2010-MADHC) MANU/TN/1850/2010 : , and have discussed maintainability as a preliminary issue before going into the merits of the case. Having decided that the petition is maintainable, to arrive at a conclusive decision on the allegations made by the Petitioners against Respondents of oppression of minority shareholders and mismanagement of the affairs of the Respondent No. 1 Company, we have con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st Petitioner was appointed as Honorary Chairman. The 2nd Respondent is a Wholetime Director of the Company and one of the two outsiders from Church. Most of the initial subscribers to the shares were persons who belong either to the Church/Trusts associated with Churches. The 3rd and 4th Petitioners were duly represented by the Secretary/General Secretary and it is found that the Share Certificates are issued in the names of the Trusts but the Trustees are registered as shareholders and their names are reflected in the Register of Members, who are the parties herein. Respondent No. 3 is the CEO of the Company. Respondent Nos. 3 and 4 were appointed as Additional Directors on 29.11.2011 by the Board of Directors and have been elected as Directors at the Annual General Meeting held on 29.09.2012. Respondent Nos. 5 to 8 had invested in the shares of the Company on various dates and the Additional Directors owing allegiance to Respondent No. 5 to 8 appear to have been co-opted in 2017. Respondent No. 5 was a Director of the Company and was appointed as the Managing Director of the Company and thereafter ceased to be a Director on 21.05.2012 due to the MIB guidelines. 84. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services of the Company Secretary. It is evident from the documents submitted by the Respondents that the alleged Extra ordinary General Meeting (EoGM) was held on 12.11.2012 at Thiruvananthapuram. In the alleged EoGM held on 12.11.2012 Mar Jacob Thoomkuzhy (P.1) and Mar Andrews Thazhath (P.2) were removed from the directorship of the Company. 86. The Tribunal has exclusive jurisdiction to decide cases of mismanagement, whether affairs of the company are being conducted in a manner which is prejudicial to the interest of the company, public and shareholders. The Respondent often pointed out on several allegations that the acts have been rendered irrelevant and infructuous due to passage of about 8 years. For addressing this argument of the Respondents, we rely on the Hon'ble High Court of Kerala order in Company Appeal No. 15/2012 dated 09.11.2012, 14.11.2012 and 06.02.2013 filed by the Petitioners. The order dated 06.02.2013 reads as follows: iv. We make it clear that any decision taken or resolution adopted by the extra ordinary general meeting which was held on 12.11.2012 will be subject to the order to be passed by the Board. v. It is also made clear that till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have also gone through the Articles of Association of the Company as regards to the conduct of Board of Directors Meetings. Articles as defined in Section 2 (2) of Old Act (Corresponding to Section 2 (5) of the new Act) means the articles of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of the Act. The Articles of the Respondent No. 1 Company clearly laid down a process on how to conduct a Board Meeting, issuance of notice of the meeting etc. Clause 107 of the Articles states that: The Managing Director or the Secretary for the time being may and on the requisition of any two Directors, shall, at any time summon a meeting of the Directors. 90. However, the clauses of the Articles of Association are subject to the provisions of the Companies Act. From the above clause of the Articles of the Company read with the Old Act, we observe that the Respondent No. 3 who called for the Board of Directors Meetings on 11.10.2012 was neither the Managing Director nor the Company Secretary during that time. As per the Articles, only the Managing Director or Secretary can issue a notice for such Board Meetings. Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services of the Secretary to summon this Board of Directors Meeting. While going through the records, we also found that the previously held Board Meetings on 31.03.2010, 11.08.2010, 03.09.2010, 26.11.2010, 17.06.2010, 01.09.2011, 29.11.2011,23.02.2012, 05.03.2012, 04.06.2012, 20.07.2012 and 17.08.2012 were as per the direction of the Chairman, the Company Secretary sends email to the Directors to inform the next meeting, where agenda was also enclosed. Therefore, it is difficult for us to validate the defences taken by the Respondents against the allegation raised by the Petitioners in this regard. 92. In the same Board of Directors Meeting, the Company Secretary was removed, and that was the only resolution available to the Petitioners in the public domain as per their averment. The Respondents have neither produced any minutes of the meeting nor any other resolutions passed in the said meeting. Therefore, we are of the view that that the Respondents have not been able to satisfy us regarding the mode of conducting Board meeting or the validity of resolutions passed in such meetings. 93. In our opinion, there should be a need and sufficient reason for removal of the Secreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial complaint cannot be sustained. The motive of removal of the Company Secretary can be found from the ultimate removal of Petitioners from the position of Directors which forms part of oppression and mismanagement. 95. At this juncture we rely on the judgement of Hon'ble High Court of Kerala in Dr. T.M. Paul Versus City Hospital (Pvt.) Ltd. and Others, (1999) 97 Comp Cas 216 : (1999) 35 CLA 164, which reads as follows: Holding the meeting and passing the resolutions must be held to be invalid for want of notice to the second plaintiff and also as adoption of these resolutions, without including them in the agenda in the background and circumstances of the case, amounted to fraud. In the instant petition also, notices were issued for the meetings without authority and without following the laid down procedures and with an ambiguous agenda in the notice amounts to no agenda, and therefore, we have no hesitation to treat it as null and void. We have observed that all other meetings thereafter were also called by Respondent No. 3 which also makes them questionable. 96. Further, the Board Meeting dated 11.10.2012 was conducted at a place which was not the usual place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99. It is also found that on 22.10.2012, the Learned Munsiff Court, Ernakulam in O.S. No. 856/2012 in I.A. No. 6569/2012 dated 22.10.2012 has granted an Order of Injunction restraining the Respondents either acting in their name or in the name of Respondent No. 1 Company from conducting any Board of Directors Meeting on 23.10.2012. Despite the above order, the Respondents apparently convened the meeting on the said date, which itself constitute the violation of Order amounts to contempt of Court. Circumstances being as above, we are of the considered view that the Board of Directors Meeting convened on 11.10.2012 and 23.10.2012 are illegal and as such invalid. 100. Extra-Ordinary General Meeting (EoGM) dated 12.11.2012: On going through the records, we observed that a requisition from 4 of the shareholders (who are Respondent Nos. 5 to 8 herein) dated 01.10.2012 to convene an EoGM to remove Petitioner No. 1 and 2 from the Directorship of the Company by invoking Section 284 of the Companies Act, 1956. On 15.10.2012, Respondent No. 3 has issued a letter (JTCL/CEO/20121015) to Petitioner No. 2 stating that an EoGM with regard to the above requisition is to be held on 12.11.2012 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e oppressive in the eyes of law to the minority shareholders, then we are of the considered view that the Tribunal can exercise the inherent power to take appropriate action against the wrong doers. If the acts are done legally but not with a good faith in the interest of the company or was done with a mala fide intention to gain control over the company, the acts are said to be illegal and non-est in the eyes of law. 103. We have also gone through the Articles of Association of the Respondent No. 1 Company for conducting EoGM. PROCEEDINGS AT GENERAL MEETING 63. The business of an Annual General Meeting shall be to receive and consider the profit and Loss Accounts, the Audited Balance Sheet, the reports of Directors and the Auditors, to declare a dividend, to elect directors in place of those retiring by rotation and to appoint auditors and to fix their remuneration. All other business transacted at an Annual General Meeting and all business transacted at Extra Ordinary General Meetings shall be deemed special, for which the provisions of section 173 (2) of the Act may also be compiled with. Section 173 (2) of the Companies Act, 1956 reads as follows: 173. EXPLANA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olders about the matter. The right of representation will be an empty formality if the proposed action does not inform the director concerned of the grounds on which he is sought to be removed since he will not know what representation he should make. Therefore, we establish that the notice of the meeting must be accompanied by a copy of the resolution and an explanatory statement. In the instant petition, we have not come across any explanatory note from the requisitionists as well as the company, attached to the letter sent to Petitioners. 107. We observe from the correspondence placed before us between the Respondent No. 3 and Petitioner No. 2, which stated that the post of Chairmanship was abolished at the Board Meeting dated 11.10.2012. We found that there is no specific legal provision under the Companies Act for removal of the Chairman of a board. The removal process relating to a Chairman is typically governed either by the Articles of Association of a company or the terms of the contract by virtue of which he is appointed. In the present case, we have come across Clause 108 of Articles of Association of the Company, which states as: The person holding the office of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioners, Respondent No. 5 is the king pin of the entire operation of removing the Petitioners No. 1 and 2, who are the original promoters of the Respondent company and took control of the Company and running it as his fiefdom with active support and connivance of Respondent No. 2 to 4. The Respondent No. 5 started this entire operation after entry into the company at a later stage. The Respondent No. 5 started creeping acquisition of shares by gaining the confidence of the original promoters, hiding his real intentions of taking over the company. In the process, the Policy Guidelines of the MIB was also been violated by Respondent No. 5. We also observed from the records that the Petitioner No. 2 has advised Respondent No. 5 to reduce his shareholding to comply with the MIB Guidelines in this regard. It appears that this advice of the Petitioners has triggered the chain of events that led to their removal from the directorship by the Respondent No. 5 and his group. 109. Further, the timing of Board of Directors meeting also indicate the evil design of the Respondent No. 5 and his group in orchestrating the removal of Petitioner No. 1 and 2 from the Directorship of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary that the company's business should be entrusted to some human agents. Hence the necessity of Directors. The law, therefore, continues to struggle against their wiles and imposes upon them certain duties which, when properly enforced, will without driving away from the field competent men, materially reduces the chances of abuse. Prior to the enactment of the Indian Companies Act 2013, the codified law with regard to the fiduciary duties of directors was largely silent on the said aspect, except for Section 291 which contained the provision dealing with general powers of the board of directors. Duties of directors, hitherto, were largely laid down by courts by looking at common law principles. To alleviate this situation, the New Act codified the duties of directors through section 166. Section 166(2) of the New Act reads as follows: A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment. A close reading of the present section lead us to conclude that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to substantiate their stand. Further, we have not come across any effort made by the Respondent Company to augment their capital by offering shares to all the shareholders of the Company. This led us to believe that the entire allotment of shares by converting the loans is a sham. In the process and in their hurry to alter the control and management of the Company, the Respondents even violated MIB Guidelines. The second point is after they came to know of the violation of MIB guidelines regarding shareholding, they indulged in another sham act of transferring their shares to 151 persons just to increase the number of small shareholders and also to support their nefarious activities. After the removal of the Petitioner 1 2 from the Directorship, Respondents Nos. 3, 5 8 along with 13 other shareholders transferred their shares to 151 persons, among these 28096 equity shares held by the 5th Respondent transferred it to one Mr. C. M Joseph in toto. The act of the Respondents to increase the members in the Company by allotting their shares raises several doubts on the intention of the Respondents. 117. From the above factual matrix, it indicates that the allotment of shares wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of loan made by any bank or financial institution to its subsidiary company is exempted from the requirements under this section: Provided that such loans made under sub-rule (1) and (2) are utilised by the subsidiary company for its principle business activities. 123. It was evident from the record submitted before us that in the year 2012-2013 loans have been advanced to subsidiary companies, Jeevan Satellite Communication Limited (JSCL) and Telejeevan Communications and Services Private Limited (TCSPL) in which Respondent No. 3 and Respondent No. 2 are Directors of the subsidiary company respectively. Even though the loan has been advanced to subsidiary companies cannot be taken into consideration as violation of Section 185 if it is sanctioned to be utilized only for the subsidiary company's principal activities. But the record before us shows that both the subsidiary company have no revenue or any operations and have not pursued any activity during the year. Hence the loan cannot be construed for the principal activities of the subsidiaries. The loan advanced to the subsidiaries herein is in contravention of Section 185 of the Companies Act 2013. 124. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be benami transactions. 127. As regards the allegation raised by the Petitioner, we have gone through the records and found that the 5th Respondent who was removed from the post of Director, to whom the security clearance was rejected by the MIB on 21.05.2012, has signed as Managing Director in the 'Directors Report' during the 14th Annual General Meeting. Even though the Respondent No. 5 has contended that he has resigned from the Directorship as per the MIB guidelines, it appears from the records that he had a free run in the affairs of the Respondent Company and its subsidiaries with the active support and connivance of the other Respondents to the detriment of minority shareholders, which we finds to be unjust and not proper. 128. Circumstances being above it is necessary to consider Section 166 (2) of the Companies Act 2013, which states as (2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, and the community and for the protection of environment. 129. It is well settled that if the Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by removing the existing auditor are not the auditors and appointed new one, does not hold any water as we are considering the process of removal of auditor in the first place. We are not concerned with who is the present auditor of the Respondent Company. 131. Subsequently, we have gone through the proceedings of the AGM held on 28.02.2014 and we found out that several shareholders including proxies of the Petitioner sought clarifications regarding discrepancies in the accounts but the Respondents did not give any clarification regarding the issue. This reflects that the company is being run by the 2nd to 8th Respondents suppressing all forms of difference of opinions and by intimidating any dissenting shareholder. 132. Let us examine the allegations of the Petitioners in the light of Section 398 of the Old Act. It provides that any members of a company who have rights to apply in virtue of S. 399 may complain (i) that the affairs of the company are being conducted in a manner prejudicial to the interests of the company, or (ii) that a material change has taken place in the management or control of the company and that by reason of such change, it is likely that the affairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and TCSPL. JSCL and have not pursued any activity as envisaged in the main objects of the companies. Hence the said loan advances cannot be construed as for principal business activity of the subsidiaries. Therefore, the loan is in contravention of Section 185 of the Companies Act, 2013. 133. Thereafter, we have scrutinised the Annual Report of 2013-2014 and Annual General Meeting dated 07.08.2014, which was video graphed pursuant to the order in C. A. 117 of 2014 passed by Company Law Board, New Delhi dated 01.08.2014 and we understand that the Annual Report for the Financial Year 2013-2014 also reflected many misrepresentations. We have also gone through the e-mails annexed with the petition as Documents No. 77 and 78 dated 02.08.2014, sent by Fr. Biju Alappat and Mr. Vincent Devassy to the Company seeking clarifications on the Annual Report and that were also seen as neglected by the Respondents. 134. In the AGM dated 07.08.2014, the Item No. 1, i.e., while the Audited Accounts being taken up for discussion, a shareholder, who had submitted his objections to the Annual Report on 02.08.2014 through the e-mail, wanted a discussion; and his objections and the request was sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent doesn't hold any water. The attitude of the Respondents as derived from the records that they are not ready to share any information with shareholders who are not belonging to their groups and also trying to suppress the voices raised against them. This itself recognised to be an act of oppression against minority shareholders, besides hiding the discrepancies in the financial statements and refusing any semblance of discussions on the discrepancies pointed out. 139. Further, in the counter the Respondents stated that the policies adopted were followed in the earlier years and in the year 2012-2013 the management was under the control of the Petitioners. From the reply we found out that the Respondents are not willing to make appropriate answer to the discrepancies alleged by the Petitioners and they are simply blaming the Petitioners who questioned them. The request for poll was refused and the AGM was conducted with scant regard for law and Articles of Association. We are not willing to go with the argument submitted by Respondents in this regard. Further, we are also convinced with the averments made by the Petitioners that the entire acts of the Respondents are ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of arguments and in their written submission, the counsel for the Petitioners has indicated that the Petitioners group is ready to purchase the shares of the Respondents to protect the interest of the company and the minority shareholders. However, we also observe that the Respondents are not interested in the said proposal by the Petitioner. 143. In the light of the above discussion and the gravity of allegations raised by the Petitioners, we have framed four issues in the matter. All the issues framed by us have been conclusively proved the allegations of the Petitioners. Therefore, this Tribunal is of the considered view that the Company's affairs in relation to the Petitioners have been conducted in an oppressive manner by the Respondents and the facts would render that it is just and equitable to wind up the Company. However, the same would unfairly prejudice the Petitioners and in the circumstances a case under the provisions of Sections 397 and 398 of the Companies Act, 1956 (Corresponding to section 241 and 242 of the Companies Act, 2013), has been made out and thereby Petitioners are entitled to reliefs under the said provision read with section 402 of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Petitioners to purchase their shareholdings at a fair value as decided by an independent valuer appointed by the reconstituted Board as per point No. (iii). vii. An Independent Auditor shall be appointed by the reconstituted Board as per point No. iii, within a month from the date of this order, to audit the accounts of the 1st Respondent Company along with its subsidiary companies for the Financial Years 2012-2013 and 2013-2014 and submit a report to the Respondent Company within 60 days from the date of appointment. The Respondent Company should place the report of the independent auditor for the information of the shareholders in the proposed Extra ordinary General Meeting, which is to be held as per point No. iv. viii. We hereby direct the Regional Director, Ministry of Corporate Affairs, 5th floor Shastri Bhawan 26, Haddows Road, Chennai - 600006 to investigate into the affairs of the 1st Respondent Company under Sections 235 and 237 Companies Act, 1956 (corresponding to Sections 210 and 213 of the Companies Act, 2013) of Companies Act, 1956 and also to investigate the acquisition of shares by the Respondent No. 5 in violation of the norms prescribed in the MIB p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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