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TMI Blog2021 (8) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... granting ad interim stay to the holding of EGM and Board of Directors meeting has to be looked at, from a very limited point of view of prima facie illegality, balance of convenience to the parties and irreparable loss to the Applicants. The two impugned orders do not require any intervention as they do not suffer from any illegality - Since the main petition is presently being heard by NCLT, we refrain from giving any opinion on the larger issue of oppression and mismanagement, as has been alleged in the said petition by the Appellants/Petitioners - Appeal dismissed. - Company Appeal (AT) No. 143 of 2020 & Company Appeal (AT) No. 227 of 2020 - - - Dated:- 12-8-2021 - (Justice Jarat Kumar Jain) Member (Judicial) And (Dr. Alok Srivastava) Member (Technical) For the Appellant : Mr. Arun Kathpalia, Senior Advocate, Ms. Surekha Raman and Mr. Shrenik Gandhi, Advocates. For the Respondent : Mr. Ankoosh Mehta, Ms. Durga Agarwal, Ms. Divya Behl, Mr. Srinivas Chatti and Ms. Shikha Tandon, Advocates for Respondent 1-3 9 Mr. Shyam Kapadia and Mr. Nikhil Pratap, Advocates for Respondent No. 7. JUDGMENT { Per: Dr. Alok Srivastava, Member (T)} 1. Appeal CA (AT) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years and has contributed to the growth and development of Respondent No. 9 company. In recognition of his work, he was appointed the Managing Director w.e.f. 15.11.2017 through a resolution of the Board of Directors of Respondent no. 9. Appellant No. 3 (Gajanan Dhakane), who joined CEPL as a result of Business Takeover Agreement in 2012 was appointed Executive Director as part of the agreement and remained so till 7.8.2020, and he is alleged to have been removed in a malafide manner. Appellant No.3 has claimed to have contribution in the conception, development and growth of the Process Automation Division of CEPL. The Appellants claim to jointly hold 162492 number of equity shares (equal to 36.7% of the total equity share capital of Respondent no. 9). (iii) As part of the CEPL s Articles of Association and Memorandum of Association and subsequent development, the Appellants hold certain number of Class A and Class B equity shares in Respondent No. 9. They demanded conversion of Class B equity shares into Class A equity shares in accordance with the decision of the Board of Directors of Respondent No. 9 company, but according to the Appellants, Respondent No. 1 destroyed the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 1 had sought a temporary injunction to the holding of this meeting and passing of resolution removing Pralhad Hage as MD. As such an injunction was not granted by the NCLT, Mumbai the Appellants have filed appeal CA (AT) No. 227/2021. In both appeals the Appellants have alleged that oppression of minority shareholders by Sirur family members and mismanagement of Respondent No. 9 which has affected adversely the employment and lives of approximately 600 employees and their family members. 4. We have heard detailed arguments of the Appellants in both of the appeals and we have also perused the appeal memos, replies of the Respondents and rejoinders by the Appellants as well their written submission. 5. In his arguments the Learned Counsel for Appellants has pointed out that the Appellants held two types of shares viz. Class A and Class B. The Class A shareholders has voting rights whereas Class B shareholders do not have voting rights. Though Appellants hold approximately 36.7% of the equity shares (of Class A and Class B combined) and are, therefore, minority shareholders, they have interest in the growth and development of CEPL, not only as shareholders but also as par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rur family had only Class A shares. As a result of Supplementary Shareholders Agreement (attached at pages 364-370/Volume II of Appeal Paper book of Appeal CA No. 143/2020)out of a total of 4,00,000equity shares, Muley and Hage held 2,66,640 shares. These shares were split into Class A and Class B shares and Muley and Hage had a total of 42.46% Class A shares, whereas the Sirur Group members had 57.54% Class A shares. Muley and Hage also owned 1,68,240, number of Class B shares, whereas the Sirur Group members did not own any Class B shares. 8. The Learned Counsel for Appellants has referred to an Agreement for Business Arrangement/Takeover dated 25.2.2012 by which Sibella Technologies Pvt. Limited (hereinafter called STPL) and Cotmac Electronics Pvt. Limited(CEPL)the business of Sibella Technologies Pvt. Limited was taken over by CEPL. As a result, Gajanan Dhakane, one of the Appellants in both of the appeals, who was associated with STPL as a Director, was co-opted as Executive Director on the Board of Directors of CEPL. Thus, his and his family's right of livelihood is linked to his position as Executive Director in CEPL. The Sirur family, the Learned Counsel of Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucting the EGM on 7.8.2020, which was to consider a proposal for removal of Appellant No.3 Gajanan Dhakane as a Director of Respondent No.9 company. The NCLT Mumbai, by order dated 6.8.2020, refused to grant ad interim relief to restrain the holding of EGM. Following this unsuccessful attempt of the Appellants to disturb the democratic process of holding the EGM, they are now seeking to re-agitate the same issues through an appeal. The Learned Counsel has added that the Appellants have also filed an IA No. 1139/2020 seeking to restrain Respondent No. 9 company from conducting a Board of Directors meeting on 26.10.2020 to consider the proposal for removal of Appellant No.1 Pralhad Hage as Managing Director of Respondent No. 9. This IA was dismissed by the NCLT Mumbai while making the observation that the Appellants have re-agitated the same issues which have been already decided by the NCLT vide its order dated 6.8.2020. 12. The Learned Counsel for Respondent No. 9 has also urged that any discretionary order passed by NCLT as a tribunal of first instance must be presumed to be correct unless it is ex-facie legally erroneous, perverse or it causes grave injustice. He contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Ravinder Sabharwal and Anr. vs XAD Inc. and Ors. [2018 (172) DRJ 645] wherein it has been held that there can be no injunction that as per a binding term, there can be no injunction restraining holding of an EGM. And, the majority shareholders have the power to appoint directors and the power to regulate them by passing a resolution for removal. The reasons for passing of a particular resolution need not be disclosed in the notice calling for the EGM. 15. The Ld. Counsel for Respondent No. 9 has emphasized that the procedure followed by Respondent No. 9 company in holding of the EGM and the Board of Directors meeting on 7.8.2020 and 26.10.2020 respectively, have been as per statutory procedures and powers available to the shareholders of the company. Closing his arguments he has urged that as the Appellants have failed to make out a prima facie case, demonstrated that the balance of convenience to be in their favor, and that grave, irreparable loss and injury will be caused if the EGM and Board meeting were not restrained, the appeal ought to be dismissed. 16. The Learned Counsel for Respondent No. 9 has clarified that the judgments cited by the Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner. 19. The Appellants have claimed that they have a right to livelihood and certain legitimate expectations which the MOU and earlier agreements provide to them. We would only say at this juncture that legitimate expectation of the appellants is circumscribed by the overall interest of the company when such interest is manifested in the decisions of the Board of Directors or that of persons empowered to take such decisions in a statutorily tenable, legally sound and democratically transparent manner. 20. Moreover the NCLT has exercised its discretion in favor of the respondents. The judgments cited by the Ld. Counsel for the Respondent No. 9 viz-a-viz reinforce the view that a discretion exercised by a court should not be interfered with unless it is grossly illegal, perverse or causes grievous harm to the party concerned. In the present case we do not find that the discretionary power used by the NCLT in not granting ad-interim orders fall in such a category. 21. The other respondents have adopted the arguments submitted by the Respondents No. 9 s Ld. Counsel. 22. In the light of the facts of the present case, where EGM was held on 7.8.2020, and thereafter a Board o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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