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TMI Blog2022 (3) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... call for and hold an EGM despite an unwilling Board. This intent and object of the legislature cannot be ignored whilst construing the relevant provisions of the Act. The decision in Cricket Club of India vs. Madhav L. Apte [ 1974 (8) TMI 75 - HIGH COURT OF BOMBAY ] applies squarely to the facts of this present case, where it was held that this Court has opined is that the word valid is restricted only to the satisfaction of the numerical and procedural requirements. Further, and more importantly, that the word or the adjective valid in Section 169 has no reference to the object of the requisition but rather to the requirements in that Section itself. Lastly and most importantly, that even if the requisition was illegal or invalid, the Board was still obliged to call for the meeting. Whether or not an Injunction could be passed against a shareholder restraining the holding of an EGM? - HELD THAT:- The Ld. Single Judge has restrained a shareholder of a Company from calling or holding an EGM. Such an injunction is in the teeth of the decision of the Supreme Court in LIC vs. Escorts [ 1985 (12) TMI 289 - SUPREME COURT ] - the Ld. Single Judge could not have deviated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nction is in the teeth of the decision of the Supreme Court in LIC vs. Escorts, the appeal is allowed. Alleged illegalities in the proposed Resolutions - HELD THAT:- The law as prevalent in India does not entitle the Board of a Company to refuse a requisition calling for an EGM if such requisition satisfies the numerical and procedural requirements set-out under Section 100 of the Act - Zee takes advantage of its own wrong and argues that in the absence of such permission, the proposed resolutions are illegal and therefore, an injunction must be granted. This is another illustration as to why Courts must uphold corporate democracy and not indulge incumbent Boards in restricting the democratic functioning of Companies. The procedure for appointment of Independent Directors - HELD THAT:- The Requisition proposes the appointment of 6 persons as Independent Directors. To this, Mr. Chinoy objects by submitting that the provisions of the Act make detailed provisions which are mandatorily required to be followed for appointment of an Independent Director and these provisions make it clear that a member cannot propose himself or someone else for appointment as an Independent Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IND N. JADHAV, JJ. Appearances : Mr. Janak Dwarkadas, Senior Advocate with Mr. Ravi Kadam, Senior Advocate, Mr.Sharan Jagtiani, Senior Advocate, Mr. Somasekhar Sundaresan, Mr. Cyrus Ardeshir, Mr. Gaurav Mehta, Ms. Rishika Harish, Mr. Bhavik Mehta, Mr. Kingshuk Banerjee, Mr. Tomu Francis, Ms. Praktruti Joshi, Mr. Zacarias Joseph, Mr. Ritvik Kulkarni, Ms. Tikshata Modi i/by Dhruve Liladhar and Co., for Appellants. Mr. Aspi Chinoy, Senior Advocate with Mr. Navroz Seervai, Senior Advocate, Mr. Pesi Modi, Senior Advocate, Dr. Birendra Saraf, Senior Advocate, Mr. Prateek Sakseria, Mr. Nitesh jain, Mr. Atul Jain, Mr. Adrish Guha, Ms. Ms. Vatsala Kumar, Ms. Ritika Ajitsaria, Mr. Brihad Ralhan i/by Trilegal, for Respondent No.1. Mr. Zal Andhyarujina, Senior Advocate with Mr. Suhail Nathani, Ms. Mumtaz Bhalla, Mr. Manendra Singh, Mr. Chanakya Keswani, Mr. Neeraj Malik, Mr. Nausher Kohli, Ms. Maithili Parikh i/by Economic Laws Practice, for Respondent No.2. JUDGMENT : ( PER S.J. KATHAWALLA MILIND N. JADHAV, JJ. ) INTRODUCTION : 1. This Appeal impugns the judgment dated 26th October, 2021 passed by the Ld. Single Judge ( Impugned Judgment ). This Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al meeting of the Respondent No. 1 company Zee Entertainment Enterprises Limited to be called held and conducted on or before 28 October 2021 or soon thereafter as maybe practicable, in pursuance of requisition dated the 11 September 2021, in such manner as this Tribunal thinks fit and proper and that for the purposes of the same, such ancillary and consequential directions be given as this Tribunal may think necessary or expedient including directions regarding the time and place of the meeting to be held, appointment of an independent Chairman for the meeting, deposit of proxies with such Chairman and all such other directions modifying or supplementing the operation of the provisions of the Companies Act, 2013 and of the Articles of Association of the Respondent No. I Company, relating to the calling, holding or conducting of the meeting, by exercise of its powers under Section 98 of the Companies Act, 2013; b. for interim and ad-interim reliefs in terms of (a) above; 2.7 We have been informed that the NCLT Petition was mentioned on 29th September, 2021 and circulation was granted for 30th September, 2021. We have been further informed that on 30th September, 2021, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l came to be filed on 28th October, 2021. 2.14 On 11th March, 2022, after hearing all parties, we reserved the Appeal for orders. SUBMISSIONS : 3. Appearing for the Appellants, we have heard Ld. Senior Advocate Mr. Janak Dwarkadas. Mr. Dwarkadas submissions can be summarized as under : 3.1 That a Civil Court cannot entertain a Suit of the nature filed by Zee; 3.2 That the Ld. Single Judge s findings that this Court has jurisdiction to entertain the Suit is in the teeth of Section 430 of the Act which ousts the jurisdiction of Civil Courts regarding matters that fall within the domain of the NCLT; 3.3 That since the Appellants had already filed an application under Section 98 i.e. the NCLT Petition, it is only the NCLT that is empowered to decide whether or not to call, hold or conduct a meeting; 3.4 That this Court cannot interfere with the statutory right of a shareholder to call for an EGM. In support of this submission, great emphasis was laid by Mr. Dwarkadas on the leading decision of the Supreme Court in LIC vs. Escorts Ors. (1986) 1 SCC 264 ( LIC vs. Escorts ). According to Mr. Dwarkadas, the Supreme Court s decision in LIC vs. Escorts ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisition for calling an EGM. Reliance in support of this submission was placed on Santosh Poddar vs Kamalkumar Poddar 1992 SCC OnLine Bom 151, Madhu Ashok Kapur vs Mr Rana Kapoor 2014 SCC Online Bom 401, Yes Bank vs Madhu Kapoor 2014 SCC Online Bom 574 and B Sivaraman Ors vs Egmore Benefit Society (1992) 75 Co Cas 198. 4.3 Mr. Chinoy placed reliance on the decisions in Isle of Wight Railway Co vs Tahourdin [1884] 25 Ch 320, Queensland Press Ltd vs Academy investments No 3 Pty Ltd. 1987 No 110 and Rose vs Mc Givern and others (1998) 2 BCLC 593 to submit that Courts have affirmed the power and jurisdiction of Courts to restrain a requisition calling for a general meeting if the object of the requisition is to do something which cannot be lawfully effectuated. 4.4 Dealing with Mr. Dwarkadas emphasis on the Supreme Court s decision in LIC vs. Escorts, Mr. Chinoy submitted that this decision does not alter the settled legal position that a Civil Court can entertain a suit impugning diverse matters arising under the Act, including inter alia a requisition issued under Section 100 on the ground of the requisition and the proposed resolutions being contrary to law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Section 98 reads as under : 98. Power of Tribunal to Call Meetings of Members, etc. (1) If for any reason it is impracticable to call a meeting of a company, other than an annual general meeting, in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this Act or the articles of the company, the Tribunal may, either suo motu or on the application of any director or member of the company who would be entitled to vote at the meeting,- (a) order a meeting of the company to be called, held and conducted in such manner as the Tribunal thinks fit; and (b) give such ancillary or consequential directions as the Tribunal thinks expedient, including directions modifying or supplementing in relation to the calling, holding and conducting of the meeting, the operation of the provisions of this Act or articles of the company : Provided that such directions may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting. (2) Any meeting called, held and conducted in accordance with any order made under subsect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting is called and held by the Board. (6) Any reasonable expenses incurred by the requisitionists in calling a meeting under subsection (4) shall be reimbursed to the requisitionists by the company and the sums so paid shall be deducted from any fee or other remuneration under section 197 payable to such of the directors who were in default in calling the meeting. 10. Section 100(2) uses the expression shall casting a mandatory obligation on the Board to adhere to the requisition. 11. Section 100(4) furnishes an additional right to members to proceed to call and hold a meeting themselves should the Board fail to call the requisitioned meeting. 12. On a plain and literal reading of Section 100(4), the words valid requisition appear to mean numerical and procedural compliance and nothing further. In support of this interpretation, we deem it appropriate to reproduce the following findings contained in Cricket Club of India vs. Madhav L. Apte [1975] 45 Comp Cas 574 (Bom) : 25. Under the Indian Companies Act, 1913, the provisions as regards calling of extraordinary general meetings on requisition were to be found contained in section 78 of the said Act. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 169 as having reference to the provisions of the earlier five sub-sections of that section rather than indicating compliance with any other requirements or provisions of the Companies Act. In other words, to put it shortly, all that is required to be seen before the provisions of sub-section (6) of section 169 become applicable would be to consider whether the requisition deposited was in accordance with the provisions of section 169 as to its contents, the number of signatories and similar matters, and it would not be open to the board of directors of a company to refuse to act on a requisition on the ground that, although such requisition was in accordance with the requirements of section 169, it was otherwise invalid. This conclusion receives support when one peruses sub-section (5) of section 169, where also the use of the word valid is perceived. The learned counsel for the plaintiffs emphasised the mischief that in his opinion would be caused by an otherwise invalid requisition being made which would put the company to considerable financial loss for what he called would be an exercise in futility. On the other hand, the question to be considered would be whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral and plain reading of Sections 98 and 100, we do not see any discretion / power vested with the Board of a Company to sit in judgment over any matter for consideration of which the meeting is requisitioned. On a plain reading, the Board of a Company is mandatorily obliged to requisition a meeting if the requirements specified in sub-sections (2) and (3) of Section 100 are satisfied. Needless to state, whether or not the proposed requisition should be given effect to, is to be decided by the shareholders at the general meeting. 16. To our mind, the language used in the aforesaid Sections aid corporate democracy and protect the rights of shareholders. Section 100(4) in fact provides shareholders with an additional right to proceed to call for and hold an EGM despite an unwilling Board. This intent and object of the legislature cannot be ignored whilst construing the relevant provisions of the Act. 17. In the Impugned Judgment, the Ld. Single Judge has, as Mr. Dwarkadas puts it, unsettled a settled judicial interpretation of the words valid requisition . In doing so, he has read into Section 100(4) and expanded it in a manner alien to the aforesaid decisions and the plain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter reached the first Court (the Bombay High Court), the RBI permission had actually come about, but which, according to the Company, was ultra vires the FERA. The Company raised various grounds of contraventions of laws, such as the FERA or the Non-residents Investment Scheme, in the matter of the subject purchase. On these grounds, the Company refused to register the share transfers. Instead of the purchasers taking up a challenge to that action of the Company, it was the Company, Escorts, that went to Court by way of a Writ Petition (out of which the Appeals before the Supreme Court in that case had arisen). The grievance of the Company in the Writ Petition inter alia was that the majority shareholders of the Company, who were financial institutions such as LIC, ICICI, IFC, IDBI and UTI, who between them held 52 per cent shares of the Company, and through them the Union of India was pressuring the Company to register the share transfer in favour of the Caparo Group. Appropriate injunctive reliefs were sought in that behalf in the Petition. Subsequent to the filing of the Writ Petition, LIC, who was also a part of the group of financial institutions holding 52 per cent share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were instrumentalities of the State and so was the Reserve Bank and it must have been thought unwise to launch into such a litigation. The institutions were, therefore, anxious to withdraw the writ petition and discuss the matter further. As the management was not agreeable to this course, the Life Insurance Corporation thought that it had no option but to seek a removal of the non-Executive Directors so as to enable the new Board to consider the question whether to reverse the decision to pursue the litigation. Evidently the financial institutions wanted to avoid a confrontation with the government and the Reserve Bank and adopt a more conciliatory approach. At the same time, the resolution of the Life Insurance Corporation did not seek removal of the Executive Directors, obviously because they did not intend to disturb the management of the company. It is, therefore, difficult to accuse the Life Insurance Corporation of India of having acted mala fide in seeking to remove the nine non-Executive Directors and to replace them by representatives of the financial institutions. No aspersion was cast against the Directors proposed to be removed. It was the only way by which the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... government vis-a-vis the Parliament. The strict theory of Parliamentary sovereignty would not apply by analogy to a company since under the Companies Act, there are many powers exerciseable by the Directors with which the members in general meeting cannot interfere. The most they can do is to dismiss the Directorate and appoint others in their place, or alter the articles so as to restrict the powers of the Directors for the future. Gower himself recognises that the analogy of the legislature and the executive in relation to the members in general meeting and the Directors of a company is an over-simplification and states to some extent a more exact analogy would be the division of powers between the Federal and the State Legislature under a Federal Constitution. As already noticed, the only effective way the members in general meeting can exercise their control over the directorate in a democratic manner is to alter the articles so as to restrict the powers of the Directors for the future or to dismiss the directorate and appoint others in their place. The holders of the majority of the stock of a corporation have the power to appoint, by election, Directors of their choice and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of the company. 98. In Inderwick v. Snell [42 ER 83] the deed of settlement of a company provided for the removal of any Director for negligence, misconduct in office or any other reasonable cause . Some directors were removed and others were appointed. The Directors who were removed sued for an injunction to prevent the new directors from acting on the ground that there was no reasonable cause for their removal. The court negatived the claim for judicial review of the reasons for removal and made the following interesting observations : The argument for the plaintiffs rested on the allegation that the general cause of removal referred to in the clause being expressed to be reasonable prevents the power referred to from being a power to remove at pleasure arbitrarily or capriciously, and made it requisite that the proceeding for exercising the power should be in its nature judicial, and that the reasonable cause should be such as a court of Justice, would consider good and sufficient. If this argument could be sustained, all the proceedings at such meetings would be subject to the review of the Courts of Justice, which would have to inquire whether the cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved, might perhaps interfere with the acts done; but supposing the meeting to be regularly convened and held, the shareholders assembled at such meeting may exercise the powers given them by the deed. The effect of speeches and representations cannot be estimated, and for those who think themselves aggrieved by such representations, or think the conclusion unreasonable, it would seem that the only remedy is present defence by stating the truth and demanding time for investigation and proof, or the calling of another meeting, at which the whole matter may be reconsidered. The plaintiffs, objecting to this meeting and considering it illegal, protested against it, but abstained from attending, and, therefore, made no answer or defence to, and required no proof of, the charges made against them. The adoption of this course was unfortunate, but does not afford any grounds for the interference of this Court. 99. Again in Bentley Stevens v. Jones [(1974) 2 All ER 653] it was held that a shareholder had a statutory right to move a resolution to remove a Director and that the court was not entitled to grant an injunction restraining him from calling a meeting to consider such a res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review. It is true that under Section 173(2) of the Companies Act, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein of every director, the managing agent if any, the secretaries and treasurers, if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Ltd., has the same right as every shareholder to call an extraordinary general meeting of the company for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LIC vs. Escorts does not bar or prohibit a Civil Court from entertaining a challenge to a requisition for an EGM, on the ground that the requisition and the proposed resolutions are illegal / contrary to law. We have applied the ratio of LIC vs. Escorts after having considered and understood the background of the facts of that case. LIC vs. Escorts is certainly an authority for what it actually decides which, in our opinion, is that no Court or Tribunal can restrain the holding of an EGM so long as the requisition of shareholders in that behalf is compliant with the procedural and numerical requirements of Section 100. 27. Faced with the decision in LIC vs. Escorts, the Ld. Single Judge in the Impugned Judgment observed as follows : 55. But the question with which I am concerned never arose in LIC v Escorts. It was under the 1956 Act, which did not separate listed companies as the 2013 Act does. In any case, as Mr Chinoy points out, the LIC v Escorts debate was about mala fides, not about the legality or legal effectiveness of resolutions proposed at an EGM. In our considered opinion, the aforesaid finding of the Ld. Single Judge is based on an incorrect assessment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a member of the executive committee until the close of the meeting at which he retires. 3. On 3rd August, 1973, the Cricket Club received from 591 of its members, including the defendants to the special case, a requisition, dated 3rd August, 1973 (hereinafter referred to as the requisition for the sake of brevity). By the requisition the requisitionists desired the convening of an extraordinary general meeting of the Cricket Club to consider and, if thought fit, to amend its articles of association by passing a resolution, which may be fully set out : Resolved that article 74 of the articles of association be amended as follows by adding the following at the end of the words he retires : Provided however that a member shall not be eligible to stand for re-election to the office of the executive committee if he has been a member of the executive committee for a continuous period of six years. Provided further that a member who has been a member of the executive committee for a continuous period of six years may seek election after the expiry of a period of three years from the date of the six years' period as mentioned in this article. For the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Under the Indian Companies Act, 1913, the provisions as regards calling of extraordinary general meetings on requisition were to be found contained in section 78 of the said Act. Under those provisions the directors of a company which has a share capital were enjoined on the requisition of the holders of not less than one-tenth of the issued share capital of the company, upon which all calls had been paid, to call an extraordinary general meeting of the company. The scheme was substantially similar to the scheme of section 169 of the Companies Act, 1956. Subsection (2) of section 78 provided for the contents of the requisition and the mode of its deposit; and sub-sections (3) to (5) provided for calling of a meeting by the requisitionists on failure by the directors to cause a meeting to be called for after deposit of a requisition. In sub-section (3) of section 78, however, the words used were date of the requisition being so deposited . Under section 169(6) of the Companies Act, 1956, one finds a change in the terminology, the provision being that the requisitionists may themselves call a meeting (subject to other provisions, with which we are not concerned) if the board does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made which would put the company to considerable financial loss for what he called would be an exercise in futility. On the other hand, the question to be considered would be whether the board of directors of a company can be allowed to ignore a requisition which complies with all the requirements laid down in section 169 of the Companies Act, 1956, on the ground that the object of the requisition was illegal or otherwise invalid and, therefore, the requisition was not a valid requisition which ground may ultimately be found to be unsustainable. In my view, the word or the adjective valid in section 169 has no reference to the object of the requisition but rather to the requirements in that section itself. If these requirements indicated in the earlier part of the section are satisfied, then the requisition deposited with the company must be regarded as a valid requisition on which the directors of a company must act. If the directors fail to act within the period specified by sub-section (6), then, in my opinion, the requisitionists would be entitled to proceed under the later provisions of that sub-section and the other sub-sections of section 169. 31. The aforesaid paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a special case or otherwise, it would still be binding, as it has been delivered by a Ld. Single Judge of this Court. Be that as it may, we are ourselves in complete agreement with the reasoning provided by the Ld. Single Judge. We completely disagree with Mr. Chinoy s dismissal of the Ld. Single Judge s decision on this ground. In any event, it is a matter of record that the decision in Cricket Club of India vs. Madhav L. Apte (supra) has been followed and relied upon by various Courts from time to time Snowcem India Ltd. Vs. Union of India [2005] 124 CompCas 161 (Del) , Power Grid Corporation of India Ltd. vs. Canara Bank [Co.A.(B) 8/2003] , Kothari Industrial Corporation Ltd. vs. Lazor Detergents Private Ltd. [1994] 81 CompCas 699 (Mad), The Indian Cable Co. Ltd. vs. Lodna Colliery Co. (1920) Ltd. AIR 1977 Cal 402 , Anantha R. Hegde vs. T S Gopalakrishna 1998 91 ComCas 312 (Kar) . In Minoo Velgaumwala Ors. vs. Maneck Kothawala AIR 1964 Kant 185, the High Court of Mysore clearly held that the Ld. Judge whose opinion is sought in such a case is required to follow the procedure prescribed under the CPC and more particularly, Order 18 thereof. Reliance can be placed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered this decision and do not see where or how this decision states what Mr. Chinoy intends us to hold. This decision merely expounds on the meaning and scope of a special case and nowhere rules that a decision on such Special Case has no binding value. 37. For the reasons aforesaid, we reject Mr. Chinoy s submissions on Cricket Club of India vs. Madhav L. Apte (supra) and endorse and approve of the view taken by the Ld. Single Judge therein. This Court s decision in Centron Industrial Alliance vs. P K Vakil Anr (1982) SCC Online Bom 318 38. Mr. Chinoy has laid great emphasis on the decision of a Ld. Single Judge of this Court in Centron Industrial Alliance vs. P K Vakil Anr. (supra) and more particularly, the following extract therefrom : 21. One of the main reasons why injunctions are not normally granted to restrain the holding of a requisitioned meeting is that the shareholders ought to be allowed to regulate and set right the affairs of the company by calling general meetings. The court, has, therefore, been reluctant to interfere in the internal management of the company. Secondly, such injunctions were sought in the cases cited before me by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectness. Firstly, the Ld. Single Judge s view predates the binding decision of the Supreme Court in LIC vs. Escorts. Considering the law as laid down post LIC vs. Escorts, we do not see how the Ld. Single Judge s view can persuade us to grant an injunction restraining the holding of an EGM in the teeth of LIC vs. Escorts. 40. Whilst interpreting this decision, the Ld. Single Judge has, in the Impugned Judgment, opined as under : 53. That, I believe, is the correct distinction to be drawn in regard to resolutions proposed at a requisitioned EGM: between resolutions that are irregular, undesirable or unpalatable to the Board and those that are illegal. The question is not of interpretation of the word valid in Section 100 at all, but whether what is sought to be done is plainly an illegality. 41. We are unable to appreciate how the Ld. Single Judge could arrive at the aforesaid finding in view of the interpretation of the word valid in the decisions in Cricket Club of India vs. Madhav L. Apte (supra) and thereafter in LIC vs. Escorts. Foreign citations relied upon by Zee 42. As stated hereinabove, Mr. Chinoy has placed reliance on the decisions in Isle of W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight, we see no occasion to deviate from the law stated in LIC vs. Escorts and adopt the view in Isle of Wight which even the Supreme Court refused to do. 45. In addition to the aforesaid, another distinguishing factor is that in Isle of Wight, the Court was dealing with and interpreting Section 70 of the Companies Consolidation of Clauses Act, 1845 which provided for a requisition to fully express the object of the meeting to be called. As opposed to this, there is no such requirement under Indian law as has been held in paragraph no. 100 of LIC vs. Escorts. 46. For all of the reasons aforesaid, we are not persuaded to accept the view laid down in Isle of Wight and would go by to the Supreme Court s decision in LIC vs. Escorts to reject the injunctive relief sought here. 47. Mr. Chinoy next placed reliance on the decision in Queensland Press Ltd vs. Academy investments No 3 Pty Ltd. (supra) and more particularly the following paragraphs therefrom : I agree, with respect, with the opinion expressed by Needham J in Turner v Berner [1978] 1 NSWLR 66 ; 3 ACLR 272 that the decision in Isle of Wight Railway Co v Tahourdin, supra , establishes the proposition that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion / resolutions are illegal as being contrary to law or the Company s Articles. Having considered this decision, it is manifest that it came to be passed in the context of the statutory scheme prevalent before it, i.e. Section 303 of the UK Companies Act of 2006. This statutory scheme is at stark variance to the statutory scheme prevalent in India. Despite this, in the Impugned Judgment, the Ld. Single Judge has erroneously adopted and read into Indian law provisions codified under the UK Companies Act of 2006. Whilst doing so, the Ld. Single Judge has deviated from the Act and binding precedents of the Supreme Court and this Court despite arriving at the finding that We do not have such a provision. 52. In the aforesaid backdrop, we reject the Ld. Single Judge s findings in paragraph no. 70 of the Impugned Judgment wherein he seeks to apply the principles contained in Section 303(5) of the UK Companies Act of 2006 to Indian company law. 53. For all of the reasons aforesaid, we are unable to accept the view cited before us from foreign jurisdictions. Whether or not an Injunction could be passed against a shareholder restraining the holding of an EGM 54. By the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court of Madras proceeded to grant an injunction on the holding of an EGM without as much as even analysing or considering the decision in LIC vs. Escorts. After the said decision was placed before the Ld. Single Judge along with the decision in Cricket Club of India vs. Madhav L. Apte (supra) amongst others, he proceeded to deal with them as under : 57. I have carefully perused the above text books on company law and the case-laws cited above, in the context of the proved and established factual aspects of the instant case. Though I have absolutely no discontent with the legal ratios held out in the above case-laws as well as the text books pertaining to the rights of the shareholders of a company and the various modes to be adopted in appointing and removing the directors and conducting the elections and so on, since they were on different facts not at all germane to the present case, the ratio held therein may not render any help or assistance t the respective parties in this case. Therefore, under the circumstances, I feel that it is totally not necessary to traverse or import or refer to any of the citations individually one by one in this case. 60. We are una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review. ? If we were to accept the proposition of Mr. Chinoy, not only would that be a clear departure from the law stated by the Supreme Court, but we would undermine the very foundations of corporate democracy in India. 63. In the present case itself, the Appellants, being shareholders of Zee, have been unable to call for and hold an EGM despite the Requisition being addressed as early as on 11th September, 2021, i.e., over 6 months ago. For the past 6 months, the contesting parties have been arguing the alleged illegalities contained in the Requisition, whilst shareholders of Zee suffer an injunction. We cannot lay down a precedent resulting in such drastic consequences derailing the democratic functioning of Companies across India owing to the non-cooperat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, the statue prescribes procedures under Sections 96 to 100 of the Act. There is a mandate prescribed under the statute that AGM should be conducted within the prescribed time limit and default in convening AGM beyond the prescribed period will invite consequences and in default in convening the AGM, the Tribunal has power to call for AGM under Section 97 of the Act. Similarly, under Section 98 of the Act, the Tribunal is empowered to call for any other meeting other than AGM which includes EGM either suo motu or an application of any Director or members of the Company, who would be entitled to vote at the meeting. Section 100 of the Act prescribed the procedure how EGM should be conducted by the Board and under Section 100 (4) of the Act, if the Board fails to convene EGM within 21 days from the date of receipt of valid requisition in regard to any matter, the requisitonists themselves can convene EGM within 3 months from the date of requisition. If there is any resolution passed in such EGM removing the Managing Director, Manager or any of the Directors of the Company which shall be prejudicial or oppression to any member or members or to public interest or in a manner prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of the matter of their requisition, if the Board does not, within twentyone days, proceed to call a meeting. In the case on hand, as the facts have transpired, it is now clearly a case of the Appellants in the face of the Board s stand vis- -vis their Requisition, though they would be within their rights to call and hold the requisitioned EGM, it is impracticable for them to hold such meeting and accordingly, they pray for an order of the NCLT to do so under Section 98. We do not see how such a matter would not fall within the purview of the NCLT and if it does, how a Civil Court could interfere by passing an order of injunction, which would have the effect of preventing the NCLT from considering the Appellants prayer. We find no credence on the reasoning based on the NCLT Rules or Schedule of Fees. We do not see how these Rules or Schedule of Fees can defeat the plain and simple language contained in Section 430 of the Act. Be that as it may, the Schedule of Fees in fact specifically provides for an application under Section 98, which, as we have already noted, has been filed by the Appellants. 70. For the reasons aforesaid, in our considered opinion, the injunction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of Mr. Punit Goenka proposes that he be and is hereby removed from the office of director of the Company and is in contradistinction to Resolution Nos 4 to 9 which propose the appointment of the six persons mentioned therein as Independent Directors subject to the approval of Ministry of Information and Broadcasting , Government of India. That the clear intent of Resolution No. 1 is to remove Mr. Punit Goenka as Director forthwith on passing of the Resolution, i.e. purports to effect a change in the Board of Directors, without taking the prior permission from the MIB. That this is not a mere inadvertence is apparent from the aforesaid difference in the language of Resolution No. 1 and Resolutions 4 to 9. That, therefore, Resolution No. 1 will clearly violate the MIB Guidelines. Such a violation, under Clause 8.2 of the MIG Guidelines, attracts serious penalties. Under Clause 8.2.1, Zee s uplinking license can even be suspended for a period of 30 days for the first violation. 75. Upholding Zee s submissions in this respect, the Ld. Single Judge held as under : 33. But it does not end there, Mr Subramaniam says. Clause 5.10 of the MIB Guidelines requires a company unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Network Limited. 78. Even otherwise, we agree with Mr. Dwarkadas submission that MIB s permission is required only in case of appointments and not removal/resignation of a Director. Considering the nature of Zee s industry and business, the MIB deems it fit to follow a process of vetting a person prior to such person being entrusted with the charge of the Board of a broadcasting company. We do not see why and how the MIB can prevent a Director (who has been previously vetted) from resigning / being removed from the Board. The record in the present case itself demonstrates that MIB approval was not sought before effecting a change in the Board of Zee on account of the resignations tendered by its two directors, viz., Mr. Chokhani and Mr. Kurien on 13th September, 2021 post the Requisition issued by the Appellants. 79. For the reasons aforesaid, we reject Mr. Chinoy s submission and the findings of the Ld. Single Judge in the Impugned Judgment. 80. Mr. Andhyarujina, appearing for Respondent No.2 / Mr. Goenka, submitted that appointments of Directors cannot be made subject to any conditions. Under the Act, Directors stand appointed upon resolutions approving their appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly not made such application. Now, in these proceedings, Zee takes advantage of its own wrong and argues before us that in the absence of such permission, the proposed resolutions are illegal and therefore, we must grant an injunction. This is another illustration as to why Courts must uphold corporate democracy and not indulge incumbent Boards in restricting the democratic functioning of Companies. The procedure for appointment of Independent Directors 85. As stated hereinabove, the Requisition proposes the appointment of 6 persons as Independent Directors. To this, Mr. Chinoy objects by submitting that the provisions of the Act make detailed provisions which are mandatorily required to be followed for appointment of an Independent Director and these provisions make it clear that a member cannot propose himself or someone else for appointment as an Independent Director, merely by giving notice in writing of his candidature, or of his intent to propose another member as candidate for election as an Independent Director at the general meeting. In support of this submission, Mr. Chinoy places reliance on Section 149(6), 149(8), 150(2), the proviso to Section 152(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year; (e) who, neither himself nor any of his relatives- (i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed; (ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of- (A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or (B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm; (iii) holds together with his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under : 52. Appointment of Directors (1) Where no provision is made in the articles of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first Directors of the company until the Directors are duly appointed and in case of a One Person Company an individual being member shall be deemed to be its first director until the director or Directors are duly appointed by the member in accordance with the provisions of this section. (2) Save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting. 93. In the present case, the proposed resolutions under the Requisition are to appoint ordinary Directors and not additional or alternate Directors. Therefore, from a reading of Sections 150(2) and 152(2), even in case of an Independent Director of a listed Company, the appointment will be made at the general meeting and not by the Board of Directors. 94. We the aforesaid backdrop, we next consider Section 178 of the Act and Regulation 19 of the SEBI LODR. Section 178 of the Act reads : 178. Nomination and Remuneration Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) The chairperson of each of the committees constituted under this section or, in his absence, any other member of the committee authorised by him in this behalf shall attend the general meetings of the company. (8) In case of any contravention of the provisions of section 177 and this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both : Provided that non-consideration of resolution of any grievance by the Stakeholders Relationship Committee in good faith shall not constitute a contravention of this section. Explanation .-The expression senior management means personnel of the company who are members of its core management team excluding Board of Directors comprising all members of management one level below the executive directors, including the functional heads. 95. Regulation 19 of the SEBI LODR reads : 19. (1) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be, to the member, if the person proposed gets elected as a director or gets more than twenty-five per cent. of total valid votes cast either on show of hands or on poll on such resolution. Provided that requirements of deposit of amount shall not apply in case of appointment of an independent director or a director recommended by the Nomination and Remuneration Committee, if any, constituted under sub-section (1) of section 178 or a director recommended by the Board of Directors of the Company, in the case of a company not required to constitute Nomination and Remuneration Committee. (2) The company shall inform its members of the candidature of a person for the office of director under sub-section (1) in such manner as may be prescribed. 97. The power given to shareholders of a Company by Section 160 and more importantly, the proviso thereto, cannot go unnoticed. In the teeth of the aforesaid provision, we cannot appreciate how the Ld. Single Judge agreed on all counts with Zee s submission that In the scheme of the Companies Act, shareholders do not get to choose individual independent directors. . Therefore, according to the Ld. Single Judge, the fate of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors with at least one woman director and not less than fifty per cent of the Board of Directors shall comprise of non-executive Directors. According to him, Optimum combination in Regulation 17 posits that the Board of Directors should, at the minimum, comprise of both executive and non-executive Directors. Therefore, Regulation 17 mandates the presence of executive Director(s). Presently, Mr. Punit Goenka is the only executive Director on the Board Zee. The Requisition seeks removal of Mr. Goenka and does not propose appointment of any executive Director by way of replacement. Accordingly, the Requisition will result in Zee not having any executive Director on its Board and this will result in Zee being in violation/ contravention of Regulation 17. Lastly, that Regulation 98 of the SEBI LODR provides for liability and penalty for companies in contravention of the SEBI LODR, including imposition of fines, suspension of trading, and freezing of promoter/ promoter group holding of designated securities. 102. Despite upholding the aforesaid alleged illegality, the Ld. Single Judge has not provided any reasoning whatsoever in the Impugned Judgment in support of Regulation 17 bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more Chief Executive Officers for each such business as may be notified by the Central Government. (2) Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration. (3) A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time : Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from being a director of any company with the permission of the Board: Provided further that whole-time key managerial personnel holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel : Provided also that a company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution pass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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