9911796707
TMI Blog2022 (5) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as "Petitioner") against Respondents M/s. Saw Mill Owners Service Enterprises Limited &Others, seeking the following reliefs: i. Issue an Order declaring the proceedings at the impugned EGM held at 11.00 hours on 03.03.2020 at Y's Mens Club Hall, Vallam, Rayonpuram, Perumbavoor to be illegal and in contravention of Article 72 (2) read with Article 75 (iv) (b) of the Articles of Association and Section 102 (1) (a) and (b) and 169(3) of the Act as well as Articles 110 read with Articles 112 & 113 of the Articles of Association and Proviso to Section 152, 164 & 169 of the Act; and as being prejudicial and oppressive to the Petitioner and the shareholders represented herein and the interests of the Company. ii. Issue an Order setting aside the Resolution adopted at the impugned EGM held at 11.00 hours on 03.03.2020 at Y's Mens Club Hall, Vallam, Rayonpuram, Perumbavoor removing the Petitioner Mr. Mookada Moosa Mujeeb Rahiman, Mr. Poly Thomas, Mr. Sadhiq Thacharukudy Pareed, Mr. Basheer Koottayi Abdul Rahiman, Mr. Salim Karimpanackal Veeran, Mr. Sulaiman Karavathukudy Kochahamed, and Mr. Babu Saidaly from the office of Director of the Company before expiry of their respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case are as under:- 3. The Petitioner is a shareholder of the 1st Respondent Company (Company) holding 17566 shares. He was appointed as the Managing Director (MD) of the Company by the Board of Director son 29.08.2019. The appointment was subsequently ratified by the shareholders at the 26thAnnual General Meeting (AGM) held on 30.09.2019, for a period of five years with effect from 29.09.2019. The Petitioner has filed this Company Petition on behalf of himself and 56 shareholders who constitute 13.21 percent of the total number of shareholders of the Company, which is 424 at present, and holding about 20 percent of the paid-up capital; after having obtained their written consent for the said purpose under Section 244 (2) of the Companies Act, 2013. The Petitioner and other shareholders have a common interest in the cause of action, the issue canvassed and the reliefs sought in this Company Petition. 4. It is stated that the 1st Respondent is a Public Limited Company incorporated on 19.05.1993 with CIN No. 09-07142 of 1993. The authorised share capital of the Company is Rs. 2,00,00,000/- divided into 20,00,000 equity shares of Rupees 10/- each. The subscribed capital of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reject the Special Notice 1 for removal of the Petitioner and the said Directors as Directors of the Company and the Special Notice 2 on the appointment of the 2nd to 8th Respondents as Directors. The Board circulated its decision to the signatories to the said letter and to all shareholders. It is also stated that 61.2% of the shareholders expressed their confidence in the Board. 7. It is stated that as a matter of abundant caution, the Petitioner and the affected Directors sought the protection of the Munsiff Court, Perumbavoor on 20.01.2020 filed OS 33/2020, seeking inter alia, to restrain the 2nd to 8th Respondents from disturbing the management of the Company and also from convening any EGM for the consideration of the aforesaid Special Notices. However, an EGM was held on 03.03.2020 in Y's Mens Club Hall, Vallam, Rayonpuram, Perumbavoor and the 2nd Respondent appointed the 9th Respondent as Scrutinizer in the said EGM. Even though the Munsiff Court did not restrain the Respondents from conducting the EGM, vide Order dated 29.02.2020 in IA 02/2020 in OS 33/2020, it was directed that the decisions taken at the said EGM would be subject to the outcome of the civil suit. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents 1 and 11 filed their reply statement and stated that the Company Petition has been filed as a composite petition under Sections 98, 169, 241 and 242 of the Companies Act, 2013. The requisite pleadings for seeking reliefs under Sections 98, 169, 241 and 242 of the Companies Act, 2013 are absent in the Company Petition and on that ground alone, the Company Petition is liable to be dismissed. The Petitioner in the Company petition who holds 17566 equity shares of Rs. 10/- each was acting as Managing Director of the Company till he was removed from the Board of Directors at the Extraordinary General Meeting held on 3rd of March 2020. It is stated that no company can block the statutory right of the shareholders to hold an Extraordinary General Meeting, if shareholders holding not less than 1/10th of paid-up capital made a request. If the Board of the Company is in default in acceding to their request, the Requisitionists themselves are entitled to call such and Extraordinary General Meeting under Section 100(4) of the Companies Act, 2013. 11. It is further stated that the statutory right and power of the shareholders will not come within the scope of Sections 241 and 242 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion) Rules, 2014, particularly Rules 17 and 18. Only special notice as required under Section 169(2) r/w Section 115 of the Companies Act, 2013 is required in respect of the resolutions dealing with the removal of the directors. There is no need to have an explanatory statement as required under Section 102 of the Companies Act, 2013 as in the case of a General Meeting convened by the Company by virtue of Rule 17(5) of the companies(Management and Administration) Rules, 2014. The Requisitionists by and large follow the Secretarial Standard on General Meeting (SS-2) specified by the Institute of Company Secretaries of India, under Section 118 (10) of the Companies Act, 2013, though it is meant for the General Meeting convened by the Company that SS-2 is applicable. 13. It is further stated that the allegation in respect of day-to-day administration of the business of the company cannot be brought under the scope of Section 241 for judicial scrutiny. The petitioner or any of the shareholders allegedly given consent to the petition did not chose to attend the 27th Annual General Meeting of the Respondent Company which was held on 28.12.2020, as required under Section 96 of the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not recapitulate here. Submissions by the Respondent Nos: 3, 6, 7 and 8 17. The Respondents 3, 6, 7 and 8 filed their reply statement and stated that the provisions by which the Company Petition filed are different in nature and procedure, and requires different sets of documents, for obtaining the relief. They are applicable to separate causes of actions, which cannot be jointed together into a single petition. It is also stated that Rule 75 of the NCLT Rules specify the manner in which petition under Section 98 has to be filed. It makes documents stated in Annexure B of NCLT Rules, a mandatory requirement to seek relief under Section 98. In Annexure B SI. 10, the first document mentioned is Documentary Evidence in proof of status of the Applicant. This document is suppressed from the purview of this Tribunal. It is also stated that these Respondents are ready and willing to conduct a meeting of the company, if the petitioner presents an application under Section 100 of the Companies Act. However, he has not filed any application to call the meeting of the company. 18. It is stated that Section 169 of the Companies Act enables removal of directors by the company, either throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bribing the shareholders, just before an EGM seeking petitioner's removal. These respondents acted ethically, and for the welfare of the company, rather than using the company for personal gains. It is also stated that there is no family, group or cartel trying to control the company. Majority of shareholders were dissatisfied with the functioning, attitude and arrogance of the petitioner, and it caused his removal and downfall from the company. FINDINGS 22. We have heard the learned counsel for both the parties and perused the entire case records/documents. We have also gone through the evidences on record. In order to arrive at a decision in the matter, we have framed the following issue:- 1) Whether the Petitioner is eligible to maintain this Petition under Section 241-242? 2) Whether the removal of the Petitioner from the Directorship is illegal? 3) Whether the removal of the Petitioner from the Directorship will be oppressive or prejudicial to attract Section 241-242 of the Companies Act? 23. Issue number 1:- In order to answer this issue, we have gone through the letter of consent filed by the Petitioner under Section 244(2) of the Companies Act, 2013 produced al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard: [Provided that an independent director re-appointed for second term under sub-section (10) of section 149 shall be removed by the company only by passing a special resolution and after giving him a reasonable opportunity of being heard:] [Provided further that] nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two thirds of the total number of directors according to the principle of proportional representation. (2) A special notice shall be required of any resolution, to remove a director under this section, or to appoint somebody in place of a director so removed, at the meeting at which he is removed. (3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting. (4) Where notice has been given of a resolution to remove a direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 27. With respect to special notice, it is profitable to quote Section 100 of the Companies Act, 2013 which reads:- Section 100: Calling of extraordinary general meeting. 100(1): The Board may, whenever it deems fit, call an extraordinary general meeting of the company. [Provided that an extraordinary general meeting of the company, other than of the wholly owned subsidiary of a company incorporated outside India, shall be held at a place within India.] (2) The Board shall, at the requisition made by,- (a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting; (b) in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company within the period specified in sub-section (4). (3) The requisition made under sub-section (2) shall set out the matters for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not required to call a meeting. May be true that the word "valid", adopted in this section, has no reference to the object of the requisition but rather to the requirements in that section itself. Therefore, it is clear that what is required to be seen is whether the requisition deposited with the first respondent was in accordance with the provisions of this section, as to its contents and other aspects. But, if it is considered to be valid, then the directors of the company shall not refuse to act on the requisition, but if the object for which the requisition was made is not for carrying out a valid purpose, then it may provide a speculation or a deadlock in this context. There is no provision, barring the jurisdiction of the civil court in matters where relief is sought for in respect of the personal rights of the shareholders, directors and so on, such denial of their right of voting or attending the general meeting and so on. It has to be seen further that the ordinary civil courts are not deprived of their jurisdiction to decide the rights of parties except where the Companies Act expressly excludes it such as in matters relating to winding up. It is, therefore, clear that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting 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 Limited, has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some Directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons its reasons for moving the resolutions." 31. In the instant case such an Extraordinary General Meeting was convened by the Requisitionists Shareholders on 3rd March 2020. The Extraordinary General Meeting was called by the Requisitionists shareholders mainly for the purpose of removing seven out of twelve existing directors of the Respondent Company. The act of the shareholders in the matter of appointing or removing the directors of the company from the Board cannot be a subject matter of judicial scrutiny since the right to appoint or remove directors is supreme as a part of the corporate democracy. 32. Issue number 3:- In this respect, a decision rendered by the Hon'ble Supreme Court in TATA Consulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the parties may have been partners in their 'Purvashrama', they had become co-members of a company accepting new obligations in law. Therefore, "a company, however small, however domestic, is a company and not a partnership or even a quasi-partnership". 17.17. It is significant that Sections 241 and 242 of the Companies Act, 2013 do not specifically confer the power of reinstatement, nor we would add that there is any scope for holding that such a power to reinstate can be implied or inferred from any of the powers specifically conferred. 17.18 The following words at the end of sub-section (1) of 242 "the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit" cannot be interpreted as conferring on the Tribunal any implied power of directing reinstatement of a director or other officer of the company who has been removed from such office. These words can only be interpreted to mean as conferring the power to make such order as the Tribunal thinks fit, where the power to make such an order is not specifically conferred but is found necessary to remove any doubts and give effect to an order for which the power is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutes are not enacted in a vacuum, it is assumed that long standing principles of constitutional law and administrative law are not displaced by use of merely general words. This is styled as the principle of legality. In the words of SIR JOHN ROMILLY: "The general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the previous policy untouched." Since every new law involves some change the above statement of LORD ROMILLY must be applied with caution and should be normally confined to cases where 'the abrogation of a long standing rule of law is in question'. There are many presumptions which an interpreter is entitled to raise which are not readily displaced merely by use of general words, e.g., an intention to bind the Crown or an intention to exclude the supervisory jurisdiction of superior courts will not be inferred merely by use of general words. It is an application of the same principle that unless there be clearest provision to the contrary, Parliament is presumed not to legislate contrary to rule of law which enforces 'min ..... X X X X Extracts X X X X X X X X Extracts X X X X
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