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TMI Blog2022 (5) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board on 09.04.2013. In the resolution passed therein, there is no protest by the respondent No.1 regarding attendance of Mr. G.V. Rao. Moreover, Dr. Renuka Datla, by letter dated 15.04.2013, which was addressed to the employees of the Company, welcomed the appointment of appellant Mahima Datla as its Managing Director and appointment of others as Directors. In the case at hand, the respondent No. 1 has not proved that the transfer of shares based on the Will dated 14.02.2005 was a fraud played on her as well as the Company. From the narration of the circumstances, wherein appellant Mahima Datla was groomed by her father to carry the operations of the Company clearly points out to his intention to make such Will. In light of the fact that no allegation of fraud or dishonesty is noticeable in this case, there is no way to ignore the application of this well settled principle - the thrust of the Duomatic Principle is that strict adherence to a statutory requirement may be dispensed with if it is demonstrated otherwise on facts, if the same is consented by all members. In this case at hand, there is overwhelming evidence to show that respondent No. 1 had accepted Mr. G.V. Rao b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ek M. Singhvi, Sr. Adv. Mr. S. Niranjan Reddy, Sr. Adv. Ms. Raavi Venkata Yogesh, AOR Mr. L. Nidhiram, Adv. Ms. Twinkle Rathi, Adv. Mr. Abhishek Sharma, Adv. For Respondent(s) Mr. Sanjay Kumar Tyagi, AOR Mrs. K. Sarada Devi, AOR Mr. S. Chakrapani, Adv. Mr. Chandan Kumar, Adv. Mr. R. Vijaynandan Reddy, Adv. J U D G M E N T Leave granted. 2. These Civil Appeals have been preferred against the judgment dated 17.11.2017, passed by the High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh in Company Appeal No.14 of 2016, whereby the appeal filed by respondent Nos. 1 to 3 against the order dated 30.5.2006 passed by Company Law Board (hereinafter to be referred to as C L B ) was allowed. 3. A brief narration of facts necessary for disposal of these appeals are that the dispute in question relates to a family feud between mother on one side and her three daughters on the other, concerning respondent No. 4 Company ((Biological E. Ltd.) (hereinafter to be referred to as the Company ) which was established by G.A. Narasimha (father of respondent No. 1) in 1953. Dr. Vijay Kumar Datla (father of the appellant Mahima Datla) was inducted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14172 1417200 2.86 11. Dr. (Mrs.) Renuka Datla Miss Mahima Datla 26995 2699500 5.45 12. M/s. V.R. Investment Pvt. Ltd. 18425 1842500 3.72 13. Mr. Pumedu Gupta Mr. Krishna Gupta 250 25000 0.05 Total 495000 49500000 100 5. On 20.3.2013, late Dr. Vijay Kumar Datla, Dr. Renuka Datla and one G.V Rao were Directors of the Company. It is a matter of fact that on 06.04.2013, G.V Rao submitted his resignation letter to respondent No.1 which was later withdrawn on 09.04.2013. Subsequently, in the Board Meeting dated 09.04.2013, Dr. Indira P. Raju was inducted as the Director of the Company in place of (Late) Dr. Vijay Kumar Datla to fulfil casual vacancy, which arose on the demise of Dr. Vijay Kumar Datla. 6. On 10.04.2013, another Board Meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition, pending before the CLB, within a period of three months. Later, the respondent No. 1, for reasons best known to her, withdrew the earlier Company Petition and filed Company Petition No. 36 of 2014. 12. Without going in depth of the details of various applications filed by the parties herein, we can only note that by order dated 30.05.2016, the Company Law Board in Company Petition No.36 of 2014 framed the following issues: (i) Whether the petitioner has requisite qualification as contemplated under Section 399 of the Companies Act, 1956 to invoke the jurisdiction of this Bench under Section 397/398 and other provisions of the Companies Act, 1956 and whether any case has been made out even under Section 111 A of the Companies Act, 1956? (ii) Whether the Board Meetings held on 09.04.2013, 10.04.2013 and 11.04.2013 are legal and valid? (iii) Whether the transmission of shares to an extent of 4,00,961 equity shares held by (Late) Dr. Vijay Kumar Datla in favour of the 2nd respondent is in accordance with the Articles and Law? (iv) Whether the A.G.M conducted on 18.12.2013 is legal and valid? (v) Whether the acts of respondents are oppressive to the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Datla was appointed as the Managing Director of the respondent No.4 Company under Article 145 of Articles of Association read with Section 269 of 1956 Act. It was contended before CLB that respondent No.1 was not physically present in these Board Meetings, however, she was aware of the action taken in those meetings wherein her daughters were appointed to the Board of Directors. Approval of appointment of her daughters by respondent No, 1 is evident from her announcement letter dated 15.04.2013 addressed to all the employees of the respondent No.4 Company. The CLB was of the view that the respondent No.1 being acquiesced in all the events is estopped from raising the said grievance. 16. With regard to the issue No. (iii) relating to validity of transmission of 4,00,961 (81%) shares in favour of the appellant Mahima Datla, it was observed that the transfer took place in the Board Meeting dated 10.04.2013 and the respondent No. 1 had already filed O.S. No. 184 of 2014 challenging the said transmission of shares. It was further held that the issue relating to inheritance of shares being of civil nature, C L B cannot deal with the same. 17. On issue No. (iv), CLB observed that A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppointment as Managing Director/Director/Whole Time Director of the Company are declared as null and void ab initio; e. The transmission of 4,00,691 equity shares held by late Dr. Vijay Kumar Datla to respondent No.2 is illegal, null and void; f. The register of members shall stand rectified by transmission of1/ 4th of the 4,00,691 equity shares to appellant No.1, pending decision on the validity of the Will dt.04 12 1987 propounded by appellant No.1 and Will dt.14 2 2005 propounded by respondent No.2 by the competent Civil Court and subject to its decision. 21. Based on the findings stated in the preceding paragraph, the High Court directed as under: a. Article 128 of the Article of Association of the Company be substituted as under: The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of a Boar, the continuing director or directors may act for the purpose of increasing the number of directors to that fixed for the quorum or of summoning a general meeting of the company, but for no other purpose. b. In exercise of the powers conferred u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter explicitly indicated that his resignation should be acknowledged and Form 32 be filed with the Registrar of Companies. Further, on 09.04.2013, G.V. Rao himself wrote a letter seeking withdrawal of his resignation, which was placed in the meeting of the Board on 09.04.2013. In the resolution passed therein, there is no protest by the respondent No.1 regarding attendance of Mr. G.V. Rao. Moreover, Dr. Renuka Datla, by letter dated 15.04.2013, which was addressed to the employees of the Company, welcomed the appointment of appellant Mahima Datla as its Managing Director and appointment of others as Directors. Further, there are numerous letters such as letter dated 24.05.2013, 22.08.2013, 07.10.2013, 19.10.2013, and 20.10.2013, which clearly acknowledge Mr. G.V. Rao in the capacity of the Director of the Company. Respondent No. 1 also participated in the Board Meetings dated 22.08.2013 and 25.09.2013, without any protest for continuation of Mr. G.V. Rao as its Director. In this context, the appellants herein have invoked the Duomatic Principle to state that the issue of resignation of the Director had lapsed and Mr. G.V. Rao continued to carry on as the Director in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion must be both intra vires and honest. 30. In the case at hand, the respondent No. 1 has not proved that the transfer of shares based on the Will dated 14.02.2005 was a fraud played on her as well as the Company. From the narration of the circumstances, wherein appellant Mahima Datla was groomed by her father to carry the operations of the Company clearly points out to his intention to make such Will. In light of the fact that no allegation of fraud or dishonesty is noticeable in this case, there is no way to ignore the application of this well settled principle. 31. The thrust of the Duomatic Principle is that strict adherence to a statutory requirement may be dispensed with if it is demonstrated otherwise on facts, if the same is consented by all members. In this case at hand, there is overwhelming evidence to show that respondent No. 1 had accepted Mr. G.V. Rao back into the Board and her conduct clearly shows that the resignation dated 06.04.2013 was clearly not accepted. 32. The High Court has clearly fallen into error by not considering the aspect of application of Duomatic Principle. The interpretation ascribed by the High Court to Article 129 of the Articles of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort 2013 Act ). The High Court has held that respondent No. 1 will continue to be the Director of the Company even though she is over 70 years of age. However, the bare perusal of Section 196 of 2013 Act and Part I of Schedule V infers that such a direction is non est in law, which are reproduced as under: 196. Appointment of Managing Director, whole time director or manager (1) No company shall appoint or employ at the same time a managing director and a manager. (2) No company shall appoint or re appoint any person as its managing director, whole time director or manager for a term exceeding five years at a time: Provided that no re appointment shall be made earlier than one year before the expiry of his term. (3) No company shall appoint or continue the employment of any person as managing director, whole time director or manager who - (a) is below the age of twenty one years or has attained the age of seventy years: Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides that no person shall be eligible to be a whole time Director of a Company after attaining the age of 70 years unless such appointment is approved by a special resolution of the Company. In absence of any such special resolution, the finding rendered by the High Court holding that such provision would not apply, is against the statutory provisions of law. 36. Further, the High Court held that the respondent No. 1 and the directors appointed by her to the Board shall continue to hold office for a period of three years. This direction of the High Court is non est in law for being contrary to the provision under Section 152(6) of 2013 Act and Articles 135 and 136 of Articles of Association of respondent No.4 Company. 152. Appointment of directors (6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two thirds of the total number of directors of a public company shall- (i) be persons whose period of office is liable to determination by retirement of directors by rotation; and (ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. (b) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company, it is inferred that one third of the Directors amongst the total Directors on the Board mandatorily retire by rotation every year. The direction of the High Court enabling the respondent No.1 (Dr. Renuka Datla) and the Directors nominated by her to continue to hold office for three years is in violation of the said provisions relating to appointment and retirement of Directors. 37. Insofar as the transfer of disputed shares is concerned, the High Court applied the rule of succession of a Hindu male, as per Section 8 of Hindu Succession Act,1956 and granted the exclusive benefit of transmission of one fourth of disputed shares in favour of respondent No.1 (Dr. Renuka Datla) without ordering the corresponding transmission of the remaining three-fourth shares in favour of appellants/daughters pending the outcome of the Original Suit No.184 of 2014. The High Court s intervention in a question relating to inheritance of shares, claimed on the basis of the Will dated 04.12.1987, which was the subject matter of Civil Suit No. 184 of 2014 before Civil Court, is untenable in Law. Respondent No. 1 is challenging transmission of 81% shares in O.S. No. 184/2014 before the City Civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets of late Dr. Vijay Kumar Datla. Hence, the division of disputed shares was inequitable on the touchstone of the Hindu Succession Act also. 39. The High Court erred in ascertaining that the actions of respondents therein, who hold office in the Company, are oppressive. Under Section 397 of 1956 Act, an application for relief can be brought by any member who complain that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members. The intention of the legislature is that majority shareholders who oppress the minority shareholders and conduct the affairs of the company prejudicial to public interest may invoke the jurisdiction of CLB under Section 397 of 1956 Act. Section 397 reads as under: 397. Application to Company Law Board for relief in cases of oppression. (1) Any members of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Company Law board] for an order under this section, provided such members have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld justify the making of a winding up order on the ground that it was just and equitable that the Company should be wound up. In order to be successful on this ground, the petitioners have to make out a case for winding up of the Company on just and equitable grounds. If the facts fall short of the case set out for winding up on just and equitable grounds no relief can be granted to the petitioners. On the other hand the party resisting the winding up can demonstrate that there are neither just nor equitable grounds for winding up and an order for winding up would be unjust and unfair to them. On these tests, the Division Bench examined the matter before it. In the present case, there is no iota of evidence placed by respondent No.1 that the affairs of the Company were being conducted in a manner prejudicial to the public interest. From the Memorandum and Articles of Association it is seen that the Company is in the business of manufacturing vaccines with profitability and even did good business during Covid pandemic. 40. The respondent No. 1 has contended that she was not allowed to register her protest in any of the meetings which flies in the face of her letter dated 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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