TMI Blog2013 (5) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... d on ground that it did not bear signature of requisitionist - Held that:- The mere fact that IFCI did not reply to TFCI's letter dated 2-12-2010 did not mean that any legal presumption could be drawn that the requisition dated 26-11-2010 was not authorised by the board and/or the company secretary of IFCI did not have the authority to requisition the EOGM. The fact was that the board of IFCI had, vide its resolution dated 29 -11-2001, given specific authority to its company secretary to sign all legal documents. IFCI's subsequent board resolution dated 31-3-2011 passed in favour of its company secretary as a measure of abundant precaution did not prove that there was no prior authorisation in favour of IFCI's company secretary when requisition dated 26-11-2010 was issued. Moreover, the board of IFCI vide its resolution dated 27-10-2010 had taken a conscious decision to reconstitute the board of TFCI. As far as the finding of the CLB that the requisition dated 26-11-2010 was not signed as required under section 169(3) was concerned, the law prescribes no particular form of the requisition. If all the documents served by IFCI was taken as a composite document, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es consequently, it was to be directed that EOGM requisitioned by the IFCI for 18-5-2011 would be held on the scheduled date but if the resolution removing the three directors of TFCI was passed therein, then it would not be given effect to till permission for the same was granted by the CLB. For that purpose, IFCI was to be granted liberty to file an application before the CLB in the disposed of petition seeking permission of CLB to give effect to the said resolutions. The instant petition was to be disposed of with the directions that the impugned order dated 22-3-2011 passed by the CLB was to be set aside.The requisition dated 26-11-2010 and EOGM dated 17-1-2011 were legal and valid.Appointment of five directors by TFCI's Board on 22-3-2011 was to be set aside. EOGM scheduled for 18-5-2011 was allowed to be held on the said date but if resolution removing the three directors including CMD, TFCI was passed therein, the same would not be given effect to till permission of the CLB was obtained by IFCI by filing an application in company petition. A retired Judge of the Court was appointed as chairman of the board of TFCI. He would only attend and chair board meetings of TFCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er with an advance copy to the other side. No further extension of time shall be sought or granted. List on 12-1-2011 at 2.30 p.m." 4. On 12-1-2011, CLB while disposing of CA 17/2011 filed by TFCI praying for stay of EOGM called by the IFCI, held as under : "8. ..... I am thus of the considered view that for the reasons aforesaid deferment of the EOGM scheduled to be held on 17-1-2011 is inevitable. I accordingly order that the EOGM requisitioned under section 169(6) of the Act and scheduled to be held on 17-1-2011 under notice dated 15-12-2010 shall be deferred till further orders. Interim order at (A) dated 1612.2010 shall also continue till further order C.A. 17/2011 stands disposed of accordingly." 5. The aforesaid order dated 12-1-2011 was impugned before this Court, wherein this Court allowed the EOGM to be held as scheduled on 17-1-2011 but directed that the decisions taken by EOGM would not be given effect to till the CLB decides the petition finally. 6. CLB in the impugned order held requisition dated 26-11-2010 issued by IFCI as invalid on the ground that it did not bear the signature of the requisitionist. CLB further held that IFCI issued notice dated 15th De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FCI i.e., the requisitionist company. From this letter one cannot comprehend that the requisition is signed by the Company Secretary of IFCI. The argument that the explanatory statement under section 173(2) of the Act formed part of the requisition under section 169(1) of the Act is also not substantiated by the covering letter of Mr. Javed Yunus at page 198 as it makes no mention of the explanatory statement under section 173(2), the notices under section 257 or the notice under section 190 of the Act having been sent with his letter. May be these did not even form part of his letter dated 26-11-2010 containing the requisition under section 169(1). Therefore the fact that these documents bear the signature and seal of Rupa Sarkar, the company secretary of IFCI does not in any manner validate the requisition under section 169(1) of the Act. A perusal of the 2 pages of the requisition shows that the second page is not printed on the letter-head of IFCI. A completely illegible seal appears to have been affixed over the initial put by some person. In both the pages below the initial, the name of the person initialing is not written as is to be found in the explanatory statement under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed on 16-12-2010 at 2.30 PM. Had it not been so, on 16/12/2010 while considering the submission by learned senior counsel for IFCI and TFCI an effort was being made by me to balance the equity on both sides by ordering status quo on the Board of Directors of TFCI and also by injuncting IFCI from taking any further step for convening an EOGM besides the steps already taken by it, i.e., requisitioning an EOGM under section 169(1), Sr. Counsel for IFCI would have divulged that the notice under section169(6) had already been issued by IFCI and nothing else remained to be done. No such statement was made. The argument advanced by learned senior counsel for IFCI and recorded by me in para 4 of my order dated 12-1-2011 also throws light on the stand taken by IFCI. I am therefore of the considered opinion that IFCI in blatant disregard of the order passed by me, fraudulently issued notices under section 169(6) of the Act after I had passed the interim order dated 16-12-2010 restraining IFCI from taking any further steps for convening an EOGM besides the steps already taken. I, therefore, hold that EOGM convened on 17-1-2010 by IFCI is null and void." 7. Consequently, CLB decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretary to sign, execute all legal documents for and on behalf of IFCI was, in fact, made available to TFCI on 8-12-2010 as a part of an advance copy of the petition filed by IFCI under section 169 of the Act before the CLB. 13. Mr. Mata next submitted that in accordance with section 169(6) of the Act in case the Board fails to call for a meeting within 21 days from the date of receipt of a valid requisition, the requisitionist may proceed to call an EOGM. He submitted that IFCI's refusal to hold EOGM triggered the invocation of section 169(6) of the Act and IFCI's act of issuing notices and subsequent EOGM are within the parameters of law. In this connection, he relied upon a judgment of Bombay High Court in Cricket Club of India Ltd. v. Madhav L. Apte [1975] 45 Comp. Cas. 574 (Bom.). 14. Per contra, Mr. U.K. Chaudhary, learned senior counsel for TFCI submitted that for a valid requisition under section 169(1) of the Act, firstly there has to be a board resolution of IFCI requisitioning an EOGM and secondly, such requisition has to be made by a person so authorised by the Board. Mr. Chaudhary submitted that by not replying to the letter dated 2-12-2010 and the fact that a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of EOGM is fixed for 17-1-2011'. The certificate from IFCI's printer that the printed notices were delivered to the designated courier and IFCI office in the morning of 16-12-2010, clearly shows that since no notice was dispatched to shareholders on 15-12-2010, it cannot be said that 'the notices were issued to the shareholders on 15-12-2010'. Mr. Chaudhary further submitted that at the relevant date IFCI was not in possession of list of updated shareholders as it asked for the same by letter dated 15-12-2010. Mr. Chaudhary also relied upon the receipts from LIC and Bank of Baroda to show that these two institutions received the notices only after 21-12-2010. He submitted that it is clear from the above stated events that IFCI had, in fact, after the order dated 16-12-2010 issued ante dated notices dated 15-12-2010 for convening EOGM on 17-1-2011. 18. Mr. Chaudhary further submitted that the decision of the Board of TFCI dated 22-3-2011 appointing five additional Directors cannot be the subject matter of appeal as these appointments were made after the dismissal of IFCI's petition by CLB. 19. Mr. Chaudhary lastly pointed out that IFCI has issued a fresh notice dated 1-4-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 196 wherein it has been held as under : "15. The meaning of the word 'issued', on which considerable stress was laid by learned counsel for the respondent, has to be gathered from the context in which it is used. Meanings of the word 'issue' given in the Shorter Oxford English Dictionary include: 'to give exit to; to send forth, or allow to pass out; to let out; ... to give or send out authoritatively or officially; to send forth or deal out formally or publicly; to emit, put into circulation'. The issue of a charge-sheet, therefore, means its dispatch to the government servant, and this act is complete the moment steps are taken for the purpose, by framing the charge-sheet and dispatching it to the government servant, the further fact of its actual service on the government servant not being a necessary part of its requirement....." 23. With reference to EOGM scheduled to be held on 18-5-2011, Mr. Mata submitted that the appellate court has jurisdiction to adjudicate only the question of law arising out of the order passed by the CLB. He relied upon judgments in Mohd. Jafar v. Nahar Industrial Enterprises Ltd., [1998] 93 Comp. Cas. 717 (Delhi) and CIT v. Scindia Steam Nav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pparent that the Company Secretary of IFCI was authorised by its Board by a prior general authorisation to requisition an EOGM. Also, during the course of hearing of the appeal, it was not controverted before me that the minutes of board meeting dated 29-11-2001 had been given on 8-12-2010 to TFCI as an annexure along with initial petition filed by the IFCI under section 169 of the Act which was later dismissed as premature. 26. I am also in agreement with Mr. Mata that IFCI's subsequent board resolution dated 31-3-2011 passed in favour of its Company Secretary as a measure of abundant precaution did not prove that there was no prior authorisation in favour of IFCI's Company Secretary when requisition dated 26-11-2010 was issued. 27. Moreover, the Board of IFCI vide its resolution dated 27-10-2010 had taken a conscious decision to reconstitute the board of TFCI. The extract of the minutes of said Board meeting is reproduced hereinbelow : "Extract of minutes of the meeting of the board of directors of IFCI Ltd. (IFCI) held on wednesday, October 27, 2010 at IFCI tower, New Delhi. ITEM No. 1.9To take note of the information memorandum regarding TFCI circulated to the Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m a bare reading of TFCI's own letter dated 2-12-2010 as well as minutes of board meeting of TFCI dated 14-12-2010, it is apparent that even TFCI had no doubt that the requisition was signed by the Company Secretary of IFCI. The relevant portion of the TFCI's letter dated 2-12-2010 as well as the minutes of Board Meeting of TFCI dated 14-12-2010 are reproduced hereinbelow : (A) Extract from TFCI's letter dated 2-12-2010 : "Re: Requisition for convening an Extra-Ordinary General Meeting (EGM) for consideration of Appointment of Directors/Removal/Replacement of Directors With reference to your letter No. TFCI/2010-26101 dated November 26, 2010 on the subject. In this regard, we inform you that while examination of the papers submitted by you we have found that the requisition submitted on behalf of IFCI Ltd. was signed by the Company Secretary, IFCI Ltd. and the required authorization/Board resolution was not submitted alongwith the requisition. You are, therefore, requested to send the specific authorization/Board resolution... ... ... ..." (Emphasis supplied) (B) Extract from minutes of board meeting of TFCI dated 14-12-2010 : ".....The Board was informed that while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning an EOGM under section 169(6) of the Act. The relevant portion of the company petition is reproduced hereinbelow : "5. Facts of the case ** ** ** (v)The Petitioner humbly submits that after being intimated the decision of the Board of Respondent Company not to convene EOGM, it has in exercise of its right under section 169(6) of Companies Act, 1956 initiated the process to convene the EOGM........" 38. It is pertinent to mention that section 169(6) of the Act only provides for issuance of notices to members by the requisitionist. 39. Moreover, IFCI in its rejoinder affidavit dated 10-12-2010 filed before CLB has categorically averred that the CLB had been informed of the date of convening of EOGM as 17-1-2011 and it was for this reason that the CLB had fixed the next date of hearing as 12-1-2011. The said averment in the rejoinder affidavit is reproduced hereinbelow : "6. The contents of para 6 are wrong and denied. It is wrong to allege that the petitioner has not disclosed about the convening of EOGM. It may be recalled that the Hon'ble CLB was informed of the date of convening of EOGM (17-1-2011) and on the request made by the Counsel for the petitioner, the CL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Board. 44. Normally neither CLB nor this Court interferes with the appointment and/or removal of directors, but in the present case, I am prima facie in agreement with Mr. Chaudhary that the subsequent requisition dated 1-4-2011 seeking removal of three directors including CMD whose tenure expires on 19-1-2012 is an act of takeover of management of TFCI by its largest shareholder who only owns about 37.85 per cent shares. At this stage, it cannot be ruled out that the intent of the EOGM scheduled for 18-5-2011 is to remove the Directors who had not supported the earlier requisitions and resolutions moved by IFCI. Though it is correct that the CMD is not a shareholder of TFCI but she is a professional who has been appointed for a specific tenure to run a financial institution. In my opinion, a professional is certainly required at the helm of affairs and there cannot be any hiatus in the management of such a company. I am also of the view that if their tenure are not protected, it would not only amount to takeover of TFCI's management by IFCI but it would also constitute an act of mismanagement by IFCI. It is pertinent to mention that out of total TFCI's Board strength of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is pertinent to mention that it is on IFCI's instance that subsequent event of appointment of 5 Directors by TFCI Board has been held to be invalid. Consequently, I am of the view that the IFCI cannot approbate or reprobate and this Court has the power to examine subsequent events. In any event, I am fortified in my opinion by the judgment of Supreme Court in Pasupuleti Venkateswarlu v. Motor General Traders [1975] 1 SCC 770, wherein the Apex Court has held as under : "4. We feel the submissions devoid of substance. First about the jurisdiction and propriety vis-a-vis circumstances which come into being subsequent to the commencement of the proceedings. It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding. Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process. If a fact, arising after the lis has come to court and has a fundamental impact on the right to relief for the manner of moulding it, is brought diligently to the notice of the Tribunal, it cannot blink at it or be blind to events which stultify or render inept the decr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of section 399. (2) If, on any application under sub-section (1), the [Tribunal] is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the [Tribunal] may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit. 402. Powers of [Tribunal] on application under section 397 or 398. Without prejudice to the generality of the powers of the [Tribunal] under section 397 or 398, any order under either section may provide for (a)the regulation of the conduct of the company's affairs in future; (b)the purchase of the shares or interests of any members of the company by other members thereof or by the company; (c)in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d)the termination, selling aside or modification of any agreement, howsoever arrived at, between the company on the one hand; and any of the following persons, on the other, namely : (i)t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the court 'to make such orders as it thinks fit' if it comes to the conclusion 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 that a material change has taken place in the management or control of the company by reason of which it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company, 'with a view to bringing to an end or preventing the matters complained of or apprehended'. Both the wide nature of the power conferred on the court and the object or object sought to be achieved by the exercise of such power are clearly indicated in sections 397 and 398. Without prejudice to the generality of the powers conferred on the court under these sections, section 402 proceeds to indicate what type of orders the court could pass and clauses (a) to ( g) are clearly illustrative and not exhaustive of the type of such orders. We are, therefore, unable to accept Mr. Sen's contention that the court's powers under section 398 read with section 402 should be read as subject to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly rejected the submission that the CLB was not justified in issuing direction to the petitioner to purchase the shares of the respondent under section 402 of the Act despite arriving at a finding of fact that no act of oppression had been committed by the appellant. The relevant portion of the said judgment is reproduced hereinbelow : "15. Ordinarily, therefore, in a case where a case of oppression has been made a ground for the purpose of invoking the jurisdiction of the Board in terms of sections 397 and 398 of the Act, a finding of fact to that effect would be necessary to be arrived at. But, the jurisdiction of the Company Law Board to pass any other or further order in the interest of the company, if it is of the opinion, that the same would protect the interest of the company, it would not be powerless. The jurisdiction of the Company Law Board in that regard must be held to be existing having regard to the aforementioned provisions. ** ** ** 17. When there are two Directors, non-cooperation by one of them would result in a stalemate and in that view of the matter the Company Law Board and the High Court have rightly exercised their jurisdiction. ** ** ** 22. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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