2021 (9) TMI 812 - Tri - Companies Law

Seeking direction to the respondents to hold/convene the annual general meeting of the company for the financial year 2018-2019 - appointment / nomination of an observer for the annual general meeting of the company to be held for the financial year 2018-2019 - HELD THAT - The objective of Section 97 of the Companies Act, 2013 is to facilitate an Annual General Meeting of the shareholders through the intervention of the court in case the directors fail to hold the AGM in accordance with the provisions of Section 96. Since the provision starts with the words, If any default is made in holding the Annual General Meeting of a company under Section 96.. , it is clear that the existence of a default is a condition prior to invoking the jurisdiction of this Tribunal under Section 97 of the Companies Act, 2013. The admitted position is that there is a default on the part of the respondents in conducting the AGM of the company, albeit both sides blaming each other for the default. Here, since the 2nd Respondent in his reply affidavit has agreed to conduct the AGM as per the provisions of Section 97 of the Companies Act, this Tribunal directs the respondents to conduct the AGM for the Financial Year 2018-2019 as prescribed under the Companies Act,2013, on 30th October 2021. Petition disposed off.

Issues:
1. Failure to hold the Annual General Meeting for the financial year 2018-2019 as per Companies Act, 2013.
2. Allegations of mismanagement, incompetence, and dishonesty against the managing director of the respondent company.
3. Dispute regarding the non-cooperation of directors in signing accounts for authentication.
4. Impact of COVID-19 pandemic on the company's operations and meetings.
5. Legal provisions under Sections 96 and 97 of the Companies Act, 2013.

Issue 1: Failure to hold the Annual General Meeting:
The petitioner filed a Company Petition under Section 97 of the Companies Act, 2013, against the respondent company for not convening the Annual General Meeting for the financial year 2018-2019 by the specified deadline. The petitioner argued that this failure was detrimental to the rights of shareholders. The respondent, in defense, cited non-cooperation from certain directors, including the petitioner, as a reason for the delay. The Tribunal noted the admitted default in conducting the AGM and directed the respondents to hold the meeting as per the Act on 30th October 2021.

Issue 2: Allegations of Mismanagement:
The petitioner accused the second respondent, who is the managing director of the company, of mismanagement, incompetence, and dishonesty. It was alleged that the second respondent wilfully violated statutory obligations, misused company funds, and prevented proper functioning of directors. However, the second respondent defended himself by stating efforts made to manage the company amidst adverse market conditions and the COVID-19 pandemic. The Tribunal considered these allegations but focused on the necessity of conducting the AGM in compliance with the law.

Issue 3: Dispute over Director Cooperation:
There was a dispute regarding the cooperation of directors, including the petitioner, in signing accounts for authentication, which led to delays in holding the AGM. The respondent claimed that efforts were made to involve all directors in the process, but certain directors, including the petitioner, were non-cooperative. The Tribunal acknowledged this issue but emphasized the importance of adhering to legal requirements for holding the AGM.

Issue 4: Impact of COVID-19 Pandemic:
The respondent highlighted the challenges faced due to the COVID-19 pandemic, including restrictions on holding meetings during lockdown periods. The petitioner's attempt to call an Extraordinary General Meeting during the pandemic was hindered by legal restrictions. The Tribunal considered these circumstances but ultimately focused on ensuring compliance with the Companies Act, 2013, regarding the AGM.

Issue 5: Legal Provisions under Sections 96 and 97:
The Tribunal analyzed Sections 96 and 97 of the Companies Act, 2013, which outline the requirements for holding annual general meetings and the powers of the Tribunal in case of default. Section 97 allows the Tribunal to intervene and direct the holding of an AGM if a default occurs. The Tribunal emphasized the necessity of fulfilling these legal obligations and ordered the respondents to conduct the AGM for the financial year 2018-2019 as per the Act.

This detailed analysis covers the key issues raised in the legal judgment, focusing on the failure to hold the AGM, allegations of mismanagement, director cooperation disputes, the impact of the COVID-19 pandemic, and the relevant legal provisions under the Companies Act, 2013.

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