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2022 (1) TMI 518 - Tri - Companies LawOppression and Mismanagement - reconstitution of shareholders at a meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal - direction to place for consideration or the shareholders all related party transactions for the years 2015-16, 2016-2017 and 2017-18 in a meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal - direction to refund to the Company all amounts in related party transactions which do not obtain the approval or the shareholders in a meeting of the shareholders of the Company to be convened by and conducted under the supervision of this Tribunal - reopening of financial statements - HELD THAT:- When a company enters into a related party transaction, covered under Section 188 of the act, this requires the consent of the company's Board of directors. Also, if such a transaction exceeds the monetary thresholds prescribed under Rule 15(3) of the Companies (Meeting of Board and its Powers) Rules, 2014, approval of the shareholders will also be required by way of an ordinary resolution. Such consent can be obtained prior to, or within three months after, entering into the transaction. However, in these matters such an action has not done by the Respondents 2 & 3. The related party contracts are to be disclosed in the Board of Directors' Report and in a register of such contracts is to be maintained. It is also seen from the records that the respondent companies have not obtained permission from the Board of Directors to enter into these related party transactions. Hence, the contention of the Respondents that these are not Related Party Transactions and that it is Simple Commercial Transactions cannot be accepted. The Related Party Transactions done by the Respondents are contrary to the provisions of law and in breach of the Articles of Association of the Respondent Company and, therefore, the said Related Party Transactions are hereby declared as invalid and all the proceedings which have been done in violation of the Articles of Associations are also hereby declared as invalid - Since it is declared that the action of the Respondents are illegal, any investigation into the Respondent Companies affairs is not ordered and no penalty imposed on the Respondents for non-compliance of the rules/articles of the Company. Petition disposed off.
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