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2023 (10) TMI 896 - AT - Companies LawGrant of Interim Order - stay order on the implementation of the resolutions approved in the EGM - balance of convenience. Whether the Appellants were able to make out a case in their favour for interim order regarding the EGM dated 3.5.2019, and since the EGM took place on 3.5.2019, for granting stay order on the implementation of the resolutions approved in the EGM? HELD THAT:- It is clear from the ad-interim injunction given by NCLT vide order dated 18.11.2016 that EGM dated 21.11.2016 was allowed to be conducted to discuss only the ordinary business of Orbit Electricals and to only take necessary steps connected with statutory compliances required to be made urgently. Further, Orbit Electricals and other Respondents were restrained from not alienating the moveable assets as listed in the agenda of EGM scheduled to be held on 21.11.2016. The essence of this ad-interim injunction, even though granted only till the next date of hearing, is that Ld. NCLT, after considering and noticing relevant facts and arguments of the parties, allowed the EGM dated 21.11.2016 to be conducted to only discuss the ‘ordinary business’ and take necessary approvals connected with the filing of the statutory compliances. The ad-interim injunction also restrained the Respondents from alienating the moveable assets to those that were enlisted in the agenda of the EGM to be held on 21.11.2016. The Learned Senior Counsel for Respondents has argued that the Articles 59 and 60 were not designated as ‘entrenched articles’ as neither a specific notice under section 5(5) was given and moreover, only four out of thirteen members attended the EGM of Orbit Electricals Pvt. Ltd. held on 30.9.2014, which does not fulfil the requirement of section 5(4) - we are satisfied after considering the arguments and averments that Articles 59 and 60 can in a ‘prima facie’ manner be considered as ‘entrenched articles’ and therefore, their amendment/deletion in the EGM dated 3.5.2019 could have been done, after satisfaction of the provisions of sub-sections (3) and (4) of section 5 of the Companies Act, 2013. In particular, sub-section (4) of section 5 of the Companies Act, 2013 makes it necessary that an amendment in the Articles should be agreed to by all the members of the company, in the case of a private company. In order to consider whether a ‘prima facie’ case has been made out in favour of the Appellants regarding the EGM dated 3.5.2019 and the implementation of the Resolutions passed in this EGM, we also look at the voting share of members present and voting in the EGM. It is noted that the shareholding of Prakash Pralhad Chhabria in R-1 company became 70.1% resulting in his having achieved majority shareholding in R-1 Company, was due to the fact that a Gift Deed was executed in his favour by his father Pralhad P. Chhabria on 28.3.2019, and subsequently, the Securities Transfer Form was also signed and executed on the same date i.e. 28.3.2019. The prima facie view that the Gift Deed, Securities Transfer Form and the holding of Board meeting on 31.3.2016 are all under a cloud of suspicion, especially since they sought to override the stated view and intention of PPC to apportion the business of the Finolex Group companies between his own children and nephews. Of course, the non-holding of Board Meeting on 31.3.2016 will be decided by the NCLT in CP 47/2016 which is pending - the balance of convenience lies in favour of Deepak Chhabria, the appellant who by virtue of being AR of Orbit Electricals in FCL has been able to continue as Chairman of FCL. The issue decided in favour of the Appellants by directing that, since EGM dated 3.5.2019 has taken place, the resolutions passed in the said EGM may not be acted upon and such an interim order should continue till the time CP No. 47/2016 is finally decided. Appeal disposed off.
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