TMI Blog2007 (9) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... it would be more appropriate to give direction to the Company Law Board to dispose of the main petition in C. P. No. 64 of 2006 pending before it and consider the same after giving opportunity to all the parties to raise their contention, and pass orders in accordance with law on or before 31-1-2008. - C.M. A. NO. 1900 OF 2007 - - - Dated:- 19-9-2007 - P.P.S. JANARTHANA RAJA, J. R. Gandhi and V. Ramakrishnan for the Appellant. P.N. Aravindh Pandian, G. Ramu, K.S. Natarajan, A.K. Raghavalu, Satish Parasaran, S. Subbiah, N.V. Srinivasan, S.S. Kumar and C. Umasankar for the Respondent. JUDGMENT 1. This civil miscellaneous appeal is filed by the appellants against the order, dated 9-8-2007 - S. Balasubramanian v. Aruna Theatres Enterprises (P.) Ltd. [2008] 141 Comp. Cas. 797 of the Company Law Board, Additional Principal Bench at Chennai, passed in Company Application No. 41 of 2007 in Company Petition No. 64 of 2006, raising the following substantial question of law : "Whether in the facts and circumstances of the case, the Company Law Board erred in law in granting interim relief to the respondents by directing the implementation of the resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 200 ( iii )S. Indira, d/o. S. Karuppasamy Pillai 200 ( iv )K. Vadivel Murugan, s/o. Karuppasamy Pillai 200 ( v )K. Muthukrishnan, s/o. S. Karuppasamy Pillai 200 ( vi )K. Muthuselvakumar, s/o. S. Karuppasamy Pillai 200 4.S. Paramasivam Pillai 766 ( i )P. Baghavathiammal (died), w/o. S. Paramasivam Pillai 500 5.S. Sundaram Pillai (died) 100 ( i )S. Gomathiammal, w/o. S. Sundaram Pillai 500 ( ii )S. Balasubramanian, s/o. S. Sundaram Pillai 666 6.S. Kalyanasundaram (died) had 766 shares ( i )K. Ulageswariammal, w/o. S. Kalyanasundaram had 500 shares ( ii )K. Muthusamy, s/o. S. Kalyanasundaram 100 ( iii )K. Shanmugasundaram, s/o. S. Kalyanasundaram 350 ( iv )K. Murugan, s/o S. Kalyanasundaram 200 ( v )V. Ananthi, d/o. S. Kalyanasundaram 43 ( vi )K. Vallidevi, d/o. S. Kalyanasundaram 41 ( vii )M. Sundari, d/o. S. Kalyanasun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited companies. All the six brothers and their children alone have been the only group of persons enjoying ownership rights over the said businesses. Even over the 3 private limited companies all the six brothers jointly held rights by allotting equal shares and whenever any single brother died, the deceased brother s legal heirs inherited joint shareholding both in the private limited companies and in the partnership businesses. The first appellant-company was promoted by six brothers of a family during the year 1979. In late 1980, when the Tamil Nadu Housing Board earmarked in the Ashok Nagar Scheme an area of 23 grounds and 1930 sq. ft. for housing a cinema theatre and the adjacent plot of land measuring 5 grounds and 800 sq. ft. for allotting to a petrol pump, all the brothers unanimously decided to obtain allotment of the said two properties for their family. As at that time if theatre and petrol pump would not have been operated over the respective lands allotted by Tamil Nadu Housing Board, the authorities were to cancel the allotment of land and further due to such an eventuality the properties were to be affected by the Urban Land Ceiling Act, the appellant-company commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent board of directors to submit a weekly report before this Hon ble Bench on the daily collections made by the first respondent-company from the cinema theatres owned by it." 6. Later appellant Nos. 2 and 3 and also the sixth respondent herein, who were the ex-directors of the company were acting against the interest of the company and hence majority of the shareholders of the company representing about 64 per cent of the share capital of the company sent a requisition notice under section 169 of the Companies Act, 1956, for convening an extraordinary general meeting of the company for the removal of appellant Nos. 2 and 3 and the sixth respondent from the board of directors of the company and in their place appointing respondent Nos. 2 to 5 as the directors of the company. The said requisition notice was sent by the shareholders to the company on 14-11-2006 and in spite of no bar in holding the board meetings, the previous board failed to comply with section 169(6) of the Companies Act, 1956, to call the extraordinary general meeting within 21 days of deposit of the said notice by the shareholders and hence the requisitionists themselves proceeded to call the extraordinary ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir place respondent Nos. 2 to 5 herein and only members holding 1,459 shares voted against the said resolutions. It is also not disputed that none of the shareholders of the company including appellant Nos. 2 and 3 and the sixth respondent herein have challenged the said meeting till date. Later respondent Nos. 1 to 5 filed an application in C.A. No. 41 of 2007, requesting the Company Law Board for implementation of the resolutions passed at the extraordinary general meeting held on 5-1-2007 and appellant Nos. 2 and 3 and the sixth respondent have resisted the implementation. After hearing the arguments advanced by both the sides, the Company Law Board, by order dated 9-8-2007, allowed the Company Application No. 41 of 2007 and ordered that respondent Nos. 2 to 5 are at liberty to implement the resolutions passed in the extraordinary general meeting on 5-1-2007, with certain conditions. Aggrieved by the order, the appellants have filed the present appeal. 8. Learned counsel appearing for the appellants submitted that the Company Law Board erred in permitting implementation of the resolutions passed at the extraordinary general meeting held on 5-1-2007, directing the removal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company sent a requisition notice under section 169 of the Companies Act, 1956, for convening an extraordinary general meeting of the company for the removal of appellant Nos. 2 and 3 and the sixth respondent from the board of directors of the company and the said notice was sent by the shareholders to the company on November 14, 2006. Pursuant to the calling of extraordinary general meeting by majority of shareholders of the company as above, some of the shareholders prayed for interim stay of the extraordinary general meeting called on 5-1-2007 and the same was rejected by the Company Law Board on 14-12-2006. Also one of the shareholders moved before this court seeking interim injunction restraining the requisitionists from holding the extraordinary general meeting of the company and this court also dismissed the same with a direction that the resolutions shall not be implemented except with the leave of the Company Law Board. Thereafter, none of the shareholders of the appellant-company challenged the said meeting or resolutions till date. Hence the general meeting held as well as resolutions passed are in accordance with law. The Company Law Board strictly has given effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the removal of appellant Nos. 2 and 3 and the sixth respondent as directors, pending disposal of the main petition. The issue involved are mixed questions of fact as well as law and the Company Law Board ought not to have held and it cannot be adjudicated at the interim stage and thereby erroneously granting the interim relief. Further, counsel vehemently contended that the seventh respondent must continue as a receiver and attend to the day-to-day affairs of the company. He alternatively submitted that suitable direction may be given to the Company Law Board to take up the main matter and dispose of the same and that till the same is disposed of, the board of directors shall not take any major policy decision. 13. Counsel appearing for respondent Nos. 6, 7, 15, 20 and 21 also submitted that the order passed by the Company Law Board is in accordance with law and further adopted the arguments of counsel for respondent Nos. 1 to 5. 14. Heard counsel. There is no dispute to the fact that a large number of shareholders of the first appellant-company holding about 64 per cent of the paid-up capital of the company, sent a requisition dated 14-11-2006, to the board of director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. In the present case, some shareholders went and challenged to call for the extraordinary general meeting before the Company Law Board and the same was dismissed on 14-12-2006, and the Company Law Board rightly called for the meeting subject to a condition that any resolution passed in the extraordinary general meeting will not be given effect to without the consent of the Bench and posted the matter on 8-1-2007, for hearing. After passing of that order, one of the shareholders challenged the same before this court. This court also by order dated 5-1-2007, dismissed the original application in O.A. No. 2 of 2007 in C.S. No. 4 of 2007. The prayer in the said original application is to declare that the notice dated 8-12-2006, issued for convening an extraordinary general meeting on 5-1-2007, at 10.30 a.m. is illegal, invalid and ultra vires and for consequential permanent injunction restraining defendant Nos. 5 to 30 therein from holding the extraordinary general meeting of the company on 5-1-2007, or on any subsequent date. After hearing the arguments, this Court held as follows : "Further, in the meeting to be held on 5-1-2007, if any resolution is passed, the same canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii )The eighteenth respondent is entitled to attend the board meetings convened periodically by the company as an invitee and shall not exercise any of the rights of a director. ( iv )This order is subject to the outcome of the main petition." 16. The majority of the shareholders of the company representing 70 per cent of the shareholders of the company extended their support for the implementation of the resolutions passed in the extraordinary general meeting on 5-1-2007. Only thereafter, they requested the Company Law Board to permit implementation of the resolutions. Also it has to be noted here that appellant Nos. 2 and 3 and the sixth respondent never challenged the order of the Company Law Board dated 14-12-2006, permitting the holding of the extraordinary general meeting, nor subsequent to the holding of the extraordinary general meeting on 5-1-2007. Hence, it is too late in the day to question the resolutions passed in the extraordinary general meeting by the majority of the shareholders. It is also not in dispute that there are no procedural irregularities or illegalities. I am also conscious of the fact that the order sought for was in the nature of one of the main ..... 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