TMI Blog2013 (2) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... the supervision of an Observer. It is not possible to accept the submission of the Appellants that the requirement of a group of shareholders desiring the convening of an EGM having to first make a requisition to the BOD is mandatory and in circumstance can be dispensed with, even by the CLB while making an order under Section 403 of the Act. That interpretation would in fact be contrary to the legislative intent behind Sections 402 and 403 and dilute the power of the CLB to pass orders which it thinks to be just and equitable in the facts of a case, particularly when an impasse has been created by one group of shareholders making it pointless for the other group to even make such requisition. In Bengal and Assam Investors Limited v. J.K. Eastern Industries Private Limited [1956 (7) TMI 24 - HIGH COURT OF CALCUTTA] it was acknowledged that when a Court directs a meeting to be held under Section 186 “it must necessarily modify or supplement the Articles or the Act.” Also see Shailesh Harilal Shah v. Matushree Textiles Ltd. (1993 (4) TMI 239 - HIGH COURT OF BOMBAY) that the requiremnent of 21 days’ advance notice for holding an AGM was not mandatory notwithstanding the use o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Company Application No. 417 of 2012 filed by Respondents 3 4 in Company Petition No. 92 (ND) of 2010. Background facts 2. The background of the present appeal is that Appellant No. 1, Mr. Sanjay Gambhir, Appellant No. 2, Mrs. Reena Gambhir, wife of Appellant No.1, and Appellant No. 3 Mr. Kanish Raaj Gambhir, son of Appellant No. 1, along with Mr. Karan Gambhir, son of Mr. Surinder Kumar Gambhir and brother of Appellant No. 1, held 33% share holding of D.D. Industries Limited ( DDIL ), Respondent No.1. Mr. Karan Gambhir is the Managing Director ( MD ) of DDIL since the year 2005. 3. DDIL was initially incorporated under the Act on 30th March 1974 as Daulat Ram Dharam Bir Auto Private Limited. Later it was converted into a public limited company with the changed name of Daulat Ram Dharam Bir Auto Limited. Subsequently, the name was further changed to DDIL with a fresh certificate of incorporation, dated 10th May 1999, issued by the Registrar of Companies ( ROC ), Delhi and Haryana. 4. DDIL is a closely held company. Its entire share holding was initially held by the family members of late Mr. Dharambir Gambhir, late Mr. Subhash Gambhir and Mr. Surinder Gambhir (Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm 32 was unauthorizedly filed with the ROC stating that the directors of the B group had vacated office. The prayer in the suit was to declare the Board Resolutions dated 10th November 2009, 1st March 2010, 8th April 2010 and 21st May 2010 as well as the resolution and minutes of the EGM dated 30th March 2010 null and void, illegal, invalid and malafide. A permanent injunction was sought to restrain the A group or their agents, representatives, servants, or nominees from approaching any statutory authority including the ROC. The additional directors appointed by the A group was sought to be restrained from representing themselves as directors of DDIL or changing the constitution of the BOD. 7. Mr. Karan Gambhir also filed a suit being CS (OS) No. 1297 of 2010 challenging the action of the BOD in seeking to take control of the management of DDIL by ousting the A group. In the suit it was prayed that the notice dated 6th June 2010 issued by Mr. Surinder Gambhir for the purpose of convening an EGM on 3rd July 2010 was illegal, unauthorized and should not to be given effect. A permanent injunction was also sought to restrain the B group from operating bank accounts or issuing any ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1297 of 2010 seeking to restrain the A group directors from entering or interfering in the peaceful possession in respect of various premises including F-1/9, Okhla Industrial Area, Phase-I, New Delhi. A large list of properties was made part of prayer a . It was prayed that Board Resolution passed on 27th July 2012 or any of the earlier meetings concerning the subject matter should not be given effect to. It was prayed that the A group directors should not be permitted to upload any Forms/Resolutions pertaining to DDIL on the websites of the ROC. A direction was sought to restrain Appellant No.1 from using his digital signatures in any manner whatsoever and direct ROC to remove the Form 32 filed by him pursuant to the purported Board meeting and restore the status of the BOD as on 23rd December 2011. On 4th August 2012 Respondent No.2 filed CS (OS) No. 2363 of 2012 seeking similar reliefs. It is stated that the application filed by Respondent No.2 under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure ( CPC ) is pending. Proceedings in the CLB 10. Respondent Nos. 3 and 4 filed an application being C.A. No. 417 of 2012 dated 9th August 2012 in the CLB seeking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance, the only hope that the shareholders had was to approach the CLB. As regards Section 186 of the Act, the CLB observed that a holistic approach had to be adopted. In order to restore corporate democracy, an EGM had to be called. The CLB further observed that its jurisdiction under Sections 397 and 398 of the Act was independent of the jurisdiction exercised by this Court in the civil suits. The B group was, therefore, not precluded from seeking reliefs as prayed for. It was observed that since Mr. Karan Gambhir would continue as MD no prejudice would be caused to the A group. 14. Accordingly, by the impugned order dated 22nd November 2012 the CLB allowed the said application and directed DDIL to call an EGM for holding election to the BOD within 15 days. An observer was also appointed to be present at the time of holding the EGM. Submissions of counsel 15. There were three propositions advanced by Mr. K. Datta, learned counsel for the Appellants. He submitted that if the Act envisaged a certain procedure for performing an act, it had to be performed in that manner or not at all. The requirement of Section 169 of the Act could not have been dispensed with. Secondly, he s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) of the Act, the office of director would become vacant if he acted in contravention of Section 299 of the Act. In the first place there had to be a determination of the violation of Section 299 of the Act. In the facts and circumstances of the case, the said provision was not attracted at all since the interest of the directors had been disclosed at an earlier meeting held on 28th March 2012. In any event there was no provision in the Act that prevented a director who was disqualified under Section 299 read with Section 283 (1) (i) of the Act from being subsequently appointed as such. There was in any event no warrant for the unilateral decision by Mr. Karan Gambhir that four of the directors of the B group had demitted office. Mr. Bakhru also submitted that the nature of the action under Sections 397 and 398 of the Act was derivative. There could be instances where, as in this case, a minority group of shareholders could oppress the majority. The power of the CLB under Section 403 of the Act was wide enough to issue directions for the proper administration of the affairs of DDIL. It was not circumscribed by Section 186 of the Act. Decision in the appeal 17. The Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioners and their group of Directors, at present, have only a single Director on Board and are thus, in minority. The Petitioners and their group of Directors have been slowly removed from the Board illegally, despite the fact that the Petitioners and their group of Directors are still holding 33% shareholding in the Respondent No. 1 Company. It is pertinent to mention that Petitioners Nos. 1, 2 and 3 have been removed illegally by the Respondent No. 1 Company. 20. There was therefore a clear acknowledgment by the A group that by that date their directors had been removed from the BOD of DDIL. Further, in para 9 it was acknowledged that it is the admitted case of the Respondents that Mr. Karan Gambhir is the Managing Director of the Respondent No. 1 company and is as such fully incharge of the divisions under his control. However, the Respondents and their group of Directors are constantly causing hindrance in his discharging his responsibilities as a Managing Director. Interestingly, in para 12 of the application the A group mentions that a meeting of the BOD had been held on 28th March 2012 but does not state anything about the directors of the B group having faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the suits, there was no occasion to hold such meeting without seeking leave of either. Further it is extraordinary that a one-man meeting was held by Mr. Karan Gambhir designating himself as Director/Chairman, without notice to the B group, declaring in the said meeting that they ceased to be directors. Mr. Karan Gambhir took a risk in proceeding with such unilateral action of doubtful validity. He persisted with it by using the digital signature in his capacity as MD to uphold Form 32 thus purporting to present the CLB and this Court with a fait accompli. 24. As rightly pointed out by Mr. Bakhru, the occasion for Mr. Karan Gambhir to invoke Section 283 (1) (i) read with Section 299 did not arise. A perusal of the minutes of the BOD meeting held on 28th March 2012 read with the notes accompanying the agenda for the meeting reveals that the factum of the exposure of DDIL to the loans advanced to DDPPL was disclosed. It was in the above circumstances that the B group filed Company Application No. 417 of 2012 seeking an order for convening an EGM of the shareholders of DDIL under the supervision of an Observer. 25. The question of law that arises for consideration in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is referred to in clause (a) of sub-section (4), whichever is less; or (c) in the case of a company not having a share capital by such of the requisitionists as represent not less than one-tenth of the total voting power of all the members of the company referred to in clause (b) of sub-section (4). Explanation. For the purposes of this sub-section, the Board shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly convened the meeting if they do not give such notice thereof as is required by sub-section (2) of section 189. (7) A meeting called under sub-section (6) by the requisitionists or any of them (a) shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board; but (b) shall not be held after the expiration of three months from the date of the deposit of the requisition. Explanation. Nothing in clause (b) shall be deemed to prevent a meeting duly commenced before the expiry of the period of three months, aforesaid, from adjourning to some day after the expiry of that period. (8) Where two or more persons hold any shares or intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to order substantial reliefs as set out in Section 402. The width of the power is indicated by the words any interim order which it thinks fit and such terms and conditions as appear to it to be just and equitable. The power is not limited by other provisions of the statute. Section 402 in fact begins with the words Without prejudice to the generality of the powers of the Tribunal . There is nothing to indicate that while exercising the powers under Sections 402 or 403 of the Act the CLB has to necessarily account for the mandatory requirements of other provisions like Sections 169 or 186 of the Act. The language in fact appears to indicate to the contrary. It permits the CLB to pass orders as long as it is in the interests of the proper conduct of the affairs of the company and it is just and equitable to pass such order. Whether in fact the order is justified will of course depend on the facts of each case. 27. It is not possible to accept the submission of the learned counsel for the Appellants that the requirement of a group of shareholders desiring the convening of an EGM having to first make a requisition to the BOD is mandatory and in circumstance can be dispens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances. As rightly observed by the CLB, it was pointless for the B group to send a notice under Section 169 of the Act to the BOD comprised entirely of directors of the A group for convening an EGM. In all probability that request could have been rejected. In the face of the unilateral acts of Mr. Karan Gambhir, the B group was not acting unreasonably in anticipating rejection of their request by the BOD constituted only by the directors of the A group. The CLB in the impugned order has rightly distinguished the decisions relied upon by the Appellants, which were pressed into service in these proceedings as well. 30. As far as the question of the CLB building in safeguards into its decision is concerned, the minutes of the meeting of the EGM held under the supervision of the Observer shows Mr. Karan Gambhir continues as MD of DDIL. Thus the interests of the A group who continue as minority shareholders of DDIL and who are represented by Mr. Karan Gambhir on the BOD are accounted for. Conclusion 31. Consequently, this Court is satisfied that no ground has been made out for interference with the impugned order dated 22nd November 2012 of the CLB. The appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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