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2015 (12) TMI 175 - MADRAS HIGH COURT

2015 (12) TMI 175 - MADRAS HIGH COURT - TMI - Non-compliance of the provisions of Section 160 of the Companies Act, 2013 - appellant did not consider the notice issued by the second respondent under Section 257 of the companies Act, 1956 for considering the appointment of its nominees - Held that:- As per Section 160 of the companies Act, 2013, notice has to be issued 14 days prior to the meeting for the appointment of Director together with the deposit of ₹ 1 Lakh for the purpose of consi .....

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ry requirement of issuing 14 days notice, the Company Law Board has not exercised its discretion and such order passed by the Company Law Board without dispensing with the notice, will not hold good. It is also not the reasoning of the Company Law Board that the appellant raised any dispute over its discretion to dispense with the notice. It is manifestly clear that the Company Law Board had adopted a callous attitude and chose not to go into the issue in detail. In any view of the matter, since .....

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> For the foregoing reasons, the common order impugned in these appeals is set aside and the matter is remitted to the Company Law Board to pass orders on the petitions in accordance with the statutory provisions. - Company Appeal Nos. 10 and 11 of 2015, M.P. Nos. 1 and 2 of 2015 in Company Appeal No. 11 of 2015 - Dated:- 29-9-2015 - Smt. PUSHPA SATHYANARAYANA, J. For The Appellant : Mr. A.K. Mylsamy for M/s A.K. Mylsamy Associates For The Respondent : Mr. T.K. Seshadri, SC for Mr. T.K. Bhaskar .....

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r the appellants and Mr. T.K. Seshadri, learned Senior Counsel appearing for the second respondent and perused the records. 4. The first petitioner Mekuba Petroleum India Private Limited [hereinafter, referred to as Mekuba ], represented by its shareholders and directors, having an authorized capital of ₹ 50 Lakhs consisting of 50,000 equity shares of ₹ 100/- each, entered into a Foreign Collaboration Agreement on 02.6.1997 with the respondents 2 and 6, viz., Wynn s Belgium NV and on .....

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a wide range of additives for automotive oils and fuels, viscosity improvers, anti-knock preparations for gasoline and diesel engines, emission control products and anticorrosion preparations for automobiles and other engines and also provision of associated and incidental services. 5. As per the Foreign Collaboration Agreement, the second respondent Wynn s Belgium holds 51% equity shares while the petitioner and sixth respondent Paul Middel [for short, Paul ] having 40% and 9% respectively. It .....

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cessary sanction from the Reserve Bank of India, ₹ 41 Lakhs was disbursed on 29.8.1998, which has to be repaid on 31.01.2005. While so, during December 2004, the third respondent Wynn Oil Company, the Holding Company of Wynn s Belgium, was taken over by the fourth respondent Illinois Tool Works Inc., USA, and as such there was a change in the management of Wynn Oil Company. After change of management of Wynn Oil Company, Holding Company of Wynn s Belgium which is entitled to have equal rep .....

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the business of Wynn Oil Company and the representatives of ITW, U.K. and India decided to terminate the Foreign Collaboration Agreement and not to use the trade name Wynn s expressing their desire to take possession of the moulds and inventory. 7. It is also the case of the petitioners that from February 2007, Wynn s Belgium stopped shipping fuel, machines, raw materials and also the other requirements sought for by them. Further, on 19.02.2007, Wynn s Belgium issued a counsel notice under Sec .....

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of Deloitte despite their endeavour to provide all the information to Deloitte. Subsequently, Deloitte also resigned its office as statutory auditor of the company by its letter dated 23.01.2008 without completing the audit. 8. In such situation, Wynn s Belgium filed C.P. No. 154 of 2007 seeking to wind up the Company on the ground that it was unable to pay its debts. This Court, by order dated 21.01.2008, directed the Company to pay a sum of ₹ 15 Lakhs per month on or before 15th of ever .....

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the interest of the Company and its minority shareholders. 9. Alleging that the termination of the Foreign Collaboration Agreement and the conduct and the scheme adopted by Wynn's Belgium as a major shareholder of the Company, are mala fide, the petitioners filed Company Petition No. 15 of 2008 before the Company Law Board for the following reliefs:- (a) To declare the termination of Collaboration Agreement dated 02.6.1997 by the second respondent in its letter dated 07.02.2008 is mala fide .....

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and (e) To direct the Company to market its products under Wynn's name. 10. Respondents 2, 4 and 5 filed counter statements separately denying the averments made in the Company Petition mainly stating that the Company Petition is not maintainable. According to the second respondent, Clause 7.6 of the FCA has not been incorporated in the Articles of Association of Wynn's Mekuba and hence, it is not enforceable. 11. Pending Company Petition No. 15 of 2008, the second respondent Wynn's .....

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teen days before the proposed Annual General Meeting on 27.9.2012. The Company Law Board, Chennai Bench, after contest, on consideration of the materials placed thereon, allowed the application by order dated 29.5.2013 directing the Company to consider the notice issued by Wynn's Belgium proposing the appointment of Directors as per the notice by convening the General Meeting of the Company. 12. The second respondent Wynn's Belgium also filed another application being C.A. No. 2 of 2014 .....

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of the shareholders to be exercised in the AGM, by order dated 26.9.2014, directed the Company to consider the appointment of nominees of the second respondent as one of the agenda in the 17th AGM on 27.9.2014 besides appointing one Kanna, Bench Officer of the Bench as Independent Observer to oversee the proceedings and adjourned the C.A. to 20.11.2014. 14. That being so, the petitioner Mekuba filed an application being C.A. No. 3 of 2014 on 17.11.2014 before the Company Law Board praying for in .....

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ct to the changes effectuated in the Board of Directors of the Company at the 17th AGM. The said application was resisted by the Company through the second appellant herein. 16. The Chennai Bench of the Company Law Board, after hearing the learned counsels for the parties, vide common order dated 14.05.2015, dismissed the application C.A. No. 3 of 2014 filed by the petitioner Mekuba holding that the provisions of Section 160 of the Companies Act have not been complied with while allowing the app .....

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econd respondent is not in accordance with Section 160 of the Companies Act, 2015. 18. Per contra, learned counsel for the second respondent submitted that since the appellant did not consider the notice issued by the second respondent under Section 257 of the companies Act, 1956 for considering the appointment of its nominees, it filed an application C.A. No. 192 of 2013 and the same was allowed directing the first respondent Company to consider the said notice. The further contention of the se .....

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respondent Company. 19. For better appreciation of the case, before going into the merits, it would be relevant to re-produce Section 160 of the Act:- 160. Right of persons other than retiring directors to stand for directorship.- (1) A person who is not a retiring director in terms of section 152 shall, subject to the provisions of this Act, be eligible for appointment to the office of a director at any general meeting, if he, or some member intending to propose him as a director, has, not less .....

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five per cent. of total valid votes cast either on show of hands or on poll on such resolution. (2) The company shall inform its members of the candidature of a person for the office of director under sub-section (1) in such manner as may be prescribed. 20. The fact remains that the first respondent Company has been carrying on business from the date of incorporation. Subsequently, it is seen that pursuant to the change in the management of the affairs of the third respondent Wynn Oil Company, h .....

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here is a prohibition clause in the Foreign Collaboration Agreement as per which the second respondent or its nominees or its associates should not carry on the same business that the first respondent company is carrying on in India. Although the second respondent had a right to appoint its nominee on the Board of the company, in view of strained relationship between the parties and the prohibition clause contained in the Foreign Collaboration Agreement, it is not proper to withdraw the first re .....

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the purpose of considering the proposal at the meeting. In the instant case, admittedly, the nomination letter dated 26.9.2014 along with the requisite sum of ₹ 1 Lakh deposit were handed over only at the meeting on 27.9.2014. Also, it transpires that on 26.9.2014, the Company Law Board had not dispensed with the mandatory requirement of 14 days notice of the appointment and the deposit of ₹ 1 Lakh per Director. On the other hand, it had only directed the Company to consider the pro .....

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ture, it would be worthwhile to refer to Company Application No. 2 of 2014 filed by the second respondent Wynn's Belgium before the Company Law Board wherein in paragraph 4, it has sought for the relief of dispensing with 14 days notice. The relevant passage in this regard is usefully re-produced hereunder:- .... In light of the aforesaid circumstances, it is essential that this Hon'ble Bench issues a direction to the Respondent No. 5 to include additional agenda items with respect to ap .....

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