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Smt. Dr. Renuka Datla Versus Biological E Ltd.

Will purportedly executed by demised - suppression and prevarication of facts - Held that:- Under Section 8 of the Hindu Succession Act, 1956, the property of a male Hindu dying intestate shall devolve firstly upon Class-I heirs. Under Section 9 thereof, all the Class-I heirs shall take simultaneously to the exclusion of all other heirs. Thus, pending adjudication of the suit filed by appellant No.1, it must be assumed that appellant No.1 and respondent Nos.2 to 4 are entitled to 1/4th share eac .....

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and in the interest of the company, it is desirable that only these persons manage its affairs, lest any outsiders interference may lead to the company which is stated to be on profit making spree getting derailed and losing its rhythm. Therefore, instead of appointing an outsider as the administrator/receiver, keeping in view the interests of the company as of paramount importance, the following arrangement is made:

1. An adhoc Board of Directors is constituted with appellant No.1 a .....

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mpany is eluded among the Board members, appellant No.1, as the Managing Director, shall approach the Company Law Board for appropriate directions.

4. The Board shall not transfer or deal with 81% shares held by Late Dr. Vijay Kumar Datla in any manner till the dispute on the issue of succession is adjudicated in O.S.No.184 of 2014.

5. The Board shall not take any major policy decisions unless there is unanimity among all its members and without the prior approval of the Co .....

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ny Application Nos.7 & 8 of 2015 are disposed of as infructuous. - Company Appeal No. 17 of 2014 - Dated:- 15-4-2015 - C.V. NAGARJUNA REDDY, J. For The Appellant : Mr. S.R. Ashok, Senior Counsel for M/s. Lakshmi Kumaran and Sridharan For The Respondent : Mr. P.S. Raman, Senior Counsel for Mr. M.V. Pratap Kumar, Mr. S. Niranjan Reddy for Mr. J. Krishna Dev, Mr. D. Prakash Reddy, Senior Counsel for Mr. Y. Suryanarayana, Ms. Rubina S. Khatoon JUDGMENT With the demise of its mentor, the closely held .....

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raigned themselves before the law Courts. The background of this sordid episode needs to be briefly recounted for adjudication of this appeal. The company was initially promoted by J.A. Narasimha Raju who is none other than the father of appellant No.1, and his friend Dasu Ramaswami in the year 1953 in the State of Maharashtra. It was engaged in the business of pharmaceutical products and vaccines. It is the pleaded case of appellant No.1 that his father held the majority shares. Ten years after .....

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pany fell on the husband of appellant No.1, who was made the Chairman and Managing Director of the company. Late Dr. Vijay Kumar Datla who became the Chairman and Managing Director w.e.f. 1-5-1972 for a long time, successfully ran the company without the involvement of other family members. However, appellant No.1, who is a qualified medical professional, possessing a Doctorate in Pharmacology, and was working in the Nizams Institute of Medical Sciences as a Professor and Honorary Consultant in .....

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inducted as Directors, except the company. At the time of the death of Late Dr. Vijay Kumar Datla, himself, appellant No.1 and one G.V. Rao, an independent Director, constituted the Board of Directors with Late Dr. Vijay Kumar Datla as the Chairman and Managing Director and appellant No.1 as the Executive Director of the company. The share holding pattern at the time of the death of Dr. Vijay Kumar Datla was as follows : Sl.No. Names of the members No. of shares Value in Rs. % of shareholding 1 .....

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- 1.17 10 Ms. Mahima Datla and Dr. Renuka Datla 14,172 14,17,200/- 2.86 11 Dr. Renuka Datla & Mahima Datla 26,995 26,99,500/- 5.45 12 M/s. V.R. Investments Pvt. Ltd. 18,425 18,42,500/- 3.72 13 Mr. Purnedu Gupta & Ms. Krishna Gupta 250 25,000/- 0.05 Total 4,95,000 4,95,00,000/- 100.00 On the demise of the Chairman and Managing Director, the independent Director, G.V. Rao, has submitted his resignation through his letter dated 6-4-2013 as the Director. The resignation letter was addressed .....

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a member of the Board and informed that he was withdrawing his resignation letter dated 6-4-2013. The events that have taken place immediately following his purported withdrawal have become the subject matter of serious disputes between appellant No.1 and respondent Nos.2 to 4. On the same day of purported withdrawal of his resignation letter, a meeting of the Board of Directors was claimed to have been held by Mr. G.V. Rao.. In the said purported meeting, one of the three daughters of appellan .....

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meeting allegedly held on 11-4-2013, respondent No.2 was said to have been appointed the Managing Director of the company. Obviously, unable to bear her daughters seeking to take complete control of the company, appellant No.1 has filed C.P.No.1 of 2013 inter alia for a declaration that the appointments of respondent Nos.2 to 4 in the Board of Directors of the company in the meetings held on 9-4-2013, 10-4-2013 and 11-4-2013 were a nullity, void ab initio and illegal. A declaration was also sou .....

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sequential direction to the respondents herein to transmit the shares in favour of appellant No.1 and deliver possession of the share certificates. She has also sought for certain alternative reliefs, reference to which is not necessary in the present context. The main basis for her suit was a Will purportedly executed by her late husband. Appellant No.1 has filed an application for withdrawal of C.P.No.1 of 2013 before the Company Law Board. In her affidavit, she has stated that she was advised .....

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nt Nos.2 to 9 are oppressive and prejudicial to the interests of the company; to declare the Board meetings held on 9-4-2013, 10-4-2013 and 11-4-2013 as illegal, null and void ab initio and to set-aside the resolutions passed in the said meetings; for removal of respondent Nos.2 to 5 as the Directors of the Company and transmission of 4,00,961 equity shares held by Late Dr. Vijay Kumar Datla in favour of respondent No.2 as illegal, null and void and consequently to rectify the register of the me .....

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interim Administrator/Special Officer for taking charge of the management and the affairs of the company; for an injunction to restrain respondent Nos.1 to 7 from altering or changing in any manner the shareholding pattern and paid up capital of the company; and a direction to the respondents not to hold the meeting of the shareholders of the company and also to restrain respondent No.2 from exercising her voting rights in respect of 4,00,961 equity shares. The Company Law Board, by its order da .....

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ction 10-F of the Companies Act, 1956 (for short the Act). I have heard Mr. S.R. Ashok, learned Senior Counsel for M/s. Lakshmi Kumaran & Sridharan, Counsel for the appellants, Mr. P.S. Raman, learned Senior Counsel for Mr. M.V. Pratap Kumar, Counsel for respondent No.1, Mr. S. Niranjan Reddy, learned Counsel for Mr. J. Krishna Dev, learned Counsel for respondent Nos.2 to 4, Mr. D. Prakash Reddy, learned Senior Counsel for Mr. Y. Suryanarayana, Counsel for respondent Nos.6 and 7, and Ms. Rub .....

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Board resolution accepting the withdrawal letter, respondent No.5 ceased to be a Director. In support of his submission, the learned Senior Counsel placed reliance on the Judgment of the Chancery Division in Glossop v. Glossop and T. Murari v. State (The Asst. Registrar of Companies) . (iii) That with the resignation of respondent No.5, the number of the Directors fell below the minimum number prescribed under Section 252 of the Act and the purported Board meeting convened and conducted by resp .....

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as designated as Managing Director was equally invalid and illegal. (vi) That the decisions taken in the meetings which were illegal to the knowledge of respondent Nos.2 to 6 cannot get validated under Section 290 of the Act, that too in respect of the matters which are not concerned with third parties, for Section 290 would not come to the aid of usurpers of the offices. In support of this submission, the learned Senior Counsel relied upon the Judgment in M. Moorthy v. Drivers and Conductors Bu .....

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blic interest and that they cannot be waived or acquiesced. In support of this submission, the learned Senior Counsel relied upon the Judgments in Firestone Tyre and Rubber Co. v. Synthetics and Chemicals Ltd. and others and Dhirendra Nath Goari v. Sudhir Chandra Ghosh and others . The learned Counsel has also relied upon the passage at page-3316 of Ramaiya on Company Law, 17th Edition. (ix) That the doctrine of acquiescence cannot be pleaded against the appellants by the respondents as the latt .....

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n certificate as envisaged under Article 66 of the Articles of Association. That the company ought not to have resorted to the method of obtaining indemnity bond as per the Article 66 of the Articles of Association unless an application for obtaining Probate of Will or succession certificate was already filed by respondent No.2 and the same was pending. (xi) That appellant No.1 has already filed a civil suit claiming declaratory reliefs based on the Will executed by Late Dr. Vijay Kumar Datla in .....

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Court. (xiii) That respondent Nos.2 to 4 being interested Directors ought not to have participated in the Board meeting held on 10-4-2013, during which shares were transferred in favour of respondent No.2 as such participation is barred by Section 300 of the Act. (xiv) That as per Article 70 of the Articles of Association, for registration of transfer of shares, the original share certificates have to be produced, while no such certificates were produced as evident from para 13(i) of the Form a .....

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.1 has not come to the Court with clean hands as she has violated the undertaking given by her to withdraw the civil suit. (iii) That appellant No.1 has pressed three interim reliefs, namely, (a) for a restraint order against her removal as the Executive Director; (b) for appointment of an administrator to take over the affairs of the company; and (c) for freezing of voting rights in respect of 81% shares. That with regard to the first mentioned relief, an undertaking was given by the respondent .....

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irectors have been approved by the Annual General Meeting and the defect if any in the appointment of respondent Nos.2 to 4 as Directors is cured by the AGM resolution; (v) That through her letter dated 24-5-2013 addressed to the Board of Directors, appellant No.1 has requested for transfer of HUF shares in her favour and thereby she has recognized the reconstituted Board; that in pursuance of the said letter shares were transmitted in favour of appellant No.1 and therefore the plea of appellant .....

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by appellant No.1 before the Company Law Board based on the plea of invalidity of the Will executed by Late Dr. Vijay Kumar Datla in favour of respondent No.2 were not maintainable before the Company Law Board. (vii) That under Sections 397 and 398 of the Act, the Company Law Board will have no jurisdiction to pass any order unless it is prima facie established that the acts of oppression and mismanagement warrant winding up of the company to enable the Company Law Board to make any order other .....

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C.P.No.1 of 2013, namely, letter dated 9-4-2013 of respondent No.5 withdrawing his resignation. Mr. S.Niranjan Reddy, who has supplemented the submissions of Mr. P.S. Raman, made the following submissions: (i) That appellant No.1 has indulged in suppression and prevarication of facts by not disclosing the withdrawal letter of respondent No.5 in C.P.No.1 of 2013 and alleging fabrication of the withdrawal letter in her criminal complaint and that in the case on hand, she has pleaded that she has r .....

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e learned Counsel also relied upon the Judgment of the Supreme Court in Sangram Singh (10-supra) to substantiate his submission that on the facts of the case the doctrine of approbation and reprobation is applicable. (v) That the jurisdiction of the Company Law Board under Sections 397 and 398 of the Act is summary in nature and that complicated questions of succession shall not be gone into by the Company Law Board. (vi) That appellant No.1 has failed to make out any case for appointment of a R .....

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there was no illegality in the participation of respondent Nos.2 to 4 in the meeting for transfer of shares in favour of respondent No.2. He has also submitted that appellant No.1 is guilty of suppression of material facts as she has not disclosed her letter dated 15-4-2013. (ii) That appellant No.1 has attended two Board meetings on 26-6-2013 and 22-8-2013 and this conduct on her part disentitles her to question the reconstitution of the Board and transfer of shares in favour of respondent No.2 .....

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eholding in favour of respondent No.2 is valid? 5. Whether appellant No.1 has recognized the reconstituted Board of Directors by her subsequent conduct, and if so, whether she is not entitled in law to challenge the appointment of respondent Nos.2 to 4 as Directors and respondent No.2 as the Managing Director and the action of the Board of Directors in transferring 81% shareholding in favour of respondent No.2? 6. Whether the Annual General Meeting, dated 18-12-2013 was validly held and the reso .....

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ll not prejudice either party in the adjudication of the Company Petition. Re Point No.1: Dr. Vijay Kumar Datla, the Chairman and Managing Director of the company died on 20-3-2013. With his death, the number of Directors on the Board of the company was reduced to 2, namely, appellant No.1 and G.V. Rao respondent No.5. On 6-4-2013, respondent No.5 has addressed a letter to the Board which reads as under: Due to unavoidable and compelling reasons, I regret my inability to continue my service as a .....

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Article 129 of the Articles of Association of the company which incorporated the provisions of Section 283(1) and 314, included resignation of a Director as one of the contingencies for arising of vacancy in the office of a Director. As per Clause (m) of Article 129, the office of a Director will become vacant if he resigns his office by a notice in writing addressed to the company. The plain language of this Clause suggests that the office of a Director will become vacant if a Director sends hi .....

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of the company sent notice in writing to the company requesting the latter to accept his resignation as Managing Director and to send a cheque for salary. Before any meeting of the Board of Directors was held, the Managing Director has sent another letter dated 23-5-1907 wherein he has stated that he has sent his resignation under a misapprehension and that he absolutely withdraws the letter. In a special meeting held by the Directors held on 24-5-1907, they have declared that the Managing Direc .....

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pany, and I think the most material articles are 84 and 85. I have no doubt that a director is entitled to relinquish his office at any time he pleases by proper notice to the company, and that his resignation depends upon his notice and is not dependent upon any acceptance. Consequently, it appears to me that a director, once having given in the proper quarter notice of his resignation of his office, is not entitled to withdraw that notice, but, if it is withdrawn, it must be by the consent of .....

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e of article 84, including the provision in the last paragraph. I have, therefore, to consider whether a managing director, giving notice to the company of resignation, is entitled to withdraw that notice prior to the passing of a resolution by the directors that the managing director has vacated his office. Such resolution has to be passed within six calendar months from the happening of the event whereby such director has vacated his office. Now what are the events whereby a director vacates h .....

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fine one, but it seems to me that if the construction contended for by the plaintiff had been intended by the articles, the words would have been used would have been of this nature: If by notice in writing to the company he resigns his office, and such resignation be accepted, instead of which the resignation of the office is made to be the vacation of the office, and the proviso is added to the effect that the directors may suspend the matter until they pass a resolution accepting his vacatio .....

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s passed to the effect that the Director who has resigned has vacated his office. The Court opined that as regards the Director who has sent his resignation in writing, he vacates the office and the vacancy would arise upon a resolution being passed by the Director within six calendar months. Thus, a subtle distinction was drawn between the vacation of office by a Director by resignation and arising of vacancy in the office of the Director. Indeed, even this distinction would not arise in this c .....

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upra) the Madras High Court has quoted the learned authors Palmer and Ramaiya in paragraphs 14 and 15 of the Judgment, which could be profitably reproduced hereunder : In Palmers Company Precedents, 17th Edn., Part I, page 565, it is stated as follows: Even in the absence of any express power to resign, it is submitted that, unless the Articles are specially framed, a director may by notice to the Company resign his directorship. Directors are merely agents of the company, and an agent may deter .....

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urse, in appropriate cases, be achieved by a director parting with his qualification shares, and so vacating office by disqualification. A verbal resignation accepted at a general meeting is effective, even though the articles provide that a director shall vacate office if by notice in writing he resigns his office. A verbal resignation would not, however, be effective in the light of such an article if made to and accepted by the Board since the Board would have no authority to accept, and the .....

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office by a director, as in the case of a managing agent (S. 342). If there is any provision in the articles giving the right to a director to resign at any time, the resignation will take effect without any need for its acceptance by the Board or the Company in general meeting. Where a director is elected or has contracted to act for a fixed period, and make him liable for damages for breach of his contract, unless the articles permit such resignation. In the absence of any provision in the art .....

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hat it is to take effect on acceptance, or the articles so require, acceptance is necessary to end the tenure of office. Where however, resignation says that it is to take effect immediately, acceptance is not necessary, unless the articles or any provision of law makes it necessary. Any form of resignation, whether oral or written, sufficient, provided the intention to resign is clear. In the absence of any indication otherwise, a resignation takes effect immediately. Resignation will not howev .....

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rovision, Articles of Association need to be looked into. Resignation of a Director will take effect as per the procedure laid down in the Articles of Association of a company. In the absence of any provision laid down even in the Articles of Association, as per the ordinary rule of common law, a Director may, by notice to the company, resign his Directorship and the resignation will take effect depending upon what the Director expresses in his resignation letter i.e., if he says that the resign .....

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ls. Under this Article, the office of a Director will become vacant the moment he addresses notice of his resignation in writing to the company Admittedly, respondent No.5 has sent his notice in writing wherein he has in unequivocal terms expressed his wish to relinquish his role as a Director with immediate effect. Thus, w.e.f., 6-4-2013, respondent No.5 has vacated his office as a Director. On 9-4-2013, respondent No.5 has addressed another letter in writing to the Board of Directors which rea .....

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he Board. It is not the pleaded case of any of the respondents that the purported withdrawal of resignation by respondent No.5 was accepted by appellant No.1 as the sole surviving Director, or for that matter, at any later point of time even by the reconstituted Board. Indeed, the occasion for the reconstituted Board to accept or reject the withdrawal letter of respondent No.5 would not arise as respondent Nos.2 to 4 themselves would not have come into existence as Directors of the company had r .....

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rectors. Article 117 of the Articles of Association of the company also prescribed the minimum number of Directors as two. As found on Point No.1, from 6-4-2013, the company had only one Director i.e., appellant No.1. Under Section 287(2) of the Act the quorum for the meeting of Board of Directors shall be 1/3rd of its total strength or two Directors, whichever is higher. With the resignation of respondent No.5 as a Director, the company failed to satisfy the mandatory provisions of Section 252( .....

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consent of appellant No.1. It is no ones case that appellant No.1 has agreed for convening of the Board meetings. On the contrary, her specific grievance is that she was not even made aware of such Board meetings, what to say of issuance of a notice to her for the Board meetings. Nothing is placed before the Court to show that the mandatory requirement of notice under the Act was served on appellant No.1. It is not known who authorized respondent No.5 to invite respondent Nos.2 to 4 who have im .....

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or the meeting held on 9-4-2013 as appellant No.1 was not present at the meeting. Therefore, the said meeting was held in violation of Section 287(2) of the Act and Article 128 of the Articles of Association. To recapitulate, it is the case of the respondents that in the purported Board meeting held on 9-4-2013, respondent No.4 was appointed as a Director; that in the so-called meeting dated 10-4-2013, 81% of the shares were transferred to respondent No.2 besides appointing the said respondent a .....

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ity of transfer of shares in favour of respondent No.2 is assailed by appellant No.1 on yet another ground i.e., respondent Nos.2 to 4 are interested Directors and their participation in the Board meeting held on 10-4-2013 is contrary to the mandatory provisions of Section 300 of the Act. Sub-section (1) of Section 300 of the Act, which is relevant for this case, reads as under : No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or arrang .....

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kash Reddy, learned Senior Counsel submitted that the expression arrangement is similar to the expression contract in Section 300 and that transfer of shares does not fall in either of the said two expressions. On a literal construction of sub-section (1) of Section 300 of the Act, the interpretation sought to be placed thereon by the learned Senior Counsel, appears plausible. However, appellant No.1 has placed reliance on the Guide to the Companies Act by A. Ramaiya, 17th Edition, 2010. Referri .....

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oard shall be incapable of passing resolution on that matter. Though no judicial pronouncements appear to be available on this aspect, I choose to follow the opinion of the author whose authoritative commentary on the Act is acknowledged as of the highest standard by all Courts including the highest Court of our country. Undoubtedly, the allotment of shares in favour of respondent No.2 furthers her personal interest and it cannot be said that the same is in general interest of the share holders. .....

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the Articles of Association. While it may not be necessary to deal with the plea based on Article 66, the contention relating to violation of Article 70 appears to have merit. Article 70 of the Articles of Association reads as under: Before the registration of a transfer, the Certificate or Certificates of the Share or Shares to be transferred must be delivered to the Company along with (save as provided in Section 108 of the Act) a properly stamped and executed instrument of transfer. Para-13( .....

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certificates is in violation of Article 70 of the Articles Association of the company and the Form prescribed under Rule 3 of the 2001 Rules. The above assigned reasons lead me to hold that (a) all the three meetings were not validly held; (b) respondent Nos.2 to 4 were not validly appointed as Directors and (c) the transfer of 81% of the shares held by Late Dr. Vijay Kumar Datla in favour of respondent No.2 has not validly taken place and consequently such a transfer cannot be recognized in la .....

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pon the letter dated 15-4-2013 purportedly addressed by appellant No.1 to the B.E. (Biological Evans) family, her letters dated 24-5-2013, 19-10-2013 and 20-10-2013, her participation in the Board meeting held on 22-8-2013 and receipt of enhanced salaries by her. With respect to these aspects, appellant No.1 has come out with her own version as projected by her counsel at the hearing as well as in his brief written submissions. It is therefore necessary to deal with each of these aspects. Appell .....

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ing it grow and prosper under my husbands leadership. I have witnessed the goodwill and commitment he shared with his team. The entire BE family have stood by him through good and bad and for this, I am eternally grateful. Although the leadership of Vijay was instrumental in cultivating BE, we must continue to evolve and grow, in order to prosper further. Today, I feel proud to share with you the news of the appointment of my three daughters Purnima, Indira and Mahima to the Board of BE. As you .....

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te, Hyderabad on 14-5-2014. Several serious allegations were made by appellant No.1 in the said complaint, reference to which in the present context is unnecessary. However, with reference to letter dated 15-4-2013, she has alleged as under : Accused No.5 in furtherance of his criminal intrigue went on addressing the complainant and caused several communications to be written by the Accused No.1 to 3 ascribing to the complainant most unpleasant and hasty things and made propaganda in society vil .....

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of conducting the board meetings and groping in dark about their ulterior motives. (Emphasis added) The Court is informed that the criminal complaint filed by appellant No.1 is pending. The truth or otherwise of the allegations contained in the complaint cannot therefore be discussed at this stage. The fact however remains that the letter dated 15-4-2013 is the subject matter of a serious controversy. Unless the investigation is complete and the criminal case is adjudicated, no conclusion can b .....

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with a view to falsely attribute acceptance of the reconstitution of the Board of Directors by appellant No.1. Coming to letters dated 19-10-2013 and 20-10-2013, reading of these letters would only reveal how seriously appellant No.1 was feeling aggrieved by the actions of respondent Nos.2 to 5. Letter dated 19-10-2013 was addressed to the company by inviting the attention of respondent No.5. This was in reply to letter dated 3-10-2013 of respondent No.5. In this letter, appellant No.1 has serio .....

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er clearly speaks the mind of appellant No.1 that far from accepting respondent Nos.2 to 4 as Directors, she has accused them of usurping the Directorship. Through her letter dated 20-10-2013 addressed to the Managing Director, she was not only highly critical of all the actions of respondent Nos.2 to 5, but also reiterated her stand that respondent Nos.2 to 4 are usurpers of office. The following portion of this letter is relevant in this context: .. You have done and created so many things beh .....

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nd that of the interests of the Minority. Please be noted that word of the majority that too, the majority acquired through illegal means is not rule of law always as you have tried to make out and I am very clear on the same. I will come on each of the replies given in you above letter shortly. Before concluding, I must state that you have avoided giving replies to my pointed issues except that you wanted me to know that you usurped the power and have been acting unilaterally under the so calle .....

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at and venting out her discontentment with and disapproval of the actions of respondent Nos.2 to 5. By merely addressing a letter to the Managing Director, appellant No.1 cannot be understood to have recognized respondent No.2 as such or accepted reconstitution of the Board of Directors. Indeed, these letters instead of advancing the case of the respondents, support the plea of appellant No.1 that she has never supported the actions of respondent Nos.2 to 5 either regarding reconstitution of th .....

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legations in her letter and that the Board decisions were taken based on the majority rule in accordance with the applicable law. A copy of the said letter is filed by the appellants along with the appeal. Consistent with her stand, appellant No.1 was bitterly critical of the Board meetings dated 9-4-2013, 10-4-2013, 24-5-2013 and 26-6-2013. She has stated : .. I understand that after the demise of my Husband, some board meetings were held on 9th and 10th April, 24th May, 26th June of 2013. The .....

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or the same. The letter further stated : .. Let Board not do anything related to the personal agendas like fixing high remunerations and appointment of new directors and personal relatives at high positions with huge remunerations, burdening the financial position of the company. Appellant No.1 finally gave a piece of advice to respondent Nos.2 to 4 and her sons-in-law as under : This would not rest the divine soul of my husband in peace. My husband is none other than father of some of you, fath .....

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ealing with the doctrine of waiver, the Supreme Court, in Dhirendra Nath Goari (6-supra), referred to and relied upon the following passage in Maxwells commentary On the Interpretation of Statutes, 11th Edition, at page 375, thus: Another maxim which sanctions the non observance of a statutory provision is that cuilibetlicet renuntiare juri pro se introducto. Every one has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the indi .....

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action themselves, and that no public interests are involved, such conditions will not be considered as indispensable, and either party may waive them without affecting the jurisdiction of the court. Further, the Supreme Court has quoted with approval the Division Bench Judgment of the Patna High Court in Sheo Dayal Narain v. Musammat Moti Kuer wherein it was held : Where the court acts without inherent jurisdiction, a party affected cannot by waiver confer jurisdiction on it, which it has not. .....

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nferred by a statute unless it is of a personal and private nature. There is a clear distinction between a contractual or a statutory right created in favour of a person for his own benefit and a right which is created on the ground of public interest and policy. The rule of waiver cannot apply to a prohibition based on public policy (See: Post Master-General, Bombay v. Gangaram Babaji Chavan) . In a well informed Judgment, the Division Bench of Karnataka High Court in Golden Valley Educational .....

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nce implies that a person who is said to have acquiesced did so with knowledge of his rights and the other person acted in the bona fide belief that he was acting within his rights. The absence of either of these elements makes the doctrine inapplicable.. Applying the proposition of law laid down as above to the facts of this case, Section 252 of the Act which prescribed a minimum of at least two Directors and Section 287 which prescribed quorum for Board meetings are undoubtedly conceived in pu .....

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ept and reject the same instrument (Verschures Creameries v. Hull and Netherlands Steamship Co. ). In Lissenden v. C. A. V. Bosch, Ltd. , the House of Lords pointed out that the equitable doctrine of election applies only when an interest is conferred as an act of bounty through some instrument. In that case, the House of Lords held that the withdrawal by a workman of the compensation in money deposited by the employer could not take away the statutory right of appeal conferred upon him by the W .....

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out of the course of conduct which he has first pursued and with which his present action is inconsistent. The above Judgments were referred to and relied upon by the Supreme Court in Bhau Ram v. B. Baijnath . That was a case where an appeal was filed before the Supreme Court under the Reva State Pre-emption Act 1949 by the plaintiff in a suit in whose favour a decree was passed and who has filed appeal before the Supreme Court not being satisfied with the decree. The plaintiff has questioned th .....

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rt rejected the preliminary objection. The legal position that emerges from the decisions referred to above is that the doctrine of approbation and reprobation applies to a case where a party has made an election and he has derived benefit out of such election. In the instant case, from the facts discussed above, appellant No.1 cannot be said to have made an election to recognise the reconstituted Board of Directors and derived any benefit out of such election. However it is represented at the h .....

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013 and that without her consent the company has been crediting the increased remuneration to her bank account. In her letter dated 22-8-2013, appellant No.1 has seriously opposed the enhancement of remuneration and appointment of new Directors. If despite this opposition, the management of the company is crediting the enhanced remuneration to the bank account of appellant No.1, she cannot be accused of deriving the benefit and reprobating therefrom. In any event, from the discussion made herein .....

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at even if the appointment of respondent Nos.2 to 4 as Directors and respondent No.2 as the Managing Director in the Board meetings held on 9-4-2013, 10-4-2013 and 11-4-2013 suffered from procedural illegalities, under the aforementioned provision the additional Directors held office only until Annual General Meeting and that in any event in the said meeting their appointments were approved. In this context, it needs to be mentioned that in the counter-affidavit filed on behalf of respondent No. .....

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ctors. When respondent No.5 has ceased to be a Director and respondent Nos.2 to 4 were not legally appointed as Directors, the very convening of the AGM and the decisions taken therein are nonest in law. Indeed, to overcome this situation, the respondents have putforth the plea of necessity to justify the holding of Board meetings as well as the general meeting on 18-12-2013 in which all the actions were purportedly ratified. They have sought to justify all their actions commencing from convenin .....

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ed that there were clearly three alternatives to left the members under the provisions of the Act, namely, (i) the required number of members as envisaged under Section 169(4) could have given a notice to the Board of Directors to call an extraordinary general meeting of the company; (ii) if the Board fails to conduct extraordinary general meeting within 21 days of the requisition, the members could approach the Company Law Board for a direction to conduct an extraordinary general body meeting u .....

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ntenance on the touchstone of judicial propriety. Stated differently, the doctrine of necessity makes it imperative for the authority to decide and considerations of judicial propriety must yield. It is often invoked in cases of bias where there is no other authority or Judge to decide the issue. If the doctrine of necessity is not allowed full play in certain unavoidable situations, it would impede the course of justice itself and the defaulting party would benefit therefrom. Take the case of a .....

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r of the former as it is the only way to promote decision-making. In the present case also if the two Election Commissioners are able to reach a unanimous decision, there is no need for the Chief Election Commissioner to participate, if not the doctrine of necessity may have to be invoked. With respondent No.5 resigning his office as Director and appellant No.1 remaining as the sole Director of the company, respondent Nos.2 to 4 as members had an option to approach the Company Law Board under Se .....

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ch the respondents have heavily banked, reads as under : Validity of acts of directors: Acts done by a person as a director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in this Act or in the articles: Provided that nothing in this section shall be deemed to give validity to acts done by a director after his appointment has been shown to the c .....

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e Director was stated to have called Board meeting on 20-5-1978 in which a third party was stated to have been inducted as a Director and thereafter he was made the Managing Director. Thereafter, the Board lead by the self-claimed Managing Director has sold two buses of the company which were its only assets. The High Court observed that out of the three continuing Directors, two Directors were not present at the meeting held on 20-5-1978 as it was their case that notices were not served on them .....

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ere there is a total absence of appointment or a fraudulent usurpation of authority. Our attention has not been drawn to any provision in the Act or any decision holding that even in the absence of appointments or usurpation of the office of director or managing director, the provisions of Section 290 of the Act would apply. Similar is the case decided by the Division Bench of Delhi High Court in Eastern Linkers (4-supra). That was also a case where the shares were allotted by a Director who was .....

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ernal management have been regular. The Bench further held that the said rule is not applicable to the case it was deciding where a Director or a de facto Director invoked the rule so as to validate a transaction which was in fact irregular and unauthorized. The Bench has thus declined to extend the benefit of Section 290 of the Act to the Director who has presumed in his own favour that things are rightly done and on enquiry it was found that they were wrongly done. Shortly put, the benefit of .....

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o, in a case where the Directors usurped their office. Conclusion on Point Nos.1 to 7: In the light of the discussion undertaken above, this Court has no hesitation to find all the issues against the respondents. Re Point No.8: Mr. P.S. Raman, has made a strong submission that unless the Company Law Board is satisfied that the conditions which are necessary for winding up a company exist, it has no jurisdiction to pass any order against the company under Section 397(1) of the Act. In support of .....

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complaint before the Company Law Board. So much so, for granting interim relief, the Company Law Board must be prima facie satisfied, that one of the circumstances mentioned in clause (a) of sub-section (2) of Section 397 exists, namely, that the companys affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members. In Sangram Singh (10-supra) the Supreme Court held the expression oppressive to mean burdensome, harsh and wrongful; tha .....

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rdensome and wrong. (b) Where the conduct is mala fide and is for a collateral purpose where although the ultimate objective may be in the interest of the company, the immediate purpose would result in an advantage for some shareholders vis-vis the others. (c) The action is against probity and good conduct. This precisely is the complaint of appellant No.1 before the Company Law Board. It is her specifically pleaded case that respondent No.5 having resigned has convened successive Board meetings .....

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ion 397 of the Act warranting interference by the Company Law Board for granting appropriate interim orders under Section 403 of the Act. Another submission made by Mr. P.S. Raman is that appellant No.1 has not approached this Court with clean hands as she has assured the Company Law Board that she will withdraw the civil suit filed by her in respect of the Will. It is the case of appellant No.1 that the said statement was made before the Company Law Board on a wrong legal advise and that she ha .....

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d for going back on her statement. Mr.P.S. Raman further submitted that in strict sense, no question of law arises for maintaining an appeal under Section 10-F of the Act. In my opinion, this submission has no merit as denial of interim orders in a case where the elements of prima facie case, balance of convenience and irreparable injury are established, itself gives rise to a question of law. Another submission which was initially made by the learned Counsel for the respondents, but later not p .....

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rom the findings on Point Nos.1 to 7, it must be held that appellant No.1 has satisfied the elements of prima facie case. Now, it needs to be considered whether the other two elements also exist for granting the interim reliefs pressed by her counsel at the hearing, namely, to supersede the Board of Directors of the company; to appoint an interim administrator or special officer for taking charge of the management of the affairs of the company; and for injunction to restrain respondent Nos.1 to .....

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With the death of the Chairman and Managing Director of the company and resignation of respondent No.5, appellant No.1 alone continued as the Executive Director. Respondent Nos.2 to 4 not having been validly appointed and respondent No.5 having resigned, the present Board of Directors cannot be allowed to run the companys affairs. The Court has therefore to necessarily exercise its power under Section 403 of the Act for making necessary arrangement for regulating the conduct of the companys affa .....

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st in her in respect of 81% of the shares held by him, respondent No.2 has also set up another Will whereunder all the 81% of the shares of Late Dr. Vijay Kumar Datla were allegedly bequeathed in her favour. As noted hereinbefore, appellant No.1 has filed O.S.No.184 of 2014 for several reliefs based on the Will propounded by her. The respective rights of appellant No.1 and respondent No.2 have therefore to be necessarily adjudicated only in the pending civil suit. Till such adjudication is made, .....

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pending adjudication of the suit filed by appellant No.1, it must be assumed that appellant No.1 and respondent Nos.2 to 4 are entitled to 1/4th share each in 4,00,961 shares in the company held by Late Dr. Vijay Kumar Datla. Thus, for the present, pending adjudication of the suit filed by appellant No.1, she and respondent Nos.2 to 4, must be treated as having more or less equal shares. Though there appear to exist simmering differences between appellant No.1 on the one side and respondent Nos .....

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