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Smt. Dr. Renuka Datla Versus Biological E Ltd.

2015 (4) TMI 1053 - ANDHRA PRADESH HIGH COURT

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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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 as the Exec .....

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g 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 Company Law Board. - 6. The .....

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s 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 01. With the demise of its mentor, the closely held family company, namely, Biological E. Limited .....

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The background of this sordid episode needs to be briefly recounted for adjudication of this appeal. 03. 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 the company came into existence, it w .....

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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 Clinical Pharmacology and Therapeutics .....

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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. 05. 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 Dr. Vijay Kumar Datla 4,00,961 .....

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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 06. 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 to the Board of Directors, .....

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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. 07. 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 appellant No.1 i.e., responden .....

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d on 11-4-2013, respondent No.2 was said to have been appointed the Managing Director of the company. 08. 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 sought to the effect .....

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on 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. 09. 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 to withdraw t .....

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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 members by order .....

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ministrator/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 dated 6-8-20 .....

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of the Companies Act, 1956 (for short the Act). 11. 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. Rubina S. .....

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f any 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 (1907(G) 1034)-(1907) 2 Ch. 370 and T. Murari v. State (The Asst. Registrar of Companies) 1976(47) Comp. Cases 693 (Madras). (iii) That with the resignation of respondent No. 5, the number of the Directors fell below the minimum number prescribed under Section 252 o .....

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rly, the purported Board meeting held on 11-4-2013 in which respondent No. 2 was 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 Sen .....

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ilable under Sections 169(1), 169(7) and 186 of the Act. (viii) That the provisions of Sections 252, 287 and 300 are mandatory, conceived in public 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 1971(41) Comp. Cases 371 and Dhirendra Nath Goari v. Sudhir Chandra Ghosh and others AIR 1964 S.C. 1300. The learned Counsel has also re .....

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nder suspicious circumstances and that the company ought not to have transferred the shares held by Late Dr. Vijay Kumar Datla in favour of respondent No. 2 in the absence of Probate of Will or succession 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 .....

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in the most illegal and unlawful manner, they are not entitled to manage the company till the Company Petition is disposed of and the same needs to be administered by an administrator to be appointed by the 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 7 .....

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has been raised in this appeal. In support of his submission, the learned Senior Counsel has relied upon the Judgment in Commissioner of Income Tax, Bombay v. Scindia Steam Navigation Co. Ltd.: AIR 1961 S.C. 1633. (ii) That appellant No. 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 Direct .....

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ights in respect of 81% shares. (iv) That respondent Nos. 2 to 4 were appointed as Additional Directors initially; that under Section 260 of the Act such appointments last till Annual General Meeting (AGM) is held; that the acts done by the Directors 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, appella .....

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Gaekwad and others v. Shantadevi P. Gaekwad (dead) Through L.Rs. and others (2005) 11 SCC 314 in support of his submission. (vi) That the Company Law Board is not competent to adjudicate on the complicated issues of succession and that therefore the reliefs claimed 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 Sect .....

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awal of his resignation, respondent No. 5 has continued as the Director and in the absence of rejection of the withdrawal letter by the Board of Directors, the resignation letter ceased to exist. (ix) That appellant No. 1 has indulged in suppression of material fact in C.P. No. 1 of 2013, namely, letter dated 9-4-2013 of respondent No. 5 withdrawing his resignation." 14. Mr. S. Niranjan Reddy, who has supplemented the submissions of Mr. P.S. Raman, made the following submissions: "(i) .....

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ed that the said letter was obtained by coercion. (iii) That appellant No. 1 has not disclosed her letter dated 24-5-2013 addressed to the Board. (iv) That appellant No. 1 has attended the Annual General Meeting on 18-12-2013 and in the criminal complaint she feigned ignorance of the said meeting. The 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 reprobati .....

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others 1993(2) ALT 154." 15. Mr. D. Prakash Reddy made the following submissions: "(i) That Section 300 of the Act has to be read with Sections 297 and 299, and so read, it is evident that the said provisions apply in respect of a contract or an arrangement and as transmission of shares does not fall within either of these two expressions, 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 a .....

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s arise for consideration: "1. Whether respondent No. 5 has ceased to be a Director of respondent No. 1-company w.e.f. 6-4-2013? 2. Whether meetings dated 9-4-2013, 10-4-2013 and 11-4-2013 of the Board of Directors were validly held? 3. Whether respondent Nos. 2 to 4 were validly appointed as the Directors of respondent No. 1-company. 4. Whether the transfer of 81% shareholding in favour of respondent No. 2 is valid? 5. Whether appellant No. 1 has recognized the reconstituted Board of Direc .....

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3 and 11-4-2013? 7. Whether the acts done by the Board on 9-4-2013, 10-4-2013 and 11-4-2013 are saved by Section 290 of the Act?" 17. I would like to proceed to decide the Points with the caveat that the findings on facts rendered in the Judgment are provisional as the Company Petition which is pending before the Company Law Board is still to be adjudicated and that these findings shall not prejudice either party in the adjudication of the Company Petition. Re Point No. 1: Dr. Vijay Kumar D .....

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you to kindly acknowledge and arrange to file Form 32 with the Registrar of Companies and furnish me a copy of the document filed with the acknowledgment." 18. Section 283 of the Act envisages various situations in which Directors vacate their office. Cessation on account of resignation is not envisaged by this provision. No other provision under the Act has dealt with 'resignation of a Director'. However, Article 129 of the Articles of Association of the company which incorporated .....

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s not lay down the requirement of acceptance of resignation for the resignation to take effect. 19. In Glossop (supra) (1907(G) 1034)-(1907) 2 Ch. 370, Article 84 of the Articles of Association of the company therein provided for various contingencies by which the office of a Director will fall vacant. As in the case on hand, one such contingency is resignation by a Director through a notice in writing to the company. On 16-5-1907, the Managing Director of the company sent notice in writing to t .....

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amed the following question: "..... whether the defendants were right in treating the plaintiff as having vacated his office as managing director in consequence of the written notice sent by him to the company requesting their acceptance of his resignation as managing director? While answering this question, the learned Judge held as under : " .... That seems to me to depend entirely upon the proper construction to be put upon the articles of association of the company, and I think the .....

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exercised by their managers, who are the directors of the company. But, of course, that is always dependent upon any contract between the parties, and that has to be ascertained from the articles of association. Now here, in the first place, I think that article 85, which declares that "The office of managing director shall be vacated on the happening of any of the contingencies mentioned in clause 84 thereof, whereby the office of director shall be vacated," reads in the whole of arti .....

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. One of those events is "If by notice in writing to the company he resigns his office," and I think that, upon such notice, he has vacated his office, although by the proviso the effect of that vacation is not immediate, but is suspensory, and does not take effect until a resolution has been passed by the directors. It seems to me that is a different matter from saying that the director cannot vacate his office until such a resolution has been passed. The distinction, no doubt, is a f .....

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is vacation. It seems to me, therefore, that the second part of this motion fails." (Italics supplied) It is worth noticeable that in the above discussed Judgment, Article 84 contained a proviso to the effect that vacancy of office shall not take effect unless the Directors pass resolution to the effect that the Director has vacated his office. Despite existence of such a provision, the Chancery Division held that the Director who resigned cannot claim to continue as such till resolution by .....

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arise in this case as Article 129 of the Articles of Association does not contain a proviso similar to the one which existed to Article 84 in the case decided by the Chancery Division in Glossop (supra) (1907(G) 1034)-(1907) 2 Ch. 370. On a true and proper construction of Article 129(m), it does not admit of any doubt that once the Director sends his resignation by notice in writing addressed to the company, the office of the Director becomes vacant and the Director so resigned shall cease to b .....

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Company resign his directorship. Directors are merely agents of the company, and an agent may determine his agency." In Palmer's Company Law, 21st Edn., page 653, under the heading 'resignation' it is stated as follows: "A director can at any time resign his office, and usually the articles make express provision accordingly. If he communicates his resignation to the Company, for instance, by a notice upon the company served in the manner provided by S. 437, his resignation .....

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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 resigning director would be unable to end his contract with the company, except in accordance with its terms, express or implied, or with the company's agreement. Where a director who was both a permanent and an ordinary director resigned, it was held that the resignation applied to both offices." In Ramaiya's Guide to the Companies Act, 6th Edn., p. 452 unde .....

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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 articles the ordinary rule of common law as regards resignation by an officer or agent must be followed, namely, intimation by notice given either to the company or the Board and acceptance of same by them. See Glassop v. Glassop 1908-2 Ch. 370, Latchford Premier Cinema Ltd. v. Ennion 1931-2 Ch. 409. In the latter case, even resignation orally tendered .....

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ided the intention to resign is clear. In the absence of any indication otherwise, a resignation takes effect immediately. Resignation will not however relieve him from any accountable or other inability which he may have secured while in office. A resignation once made cannot be withdrawn except with the consent of the Company or the Board. See Rev. Mayor of Wigan 1886. 14 Q B.C. 908; Glassop v. Glassop 1907-2 Ch. D. 370; Sivial v. Tricamdas Mills Co. Ltd., 36, Bom. 564." 21. From the judi .....

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sign 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 resignation is to take effect on acceptance, it will take effect on such acceptance, and where the resignation says that it is to take effect immediately, acceptance is not necessary. Resignation once made cannot be withdrawn except with the consent of the company or the Board. However, the resignation will not relieve the Director from being a .....

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w.e.f., 6-4-2013, respondent No. 5 has vacated his office as a Director. 23. On 9-4-2013, respondent No. 5 has addressed another letter in writing to the Board of Directors which reads as under : "I, G.V. Rao, would like to continue as member of the Board, and hereby withdraw my resignation letter dated 6.4.2013." As per the law discussed above, while a Director can unilaterally resign, his withdrawal of the resignation cannot be unilateral and unless and until the Board of Directors .....

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nstituted 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 respondent No. 5 has not proceeded on the premise that his resignation letter stood withdrawn and that he continued as a Director. 24. On the analysis as above, this Court has no hesitation to hold that respondent No. 5 has ceased to be a Director of the Company w.e.f. 6-4-2013 and he was not reinstat .....

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ectors 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(2). Under Article 128 of the Articles of Association, a minimum of two Directors is required even to increase the number of Directors and to summon the General Meeting. 25. With the resignation of respondent No. 5 coming into force with immediate effect as desired by him, he had no authorit .....

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gs. 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 immense personal interest, to the meetings and appoint them as Directors/Managing Director. From the manner in which respondent No. 5 acted unilaterally behind the back of appellant No. 1 who was the Executive Director besides holding about 30,000 shares either on her own or j .....

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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 along with respondent No. 3 as Directors and in the Board meeting held on 11-4-2013, respondent No. 2 was appointed as the Managing Director. These acts are without any sanction of law as there was no validly convened and held Board meeting to begin with on 9-4-20 .....

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rovisions 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 arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, whether directly or indirectly, concerned or interested in the contract or arrangement; nor shall his presence count for the purpose of forming a quoru .....

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ressions. 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". Referring to Section 300 of the Act, the learned author wrote : "A proper construction of the word "Interest" here should be an interest conflicting with duty. For example, if the .....

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n 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. On the contrary, it was detrimental to one of the major share holders viz., appellant No. 1. In my opinion, the facts of the present case attract the prohibition .....

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pears 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(1) of the Form prescribed under Rule 3 of the Companies (Compliance Certificate) Rules 2001 requires the Company Secretary to state as to whethe .....

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29. 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 law. Point No. 5: All the learned Counsel for the respondents have forcefully pleaded that appellant No. 1 had the knowledge of Board meet .....

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13, 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. 30. 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. Appellant No. 1 has allegedly addressed letter dated 15-4-2013 which makes an interesting reading. The said letter reads : "Over th .....

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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 are aware, Mahima has been working alongside you and my husband for over 15 years now and shares his passion for this .....

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t, 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 vilifying her character and placing it in bad and blackest odor and coaxing/coercing her int .....

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quot; (Emphasis added) 31. 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 be drawn as to whether appellant No. 1 has addressed letter dated 15-4-201 .....

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on of the Board of Directors by appellant No. 1. 33. 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 seriously disputed the Will propounded by respondent Nos. .....

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lant 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 behind my ba .....

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f 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 called majorit .....

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lant No. 1 was seething with anger at and venting out her discontentment 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 .....

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n; that the Board took note of the contents of the allegations 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 view, 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 wer .....

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in the absence of the same, I cannot put my stamp of approval for 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 n .....

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9;s death. That her resolve to oppose all those actions was getting stronger and stronger is reflected in this letter. 35. The Supreme Court, in Dhirendra Nath Goari (supra: AIR 1964 S.C. 1300, referred to and relied upon the following passage in Maxwell's 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 h .....

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. But if it appears that the statutory conditions were inserted by the legislature simply for the security or benefit of the parties to the 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 (1942) .....

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irestone Tyre and Rubber Co. v. Synthetics and Chemicals Ltd. and others (supra) 1971(41) Comp. Cases 371 held at para-49: " There can be no estoppel against a statute nor can a person waive any right or benefit conferred 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 waive .....

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e detriment of the other side. For it is elementary that there can be no acquiescence without full knowledge both of the right infringed and of the acts which constitute the infringed and of the act which constitute the infringement. Acquiescence 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.... .....

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ve sought to press the doctrine of approbation and reprobation. 39. The phrase "approbate and reprobate" is borrowed from Scotch Law where it is used to express the principle embodied in the English doctrine of election, namely, that no party can accept and reject the same instrument (Verschures Creameries v. Hull and Netherlands Steamship Co. [1921] 2 K.B. 608). 40. In Lissenden v. C. A.V. Bosch, Ltd. (1940) A.C. 412, the House of Lords pointed out that the equitable doctrine of elect .....

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nd blowing cold" held : "These phrases must be taken to express, first, that the party in question is to be treated as having made an election from which he cannot resile, and, second, that he will not be regarded, at least in a case such as the present, as having so elected unless he has taken a benefit under or arising out of the course of conduct which he has first pursued and with which his present action is inconsistent". 42. The above Judgments were referred to and relied up .....

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maintainability of the appeal on the ground that after the Special Leave was granted to file the appeal the plaintiff has withdrawn the price of pre-emption which was deposited by the defendant by pressing into service the doctrine of approbation and reprobation. Placing reliance on the English law referred to above, the Constitution Bench of the Supreme Court rejected the preliminary objection. 43. The legal position that emerges from the decisions referred to above is that the doctrine of appr .....

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ll the Directors, including appellant No. 1, was implemented and appellant No. 1 is deriving the benefit from such decision. Appellant No. 1 who was present in the Court submitted that she has in fact opposed the increase in remuneration in her dissenting views expressed through her letter dated 22-8-2013 referred to in para-13 of the Minutes of the meeting dated 22-8-2013 and that without her consent the company has been crediting the increased remuneration to her bank account. 45. In her lette .....

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he decisions taken by respondent Nos. 2 to 5, which were impugned in the Company Petition except the letter dated 15-4-2013, which, as observed hereinbefore, is subject of serious controversy. This Point is answered accordingly. Point No. 6 : Heavy reliance is placed on the first proviso to Section 260 of the Act by the learned counsel for the respondents. They have submitted that even if the appointment of respondent Nos. 2 to 4 as Directors and respondent No. 2 as the Managing Director in the .....

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have been filed by respondent No. 1. A perusal of the record shows that no such material was produced even before the Company Law Board though a reference to the said AGM was made in the order under appeal. Therefore, in the absence of any such material, it is not possible to accept the submission of the learned counsel for the respondents that the earlier appointments of respondent Nos. 2 to 4 were ratified or approved in the said AGM. One another strong reason which impels me to reject this s .....

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rine of necessity. They have sought to justify all their actions commencing from convening and holding of the Board of Directors meeting on 9-4-2013 to the convening and holding of the Annual General Meeting on 18-12-2013 on the ground that they had no choice other than resorting to such actions with the death of the Chairman and the Managing Director of the company and the obvious non-cooperation of appellant No. 1 who was the Executive Director. 46. Countering this plea, the learned Senior Cou .....

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traordinary general body meeting under Section 169(7); or (iii) to approach the Company Law Board under Section 186 to order a meeting of the company to be called and held in the manner as may be directed by the Company Law Board. 47. In Election Commission of India v. Subramaniam Swamy (1996) 4 SCC 104 the Supreme Court, explained the doctrine of necessity, in para-16 as under : "We must have a clear conception of the doctrine. It is well settled that the law permits certain things to be d .....

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defaulting party would benefit therefrom. Take the case of a certain taxing statute which taxes certain perquisites allowed to Judges. If the validity of such a provision is challenged who but the members of the judiciary must decide it. If all the Judges are disqualified on the plea that striking down of such a legislation would benefit them, a stalemate situation may develop. In such cases the doctrine of necessity comes into play. If the choice is between allowing a biased person to act or t .....

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2 to 4 as members had an option to approach the Company Law Board under Section 186 of the Act for a direction to hold a general meeting of the company. Instead of following this simple procedure, respondent Nos. 2 to 5, for the reasons best known to them, have embarked upon a procedure which has proved to be in utter violation of the statutory provisions of the Act as discussed above. Therefore, the respondents cannot seek to justify their otherwise indefensible and unjustifiable actions by inv .....

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validity to acts done by a director after his appointment has been shown to the company to be invalid or to have terminated." On a plain reading of the above reproduced provision, it is clear that this provision applies only in a case where invalidity of appointment of a director was discovered after he has done the acts. This provision fell for consideration of the Courts at least in two decisions, viz., M. Moorthy (3-supra) and Eastern Linkers Pvt. Ltd.(4-supra). In M. Moorthy (3-supra), .....

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the meeting held on 20-5-1978 as it was their case that notices were not served on them and that therefore such a meeting which had no quorum could not be recognized as a valid meeting and any decision taken therein cannot be treated as valid. Repelling the contention that Section 290 of the Act saved the action of the Board, the Madras High Court held : " ... That section, however, will have no application to the present case where, as per the earlier discussion, there had been a usurpati .....

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gh Court in Eastern Linkers (4-supra). That was also a case where the shares were allotted by a Director who was purported to have been elected at an invalid meeting. Rejecting the argument based on Section 290 of the Act, the Bench in no uncertain terms held that the said provision is based on the rule culled out from Turquand's case (1856) 25 LJ QB 317 which, as reproduced in Morris v. Kanssen (1946) 16 Comp. Cases 186 : 1946(1) All.E.R. 586 : (1946) AC 459 is to the effect that the person .....

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he 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. 50. Shortly put, the benefit of Section 290 of the Act is generally available to third parties who enter into transactions with a company not knowing what the internal structure and mechanism of the company is. A person such as a Managing Director or a Director who is expected to know what is right and what is wrong and what .....

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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 his submission, he has placed reliance on the Judgment in Sangram Singh (10-supra). There is no quarrel about this submission. Intervention by the Company Law Board can be made only if the applicant before it establishes that the company's affairs are being conducted in a manner prej .....

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ducted in a manner prejudicial to public interest or in a manner oppressive to any member or members. 52. In Sangram Singh (10-supra) the Supreme Court held the expression "oppressive" to mean burdensome, harsh and wrongful; that oppression complained of must relate to the manner in which the affairs of the company are being conducted and the conduct complained of must be such as to oppress the minority members and by reason of such acts of oppression it must be shown that the majority .....

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lders vis-à-vis the others. (c) The action is against probity and good conduct." 54. 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 and allowed respondent Nos. 2 to 4 to usurp the office of Directors and have manipulated the transfer of overwhelming majority of the shares in the company in favour of respondent No. 2 and allowed her to unla .....

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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 has later realized that the scope of the cases before the Company Law Board and that of the suit before the Civil Court is distinct from each other. The learned Counsel has fairly conceded that the valid .....

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mission 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. 57. Another submission which was initially made by the learned Counsel for the respondents, but later not pressed is the maintainability of the Company Petition before the Company Law Board. It has now been conceded that appellant No. 1 on her own without the aid of the other appellants could main .....

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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 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 meetings of the shareholders o .....

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s. 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 company's 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 company's affairs upon such terms and conditions as appear to it to be just and equitable. In the peculiar facts and circumstances of the case, this Court, therefore feels the n .....

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ay 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, it is not possible for this Court to take any view on the genuineness or otherwise of these Wills. At this stage, therefore, this Court has no opt .....

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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. 62. Though there appear to exist simmering differences between appellant No. 1 on the one side and respondent Nos. 2 to 4 on the other, considering the fact that they are no other than mother and daughters who can sink their differences in their .....

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