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TMI Blog2016 (6) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... ic limited company having 27666500 shares of Rs. 100 each amounting 82.56% paid-up capital of R-1 Company. The Board of R-1 is constituted of two directors namely Naushad Ahmed (P-2) and Shiv Sewak Singh (R-2) with each holding 26,29,575 shares in R-1 amounting 7.85% holding each. R-3 (Sanjay Kumar Singh) holds 292175 shares amounting 0.87% of the company. R-4 (Anil Kumar Singh) is another shareholder holding same 0.87% equivalent to the shares held by R-3. Now, P-1 Company and P-2 filed this CP asking reliefs as mentioned above. 3. Now the grievance is that R-2 has been avoiding attending board meetings on one or other excuse despite receipt of notices of every board meeting, which causes impairment to the growth of the company, P-2 had informed to R-2 vide letter dated 18.06.2015 about convening board meeting at New Delhi on 25.06.2015, but R-2 denied to attend the same with a request for holding board meeting at Lucknow for both the directors are residing in Lucknow itself. When P-2 wrote another letter on 22.06.2015, stating that the meeting would be held at the schedule time and date because the most of the records are maintained at New Delhi, therefore, it was imperative for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition, P1 being requisitionists, called the EGM in terms of Section 100(4) of the Act 2013 vide its letter dated 10.08.2015. To make it happen, P-1 followed the due procedure of law for calling this meeting by giving 21 days notice to the shareholders. As the respondents failed to attend the EGM scheduled on 07.09.2015, for there being no quorum of five members to hold general meeting, no meeting was held on 07.09.2015. Then again on 22.08.2015, P-2 requested R-2 to attend the board meeting to be held on 30.08.2015, but R-2 raised another objection vide letter dated 24.08.2015 regarding the agenda of the meeting, venue and such other frivolous matters which should be kept aside when it comes to the interest of the company. Since P-2 sent another letter to R-2 on 28.08.2015 regarding the notice of board meeting to be held on 30.08.2015, R-2 via e-mail dated 29.08.2015, asked queries about holding board meeting. Then, P-2 replied that every query would be clarified and discussed provided R-2 attends to the board meeting. To avoid attending board meetings, R-2 again came up with a request to adjourn the board meeting schedule to be held on 30.08.2015. The company being helpless and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or grant) company i.e., R-1 company, there was an excess payment to a tune of Rs. 66 crores from R-1 to the EPC contractor in violation of the legal provisions. P-2, being the sole signatory, grossly misused his powers and took excess payment in the name of EPC contractor (P-1) in compression to the work done. On seeing such a gross mismanagement and embezzlement of the funds, R-2 wrote a letter on 17.06.2015 to the Deputy General Manager. SBI Project financial, Delhi, by explaining as to how P-2 mismanaged the funds of the company. Here, one fact should not be lost sight of is P-2 released the abovesaid money to P-1 under the cover of EPC contract, this transaction is not only questioned by the bankers but also noticed mismatch of Rs. 28.29 crores in the funds utilised vis-a-vis made available to P-1 by R-1 as on July 31, 2014. Now, these petitioners insist upon holding board meetings only to ratify their irregularities and illegal acts committed by them. When R-2 received notice of board meeting dated 22.08.2015, he had sought the information below from the petitioner regarding the agenda of the meeting proposed to be held on 30.08.2015, the information sought on 24.08.2015 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when P-2 called for a board meeting at Delhi, R-2 requested P-2 to hold board meeting at Lucknow because P-2 and R-2 reside at Lucknow and it would be convenient to both the parties to assemble at place where they are, instead of all the way coming to Delhi, which he could have it at Lucknow itself. That the records of R-1 Company were throughout being maintained in Lucknow, R-2 says, it is incomprehensible to him as 10 how the records which were earlier maintained at Lucknow have been suddenly shifted to Delhi just before convening a board meeting. It is true that R-2 declined to hold board meetings in the premises of P-1, because disputes are on in between P-1 and R-2. For if the petitioners are ready and willing to hold any board meeting or general meeting by supplying information to the Respondents in relation to agenda items of respective notices, there can't be any impracticability for holding general meeting, the Respondents submit that they will attend meetings. These petitioners cannot hold out seeking deferment of a meeting, request for change of venue and request for supply of material information connected to agenda items as a ground to invoke jurisdiction u/s 186 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for both the directors arc residing at Lucknow and most of the records are lying at Lucknow. it is therefore incomprehensible as to why R-2 insists upon holding Board meetings at Delhi. 14. Though there are allegations and counter-allegations of embezzlement of funds and other points, now this Bench is not on the points other than the point of impracticability. P-2 says that it is impracticable to call or to hold or to conduct general meeting because the Respondent avoiding attending every board meeting and general meeting so as to make the company dysfunctional. To counter this, the respondents submit that they are not averse to attending any meeting, they are indeed interested to attend meeting provided there is a possibility of having fruitful discussions over the issues and such fruitful discussions will take place only when relevant material is supplied to the other side. It is the case of the respondents that they have not been supplied even audit report and other valuable documents that reflect the financial of the company. 15. It is not the case that the petitioners have exclusive control over the company; however R-2 says he has participatory role in P-1 Company as much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. 18. The meaning and intent of this section is well explained in Para-6 of the judgment supra, which says as below: "It corresponds with slight variation to section 79(3) of the Companies Act, 1913 and section 135 of the English Companies Act, 1948. The plain meaning of section 186 is that the court may order a meeting of the company to be called, held and conducted in such manner as the court thinks fit in any or more of the following contingencies. (i) If for any reason it is impracticable to call a meeting of the company other than an annual general meeting. (ii) if for any reason it is impracticable to hold the meeting of the company in the manner prescribed by the Act or the Articles. (iii) If for any reason it is impracticable to conduct the meeting of the company in the same manner. On the occurring of any or more of the said contingencies the court has to order the calling of a meeting of the company and its holding and conducting in such manner as the court thinks fit. The use of the word 'and' between the words 'held' and 'conduct' in clause (a) of sub-section (1) clearly shows that the court has no power to make any order re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the company to function, especially when the shareholders' whereabouts are not known and when they have abandoned the company. There are many other remedies available under the Companies Act to make the company function. The remedy u/s 186 is a sword that in one stroke, strike off the functional role of the shareholders. No doubt, a company is an independent identity having an interest independent of the interest of shareholders: that does not mean it is a separate and exclusive interest from the interest of the shareholders interest, the company's interest is rather a collective interest of the shareholders. Company is a lifeless entity; it is shareholders who breathe life into it. Paramount interest of the company means collective interest of the shareholders, because the company is set up for the interest of the shareholders, and therefore it is important to see whether canvass of some out of these shareholders is for collective interest or for the interest of them alone. At times, it is challenging task to delineate collective interest of the shareholders and interest of a group of shareholders of the company. 21. It is needless to say when apex court of us alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was incorporated, three-the respondent directors being aware of the fact that the inevitable result of convening and holding AGM would be that they would find that they had ceased to be directors. 26. The reasons for passing such an order is altogether different from the reasons the petitioner herein raised in this CP for passing relief u/s 186 of the Companies Act, 1956. Moreover, the relief granted in the case supra is for holding AGM not for EGM, hence the ratio decided in the case supra is not applicable to the present case. 27. The petitioners relied upon Pucci Dante vs Rafeeque Ahmed & Anr. [(1999) 95 Comp Cas 566 CLB)], to say that when relations in-between the shareholders are not cordial and when it is impracticable to hold EOGM, the provisions of Section 186 can be invoked. In the ease supra, CLB, Chennai, concluded as below:- "15. On the facts and circumstances of the present case, where there are serious disputes among the petitioner on the one hand and the first respondent as well as Mr. Faiz Mohammed on the other hand, the first respondent and Mr. Faiz Mohammed have an insignificant stake in the company when compared to the petitioner; the requisition dated Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1 equivalent to the shareholding of P-2. R-2 and his group admittedly have 34,67% shareholding; of course R-2 alleged in the CP 140/2014, that his group had 42.38% holding in P-1 before their shareholding was reduced. If Section 186 is invoked just by being coasted on the allegations in the petition, by ignoring other shareholders reservations to attend general meeting, it will amount to bulldozing the rights of the shareholders. This situation can't he extended to say that whenever shareholders absent to any meeting that will become impracticable, so that court is at liberty to grant relief under section 186 of the Act, 1956, wiping the rights of the other shareholders. 30. This relief could only be passed in a case where it is impracticable to call even a meeting, in a situation like where shareholders addresses are not known to the company and their whereabout are not known to the company. But not in a case where shareholders are very much present and it is not impracticable to call the meeting, more especially in a case where shareholders express their willingness to attend the meeting. 31. The petitioner relied upon Sanjay Gambhir & Ors. v. D. D. Industries Ltd & Ors 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs are very much present and available for attending the meeting henceforth; the ratio decided in the case above is not applicable to this case. 35. The petitioner relied upon LIC Corporation of India v. Escorts Ltd and Ors (AIR 1986 SC 1370) to say that even shareholder of the company has a right to call an EGM in accordance with the provisions of the Companies Act and he cannot be restrained from calling a meeting and he is not bound to disclose the reasons for resolutions proposed to be moved at the meeting. 36. In the case supra, no order has been passed invoking Section 186 of the Companies Act, all it says is an injunction cannot be granted to restrain holding general meeting to remove a director and appoint another one, therefore, the ratio decided in that case is not applicable to the present case. 37. The Respondents relied upon In Re: Ruttonjee & co. Ltd. (AIR 1969 Cal 550) to say that section 186 cannot be invoked in the facts and circumstances the petitioners raised, to which, the respondents relied upon the para below: "40. It is manifest that the Mallya group wants to eliminate the Bhesania group from the Board altogether although at the inception it was solemnly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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