TMI Blog2017 (6) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceeding at the meeting” as mentioned in page 50 of the CP. The Memorandum of Association and the Articles of Association are the mandate of the shareholders in the Company having the nature of quasi-partnership. They are supposed to abide by their own Memorandum of Association and the Articles of Association. As also when the Respondent No.4 having not actively participated in the affair of the Company and the Company since then could not carry on any active business due to dysfunctional Board of Directors, the appointment of Respondent No.3 was justified in the best interest of the Company, as also the shareholders of the Company. There is no act of oppression against the petitioner or that there is any lack of probity on the part of the Respondents. Thus, there is no scope to declare the appointment of the Respondent No.3 as invalid and/or to declare any Board meeting and the Annual General Meeting as illegal and void on the ground that it was an act of oppression. - C.P. NO. 118/2014 - - - Dated:- 5-5-2017 - Ms. Manorama kumari, J. For The Petitioners : Aritra basu, Patit Paban Bishwal For The Respondent : Jishu saha, Sr. Adv, Arpita Saha, Adv. RAjshree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such document in the MCA Portal. Similarly, as alleged by the petitioner, there was no AGM for 2012-2013 which has been shown to have held on 30-09-2013 which is again illegal, null and void since no notice was received by the Petitioner No. 1 and the Respondent No.4 (wife of Petitioner No. 1) and accordingly, no Form 32 is filed and the appointment of Respondent No.3 on the Board is also illegal. In view of the above, the AGM dated 31 -03-2012, 31-03-2013, held on 29-09-2012 and 30-09-2013 respectively as reflected in para 9 of page 12 are illegal null and void. 3. The main allegations, in brief, against the respondent(s) by the petitioners are : (i) That the Respondent No.3 has been wrongly appointed as Director of the Respondent No. 1, Company on 29-08-2013 without having the quorum. (ii) The Company has wrongly let out 1670 sq.ft. flat situated at 180, Block G, New Alipore which was purchased for the use of the petitioners for residential purpose. (iii) Other allegations levelled against the respondent(s) regarding irregularity and illegality committed by the Respondent(s) such as :- (i) Balance sheet of 2011-12 was signed by the Respondent No.3 ; (ii) Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e affairs of the Company. 5. In order to buttress the allegation against the Respondent(s), the petitioner relied upon the following citations relating to oppression : (i) SCC-2005 (II)- 314 Para/190/196 183. The expression oppressive', it is now well settled, would mean burdensome, harsh and wrongful. In Halsbury's Laws of England, 4th Edition, Volume 7, para 1011, it is stated : 1011. Conduct amounting to oppression. In this context, oppressive means burdensome, harsh and wrongful. It does not include conduct which is merely inefficient or careless. Nor does it include an isolated incident: there must be a continuing course of oppressive conduct, which must be continuing at the date of the hearing of the petition. Further, the conduct must be such as to be oppressive to the petitioner in his capacity as a member: whatever remedies he may have in respect of exclusion from the company's business by being dismissed as. an employee or a director, he will have none under the provisions relating to oppression. On the other hand, these provisions are not confined merely to conduct designed to secure pecuniary advantage to the oppressors; they cover th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing on one or other of these forms of combination, one result followed from the method adopted, which is common to partnership, that there should be the utmost good faith between the constituent members . Finally, it was held that the court ought not to allow technical pleas to defeat the beneficent provisions of Section 210 (page 344 per Lord Keith; pages 368-369 per Lord Denning). 49. In his judgment in Re Westbourne Galleries (supra) Lord Wilberforce has referred at two places to the decision in Blissett v. Daniel 68 E.R. 1024 which is recognised as the leading authority in the Law of Partnership on the duty of utmost good faith which partners owe to one another. Lindley on Partnership (14th Edition, pages 194-195) cites Blissett v. Daniel 68 E.R. 1024 as an authority for the proposition that: The utmost good faith is due from every member of a partnership towards every other member; and if any dispute arise between partners touching any transaction by which one seeks to benefit himself at the expense of the firm, he will be required to show, not only that he has the law on his side, but that his conduct will bear to be tried by the highest standard of honour. 53. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst point, it was said that the meeting of the Board of Directors dated December 16, 1953, was not properly convened for the reason that notice of the meeting was not given to all the Directors. The trial Court found that one of the Directors, viz. Mr. BP Khaitan, was not given notice of the meeting of the Board of Directors held on December 16, 1953, and that he was not present at the meeting when the resolution to terminate the services of the appellant was passed. 10. Now, it cannot be disputed that notice to all the Directors of meeting of the Board of Directors was essential for the validity of any resolution passed at the meeting and that as, admittedly, no notice was given to Mr. Khaitan, one of the Directors of the Company, the resolution passed terminating the services of the appellant was invalid. 11. Article 109 of the Articles of Association of the Company provides as follows : 109. When the Extra ordinary General Meeting to be convened - A Director may at any time summon meeting of the Directors by serving every Director with at least 72 hours' notice in writing, through the officer of the Company authorised to receive such notice who shall arrange to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice was sent on 22-03-1996. Apart from this, it was known to the respondent Sajal Dutta who is the brother of Appellant 1 that whenever his brother comes to Calcutta he does not stay in his house yet the notices were sent to Jodhpur Park, Calcutta. This shows lack of probity on the part of Respondent No.2 to somehow or the other oust his brother from the majority shareholding. Similarly, on the basis of such resolution Dr. Binod Prasad Sinha, Appellant 2 was ousted from the Directorship under Section 283(1 )(g) of the Act on the ground that he has not attended the meeting and he has no interest whatsoever. Similarly, Appellant 1 was also ousted from the meeting which was held on 7-2-1996 when another meeting was scheduled to be held on 16-02-1996 and it was within the knowledge of Sajal Dutta that his brother was likely to attend the meeting to be held on 16-02-1996. But suddenly the meeting was held on 7-02-1996 when another meeting was scheduled to be held on 16-02-1996 and it was within the knowledge of Sajal Dutta that his brother was likely to attend the meeting to be held on 16-02-1996. But suddenly, the meeting was held on 7-2- 1996 and Appellant 1 was stripped off his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta - 700 053. The said flat was purchased in and around 1996 for a consideration of ₹ 16,77,000/- out of loan received by the Company which was repaid Put of the rental income of the flat. The ld. Lawyer of the Respondent(s) further submitted that Respondent No. 2 and Respondent No.3 are the Promotor Director of the Respondent No. 1, Company at the time of its incorporation sometime in the year 1995 as would appear from the subscription of the Memorandum and the Articles of Association as reflected at Page 56. Only on 9-11-2000, the petitioner became the shareholder of the Company and by that time the major payment of the said New Alipore Flat has already been made under the terms of agreement entered into with the Promoter of the building. The respondent further submitted that the Company never carried any business and there was no need for it to have active Board of Directors. 7. In the year 2000, when the petitioner was allotted share in the Company, his wife, Respondent No. 4 was inducted as Director of the Company only on the pleasure of Respondent Nos. 2 and 3. It is pertinent to mention that the Respondent No. 4 was never participated in the affairs of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e challenged by them. This itself shows that the presence of Respondent No.4 in the Board meeting of the Company and the presence of the petitioner in General Meeting of the Company were deemed on the basis of their consent obtained telephonically which is a long standing practice. This is because of the fact that the Respondent No. 1, Company never intended to carry on any business; hence formal notice of the meetings are not required to be served as per Clause 10(b) of the Company's Articles of Association which specifically provides that any omission to give notice or the non-receipt of the notice by any member or other persons to whom it is to given shall not invalidate the proceeding at the meeting . 10. The respondent(s) further submitted that the Respondent No.3 was the Director of the Company prior to the induction of the Respondent No.4 as Director in its Board. The Respondent No.3 resigned only to facilitate the induction of Respondent No.4, but as the Respondent No.4 left Kolkata in 2005, in order to accompany her husband, as such it was decided that the Respondent No.3 will be re-inducted in the Board without removing the Respondent No.4 and accordingly, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly, in the light of the instant case wherein the petitioner is taking steps to impede the functioning of the Company inducting another person as Director, i.e. Respondent No.3. However, may be irregular, illegal but was justified in the interest of the Company . Palghat Exports (P.) Ltd. v. T.V. Chandran [1994] 79 Comp Cas. 213 (Ker.) 'It was held If the petition if filed with collateral purpose and is an abuse of process of law or lacks bona fide, it should not be entertained' Scottish Co-operative wholesale Society Ltd. v. Meyer [1958] 3 All ER 66 (HL) it was held the Court have regularly directed the alleged operation to buy out the shares belonging to the oppressed at a fair price in pursuance of the power available under Section 204 of the Companies Act, 1956 . 12. Necessitating the present case and the reference in detail and taking into all the principal objection and having examined carefully the fact of the case in the light of the pleadings of the petitioner, the Respondents' reply and rejoinder and the documents produced by both the side, the basic point for consideration in the Company petition are (i) Whether the appointment of Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly the permanent resident of Chennai since 2005 and to secure her presence at Kolkata for attending the Board meeting was neither practicable nor feasible when the Company never carried on any business of its own. With regard to the issue No.2, that the wrongful letting out of the Company's assets, on perusal of the document and as also the own admission of the petitioner, the said asset (flat) was purchased sometime in the year 1996 as per the version of Respondent but on perusal of the petition, as per the version of the petitioner, it was purchased sometimes in the year 1995. Whatever may be the dispute on the date, with regard to purchase of the flat, but the fact remains that the said Flat was purchased in the name of the Company by taking loan before induction of the petitioner, as well as the Respondent No.4 who is the wife of the Petitioner No. 1 and the loan was repaid by the Respondent out of the rental income generated through the flat. The allegation with regard to the fact that the flat was purchased for the residential purpose of the petitioner, is not tenable on the own averment/admission made in the petition by the petitioner, wherein admittedly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any minimum two Directors are required to complete the quorum in Private Limited Company. Owing to the reason that one Director was outstationed, the appointment of the respondent No.3 was to promote and for smooth running of business and in doing so, it is not correct to allege that the respondents lack commercial probity, I believe, the Respondent(s) exercised the commercial prudence. 15. In support of my view, I referred to the decision in Needle Industries (India) Ltd. (supra) Mere illegal/invalid or irregular act by themselves, unless they are oppressive to any shareholder or prejudicial to the interest of the Company or to public interest, cannot support a petition under Section 397. It is not the petitioner's case that the appointment of Respondent Nos.3 and 4 as Directors, is oppressive to any shareholder including the petitioner(s) or prejudicial to the interest of the Company or to public interest . In another case, Winfield Investments Ltd. v. Mainslay Tele Services Pvt. Ltd. it was held that an act which is in contravention of the law, may be in the interest of the shareholder and the Company. Moreover, it is the prerogative of the shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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