9911796707
TMI Blog2015 (5) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Plastics Products by late K.N Gnanaprakasam and 9 others as partners with equal shareholding/share capital with modest capital of less than Rs. 1O lakhs. The petitioner. the 4th respondent and the 8th respondent herein were initially in charge of the said unit. It is submitted that the petitioner had visited UK in 1973/1974 and finalized the purchase of a sheet moulding compound (SMC) plant, with technical know-how for sheet moulding compound and Dough moulding compound from M/S. Fothergill and Harvey Ltd, UK. Accordingly, the said plant was imported and installed in the said unit. It is submitted that in the year 1983 the said partners of the firm, had formed the first respondent company with the objects clauses as stated therein. The first respondent company started manufacturing sheet moulding compound (SMC), dough moulding compound in the above said premises. The first respondent has also diversified into moulding of components using Hydraulic Presses ranging capacity from 100 Tons to 250 Tons and started supplying finished switch gear parts to the various electrical industries. A tool room was also developed at Unit 'A' by the 8th respondent and later it was moved t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expertise built over the last few years in sufficient to execute this project to world class standards. The project approvals from different bodies, is expected and the project should commence in next 2 to 3 months. The building plans and other structure, civil work offers are kept ready and the project can be implemented as soon as the approvals is in hand. The following are the sales figure for the last 2 years. 2007-08 2008-09 Unit 'A' 64.17 57.55 Unit 'B' 1O.20 10.19 Unit 'C' 26.17 29.56 Approximately profit figures is also attached herewith for the year March 2008 and March 2009 and also a sales review for Unit 'C' and profitability statement (Unit 'C') presented to Board by the petitioner. In additions to the above several new developments are being made at Unit 'C' by the petitioner. These projects when implemented will be in first of it kind in India and it can be offered to the local as well as the world market, for which there is a great potential, as such equivalent products available are very expensive. The petitioner is one of the founder members and was President of FRP Institute, India in the year 2006-2008, He is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and would not have termed it as a division of the 1st respondent. In fact earlier to this arrangement, the 1st respondent company was doing such consultanc services to two US customers viz. Stahlin Enclosures and New Basis and by such services the company had eamed approximately 3,46,000 US dollars for the years 2006-08. There was no objection by the directors till date. It is submitted that in support of his reply, the said Michel Jackson has also submitted a detailed letter stated 18.06.2006 stating the circumstances under which the consultancy services was started. Inspite of quick response from the petitioner, to the show cause notice from USA, the 1st respondent company had issued a public notice in various major newspapers with an intention to tarnish the image of the petitioner. After seeing the public notice, the petitioner has returned to India to take stock of the situation. 9. It is submitted that the petitioner has received a notice dated 17.06.2009 for Extra Ordinary General Meeting on 27.06.2009. As per the said notice, the main agenda is to consider the said reply of the petitioner to the show cause notice and pass necessary resolution in this regard. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the 1st respondent company. The minutes in this regard had been recorded and are in the custody of the 1st respondent. Since many of the applications are still pending, the petitioner could not assign the patent right. As and when the petitioner gets the right from the patent registry, all the patent rights will be assigned in favour of the 1st respondent. In fact the draft assignment has already forwarded to the company's auditor for his approval and it was also discussed in various Board meetings and issue was resolved. The above acts cannot be termed as fraud committed on the company with improper and ulterior motive to siphon off the funds of the I respondent company and such allegations are made without any basis and there is no documentary proof tor such frivolous allegations. 11. It is further submitted that when the petitioners father namely Sri K. Rajagobal Chatty was acting as chairman, the other directors had removed him on the ground that he had long list of ailments vide resolution dated 14.03.2008. On the other hand the respondents had chosen to appoint one Mr V. Mari Chettiar (11th respondent) as a whole time director w.e.f. 01.04.2008 vide resolution dated 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himala Beach Resorts Pvt Ltd. 11. (2007) 139 CC 246 (CLB) in the matter of Naginder Singh Shiena Others Vs. R.S Infrastructures Ltd. 12. (1999) 4 Comp W 369 (CLB) in the matter of Naresh Trehan Vs. Hymatic Agro Equipment Pvt Ltd Ors 13. (2007) 73 SCL 338 (CLB) in the matter of Dinesh Sharma vs. Vardaan Agrotech Pvt Lts. 14. (2006) 134 CC 500 (CLB) in the matter of Arunkumar Mohta Another Vs. Ganesh Commerical Company Ltd Others. 12. The respondents 1 to 6 and 8 to 11 filed common counter to the main petition. Shri R. Venkatavaradan, learned counsel appeared for the respondents submitted that the present company petition is a gross abuse of the process of this Hon'ble Board and the petitioner is disentitled to any relief claimed in the petition. The petitioner is guilty of suppressing material facts and is trying to mislead this Hon 'ble Board by filing this petition. The reliefs sought for in the petition are neither maintainable in law nor on facts and the petitioner has tried to justify his gross breach of fiduciary duty' as an Executive Director of the 1st respondent company. Even a cursory look at the prayers of the petitioner, would reveal that the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the title "ABOUT US" page a link 'VIEW OUR PARENT WEBSITE' at www.devipolymers.com has been provided. During the period or March, 2009/1st week of April, 2009 the webpage of www.devipqlvmers.com was updated by one Mr Santosh of Easylinkindia who has designed and maintained both the sites referred to above with a link "VISIT OUT SISTER CONCERN AT www.devidcs.com" under the instruction of Mr R. Ramesh through his P.A Mr P. Immanuel. This autocratic act of Mr R. Ramesh setting up the webpages with misleading links and information to the clients/customers who visit the said websites is yet another prof of his fraudulent intentions and character. The creation and launching of website and attaching a link without authority and knowledge of DPPL would attract the penal provisions of sections 463 & 464 of IPC. The petitioner is fully aware that proper answers to the questions raised above would prove his guilt beyond all reasonable doubt. Therefore, the petitioner has tried to gloss over the entire issue in his petition. The petitioner is guilty of suppressing the factual details which would be a complete answer for the question raised above. 13. It is submitted that the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld on 25.04.2009, the petitioner, who also attended the said meeting, enquired as to whether a copy Of the Annual Review Report dated 03.04.2009 had been circulated to the Board. The members of the Board informed the petitioner that no such report was circulated. There was no submission of any Annual Review Report relating to Unit-C as alleged. The respondents submit that the Annexure-I I to the petition contains review of Unit-C for the period April '08 to March '09. This report as mentioned above does not even bear the signature of the Executive Director Mr R. Ramesh. Ihis has not been placed before the Board of directors and is shown to be dated 03.04.2009. It is important to mention here that prior to this report, the petitioner had already executed a Memorandum of Understanding (MOU) with Mr Michael Jackson on 02.03.2009. parallel concern by name DCS therefore had been launched long before the alleged review. The alleged review of Unit-C in Annexure-11 does not even contain a whisper about the starting of the parallel concern by name DCS. The petitioner is clearly guilty of suppressing the fact that the petitioner had not taken any approval or consent from the board no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a perusal of the website would prove that DCS does not stop with consultancy services along but also provides manufacturing, R & D, Design Engineering, Testing and Commissioning, Installing, Components and Assembly supply with their customers being Siemens, Areva, Socomac, Stahl, Stahlin, New Basis, Larsen & Toubro and Alsthom. Some of these are already existing customers of the 1st respondent company and therefore this is clear proof of diversion of business by the petitioner. It is clear that the roles played by DCS, as mentioned in the website pertaining to the services offered, are similar to the ones offered by the 1st respondent company to its existing customers. The petitioner has published photographs of machineries and buildings at Unit-C belonging to the 1st respondent company to mislead the customers and make it appear as if it belongs to DCS. The petitioner has also given wide publicity in various trade journals portraying DCS as a one stop solution for customers worldwide which include the customers of 1st respondent company. The petitioner has given press releases to various trade journals including a journal by name Reinforced Plastics dated 05.04.2009, Nasscom dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en convened only to remove the petitioner from the Board. The petitioner has unnecessarily dragged the issue regarding the 7th respondent and the fact that he was one of the directors earlier. This as well as the false averment regarding the alleged removal of Mr Rajagopal Chatty as the chairman has been deliberately distorted to present a picture as if the petitioner and his family are sidelined. It is necessary to mention here that the 7th respondent as a director had been involved in surreptitious sale of land belong to another group company by M/s. Glenrock Estates Pvt Ltd. The 7th respondent had entered into a secret agreement which strangers for parting with valuable lands belonging to the said M/s.Glenrock Estates Pvt Ltd and had handed over possession of these lands without any authority. This has been done by the 7th respondent knowing fully well that the estate lands were the subject matter of dispute before the Hon'ble Supreme Court and that the company had given an undertaking before the Hon'ble Supreme Court that it would not deal with the said estate lands in any manner whatsoever until the pendency of the same before the Hon'ble Supreme Court. When the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f-serving allegation. The respondents submit that there cannot be a better case on hand for removal of a director by the shareholders in the General Meeting. The reliance placed on Article 8 is of no consequence in the present case as the fraudulent actions on the petitioner do not come within the purview of Article 8. 19. It is submitted that as regards the patents. the petitioner has averred stating the he is ready to assign the patents in favour of the 1st respondent company. It is pertinent to mention here that the petitioner. his son and daughter have registered various patents in their names. These patents are actual products and designs which have been designed by the 1st respondent company. Further. the patent for the same product in the US is in the joint names of the petitioner, his son Mr Roahan Ramesh and one Mr Martin Fitzer having Intemational Patent No. PCT/IN/2002/00025. This is available in the World Intellectual Property Organisation Webpage which has been published on 21.08.2003. The respondents submit that the expenses for the registration of these patents have been debited to the 1st respondent company and hence these rightfully belong to the 1st respondent co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoved as a director for an absolutely just cause. The prayer of the petitioner if granted would amount to rendering the provisions of section 284 redundant. The removal of the petitioner as a director is all the more justified since the I st respondent company is admittedly a company in which the family members are shareholders and there could be no room for any breach of fiduciary duty or acts of fraud. The learned counsel submitted that the petitioner has not made out any case and prayed this Bench to dismiss the petition. In support of his contention he relied upon the following decisions: 1. AIR 1965 SC pg 1535 in the matter of Shantiprasad Jain Vs. Kalinga Tubes. 2. (2000) CC Vol 100 pg 66 (CLB) in the matter of Vinodkumar Mittal Vs. Kaveri Lime Industries Ltd Ors. 3. (1996) 10 SCC 696 in the matter of Kilpest Pvt Ltd ors vs. Shekhar Mehra. 4. (1987) Vol 61 CC 20 (Madras High Court) in the matter of V.M Rao Vs. Rajeswari Ramakrishnan Others. 20. Heard the learned counsel appeared for the respective parties, perused the pleadings, documents and citations relied upon by them, After analysing the pleadings the following issues are felt for consideration and need to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital of the RI Company as on the date of filing of the petition. However from the perusal of averments made in the petition, and the reliefs sought therein it is evident that the petitioner is ventilating the grievances in respect of directorial complaints. Coming to the main issue the main grievance of the petitioner is that he has received a show cause notice dated 17.06.2009 through email from the RI Company to show cause the matter of (i) Setting up of consultancy service in USA and (ii) the registration of certain patents in the name of his family members. 22. It is stated in the said notice "hence you are hereby given an opportunity to offer your explanation to the above stated acts of yours in the matter of setting up of DCS (Devi Consultancy Services) in USA and in India and the registration of patents in the names of your family members and outsiders and the failure to assign the said patents in the name of the company within 5 days from the receipt of this letter or failing which to present your case at the time of EOGM of RI Company to be convened on 27.06.2009 at the corporate office of RI Company at 10.30 AM tor which due notices has been given to all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z., daughter Ms Jyothsna Ramesh and son Mr Roahan Ramesh) and tilt-ther registered a patent in the joint names of Mr R. Ramesh, and his son Mr Roahan Ramesh and one Mr Martin Fitzer. When confronted repeatedly about this Mr R. Ramesh finally promised to assign the said patents in the name Of the company. But unfortunately Mr R. Ramesh had failed to assign the said patents in the name of the company to this date. 3) The company by its letter dated 17.06.2009 had given an opportunity to Mr R. Ramesh to explain his conduct in the above stated matters in writing before the presently convened Extra Ordinary General Meeting of the company on 27.06.2009. 4) Members are therefore requested to attend this important Extra Ordinary General Meeting of the company to discuss the above stated issue and consider the written reply of Mr R. Ramesh, if any given. to the show cause notice, or in the absence of any such written submission, consider the said acts of Mr R. Ramesh in the above stated matter and pass necessary resolutions in this regard. 23. The petitioner has given a detailed reply on 27.06.2009 for the notice of intended resolution for his removal as director by the shareholders. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een specifically mentioned that the petitioner has started the Devi Consultancy Services without the approval of the Board of the RI Company. To my view the removal of the petitioner is on two counts i.e. starting a division in the name of DCS and not assigning the patents to the RI Company. However the petitioner contended that the forming of DCS is not a separate unit but a marketing tool for obtaining further business. On the Other hand the respondents contended that the DCS is not a marketing division nor an extension of RI Company but a separate unit. Further it is contended that the petitioner committed breach of fiduciary duty by starting a parallel business in the name of DCS. The annual report which the petitioner strongly relied upon that the respondents are aware regarding the starting of DCS. From the perusal of annual review report of Unit 'C' for the year April 2008 to March 2009 there is a mention regarding future growth. At sub clause 2 of the future growth it states that "we are promoting the sale of design. engineering services and supply therefrom from the export market. Steps have been taken to promote these services". From the said statement it is a tac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that tremendous amount of consultancy work done by the company for various clients in USA in the design of new products, which had also generated substantial business for the company. I do not accept the contentions made by the learned counsel for the petitioner. With regard to the compliance Of the provisions of section 190 is concerned, the learned counsel for the respondents submitted that under article 15 of AOA, the company can hold an EGM by giving 7 days' notice in writing. Accordingly the EGM of the company was convened on 27.06.2009 and complied with the articles by giving 7 days' notice as required under article 15. Article 1 5 of the Articles of Association reads thus: "A general meeting other than the AGM of the company may be called by giving not less than 7 days * notice in writing and the provisions of section 173 of the Companies Act, 1956 shall not apply to the company". Even before dealing the said article and the provisions of the Companies Act it is to state that the articles of the company are binding on the company and its shareholders. Under Section 170(1) of the Companies Act, the provisions of section 171 to 186 applies to public company or a pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion. The learned counsel for the respondents submitted that principles of quasi partnership can be invoked in a petition for relief against oppression where the shareholding between the contesting parties more or less equal, there is a dead lock in the management of the company on account of an equal division in the shareholding and directorship, lack of probity in the conduct of the affairs of the company. It is an admitted fact that the petitioner is holding only 10% shareholding, therefore the first criteria that the shareholding between the contesting parties is more or less equal is ruled out. Admittedly there is no deadlock in the management of the company on account of an equal division in the shareholding and directorship, lack of probity in the conduct of the affairs of the company, It is an admitted fact that the petitioner is holding only 10% shareholding, therefore the first criteria that the shareholding between the contesting parties is more or less equal is ruled out. Admittedly there is no deadlock in the management of the company on account of an equal division in the shareholding and directorship. With regard to lack of probity I am of the view that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of shares and the only issue is regarding the removal of the petitioner as a director. Therefore on facts the said judgment is not applicable to the present case. In the matter of MSDC Radharaman (7) supra relied upon by the learned counsel for the petitioner is to state that the ratio in the said judgment is not applicable to the facts of the present case as there is no deadlock in the management of the company. On the point of legitimate expectation the learned counsel relied upon the judgment in the matter of N. Ram & Others (4) supra. The question of legitimate expectation does not arise in the present case on the ground that the facts are completely different to the facts of that case. 24. The learned counsel for the petitioner contended that the removal of the petitioner is an act of oppression. On the other hand the learned counsel for the respondents submitted that the removal of the petitioner is an isolated act and not an act of oppression. To contend it is an act of oppression it is stated that the petitioner has been the executive director of the company for a long period of time and therefore his removal as a director constitutes an act of oppression. It is a wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gments on the point of removal. In the matter of B. V ftirumalai & Others (8) supra. In the said case the petitioner was removed as a director from a family company without a notice for the removal of the petitioner as director and a blank paper was sent in registered post to the petitioner and the petitioner had been removed by the respondents in the alleged meeting convened based on the notice. In the matter of B. Natarajan (9) supra the respondents in that case removed the petitioner as director and had made further allotments to themselves in a family company, The facts of the said judgments are different to the facts of the present case. The citations relied upon by the learned counsel for the petitioner at 10. 11, 12, 13 & 14 supra are not at all applicable to the facts of the present case. In view of the reasons as stated supra the petitioner has not made out any case seeking injunction restraining the respondents from removing the petitioner from the post of director of the R I Company, The EGM was held in a democratic manner and duly complied with the articles and law, Not but the least the position of the director in the company is one of the utmost good faith and the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I Company, the petitioner cannot continue to carry on the duties in view of the reason that the petitioner is no more a director of the company. The company entrusted carrying on the duties of Unit 'C' of the RI Company to the petitioner in the capacity as executive director. The Articles of the company empower the Board to appoint one or more of its members as managing/executive director or directors of the company for such a period and on such terms and conditions as the Board may think fit. In view of the articles the Board only has the power to appoint one of its members (directors) as managingexecutive director. Since the petitioner is ceased to be a director by virtue of this order he has no locus standi to continue as executive director more particularly to look after the duties in relation to Unit 'C' of the RI Company. The relevant article 7 of the AOA is reproduced hereunder for better appreciation: "AT THE EGM held on 27.09.1989 clause (7) be deleted and incorporated the following in its place: The Board shall have power to appoint from time to time any one or more of its members as Managing/Executive Director or Director(s) of the company for such pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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