TMI Blog2000 (11) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... reholder. Later, the 4th respondent and his family members were also admitted as shareholders. The shareholding position was that the petitioners family held 35 per cent, 2nd respondent s family 30 per cent, 3rd respondent 10 per cent and the 5th respondent 25 per cent. The 1st petitioner was one of the first directors as also the managing director by virtue of articles 29 and 43 of the articles of association of the company. In an EOGM held on 30-1-1997, the 1st petitioner was removed as a director and the managing director and in the same meeting the 2nd respondent was appointed as a director and managing director. The removal as well as appointment have been challenged in this petition. 3. Shri Ramesh Babu, the Advocate appearing for the petitioners submitted as follows: This company was incorporated with a view to expand the business of the erstwhile partnership of which the petitioners were the partners and with a view to have a controlling say in the company, it was provided in the articles that the 1st petitioner would be the first managing director. One of the arrangements with the promoter respondents was that the petitioners would have 35 per cent shares in the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce that anybody requisitioned that meeting under section 169 other than the one for calling for convening an annual general body meeting. Further, there is nothing on record to show that the Board of Directors of the company had considered any such notice. The notice received by the auditors of the company had been signed by two persons purportedly as directors and the notice has not been issued in the name of the company. Further, for removal of a director, a notice under section 284 should have been given to the directors while no such notice was issued in the present case. Further, a special notice in terms of section 284 should have been given to the first petitioner. Therefore, not only the holding of the meeting is in violation of section 169, the removal also is in violation of section 284. Further, in the same meeting the 2nd respondent was appointed as the managing director without this item being on the agenda of the notice of the alleged requisition. Transacting a business in a requisitioned EOGM without the same being included in the notice of the requisition is against the provisions of section 169. Therefore, all the proceedings of EOGM should be declared as null and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the provisions of the Act either in the removal of the petitioner and the appointment of the 2nd respondent as a director/managing director. 5. The learned counsel for the respondents further submitted that a single act alone cannot constitute oppression or mismanagement and if the action of the directors is invalid, then, a proper remedy would be to move the civil court and not the CLB under section 397/398 (Suresh Kumar Sanghi v. Supreme Motors Ltd. [1983] 54 Comp. Cas. 235 ). On the same proposition, he cited a few other cases also. 6. We have considered the pleadings and arguments of the counsel. The main grievance of the petitioner relates to his removal as a director/managing director. Normally, in section 397/398 petition, directorial complaints are not entertained save in certain circumstances like the family company in the garb of a quasi-partnership etc. In the present case, the company has taken over the business of a partnership firm with the petitioners as the only partners. In the articles of association of the company, the 1st petitioner is shown to be the managing director and the petitioners collectively held 35 per cent shares in the company. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be held at Abad Plaza at 11 A.M. on 30-1-1997. You are also asked to please bring the minutes book and all the account books and other necessary/relevant records for the perusal of the Board of Directors and the all shareholders of the company. The Auditors and the Accountant Officer of the company is also hereby asked to be present to explain various matter arising during the abovesaid meeting. Thanking you, Yours faithfully, Sd/- Mathew Vellapally Director Baldev K. Dardi Director. 8. A perusal of the notice would show that this notice has not been issued in the name of the company and then it does not indicate that it has been requisitioned by certain shareholders. Further, it also does not indicate the business to be transacted in the meeting nor it indicates that the notice of requisition received by the company has been enclosed therewith. Further from the requisition notice, we do not find any indication that a special notice in terms of section 284 has been given to the company. The company has also not established that in terms of section 284, whether any opportunity was given to the 1st petitioner to represent against his removal. Thus, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artnership firm in which the petitioners were partners was converted into a company, out of mutual trust and confidence, they had allowed the respondents to have 65% per cent shares and this mutual trust and confidence no longer exist. Under these circumstances, any direction by us consequent to our findings on the allegation would only escalate further disputes between the parties and therefore we are not giving any directions. However, with a view to put an end to further disputes between the parties, we give the option to the petitioners to sell their shares in the company to the respondents for a fair price to be determined by the statutory auditors of the company as per the balance sheet as at 31-3-1997, being the proximate date to the filing of the petition. In case they exercise their option, they should give a notice to the company/2nd respondent latest by 31-12-2000. Once such a notice is received by the company/2nd respondent, then the notice will be binding on them. The company should proceed with the determination of the fair price for the shares within a month thereafter and the 2nd respondent will be bound to purchase the shares of the petitioners at the value so dete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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