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Jai Kumar Arya & Ors. Versus Chhaya Devi & Anr.

2017 (11) TMI 487 - DELHI HIGH COURT

Removal from the Directorship of the Company - obligation to disclose the reasons for removing a person from Directorship of a Company prior to the EGM where such proposal is to be considered - Held that:- In our view, no manner of doubt can remain, that the reasons for removal of Plaintiff No 1, in the present case, were required to be communicated, or made known, to her, only before the proposal, for removing her from office as Director of the Company, was taken up at the EGM. - A notice u .....

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be emphasized that no decision, towards removal of Plaintiff No.1 from the Directorship of the company, was to be taken, this way or that, at the meeting to be held on 26th August 2017. The interests of Plaintiff No.1 were not, therefore, in any way prejudiced by the notice dated 8th August 2017, so that the very maintainability of the application for ad interim injunction filed by her was questionable. - As such, the notice dated 8th August 2017, in our opinion, was not a notice under Secti .....

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as the decision to convene the EGM would be relatable to sub-clause (1) rather than sub-clause (2) of Section 100 of the Act. We may, however, in passing, note that no specific form or format of a “requisition” is prescribed in the Act, or in any cognate legislation, so that any document issued by the requisite member of Directors as specified in Section 100(2) of the Act (which calls for convening of an EGM) would be eligible to be styled as a “requisition”. It does not appear to us, that the .....

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or should not, be convened, and whether the proposal to remove Plaintiff No. 1 from Directorship of the Company, is justified or not, we, needless to say, express no opinion. - FAO (OS) 253/2017 & CM No. 33724/2017 - Dated:- 7-11-2017 - MR. C. HARI SHANKAR J. Appellants Through: Mr. A.S. Chandhiok, Sr. Adv. with Mr. Avinash Trivedi, Ms. Ritika Trivedi, Mr. Ritesh Kumar, Ms. Monica Tyagi and Mr. Tejasvi Chaudhary, Advs. Respondents Through: Mr. Anil Sapra, Sr. Adv. with Mr. Ankur Goel, Mr. Karti .....

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ia) Pvt Ltd (hereinafter referred to as PZFIPL ), which is engaged in the manufacture of chewing tobacco and associated products. M/s Prabhat Zarda Factory was conceived as a sole proprietorship of Lalit Kumar Arya in 1962, and, subsequently, metamorphosed into a partnership in 1965 and into the present private limited Company in June 1985 - originally named M/s Prabhat Zarda Factory (Muzpur) Pvt Ltd and later rechristened as PZFIPL on 27th March 1991. The Dramatis Personae 3. First, to introduc .....

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aurav Kumar Arya (hereinafter referred to as Gaurav ). 6. Pradeep was married to Manju Devi, and had only one son, Purushottam Kumar Arya (hereinafter referred to as Purushottam ). 7. Vijay married Chhaya Devi. Their children, if any, have no part to play herein. 8. The relative positions of the above listed members of the PZF family tree, in CS (OS) 285/2017, and in the present appeal, with their respective shareholdings in PZFIPL, may be tabulated thus: In CS (OS) 285/2017 In the present appea .....

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ented as under: Lalit - Rukmini Devi (D1) (8%) Jyoti (D2/A4) (7.8%) - Malti Devi (D5) (2%) Jai (D6/A1) (1.3%) Ujjwal (D7/A2) (1.3%) Gaurav (D8/A3) (1.3%) Pradeep - Manju Devi (D9) (2.6%) Purushottam (D4) (11%) Vijay - Chhaya Devi (P/R1) (30.4%) 10 This position may also be represented, in the form of a family tree,thus: The Proceedings, and associated facts 11. The internecine disputes and conflicts between the plaintiffs and defendants do not concern the present appeal, and are in seisin before .....

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m the recital that follows. For ease of reference, the various parties would be denoted by their respective positions in CS (OS) 285/2017. PZFIPL would be referred to as the Company . 12. Sometime in 2014, Defendants Nos 2 and 6, i.e. Jyoti and Purushottam, filed Company Petition 136/2014 before the National Company Law Tribunal (hereinafter referred to as the NCLT ), alleging oppression and mismanagement, of the affairs of the Company, by Plaintiff No. 1. The said petition is still pending befo .....

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31st of May 2014, to terminate the directorship of the defendants, and (iii) appointment of Defendant No 1 (Rukmini Devi) as Managing Director of the Company. 14. On receiving the said requisition, the plaintiff (Chhaya Devi) responded, on 25thApril 2017, alleging that the requisition was not in accordance with Section 169, read with Section 115 of the Companies Act, 2013 (hereinafter referred to as the Act ), inasmuch as no Special Notice had been served, by the shareholders, on the Company and .....

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otal voting power or holding shares on which such aggregate sum not exceeding five lakh rupees, as may be prescribed, has been paid-up and the company shall give its members notice of the resolution in such manner as may be prescribed. 169. Removal of directors. - (1) A company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard: Pro .....

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ution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting. (4) Where notice has been given of a resolution to remove a director under this section and the director concerned makes with respect thereto representation in writing to the company and requests its notification to members of the company, the compan .....

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to his right to be heard orally require that the representation shall be read out at the meeting: Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company s co .....

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ce till the date up to which his predecessor would have held office if he had not been removed. (7) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions of this Act: Provided that the director who was removed from office shall not be re-appointed as a director by the Board of Directors. (8) Nothing in this section shall be taken- (a) as depriving a person removed under this section of any compensation or damages payable to him .....

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rdinary resolution, under Section 169 (1). In such a situation, the following procedure would apply: (i) A special notice of such resolution has to be issued to the Company, in the manner specified in Section 115.[Section 169 (2) and (5)] (ii) On receiving such resolution, the Company has to send a copy thereof, to the concerned Director. [Section 169 (3)] (iii) The concerned Director shall be entitled to be heard on the resolution, at the meeting whereat he is proposed to be removed. [Section 1 .....

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If the copy of the representation made by the concerned Director is not sent as aforementioned, the Director may require the representation to be read out at the meeting. [Section 169 (4)] 17. Section 100 of the Act, which governs calling of EGMs, reads as under: 100. Calling of Extraordinary General Meeting. - (1) The Board may, whenever it deems fit, call an extraordinary general meeting of the company. (2) The Board shall, at the requisition made by,- (a) in the case of a company having a sha .....

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company within the period specified in sub-section (4). (3) The requisition made under sub-section (2) shall set out the matters for the consideration of which the meeting is to be called and shall be signed by the requisitionists and sent to the registered office of the company. (4) If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-fi .....

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mpany and the sums so paid shall be deducted from any fee or other remuneration under section 197 payable to such of the directors who were in default in calling the meeting. 18. Unlike the scheme in Section 169, therefore, an EGM is necessarily required to be called by the Board of Directors of the Company (hereinafter referred to as the Board ). An EGM would be called where there is a requisition, by the number of shareholders of the Company specified in sub-section (2) of Section 169. Such re .....

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to the shareholders/directors of the petitioner, that an EGM would be convened on 26th May 2017. 20. This communication, apparently, acted as the proverbial spark in the litigative tinderbox, resulting in a spate of proceedings, leading up to the present appeal before us, but which still continue unabated before the learned Single Judge. 21. The above communication resulted in Plaintiff No 1 (Chhaya Devi) filing, on or around 15th May 2017, IA 17/KB/2017 in Company Petition 136/2014 already pend .....

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lding its Extraordinary Meeting on May 26, 2017 or any time thereafter till the disposal of the company petition; (d) Injunction be passed restraining Prabhat Zarda Delhi (India) Private Limited (respondent no 1) from acting in terms of the purported communication/request dated April 24, 2017 or any other notice of like nature; (e) Status quo be passed in respect of the Board of directors of the respondent no 1 i.e. Prabhat Zarda Factory (India) Private Ltd; (f) Declaration that the purported no .....

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; (i) injunction be passed restraining the company from convening any Extraordinary General Meeting of the respondent no 1 i.e. Prabhat Zarda Factory (India) Private Ltd pursuant to the notice dated April 24, 2017 purporting to be under section 100 read with section 169 of the Companies Act, 2013 or on the basis of any other notice of like nature till the disposal of the company petition; (j) Injunction be passed restraining the company from convening/holding any extraordinary general board meet .....

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2017, and CS (OS) 233/2017, filed on 20th May 2017, seeking, substantially, the same reliefs as were sought by IA 17/KB/2017 before the NCLT. 23. CS (OS) 225/2017, filed by the plaintiffs against Defendant No 1 (Rukmini Devi) alone, sought a decree of permanent mandatory injunction in favour of the Plaintiffs and against the Defendant restraining her, her agents, servants, representatives and/or anyone acting on her behalf from threatening and/or harming and/or issuing any letter (s) with a view .....

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t. 24. IA 17/KB/2017 came up before the NCLT on 18th May 2017. The NCLT declined the prayer for stay of the EGM, proposed to be held on 26th of May 2017, but directed that, if the meeting took place, any resolution passed therein be not given effect, without prior permission of the NCLT. For this purpose, it was further directed that any such resolution, if passed, be submitted to the NCLT within 3 days of the meeting. 25. It does not appear that the aforementioned order, dated 18th May 2017, of .....

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the approved couriers, returnable on 24.05.2017. Dasti in addition. Dasti notices shall be collected on or before 20.05.2017. The affidavit of service shall be filed prior to the next date of hearing. 27. The plaintiffs proceeded, on 22ndMay 2017, to file yet another suit, i.e. CS (OS) 233/2017, this time against Defendants Nos 2 to 9 (which includes the present appellants), praying for a decree of permanent injunction in favour of the Plaintiffs and against the Defendants restraining them, the .....

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g and functioning of the Plaintiff No 2 company and functioning of the Plaintiff No 1 as the Chairman and Managing Director of the Plaintiff No 2 company and/or doing any such acts or issuing any such notice/letter which obstructs the smooth functioning of the Plaintiff No 2 company . IA 6382/2017, under Order XXXIX Rules 1 and 2 of the CPC, seeking interim injunction, was also filed therewith. 28. It is plainly apparent that the reliefs sought in CS (OS) 233/2017 were identical to those sought .....

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he Defendant No 1 and 2 herein have filed Co. Pet. 136 of 2014 against the Plaintiffs and other persons of the Plaintiff No 2 company when the Defendant No 1 and 2 are seeking reinstatement as Directors in the company despite having sought the similar relates in CS (OS) No 1319 of 2013 which makes it amply evident that the Defendant No 1 and 2 are agitating the same issues before 2 different courts and moreover are making false averments. Pertinently, the subject matter of CS (OS) No 1319 of 201 .....

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ave been reserved on the said application for 22.05.2017. A copy of the stay application filed by the Plaintiff No 1 in Co P No. 136 of 2014 is annexed and marked as Annexure-P/14. (Emphasis supplied) 29. CS (OS) 233/2017 and IA 6382/2017, filed therein, came up for hearing before a learned Single Judge, of this court, on 23rd May 2017. Significantly, once again, the order did not record any appearance, on the part of the defendants, so that the plaintiffs alone were represented during the heari .....

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her-in-law of plaintiff No 1 and the brother of her deceased husband. The grievance of the plaintiff is that the defendants are proposing to hold an Extra-Ordinary General Meeting (EGM) which is scheduled for 26.05.2017. The agenda of the meeting has been circulated through a communication dated 24.04.2017. There are 3 agendas, all of which are against the statutory obligations contained in the Companies Act. It is pointed out that as is clear from the communication dated 24.04.2017, the EGM pro .....

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ent which is required to be furnished has not been furnished. The 3rd grievance of the plaintiff is that the agenda proposing to invoke the removal of defendants No 1 & 3 as directors of plaintiff No 2 (which was done in the year 2014) cannot be effected as this matter is already sub-judice before the NCLT in Company Petition No 136/2014 before the Calcutta Bench. The submissions have been noted. They are prima facie borne out from the record of the case. Issue summons of the suit and notice .....

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of 23rd May 2017,Plaintiff No 1 filed an affidavit, in CS (OS) 233/2017 at 2:19 PM on the same day, i.e. 23rd May 2017, purporting to state that she had just been informed, regarding the order, dated 22nd May 2017, passed by the NCLT in Company Petition 136/2014. Asseverations, to the same effect, find place in sub-paras v) and x) of para 3 in CS (OS) 285/2017, wherein it is sought to be submitted that it was only on 22nd May 2017 that the plaintiffs received a copy of the order, dated 18th May .....

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l to support this submission, which does not find support from the order, dated 23rd May 2017, of the learned Single Judge, either. 32. On 24th May 2017, the plaintiffs condescended to place, on the record of CS (OS) 233/2017, a copy of the order, dated 18th May 2017 supra passed by the NCLT. 33. The above situation resulted in Defendant No 2 (Jyoti, who is Applicant No 4 in the present appeal) moving IA 6537/2017 in CS (OS) 233/2017, under Order XXXIX Rule 4 of the CPC, for vacation of the stay .....

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17, stated that the defendants had pleaded, before the learned Single Judge, that the proceedings before the NCLT, and the pendency of CS (OS) 225/2017 had been concealed from her, and that she had refused to accede to the said submission, stating that she had been informed of the said proceedings. 34. The said order, dated 25th of May 2017, of the learned Single Judge, was challenged, by the defendants, by way of FAO (OS) 179/2017 (Jai Kumar Arya v Chhaya Devi) and FAO (OS) 180/2017 (Jyoti Kuma .....

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raordinary General Meeting dated 26.05.2017 had been granted to the respondents in these proceedings. The proceedings are stated to be still pending before the National Company Law Tribunal. 4. In view thereof, there shall be stay on the effect and operation of the order dated 23.05.2017 till the next date of hearing. List on 16.10.2017. The interim stay, granted by para 4 of the above mentioned order, dated 30th May 2017, passed by us in FAO (OS) 179/2017 and FAO (OS) 180/2017 continues till da .....

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ditional Directors therein. 37. Vide order dated 9th June 2017, SLP (C) 16274/2017was disposed of, by the Supreme Court, in the following terms: Heard learned senior counsel for the petitioners. These special leave petitions have been filed against an interim order dated 30th May, 2017 passed by the Division Bench of the High Court in FAO (OS) No 179/2017. Learned senior counsel for the petitioners submitted that the observations made by the Division Bench while issuing notice and granting inter .....

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ve observation, the specially petitions are dismissed. Pending application, if any, also stands disposed of. (Emphasis supplied) 38. On the basis the liberty granted, by the Supreme Court, in the aforementioned order dated 9th June 2017, the plaintiffs moved the Original Side of this Court by way of a third suit, viz. CS (OS) 285/2017, praying that this Court be pleased to pass a decree of permanent mandatory injunction in favour of the Plaintiffs and against the Defendants restraining them, the .....

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ught stay of the Notice, dated 2nd June 2017, issued by Defendant No 1, and injunction against holding of the meeting, on 12thJune 2017, pursuant thereto. Para 12 of the plaint makes for interesting reading, and may be reproduced, to advantage, as under: 12. It is submitted that subsequent to the ex parte order dated 30.05.2017, the Plaintiff No 1 was shocked to receive the notice dated 02.06.2017 and being aggrieved by the order dated 30.05.2017 passed in FAO (OS) No 179 of 2017 and FAO (OS) No .....

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eased to record the submission of the Plaintiffs seeking appropriate relief against the impugned notice dated 02.06.2017 for convening an illegal meeting of Board of Directors on 12.06.2017. It is submitted that the Plaintiffs are approaching this Hon ble Court with utmost urgency as the illegal meeting is scheduled for12.06.2017 at 11 AM. (Emphasis supplied) CS (OS) 285/2017 was accompanied by IA 7139/2017, under Order XXXIX Rules 1 and 2 of the CPC, seeking ad interim injunction. 39. CS (OS) 2 .....

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im stay of the meeting of the Board of the Company, to be held on 12th June 2017, and further ordered that, if the said meeting had already been held, no effect be given to the decisions taken therein till the next date of hearing. 40. Defendant No. 2 (Jyoti), thereupon, filed IA 7150/2017 (under Order XXXIX Rule 4) and IA 7151/2017 (under Order XXXIX Rules 1 & 2) in CS (OS) 285/2017. These applications need not, however, detain us as, when they were listed before the learned Single Judge on .....

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be held on 10.07.2017 in terms of Minutes of Meeting dated 12.06.2017. He submits that since this Court had interdicted the Resolutions passed on 12.06.2017, the Board of Director propose to convene an Extraordinary General Meeting in terms of Section 100 of the Companies Act, 2013, independent of the said resolution. It is clarified that if the Board of Directors have any independent right to convene an Extraordinary General Meeting in terms of the Companies Act, 2013, they are at liberty to do .....

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o be reproduced, in extenso, thus: Date 08.07.2017 To The Directors of PRABHAT ZARDA FACTORY (INDIA) PRIVATE LIMITED Registered office: New Area SIC Andarpur, PO Muzaffarpur Bihar-842001, India. Dear Sir/Madam, Subject: Special notice U/S115 of the Companies Act, 2013 for removal of MrsChhaya Devi from the office of Director. We, Rukmani Devi (6000 shares), Jyoti Kumar Arya (5850 shares), Jyoti Kumar Arya HUF (1500 shares), Malti Devi (1500 Shares), Jai Kumar Arya (1000 shares), Ujjwal Arya (100 .....

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RESOLUTION: RESOLVED THAT MrsChhaya Devi, having the Director identification number 02354785, be and is hereby removed from the office of Director of the Company with immediate effect. GROUNDS OF REMOVAL The Actions of the director, under proposed removal, are against the companies interest. The company is requested that this special notice be circulated to all the directors and shareholders and auditors of the company and a copy be also served on Mrs Triad Devi, the director under proposed remo .....

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f No 1 to attend the said meeting. Nothing, however, turns thereon, as the said notice was, subsequently, withdrawn before court on 26th July 2017, with liberty to issue a fresh notice in accordance with law. 43. The plaintiffs (Chhaya Devi and the Company), thereupon, moved IA 7854/2017 and IA 7856/2017, in CS (OS) 285/2017, the former under Order VI Rule 17, and the latter under Order XXXIX Rules 1 and 2 of the CPC. 44. IA 7854/2017 sought to amend CS (OS) 285/2017. Paras 12A to 12D were sough .....

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rdinary General Meeting of Plaintiff No 2 and from attending/convening the Meeting of the Board of Directors scheduled for 18.07.2017 and also from giving effect to any resolution passed in the Board Meeting of Plaintiff No 2 on 18.07.2017, if convened; iii) A decree of permanent mandatory injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from convening any Board Meeting and/or Extraordinary General Meeting and/or suc .....

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he Defendants from interfering and/or obstructing and/or hindering the smooth running and functioning of the Plaintiff No 2 company and functioning of the Plaintiff No 1 as the Managing Director/Director of the Plaintiff No 2 company and/or doing any such acts or issuing any such notice/letter which obstructs the smooth functioning of the Plaintiff No 2 company; 45. IA 7856/2017, filed under Order XXXIX Rules 1 and 2 of the CPC, prayed that this Court be pleased to (i) pass and ad interim ex par .....

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m ex parte injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from convening any Board Meeting and/or Extraordinary General Meeting and/or such other meeting of the Plaintiff No 2 without the leave of this Hon ble Court; 46. IA 7854/2017 and IA 7856/2017came up for hearing, before the learned Single Judge, on 17th July 2017, whereupon notice was issued on the said applications, and was accepted by the defendants. Learn .....

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ad, did not provide the statutorily required one-week period till the date of the meeting scheduled for 28th July 2017. In the circumstances, the defendants submitted, without prejudice, that they would issue a fresh notice in accordance with law, and in furtherance of the requisition received from the shareholders on 8thJuly 2017 and, therefore, withdrew the notices dated 10th July 2017 and 22ndJuly 2017. In the circumstances, the plaintiffs, too, withdrew IA 7856/2017 without prejudice to the .....

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meeting of the Board on 26th of August 2017, pursuant to the requisition, dated 8thJuly 2017, received from the Company.The items on the Agenda, for the meeting proposed on 26th of August 2017, as annexed to the notice dated 8 August 2017, read as under: 1. To discuss upon whether to issue a notice to convene an Extra Ordinary General Meeting pursuant to the Special Notice dated 08.07.2017 received from the members of the Company proposing to remove MrsChhaya Devi, (Director identification Numbe .....

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amend the plaint (CS (OS) 285/2017). Whereas the earlier amendment application (IA 7854/2017) - which was still pending before the learned Single Judge - proposed to add paras 12A to 12D in the plaint, IA 9617/2017 sought to add paras 12A to 12I. These paras went on to challenge the notice, dated 8thAugust 2017 supra as being in complete violation of the Companies Act, 2013, the Companies (Management and Administration) Rules, 2014 and the Secretarial Standards on Meetings of the Board of Direc .....

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sending any notice for convening any Extraordinary General Meeting of Plaintiff No 2 and from attending/convening the Meeting of the Board of Directors scheduled for 26.08.2017 and also from giving effect to any resolution passed in the Board Meeting of Plaintiff No 2 on 26.08.2017, if convened; iii) A decree of permanent mandatory injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from convening any Board Meeting and/ .....

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n in favour of the Plaintiffs and against the Defendants from interfering and/or obstructing and/or hindering the smooth running and functioning of the Plaintiff No 2 company and functioning of the Plaintiff No 1 as the Managing Director/Director of the Plaintiff No 2 Company and/or doing any such acts or issuing any such notice/letter which obstructs the smooth functioning of the Plaintiff No 2 company; 52 IA 9618/2017, filed under Order XXXIX Rules 1 and 2 of the CPC, prayed that this Court be .....

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solution passed in the Board Meeting of Plaintiff No 2 on 26.08.2017, if convened; (ii) Pass an ad interim ex parte injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from convening any Board Meeting and/or Extraordinary General Meeting and/or such other meeting of the Plaintiff No 2 without the leave of this Hon ble Court; . 53. IA 9618/2017 advanced the following submissions, in support of the prayer for ad interim i .....

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meeting. This condition was also violated, insofar as Plaintiff No 1 was concerned, as the notice had been sent to an e-mail address, of Plaintiff No 1 which, however, was not her registered e-mail address. Such service did not, therefore, amount to valid delivery of the notice. That apart, in the case of delivery through registered post, two additional days were required to be added. (iv) Standard 1.1.1 of the Secretarial Standards on Meetings of the Board of Directors (hereinafter referred to .....

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be acted upon. That apart, more than 21 days had elapsed since the notice of 8thJuly 2017. (vi) Standard 1.3.8 of the Secretarial Standards required that each item of business requiring approval at the meeting be supported by a note setting out the details of the proposal. The notice dated 8thAugust 2017 merely had an agenda, without any note or reference papers in support thereof. Neither was any note appended to the Special Notice dated 8thJuly 2017 which, too, merely contained a statement tha .....

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g in favour of the resolution to convene the EGM on 7th October 2017, pursuant to the Special Notice dated 8thJuly 2017. 56. It was in these circumstances that, on 11th September 2017, the impugned order came to be passed by the learned Single Judge in IA 9618/2017. The reasoning of the learned Single judge, as contained in the impugned order dated the 11th of September 2017, proceeds thus: (i) As regards the notice, dated 8thJuly 2017, issued under Section 115 of the Act, there was no dispute t .....

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ion, explanation or reasons, specifying the particulars of such actions, were contained in the said notice. (iv) It was candidly submitted, by learned counsel for the defendants, that the Directors could not, of their own, seek to remove another Director, and could only act on receipt of a Special Notice. (v) The learned counsel for the defendants himself contended that the letter, dated 8thJuly 2017, was not a requisition. It was not possible, therefore, to understand how the Board exercised po .....

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bald averment that Plaintiff No 1 was acting against the company s interests. Communication of the grounds on which she was being proposed to be removed, to Plaintiff No 1, was mandatory, as he was entitled to represent thereagainst. (viii) Curtailment of the statutory rights already enured in favour of Plaintiff No 1, who had been appointed as a whole time Director for a period of 10 years in 2008, required compliance with Section 169 of the Act. In the absence of any reasons, in the notice dat .....

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assurance that the reasons, for removal of Plaintiff No 1, as Director in the Company, would be supplied along with the Explanatory Note for the meeting. The explanatory note had to be prepared by the Directors who convened the meeting, not by the shareholders who had requisitioned the same. If there was no material available on record with the Directors who had convened the meeting, no such material could, obviously, be supplied in the explanatory note thereto. Holding, therefore, that permitt .....

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s, thereagainst. The Rival Contentions 58. We have heard, Mr. A. S. Chandhiok and Mr Anil Sapra, learned Senior Counsel appearing for the appellants and respondents respectively, at great length, and exhaustively perused the record before us. 59. In support of the appeal,Mr. Chandhiok advances the following submissions: (i) The impugned order was without jurisdiction, in view of Section 430 of the Act, which barred civil courts from granting any injunction in respect of any matter which the NCLT .....

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sition, on the judgement of this Court in H. B. Stockholdings v D.C.M. Shriram Industries Ltd, 163 (2009) DLT 443. (iii) The plaintiffs filed CS (OS) 225/2017 and CS (OS) 233/2017, seeking the same reliefs as had been sought from the NCLT. While doing so, however, the plaintiffs intentionally suppressed the order, dated the 18th of May 2017, passed by the NCLT, from this Court. Moreover, in CS (OS) 233/2017, the plaintiffs misrepresented the facts, by stating that the NCLT had reserved orders on .....

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IA 9617/2017, for amendment of the plaint, was still pending adjudication, notice alone having been issued thereon. Till the amendment was allowed, there was no substantive challenge, to the notice dated 8thAugust 2017, or the proposed meeting of the Board scheduled for 26th August 2017. Interim relief, by way of stay of the said meeting, the challenge to which was still not part of the plaint, could not, therefore, have been granted under Order XXXIX of the CPC. (v) The learned Single Judge er .....

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s in their place. The reasons therefor were not required to be disclosed. The statute only cast a duty on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable shareholders to form a judgement on the business before them. (vi) Sub-Sections (3) and (4) of Section 169 of the Act contemplated that the Director, who was being proposed to be removed, would be heard at the EGM, where the resolution of such remov .....

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any to remove any Director/Directors by an ordinary resolution, after giving him an opportunity of being heard. All that was required was that a special notice, under Section 169 (2) be issued prior thereto, of the resolution to remove the said Director. (viii) Section 100 empowered the Board to call an EGM, either of its own accord [under sub-section (1)] or on the requisition made by the requisite number of shareholders [under sub-section (2)]. In the present case, it was an admitted position, .....

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of its issue and had, therefore, expired on 7th October 2017, was misplaced, in view of the law laid down by the Supreme Court in Shree Chamundi Mopeds v Church of South India Trust Association, AIR 1992 SC 1439, which holds the quashing of an order results in restoration of the position as it stood on the date of passing of the order thus quashed. 60. Mr Chandhiok highlights the following, as irrefutable evidence of the fact that the plaintiffs have been economical with the truth and have, the .....

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ants before the NCLT) of the fact that Plaintiff No 1 had, a day earlier, filed CS (OS) 225/2017, before this Court, seeking reliefs largely similar to those sought from the NCLT. (iii) The plaintiffs, who alone attended the hearing of CS (OS) 225/2017, on 19th May 2017, before the learned Single Judge, apparently did not bring, to the notice of the learned Single Judge, the factum of IA 17/KB/2017 having been filed, by the plaintiffs themselves, before the NCLT, or of the order passed by the NC .....

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the plaintiffs, as IA 17/KB/2017, moved by the plaintiffs before the NCLT, stood unequivocally dismissed, by the NCLT, on 18th May 2017 itself. (vi) The plaintiffs were, therefore, doubly disingenuous while drafting CS (OS) 233/2017, inasmuch as they were guilty, not only of suppressing the facts relating to CS (OS) 225/2017, and the order dated 19th May 2017 passed thereon, but also of misstatement with respect to the proceedings before the NCLT in IA 17/KB/2017. (We may note, here, that Mr Ani .....

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25/2017, was listed. (viii) It was not possible to believe, either, the assertion, in the affidavit filed by Plaintiff No 1, in CS (OS) 233/2017 at 2:19 PM on 23rd May 2017, as also in sub-paras v) and x) of para 3 of CS (OS) 285/2017, that the plaintiffs became aware, of the order dated 18th May 2017, passed by the NCLT, only on 22nd May 2017, when they received a copy thereof. 61. Per contra, Mr. Anil Sapra, learned Senior Counsel appearing on behalf of the plaintiffs (respondents) contends th .....

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9618/2017. (ii) Section 169 (2) of the Act required issuance of special notice, under Section 115, of the resolution to remove the Director, before the resolution could be acted upon. Subsection (3) of Section 169 mandated sending of a copy, of such special notice of resolution, to the concerned director, and sub-section (4) permitted the said Director to represent thereagainst. Further, the 2nd proviso to Section 179 (1) of the Act prohibited the Board from exercising any power, or doing any a .....

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of one. It did not seek convening of any EGM, but merely stated that the resolution was intended to be moved as and when the meeting would be convened. Further, it was totally unreasoned, in that the only ground to remove Plaintiff No 1 from Directorship of the Company was that she had acted against the Companies interest. No particulars were forthcoming. It was impossible, therefore, for Plaintiff No 1 to respond thereto, or represent thereagainst. Such a notice did not conform to the requirem .....

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actual fact, it only suggested proposal of the resolution at the next EGM, when convened. (v) In any event, the issue had been rendered infructuous as, the time for holding of the meeting, as stipulated in Rule 23(1) of the Companies (Management and Administration) Rules, 2014, had expired on 8th October 2017. The notice, dated 8th July 2017 had, thereby, been rendered infructuous. (vi) The bar, to exercise of jurisdiction by the civil court, as contained in Section 430 of the Act, applied only .....

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Court, continues to operate, would stand excluded. (ii) Section 430 of the Act applies, as the proviso to Section 169 (4) specifically refers to the NCLT. Because recourse, to the NCLT, was also available, to the plaintiff, by virtue of Section 241 (1)(a) of the Act. Reliance was also placed, in this regard, on the words either expressly or impliedly barred , figuring in Section 9 the CPC. (iii) That the plaintiffs were forum shopping was also clear from the fact that, having elected to submit .....

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t to, till the next date of hearing. Having granted the said relief, there was no justification, whatsoever, for the learned Single Judge to, vide the impugned order dated the 11th September 2017, restrain the defendants even from acting on the notice dated 8th August 2017, and to finally allow IA 9618/2017 in the said terms. (v) The concession , recorded as having been given by learned counsel appearing for the defendants, in para 30 of the impugned order, to the effect that Directors, of their .....

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ress, in the present case, our brief, as noticed at the very outset, is limited. The impugned order, dated 11th September 2017, passed by the learned Single Judge, disposes of IA 9618/2017 by restraining the defendants (including the appellants before us) from acting upon the notice, dated 8th August, 2017, or on any resolution passed in the consequential meeting, dated 26th August 2017. We are only required to examine whether the said order, of the learned Single Judge, can be sustained, in law .....

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reinabove, our brief is limited, it throws up quite a few issues for consideration, especially in view of the rival contentions advanced at the bar before us. These may be enumerated thus: (i) Has the entire controversy become infructuous, in view of Section 100 (4) of the Act or Rule 23 (1) of the Companies (Management and Administration) Rules, 2014 (hereinafter referred to as the 2014 Rules )? (ii) Was the learned Single Judge barred, by Section 430, read with Section 169 (4), of the Act, fro .....

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otice is yet to be issued on IA 9617/2017? The contention, of MrSapra, that this mistake was only technical, as the relief, which stands granted, by the impugned order, by way of final disposal of IA 9618/2017, could as well have been granted by way of interim relief, while issuing notice on the said IA, would also require to be examined in this context. (vi) Has the learned Single Judge erred in distinguishing the judgement in L.I.C. of India (supra)? What is the effect of the said judgement? ( .....

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he Act would also come into consideration. The judgement of the Kerala High Court in Queens Kuries& Loans (supra) would also be required to be examined in this connection. (viii) Has the learned Single Judge erred in treating the notice, dated 8th August 2017, as having been issued under subsection (2) of Section 100 of the Act, instead of subsection (1) thereof? What was the distinction? (ix) Was the notice, dated 8th August 2017violative of Section 179 (1) of the Act, read with the Article .....

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ue No. 1 - Have the present proceedings become infructuous, in view of Section 100 (4) of the Act and/or Rule 23 of the Companies (Management and Administration) Rules, 2014? 67.1 The impugned order, dated the 11th of September 2017, passed by the learned Single Judge, directs as under: The balance of convenience is in favour of the plaintiffs, accordingly, it is directed that the defendants are restrained from acting upon the notice dated 08.08.2017 and the resolutions passed in the consequenti .....

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pany Secretary, or by a Director of the Company. In the circumstances, the notice, dated 10th July 2017, was withdrawn. Vide letter dated 28thJuly 2017, Ajay Kumar, a practising Company Secretary, was requested to convene the Board meeting, pursuant to the requisition, dated 8thJuly 2017, received from the shareholders. Ajay Kumar, however, responded that he was not employed with the Company and could not, therefore, issue the notice for convening of the Board meeting, which would have to be iss .....

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her office as Director of the Company. 67.3. IA 9618/2017 came to be filed, by Plaintiff No 1, in CS (OS) 285/2017, seeking stay of the notice dated 8th August 2017 supra. The following order came to be passed, on 25th August 2017, by the learned Single Judge, on the said application: Issue notice. Notices accepted by the learned counsel appearing for the defendants. Let reply be filed within 3 days. Rejoinder before the next date. It is clarified that any decision taken in the meeting, schedule .....

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hallenge before us. 67.6 The contention of Mr. Sapra is that the said challenge has now become academic, and the present appeal itself infructuous, in view of Section 100 (4) of the Act and Rule 23 (2) of the 2014 Rules. 67.7 Section 100 (4) of the Act, and sub-rules (1) and (2) of the 2014 Rules, read thus: Section 100 (4) of the Act: (4) If the Board does not, within 21 days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration .....

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ich an aggregate sum of not less than five lakh rupees has been paid up on the date of the notice. (2) The notice referred to in sub-rule (1) shall be sent by members to the company not earlier than three months but at least fourteen days before the date of the meeting at which the resolution is to be moved, exclusive of the day on which the notice is given and the day of the meeting. 67.8 Mr. Chandhiok refutes the submission of Mr. Sapra, essentially by contending that, in view of the interim s .....

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isions would stand extended by the period during which the interim stay, granted by the learned Single Judge on 25th August 2017, has continued - and would continue - to remain in operation. He relies, for this proposition, on Shree Chamundi Mopeds (supra). 67.9 We feel that the submission, of Mr Chandhiok, is well-taken, though the reliance, by him, on Shree Chamundi Mopeds (supra), may not be entirely apt. 67.10 In deference to the submission made by Mr Chandhiok, we proceed to examine Shree C .....

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he High Court under section 433(e) of the Act. 67.12 While the said petition, seeking winding up SCM, was pending before the High Court, SCM filed a reference, under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the SICA ),before the Board of Industrial and Financial Reconstruction ( the BIFR ), whereon the BIFR, videorder dated 26th April 1990, found that SCM had become economically and commercially non-viable and deserved to be wound .....

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ned that the pendency of WP(C) 594/1991, before this Court, and the grant of stay therein, did not stand in the way of his proceeding with the matter. An appeal, thereagainst, by SCM, was dismissed, by the Division Bench of the High Court, whereagainst one of the two appeals, decided by the Supreme Court (Civil Appeal 126/1992) was preferred by SCM. 67.14 In the interregnum, the Church filed an eviction petition, under Section 21(1) of the Karnataka Rent Control Act, 1961, against SCM. SCM moved .....

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SCM, of the amount claimed against it. The learned Single Judge observed that the grant of stay, by this Court, on 21st February 1991, did not operate to revive the appeal of SCM before the AAIFR, which stood dismissed on 7th January 1991. 67.15 In these circumstances, two questions were framed by the Supreme Court, of which the second is not relevant for our purposes. The first question framed by the Supreme Court read thus: What is the effect of the order passed by Delhi High Court dated Febru .....

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ch company, (i) an inquiry under Section 16 was pending, or (ii) a scheme referred to in Section 17 was under preparation or consideration, or (iii)a sanctioned scheme was under implementation, or (iv) an appeal under Section 25 relating to the industrial company was pending. (ii) The appeal, filed by SCM, having been dismissed by the AIIFR on 7th January 1991, no proceedings, under the SICA, were pending before the BIFR or the AIIFR, on 21stFebruary 1991, when this Court granted interim relief .....

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staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not me .....

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ppellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law and so long as it exists, it cannot be said that the appeal which has been disposed of by the said order has not been disposed of and if still pending. We are, therefore, of the opinion that the passing of the interim order dated February 21, 1991 by the Delhi High Court staying the operation of the order of the Appellate Authority dated January 7, 1991 and it cannot be said that .....

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lt in the proceedings before the AIIFR continuing to be deemed as pending during the currency of the stay order of the High Court The question was answered, in the negative, by the Supreme Court. However, the judgment does contain an observation (underscored hereinabove), to the effect that, if the order of the AIIFR were to be quashed and the matter remanded, the appeal would stand restored and could be said to be pending before the AIIFR after quashing of the said order. 67.18 The precise issu .....

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100 (4) of the Act or Rule 23 (2) of the 2014 Rules. Shree Chamundi Mopeds (supra)cannot really be said to be of aid, to us, in finding the answer, though some guidance could possibly be drawn therefrom. 67.19 An answer does, however appear to be directly forthcoming in the judgment of Supreme Court in Kanoria Chemical Industries Limited v UPSEB, (1997) 5 SCC 772- which, incidentally, relied on Shree Chamundi Mopeds (supra). The legal position, in this regard, has been set out with precision an .....

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led by the defendants before us were to succeed, the appellants and respondents would have to be put back in the position as it existed prior to passing of the said order, by the learned Single Judge on 25th August, 2017. 67.21 As such, the present appeal cannot be said to have been rendered infructuous, as contended by Mr. Sapra. 68 Issue No. (ii) - Whether the learned Single Judge was barred from passing the impugned order because of Section 430 of the Act? 68.1 Section 430 of the Act reads th .....

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, by the Tribunal or the Appellate Tribunal. 68.2 Parallelly, of course, Section 9 of the CPC postulates that the Courts shall (subject to the provisions herein contained) have jurisdiction to try all sorts of possible nature excepting suits of which the cognizance is either expressly or impliedly barred. 68.3 Clearly, Section 430 bars the Civil Court from entertaining any suit or proceeding, in respect of any matter which the NCLT is empowered to determine by or under this Act or any other law .....

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s drawn our attention to various provisions of the Act, which contain such express statutory empowerment. 68.5 Mr. Chandhiok, who does not seriously join issue, on principle, with Mr Sapra s submission, would seek, instead, to point out that such statutory empowerment of the NCLT is, indeed, to be found in the proviso to Section 169(4) of the Act. Section 169(4), may for ready reference, be reproduced as under: (4) Where notice has been given of a resolution to remove a director under this secti .....

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on by the company), and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company s default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting. Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal i .....

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re to be strictly construed, and exclusion of such jurisdiction is not to be lightly inferred. The principle of exclusion of jurisdiction is, moreover, never absolute. In what is regarded as the classic exposition of the law on the point, Thankerton, J., speaking for the Privy Council, in Secretary of State v Mask & Co., AIR 1940 PC 105, pronounced thus: It is settled law that the exclusion of the jurisdiction of the Civil Courts is not to be readily inferred, but that such exclusion must ei .....

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ferently (in para 22 of the report): The principle thus is that exclusion of the jurisdiction of the civil courts is not to be readily inferred. Such exclusion, however, is inferred where the statute gives finality to the order of the tribunal on which it confers jurisdiction and provides for adequate remedy to do what the courts would normally do in such a proceeding before it. Even where a statute gives finality, such a provision does not exclude cases where the provisions of the particular st .....

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9 of the CPC: (1) Where the statute gives a finality to the orders of the special Tribunals the civil courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an exp .....

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ates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not. (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go .....

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tutional limits or illegality collected a suit lies. (6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of the jurisdiction of the civil court is not readily to be i .....

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, an efficacious alternative to the civil court. Even when these two indicia stand satisfied, the jurisdiction of the civil court would continue to exist where the action, complained against, violates the statute. 68.10 We are unable to subscribe to Mr. Sapra s contention that the legislative bar to exercise of jurisdiction, by civil courts, engrafted in Section 430 of the Act, would operate only where the provision in the Act specifically, and in so many words, confers jurisdiction on the NCLT. .....

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e, therefore, Section 430 uses the words by or under this Act the words by and under have to be understood as conveying different and distinct meanings. The position in law may, in fact, be treated as covered by the judgement of the Supreme Court in Dr. Indiramani Pyarelal Gupta V. W.R.Natu, AIR 1963 SC 274,which holds as under: A more serious argument was advanced by learned counsel based upon the submission that a power conferred by a bye-law framed under Section 11 or 12 was not one that was .....

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by rules under the Act i.e. those framed under Section 28 and a bye-law is certainly not within that description. The question therefore is whether a power conferred by a bye-law could be held to be a power conferred under the Act . The meaning of the word under the Act is well known. By an Act would mean by a provision directly enacted in the statute in question and which is gatherable from its express language or by necessary implication therefrom. The words under the Act would, in that contex .....

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n Bench of the High Court of Bombayexpressed the same sentiment, equally felicitously (in Manibhai Govindbhai Patel v The Nadiad City Municipality, AIR 1927 Bom 55), thus: In this view, the main question is whether it is a duty "imposed under" the Act. I think it is obvious that the Legislature in using the expression "by or under this Act" did not use the word "under" simply to repeat what would he expressed by the word " by." The word" under " .....

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aid to be imposed '' under the Act, " although they are not imposed "by the Act." I reject the contention of Mr. Thakor for the appellant that the words "by or under this Act" are limited to duties imposed by some provision of the Act itself. (Emphasis supplied) 68.13 All such proceedings which, therefore, the NCLT would be competent to adjudicate would, consequently, stand excluded from the jurisdiction of Civil Courts. The submission of Mr. Sapra, that, such ex .....

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t jurisdiction does stand expressly conferred, by the Act, on the NCLT in respect of the subject matter of CS (OS) 284/2017, on Sections 169(4) and 241 thereof. 68.15 As already reproduced hereinabove, the relief, in CS(OS) 285/2017, as also in IA 7856/2017 and IA 9618/2017 filed therein, was essentially seeking restraint, against the defendants, from acting upon the notice issued by the directors, or on any resolution taken at the meeting contemplated by such notice which, in turn, contemplated .....

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isdiction, conferred on the Tribunal by the proviso to Section 169 (4), is to order the company s costs, on an application, moved by the Company or any other aggrieved person, to be borne by the Director of the Company, where the Tribunal is satisfied that the facts disclosed abuse of the rights conferred by Section 169 (4). 68.17 Adverting, now to Section 241 of the Act, clause (a) thereof could, alone, be said to be of relevance. The said clause may, for ready reference, be reproduced as under .....

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8.18 The amplitude of the words used in Clause (a) of Section 241(1) of the Act are undoubtedly wide and expansive. They cover all cases, where a complaint that the affairs of a company being conducted in a manner prejudicial to public interest, or in a manner to the complaint, or oppressive to the complaint, or prejudicial, or oppressive, to any other member or members, or prejudicial to the interests of the company, is made. 68.19 Clause (a) of Section 241 (1) of the Act limits the applicabili .....

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relevant clauses of Section 242 may be quoted thus: 241. Powers of Tribunal. - (1) If, on any application made under section 241, the Tribunal is of the opinion (a) that the company s affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and (b) that the winding of the company would unfairly prejudice such member or members, but that otherwise the facts .....

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company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer of allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, the just an .....

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ithin 3 months before the date of the application under this section, which would, it made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (h) removal of the managing director, manager or any of the directors of the company; (i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilization of the recovery including transfer to Investor Education and Protection F .....

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n the opinion of the Tribunal, it is just and equitable that provision should be made. [Clauses (b) to (g), (i), (k) and (m) of Section 242 (2) are obviously inapplicable, and no reference, thereto, is being made in the discussion that follows.] 68.21 Does the grievance ventilated by the plaintiffs in CS (OS) 285/2017, or the relief prayed for by them therein, fall within any of the species of cases contemplated by Section 242 of the Act? In our considered opinion, no. 68.22 Section 242 (1) is c .....

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pany, even prima facie, was made out. 68.23 Adverting, now, to Section 242, clauses (a) to (g) and (i) to (l) thereof are obviously inapplicable. Clause (h) would, in fact, indicate that the reliefs prayed for in CS (OS) 285/2017 were outside the jurisdiction of the Tribunal, as the said clause empowers the NCLT to pass an order providing for removal of the managing director, manager or any of the directors of the Company. If one were to apply the expression unius est exclusion alterius principl .....

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ing clauses of the said subsection, and a species of case which is impliedly excluded from one of the said preceding clauses could not be, by implication, brought into clause (m). Any attempt to do so may amount to doing violence to the legislative intent. 68.24 We are constrained, therefore, to observe that it is not possible to accept Mr Chandhiok s submission that the reliefs claimed by the plaintiffs in CS (OS) 285/2017 fall, statutorily, within the purview of jurisdiction of the NCLT. 68.25 .....

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earned Single Judge of the Karnataka High Court, was, in Prakash Roadlines Ltd v Vijaya Kumar Narang, (1995) 83 Comp Cas 569, concerned with a claim, legally similar to that of the present plaintiffs, to remove certain directors from the company and appoint a director in their place. As in the present case, it was sought to be contended that the claim was not maintainable before the High Court, as it lay within the purview of jurisdiction of the Tribunal, under Section 397 of the Companies Act, .....

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uch that normally the company could be sought to be wound up under the "just and equitable" clause but such winding up would unfairly prejudice the members. Therefore, I am of the view that section 397 is not an effective forum to grant any relief of an individual member under all circumstances. Similar is the situation under section 398 also. Being a constituent of the company a shareholder has several individual rights and those rights could be enforced by invoking the civil jurisdic .....

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e for the longest period since the last election. The controversy, before the High Court, pertained to the annual general meeting of the company, scheduled to be held on 30th December 1967. The respondent RL Kaushik contended that his name was proposed to be included, in the said meeting, as one of the directors scheduled to retire the rotation, even though, in his submission, he was not so due for retirement. Mr Kaushik, therefore, filed a suit in the Court of the Subordinate Judge, for a decla .....

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iminary objection to the effect that the jurisdiction of the civil court, to adjudicate on the matter, stood ousted by Section 9 of the CPC read with Sections 398 and 402 of the Act. These provisions, it may be noted here, were somewhat parallel to Section 241 and 242 (2) of the present Act. Consequent on a detailed discussion, the learned judge held that the civil court had jurisdiction to try the suit. Significantly, in the course of such discussion, reliance was placed on the following aphori .....

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wherein it was held that a suit for declaration that the plaintiff is a director and for the protection of his rights qua director is competent . 68.29 Ravinder Kumar Jain v Punjab Registered (Iron and Steel) Stockholders Association Ltd, (1978) 48 Com Cas 401 (P & H) was concerned with a situation in which a petition was moved, before the High Court, under Section 166 of the erstwhile Companies Act, 1956, for declaration of a meeting of the Company, held on 28th September 1977, to be illeg .....

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me of the above discussion is that the invocation, by Mr Chandhiok, of Section 430 the Act, to nonsuit the plaintiffs, is misplaced. Per sequitur, CS (OS) 285/2017 has to be held to be competent. 69 Issue No. (iii)- Whether, having elected to submit to the jurisdiction of the NCLT in respect of the notice dated 24th April, 2017, the plaintiffs were estopped or otherwise barred from invoking the ordinary jurisdiction by this Court by way of CS (OS) 285/2017? 69.1 Jurisprudentially, the reliance o .....

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t there, the doctrine will not apply. According to American Jurisprudence, 2d, Vol. 25, p. 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Principles of Equity (31st Edn., p. 119), the doctrine of election of remedies is applicable only when ther .....

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S (OS) 285/2017does not appropriately fall within the purview of jurisdiction of the NCLT, the first of these three essential pre-requisites, for the doctrine of election to apply, is absent. Per sequitur, the doctrine does not call for invocation in the present case. 69.2 That apart, in view of our above finding that CS (OS) 285/2017 was competent and maintainable, the plaintiffs, quite obviously, could not be foreclosed from maintaining it merely because, earlier, they may have invoked the jur .....

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is not, therefore, a case of which the plaintiffs could be accused of forum shopping by invoking the jurisdiction of NCLT and later of this Court for identical reliefs. The resort, by the plaintiffs, to the jurisdiction of the NCLT, by way of IA No. 17/KB/2017, filed in Company Petition No. 136/2014 (supra), was only because the dispute between the plaintiffs and the defendants, was actually in seisin before the NCLT, at the time, in the said company petition. Whether they ought to have done so .....

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ra seeking similar reliefs. 69.4 Issue No (iii) has, therefore, necessarily to be answered in favour of the plaintiffs, and against the defendants. 70 Issue No. (iv) - Whether the plaintiffs were guilty of concealment of facts, and thereby disentitled to injunction, as claimed in IA 9618/2017? 70.1 Prayers (i) and (j), as made by the defendants before the NCLT in IA 217/KB/2017, read as under: (i) Injunction be passed restraining the company from convening any Extraordinary General Meeting of th .....

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t leave of the Hon ble Tribunal; 70.2 Clearly, therefore, the relief sought, by the plaintiffs, from the NCLT, was not restricted to the notice dated 24th April, 2017 and the consequent meeting to be held on 26th May, 2017, but also encompassed any future EGM, which might be held on the basis of any other notice of like nature till the disposal of the Company Petition . The said Company Petition, i.e. Company Petition No. 136/2014, as well as IA 217/KB/2017, continue to remain pending in the NCL .....

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oached this Court, in IA 9618/2017, without coming clean regarding the proceedings initiated by them and pending before the NCLT, or the order dated 18th May 2017 passed by the NCLT thereon, the plaintiffs were disentitled to seek any discretionary or equitable relief of injunction from this Court. 71 Issue No. (v) - Whether the learned Single Judge erred in allowing IA 9618/2017 even when notice was yet to be issued IA 9617/2017? 71.1 Mr. Chandhiok contends that Order XXXIX of the CPC permits g .....

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notice dated 2nd June 2107 and the meeting to be held on 12th June 2017 referred to therein. Indeed, it could not have been otherwise, as CS (OS) 285/2017 was filed before the notice dated 8th August 2017 came to be issued. As such, challenging the notice dated 8th August 2017 or seeking restraint, on the defendants, from acting on any resolution taken at the meeting dated 26th August 2017 necessarily required amendment of the plaint by means of an appropriate application under Order VI Rule 17 .....

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when IA 9618/2017 came to be allowed by the learned Single Judge by way of the impugned order dated 11th September 2017. This, Mr.Chandhiok points out, is not permissible in law, until and unless IA 9617/2017 were allowed and CS (OS) 285/2017 amended in accordance therewith. The challenge to the notice dated 8th August 2017, or to the proposed meeting dated 26th August 2017, formed no part of the plaint in CS (OS) 285/2017. Injunction under Order XXXIX Rules 1 and 2, CPC, Mr.Chandhiok points ou .....

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, the power of the Court to pass appropriate orders in the interests of justice would be available for invocation, and there was no gainsaying this proposition. 71.3 The necessity of grappling with these rival points of view was, we are glad to say, obviated by the graceful acknowledgement, of Mr.Chandhiok, that, de hors his objection premised on Order XXXIX Rules 1 and 2 of the CPC, the power to do complete justice undoubtedly inheres in this Court by virtue of various other provisions in the C .....

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ing disposal of the said IA. The learned Single Judge, at worst,could be said to have erred in finally disposed of IA 9617/2017 instead of keeping it pending and granting ad interim relief, as granted by the presently impugned order. The said submission appears, to us, to be well taken. 71.6 The objection, of Mr.Chandhiok, to the effect that the learned Single Judge ought not to have disposed of IA 9618/2017 by way of the impugned order, while IA 9617/2017 was still pending, stands disposed of a .....

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ment Scheme (hereinafter referred to as the Scheme ), formulated by the Government of India to encourage investment by nonresidents of Indian nationality or origin, in Indian companies. Under the Scheme, non-resident individuals of Indian nationality/origin, as well as overseas companies, firms and other corporate bodies, which were owned by, or in which the beneficial interest vested in non-resident individuals of Indian nationality/origin, to the extent of not less than 60%, were entitled to i .....

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gin. They held 61.6% shares in a foreign company, known as Caparo Group Ltd (hereinafter referred to as Caparo ) which, in turn, held 100% shares in 12 foreign companies and 98% shares in a 13th foreign company. These 13 foreign companies desired to invest in the shares of Escorts Ltd, taking advantage of the Scheme. They designated the Punjab National Bank (PNB) as their authorized dealerbanker. The PNB wrote to the Reserve Bank of India ( RBI ), for permission to open Non-resident External (NR .....

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gister the transfer of shares, and wrote, to the RBI, to consider whether the Scheme contemplated circumvention, of the 1% ceiling stipulated therein, by a single foreign company channelling investment through a dozen subsidiaries. Other illegalities, on the part of the said 13 companies, were also alleged. Ultimately, the RBI accorded permission, to the PNB, to release the money remitted by Caparo from abroad, for making payment against shares of Escorts and DCM, subject to certain conditions. .....

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inating 9 others in their place. 73.3 Escorts, thereupon, amended the writ petition filed by it before the Bombay High Court, by adding a prayer, therein, for issuance of a declaration that the requisition to hold the meeting, as issued by LIC, was arbitrary and illegal. The High Court allowed the writ petition of Escorts, whereagainst appeals were preferred, to the Supreme Court, by the Union of India, the RBI and the LIC. The operative portion of the judgement of the High Court read, inter ali .....

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n taken for collateral purpose; it is violative of Article 14 of the Constitution of India. 73.4 The substantive challenge before the Supreme Court, on the issue of whether the 13 companies were entitled to invest in Escorts and DCM, under the Scheme, is of no relevance to the present appeal. What is of relevance is the dispute between Escorts and the LIC, the discussion whereon commences from para 93 of the report. The Supreme Court held, on this aspect of the matter, as under: (i) The sequence .....

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he Company, in the EGM, and the Directors, were comparable to the legislative and executive organs of a parliamentary democracy, in which legislative sovereignty rested with the Parliament whereas administration was left to the executive government, subject to a measure of control by the Parliament through its power to force a change of government. Another view was that it was more akin to the division of powers between the Federal and State Legislature under the Federal Constitution. (iv) As it .....

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merical requirements, to call an EGM in accordance with the Act. Neither could he be restrained from doing so, nor was he bound to disclose the reasons for the resolutions proposed to be moved at the meeting. (vii) The reasons for the resolutions proposed to be moved at the meeting were also immune from judicial review. (viii) Though there was a statutory duty cast on the management, to disclose, in an explanatory note, all material facts relating to the resolution coming up before the EGM, to e .....

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ined from doing so, nor was the LIC bound to disclose its reasons for moving the resolution. 73.5 The learned Single Judge has, in 43 of the impugned judgement, sought to distinguish L.I.C. of India (supra) thus: The judgement of the Supreme Court in Life Insurance Corporation (supra)relied on by the learned counsel for the defendants, in my view, is not applicable in the facts of the present case. The Supreme Court in the said judgement was not considering a provision like Section 169 which spe .....

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, had specifically been infracted by the notice issued by LIC - was not only in parimateria but practically in haecverba to Section 169 the Act. While it is true that the words after giving him a reasonable opportunity of being heard , which figure in Section 169 (1) of the present Act, were absent in Section 284 (1) of the Companies Act, 1956, the substantive provision permitting such hearing, i.e. sub-section (3), was identical in the erstwhile Section 284 and the present Section 169, and read .....

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referred to in sub-section (3) of the same Section. The reasonable opportunity of being heard contemplated by sub-section (1) of Section 169 is only required to be afforded prior to removal of the director concerned. Such opportunity is also contemplated by sub-section (3). The two provisions are, therefore, required to be read conjunctively, not disjunctively. Viewed thus, it becomes apparent that the law laid down by the Supreme Court, in L.I.C. of India (supra), albeit in the context of Secti .....

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the company has availed itself of the option given to it under section 163 to appoint less than two thirds of the total number of directors according to the principle of proportional representation, then the provisions of this section shall not apply. Special notice by specified number of members shall be required of any resolution, to remove a director or to appoint somebody in place of a director so removed. The clause further provides that the Director shall be entitled to be heard on the res .....

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he present case, and that the learned Single Judge was in error in holding otherwise. 73.9 Applying the principles emanating from L.I.C. of India (supra) - which already stand enumerated hereinabove - the following conclusions would clearly emerge: (i) The 6 Directors, who issued the notice dated 8th August 2017, for holding a meeting of the Board of Directors, to decide whether an EGM was required to be convened to consider the proposal to remove Plaintiff No 1 from Directorship of the Company, .....

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resolution coming up before the EGM, to enable the shareholders to form a judgement on the business before them. The shareholders were not required to disclose the said reasons in advance. (v) The said reasons were not subject to judicial review. 73.10 A case, involving a dispute facially similar to that with which we are seized, is to be found in S. Varadarajan v Venkateswara Solvent Extraction (P) Ltd, (1994) 80 Com Cas 693 (Mad), decided by A.R. Lakshmanan, J. (as he then was), sitting singly .....

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ent Act is concerned - as it dealt with removal of a Managing Director, which is outside the purview of the said provision - it offers considerable guidance, on the issue of interpretation and understanding of Sections 100 and 115 of the Act. A reading of the said decision reveals that the requisition from the shareholder, as well as the notice for holding of EGM, in the said case, parallelise the said documents in the present case (except that the notice for convening of the EGM, in that case, .....

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by injunction from calling the meeting and he is not bound to disclose the reasons for the resolutions proposed at the meeting. Nor are the reasons for the resolutions subject to judicial review. Though section 169 uses the expression "such number of member of the company" in the plural, yet the requirements of the provisions would be satisfied even if one member holding the requisite number of shares or voting rights makes the requisition. It is also well settled that words in the pl .....

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ompany did not call the extraordinary general meeting within 21 days from February 8, 1992 (date of deposit of the requisition) and therefore the second respondent himself called the extraordinary general meeting under the notice dated March 28, 1992, and the said meeting was convened on April 23, 1992, at 4 p.m. at No. 1, South Street, Annavasal, Pudukkottai. It is significant to notice that the aforesaid notice dated March 28, 1992, clearly sets out the business proposed to be transacted at th .....

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ansact special business. When a requisitionist calls for an extraordinary general meeting under section 169, there is no obligation on the requisitionist to annex an explanatory statements to the notice of the meeting. There is in my view no warrant for imposing such an obligation on the requisitionists. Therefore, I am of the view that there is no merit in the contention of Mr. A. K. Mylsamy, learned counsel for the petitioner, that the requisition notice dated February 8, 1992, and the notice .....

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also ruled that no injunction can be granted restraining a shareholder from convening an extraordinary general meeting … (Emphasis supplied) 73.11 The position, in law, that (i) there is no obligation to disclose the reasons for removing a person from Directorship of a Company prior to the EGM where such proposal is to be considered, (ii) no injunction, of the decision to hold such EGM, can be granted by the court, and (iii) the said reasons are immune from judicial review, stands reinfor .....

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ncement, of the Constitution Bench of the Supreme Court in L.I.C. of India (supra), to the effect that the notice under Section 169 of the Act was not required to set out the reasons for the proposalto remove the Director, it cannot be said that the notice, dated 8th July 2017, was bad for want of sufficient reasons. As correctly contended by Mr Chandhiok, the reasons were required to be forthcoming only in the Explanatory Note at the Meeting with the proposal was to be considered. Indeed, there .....

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se; that, however, cannot invalidate the notice calling for a meeting of the Board for deciding on convening of the EGM. Due process as its own ebb and flow, and judicial interdiction midstream is to be eschewed, save where considerations of irreparable prejudice and the like mandate otherwise. 74.2 What Section 169 guarantees to the Director, who is on the threshold of removal, is a reasonable opportunity of being heard . Unquestionably, this opportunity connotes, and denotes, a right which is .....

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t to decide whether an opportunity has been given and whether that opportunity has been reasonable. (Emphasis supplied) 74.3 Where, therefore, the statute provides for a reasonable opportunity of being heard , the opportunity is required to be reasonable, and realistic. In the absence of any specific statutory prescription to that effect, however, it is not open to the person affected by the action to contend that the opportunity ought to have been given at this stage, or that. So long as the op .....

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report: Special notice of the resolution to remove directors required by section 284 of the Act shall be given to the company, not less than 14 days before the meeting at which it is to be moved (section 190 of the Companies Act). The notice must disclose the ground on which the director is proposed to be removed. The disclosure of the ground for removal is a matter of substance and not a form because the directors contained are entitled to make representations in writing at the meeting. The co .....

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urt in Queens Kuries (supra). He suggested it was impossible for his client to make a meaningful representation, without being made aware of the specific acts, committed by her, which were alleged to be against the interests of the Company. 74.5 In view of the law laid down by the Supreme Court in L.I.C. of India (supra), we, with great respect, are unable to subscribe to the view, expressed by the Kerala High Court in Queens Kuries (supra), that the reasons for the proposal to remove the direct .....

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5. The appellants before the High Court (who were two of the Directors of the Bank) moved the trial court on the ground, inter alia, that the convening of the said meeting had to be accompanied by an explanatory statement, as provided in Section 173 of the Companies Act, 1956 (corresponding to Section 100 of the present Act). As in the present case, the contention, of the said aggrieved Directors, was that a very cryptic explanatory statement has been annexed to the notice which states that the .....

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al of a director, from office, was one with serious repercussions, and that, therefore, the notice calling for the meeting had necessarily to set out the specifics of the allegations against the said directors, so that the shareholders at the meeting would be able to impartially adjudicate thereon. Significantly, the High Court found particular fault with the fact that a letter, dated 7th January 1995, which actually set out being a chance against the directors and was the catalyst in prompting .....

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dy meeting (EGM) of the company. We are informed that the EGM is scheduled to be held on 30-3-1995. The injunction granted [B.G. Somayaji v. Karnataka Bank Ltd., (1995) 83 Comp Cas 649 (Kant)] by the High Court is, therefore, vacated. Moreover, the appellants also undertake to circulate a copy of the letter dated 7-1-1995, Annexure ‗B to the shareholders who attend the extraordinary general meeting before commencement of the extraordinary general meeting. (Emphasis supplied) 74.6 After thi .....

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ice, dated 8th August 2017 was issued under sub Section (1) or sub-Section (2) of Section 100 of the Act? Was the learned Single Judge wrong in treating the same having been issued under sub-Section (2) thereof? 75.1 Sub-section (1) of Section 100 confers absolute power on the Board to call an EGM, whenever it deems fit. Sub-section (2) deals with a specific situation in which the Board is in receipt of a requisition made by the members, of sufficient strength as stipulated therein. It requires .....

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first glance, that the notice, dated 8th August 2017, is neither relatable to subsection (1) nor to sub-Section (2) of Section 100 of the Act. Both these provisions empower the Board to call for an EGM. The notice dated 8th August 2017, on the other hand, does not call for any EGM, or for convening of any EGM. It merely calls for a meeting of the Board on 26th August, 2017, to discuss whether a notice, to convene an EGM, pursuant to the subject notice dated 8th July 2017, received from the memb .....

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not correctly appreciated the import of the notice dated 8th August 2017. As Mr. Chandhiok submits, the said notice was absolutely innocuous in nature, intended only to decide whether to issue a notice under Section 100, for convening of an EGM, or not. The law laid down by the Supreme Court in L.I.C. of India (supra) makes it clear that a notice under Section 100, were it to be issued, could not have been injuncted by the Court. If the notice which might possibly have been issued, consequent t .....

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ting to be held on 26th August 2017. The interests of Plaintiff No.1 were not, therefore, in any way prejudiced by the notice dated 8th August 2017, so that the very maintainability of the application for ad interim injunction filed by her (in IA 9618/2007) was questionable. 75.4 As such, the notice dated 8th August 2017, in our opinion, was not a notice under Section 100 of the Act at all, and the learned Single Judge has, therefore, clearly fallen in error in regarding as it one. No occasion, .....

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t, a notice under Section 100 of the Act at all, no question of any infraction, in issuance of such notice, of Section 179 (1) of the Act, could be said to exist. No proscription, against issuance of such notice, is to be found in the Act or any cognate legislation, plenary or subordinate. It cannot, therefore, be said that the notice was illegal in any manner. 77. Issue No. (x)- Whether the notice, dated 8th July, 2017, was a requisition for convening of an EGM and whether the subsequent notice .....

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itself convene an EGM but only calls for a meeting of the Board, to decide whether an EGM should be convened, or not. As such, the decision whether to convene an EGM or not was to be taken at the meeting dated 26th August 2017, which, inasmuch as it would be taken by the Board on its own accord, would clearly be relatable to Section 100(1) of the Act rather than Section 100 (2) thereof. As the Board, in the meeting to be convened on 26th August 2017, would be acting on its own accord in deciding .....

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esent appeal. 77.3 Having said that, a reading of the notice dated 8th July 2017 reveals that it has been signed by 9 Directors and does not even purport to be a requisition for convening an EGM. It is, quite clearly, a notice in terms of Section 169(2) read with Section 115 of the Act. The preambular subject to the said notice itself states that it is a Special Notice u/s 115 of the Act. In that view of the matter, in our opinion, not much can be made of the reference, in Para 1 of the notice d .....

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would be relatable to sub-clause (1) rather than sub-clause (2) of Section 100 of the Act. We may, however, in passing, note that no specific form or format of a requisition is prescribed in the Act, or in any cognate legislation, so that any document issued by the requisite member of Directors as specified in Section 100(2) of the Act (which calls for convening of an EGM) would be eligible to be styled as a requisition . It does not appear to us, that the expression requisition is a term of art .....

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