TMI Blog2013 (6) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... quity shares of ₹ 10 each. The R-1-company's subscribed and paid-up capital, according to the petitioner is ₹ 3,99,000 in which the petitioner's shareholding is 62.36 per cent and the R-2 holding 2 shares of the Company, R-3 holding 4 shares of the company and R-4 holding 14,920 equity shares hold 0.0050 per cent. 0.0100 per cent, 37.39 per cent, respectively. 2. The petitioner's case is that she has been illegally removed from the directorship of the company. The notices appearing on pp. 240 to 243 do not indicate the reasons for her removal. She was a majority shareholder and the founder director of the company, her removal without giving proper reason is improper, illegal and against the principle of natural justice. She did not attend the extraordinary general meeting ('EGM') to submit any representation because she was apprehending a threat to her life. The primary procedure of approving notice for convening EGM and issue the same to the shareholder has to be considered at a Board meeting only. It was contended that no such Board Meeting was conducted as no Board meeting could be held without her she being a director. She had not received any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect. No such draft resolution was received by the petitioner and it is only concocted records. Board meeting is shown as of 20th February, 2010 then it is not understood as to what was the reason for passing the resolution of shifting the registered office by circular resolution dated 20th February, 2010 (the same day) why it was not done at the Board meeting. 6. Replying to the petitioner's allegations regarding shifting of the Registered office of the R-1-company it was contended that the registered office of the company is situated at 10, Sakan Twins Opp. Satellite Center, Vastrapur, Ahmedabad, the fact that the petitioner has stated the address of the registered office of the company, at the said address in the said paragraph and at several places in the petition clearly amounts to the petitioner's admission that the registered office of the company has been duly shifted to the said address. Since 20th February, 2010 the petitioner had never disputed the registered office address till the filing of this petition, hence the petitioner is required to be penalised for the false affidavit and contradictory Statement made by her in the petition. 7. The respondents' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the increase of paid-up capital, the respondents had sought approval for appointment of new auditor which the company had already appointed in their annual general meeting ('AGM') on 4th September, 2010 on which date the petitioner along with her brother-in-law a retired Deputy Director of the Gujarat based corporation were also present. It was pointed out that approval from ICAI New Delhi is still awaited and as such the company is unable to have the accounts audited, passed and comply with the provisions of the Act and also filing of Registrar of Companies ('RoC') returns for the succeeding years. It was pointed out that the petitioner holds only 9,880 equity shares of the company and not 24,880 shares as falsely contended by her, she had not paid for the allotment money on 5th December, 2007 for the allotment of 15,000 shares, the Board of directors of the respondent-company had not passed-a resolution on 5th December, 2007 that the capital of the company would be increased by ₹ 1,50,000 and 15,000 Shares are to be allotted to Smt. Varsha S. Trivedi the petitioner, no notice was issued, the other only Director on Board had not attended the Board meeting so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not handing over the same, the company did not know the Serial Number of the resolution and moreover as the resolution was passed by circulation the number of the resolution was shown as 00 in the Forms 18 and 32. 10. It was argued that on receiving the requisition on 7th April, 2010 a resolution by circulation was passed by the Board of directors of the company for convening an EGM on 24th April, 2010 that the petitioner be removed from the director of the company, the petitioner was also sent the Resolution by Circulation but she Refused to sign or acknowledge the same. Since the resolution of Board was passed by circulation there was no questioning of quorum being present, the resolution by circulation was passed by three out of four directors of the company. The Board immediately sent to the petitioner a copy of the special notices from members of the company with remark to submit the representation to be read at EGM, a copy of the requisition under section 169 of the Act and a copy of the notice of EGM with Enclosures. The postal vouchers with speed posting numbers given by postal department on each cover vide which these were sent, the same were returned back. The pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp Cas 351, it was contended that the mere loss of confidence between groups of shareholders would not come within s. 397 unless it be shown that this lack of confidence sprang from a desire to oppress the minority in the management of the company's affairs and that there was at least an element of lack of probity or fair dealing as shareholders. 14. I have considered the rival submissions and the case law cited. There is no dispute over the proposition that a petition under section 397 should also make out not merely lack of confidence but the lack of confidence must arise out of lack of probity or fair dealing as a shareholder. In the present case, it is noted that the petitioner has succeeded in making out a case under sections 397 and 398 of the Act. The respondents' Company Application No. 203 on maintainability of this company petition already stands disposed off by the CLB vide an earlier order dated 19th November, 2012. 15. It is noted that the respondents who stand in reply to this company petition have made certain counter allegations against the petitioner in another Company Petition No. 20/2010 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he procedural requirements stipulated in the section. But compliance with those requirements and justifying the removal as valid cannot be a deterring factor to ascertain whether the removal, though in conformity with law, is fair or unfair to the minority shareholder, because in perhaps a vast number of cases, the removal is likely to be motivated by an improper purpose or mala fides and hence oppressive to the minority, especially in a quasi-partnership type of company. The test of fairness rather than legality is to be applied in determining whether the removal constitutes an oppressive act or not. A shareholder or any person has no right to be a director. It is not open to any person to prevent the company holding a meeting and passing a resolution for removal of a director. A person who has no right to be elected as a director, cannot complain of any injury or loss by his removal. The loss caused as a result of removal is not an irreparable loss or injury entitling him to seek relief of injunction. To remove a director under section 284, certain essential requirements are to be followed. Noncompliance of these requirements would render the resolution passed in the general meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the various groups of shareholders, if some way could be found out for continuing the company as a running concern after removing misunderstanding and settling right the acts of the group of the shareholders which constitute the oppressing group. The CLB has, therefore, to consider in all such cases whether, short of winding up, it is possible for the company's affairs to be remedied by recourse to section 397. In the present case, it is noted that though the petitioner has succeeded in making out a case of winding up of the R-1-company but winding up would be unfairly prejudicial to the member petitioner. 19. The respondents have failed to controvert the petitioner's contention regarding the discrepancies in the change of registered office of the R-1-company. However, this issue can be sorted out by the newly constituted Board of the R-1-company as per status quo ante order on management and keeping in view the fact that at present there is no activity in the R-1-company. 20. As regards the petitioner's allegation of siphoning off of funds of the R-1-company, it is noted that in view of the fact that there was no activity in the R-1-company, even the assets had b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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