TMI Blog1999 (12) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... to retire by rotation. As per Article 39(a), the petitioner was to be managing director and chairman of the company for life. The two sons were inducted as directors some time in 1993. Due to some family disputes/ differences, now the first petitioner and the first respondent are living separately for quite some time. Now the second petitioner is with the father and the second and fourth respondents with the mother. Thus, the petitioner group holds 40 per cent shares in the company while the respondent group holds 60 per cent shares. The company has a subsidiary by the name of Coromandel Indag Products India Limited in which the company holds about 70 per cent of shares. Through a letter dated November 21, 1997 (exhibit A4), the second respondent informed the first petitioner that the latter had ceased to be a director/managing director by virtue of provisions of Section 274(b) on the ground that the petitioner had been declared as undischarged insolvent by the High Court of Madras. A copy of this letter was addressed to all the shareholders of the company as well as the subsidiary. Further, the respondent shareholders also requisitioned an extraordinary general meeting to transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution which is in violation of Section 169. Further, no explanatory statement had been enclosed with the requisition. In addition to this, these two persons could have been appointed as additional directors to hold office only up to the next general body meeting, since no general body meeting had been held after their appointment, they have ceased to be directors on the day on which the general body meeting should have been held. In the same meeting, the second respondent was also appointed as managing director for a period of five years. In view of the illegalities in the appointment of the second respondent as the managing director, the petitioner filed a criminal case against the second respondent under Sections 205, 406 and 500 of the Indian Penal Code and the matter is pending before the metropolitan magistrate. He referred to V.G. Balasundaram v. New Theatres Carnatic Talkies Pvt. Ltd. [1993] 77 Comp Cas 324 (Mad) in which the scope and application of Sections 169 and 173 has been discussed in detail and has been held that violation of the provisions would invalidate the meeting held and the decision taken thereat. Accordingly, he prayed that the decisions taken in the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were appointed only with a view to give the employees a representation on the board. In other words, he submitted that whatever was done was only for the benefit of the company and as such he prayed for dismissal of the petition. He further pointed out that the resolutions passed in that meeting have not been given effect to in view of the orders passed by this Bench on April 18, 1998, in which while permitting the holding of the meeting, the Bench had directed that the resolutions passed in that meeting should not be given effect to till the disposal of the petition. 4. We have considered the pleadings and arguments of the counsel. Considering the relationship between the parties we advised both the groups that they should try to resolve the disputes amicably and accordingly an order was passed on July 6, 1998, as follows : in view of the family nature of the company and that there are other family disputes between the parties, we have advised the counsel for both the sides to resolve the disputes amicably by which they part ways. Both counsel are agreeable to explore the possibilities of amicable settlement. Accordingly both will exchange, within a week from today their pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems that there was a family settlement in the form of an MOU dated March 18, 1994, by which the affairs of the various group companies were to be managed. After the induction of the two directors, there was parity in the board--two of the petitioners and two of the respondents. Any disturbance in the board resulting in marginalisation of one group has to be considered as an act of oppression in a family company like the respondent-company. Therefore, irrespective of the fact whether the extraordinary general meeting was properly convened and held, the complaint of the petitioners that the appointment of two additional directors in that meeting is an act of oppression is justified. In regard to the appointment of the second respondent as the managing director, perhaps, it was done on the ground that the first petitioner had disqualified himself to be a director/managing director in terms of Section 274(2). Since we have already held that the first petitioner is not disqualified and would continue to be the managing director, the appointment of second respondent as the managing director especially when the company does not carry on any business has to be declared as invalid and accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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