TMI Blog2018 (5) TMI 1571X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal by the way of present petition seeking various reliefs, the petitioners, more particularly petitioner No. 1 and petitioner No.10 never came with clean hands. The infirmities, so pointed out by the respondents running in the petitioners’ case get slips to total insignificance when one compares such infirmities with the illegalities committed by the respondents in running the affairs of the company. Therefore, such infirmities on their own could cause no serious harm to the case of the petitioners. However, most of the decisions, relied on from the side of respondents, could hardly advance the cause which respondents tried to propound in the present proceeding case. Therefore, in the facts and circumstances of the present case, in my considered opinion, such decisions could not turn the table in favor of the respondents. The respondents are also guilty of coming to the court with dirty hands. However, when one compares the illegalities committed by the parties hereto, he would find that the hands of the respondents are more soiled than that of the petitioners. The illegalities committed by the respondents were so huge and enormous that such illegalities reduced share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 300720/- of 3072 nos. of equity shares of ₹ 100/- each as per annual report of the company as on 31-03-2009. Out of the aforesaid equity shares, 600 nos. of equity shares were held by the Government of Assam, the same being 20% of the total shareholding and the remaining 2472 nos. of equity shares were held by the shareholders and the employees of the company. 5. Though, the registered office of the company was initially at A. K. Azad Road, Gopinath Nagar, Guwahati 781 016 however, due to some ongoing disputes between the shareholders and the then Managing Director of the company, D. N. Singh, the registered office of the company was shifted to Shantipur Road, House No.16, near Pragjyotish College, Guwahati 781 009, vide board resolution dated 05-01-2010. 6. The company - which was incorporated in 1946 with the objects, specified in the Memorandum of Association (in short, MOA) - has been doing its business with great reputation over a very long period of time. The products, manufactured by the company, had always been sold like hot cakes which indicate the goodwill and popularity which the company enjoyed over the years 7. However, in the month of July, 2009, a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Director of the company, issued notice dated 21-10-2009 convening the EOGM of the shareholders on 14-11-2009 in the registered office of the company. Accordingly, the EOGM was held on 14-11-2009 which was attended to by all the shareholders. However, R-5 did not attend the same, and that too, without seeking any permission therefor from the authorized authority. 13. Said meeting was convened under the supervision of the District Administration -since ---- the conveners of the meeting apprehended that some of the shareholders, close to R-5, might cause serious law and order situation on the aforesaid date. The said meeting was, thereafter, conducted under the chairmanship of Mr. H. K. Das (petitioner No.4 and P-4 in short). The shareholders discussed the agenda in the notice and took resolution to remove the then MD, D. N. Singh from the office of MD as well as director of the company with immediate effect. 14. The shareholders by majority decision had also appointed Mr. Deba Kumar Hazarika (petitioner No.1 and P-l in short) as director of the company with effect from 14-11-2009, in place of D. N. Singh (R- 5). A copy of the resolution of the EOGM held on 14-11-2009 was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice director /MD of the company as well as the appointment of Deba Kumar Hazarika (petitioner No.1) in the Board of Directors, in compliance of the directions in the resolution passed by the shareholders in the EOGM held on 14-11-2009. 20. On 25-11-2009, the newly constituted Board of Director by majority vote adopted a resolution under the chairmanship of the Government Nominee Director, Shri Bipul Das, in which Deba Kumar Hazarika was appointed as MD of the company with effect from 25-11-2009. In the meantime, Sri Bhupen Chandra Kalita (P-2) was also appointed as director of the company on following the prescriptions of law and mandate in the charters of the company. The appointment of P-l as MD and P- 2 as director of the company had also been communicated to the ROC, Shillong by submitting Form No.32. 21. Although R-5, DN Singh was duly conveyed all those decisions, he instead of handing over his charge of the offices and rendering necessary assistance to the newly constituted Board of Directors, started creating hurdles and obstacles in running the affairs of the company smoothly. Since R-5 was creating all hurdles and difficulties in running the affairs of the company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ₹ 100/- each to the respondent No.5 himself and to his associates without consent of all the existing shareholders of the company as required under the Article of Association (AOA, for short) Such fact was immediately referred to the Bureau of Investigation of Economic Offences for taking necessary action against R-5. 27. Even thereafter, R-5 without approval of the majority shareholders fraudulently removed the petitioner Deba Kumar Hazarika from the office of Managing Director of the company and equally illegally got himself appointed as Managing Director of the company. Thereafter, he illegally altered all the relevant records in contravention of the provisions of the Companies Act, 1956. 28. During the pendency of the Company Petition No.972/2010, before the Company Law Board (CLB), Kolkata, the authorized capital of the company was increased from ₹ 5.00 lacs to ₹ 10.00 lacs of ₹ 100/- each and the relevant provisions in MOA and AOA were altered. What is, however, surprising and astonishing as well is that all these were done in total violation of rules and procedures framed in that regard and also in keeping majority shareholders in complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. The respondents also claimed that most of the facts incorporated in the petition were not incorrect, false and misleading. They also contended that the petition suffers from enough legal infirmities and lacuna which invariably required the CLB to dismiss the same. Initially on hearing the parties, learned CLB, Kolkata came to the conclusion that the petition is maintainable, despite the defects pointed out in the frame-up of the petition. 35. In due course, the parties have exchanged their pleadings and thereafter, the learned CLB, Kolkata came to the conclusion that the petition is not maintainable since it suffers from serious infirmities in the frame-up of the petition. It also held that the petition was structured on falsehood and fabrication and its main aim was to put the respondents in trouble. On such ground, the learned CLB, Kolkata dismissed the petition. 36. Against such dismissal order dated 20-03-2014, the petitioners preferred an appeal under Section 10F of the Companies Act, 1956 before the Hon ble Gauhati High Court. The Hon ble High Court on receipt of the appeal filed under section 10F of the Companies Act, 1956 issued notice to the respondents and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 4 and 5 were answered in favour of the appellants/petitioners, the other issues were remanded to the learned CLB, Kolkata for taking decision thereon in accordance with prescription of law. 39. The Hon ble Gauhati High Court also found that the allottees of 6715 equity shares were not made parties to such a proceeding, although their interest is likely to be affected by any orders passed by the learned CLB, Kolkata in the aforesaid proceeding and in such circumstance, the Hon ble High Court had directed the appellants/petitioners to issue newspaper advertisement to bring to the notice of the allottees of 6715 equity shares about the pendency of the company petition under consideration, requiring them to respond to the allegations in such petition. The relevant part of the aforesaid order of the Hon ble High Court is reproduced below: - 27. In the light of the above discussion, impugned order of the Company Law Board dated 20.03.2014 cannot be sustained and is accordingly set aside and quashed. Matter is remanded back to the Company Law Board, Kolkata Bench for fresh decision on merit in Company Petition No.992/2011. As a measure of abundant caution, appellants may be perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent company to get them out of management. Since, very basis of the petition was false, the petition under consideration is required to be dismissed on this count alone. 45. The respondents did not dispute that the petitioners made a requisition to the respondent Company on 03-10-2009 seeking calling of EOGM purportedly for removal of the respondent No.5 from the offices of director and Managing Director of the respondent Company. On receipt of such requisition, the respondent No.5 issued notice dated 21.10.2009 calling an EOGM on 14-11-2009. 46. However, since such EOGM was aimed at removing the respondent No.5 from the posts aforesaid most illegally, the respondent No.5 on invoking a arbitration clause in a connected agreement, approached the Civil Court and also secured an order restraining the petitioners, their men, servants, agents from deliberating on agenda item No.2 in the notice dated 21-10-2009. More importantly, such injunction order was duly communicated to the petitioners in time. 47. Despite such injunction order having been served on the petitioners well in time, the petitioners in total disregard to the directions rendered in the injunction order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an EOGM of the shareholders of the company on 02-03-2010 and in that EOGM, the petitioners No.1 and 2 were removed from their offices and Form 32 in regard to cessation of the petitioners No.1 and 2 as being directors of the company had been duly sent to the ROC, copy of which was attached with the company petition as Annexure Z. Quite importantly, said meeting was conducted strictly in accordance with the requirements of law and, therefore, the allegation that the petitioners were wrongly removed from their offices as well as the allegation that the documents in the office of the ROC were illegally tampered is without any basis whatsoever. 53. According to R-3 and R-4, all the allegations in the petition are based on past acts or actions. In other words, the petition is founded on all stale and dead claims. It is a settled position of law that the petition under Section 397/398 of the Act cannot be premised on past acts or actions. As the petitioners have based their petition only on past acts/ actions, this bench ought to have thrown the petition at the very threshold. 54. It has been submitted that in a petition under Section 397/398, the petitioner needs to make out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eshold. 59. The learned legal representative for respondent Nos. 3 4 has submitted the following decisions in support of the various claims, he canvasses before the Bench during the course of arguments: - 1. S.P. Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535 2. Palghat Exports Pvt. Ltd. v. T.V. Chandran [1994] 79 comp Cas 213 (Ker.) 3. Bagree Cereals (P) Ltd. v. Hanuman Prasad Bagri 2001 105 comp LJ 397 Cal 4. Hind Overseas Pvt. Ltd. (supra) 5. Hon ble High Court of Delhi decision in CO. A(SB) 39/2012 (Reivera Builders (P.) Ltd. v. Vijay Kumar Sekhri) decided on 02/07/2012 6. Charanjit Khanna v. Khanna Paper Mills Ltd.[2011] 107 SCL 187 (Delhi) 7. Hon ble Andhra High Court decision in Manoj Kumar Kanuga v. Marudhar Power (P.) Ltd. and 18 Ors. Decided on 23/04/2013. 8. Hanuman Prasad Bagri v. Bagrees Cereals (P.) Ltd. [2009] 90 SCL 209 (Cal.) 9. Supreme Court of India decision in M.S.D..C Radharaman v. M.S.D. Chandrasekara Raja [2008] 83 SCL 451 (SC) 10. Supreme Court of India decision in Hanuman Prasad Bagri v. Bagress Cereals (P.) Ltd. [2001] 33 SCL 78 (SC) 11. (CLB) Kolkata in C P. No. 136 of 2014 decision in Jyoti Kumar Arya v. Prabhat Zarda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act of 1956 Such a contention can be found in Para 3 (ii) and 3 (iv) of the reply. It is also the case of the respondents No.11 and 12 that the disputes in question are in the nature of dictatorial disputes and it is repeatedly held that dictatorial dispute cannot be made a subject matter of a proceeding under section 397/398 of the Act of 1956. 63. These two respondents also contended that the petitioners No.1 and 2 were dismissed from their services of the respondent No.3 Company under the resolution adopted by the Board Meeting held on 18-10-2008 which was attended to by the petitioner No.2 who duly consented to the said resolution. Therefore, the petitioners No.2 is estopped from disputing the removal of the petitioners No. 1 and 2 from the service of the respondent No.3 Company. The minutes of the Board Meeting held on 18-10-2008 annexed as Exhibit-21 to their reply. 64. It is again contended that the petitioner No.1 was also subsequently removed from the office of the directorship of the company under the resolution adopted in the EOGM held on 24-01-2009, which was chaired by the petitioner No.4. Said EOGM was also attended by the petitioner No. 4 and the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in Palghat Exports (P.) Ltd. (supra) 2. P. Ramkumar (M.F.A. No. 64 of 1993) v. T.V. Chandran 26/05/1993 3. The decision of the Hon ble Calcutta High Court in Babulal Madhavji Varma v. New Standard Coal Co. (P.) Ltd. [1967] 37 Comp Cas 446 (Cal) 4. Rajasthan State Industrial Development and Investment Corpn. v. Diamond Gem Development Corpn. Ltd. [2013] 5 SCC 470 5. Chatterjee Petrochem (India) (P.) Ltd. v. Haldia Petrochemical Ltd. [2011] 14 Haldia Petrochemical Limited and ors, reported in 2011 10 Supreme Court Cases 466.) 6. Ravindra Kumar Sharma v. State of Assam [1999] 7SCC 434 7. Subash Hastimal Lodha v. Manikchand Promoters and Developers (P.) Ltd. [2007] 140 Comp Cas 512 (CLB) 8. Hanuman Prasad Bagri v. Bagress Cereals (P.) Ltd., [2001] 33 SCL 78 (SC) 9. Shanti Prasad Jain v. kalinga Tubes Ltd. in AIR 1965 SC 1535 10. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333. 69. The respondent No. 6/7/8/9/10/13/14 too contested the case projected through the petition under consideration having filed reply but I have noticed that the reply, they submitted, is, in fact, the repetition of the repli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f U. P. 2006 1AWC 34 10. M.C.D. v. State of Delhi AIR 2005 SC 2658 74. I have heard the arguments, advanced by the learned counsel/legal representatives appearing for the party/parties, they represent. It may be stated here that the Hon ble High Court while rendering the judgment in Comp. Appeal No.3/2014 had decided as many 3 questions of law while leaving the rest to be decided by the learned CLB. Further, Hon ble High Court also directed the CLB to hear the matter afresh after giving concerned, an opportunity of hearing. Since as many as 6 issues of law are left to be decided by this Tribunal, before deciding the rival controversies herein, I propose to address the question of law, already framed by Hon ble High Court. Issue No 1 75. In a long chain of judgments, it has been held that Section 397/398 of the Act is a Code in itself. Therefore, it excludes the jurisdiction of all other Courts or Tribunals in respect of the matters, covered there under. More importantly, under Section 402 of the Act of 1956 the CLB statutory authority, has been given wide amplitude of powers to address any grievance, established in accordance with law in a proceeding under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appointed by shareholders holding 64% of paid-up capital in the company, he can be removed by shareholders holding 28% of paid-up capital in the company-provided-in the meeting which is so summoned to remove such a director, such shareholders constitute majority of the voters who are competent to vote. In other words, the majority shareholders who are competent to vote in a particular meeting can remove any director-although such person was appointed by the voters whose aggregate shareholdings were much more than the shareholdings of the majority voters who remove such a director from the office in a particular meeting subsequently This issue is answered accordingly. Issue No 8 82. This issue relates to the question whether the outsiders other than the existing shareholders of the Company, who were allotted shares on 20-02-2010 and 15-09-2010, were entitled to members of the Company given the prohibition of allotment and transfer of shares to outsiders as per Article 28 of the Articles of Association of the Company. In view of rival submissions on this question, I propose to discuss this issue at appropriate time and place. Issue No.9 83. In this issue we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, authors of those allegations, which were published in the newspapers were the petitioners No.1 and 10 since they not only fabricated such reports but also furnished such information to the various newspapers for wide publication/circulation so that such newspaper reports could subsequently be made foundation of a proceeding under Section 397/398. Therefore, the very allegation that the petitioners including petitioners No. 1 and 10, came to know about the alleged misdeeds of the respondents only from the reports in the newspaper is nothing but a pack of lies only. 88. I have considered such submissions in the light of the materials available on records, more particularly, the averments made in the written statements and the documents annexed therewith and found reason to conclude that the news items which were circulated in various newspapers, referred to above, were, in fact, manufactured by the petitioner Nos.1 and 10. Since those two petitioners had manufactured those information and also communicated such information to those newspapers, therefore, the allegation to the fact that the petitioners, at least the P-1 and P-10, came to know about the various allegations, inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice, issued from the office of the Principal Civil Judge on 13-11-2009, yet, the materials on record, more particularly, the letter dated 14-11-2009 (Annexure XIII to the reply of respondent Nos. 6 to 10,13, 14), unmistakably demonstrates that the order was duly communicated to the petitioners. 94. In spite of that, they have taken a resolution on item No.2 in total violation of directions of the Civil, Judge, Guwahati rendered in order dated 13-11-2009 in Misc. (Arb.) No 571/2009. Such episodes were never made known to this Tribunal by the petitioners incorporating such information in the petition under consideration. Since the injunction order in Misc. (Arb.) No 571/2009 has some bearing on the dispute in the present proceeding and since it was not made known to this Tribunal by the petitioner, such conduct on the part of petitioners now requires me conclude that in approaching this Tribunal, the petitioners never came with clean hands. 95. The respondents again claimed that in the notice dated 21-10-2009, there were only two matters to be discussed in the EOGM convened on 14-11-2009. More importantly, the notice did not indicate any possibility of discussion on any thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as director of the company in the EOGM held on 14-11-2009- not under any other provisions of law-but- under the provision of Section 284(5) of the Act of 1956. Such disclosures again certain to extent shows that the petitioners too did not come to the Court with clean hands. 101. The respondents strenuously contended that the petitioner No.1 and 10 were employees of the company -but they were dismissed from services for their resorting to conduct as an employee of the company, which was against the interest of the company in general and against the shareholders in particular. Such an episode assumes great importance in ascertaining the bona fide of the petitioners in preferring the present petition since the materials on record firmly demonstrate that the petitioners, more particularly petitioners No.1 and 10, wanted to be directors/MD of the company. 102. The directors of the company occupy a fiduciary position in relation to management of the affairs of the company. In other words, directors are the trustees of the company and, therefore, they are to conduct themselves in such a way that trust, reposed on them, does not get eroded at any point of time. However, the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the petitioners have heavily relied on the newspaper reports to bring home the allegation of misappropriation of PF Contribution and evasion of taxes. But it is a settled proposition of law that newspaper reports are secondary evidence and therefore, such newspaper reports are inadmissible in law unless such reports get graduated to the status of primary evidence. 108. It is not in dispute that the petitioners did make no effort to convert those secondary evidences to primary one. Nor did the petitioners produce any other material to justify non-payment of PF Contribution to the concerned authority or evasion of taxes. In other words, in order to substantiate the allegation of misappropriation of fund and evasion of taxes, the petitioners completely relied on newspaper reports which, as stated above, are found to be secondary evidence only and therefore, cannot laid the foundation of the allegations, aforementioned. 109. The respondent had also questioned the legality of the allegations aforesaid contending that they have already questioned the correctness of slapping of notice on the respondent company by the concerned department demanding VAT etc. from the former ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the post of the Managing Director as reflected in the ROC records w.e.f 16/02/2011 and a stranger naming one Sri Madhav Das has been appointed as the Managing Director of the Company by a board Meeting dated 16/02/2011 and ROC records have been tempered showing forged issue of new shares without the knowledge of the other existing Shareholders of the Company. Sri Madhav Das, the stranger, forcible occupying the office of the Managing Director of the Company and Misusing Company s property and funds by illegal means for which he has no right in the company. Presently, Sri Madhav Das continuing the office of the Managing Director forcibly using goons and filing malicious petitions and illegal litigations including contempt of court before the courts against the new board of Directors having no jurisdiction to try company matter and that to only to harass the present Board of Directors so that they might be out of the company s day-to-day affairs. The petitioners are not in a position to manage the affairs of the company smoothly due to the ongoing restraints and the company sustaining irreparable financial losses caused by the illegal acts of respondent No. 5 and Sri Madhav d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen --- there are plethora of materials on record to conclude that R-5 as being the MD of the company -conducted affairs of the company- not for himself alone- but -for the other directors as well who were on the board during the time under consideration and therefore, the other directors of the BOD, which was headed by the respondent No. 5 are vicariously liable for the alleged illegal acts/conducts of the MD of the company who was admittedly the R-5 during the time relevant. 118. In this connection it would be apposite to understand the inter se relationship between the company, Board and MD. The position, status and authority of the MD qua company and BOD depend upon the authority which appoints him and so also the powers which were conferred on him at the time of appointment as such. Since section 2 (26) of the Act of 1956 speaks about mode of appointment of MD as well as his power, I find it necessary to have a look into the aforesaid provision of law. For ready reference section 2(26) of the Act of 1956 is reproduced below: - (26) managing director means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred on the MD under Section 2(26) - unless and until --of course--they succeed in disowning those acts/conducts, which are attributed to the MD and which were found to be illegal and beyond the terms of their employment. 122. In our instant case, the other directors of the BOD, headed by D.N. Singh, had never questioned the alleged illegalities committed by R- 5. Quite interestingly, they supported each and every conduct of R-5 which is alleged to be illegal. That being the position, there cannot be any escape from the conclusion that all the members of the BOD, headed by R-5, are equally responsible for such irregularities/ illegalities allegedly committed by such a respondent in discharging the affairs of the company. In the teeth of such revelations, it needs to be concluded that the contention that all the allegations in the petition were directed only against the only R-5 is found to be totally untenable in law and on facts. 123. It is in those backdrops; let me consider if the other allegations, hurled at the respondents could make out the charge of oppression and mismanagement in running the affairs of the company. In that connection, I find it necessary to asce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the shareholders of the company in the EOGM, held on 14-11-2009. 128. But such resolution was totally illegal and non-est in law since such a resolution to remove the R-5 from the post of director and MD of the company was adopted on 14-11-2009 in complete disregard to the lawful direction of the court of law requiring the petitioners not to make any discussion on the item No. 2 in the Notice dated 21-10-2009. Since the very removal of the R-5 from the office of the director and MD of the company was profoundly illegal and non-est in law, one can very well conclude that legally and technically, the R-5 continued to be the MD of the company even after 14-11-2009. 129. Since the R-5 continued to hold the office of the director and MD of the respondent company for all purposes even after 14-11-2009, one cannot but conclude that no casual vacancy ever occurred in the office of the director of the company on 14-11-2009 requiring the shareholders in the EOGM, to fill such post by the petitioner No. 1 immediately. Since the removal of the R-5 was found to be illegal and non-est in law, all subsequent appointments including the appointment of P-1 as director of the company on 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other wrong, in fact, unknowingly invites wrong with more devastation. However, unfortunately, the respondents were hell bent in repeating unfailingly what the adage, aforesaid explicitly forbids to do---since---instead of rushing to the authority concerned complaining such illegalities and also seeking appropriate relief therefrom, the respondents took upon themselves the job of correcting the aforesaid alleged illegalities by adopting reverse resolutions on 02-03-2010 which, as stated above, are found to be as good or worse as the removal of R-5 from the office of the director and MD of the company on 14-11-2009 by the petitioners in violation of the court order. 135. Once it is found that the actions of the respondents in removing the petitioner No.1 from the offices of the director and MD on 02-03-2010 and the petitioner No.2 from the office of the director on 02-03-2010 are illegal, there cannot be any escape from the conclusion that the correcting the records of ROC by sending fresh Form 32 in favour of the respondent No 5 from the side of the respondents is equally bad and unsustainable in law. 136. However, more and more materials on record relied behind the above con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : - In any case on withdrawal of the civil suit, the injunction order automatically stood vacated on 01-03-2011. Therefore, there was no bar at all for the Company Law Board to examine the grievance raised by the appellants in the company petition on merit. (para 23) 140. It is worth noting here that following the decision of Hon ble Apex Court in Life Insurance Corporation of India v. Escorts Ltd. AIR 1986 SC 1370 the learned CLB, Chennai, in case of N. Thirumurthy v. Sree Pavithra Steel (P) Ltd., reported in (2014) 123 SCL 70 (CLB) held that convening, holding and conducting a proposed extraordinary general meeting cannot be restrained just because of the fact that the applicant may be removed from the directorship of the Company. 141. Such restraint, if allowed, would hit the very concept of the corporate democracy which is the guiding factor in running the affairs of the company. Sadly, in approaching the civil court by way of Mise (Arb.) 571/2009, the R-5 resorted to a conduct which is strongly condemned by the CLB in N. Thirumurthy (supra) which further demolishes the case of R-5 which was, as stated above, primarily structured on the alleged illegality in adopting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the appointments, subsequent to the removal of the R-5, are equally and non-est in law. Sadly, enough, such a plea is already held to be wholly unequal to the task of taking the wind out of the sail of petitioners. Our foregoing discussion makes such position absolutely clear. 145. Viewed from this angle, it would appear clear that in the removal of the P-l and P-2 from their posts, the respondents paid no respect whatsoever to the laws/rules and procedures dealing with appointment and removal of the directors and therefore, such removals are found to be totally untenable in law. The removal of the P-l and P-2, in the facts and circumstances of the case in hand, further demonstrate that they were so removed from their posts with the sole object of gaining control in the management of the company. 146. In a long chain of judgments including the judgment in Arun Kumar Mehta v. Ganesh Commercial Co. Ltd. [2006] 134 Com Cas 500(LB) it has also been held that removal of the director in violation of Rules and procedures framed in that regard tantamount to denial of natural justice and therefore, such removal is to be declared null and void. Further, when such removal is made with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appropriate authority, they took the extreme steps in the form of increase of authorized capital of the company and also to issue fresh shares to the persons some of whom were strangers to the company on the dates of issuance of such shares although some of those fortunate allottees were existing shareholders too. Such revelations, however, become tell tale testimonies of increasing the authorized capital of the company and so also the issuance of further shares on 20-02-2010 and 15-09-2010 most illegally and most unlawfully. 152. The claim of increase of authorized share capital of the company or the issuance of fresh shares on 20-02-2010 and 15-09-2010 are found unsustainable for another very valid reason too. Since the respondents persistently claimed that the company fell into a deathtrap following the freezing of the all the accounts in the name of the company, it became a bounden duty on the part of the respondents to establish such dire financial position of the company by bringing on record the relevant financial documents of the company during the period under consideration. 153. But then, the respondents did not do anything in that direction to establish its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158. The respondents also contended that since the petitioners themselves became the shareholders of the Company only on violating the provisions of aforesaid Articles, therefore, now, it does not lie in their mouth to contend that the issuance of shares in violation of Article 28 is illegal and therefore, same is unsustainable in law. This is because of the fact that a person cannot be allowed to approbate one thing at one stage and reapprobate the same thing at another stage. 159. It is true that a person cannot be allowed to approbate and reapprobate same thing at different points of time --but then--such a principle has no application to the problem, now, we are seized with--- since---the question here is not what had been the practice of the company in issuance of shares but the question is whether MOA and AOA can be flouted. In that connection, I also find it necessary to look into provisions of Section 36 of the Act of 1956 which has huge bearing in understanding the dispute under consideration and also in finding a solution thereof. For ready reference, Section 36 of the Act of 1956 is reproduced below: - 36. EFFECT OF MEMORANDUM AND ARTICLES (1) Subject to the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts -had initiated any proceeding questioning the allotment of shares to the petitioners in violation of mandate in Article 28. Such a revelation only serves to show that the persons who were entitled to question such allotments of shares to the petitioners chose not to rake up such issue in time. 164. Rather, they chose to sleep over the same for a pretty long period of time. Therefore, such a matter cannot be allowed to be agitated after the elapse of such a long period, and that too, in a proceeding which was initiated- not by the respondents -but- by the petitioners instead. This is, in my opinion, another compelling reason as to why challenge to the issuance of shares to petitioners, made in distant past, is required to be turned down. 165. Our foregoing discussions now very firmly reveal that in conducting the affairs of the company, the respondents, more particularly the BOD, headed by the R-5, had ruthlessly violated both the fundamental documents of the company, such documents, being MOA and AOA. In ABP (P.) Ltd. v. United News India [2008] 142 Com Cases 688, it has been held that issuance of shares in violation of the AOA itself is an act of oppression. 166. In S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75 50 100 275 09. Rabin Kumar Das NIL 50 200 250 10. Kanak Das 20 100 100 220 11. Ajit Deka 75 100 500 675 12. Tilak Chandra Das Nil 50 NIL 50 13. Munindra Haloi NIL 20 50 70 14. Dipak Kalita NIL 20 50 70 15. Sarat Chandra Kalita 05 Nil 10 15 16. Pratul Bhuyan Nil 100 100 200 17. Pranab Das 70 Nil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in running the affairs of the respondent company. For ready reference, the letter dated 11-05-2011 is reproduced below: GOVERNMNENT OF ASSAM OFFICE OF THE COMMISIONER OF INDUSTRIES COMMERCE, ASSAM UDYOGBHAWAN: GUWAHATI-21 Dated Guwahati the 11th May/2011 No. CI C (VJ) 191/2010/173 To The Principal Secretary to the Govt of Assam Industries Commerce Department, Dispur Sub: Filing of Form No. 32 Ref: (1) My letter No. CI C(V)/191/2010/17332 dt 31-3-2011 (2) Letter No. 70/3634 dated 6.4.2011 Sir, With reference to the above mentioned subject I would like to inform you that I had requested the Managing Director of M/s Assam Chemical Pharmaceutical Pvt. Ltd. to file Form No.32 as I have Been designated as a Govt. Director of the Industry Department, Govt. of Assam which is holding 600 snares (a copy of the letter is enclosed) However, the Director vide their letter No. 70/3634 dated 6-4-2011 has informed that the State Govt. s 600 equity shares about 6% of the total shares of 9787 and hence filing of Form No. 32 does not arise. (copy of the letter enclosed) The means of increase of total shares f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no wrong whatsoever in reducing the shareholding of the state of Assam from 20% to 6% on 15-09-2010 - although- the petitioners all along claimed that such lowering in the shareholding of State of Assam was done in profound violation of the prescription of law and mandates in MOA and AOA and that such illegalities were done only with the object of illegally gaining the control of the management of the company. 174. In view of such revelations, I feel inclined to hold that despite state of Assam not being a party to this proceeding, the letters aforesaid cannot be ignored-since-the facts recorded in such letters are found to be in tandem with the allegations incorporated in the company petition -and - since- every bit of information therein has huge bearing in ascertaining the allegations which were hurled at the respondents. 175. Resultantly, the letters aforesaid further fortify my view that the shareholding of State of Assam or for that matter, the shareholdings of the petitioners were reduced in profound violation of the prescription of law and mandates in MOA and AOA, and all those were done only with the object of illegally gaming the control of the management of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nues to suffer from illegal allotment of shares till such wrong is rectified. 181. Since in our case in hand, the petitioners have established without any shadow of doubt that the issuances of shares on 20-02-2010 as well as on 15-09-2010 were done in total violation of the mandate in Article 28 of the AOA, in view of the law laid down in ABI (P.) Ltd. (supra), it needs to be concluded that this proceeding is not bad for being based on all stale and past claims as alleged by the respondents. 182. Further, I have also found that the authorized capital of the company was increased from ₹ 5 lakhs to ₹ 10 lakhs on 16-09-2010 in violation of the mandates in MOA and AOA. Since the issuance of the shares in violation of the AOA tantamounts to oppression with continuing effect, on the same analogy, it needs to be concluded that the increase of authorized capital in violation of commands in the MOA is equally an oppressive act with continuing effect. Such revelation further fortifies my view that the present proceeding cannot be said to be based on stale and past acts/actions (b) 183. The learned counsel/legal representatives appearing for the respondents categoric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich I have indulged in hereinbefore unmistakably evince that the petitioners have proved oppression and mismanagement in running the affairs of the company under consideration. 188. Referring to the provisions in the Specific Reliefs Act, it has been submitted on behalf of the respondents that in a proceeding u/s 397/398, it is the bounden duty of the petitioners to describe appropriately and accurately the reliefs, sought for, in a proceeding. Unless the reliefs, sought for, are accurately and appropriately described in the petition, the Bench may refuse to grant any relief -even if- the petitioners succeed in showing some illegalities having been committed by the respondents in running the affairs of the company during the period under consideration. 189. In support of such contention, it has been submitted that the reliefs, prayed for in the petition under consideration are so unclear, so indistinct and so vague that it would not be possible for the Bench to grant any relief there under --even if--this Bench- for one reason or other--- wants to extend some reliefs to the petitioners in this proceeding. This shortcoming alone---in the facts and circumstances of the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defects aforesaid cannot be upheld. 194. It is worth noting that in a catena of judgments, various courts of the country including the Hon ble Apex Court repeatedly held that a proceeding cannot be dismissed only for failure of the petitioner to quote/misquote the provision of law in the petition. Similarly, such a proceeding cannot be rejected only for the inability of the petitioner to seek appropriate relief in such a petition. If necessary, the court would rise to the occasion and would mould the relief(s) depending on the demand of the situations. 195. Such decisions were founded on the principle that the technicalities of law must not be allowed to cost the cause of justice--provided--the proceeding is otherwise tenable in law as well as on facts. Since the petitioners have successfully proved the allegations of oppression and mismanagement in the present proceeding, the above infirmities in describing the reliefs, sought for in the present proceeding, in my opinion, cannot be allowed to overthrow the proceeding under consideration. (d) 196. The respondents had attacked the petition under consideration alleging that the present proceeding is not maintainable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.302/2010 are one and the same. My desire to find a reply to the query above caused me to go through the petition under consideration which, in turn, reveals that in the petition, the petitioners had alleged that R-5 in league with his cahoots committed a series of serious irregularities and illegalities in running the affairs of the company. 201. Such illegalities and irregularities range from evasion of tax, defalcation of company s contribution to the Provident Fund authorities--to -- unauthorized increase of authorized capital of the company, from unauthorized issuance of shares -to -removal of Directors/Managing Director of the company, from fabrication of false documents to facilitate the illegal occupation of the various posts of the company by respondent No.5 and his associates etc. But then, the subject matter before the Civil Court is whether the judgment and decree in T.S.No.04/2010 was obtained by R-5 on playing fraud on the court. 202. Though the resolution dated 14-11-2009 in some way or other had some connection with the dispute in T.S.No.302/2010 -yet-- only for such connection of resolution dated 14-11-2009 with the T.S.No.302/2010, it cannot be said that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , what a Civil Court could do after a very long journey in the form of a preliminary decree for partition, a final decree and the actual division of properties, is something that the Company Law Board cannot do. But, what the Company Law Board can do under Section 402. is something that may even put an end to the civil dispute, on completely different terms. For instance, the Company Law Board can always pass an order giving an exit option to any one of the two warring parties, namely, the father or the son. In such an event, at least the company will not be put to any more dispute or hardship. The just and equitable clause contained in Section 402(g) is too wide to find a solution to the long dispute that the father and son have had for more than a decade. This will at least alleviate the sufferings of the company, if not the sufferings of the individuals behind the company. Once this is done, at least a portion of the dispute pending before the Civil Court will get terminated and a possible solution for the resolution of the civil dispute may appear in the distant horizon. 76. If looked at from the above angle, it would be clear that the issues directly and substantially ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding, are directed against the R-5 and R-5 only, and none else, has already been scrutinized in great detail and it was found that such a contention was far from the truth and therefore, said contention deserves no further reiteration here. Suffice it to say that the allegations herein are directed against other persons as well who have been facing trial in the present proceeding. 209. So situated, let us see if on the death of respondent No.5, the present proceeding stood abated as alleged by the respondents. Such a question arose before the Hon ble Allahabad High Court in the case of J.K. Investment Trust Ltd. v. Muir Mills Co. Ltd. [1962] 32 Comp Case 93. In such a proceeding, a petition under Section 397/398 of the Companies Act 1956 was filed against the Company and 7 others seeking various reliefs including removal of some directors from their office. Respondent No.5 therein, however, died during the pendency of the proceeding. 210-211. Thereafter, a petition was filed for bringing on record as many as 5 (five) persons who are said to be personal heirs and legal representatives of the respondent No.5 therein. Such application was oppose to by the proposed heirs and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the applicant that the heirs of the deceased Sri Hari Shanker Bagla can be brought on record and proceeded against in these proceedings without having recourse to Section 406 or the provisions of the sections mentioned therein . 212. Similar question has also come up before the High Court of Delhi in Rajender Nath Bhaskar v. Bhaskar Stone Ware Pipe (P.) Ltd. [1990] 68 Com Case 256 (Delhi). The Hon ble Delhi High Court too concurred with the finding of the Hon ble Allahabad High Court in the case of J.K. Investment Trust Ltd. (supra). Such decisions leave no manner of doubt that in a proceeding under Section 397/ 398, it is not permissible to implead the heirs of legal representative of deceased Director and to continue the proceeding against them. 213. It is worth noting that the Hon ble Andhra Pradesh High Court in case of Nalam Satya Prasad Rao v. Vinipamula Lakshmi Dara Sihma Sastri [1991] 70 com cas 303 also held that on the death of one of the respondents, a petition under Section 397/398 cannot be dismissed-provided----that other persons who allegedly perpetuated oppression on the petitioners, in league with deceased respondent are already on record. In the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo different locations taking contradictory decisions thereby causing extremely awkward situation in running the affairs of the company and the fact that one set of BOD had taken steps even to freeze the accounts in the name of the company overwhelmingly show the magnitude of disharmony between two sets of shareholders or for that matter two sets of BODs. 218. In this connection, one may look into the decision of CLB, New Delhi in Suresh Kumar Sanghi v. Supreme Motors Ltd, [1983] 54 Comp.cas 235 (Delhi). In Suresh Kumar Sanghi (supra), CLB, Delhi held that where serious infighting among the directors of the company caused serious prejudice to the company and its stakeholders, the provisions of section 398 of the Act of 1956 were attracted. Similar view was taken in the case of Sishu Nath Ranjan Das v. Bhola Nath Paper House Ltd. [1983] 53 Comp Cas 883. In the face of such revelations, I am to conclude that the disputes under consideration no longer remains a directorial dispute as alleged by the respondents. 219. In Kumar Tekriwal v. Unique Construction (P.) Ltd. reported in (2009) 147 Com. Cas 737, it has been held that a directorial complaint can be subject matter of a proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. However on a careful perusal of the record, it is found that the Board Meeting, held on 25-11-2009, was attended to by Mr. Bipul Das (purported to be Govt. Nominee), Mr. D. K. Hazarika (P-l), Mr. Bhupen Ch. Kalita (P-2), and one Mr. Sarat Ch. Kalita. According to the learned representative appearing for the respondent Nos. 3 and 4, Mr. Bipul Das and Mr. Sarat Ch. Kalita, had no locus standi to remain present in the Board Meeting as director of the company. In that connection, my attention has been drawn to the Article 51 which says that the Government of Assam as long as holds not less than 25 % of the paid-up capital of the company, it would be entitled to have 2 nominee directors in the BOD. 224. Since on 25.11.2009, its paid-up capital in the company was less than 25%, the Govt. of Assam cannot have any nominee director in BOD of the company which means that Mr. Bipul Das (Purported to be Govt. Nominee) had no legal right to remain present at the Board Meeting, held on 25.11.2009. In respect of Mr. Sarat Ch. Kalita, it was submitted that on 25.11.2009, he was not all a director of the respondent company. 225. However, such an argument is founded neither on law nor on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the respondents did not initiate appropriate proceeding seeking removal of the petitioner No.1 from the post of director of the company well in time, such a claim became a stale one long back and therefore same cannot be allowed to rake up in a proceeding which was initiated not by the respondents but by the petitioners. 230. We have found that learned counsel/learned legal representatives appearing for the respondents have relied on series of judgments in support of their respective case. I have considered such decisions in the light of materials on record and found that some of the decisions, relied on by the respendents, to some extent support some of their contentions qua infirmities in the case of petitioners, such as, the petitioners coming to the court with somewhat dirty hands or some parts of their case their case being based hearsay evidence etc. 230A. But then, the infirmities, so pointed out by the respondents running in the petitioners case get slips to total insignificance when one compares such infirmities with the illegalities committed by the respondents in running the affairs of the company. Therefore, such infirmities on their own could cause no se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (b) The resolution, adopted in the Board meeting held on 14.11.2011 under which the respondent No.5 was appointed as MD of the respondent company, is declared illegal null and void. (c) The issuances of further shares on 20.02.2010 to some existing shareholders and outsiders are declared illegal, null and void. (d) The resolution adopted in EOGM held on 06.09.2010 enhancing authorized capital of respondent company from 5000 to 10000 is declared illegal, null and void. (e) Issuances of further shares to some existing shareholders and outsiders on 15.09.2010 and on any other dates, if any, subsequent thereto, are also declared illegal, null and void. (f) The resolutions adopted in the EOGMs, held on 14.11.2009, Board meeting 25.11.2009, are restored. (g) The shareholdings of the shareholders/members in the respondent company as it was on 14.11.2009 are restored. (h) The respondent company shall normally function from its registered office. (i) All the actions, taken by the BOD, headed by Petitioner No.1 are declared valid and stand protected. (j) All the actions, taken by the BOD, headed by R-5 and R-4, to the extent they are inconsistent with the action ..... X X X X Extracts X X X X X X X X Extracts X X X X
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