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TMI Blog2018 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... aration that the meetings of the Members of the Respondent No.1 company including all the resolutions passed thereon from March, 2016 onwards are illegal, null and void; vi. Injunction restraining the Respondents and their men, servants and agents from operating any of the bank accounts of the Company without the concurrence of the Petitioner No.1 & 2; vii. Injunction restraining the Respondents and their men, servants and agents from operating any of the Demat accounts of the Company without the concurrence of the Petitioner No 1 & 2; viii. Injunction restraining the Respondents from selling or dissipating any investments as held by the Respondent Company or its funds without the concurrence of the Petitioner No.1 & 2; ix. Injunction restraining the Respondents from altering or changing in any manner the shareholding of and in the Company without the concurrence of the Petitioner No.1 & 2; x. Injunction restraining the Respondent Nos.2, 3 and 4 from interfering with or intermeddling with the management and affairs of the Company in any manner whatsoever" ix. Injunction restraining the Respondents from altering or changing in any manner the shareholding of and in the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y goods, hardware items and some other related goods in Sivsagar Town, Assam in 1968. The respondent No.2 at that time had been doing his studies staying in Kolkata whereas the petitioner No.1, although aged about 10 years, helped his father in carrying out their family business. However, while helping his father as aforesaid the petitioner No.1 had also successfully completed his graduation. 3. After the death of their father, the family business at Sivsagar was looked after by the petitioner No 1 However, sometime thereafter, the Goel brothers shifted their family business to Guwahati in quest of better fortune and prospect. Once the Goel brothers shifted their family business to Guwahati, they formed a private company and same was incorporated under the name and style "Goel Marketing and Distribution Company" with its registered office at Dhenuka Complex, Athgaon Guwahati, Assam, the aims and objects of such company were described in great detail in Memorandum of Association, (in short, MOA) and Articles of Association, (in short, AOA) 4. According to the petitioners, when the company was originally conceived of, it was so designed that out of the total equity shares in/of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 170000 1700000 4 04 Mrs. Satyabhama Goel 40000 400000 5 05 Mrs. Anita Goel 80000 800000 6 06 Ms. Nisha Goel 80000 800000 7 07 Ms. Sarika Goel 80000 800000 8 08 Rajesh Goel (Karta of Ramkrishna Goel & Sons 59850 598500 9 09 Rajesh Goel (Karta of Rajesh Goel & Sons) 50000 500000 10 10 Mukesh Goel (Karta of Mukesh Goel & Others) 50000 500000 11 11 Ritesh Goel (Karta of Ritesh Goel & Others) 50000 500000 12 12 Mr. Pawan Kumar Agarwal 10 100 13 13 Mr. Sanjay Kumar Agarwal 10 100 14 17 Mrs. Prabhawati Devi Agarwalla 10 100 15 18 Mr. Sajjan Agarwal 10 100 16 19 Mrs. Sanju Devi Agarwal 10 100 17 20 Mr. Umesh Agarwalla 10 100 18 21 Mr. Tarachand Agarwalla 10 100 19 22 Mr. Suresh Kumar Agarwalla 10 100 20 23 Mr. Rajesh Agarwalla 10 100 21 24 Mr. Binod Kumar Agarwalla 10 100 22 25 Mrs. Laxmi Devi Agarwalla 10 100 23 26 Mr. Ratan Kumar Agarwalla 10 100 24 27 Mrs. Renu Devi Agarwalla 10 100 25 31 Mr. Kishore Sharma 10 100 26 35 Mrs. Prabha Agarwal 10 100 27 36 M/s. Mountview Highrise Private Limited 25000 250000 28 37 M/s. Om Namah Shivaya Agencies Private Limited 25000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, Gurgaon. During such difficult days, the other two brothers of the respondent No.2 extended him all possible support which included arrangement of money, necessary for his treatment. But after recovering from the illness, the respondent No.2 became more and more arrogant and also started misbehaving with one and all including his brothers. However, considering the wellbeing of all concerned including the company, his ill behaviour of enormous proportion was ignored. 12. However, in the meantime, Rochak Goel (respondent No.3), son of the respondent No.2, completed his study and came back to Guwahati. On his return, the respondent No.2 insisted that his son be allowed to join the company as its whole time director which was, however, objected to by P-l and P-2. Unfortunately, such episodes strained more and more an already inimical relationship between the brothers. Owing to such acrimonious relationship between the parties, the respondent No.2 started treating his brothers as his avowed enemies. 13. However, the elders of the family had intervened and tried to settle the disputes amongst the brothers. But such exercise failed to get any desired result and same was basically du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o P-l and P-2. 17. In such scenarios, P-l and P-2 were left with no other way out but to leave their abode in Guwahati forever and to settle somewhere so as to make a search for new opportunity/opening so that they could take out their livelihood without wholly depending on the earning from the respondent No.1 Company. But despite leaving their abode for ever under compulsion, they tried their best to see that the affairs of the respondent company are being conducted in accordance with the requirement of law. 18. Since the company in question is a closely held family company, the petitioners did not make much enquiry about the running of the company for a couple of months. However, since they did not hear anything about the holding of the AGM of the company over a long period of time, they started suspecting something fishy on the part of the respondents and as such, in the month of April, 2017, they started collecting information about the way in which the affairs of the company were being conducted during the period passed by in the meantime. 19. Such an exercise from the side of P-l and P-2, however, reveals some startling episodes which were not known to those petitioners ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of section 196 of the Companies Act 2013, read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Mr. Rochak Goel who has been appointed as the Director of the Company, who has consented to act as the Whole Time Director of the Company, be and is hereby appointed as Whole Time Director of the Company, w.e.f. 23rd March, 2016 for a period of 5 (five) years. RESOLVED FURTHER THAT pursuant to the provisions of Section 196, 197 and Schedule V read with relevant rules of the Companies Act 2013 and other application provisions of the Act, Mr. Rochak Goel, Whole Time Director of the Company, be entitled to salary of Rs. 40,000/= (Rupees Forty Thousand) per month during his tenure as the Whole Time Director of the Company." APPOINTMENT OF MRS. ANITA GOEL Members present discussed regarding appointment of Mrs. Anita Goel as the Director of the Company. After brief discussion the following resolution was duly proposed by Mr. Rajesh Goel and seconded by Mr. Satyabhama Goel as an Ordinary Resolution: "RESOLVED THAT pursuant to provision of Section 152 of the Companies Act 2013, read with Companies (Appointment and Qualification of Directors) Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r names as many as 60,000 nos, of equity shares, held by three companies-namely - (1) High Rise Pvt. Ltd., (2) Namo Shivaya Agency Pvt. Ltd. and (3) Nortel Textiles Pvt. Ltd. 26. Since the petitioners have been wrongly and illegally removed from the Board of Directors and since the respondents No. 3 and 4 were illegally inducted in the company as Whole Time Director and Director respectively and since 60,000 nos. of equity shares pertaining to the aforesaid three companies were illegally transferred in favour of the respondent No.3 since thereafter, respondents had committed some other illegalities of enormous size and proportion and since all those actions were taken by the illegally constituted Board of Directors/EOGM, the same are not valid in the eyes of law and all those illegal actions on the part of the respondents are required to be declared null and void and, therefore, the petitioners have approached this Bench by way of present application, seeking the reliefs as stated hereinabove. 27. Having been served with the notice, the respondents entered appearance and having filed a common counter affidavit, contested the claims of the petitioners in this proceeding. The respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid letter, it has been stated that the respondent No.2 is the driving force of the respondent No.1 Company. However, despite doing everything possible on his part to make the respondent No.1 Company a very viable business entity, he was always asked to play a second fiddle. In that connection, it has been pointed out that while the work pertaining to the manufacturing products of the respondent company was assigned to the respondent No.2, the prize work, same being distribution and marketing etc. of the products of the company, was allotted to P-l and P-2. 33. It has also been contended that though there had always been optimum production of various goods in the manufacturing unit of the company and although those products were being marketed fairly regularly-yet- the marketing was done in such a way that the sale proceeds were not utilized for the benefit of the company or its shareholders but was diverted to the personal coffers of P-l and P-2. This is evident from the fact that despite there being sufficient cash in the casket of the company, no explanation could be provided by the petitioners as to why the company continued to experience financial setback over a long period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the fact that on 10-03-2016 itself, P-l and P-2 had also given written consent to convene EOGM on 23-03-2016 with a shorter notice so that the company could take decision on the exit of the petitioners from the company sooner than later. 38. Targeting the case of the petitioners more and more, it has again been submitted that though under the letter dated 10-03-2016, all the petitioners had duly consented to the holding of the EOGM under a shorter notice, yet, all other necessary formalities, specified in section 101 of the Act of 2013, were strictly followed in convening and conducting the said EOGM. In that connection, my attention was also drawn to the purported notice to shareholders of the company seeking their consent to convene EOGM on 23-03-2016 under a shorter notice (vide Annexure 4) and purported consent letter dated 10-03-2016 from the shareholders {(vide Annexure 5 (colly)} to confirm the contention of the respondents on this score. 39. Their further case was that in convening and conducting the Board Meeting on 10-03-2016, the respondent No.2 duly followed all the prescription of law, rendered in section l73/174 of the Act of 2013.The letter dated 10-03-2016, issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided his brothers employment in the company and allowed them to draw their salaries on very liberal terms. They have subsequently used such monies in acquiring shares in the company. For all these reasons, the respondents urge this Bench to dismiss the present petition. 43. The so projected by the respondents can also be seen in the paragraph vii of the reply. The relevant part of such paragraph is also reproduced below: - "Be it stated herein that the petitioner nos. 1 and 2 had created such a situation that the respondent no.2 had no option but to agree with their proposal and things did move in that direction. The petitioner nos.1 and 2 had agreed to exit from the respondent No.1 company by resigning from their Directorship but it was decided that before the resignation of petitioner nos.1 and 2, the respondent nos.3 and 4 should be inducted as Director and Whole Time Director, respectively so that minimum numbers of Directors do not get reduced to below three. Accordingly, consent was taken from the respondent no.3 and 4 for their appointment. Since the petitioner nos.1 and 2 wanted to start their business in the new financial year starting from April, 2016, they showed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsent letter on behalf of the Goel Entrade Pvt. Ltd, Ramkrishna Goel & Sons HUF as well as Rajesh Goel & Sons HUF. The answering respondents humbly state and submit that the petitioners have suppressed all these above mentioned facts from this Hon'ble Tribunal." 44. It may be stated here that during the course of arguments, the learned counsel for the parties had repeated what have already been stated by the parties in their respective pleading. Therefore, I refrain from reproducing such arguments here once again. But I propose to refer to such arguments as and when reference to such evidence becomes necessary. A careful perusal of the pleadings of the parties would show that there was no dispute that P-l, P-2 and the respondent No.2 are brothers while respondent 5 is their mother. It is also not in dispute that those brothers inherited their family business which was started by their deceased father at Sibsagar in 1968. 45. There is no quarrel over the fact that R-1 company was incorporated in 2006 under the name and style Goel Marketing and Distribution Co. Ltd with the aims and objects, stated in the charters of the company. It is also not in dispute that as per Article 97 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for him to resign from the post of Whole Time Director while retaining the post of Director of the company. In that view of the matter, the manner or method of appointment would show to great extent if aforesaid two posts are conferred on the same person or not. 50. Coming back to our case, it is found that the Article 97 of the AOA of the company says that P-l, P-2 along with R-2 would be the original Directors of the company. But then, a very careful scrutiny reveals that AOA makes no provision for appointment of those original Directors as the Whole Time Director of the company too. But there is indisputable evidence on record to show all Goel Brothers have also been working as Whole Time Directors of the company over a long period of time. Such revelation is, therefore, a clear testimony to the fact that P-l, P-2 and R-2 were appointed as Directors and Whole Time Director of the company at different points to time. 51. Since the Goel brothers were appointed as the Directors and Whole Time Directors of the company at different points of time, it is possible for PI and P2 to resign from the post of Whole Time Directors while retaining the post of Directors in the R1 Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey were holding in the company till then only on 23-03-2016. The respondents further claim that the notice of the Board Meeting, convened on 10-03-2016, was properly sent to P-l and P-2 and having received such notice, P-1 and P-2 attended such meeting, actively participated therein and duly approved the resolutions, adopted by the Board in such a Meeting. 56. In the meeting, aforesaid, the Director in attendance adopted as many as three resolutions and in adopting such resolutions also, the prescriptions of law were meticulously followed. Therefore- argues respondents- it is quite wrong to contend that the appointment of R3 as the Whole time director as well as the Director of the company on 10-03-2016 and that the appointment of R-4 as Director of R-1 company same day were made in total disregard to the law holding the field in question. Such revelations are also testimonies to the fact that the Board meeting, convened on 10-03-2016, did not suffer from any infirmity whatsoever. 57. Since the respondents had categorically contended that the Board Meeting ,under scrutiny, does not suffer from any infirmities inasmuch as such a Board Meeting was convened and conducted strictly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any. (4) Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees. (5) ." 59. Section 174 of the Act of 2013, amongst other things, speaks about quorum of the Meeting of the Board. For ready reference, section 174 of the Act is reproduced below: - "174. [(1) The quorum for a meeting of the Board of Directors of a company shall be 1[one third of its total strength or two directors, whichever is higher], and the participation of the directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum under this sub-section.] (2) The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company and for no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors is reduced below the minimum fixed by the Articles, no business should be transacted unless the number is first made up by the remaining Director(s) or through a general meeting. (iii) The presence of all the members of any committee constituted by the Board is necessary to form the Quorum for meetings of such Committee unless otherwise stipulated by the Board while constituting the Committee." 62. Therefore, when one reads section 173(3) and 174 of the Act of 2013 together having regard to various guide lines, issued by the Institute of ICSI, qua Board Meeting, in the context of dispute under consideration, he would find that on 10.03.2016, there could not have been any valid Board meeting, unless it is shown: (i) That the respondents had sent notice -along with the agenda of the meeting therein to the petitioner No. 1 and 2 in a manner as required under section 173 of the Act of 2013, (ii) That the petitioner No. 1 and 2 had received such notice requiring them to remain present at such meeting, (iii) That on being served with such notice, those two petitioners or at least one of them duly participated in the meeting as indicated in section 173(2) (iv) That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he truth. This is because of the fact that the respondents once again could not produce any material in proof of such a meeting being attended to by PI and P-2 personally. In this connection, it may be stated that clause 4 of the Secretarial Standard -1 requires every company to maintain separate attendance register for the Meeting of the Board and Meeting of the Committee. 68. As per clause 4.1.2 of the Secretarial Standard -1, every director who is in attendance and every invitee who attends a Meeting of the Board or Committee thereof is under an obligation to sign the attendance register maintained in that regard. More importantly, adherence to Secretarial Standard -1 which came into force with effect from 01-07-2015 is mandatory in terms of sub-section (10) of Section 118 of the Companies Act, 2013. 69. Thus, even if one accepts the contention of the respondents that having received the notice of Board Meeting, P-l and P-2 attended the purported Board Meeting on 10. 03.2016 - then- in view of clause 4.1.2 of the SS -1, P1 and P-2, being the Directors of the company, were to sign the attendance register and in that event, the production of such a register would have settled on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners and that having been so served with such notice, P-2 had attended the said Board Meeting in person. 73. On examining the letter dated 10-03-2016, more and more, from different angles having regard to the letter dated 23-03-2016, I have also found that said letter too does not give any impression- even remotely- that petitioner No. 1 and 2 had actually agreed to resign from the posts of director of the company during the run up to the Board Meeting held on 10-03-2016. Quite contrary to it, the letter dated 10-03-2016 simply discloses that the petitioners had only agreed to the convening of EOGM on 23-03-2016, of course, under a notice with a shorter period. 74. Equally importantly, the letter dated 23-03-2016 merely shows that P-l and P-2 had intended to resign from the offices of the Whole Time Directors of respondent No.1 company with immediate effect. Since the words and language, used in the letters dated 10-03-2016 as well as in the letters dated 23-03-2016 are found to be fairly unambiguous, plain and explicit, therefore, they cannot be interpreted in a way so as to import thereto something which are conspicuously lacking in those letters. 75. In the face of above r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Board to appoint R-3 and R-4 as full-fledged directors is found to be illegal for yet another very valid reason. It is a settled law that a full-fledged Director can be appointed by the shareholders only in the AGM. However, under certain circumstances, the Board of Directors can appoint someone as Additional Director for a limited period, provided the AOA of the company allows to do so. However, if such an Additional Director is to continue beyond that time, prescribed under the Law, once again, for such continuance, the approval of the shareholders is necessary and same can be done only in the General Meeting. 80. In that connection, one may look into Section 161(1) of the Companies Act, 2013 which deals with appointment of Additional/Alternative Directors. For ready reference, the relevant part of Section 161(1) is reproduced below: - 161. Appointment of additional director, alternate director and nominee director - (1) The articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting. (3) The notice of every meeting of the company shall be given to- (a) Every member of the company, legal representative of any deceased member or the assignee of an insolvent member; (b) The auditor or auditors of the company; and (c) Every director of the company. (4) Any accidental omission to give notice to, or the non-receipt of such notice by, any member or other person who is entitled to such notice for any meeting shall not invalidate the proceedings of the meeting. 84. Section 101(2) of the Act of 2013, amongst other things, requires that notice of such meeting shall specify the place, date, day and the hour of meeting and shall contain statement of the business to be transacted at such meeting. On the other hand, Section 101(3) says that notice of the General Meeting shall be given to:- (a) Every member of the company, legal representative of any deceased member or the assignee of an insolvent member; (b) The Auditor or the Auditors of the company; (c) Every director of the company. 85. In the case of the Asansol Electric Supply Co. v. Chunnilal Daw AIR 1972 Cal 19, the Hon'ble Calcutta High Court held that the directions in Section 172 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 10-03-2016 consenting the convening of EOGM on 23-03-2016. However, referring to the letter dated 10-03-2016 as well as the letter dated 23-03-2016, the respondents have strenuously contended that those letters leave no manner of doubt that the petitioners did receive the notice in respect of EOGM held on 23-3-2016 and duly participated in such Meeting approving all the resolutions, slated for discussion in such an EOGM. 88. It is not in dispute that the petitioners had agreed to the convening of EOGM on 23-03-2016, which was convened even before expiry of the statutory 21 days' period. However, such concession from the side of the petitioners did not absolve the respondents from sending notice to the petitioners containing all the information, specified in section 101 of the Act of 2013, in respect of EOGM, convened on date aforementioned-since- giving consent to convene EOGM with shorter notice is one thing whereas giving notice under section 101 of the Act 2013 to the shareholders of a company is another thing. 89. Since, the petitioners had denied the receipt of notice aforesaid, it becomes a bounded duty on the part of respondents to show that notice had, in fact, been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which make all subsequent actions/deeds, done by unlawfully constituted Board equally illegal, I find it redundant to consider all other disputes, aforementioned. 94. For the above reasons, I hold that all the resolutions passed at the Board Meeting, held on 10-03-2016 and all the resolutions, adopted at EOGM held on 23-03-2016 as well as the resolutions adopted in resolutions adopted in Board Meeting held on 30-03-2016 and all the actions done by the wrongly constituted Board are found to be harsh, burdensome and per se oppressive in character and bad in law. 95. In the result, the present petition is allowed declaring that: - (a) All the meetings of the Board of Directors with all the resolutions passed in such Meeting w.e.f. March, 2016 onwards are illegal, null and void; (b) All resolutions, passed in the Extra Ordinary General meeting, held on 23/03/2016 are illegal, null and void; (c) The appointment of R-3 as Whole Time Director as well as Director and the appointment of R-4 as Director of the R-1 company are also declared illegal and bad in law (d) Petitioner No.1 and Petitioner No.2 are restored to the position which they occupied as on 09th March, 2016. (e) T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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