TMI Blog2018 (7) TMI 1985X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner. Whether the removal of the Petitioner from the post Of Managing Director and Director is valid or not? - HELD THAT:- The removal of the Petitioner from the post of office of the Director has not been done in consonance with the provisions Of the Companies Act and, therefore, it is held that the removal of the Petitioner as a Director is not valid. Whether the Petitioner is entitled to get 25% of share in the company or not? - HELD THAT:- As per the FCA also, as seen in the pattern of shareholding of the company, only 10% was fixed and decided to be allotted to the Petitioner. There is no evidence that the Petitioner is entitled to get 15% of the shares from R2. Therefore, the claim of the Petitioner for 25% of the shares in the company should fail and this issue is answered in negative to the petitioner. Whether the Petitioner besides his terminal benefits and salary is entitled for exemplary costs or not? - HELD THAT:- In terms of Section 202(3) of the Companies Act, upon removal, the Managing Director of a company would be entitled to receive remuneration which he would have earned if had been in office for the remainder of his term or for three years, whichev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that too at the time of AGM and the Petitioner was managing the affairs of the company solely and the Petitioner's tireless contribution since 1996 was huge in making the RI company a successful enterprise. That the petitioner during the year 2011 learnt that the cornpany was violating the transfer pricing norrns since incorporation and R2 accepted the violation by his email dated 13.11.2011 and this act of R2 was protested by the petitioner. That the Petitioner came to know that R2 had made huge cash withdrawals from the accounts of the cornpany for his own purpose during the year 2015. That R2 incorporated M/s.Waterman Consulting Engineers India Private Limited and also another company M/s. Consulting Structural Engineers India Private Limited in the year 2014. In order to augment income for his cornpany he purchased two cars and leased the said cars to the RI company. The cost of the oars would be ₹ 18 to ₹ 19 Lakhs, whereas the company paid ₹ 39.73 Lakhs towards lease, when questioned, Respondent 2 declined this issue. That R2 in connivance of R3 to 6 conspires, made false allegations against the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging Director and not from the Office of the Director. That the Petitioner could not attend EGM held on 07.082015 in tirne as he got stuck in a traffic jam. The petitioner's request through SMs to postpone the meeting was recorded in the minutes of EGM held on 07.08.2015. That the said meeting was commenced at 11.30 a.m. and ended at 11.33 a.m. and according to Clause 1 of Section V of FCA, the presence of the Petitioner is must to from a quorunl. Since he was not present in the said EGM the same is illegal, non est and void. Subsequently, R2 has filed a DIR12 with R C falsely recording that the Petitioner was removed frorn the office of the Managing Director and Director. The company has also issued a Public Notice in the newspaper The Hindu on 09.08.2015 which caused great prejudice to the reputation of the Petitioner. After removal of the Petitioner, the company has convened AGMs on 19.10.2015 and on 13.10.2016 wherein company has increased its capital from ₹ 25 Lakhs to ₹ 35 Lakhs and also arnended the Articles of Association. As per the FCA, the presence of the Petitioner is a must for shareholders meeting and since the Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as Managing Director and his participation in the said meeting is recorded properly. The other directors exercised their right under Clause 108 of the AOA to revoke the Petitioner's appointment as Managing Director. The removal of the Petitioner from the Office of the Director has to be decided in an EGM. There is nothing in the minutes of the meeting to show that it has been falsified as claimed by the Petitioner. The minutes are the evidence as per the provisions of Section 118 (7) and (8) of the act. o That R2 and R3, the other directors, have filed a counter denying the allegations of the falsification of the minutes made by the Petitioner. o That the Petitioner was not appointed as Managing Director of the company for life time and his appointment does not specify any term of office and, therefore, he cannot claim any contractual or statutory right to remain in the office of the Managing Director. o That the majority shareholders have every right to remove the Director. Section 169 of the act, 2013 and Clause 85C of the Articles of Association, empower the shareholders to remove the Petitioner from the Office of the Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is false to state that the entire turnover of R7 is contributed by the activities of the company and the software business of R7 in India is insignificant to the sales of R7. 4. The Learned Counsel for the Respondents while reiterating the above averments prayed that the Petitioner's shareholding be valued by an Independent Valuer and the Respondents could be directed to purchase the same. The Learned Counsel for the Respondents relied on the following judgements in support of his submissions: (i) Shanthi Prasad Jain Vs Kalinga Tubes - wherein it is held that non performance of an agreement to which the company was not a party will not constitute oppression and any Change in the management which has not caused any prejudice to the company cannot be an act of oppression. (ii) V B Rangaraj V B Gopalakrishnan - wherein it is held that an agreement between shareholders which is not incorporated in the articles of association is not binding on the company. (iii) LIC Vs Escorts Limited and G. Govindaraj Vs.Ventures Graphics - wherein it is held that the majority of the shareholders have right to rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minority in the management Of the company's affairs and that there was at least an element Of lack Of probity and fair dealing to a member in the matter of proprietary right as a shareholder. (b) Superintendent Company Of India (P) Limited Vs. Sh Krishan Mugalr - Manu/SC/0457/1980 - wherein it is held that to determine whether agreement is void one has to be see reasonableness of restraint and onus being upon covenanter to show it to be unreasonable. (c) Needle Industries (India) Limited and others Vs. Needle Industries Newey (India) Holding Limited and others - wherein it is held that an act which is perfectly legal may yet to be oppressive. (d) Sanramsinh P Gaekwad and others Vs. Shantadevi P Gaekwad Manu/SC/0052/2005 wherein it is held that special circumstances that directors shall have fiduciary duty towards shareholders. (e) Alexander Brault Vs Indrakrishna Kaul http://lndia Kanoon.org/doc/977383 - wherein it is held that the injury which the defendant has done to the Plaintif Ps character and reputation, both in life and in his business, cannot be calculated with any degree Of precision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders and even the shareholding of the company is fixed in the FCA, it is in our considered view, the FCA is binding on the company. The first issue is answered in favour of the Petitioner. 8. In view of the above disc us s ions relating to the first issue, the Board Meetings and Shareholders Meeting in the company were not held without quorum. Further, the respondents themselves admitted that there is a typographical error in the notice as well as in the minutes of the EGM. It is a fact that the Agenda of the Board Meeting do not disclose the intention of other directors / shareholders with regard to the removal of the Petitioner from the post of Director also. Further to the above, we are of the opinion that the removal of the Petitioner from the post of office of the Director has not been done in consonance with the provisions Of the Companies Act and, therefore, it is held that the removal of the Petitioner as a Director is not valid. 9. No doubt, the Petitioner was the Managing Director right from the incorporation of the company and he was removed only in the year 2015. i.e. 1996 There is no fixed term for continuation as Man ..... X X X X Extracts X X X X X X X X Extracts X X X X
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