TMI Blog2020 (3) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondents R2 to R11 being Directors at the time of forfeiture of the said shares on 27.07.2015, and assuming they were authorised to cancel the shares, we are of the view that legally the Directors of the Company cannot utilise their fiduciary powers over the shares purely for the purpose of cancellation of the shares of the minority shareholders to improve their voting power. The court cannot allow to exercise such powers which might have been delegated by the company to the Board. Therefore, we are of the opinion that there was no authority with Respondents R2 to R11 to forfeit the shares of the Petitioner. The whole action is patently illegal, perverse and is hereby declared as null and void. Whether the removal of petitioner and the Respondents R12 to R19 from the office of directors at the Extra Ordinary General Meeting purportedly held on 27.07.2015 is in accordance with law and legally tenable? - Whether the appointment/election of Respondents R6 to R11, as directors of the company, on 27.07.2015 is in accordance with law or legally tenable? - HELD THAT:- As the Extra ordinary General Meeting purportedly held on 27.07.2015 is declared as void, all the decisions ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectorship; (ii) Forfeited the share held by the petitioner; and (iii) Appointment of Respondents 6 to 11 as directors. 4. The counsel for the petitioner stated that R12 was appointed as Director of the company on 30.09.2013, R13 as additional Director in the Board Meeting held on 01.10.2014 and R14 to R19 were appointed as additional Directors in the Board Meeting held on 28.04.2015. It was further stated that the petitioner is holding only one equity share of ₹ 1000/- and constituting 0.01% of the paid-up capital. As there is only 9 members in the company, the petitioner is therefore qualified to file this petition under section 244(1) of the Act. The counsel further submitted that the respondents 2 to 5 and R21 and R22 are holding one equity share each. R20 is the holding company of the R1 Company and holding 9957 equity shares of ₹ 1000 each. He also stated that R6 to R19 are not holding any shares in the company. 5. The counsel submitted that R2 to R5 earlier filed petitions, CP No. 34/2015 and CP No. 35/2015 challenging the appointment of certain directors and vacation of office of certain directors in the affairs of R20 Company and in the affairs of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n questioning the validity of an EGM dated 27.07.2015 and submitted on an alleged basis that the said EGM was held without notice to the petitioner herein. The respondents further contended that on this sole basis, the petitioner alleged that there was oppression and mismanagement in the Company. Respondents herein denied all the allegations of the petitioner by detailing the sequence of events for holding the EGM which showed that there is no basis for the allegations of this petition. 11. The respondents contended that the petitioner has filed the present petition as an afterthought over matters that are past and concluded and is therefore affected by latches. It was further mentioned that the petitioner was part of Board of Directors when the decision to convene an EGM to approve the removal of R12 to R19 from directorship and appointment of R6 to R11 as directors was taken. Having taken all the decisions, the petitioner cannot at a later point raise it as an issue of oppression before this Bench. 12. The respondents in their counter mentioned that the petitioner has falsely and deliberately supressed information relating to pending criminal complaint bearing FIR No. 1898/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act, thereby, R12 to R19 were denied the opportunity to make their representation on the alleged removal from the office of directors. 19. The counsel for the Respondents 12 to 22 also submitted that the Board Meeting allegedly held on 01.07.2015 or the EGM allegedly held on 27.07.2015 is illegal, null and void and to be set aside. Rejoinder by the petitioner: 20. It was submitted by the counsel for the petitioner that the counter has been signed by R2 alone and not signed by the respondents R1 and R3 to R11. Therefore, the counter has to be treated as the counter of R2 alone. 21. The counsel submitted that R2 who claim that R6 to R11 have been appointed in the EGM allegedly held on 27.07.2015 did not conduct the Annual General Meeting for the financial year 2014-15 and 2015-16 of the Company and filed the Balance Sheet and Annual Returns for those two financial years with the Registrar of Companies, Kerala. The precise reason for not holding the AGMs for the above two years is that R2 knew that the EGM stated to have been held on 27.07.2015 was not at all held and consequently the Board of Directors which he claims to constitute is an illegitimate Board an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for those two financial years have not been filed with the Registrar of companies, Kerala. 28. The Sur-rejoinder speaks out that all the records including the minutes book and other proofs are all placed inside the Company and as already stated the respondents are denied entry into the premises of the company, they could not produce the same. It is further submitted that the petitioner has access to the Company and he was a part of the Board when the decision to convene the EGM on 27.07.2015 was taken along with the other Respondents R12 to R22. 29. It is further submitted that the petitioner has falsely misrepresented his residential status at the time of share allotment itself. By doing so, he has violated the provisions of Foreign Exchange Management Act, 1999 and also the provisions of the Indian contract Act, 1872. Further, it is submitted that the complaint CMP 3841/2015 and FIR 1898/2015 has been dismissed as a mistake of Fact . However, no way does Mistake of fact negate the occurrence of crime. Further, Mistake of fact is not the same as Mis-statement of facts as claimed by the petitioner. Findings 30. On perusal of records, it was found that the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not show who has issued the said notice. The other part of Notice showing Item no.3 under the Ordinary Business is attached with Form DIR-12 in relation to appointment of Directors (R6 to R11), filed with Registrar of Companies, was signed as Chairman of the R1 company, but no name was mentioned. However, the petitioner produced the copy of passport to prove that he was abroad during the date of Board Meeting purportedly held on 01.07.2015 and have not received the notice which was issued on the same date. The petitioner therefore, questioned the authenticity of the notice issued for the purported EGM conducted on 27.07.2015 and as the respondents was not able to prove their contentions with documentary evidence, we are of the view that the alleged EGM was either not conducted at all or even if conducted, not valid as process laid down for conduct of EGM under section 100 of the Companies Act, 2013 was not adhered to. We are of the view that the defence taken by Respondents R1 to R11 is highly improbable and full of fallacy. Therefore, convening, holding and conducting of the EGM purportedly held on 27.07.2015 was nothing but a total betrayal and disregard to the procedure establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that legally the Directors of the Company cannot utilise their fiduciary powers over the shares purely for the purpose of cancellation of the shares of the minority shareholders to improve their voting power. The court cannot allow to exercise such powers which might have been delegated by the company to the Board. Therefore, we are of the opinion that there was no authority with Respondents R2 to R11 to forfeit the shares of the Petitioner. The whole action is patently illegal, perverse and is hereby declared as null and void. This view is fortified by the ruling given in Rashmi Seth v. Chemen (I.) (P.) Ltd. [1995] 82 Comp. Cas 563 (CLB). Issue No (iii) (iv): - 36. As the Extra ordinary General Meeting purportedly held on 27.07.2015 is declared as void, all the decisions taken in such meeting is considered to be void ab initio. Therefore, the removal of petitioners and R12 to 19 from directorship and appointment of respondents R6 to R11 as directors, dated 27.07.2015 per se are non-operable, null and void. Order 37. In the light of the factual and legal position stated above, we hold that the Extra ordinary General Meeting (EGM) purportedly held on 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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