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TMI Blog2020 (6) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... e connected files to New Delhi Bench of Company Law Board. When the National Company Law Tribunal (NCLT), Chennai Bench was constituted, the petition was taken up by NCLT, Chennai as TCP No. 234 of 2017. Further, on creation of NCLT, Kochi, the case was again transferred to Kochi Bench (hereinafter referred as 'Tribunal'). We have renumbered the case record as TCP No. 57 of 2019 and considering it under the Companies Act, 2013 (hereinafter referred as the 'New Act'). BRIEF BACKGROUND 2. The Company, M/s. Jeevan Telecasting Corporation Limited (hereinafter referred as the 'Company/JTCL) was incorporated to provide a medium for disseminating spiritual and human values, especially in view of the nature of Television programmes which were being telecast. In order to improve the quality of the Television programmes which were widely viewed by impressionable minds and to inculcate spiritual values, some of visionaries of the Church conceived of a vision to run a holistic TV Channel to cater to the requirements of spiritually and humanely inclined viewers and would be a family channel. Under the leadership of the 1st Petitioner, who was then the Arch Bishop of Trichu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri. Joy Alukkas, Padmashree Dr. Sri. C. K. Menon, NRI Businessman, Mr. Dinesh Nambiar and prominent businessman Mr. Baby Mathew were prepared to assist the Company by mobilizing required fund to start its programme after approving the condition to keep the democratic set up in its entire policy and future functions. The logo was also changed thereafter to meet the requirements of policy guidelines of Government of India. After obtaining the MIB approval, it was only as late as 1-8-2002 that the Company began telecasting operations. PETITIONERS' RIGHT TO APPLY: 7. The 1st Petitioner is the Honorary Chairman/Director of the Company and holding 10 Equity shares of ? 1,000/- each of the Company and was the First Director/Chairman of the Company from the date of incorporation. The Second Petitioner is the Chairman (appointed on 27-10-2005)/Director of the Company and holds 90 Equity Shares of the Company. He was the First Director from the date of incorporation and was appointed as the 1st Managing Director in accordance with clause 120 of the Articles of Association. The 3rd Petitioner is the Trustee of Matha Jeeva Trust, represented by the Secretary and holds 14425 Equity sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssur, including the 3rd and 4th Petitioners. The Third Petitioner was established in 2001, and which was registered under a Deed of Trust by the Arch Diocese of Trichur. The Patron of the Trust was the Arch Bishop of Trichur. Further, the 4th Petitioner was formed under a Deed of Trust in the year 2001 by the 2nd Petitioner and the 2nd Petitioner is the first sole Trustee of the 4th Petitioner. Some of the Share Certificates are issued in the name of the Trusts but the Trustees are registered as the Shareholders in the Register of Members. 11. The learned counsel for the Petitioners in his submission stated that a large number of Shareholders in the Company are the persons who subscribed to the shares taking into account the involvement of the Church and the appeals made by the Church and the First and Second Petitioners, for the investment. Most of such Shareholders have held shares from the inception of the Company. The shares are widely held and more than 95% of the Shareholders are small shareholders, each holding less than 100 shares. These shareholders were the initial stakeholders in the Company. These shareholders did not invest in the shares for commercial purpose but to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances relating to the formation of the Company and the pre-dominant role of the Church and its members. On 29-11-2011, Mr. P.J. Antony, Mr. N.S. Jose and Mr. Davis Edakulathur Ittoop were appointed as the Additional Directors. They were elected as directors at the Annual General Meeting held on 29-9-2012. Mr. N. S Jose was appointed as Whole-time Director/CEO by the Board on 1-7-2012. The Petitioner Nos. 1 and 2, Respondent Nos. 2 to 4 were the Directors of the Company as of September 2012. 15. The Learned counsel appearing for the Petitioners submitted that being aware of the fact that the 2nd Petitioner is out of India, the Respondent No. 3 by taking advantage of his absence, issued a notice on 3-10-2012 purporting to convene a Board Meeting on 11-10-2012 at Trivandrum. This notice was issued in contravention of Article 107 of the Article of Association which empowered the Managing Director or the Company Secretary to issue notice for convening Board Meetings, at the request of at least 2 Directors to convene a Meeting. 16. The Second Petitioner on 8-10-2012 issued instructions to the Company Secretary pointing out the invalidity of the Board Meeting which was sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board, therefore, sought the assistance of a Practicing Company Secretary and conducted the Board Meeting. The Company has also filed the Board Resolutions dated 3-11-2012 with the Registrar of Companies, Kerala, on 5-11-2012. 19. The learned counsel submitted that as the Company had already received the consent from MIB for the appointment of Fr. Biju Alappat, as a Director of the Company, at the Board Meeting held on 3-11-2012, Fr. Biju Alappat has been appointed as an Additional Director and also designated as Wholetime Director, to take care of the affairs of the Company in the absence of CEO, the 3rd Respondent herein. As the termination of the Company Secretary was done hastily and would not stand scrutiny of the law, the Board decided to revoke the termination. As no particulars of the requisitionists who allegedly sought for the Extraordinary General Body Meeting were provided, the Board decided to instruct Dr.Fr. Biju Alappat to investigate and verify whether such requisitions have been made to enable the Board to take a decision on the same. 20. The learned counsel for the Petitioners submitted that the Respondent Nos. 2 to 4 are acting in concert with the Respondents 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cie oppressive of the Petitioners' rights and any decisions taken/Resolutions passed at the said Board Meetings are invalid. The learned counsel further submitted that these are not mere directorial complaints but also gross acts of mismanagement by the Respondent Nos. 2 to 4 as Directors, and are oppressive actions against the shareholders who are in a minority though they are the original promoters of the Company. 23. The Petitioners stated that on 20-6-2013, the Company issued notice convening a Board Meeting on 29-6-2013. The notice of the said Meeting did not contain any agenda nor was any papers/Board notes circulated to the 1st and 2nd Petitioners. The Notice issued by 3rd Respondent was not addressed to the 1st and 2nd Petitioners, but they were only forwarded copies for information. The 2nd Petitioner on 27-6-2013 informed the Respondents No. 2 to 4 of his inability to attend and requested that the Minutes of the Meetings be provided to him. Fr. Biju Alappat, who was an Additional Director, sought an explanation as to the reasons for convening the meeting. But none were provided. Subsequently, the Company held Board Meeting on 29-6-2013, 30-11-2013, 24-1-2014 and 4-7- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change Rates' issued by the Institute of Chartered Accountants of India (ICAI) not quantified. iv. We are unable to comment on the compliance with AS 26 on Intangible Assets' and AS 28 on "Impairment of Assets issued by the ICAI in the case of programme software under other non-current assets, in the absence of appropriate details. v. Non-provision of diminution in value of Rs. 122 lacs on investment in shares and the recoverability of dues of Rs. 130 lakhs in subsidiary companies. vi. Non-provision of liability of Rs. 224 lacs against a decreed creditor, the recoverability of which is stayed against bank guarantee and court fee of Rs. 5 lacs paid against the appeal pending for write off. vii. Non-renewal of cash credit of Rs. 202 lacs from a bank which is overdue and withdrawal of the collateral security provided by a third party not accepted by the bank against the credit facility and the implications thereof. viii. We have relied on the long outstanding share application money pending for allotment of Rs. 36 lacs in the absence of appropriate details and confirmation. ix. We have relied on the creditors written back shown as income under exceptional items fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows: i. The difference of Rs. 32.58 lakhs, which was shown as Share Application Money in Annual Report of Financial Year (FY) 2012-13, has been now shown as a unsecured loan from Directors and categorised under Short Term Borrowing in Annual Report FY 2013-14. The Annual Report of 201213, has not disclosed/mentioned any loan from Directors, whereas, in the Annual Report of 2013-14, an entry is made as if a loan of Rs. 32,58,000/- has been taken from Directors in the previous FY 2012-13. There is a balance of Rs. 32.58 lakhs as loan repayable to a Director. ii. The difference of Rs. 1, 15,590/- is the interest on TDS. However, the interest on TDS of FY 2012-13 is shown as Miscellaneous Expenses, regrouped under Other Expenses. Such regrouping is not as per Revised Schedule VI to the Companies Act, 1956. iii. As per Annual Report of FY 2011-12, Mar Jacob Thoomkuzhy/Jeeva Trust was disclosed as holding 26,990 Equity Shares (ie.,8.88% of the Total Equity) in Notes of Financial Statements dated 30-11-2013. In Directors' Report dated 24-1-2014, the shareholding is sought to be altered as a "small error". No shares have been transferred by 1st/3rd Petitioners in FYs 2012-13 or 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacement Charges in FY 2013-14 from expenses in FY 2012-13. Details are not provided known. There is an increase of Rs. 22 lakhs in Legal, Professional and consultancy charges when compared to previous year. No clarification on the payments made and the proceedings have been disclosed despite request by shareholders. There is an increase of Rs. 13.5 lakhs in rent paid as compared to previous year. 29. The Petitioners further stated that on 5-8-2014, the proxy forms for the Petitioners were duly lodged with the Company. During AGM held on 7-8-2014, the Item No. 1, the Audited Accounts, being taken up for discussion, a shareholder, who had submitted his objections to the Annual Report on 2-8-2014, wanted a discussion, his objections and request was summarily dismissed and the Respondent No. 4, stated that as a shareholder holding 1 share, he is not entitled to any discussion. The proxies for the Petitioners have requested for Poll on resolution but then also the Respondent No. 4 declined to hold it. The Petitioners submitted that such AGM held on 7-8-2014 was in complete violation of the law should be declared illegal and all decisions taken at such AGM shall be null and void and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficient specificity or detail as required; b. the consents have not been given after applying their minds to the allegations and the reliefs sought in the Petition since a number of the Consent Affidavits appear to have been executed in support of the Petition many days prior to the date of the Petition and merely contain a mechanical statement that they are aware of the Petition. It is not known how a statement could be made in the Consent Affidavit that the consent givers have "read the Petition". When the Consent Affidavits are dated in the end of October 2012 and the Petition was finalized on 5-11-2012 and filed; and c. the Consent Affidavits also appear to have been signed and notarized in Thrissur. It is not known how the consent givers could have physically seen or verified the Petition which was finalized much later. Consequently, all such Consent Affidavits warrant to be rejected. Moreover, these consenters cannot make the petition valid under section 399 of the Companies Act, 1956. 33. It is also submitted that the Petitioner No. 1 and Petitioner No. 2 are no longer Directors of the Company and have been validly removed as Directors. It is submitted that Petitioner N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Thrissur should continue as a Chairman of the Company. 37. In relation to the substantial holding in the company held by the institutions related to the Thrissur Diocese (i.e., Petitioner Nos. 3 & 4) the Respondents stated that the shareholding level is approximately 13-14% only. However, the Petitioners in acting on behalf of the Petitioner No. 3 Trust have acted without the authority of its Council of Trustees. 38. Further in relation to the stakeholder's investment in the company, the shareholders did not invest their shares for commercial purposes. It was denied by the Respondents that more than 95% of shareholders are small shareholders holding less than 100 shares. On the contrary, a substantial portion of the shares have come due to the collective involvement initiated by Respondent No. 5 and persons associated with him. The shareholders of more than 9000 are keenly interested in the affairs and development of the company. They themselves have formed 4 Registered Shareholders Associations, namely: I. Save Jeevan Forum Charitable Society (TSR/TC/35) II. Jeevan TV Christian Shareholders Association (IDK/TC/460) III. Jeevan TV Shareholders Association (TVM/TC/153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the statutory responsibility of the Directors to inform RoC when there is a change in the office of Directors or Company Secretary and this responsibility was complied with. 43. The Respondents further stated that two letters were issued to Petitioners respectively on 15-10-2012 and not on 13-10-2012 as stated by the Petitioners, containing the notice required under section of the 284 Companies Act 1956, and informing them of a proposed resolution at an upcoming EoGM removing them as Directors. Therefore, the Respondents denies that the said act is contrary to clause 108 of the Articles of Association. Further it is stated that the Article 108 provides that the Archbishop of Thrissur shall be the Chairman of the Company but not provide that he shall be a permanent Director of the Company. Petitioner No.2 did not retire by rotation as a Director as he was required to do at the AGM of the Company in 2010, accordingly he was not a valid Director since 2010. Therefore, if it is accepted that the Archbishop should be permanent Director of the company, the shareholders in the general meeting are capable of removing a permanent Director under S.284 of the Companies Act 1956. 44. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is a need to give one. The proceedings of the AGM on 28-2-2014 was video recorded which shows that allegations of the Petitioners are baseless and contrary to facts. 48. In relation to the removal of the Petitioner No. 1 & 2 result in the shareholders being unrepresented is not right since there is no evidence put forward by the Petitioners showing that they represent large number of small shareholders from the Christian community and connection with the Trissur Diocese. It is also mentioned that all the present Directors are elected unanimously and represent the interest of all the shareholders. 49. The counsel for the Respondents submitted that upon the direction of the Hon'ble High Court and Company Law Board, the proceedings of the 15th AGM dated 7-8-2014 were video recorded, shows that the meeting was held in a democratic manner. It is only after such detailed discussion that the motion for approval of accounts was moved, discussed, seconded and declared as passed. 50. The counsel for the Respondents further submitted that the presence of proxies at the AGM dated 7-8-2014 is a matter of record, therefore when a body corporate appoints a proxy, it should be support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Memorandum and the Articles of Association insofar as the latter are repugnant to the former." * Tarlok Chand Khanna and Ors. v. Raj Kumar Kapoor and Ors- Delhi High Court- "Section 9 of the act provides that the provisions of the Act would have effect, notwithstanding anything to the contrary contained in the articles of the company". * Sanjay Parlikar and Ors. v. Ajit Scanning and Diagnostic Centre Pvt. Ltd. and Ors. (08-12-2016 - NCLT - Mumbai) : MANU/NC/0133/2016- NCLT Mumbai- "the right of removal of any director of the company as per articles is still with the shareholders of the company". * Bagree Cereals (P.) Ltd. and Ors. v. Hanuman Prasad Bagri and Ors. (18-8-2000-CALHC):MANU/WB/0256/200. * Bagree Cereals (P.) Ltd. and Ors. v. Hanuman Prasad Bagri and Ors. (18-8-2000-CALHC):MANU/WB/0256/200 * Shri Narendra Kumar Jain, Smt.Sandhya Jain, Shri Mahabir Prasad Jain and Smt.Manbhar Devi Vs.Ahimsa Mines and Minerals Ltd. And Shri Nemi Chand Jain, MD-MANU/CL/0086/2006. * Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton and Jute Mills Co Limited (AIR 1965 Guj 96). * Pawan Kumar Kanodia v. Kanodia Tex Industries and Ors. (03-5-2017 - NCLT - Mumbai): MANU/NC/0428/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, would establish the falsity of the Respondents' contention. The continuing role of the Arch Diocese in the affairs of the Company is obvious from the fact that its property has been provided as security for the financial facilities availed by the Company from Federal Bank, Palarivattom and which security still continues to be retained. The Respondents have recently sought to deliberately and vindictively sabotage the security by stopping servicing of the debt. These Respondents are driven by self-interest and would destroy the Company and its Objects in pursuit of their personal Agenda. The provisions of the Articles of Association are never been abused/misused by the Petitioners but are to protect the Company and its small shareholders from misuse by shareholders like the Respondents. 59. The Petitioners stated that documents referred by the Respondents have been fabricated by them in pursuance of their agenda to alter the management of the Company and to oppress the minority shareholders. The Agenda for the Board Meeting dated 11-10-2012 had no reference to any requisition by any shareholder of any EoGM or for convening any EoGM. The proceedings of Minutes of 11-10-2012 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed consent affidavits after having read through the Petition. These shareholders are fully aware of the averments in the Petition and have consciously supported the Petitioners. The counsel for the Petitioners denied the allegations regarding the Petitioners are no longer Directors and the 2nd Petitioner has not been a Director since 2010. The validity of the EoGM where such alleged removal was affected, is challenged before this Bench. 64. It is further stated that the 2nd Petitioner was appointed as a Director and by virtue of his office as Archbishop, continued as Chairman of the Company so long as he remains the Archbishop. Accordingly, the Company had not sought for any reelection as his appointment was not an appointment which was subject to retirement by rotation. Therefore, by virtue of Section 256, he continued as Director till he was sought to be illegally removed at an EoGM held on 12-11-2012 and contrary to Article 108. 65. The Petitioners stated in the Rejoinder that about 30% to 40% of shareholding and over 7000 shareholders support the Petitioners and are opposed to the oppressive actions of the Respondents. The Petitioners further stated that a large number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te company called Jeevan Satellite Communications Ltd. and not of the Respondent Company. The 5th Respondent has not been a Director of the Company since he stepped down on 21-5-2012 and he has not held himself out as Managing Director of the Company, since he ceased to be the M.D. The document filed with the Rejoinder on which the Petitioners rely in support of their contention is the result of misreading the true and correct position, which is reflected in all official communications and on record with the Registrar of Companies. Respondent No. 5 was appointed Chief Operating Officer of the Company unanimously by the Board (including Petitioner Nos.1 & 2) at a Board meeting dated 4-6-2012 but has since recently resigned that position. 69. The learned counsel for the Respondents submitted that as set out in the Counter, 3rd Respondent (Whole Time Director & CEO) has been carrying out the role and duties of a Managing Director since R5 stepped down from that role and 3rd Respondent was appointed as CEO on 4-6-2012. Section 2 (26) of the Companies Act 1956 states that any Director exercising substantial powers of management is to be considered as the Managing Director, by whatever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CASES OF MISMANAGEMENT (1) Any members of a company who complain - (a) that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company; or (b) that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors or manager or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company ; may apply to the [Tribunal] for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub-section (1), the [Tribunal] is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable for the payment of any costs which the 1 [Tribunal] dealing with the application may order such member or members to pay to any other person or persons who are parties to the application." A diligent reading of Section 399 tells us that to file a petition under section 397 and 398, the member/members have to satisfy the conditions prescribed in the above provisions. 72. In the light of the above provisions of Sections 397, 398 and 399, let us examine whether the Petitioners have the requisite qualifications as prescribed under section 399 to file this petition? 73. Petitioner No. 1, Director of the Respondent No. 1 Company is holding 10 equity shares and Petitioner No. 2, who was the Chairman cum Director of the Respondent No. 1 Company, holds 90 equity shares. It is seen that Petitioner No. 3 holds 14425 equity shares constituting 4.8% and Petitioner No. 4 holds 26980 equity shares constituting 9% of the paid-up capital of the Company respectively. From the petition it is observed that the Petitioners collectively hold 41,505 equity shares and consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Petitioner No. 3 herein. Clause No. 16 in the Trust Deed reads as follows: "16. Legal Proceedings: In all proceedings by or against Matha Jeevan Trust in any Court of law or revenue authorities or before any competent authorities, Matha Jeevan Trust shall be represented in its Corporate name by the Secretary or some other person holding power of attorney from the secretary." We have also gone through the Trust Deed of Jeeva Trust dated 5-10-2001, who is the Petitioner No. 4 in the petition in hand. Clause no. 10 of the said Trust Deed states about Powers and Duties of the Office bearers, relevant portion reads as follows: "1. General Secretary a. xxxxxx b. xxxxx c. To appear and to act for and on behalf of the Trust in all legal proceedings before any competent authority." 77. From the above findings, we observe that the Secretary of the Petitioner No. 3 and General Secretary of the Petitioner No. 4 was authorised to appear before any Court of law or in any legal proceedings by the respective Trust Deeds, and they have duly filed this petition. The trustee can come before the court through the representation of Secretary/General Secretary, as the Trustees of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent to contract consent to the delegation; (5) where the delegation to a co-trustee is in the regular course of the business; (6) where the co-trustee merely gives effect to a decision taken by the trustees jointly". Reading the above-mentioned judgement, we find that the item no (2) in the exceptions talk about where there is an express sanction or approval of the act by the co-trustees, these authorised representatives can file the petition. In the instant petition we observe that the respective Trust Deeds clearly authorised the Secretary/General Secretary to act on behalf of the Trustees. Even though the Respondents have quoted the above judgement, however, this is not supporting the stand taken against the Petitioner Nos. 3 and 4. Therefore, we are of the considered view that the name of the Petitioner Nos. 3 and 4 can be added as a party to the petition. 79. Considering the other point raised by the Respondents under maintainability, the expression "consent in writing" occurring in Section 399(3) of the Act will have to be read in the context of the provisions contained in Section 399(1). Section 399(1)(a) contemplates not less than 100 members of the company filing the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19-7-2010-MADHC) : MANU/TN/1850/2010, and have discussed maintainability as a preliminary issue before going into the merits of the case. Having decided that the petition is maintainable, to arrive at a conclusive decision on the allegations made by the Petitioners against Respondents of oppression of minority shareholders and mismanagement of the affairs of the Respondent no. 1 Company, we have considered the material on record and the chequered history between the contesting parties, and the chronology of the actions taken by the Respondents, as borne out from record. Accordingly, this Tribunal has framed the below mentioned issues to find out whether the Petitioners have a strong prima facie case in their favour: i. Whether the Board of Directors Meeting of the 1st Respondent company dated 11-10-2012, 23-10-2012 and Extra ordinary General meeting held on 12-11-2012, are validly held complying with the clauses of the Articles of Association and provisions of the Companies Act and whether the proceedings of the meeting and the resolutions passed therein are aimed to oppress and abuse the minority shareholders including the original promoters and consequently to effect a change i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012. Respondent Nos. 5 to 8 had invested in the shares of the Company on various dates and the Additional Directors owing allegiance to Respondent No. 5 to 8 appear to have been co-opted in 2017. Respondent No. 5 was a Director of the Company and was appointed as the Managing Director of the Company and thereafter ceased to be a Director on 21-5-2012 due to the MIB guidelines. 84. It is found from the records that from the inception of the Company, the Chairman or his nominee have convened and presided over almost all the Board Meetings and Annual General Meetings of the Company. We also observe that, normally, all the Board meetings were conducted as per clause 107 of the Articles of the Respondent no. 1 Company by the Company Secretary. It is also found that almost all the meetings of the Company were held at the office of the Arch Bishop at Thrissur or at the Registered Office of the Company, i.e., at Ernakulam. From the documents appended with the petition, we come across that the 13th Annual General Meeting was held on 29-9-2012 (The meeting held immediately before the alleged Board Meeting dated 11-10-2012). We found that the above Annual General Meeting dated 29-9-2012 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order in Company Appeal No. 15/2012 dated 9-11-2012, 14-11-2012 and 6-2-2013 filed by the Petitioners. The order dated 06-2-2013 reads as follows: "iv. We make it clear that any decision taken or resolution adopted by the extra ordinary general meeting which was held on 12-11-2012 will be subject to the order to be passed by the Board. v. It is also made clear that till the disposal of the matter by the Board as directed above, if any decision is being taken in any meeting or any meeting is held at the instance of the Respondents, notice shall be given to all the Directors, irrespective of whether Respondents have a contention that the Directors are not entitled to receive any such notice." In a case like the present one in hand, that requires expeditious decision on merits considering the facts and circumstances, the argument raised by the Respondent is considered to be irrelevant and we think that the further delay may be fatal and cause irreparable harm to the Petitioners as well as the Respondent Company. 87. After going through the factual matrix in the case, let us examine the allegations in detail from the records produced by the parties before us vis-avis the issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above clause of the Articles of the Company read with the Old Act, we observe that the Respondent No. 3 who called for the Board of Directors Meetings on 11-10-2012 was neither the Managing Director nor the Company Secretary during that time. As per the Articles, only the Managing Director or Secretary can issue a notice for such Board Meetings. Even on the date of issuance of notice for this purported Board Meeting dated 11-10-2012, there existed a Company Secretary for the Company but the notice was issued through the Respondent No. 3 who was CEO of the company. Let us therefore, examine whether Respondent No. 3 can assume the role of Managing Director, in the absence of designated Managing Director. To come to a conclusion on the above point we rely on the definition of the Managing Director as given in the Act. Sub-Section 26 of Section 2 of the Old Act defines Managing Director as follows: "(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 meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with substantial powers of managem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther resolutions passed in the said meeting. Therefore, we are of the view that that the Respondents have not been able to satisfy us regarding the mode of conducting Board meeting or the validity of resolutions passed in such meetings. 93. In our opinion, there should be a need and sufficient reason for removal of the Secretary. The Respondents' contention in the counter and the proceedings of the said meeting placed before us, we are of the view that the resolution passed for the removal is frivolous in the eyes of law. The Secretary to be removed shall be intimated about the charges and should be given an opportunity to explain to the Board on the changes. The same was not done and the Secretary was removed with undue haste. The Principles of natural justice like Audi alteram partem, nemo judex in causa sua, etc. have not been followed by the Directors of the Board who have passed this resolution or have not submitted any proof for the same. The reasoned order was issued by the Chief Executive Officer, i.e Respondent No. 3 on 12-10-2012 to the Secretary without any authorisation or say from the Chairman of the Company, which was also sent a day prior to her removal in the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us agenda in the notice amounts to no agenda, and therefore, we have no hesitation to treat it as null and void. We have observed that all other meetings thereafter were also called by Respondent No. 3 which also makes them questionable. 96. Further, the Board Meeting dated 11-10-2012 was conducted at a place which was not the usual place at which such meetings were being held in the past. The meeting was purportedly held in Thiruvananthapuram, as neither the registered office of the Company nor any reasons were given for holding that meeting at Thiruvananthapuram. Further no documents were produced to prove that any of the meetings have ever been held there before. Except Respondent No. 5, who was the earlier Managing Director till 2012, none of the Directors resides/carries on any business in Thiruvananthapuram, which add credence to the allegation of the Petitioners that Respondent No. 5 has lot of clout in that place and to bulldoze the outcome, hence it was held there. 97. Board Of Directors Meeting dated 23-10-2012.: It is found from the records that Respondent No. 3 has issued a notice to the Petitioner No. 2 regarding the Board Meeting which is to be held on 23-10-2012 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to convene an EoGM to remove Petitioner No. 1 and 2 from the Directorship of the Company by invoking Section 284 of the Companies Act,1956. On 15-10-2012, Respondent No. 3 has issued a letter (JTCL/CEO/20121015) to Petitioner No. 2 stating that an EoGM with regard to the above requisition is to be held on 12-11-2012 for the sole purpose of removal of Petitioners from the Directorship of the company and it will be held in Thiruvananthapuram. Even though the Respondents have stated about the requisition from the shareholders, the Petitioners have not received the copy of the same enclosed with the letter sent to them. To examine the act of Respondents, we rely on Section 169 of the Old Act. Section 169 provides that an extraordinary general meeting may be called on requisition of members holding at least one tenth of the paid-up capital carrying voting rights in respect of that matter. A notice should be sent by the requisitionists to the company. The company should forthwith convene a board meeting and the board will summon the meeting of EoGM within 45 days from the receipt of the requisition. If the board does not convene the meeting, then the requisitionists would convene the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her business transacted at an Annual General Meeting and all business transacted at Extra Ordinary General Meetings shall be deemed special, for which the provisions of section 173 (2) of the Act may also be compiled with." Section 173 (2) of the Companies Act, 1956 reads as follows: "173. EXPLANATORY STATEMENT TO BE ANNEXED TO NOTICE (1) For the purposes of this section - xxxxxxxxxxxxxx (2) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business, including in particular the nature of the concern or interest, if any, therein, of every director, [***] and the manager. " 104. To get more clarity on the underlying object of the above section and the role of Articles of the Company in conducting EoGM, we have also relied on the judgement inFirestone Tyre and Rubber Co. Ltd. v. Synthetics and Chemicals Co. Ltd. [1971] 41 Comp Cas 377 in which the Bombay High Court held that "the object underlying Section 173(2) is that the shareholders may have before them all facts which are material to enable them to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either by the Articles of Association of a company or the terms of the contract by virtue of which he is appointed. In the present case, we have come across clause 108 of Articles of Association of the Company, which states as: "The person holding the office of the Arch Bishop of ARCHDIOCESE of Trichur or his nominee from time to time shall be the Chairman of the Company. Term of such nominated Chairman shall be for a maximum period of 3 (three) years. Mar Jacob Thoomkuzhy shall be the first Chairman of the Company. The Chairman shall nominate persons as nominee directors on the Board of Directors so that the total number of nominated directors by Chairman does not exceed six directors. There shall be two co-chairman for the Company. Co-Chairman shall be elected from among the directors nominated by the Chairman". As the Companies Act is silent in this regard, the Chairman may be removed by the Board by passing a resolution backed by a majority vote, unless the Articles of Association provides otherwise. If a company's Articles appointed the chairman, the meeting cannot remove him unless it is due to bad faith, impartiality or abuse of authority. However, in the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctorship by the Respondent No. 5 and his group. 109. Further, the timing of Board of Directors meeting also indicate the evil design of the Respondent No. 5 and his group in orchestrating the removal of Petitioner No. 1 and 2 from the Directorship of the Company to perpetuate the control and effect their change in the management. Respondent No. 5 and his cohorts had taken advantage of the absence of Petitioner No. 2 from the country, who was holding the position of the Chairman, and called for the illegal Board Meeting. There was no explanation why a Board Meeting was called urgently on 11-10-2012 that too immediately after the validly conducted Annual General Meeting on 29-9-2012. No traces of any allegations were raised on the Company Secretary in that AGM nor any discussion took place on this point. Removal of Company Secretary does not warrant such a hastily called Board Meeting. This gives credence to Petitioners' allegations. Further to achieve their ends, the Respondents have not even bothered to follow the process laid down either in the Companies Act or the Articles of Association of the Company. This led Mar Jacob Thoomkuzhy (Petitioner No. 1) and Mar Andrews Thazhat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment." A close reading of the present section lead us to conclude that it is motley of easily identifiable elements like shareholders and employees along with vague groups like the community. Thus, it would provide a cause of action to any person from the society giving rise to a problematic and absurd scenario. 114. The second issue involving interpretation relates to whether the director is expected to act in 'good faith' for the promotion of the objects of the company or should it also encompass other groups in the sub-section. It is pertinent to take note of Lord Greene's judgment in Stone v. Ritter [911 A.2d 362, 369 (Del 2006)] , which weighs good faith and best interest considerations so as to balance each other, as : "Directors must exercise their discretion bona fide in what they consider and not what a court may consider -is in the best interests of the company." While acting in the best interest, a director must carefully weigh commercial interests of the company on one hand while also tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. The act of the Respondents to increase the members in the Company by allotting their shares raises several doubts on the intention of the Respondents. 117. From the above factual matrix, it indicates that the allotment of shares was done to achieve different purposes, i.e., to increase the number of members of their group in the company and conversion of loan amount as share application money, is to increase their shareholding and to maintain the control over the company. 118. In this connection, we relied on PiercyV S Mills & Co. Ltd. [1920] 1 Ch 77 (ch d), wherein it was held that the power to issue shares in a limited company is given to directors for the purpose of enabling them to raise capital when required for the purpose of the Company -is a fiduciary power to be exercised by them bonafide for the general advantage of the company, and when the company is in no need of further capital, directors are not entitled to use their power of issuing shares merely for the purpose of maintaining their control or the control of themselves and their friends, over the affairs of the company or merely for the purpose of defeating the wishes of the existing majority shareholders. 119 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year. Hence the loan cannot be construed for the principal activities of the subsidiaries. The loan advanced to the subsidiaries herein is in contravention of Section 185 of the Companies Act 2013. 124. Since the directors of the company has acted in contravention to provision of the Companies Act by allowing to perpetuate their interest in the conduct of the business of the company and granting loans to the subsidiaries, we are of the opinion that the Directors in the instant petition forgot the principles which they are bound to follow or the real meaning of the company. Though the company being an artificial person its business affairs are carried on by its agents called the Board of Directors, the Board of Directors carries with them certain duties attendant upon the management of the affairs of a company. The directors have to perform their duties under obligations of trust and confidence to the company or its shareholders and must act in good faith for the interests of a company and its shareholders, with due care and diligence and within the scope of their authority. 125. It is the duty of directors to see that a company keeps within its corporate powers and obeys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers as a whole, and in the best interests of the company, its employees, the shareholders, and the community and for the protection of environment." 129. It is well settled that if the Directors exercise their powers for the purposes other than those for which they were conferred, it may be said that they have exceeded their authority. It is evident that the mala fide intention of the Respondents 2 to 4 at the behest of Respondents 5 to 8 to remove the Petitioners from the Company has been done with undue haste for the purpose of grabbing power in the Respondent No. 1 Company. This clearly depicts that the Respondent 2 to 4 were hand-in-glove and supporting the actions of the Respondent No. 5 and gives credence to the allegations of the Petitioners. Therefore, we are of the view that the Respondents group led by Respondent No. 5 are acting against the interest of Respondent Company and minority shareholders, for making material changes in the management of the Respondent company. Issue No. iv: 130. As regard to issue no iv, we found out various discrepancies from the Annual Report of 2012-13 and 2013-14. As per records the AGM for the financial year 2012-2013 was held on 28-12-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terests of the company, or (ii) that a material change has taken place in the management or control of the company and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to the interests of the company. On such application being made, if the Tribunal is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the matter of management or control of a company, it is likely that the affairs of the company will be conducted as aforesaid, the Tribunal may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit. This section comes when there is actual mismanagement or apprehension of mismanagement of the affairs of the company. It may be contrasted with Section 397 which deals with oppression to the minority shareholders, whether there is prejudice to the company or not. In the present case, the Petitioners relied on the discrepancies pointed out in the Audited Financial Statements to show that the affairs of the Company were being conducted in a manner prejudicial to its interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted his objections to the Annual Report on 2-8-2014 through the e-mail, wanted a discussion; and his objections and the request was summarily dismissed by the 4th Respondent, stated that as a shareholder holding 1 share, he is not entitled to any discussion. In the counter, the Respondents also admitted that the 4th Respondent asked about the shares owned by Mr. P.D Vincent. 135. The above finding leads us to another question, whether the proxy can demand for poll? The Companies Act, 1956 defines "Demand for poll" in Section 179, which is akin to the issue in the present petition. 136. In the light of the provisions of the Companies Act regarding the subject under discussion, we have gone through Articles of Association of the Company. Clause 68 of the Articles reads as follows: "68. At any general Meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll (before or on the declaration of the result of the show of hands) is demanded in accordance with the provisions of Section 179 of the Act. Unless a poll is so demanded a declaration by the Chairman that a resolution has, on a show of hands been carried unanimously or by particular m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, we are also convinced with the averments made by the Petitioners that the entire acts of the Respondents are mala fide and with ulterior motives. Conclusion: 140. On the basis of aforesaid findings, we now proceed to consider the applicability of the provisions contained in Sections 397and 398 of the old Act. Section 397 gives a right to members of the Company who comply with the conditions of Section 399 to apply to the court for relief under section 402 of the act or such other relief as may be suitable in the facts and circumstances of the case. In the instant case, it cannot be disputed that the conditions of Section 399 are complied with. There is no substance in the contention that the Petitioners are not entitled to make the application, as the Petitioners do not constitute 10% shareholding in total. However, the tribunal can exercise its powers, the tribunal must be satisfied that the requirements of the Section 397 are fulfilled and the said requirements are that on an application under section 397 of a member who has right to apply in virtue of Section 399. 141. By taking into consideration the order passed by the Hon'ble High Court of Kerala on 6-2-2013 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thereby Petitioners are entitled to reliefs under the said provision read with section 402 of the Companies act, 1956 (Corresponding to Section 242 of the Companies act,2013). Accordingly, this TCP/57/KOB/2019 is allowed. ORDER 144. Based on our findings and the above discussion, we pass the following order to meet the ends of justice: i We hereby declare that the board meetings dated 11-10-2012, 23-10-2012 and the Extra Ordinary General Meeting dated 12-11-2012 are held illegal and invalid and consequently held as null and void. All the resolutions passed and decisions taken at the said meetings are hereby set aside. The actions taken pursuant to the said meetings are also set aside and not binding on the Company. Any forms filed with the Registrar of Companies, Kochi pursuant to the decisions taken in the said meetings shall also stand cancelled. ii. As regards to the strength of the Board this Tribunal restores the position ante as on the date of the last validly held Annual General Meeting on 29-9-2012. Henceforth, the Respondent Company is directed to conduct all Board Meetings in accordance with Article 108 of the Articles of Association of the Company. The Company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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