TMI Blog2021 (2) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board of Directors Meeting of the 1st Respondent company dated 14.10.2019 is 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 valid in the eyes of law? - HELD THAT:- This Tribunal came to a conclusion that as per Section 241 and 242 of the Companies Act, every member who comes before the court must have a grievance, either that he has been oppressed or that the company is being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company. This grievance must be a personal grievance of member who comes before the court. It cannot be a vicarious grievance, a grievance of his beneficiary. In the present case, it has not been proved that the appointment of R4 as CEO can be attributed as an act oppressive against the petitioner or prejudicial to public interest but for the flourishment of the Company and the same is to be equivalent with the objects that has been set out in the Memorandum of Association, which has been followed by the management of R4 for past three decades. Regarding the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual means - This Tribunal is of the view that in case the Chairman of the Meeting is participating through video conferencing, he/she should, while transacting any restricted items of business, vacate the Chair and entrust the conduct of the proceedings in respect of such items to any other Non-interested Director attending the Meeting physically and should not participate in the meeting in respect of such items and not for other matters. The meeting was conducted on 01.11.2019 and 04.02.2020 complying the basic provisions for conducting a meeting and the same is valid. But the resolutions passed in the said meetings are similar to that which were taken in the Board of Directors Meeting held on 14.10.2019. Therefore, the resolutions passed are considered to be invalid - With regard to the Board of Directors Meeting held on 21.08.2020, since no evidence has been produced to show that notice was given and, it is considered to be void ab initio and all the resolutions passed in that meeting are invalid. Whether the petitioner in CP/117/KOB/2019, who acted in his capacity as Director of the Company has failed to comply with the fiduciary duty towards the shareholders? - HELD TH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd documents have already been handed over to the Respondent No 1 Company in November 2019. Thus, both the petitioners in CP/117/KOB/2019 and CP/19/KOB/2020 failed to prove oppression and mismanagement on the part of the respondents therein in carrying on the affairs of the company for the full satisfaction of the directors/ shareholders of the Company. Object and purpose of Sections 241 and 242 of the Act is two-fold. Firstly, to set right the wrongs and secondly, take remedial action to prevent the occurrence of wrongs in future. Since we found that there is no oppression or mismanagement for the reasons stated in the above paragraphs, it is not necessary for this Tribunal to consider any other points raised by the parties. Petition disposed off. - CP/117/KOB/2019 & CP/19/KOB/2020 - - - Dated:- 19-1-2021 - Hon ble Mr. Ashok Kumar Borah, Member (Judicial) For Petitioners in CP 117/KOB/2019 Shri BK Gopalakrishnan, Advocate For Respondents in CP 117/KOB/2019 Shri Santhosh Mathew, Advocate (R2 to 5) For Petitioners in CP 19/KOB/2020 Shri Santhosh Mathew, Advocate For Respondents in CP/19/KOB/2020 Shri BK Gopalakrishnan, Advocate (R2 3) No representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggis Private Limited (R1) having 29.93% of the total shares of the Company. The petitioner was appointed as the Joint Managing Director w.e.f 01.10.2018 for a period of three years. Respondent Nos. 2 and 3 are the sisters of the petitioner and was inducted in the Company as Independent Directors w.e.f. 01.10.2018 for a period of one year. On completion of their term, they were again decided to be re-appointed for a period of 2 years as Independent Directors in the 72nd AGM of the Company held on 30.09.2019. Respondent No. 4 is the husband of Respondent No.2. He is not a shareholder of the Company. But he held the position of Managing Director for the last three decades i.e., upto 30.09.2019. The re-appointment of Respondent No. 4 was rejected in the 72nd AGM of the Company held on 30.10.2019. Respondent No. 5 is also not a shareholder of the Company, but he held the position as the Whole Time Director of the Company. The re-appointment of Respondent No. 5 was also rejected by the 72nd AGM of the company held on 30.09.2019. 5. In the 72nd AGM of the Company the following resolutions were passed: i. Declaration of Dividend of ₹ 150/- per fully paid-up shares as on 31.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer from 01.10.2019: R3 proposed which was seconded by R2. However, Mr Mohan Thomas, the petitioner herein objected the proposal stating that the said resolutions are to circumvent the decision of the 72nd AGM held on 30.09.2019. But R3 stated that Mr Paulose Joseph(R4) is a Key Employee for the Company and the resolution was passed. iii. Appointment of Mr. W. C Thomas as the Executive Director -Tea Operations from 01.10.2019: R3 proposed which was seconded by R2. Petitioner objected to the proposal stating that the said resolution is to circumvent the decision of the 72nd AGM held on 30.09.2019. But then resolution also passed. iv. Appointment of Mr Paulose Joseph as the sole authorized signatory to the 13 company Bank Accounts, demateriai1zed accounts and mutual fund accounts maintained by the company. R3 proposed which was seconded by R2 and passed the resolution. v. Appointment of Mr Paulose Joseph and Mr. W C Thomas as the authorized signatories to the other 5 Company Bank Accounts maintained by the company: R3 proposed which was seconded by R2 and passed the resolution. vi. Request of Mrs Meera Joseph to Mr. Mohan Thomas to undertake a study and submit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner stated that the Respondent No.4, the former Managing Director, refused to hand over the property and records of the 1st Respondent Company as he was not willing to hand over the same. 12. The learned counsel for the petitioner argued that on 21.08.2020, the respondents herein abused the powers of the Board by passing the following resolutions in a Board meeting, contrary to the common law of the land. The Meeting was chaired by Respondent No. 3: - (a) Sale of Listed Company Stock of INR 3.75 Crores. (b) Letter of appreciation to Mr. Poduval along with payment of INR 10 Lakhs (c) Cancellation of Domestic Enquiry which is in progress, against an employee [Mrs Birdie Nirmal], revocation of Suspension Order and re-instatement with full back wages suo motu by Respondent No. 2 and 3, even without any representation from the delinquent employee to the Board. (d) Re-instating the resigned employee [Mr Ramachandran] with full back wages, suo motu, without any representation. 13. The learned counsel for the petitioner further argued that on 07.09.2020, another Board Meeting was held and Respondent Nos. 2 and 3 were not attended the said Meeting. As there was no quorum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment of Respondent No 3 as an employee of the Company is null and void, as such appointment without Board sanction is in substantive and procedural violation of sec 188. The brief facts are as follows: 18. The 1st Petitioner holds 1590 equity shares of Rs. 50/- each of the Respondent No 1 Company, which constitutes 7.95% of the total issued, subscribed and paid-up share capital of the Company. The 2nd Petitioner holds 830 equity shares of Rs. 50/- each of the Respondent No 1 Company, which constitutes 4.15% of the total issued, subscribed and paid-up share capital of the Company. The 1st and 2nd petitioners are sisters (who are R2 and R3 in CP/117/KOB/2019). The 3rd Petitioner holds 650 equity shares of Rs. 50/- each of the Respondent No 1 Company, which constitutes 3.25% of the total issued, subscribed and paid-up share capital of the Company. The Petitioners together hold 15.35% of the total issued, subscribed and paid-up share capital of the Company. The Respondent No.2 is, the majority shareholder (20.93%) who is the present Joint Managing Director of the Respondent No 1 Company (Petitioner of CP/117/KOB/2019). This 20.93% is the joint shareholding with his mother Mrs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 meeting, which would articulate the roles and responsibilities of the Board and other Senior Executives, non-payment of reimbursement of medical expenses to Mr Poduval, a Senior employee despite such reimbursements being made regularly to senior employees and despite Board sanction, unilaterally deciding on his own that Mr Paulose Joseph and Mr WC Thomas are not employees of the Company despite a valid employment contract binding on the Respondent No 1 Company and not permitting other employees to interact with Mr Paulose Joseph and Mr W. C Thomas, and also withholding salary payments. v. Post October 1, 2019, the Respondent No 2 is making criminal accusations and unilaterally suspended Mrs Birdie Nirmal (accountant) and terminated the employment of Mr Ramachandran (factory manager) and Mr Poduval (personnel and administration head) without any shred of evidence, making criminal accusations against Mr Paulose Joseph, Mr WC Thomas and Petitioner No 1, etc. No other Court or authority or 3 Party as on date have held such persons to be responsible for the matters that Respondent No 3 is accusing them of. Respondent No 3 is the accuser, prosecutor, judge and jury on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial and private e-mail without prior notice or approval from Mr Paulose Joseph constitutes serious mismanagement, which is an offence under the Information Technology Act, 2000. x. Respondent No. 2 intentionally failed to disclose that he had interest in three other companies in contravention of Section 167, 184 and 203 of the Companies Act, 2013 and in breach of his fiduciary duty as Director of the Respondent No.1 Company. xi. Respondent No.2 continues to misuse the property of the Company in contravention of the provisions of Section 166 of the Companies Act, 2013. 20. The learned counsel for the petitioner stated that on account of the above facts, duly supported by documentation and positions of law, the Respondent Nos. 2 and 3 are managing the R 1 Company unilaterally without shareholder s support, not following the Board mandate and managing the R1 company inconsistent with the Articles and misused their positions to make undue gains. It is further stated that in the light of the above averments put forth and documents produced, it is clear that the present case is one of gross oppression and mismanagement, and therefore, this Tribunal should intervene in the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board Meeting held on 14.10.2019. 23. The Respondents further stated that the appointment of R4 and R5 are valid, and that was consistent with the provisions of the Companies Act, 2013, narrating the following points: - The meeting of 14.10.2019 had been properly called and convened with proper written notice and proper quorum. There is no restriction whatsoever in the Companies Act, 2013 or the Articles that requires a CEO or President Tea Operations, who has attained the age of 70 to be appointed through a special resolution in a general meeting. The roles performed by R4 and R5 clearly demonstrate that R4 or R 5 do not manage the whole or substantially whole of the affairs of R 1 Company. Respondents 2 or 3 have on various occasions communicated to the Petitioner that he is in overall charge of the affairs of the business of R 1 Company and tried to formalize governance processes through Board resolutions to clarify the role of R4 and R5, which the Petitioner has not accepted / taken forward. In light of the powers of the Board under Article 126(5), the Board of Directors can appoint senior employees. The Petitioner does not have in his mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aration benefits was made to all the shareholders and particularly the Petitioner and his family, as they hold 29% of the shares, who are relative to Respondent No 2 and 3 and their families who hold only 26% of the shares of Respondent No. 1 Company. The Respondent No 1 Company vide Board Meetings held on 18.10.2019 / 01.11.2019 annulled the Dividend declaration and did not distribute the dividend. 26. It is further submitted that the Dividend was proposed to be a distribution from the monetization of non-core assets, which would generate profits. As regards the allegation on operation and signing powers given to Respondent No 4 over the Company s bank accounts, dematerialized accounts and applicable mutual fund accounts, the respondents stated that the Respondent No 1 Company annulled this power vide resolution passed in the Board Meeting held on 18.10.2019 and 01.11.2019. Respondent No 4 has not signed even a single cheque before September 30, 2019. Thus, the transaction which did not even taken place and the decision is not in force cannot constitute an act of oppression. The power to Respondent No 4 was never a sole signatory power but one of the signatories to the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs ago and thus the same is barred by limitation. The Petitioner was also a whole-time director in R 1 Company at that time and now he is trying to build fallacious and patently false allegations that Respondent No 4 profited from managing the Respondent No 1 Company and that he could not succeed in building even one credible claim. It is further stated that the Peerumed Tea Company is not a related party and advances were provided in the ordinary course of business with interest rates as high as 24%. The Respondent No 1 Company has a track record of nearly 100% recovery of advances, which the Petitioner has not disputed and the respondents have submitted detailed documentation / correspondence with the Peerumed Tea Company, which clearly demonstrates the efforts made to collect the advances and the circumstances why the advance could not be recovered i.e., lock out of the Tea Estate, drop in tea prices, etc. 31. Regarding the allegation that the Petitioner was not given signatory powers in respect of mutual fund accounts of Respondent No 1 Company prior to October 1, 2019, the respondents stated that the power to operate and sign mutual fund accounts was sanctioned by the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of no quorum and the place of the meeting was not the registered office of the Company, the respondents stated that the Petitioner has got a wrong information that the quorum is incomplete in view of the meeting held through video conference. In this connection the learned counsel for the Respondents referred to Sections 173 and 174 of the Companies Act 2013 to say that participation of Board members through video-conference / audio-visual means shall be counted towards quorum. The restricted matters / matters not to be dealt with through video conference are contained in paragraph 4 of Companies (Meeting of Board and its Powers) Rules 2014. The Respondents submit that none of the matters listed under the said Rules were the subject matter of the Board meeting of 18.10.2019 and 01.11.2019 and thus not subject to such restrictions. Thus, there is no requirement of a physical quorum. 35. It is further stated that under the Companies (Meeting of Board and its Powers) Rules, for every meeting held through video conference, the scheduled venue of the meeting as set forth in the notice convening the meeting shall be deemed to be the place of the said meeting. Thus, under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny legally actionable cause of action accruing in favour of the petitioners to sue for oppression and/ or mismanagement. 38. As regards the allegation of appointment of Respondent No.3, as a staff of the company in contravention of Section 188 of the Act, the learned counsel for the Respondents submitted that the object underlying Section 188 of the Companies Act, 2013 is to prevent a director or his relative from holding any office or place of profit carrying a total monthly remuneration beyond the prescribed limits under the Companies Act and thereby put in his pocket, directly or indirectly, and make additional profit over and above the remuneration to which he is entitled as such a director, without obtaining the requisite permission. It is a settled law that a contract with any of the related parties entered in the ordinary course of business, irrespective of value are exempted from taking the consent of the board of directors. A simple way to demonstrate absence of conflict of interest is to prove that existence of special relationship between contracting parties has not affected the transaction and its terms, by following industry benchmarks and past transactions entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the directors of the respondent company as they are also the directors of other three companies. The principles of acquiescence will apply in this case. The allegations of the petitioners against the Respondent No. 2 with regard to disclosure of interest are not at all tenable and are only brought up as a counter blast to the Company Petition CP/117/KOB of 2019 filed by Respondent No. 2. 43. The learned counsel for the Respondents submitted that Section 166 deals with a situation having conflict of interest with the Company and in the instant case, there is no enrichment or undue gain to the Respondents No. 2 and 3. Hence the said provision is not applicable in the instant case. It is also submitted that Section 184(2) of the Companies Act deals with a contract or an arrangement having direct or indirect connection which were entered by a Director with the other firm or Company etc. In the instant case, there is no such contract or arrangement having any direct or indirect association with any other company by the 2nd Respondent and hence Section 184(2) is not at all applicable. 44. Respondent No. 2 further stated that he has been using Bungalow No. 6 of the 1st Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore this Tribunal. In CP/19/KOB/2020: i. IA/106/KOB/2020: This application was filed by the Respondent No.2 and 3 herein under Section 195 and 340 of the Criminal Procedure Code stating that the petitioners have committed fraud on the court. ii. IA/132/KOB/2020: This application was filed for a direction petition filed by Respondent Nos. 2 and 3 herein to stay the decisions taken in the Board of Directors Meeting held on 21.08.2020 and to declare it null and void. 49. This Tribunal heard the arguments advanced by the learned counsel on either side and perused all case records. A meticulous perusal of all case records including the lengthy arguments advanced by the parties as also the compilation of case laws submitted by them, this Tribunal found that the main allegation raised by the Respondents in CP/19/KOB/2020 was regarding the maintainability of the petition. However, the Respondents have not pressed for considering this issue separately even though, they made it a point in their arguments. The only point raised by the Respondents of CP/19/KOB/2020 was that no oppression and mismanagement in the Company has been made out by the petitioners. The petitioners fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on recording all events took place; whether two cause of action arose to be addressed through two different petitions. In a given situation it is a possibility that number of causes of action may arise on same set of facts, such as, fraud, embezzlement, siphoning, mismanagement etc from an instance of unlawful handling of funds. Thus, a petitioner is required to connect facts of a case with the cause of action. A direct nexus is required to be established between cause of grievance and happening of event. 54. Accordingly, this Tribunal framed the below mentioned issues to find out whether the petitioner in CP/117/KOB/2019 or petitioners in CP/19/KOB/2020 have a strong prima facie case in their favour: i. Whether the Board of Directors Meeting of the 1st Respondent company dated 14.10.2019 is 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 valid in the eyes of law? ii. Whether the Board of Directors Meetings of the R1 Company held on 18.10.2019, 01.11.2019, 04.02.2020, 21.08.2020 are valid? Whether the proceedings of that meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % shareholding did not approve the special resolution for appointment of Respondent Nos. 4 and 5 as the resolution was rejected for want of 75% vote in favour of the resolution. 58. Thereafter, even though R2 issued circular resolution on 01.10.2019, Petitioner objected it and stated that under Section 175 of the Act, if not less than one-third of the total number of directors of the company for the time being requires that any resolution under circulation must be decided at a meeting, the chairperson shall put the resolution to be decided at a meeting of the Board. In view of the objection sent through his email dated 05.10.2019, R2 issued the short notice of Board Meeting on 14.10.2019. 59. As regards the conduct of Board Meeting, this Tribunal gone through the Articles of Association of the Company. Article 115 of the Articles of Association of Respondent No 1 Company states as under: 115. A Director may at any time, and the secretary, if any, upon the request of a director, shall convene a meeting of the board of directors by giving a notice in writing to every director for the time being in India, and at his usual address in India to every other director. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of Managing Director, Whole Time Director and Manager and for no other category of managerial personnel such as CEO or Executive Director. Regarding the appointment of R5 as Executive Director- Tea operations, as per Rule 2(1)(k) of the Companies (Specification of definitions details) Rules, 2014 Executive Director means a Whole Time Director as defined in clause (94) of section 2 of the Act . As per Clause 2(94) of Companies Act, 2013 whole-time director includes a Director in the whole-time employment of the company . Therefore, a person who is Director + Whole Time Employee of the Company indirectly shall be considered as Executive Director due to Rule (2)(1)(k) whether designated by Company as executive Director or not. The mandatory appointment of Wholetime Managerial Personnel under Section 203 of the Act is not applicable to a private limited company. As the appointment of R5 as Whole Time Director was rejected by the AGM dated 30.09.2019, he cannot be indirectly appointed to be an Executive Director but can be a Non-Executive Director of R1 Company. 63. Even before filing of CP/117/KOB/2019, the petitioner sent an email dated 14.10.2019 alleging irregularit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment specifically state the powers, functions, roles, responsibility and duties of the Executive Director. At the same time, it is important that substantial powers of the management of the company are not entrusted to the Executive Director or Whole-Time Director. Such powers can only be entrusted to the Managing Director or the Manager. From the letter itself it is clear that the Board has not diluted the power of the petitioner, wherein he is acting as a Managing Director/ Whole Time Director by holding the post of Joint Managing Director. Reliance has been placed in the case of Killick Nixon Ltd. and Ors. V/s. Bank of India Ors. (1958) 57 CompCas 831 (Bom), wherein it was held that: Under Section 397 and 398 any personal grievance of the member himself is not contemplated. The cause of action under Section 397 is the conduct of the affairs of a company in a manner prejudicial to public interest or in manner oppressive to any member or members of the company. Now, prejudice to public interest may not necessarily amount to a prejudice to the complaining member personally. Even in the latter category, the oppression need not be of the members who file a petition. Op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nlal Ganpatram v. Sayaji Jubilee Cotton Jute Mills Co. Ltd. [(1964) 34 Com Cas 777 : AIR 1965 Guj 96 : (1964) 5 Guj LR 804] that a resolution passed by the directors may be perfectly legal and yet oppressive, and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company . On this question. Lord President Cooper observed in Elder v. Elder [1952 SC 49] : The decisions indicate that conduct which is technically legal and correct may nevertheless be such as to justify the application of the just and equitable jurisdiction, and, conversely, that conduct involving illegality and contravention of the Act may not suffice to warrant the remedy of winding up, especially where alternative remedies are available. Where the just and equitable jurisdiction has been applied in cases of this type, the circumstances have always, I think, been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility on measurement of the asset or the liability at fair value shall be excluded; or ] (b) out of money provided by the Central Government or a State Government for the payment of dividend by the company in pursuance of a guarantee given by that Government: Provided that a company may, before the declaration of any dividend in any financial year, transfer such percentage of its profits for that financial year as it may consider appropriate to the reserves of the company: [Provided further that where, owing to inadequacy or absence of profits in any financial year, any company proposes to declare dividend out of the accumulated profits earned by it in previous years and 7[transferred by the company to the free reserves], such declaration of dividend shall not be made except in accordance with such rules as may be prescribed in this behalf:] Provided also that no dividend shall be declared or paid by a company from its reserves other than free reserves. [Provided also that no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distributed as a dividend is less than 10% of the surplus assets of the Company ... Mrs Meera Joseph seconded the resolution and they were put to vote. It was declared, passed by the Chair Person, 2 votes for and 1 vote against the resolutions. 70. In view of the above-mentioned Articles and provisions of the Act, the interim dividend declared by the Board on 14.10.2019, just after passing the Dividend in the AGM held on 30.09.2019 is contrary to law. Even if the declaration of dividend is beneficial to both the parties, it is not in the interest of the Company. To know whether it is an oppressive act, other allegations are also to be considered and analysed, as to whether it is burdensome, harsh and wrongful or whether there had been, an unfair abuse of powers and an impairment of confidence in the probity with which the company s affairs are being conducted. 71. Regarding the resolution passed in regard to the signatory powers to R4 over the company s bank accounts, dematerialized account and applicable mutual fund accounts as also the signatory power to R5 over the Company s Bank account, this Tribunal finds that as both R4 and R5 were ceased to be Directors of the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 117. 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 the continuing Director may act for purpose of increasing the number of Directors to two or of summoning a general meeting of the company but for no other purpose. Quorum for Board Meetings. 118. The quorum for a meeting of the Board of Directors shall be on-third of the total strength (any fraction contained in that one-third being rounded of as one) or two Directors whichever is higher. The total strength of the Board shall mean the number of Directors actually holding Office as Directors on that date of the resolution or meeting that is to say, the total strength of the Board after deduction there from the number of Directors, if any, whose places are vacant at the time. Election of Chairman of Board. 119. (1) The Board may elect a Chairman of its meeting and determine the period for which he is to hold office. (2) If no such Chairman is elected, or if at any meting the Chairman is not present within five minutes after the time appointed for holding the meeting, the Directors present may choose one of thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be 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 other purpose. (3) . xxxx (4) . xxxx 75. On a careful reading of the afore quoted Articles and the provisions of the Act, on the question to be answered in the present case, this Tribunal is of the view that the Respondent Nos. 2 3 have conducted an alleged meeting of the Board on 18.10.2019 under the guise of the request of the petitioner. It is evident from the email dated 11.10.2019 and 12.10.2019 that the meeting which was proposed by the petitioner on 18.10.2019 was advanced to 14.10.2019. That being the position, it is clear from admission of R2 R3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts clearly during the course of the meeting: Provided that the persons, who are differently abled, may make request to the Board to allow a person to accompany him. (3) (a) The notice of the meeting shall be sent to all the directors in accordance with the provisions of sub-section (3) of section 173 of the Act. (b) The notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio-visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio-visual means. (c) A director intending to participate through video conferencing or audio-visual means shall communicate his intention to the Chairperson or the company secretary of the company. (d) If the director intends to participate through video conferencing or other audio-visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf. (e) The director, who desire, to participate may intimate his intention of participation through the electronic mode at the beg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meeting through video conferencing or other audio-visual means is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director. (9) If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll and note the vote of each director who shall identify himself while casting his vote. (10) From the commencement of the meeting and until the conclusion of such meeting, no person other than the Chairperson, Directors, Company Secretary and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board. (11) (a) At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority. (b) The minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or other audio-visual means. (12) (a) The draft minutes of the meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 79. This Tribunal is of the view that in case the Chairman of the Meeting is participating through video conferencing, he/she should, while transacting any restricted items of business, vacate the Chair and entrust the conduct of the proceedings in respect of such items to any other Non-interested Director attending the Meeting physically and should not participate in the meeting in respect of such items and not for other matters. 80. Therefore, the meeting was conducted on 01.11.2019 and 04.02.2020 complying the basic provisions for conducting a meeting and the same is valid. But the resolutions passed in the said meetings are similar to that which were taken in the Board of Directors Meeting held on 14.10.2019. Therefore, the resolutions passed are considered to be invalid. 81. With regard to the Board of Directors Meeting held on 21.08.2020, since no evidence has been produced to show that notice was given and, it is considered to be void ab initio and all the resolutions passed in that meeting are invalid. Point (iii): Fiduciary Duty of Directors: 82. Directors are often in a position that enables them to gain pecuniary benefit at the expense of the company or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. (6) A director of a company shall not assign his office and any assignment so made shall be void. (7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 84. Articles 125 and 126 of the AoA clearly defines the powers and duties of the Directors. The main allegations raised by the Respondents 2 3 (petitioners in CP/19/KOB/2020) against the petitioner (Respondent in CP/19/KOB/2020) is that he is in breach of fiduciary duty and in contravention of the provisions of the Companies Act, 2013 as he failed to disclose that while being the Joint Managing Director or Whole Time Executive Director of the R1 Company, he had also held key managerial positions in three other companies. 85. Petitioner was appointed as Joint Managing Director on September 30, 2017 for one year and then on September 30, 2018 for another 3 years. At the time of appointment, petitioner was Managing Director in Etham Floriex Limited and Managing Director / Director in Acsah Organics Private Limited and Anaihta Gardens Private Limited ( Own Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent Company and other shareholders, for making material changes in the management of the Respondent company. 89. During the pendency of the case before this Tribunal, it has been observed that unilateral action being taken by the petitioner, without reference to the Board as per the prevailing mandate. These matters as well clearly demonstrate that the Petitioner has not approached this Tribunal with clean hands and he has filed this petition to assume total control over R 1 Company trying to oust the other Respondents. In this connection, the following points are to be taken into consideration: Recruitment of senior personnel as in the case of Head-Accounts in early May 2020, which requires Board approval, as per the mandate of the Board. Absurd, unreasonable and totally impractical transfer orders issued to Senior Managers as in the case of Mr Poduval (Cochin to Ettumanoor with 1-day notice) and Mr Ramachandran (Chennai to Ettumanoor). Respondent No 4 presently holds an Employment Contract appointing him as CEO. In spite of this, the petitioner has been issuing memos to Company personnel that Mr Paulose Joseph has ceased to be an employee of the Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds of the company for his own use, where General Body approval through special resolution is required to approve additional compensation to Director, and also done acts in breach of his fiduciary duty vice versa, the Respondents were also acting without complying the provisions of the Act or without applying the mind. Even if certain Board Meetings were conducted complying with the provisions of the Act, each of them depicts the same agenda mainly for ratification. 94. While dealing with an application under Section 210 of the English Act (which is similar to Section 397 of the Companies Act, 1956 and Section 241 of the Companies Act, 2013), ROXBURGH, J., put it succinctly that the purpose of Section 210 of the English Act is not so much to rake up the past as to redeem the future . When the case went on appeal to the court of Appeal in In Re, H.R.Harmer Ltd {1958 (3) All.E.R. 689} Jenkins, L.J., pointed out that: the phrase 'the affairs of the company are being conducted' suggest prima facie, a continuing process and is wide enough to cover oppression by anyone who is taking part in the conduct of the affairs of the company . 95. The decision In Re, H.R.Harm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Two cars along with the keys and documents have already been handed over to the Respondent No 1 Company in November 2019. Conclusion: 99. In view of the aforesaid findings, it clearly establishes that both the petitioners in CP/117/KOB/2019 and CP/19/KOB/2020 failed to prove oppression and mismanagement on the part of the respondents therein in carrying on the affairs of the company for the full satisfaction of the directors/ shareholders of the Company. Object and purpose of Sections 241 and 242 of the Act is two-fold. Firstly, to set right the wrongs and secondly, take remedial action to prevent the occurrence of wrongs in future. Since we found that there is no oppression or mismanagement for the reasons stated in the above paragraphs, it is not necessary for this Tribunal to consider any other points raised by the parties. 100. However, the Tribunal is duty bound to pass an order giving suitable directions in accordance with law which is both preventive and curative. In Needle Industries (India) Ltd. versus Needle Industries Newey (India) Holding Ltd. reported in (1981) 51 com. Cases 743 it has been held that power to exercise jurisdiction under Sections 397 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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