TMI Blog2019 (7) TMI 1849X X X X Extracts X X X X X X X X Extracts X X X X ..... ith to call an Extra Ordinary General Meeting of the members of the respondent company in terms of the requisition dated 20.12.2017 issued by the petitioner. The Board of Directors of the respondent company shall proceed to call the EGM for considering matters specified in the requisition notice dated 20.12.2017 within 30 days from the date of receipt of an authentic copy of this order by prescribing minimum 21 days' notice to its all shareholders. It shall not be convened beyond 45 days from receipt of this copy of this order without having express permission of this Court - In the event the Board of Directors does not proceed to call for the EGM within the time stipulated in this order, it shall be open to the petitioner/ shareholders to convene that hold EGM themselves in another 45 days. Thus, such meeting shall be convened thereafter within a period of three (3) months from the date of receipt of an authentic copy of this order and then such meeting as held by the shareholders / petitioner shall be deemed to be a valid EGM of the respondent company. The interim direction(s) issued, if any, by this Court stands modified suitably and merged with the present order. Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eking the above stated reliefs. 3. It is stated that the respondent company was incorporated on 10.02.2012 engaging in the business of manufacturing of Rubber and Plastic products. The present Directors of the respondent company are Shri Hiren Subhashbhai Chawra and Shri Subhash Ratilal Chawra. 4. The petitioner company contends that the directors of the respondent company as well as the petitioner at one point of time had desired to infuse funds and to generate more capital for the Respondent Company. Therefore, a Joint Venture Agreement (JVA) was executed between the petitioner and one M/s. S.B.P.L Polymers LLP (SBPL), a Limited Liability Partnership, on 22.02.2013. M/s.SBPL is owned and controlled by Shri Hiren Subhashbhai Chawra and Shri Subhash Ratilal Chawra. The said JVA has been annexed with the present petition. 5. The parties had agreed that the paid up share capital of the Respondent Company would be Rupees Hundred and Eighty Million consisting of Eighteen Million Equity Shares of Face value of Rupees Ten each. It was further agreed between the parties, i.e. the Petitioner herein as well as SBPL, shall each subscribe Nine Million equity shares and, thus, their s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing a Residential Villa situated at Amby Valley, as collateral security to the Union Bank of India (UBI) to facilitate grant of financial assistance to the respondent company. 10. The petitioner submits that, by taking into consideration of the shareholding pattern of the Respondent Company, the petitioner is entitled to have at least two-third representation in the Board of Directors of the respondent company. It is alleged that the petitioner, being a Non-Resident Investor, has been completely sidelined by the SBPL. Despite several representations, SBPL has prevented the petitioner to have any representation in the Board of the Company. On the other hand, the other group, i.e. SBPL, has been indulged into various acts of mismanagement and oppression. 11. The petitioner once again addressed a notice dated 28.12.2016 to the respondent company reiterating the contents of the notice dated 18.11.2016. In response to the notice dated 28.12.2016, the respondent gave reply-notice dated 06.01.2017 and 25.01.2017 making evasive denials. 12. In view of the above, the petitioner sent a requisition notice under the provisions of Section 100(2)(a) of the Companies Act, 2013 on 20.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tantamount to oppression and mismanagement under Section 241 of the Act. 16. In support of its case, the petitioner placed reliance upon the judgment of the Hon ble Supreme Court in the case of LIC vs. Escorts Limited reported in AIR 1986 SC 1370. A particular reference to the observation made by the Hon ble Supreme Court in paragraph-95,99,100 and 110 (9) of the said judgment. This judgment recognizes the supremacy of the shareholders over the Board of Directors of the company. The Hon ble Supreme Court also recognizes the right of the shareholders to requisition EGM and can pass any resolution as may be deemed fit by the shareholders of the Company. It is not open for the company to tamper or alter with the resolution proposed by the shareholders. The judgment further observes that there cannot be any injunction against such an action on the part of shareholders of the company. Thus, the Hon ble Supreme Court recognizes complete powers with the shareholders of the company to take appropriate decision through the process of requisitioning an EGM. 17. The petitioner further contended that it is settled legal position that if law prescribes to do a thing in a particular mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. 21. We examined the provisions contained in Section 100 of the Companies Act, 2013 also Section 169 of the Companies Act, 1956, which was para materia provision to Section 100 of the present Act, which reads as under; (1) The Board may, whenever it deems fit, call an extraordinary general meeting of the company. [Provided that an extraordinary general meeting of the company, other than of the wholly owned subsidiary of a company incorporated outside India, shall be held at a place within India] (2) The Board shall, at the requisition made by,- (a) in the case of a company having a share capital, such number of members who hold on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting; (b) in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company within the period specified in subsection (4). (3) The requisition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract of the decision are reproduced hereinbelow; Thus, we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review. It is true that under S. 173(2) of the Companies Act there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managing agent if any, the secretaries and treasurers, if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they made, it is settled legal position. Then shareholder possesses a legal right to increase its strength in the Board of Directors, by following the principle of Democracy in Corporate Governance. Hence, in our view, there appears no illegality in proposed agenda nor it can be treated as unethical. It is also well settled legal position that a right conferred to shareholder must prevail over an agreement or MOU entered between the parties. Such agreement cannot be made enforceable through a Court, so as it goes contrary to the statutory provisions. Hence, the plea of respondent must fail in this count also. 25. Hence, prima-facie, in our view, it is not a case of oppression. We feel that in a corporate governance supremacy of shareholders is legally required to be maintained in its right perspective by the Management/ Board of Directors of the respondent company. Hence, we find that the JVA entered between the parties stands renovated or arnended. Otherwise, in alternate, it has not been performed fully in original term, then it became frustrated under Section 62 of the Indian Contract Act, hence, it is not enforceable. Therefore, there can be no impediment for petitioner, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Extra Ordinary General Meeting (EOGM) under Section 169 of the Act, if the Board of Directors fails to convene the same. The Madras High Court, in its decision in the matter of S. Varadarajan vs Venkateswara Solvent Extraction Pvt. Ltd. (1994) 80 Company Cases, held that shareholders have statutory right, subject to fulfilment of statutory provisions to call the EOGM. No injunction can be issued restraining them from calling such meeting. While observing so, the Hon 'ble Madras High Court, through Hon'ble Justice Mr. A.R. Lakshmanan (as then the Lordship was) has pleased to place reliance on the decision of the Hon ble Supreme Court of India in the matter of LIC of India v. Escorts Ltd., held as such; 18. The apex court in LIC of India v. Escorts Ltd. [1986] 59 Comp Cas 548 had laid down the following legal proposition while construing the scope of section 173(2) of the Act (at page 636) . Thus we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call and extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory right subject to the fulfillment of the provision of section 169 to call an extraordinary general meeting. No injunction can be issued restraining him from calling a meeting. I have found that the requisition as well as the notice of meeting are valid. The Supreme Court in LIC's case [19861 59 Comp Cas 548 has also ruled that no injunction can be granted restraining a shareholder from convening an extraordinary general meeting and the said view is clear from the following ration found at pages 549, 550 and 551, which is as follows : A shareholder has an undoubted interest in a company, an interest which is represented by his shareholding. Share is movable property, with all the attributes of such property. The rights of a shareholder are : (i) to elect directors and thus to participate in the management through them; (ii) to vote on resolutions at the meeting of the company; (iii) to enjoy the profits of the company in the shape of dividends; (iv) to apply to the court for relief in the case of oppression; (v) to apply to the court for relief in the case of mismanagements; (vi) to apply to the court for winding up for the company and (vii) to share in the surplus on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner/ shareholders to convene that hold EGM themselves in another 45 days. Thus, such meeting shall be convened thereafter within a period of three (3) months from the date of receipt of an authentic copy of this order and then such meeting as held by the shareholders / petitioner shall be deemed to be a valid EGM of the respondent company. Any reasonable expenses which are to be incurred by the petitioner in calling such an EGM shall be reimbursed by the respondent company. 32. Notwithstanding the above, in order to ensure smooth conduct of the AGM in a transparent manner, we hereby appoint Advocate, Mr. Nipun Singhvi (Mobile No.98290 31411) as an observer to the above said AGM/EGM. In addition to the above, a nominee from the secured creditors of the respondent company, preferably from Nationalised Bank, i.e. Union Bank of India, shall participate as permanent invitee to the meeting of the Board of Directors of the Respondent Company as well as in the proposed AGM. Both of them shall submit an independent report to this Court. Such measures are being taken so as to rule out any possibility of any kind of oppression with the minority shareholders of the company in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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