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TMI Blog2021 (8) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the order of NCLT, Mumbai dated 6.8.2020 in Interlocutory Application No 1021 of 2020 in CP No. 975/MB/2020. The same set of Appellants have filed Appeal CA (AT) No. 227/2020 aggrieved by the order dated 26.10.2020 passed by NCLT, Mumbai in Interlocutory Application No 1139 of 2020 in the same CP No. 975/MB/2020. 2. It is noted that in both the Appeals No. CA (AT) (Ins) 143/2020 and CA (AT) (Ins) No. 227/2020, the Appellants and the Respondents are the same. The issue that has been raised in first appeal No. CA (AT) (Ins) 143/2020 relates to refusal to grant ad interim stay to the holding of EGM on 7.8.2020, and to give direction for stay regarding the removal of Gajanan Dhakane as a Director of Respondent No. 9 company. The issue in the second appeal CA (AT) (Ins) No. 227/2020 relates to the refusal to grant stay to the proposed changing the designation of Pralhad Hage from that of Managing Director to Executive Director and declaration of already held EGM dated 7.8.2020 as illegal. We have noted that Respondents and Appellants are the same in both the appeals and the issues are also connected with the series of events in the same case Company Petition No. 975/MB/2019 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd did not carry out the conversion of Appellant's Class B equity shares into Class A equity shares. (iv) The members of the Sirur family, who hold majority shareholding in Respondent No. 9 company, were running the affairs of Respondent No. 9 company in an unprofessional manner as alleged personal expenses and incentives relating to Sirur family members were being booked in the accounts of Respondent No.9 company. This was questioned by Appellant No.1 and Appellant No. 3. (v) The Appellants have stated that on 4.7.2020, Respondent No. 7Sibella Private Limited, a company wholly controlled by the Sirur family members, issued a letter signed by Respondent No.1 to the Board of Directors of Respondent No.9 company, requisitioning the convening of Extraordinary General Meeting (hereinafter called EGM) of Respondent No. 9 company to remove Appellant No.3 Gajanan Dhakane from the position of Director of Respondent No. 9 company. This requisition letter dated 4.7.2020 was acknowledged by Respondent No.1, as Executive Chairman on behalf of Respondent No. 9 company and on the same day i.e. 4.7.2020, Respondent No.1 issued a letter convening the meeting of the Board of Directors of Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisitioned by Respondent No.7to be held on 7.8.2020, to consider a proposal to remove Appellant No.3 (Gajanan Dhakane) from his position of Executive Director. The convening of this EGM was opposed by the appellants in IA No. 1021 of 2020 before the NCLT, Mumbai but NCLT did not grant injunction to the appellants by holding that the board of meeting is in accordance to the wisdom of the board. The Ld. Counsel has claimed that the said EGM, which was to take place at the instance of Sirur family members, was scheduled to take up for consideration the proposal to divest Appellant No. 3 of the position of Executive Director. Such an act, he claimed, was oppressive to Appellant No. 3,as the Appellant No. 3, the company's employees and their family members were dependent on their position in the company's management for their livelihood, and the Appellants had a legitimate expectation regarding their gainful position in the management on account of a previous MOU and agreement. This according to him, amounts to oppression of the minority shareholders and mismanagement in the affairs of the company and, therefore, the Appellate Tribunal should allow the appeal. 6. The Learned Counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s when they started raising issues regarding inappropriate expenses and demanded transparency in maintenance of accounts. As a result, Gajanan Dhakane was removed as Executive Director vide resolution in the EGM held on 7.8.2020. Later, in a similar manner, Pralhad Hage's designation was changed from that of Managing Director to non-Executive Director in CEPL vide resolution in board meeting dated 26.10.2020. This action was taken as Hage supported Dhakane in his demand to bring greater transparency in the management of CEPL which was anathema to the Sirur family members in CEPL. These actions, the Learned Counsel has claimed, amount to oppression of minority shareholders and interference in their and their dependents' right of livelihood, which they receive due to their position in the management of CEPL. Therefore, their interest in the company is more than that of a shareholder. 9. The Learned Counsel for Appellants has claimed that though the actions of the majority shareholders belonging to Sirur Group may be legal, oppression and legality can go hand-in-hand, as oppression is conduct which is burdensome, harsh or wrongful, and also denial of legitimate expectation. He has ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound principles of law keeping in mind the interests of all the stakeholders in the company CEPL. He has cited the judgment of Hon'ble Supreme Court in Shah Babulal Khimji vs Jayaben D Kania &Anr. (1981 4 SCC 8) and Wander Limited and Ors. Vs Antox India Pvt. Limited [1990 (Supp) SCC 727]where the Hon'ble Apex Court has observed that the Appellate Court is not supposed to interfere with the exercise of discretion of the court of first instance and substitute its own discretion, except where the discretion has been shown to have been exercised arbitrarily, or capriciously, or perversely, or where the court has ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. He has also cited the judgment of the Appellate Tribunal, in the case of Shyam Manglunia & Ors. vs Ravi Shankar Shrivastava & Ors.[Company Appeal (AT) Nos. 94-95 of 2018]where it has been held that the discretion exercised judicially by the National Company Law Tribunal need not be interfered by substituting Appellate Tribunal's discretion for what has been exercised by the NCLT. 13. The Learned Counsel for Respondent No. 9 has cited the judgment in Rudraksh Synthetics Pvt. Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stay because the proposed meetings were held and resolutions were passed therein by adopting of prescribed procedure under the Companies Act and the decisions therein that were proposed to be taken were taken by a majority of shareholders of Directors/shareholders in accordance with democratic procedure which is required under the Companies Act. 17. The Learned Counsel for Respondent No. 9 has cited judgment of Hon'ble Supreme Court in Shipping Corporation of India Limited vs Machado Brothers &Ors. [(2004) 11 Supreme Court Cases 168], wherein the court has taken the view that if the dispute raised has lost its relevance and subsequent events which are taking place during the pendency of litigation, then continuing the litigation will be like flogging a dead horse. In the present case, the Learned Counsel has contended, that events that have happened after the institution of these appeals have overtaken the holding of the EGM and the Board of Directors. meeting on 7.8.2020 and 26.10.2020, respectively, and the resolutions passed therein, and therefore continuing with these appeals and therefore giving any order which will upset the actions that have already happened may not be desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts had sought ad interim stay, no final order was passed by the NCLT after adjudicating on the oppression of the minority shareholders, or mismanagement in the affairs of the company. In the cases that have been cited, the protection that has been granted to the applicants/petitioners are through final orders. The question of granting ad interim stay to the holding of EGM and Board of Directors meeting has to be looked at, from a very limited point of view of prima facie illegality, balance of convenience to the parties and irreparable loss to the Applicants. Seen from these points of view, we do not see any infirmity in the order dated 6.8.2020 in IA No. 1121/2020 and order dated 26.10. 2020 in IA No. 1139/2020. 23. On the basis of the discussions above, we come to a very clear conclusion that the two impugned orders dated 6.8.2020 in IA No. 1121/2020 and 26.10.2020 in IA No. 1139/2020 do not require any intervention as they do not suffer from any illegality. Since the main petition CP No. 975/MB/2019 is presently being heard by NCLT, we refrain from giving any opinion on the larger issue of oppression and mismanagement, as has been alleged in the said petition by the Appellants/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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