TMI Blog2020 (10) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... Board in such cases. Therefore, it becomes abundantly clear that this Bench cannot use its discretion for the wisdom of the Board of Respondent No.9. The issue of appointment of Director as Managing Director has to be in line with the Articles of the Company and the wisdom of the Board of the Company. This Bench places reliance on a similar Judgment given by Hon'ble High Court of Delhi in case of Ranjit Singh vs Sylvania Laxman Ltd, [ 1978 (5) TMI 131 - DELHI HIGH COURT ] where the Hon ble Delhi High Court has observed that the holding of a meeting is only the first stage in the matter and the result of such a meeting is quite different from restraining the removal of the Managing Director. If a meeting is held and action taken at that meeting to remove the Managing Director or Joint Managing Director, then only can it be said that the action is either wrongful or contrary to contract which would led to damages or it can be said that such action is ultra vires leading to the Court's decision that the removal is nonest. Before such removal actually takes place, there is no occasion for the grant of an interim injunction. The above Judgment of High Court clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in a manner which is in the best interests including but not limited to the technical interests of Respondent No. 9. 4. The Applicants had filed an application before this Tribunal (I.A. No. 1021 of 2020) wherein the Applicants had prayed for the following major reliefs; a. That, the Extra Ordinary General Meeting to be held by Respondent No. 9, on the 07.08.2020, be declared as illegal and void. b. That, without prejudice, the convening of the Extra Ordinary general Meeting by Respondent No. 9 on the 07.08.2020 and/or any other date, for removing Applicant No. 3 as the Executive Director of Respondent No. 9, be stayed till a final decision, in the said petition. c. That, it be declared that, Applicant No. 1, cannot be threatened and/or cannot be removed as the Managing Director of Respondent No. 9 till a final decision is arrives, in the said petition. d. The Interlocutory Application No. 1021 of 2020 of the Applicants was dismissed on 06.08.2020 and the copy of the said order is attached to the application. 5. Being aggrieved by the said order dated 06.08.2020 of this Tribunal, the Applicants had preferred to file an appeal (Appeal No.: Company Appeal (AT) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2013 ( Act ) (Section 284 of the Companies Act, 1956) deals with the removal of the directors. Reliance is placed on the case of S. Vardarajan v Venkateswara Solvent Extraction (1992 MLJ (2) 13), to submit that Section 169 of the Act does not deal with the removal of the Managing Director . Therefore, the removal of Applicant No.1 from the position of Managing Director is regulated by the Articles of Association of Respondent No. 9. Section 169 of the Act does not affect the power of the Board of Directors of Respondent No. 9 ( Board of Respondent No. 9 ) II. The Respondents to buttress their Response have placed reliance on case of S. Varadarajan v. Venkateswara Solvent Extraction (P.) Ltd. And, [1994] 80 CompCas 693 (Mad) of Hon ble High Court of Madras and also on the case of M. Viswanathan vs. Sai Sri Krishna Properties and Facilitators Pvt. Ltd. and Ors, decided on 9.12.2015 by the Company Law Board . Relevant extracts from these judgements were also placed before the Bench during the course of the hearing of the matter. 8. The Respondents have submitted that the removal of Managing Director from Respondent No. 9 is regulated by the Articles of Association of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 1, which seem to have failed. c. The Petitioner apart from contributing to the share capital of Respondent No. 1, never contributed to the growth of Respondent No. 1. The Petitioner has never been involved in the day-to-day functioning and business of Respondent No. 1. d. By the year June 2012, the Petitioner had earned a total of ₹ 6,00,000/- on dividends and ₹ 61,73,888/- through payments made to the Petitioner and his relatives on directions from the Petitioner in lieu of stake sale/transfer of shareholding. These payments were made after due consent and approval received by the Petitioner. e. As regards the merger it is contended that there is no merger and the same is only a Limited Liability Partnership, which is not involved in any business. No Limited Liability Partnership Agreement has been entered into between the Respondents. The invoices sent out as late as 03.12.2018 are only on the letterheads of Respondent No. 1 and revenue is generated and booked by Respondent No. 1 in his books. Findings: 12. Heard both sides. This Bench notes that in this IA No.1139/2020 the Applicants have mainly prayed for the following two reliefs:- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t regarding his non-removal as Managing Director of Respondent No. 9 till a final decision is arrived in Company Appeal No. 143 of 2020 is worthy of dismissal for the reasons that it has already been decided on merits by the Order of NCLT Mumbai dated 06.08.2020 and also because of the fact that it is presently pending before the Hon'ble NCLAT where no stay has been granted regarding the Order passed by NCLT Mumbai dated 06.08.2020. 16. The Learned Counsel of the Applicants during the hearing mentioned that the Applicants are not agitating for any interim relief which they had sought earlier by way of IA 1021 which was dismissed by NCLT on 06.08.2020 but regarding a new cause of action which arose on 17.10.2020, the date on which it received the notice of the Board meeting where one of the Agenda items for the removal of Mr. Pralhad Hege from the post of Managing Director and make him Non-Executive Director of Respondent No.9. This, Applicants mentions, is not being decided by NCLAT and therefore not pending before Hon'ble NCLAT. The Applicant further adds that though as per the Board Agenda item, he is not being removed as Director but his substantial power of managemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom it is evident from the list of directors annexed along with the annual returns shows that the company was having four directors i.e. the petitioner, the 2nd respondent who were appointed on 14.06.2002 and Mr. S. Natarajan and Mr. S. Ramasami who were actually appointed on 27.10.2004 in a Board meeting held on 27.10.2004. Therefore on the date of Board meeting i.e. 07.07.2005 the company was having four directors and three directors were present in the Board meeting held on 07.07.2005 accordingly the Board meeting dated 07.07.2005 is valid and legal. As per the clauses of the articles the discretion to appoint one of the directors to the office of Chairman, Vice Chairman or Managing Director is left to the wisdom of the Board. Therefore, I am of the view that this Bench cannot interfere with the wisdom and exercise of its discretionary powers in a democratic manner. Therefore, I do not find any illegality in the decision taken in the Board meeting dated 07.07.2005. Accordingly, the issue is answered. The Hon'ble Supreme Court also held that if a director illegally terminated cannot bring his grievance as to termination to Vending up the company for that single and isolated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a meeting, but when the Board of Directors actually take some positive action on the proposed resolution. (11) In my view, as stated above, the holding of a meeting is only the first stage in the matter and the result of such a meeting is quite different from restraining the removal of the Managing Director. If a meeting is held and action taken at that meeting to remove the Managing Director or Joint Managing Director, then only can it be said that the action is either wrongful or contrary to contract which would led to damages or it can be said that such action is ultra vires leading to the Court's decision that the removal is nonest. Before such removal actually takes place, there is no occasion for the grant of an interim injunction . 20. The above Judgment of High Court clearly again substantiates the view of the Bench that even if there is going to be change of designation of a Managing Director to Non-Executive Director as per proposed Agenda of the Board meeting of the Respondent no. 9, there is no occasion for the grant of an interim injunction. This Bench feels that it has no business to interfere in the Corporate Governance matter which is entirely in the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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