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TMI Blog2022 (8) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants from acting upon or giving effect to any resolution passed at the EGM held on 25.01.2022 till the disposal of the Company Petition. Brief Facts: Appellant's Submissions: 2. The Learned Senior Counsel appeared for the Appellants submitted that the resolutions passed by the company i.e. SACL the 2nd Respondent herein (Sakthi Auto Component Limited) at a validly conducted EGM by the requisitionists i.e. the 3rd Appellant herein (Sakthi Global Auto Holdings Limited) SGAHL who is a 77.04% shareholder of SACL. The impugned order dated 29.03.2022 was passed in a petition that was filed in abuse of legal process without effectively hearing the Appellants and without even giving them an opportunity to file a counter to the Company Petition. 3. The Learned Senior Counsel submitted that the 2nd Respondent is a subsidiary of 3rd Appellant. As per Shareholders Agreement dated 29.09.2018 (2018 SHA) and the Articles of Association of the 2nd Respondent read with Shareholder Agreement, the Appellants have right to appointment of additional nominee directors of the Appellants and for removing the current nominee directors of the 1st Respondent and its Group Companies, who wrongly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petition filed though another Sakthi Group Company. It is submitted that no orders have been passed by NCLT in above CP No. 387 of 2020 which was filed by SSL (3rd Respondent). 7. The Learned Senior Counsel further submitted that due to deliberate failure and refusal to honour the terms of 2018 SHA, the Appellants invoked arbitration under the terms of 2018 SHA and issued notice of arbitration on 11.10.2019. However, the ABT UK filed an application in the SIAC Arbitration under Rule 30.1 of the SIAC Rules seeking an adjournment of the Arbitration proceedings. On 30.06.2020 the Arbitral Tribunal in the SIAC Arbitration passed an order allowing the relief sought in the interim relief application whereby the Tribunal directed the ABT UK to undertake all necessary steps and corporate actions to update its Articles of Association to incorporate the relevant terms of SHA with respect to 2nd Respondent Company i.e. SACL. 8. The SACL failed to comply with the interim order of the Tribunal and the 3rd Appellant took corporate steps under the Companies Act, 2013 and issued a postal valid notice on 06.10.2020 for passing the necessary resolutions for amendment of SACL Articles. While so the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 am for passing resolutions relating to appointment of Aapico Nominee Directors and removal of the ABT Nominee Directors. The EGM notice was sent to the members and also all the Directors of SACL, hence the procedure contemplated under the Companies Act was strictly followed. 14. While so, the CP was listed before the NCLT on 17.01.2022 however, the NCLT informs all the parties stating that in virtual mode they would not be taking up regular matters, despite the above, the Counsel appearing for the petitioner therein, without filing any application made an oral mention and pressed for an urgent stay on the EGM schedule to be held on 25.01.2022. 15. The Learned NCLT was not inclined to hear the Appellant's arguments opposing the stay of the EGM and to avoid an absolute injunction on the conduct/holding of the EGM on 25.01.2022 and in order to ensure that the EGM could atleast take place and the Appellant's rights not to be frustrated even further, the Appellants offered the following undertaking on 18.01.2022: "Respondent No.2, 3 and 4 hereby undertake to not act upon or implement the resolutions proposed to be passed by the shareholders of Respondent No.1 at the Extra-ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contentions raised by the Appellants in their written submissions, the NCLT granted interim relief to the Respondents/Petitioners. The Learned Senior Counsel submitted that the impugned order is an egregious departure from the law settled by the Hon'ble Supreme Court in LIC vs. Escorts Limited & Ors. (1986 (1) SCC 264) wherein the Hon'ble Supreme Court held that the resolutions validly passed at an EGM cannot be stayed. Further it is submitted that the impugned order does not even apply or deal with the applicable standards of law and Supreme Court case law. Further, there is no determination on whether even a prima-facie case for oppression and mismanagement has been made out. The interim relief granted is in effect interferes with the statutory rights in favour of the Appellants as majority shareholders. In support of the contention the Learned Senior Counsel relied upon the judgments of the Hon'ble Supreme Court, and Hon'ble High Courts. 21. In view of the above, the Learned Counsel prayed this Bench to set aside the order dated 29.03.2022 passed by the NCLT, Division Bench, Chennai in CP No. 25/2022. Respondent's Submissions: 22. The Learned Counsel appeared for the 1st re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntation in the Board of SACL. It is to state that the award itself notes that UK Court is the proper Court to decide on whether Aapico is entitled to control of SGAH (3rd Respondent). In the circumstance, the Singapore Award presently not enforceable since UK Court is yet to finally determine whether Aapico is at all entitled to control SGAH. If Aapico is not entitled to control the SGAH, naturally Aapico is not entitled to control SACL which is only a subsidiary of SGAH. 26. It is submitted that the Aapico on its own requisitioned an EGM of SACL to remove all the present directors of SACL and appoint only Aapico nominees to the board and Aapico wanted to take control of SACL without awaiting Court orders. The Board of SACL on 17.12.2021 rejected the requisition of Aapico as not valid on multiple legal grounds. In the Company Petition it was also contended that Aapico would have had no quorum to conduct to EGM unless the promoters attend the EGM. As stated supra to get over the same Aapico illegally transferred 4 equity shares to 4 distinct third parties to claiming that they had valid quorum. However, the requisition meeting was held by Aapico themselves on 25.01.2022 and the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Counsel for the Respondent also relied upon various judgments of the Hon'ble Supreme Court and the Hon'ble High Courts in support of his case. 31. In view of the reasons as stated above the Learned Counsel prayed this Bench to dismiss the Appeal. Analysis / Appraisal: 32. Heard the Learned Counsel for the respective parties, perused the pleadings, documents and citations relied upon by them. After analysing the pleadings, the moot point for consideration is whether the impugned order passed by the NCLT is in accordance with law or called for any interference. 33. The 1st Respondent herein filed the Company Petition bearing No.25 of 2022 arraying the Appellants and the other Respondents as the Respondents to the said Company Petition filed under Section 241 and 242 of the Companies Act, 2013 alleging certain acts of oppression and mismanagement and the petitioner therein (1st Respondent) pressed certain interim reliefs, however, the Respondents therein objected and opposed for the grant of interim relief. While so, the Learned NCLT vide order dated 29.03.2022 passed the following interim relief: "The Respondents are restrained from in any manner acting upon or giving ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 3rd Appellant. Thus, Aapico holds 100% shares in 3rd Appellant (SGAH). In turn the 3rd Appellant SGAH holds 77.04% shares in SACL. 41. As stated (supra) the 1st Respondent herein filed CP No.25/2022 under Sections 241 to 244 alleging certain acts of oppression and mismanagement in the 2nd Respondent Company (SACL) stating that the Petitioner being a minority shareholder of SACL holding 0.85% of the paid up share capital of SACL. Even the petitioner therein, has given the shareholding pattern of SACL at page 613 Volume-3 admitting that 77.04% shares are held by (SGAH) 3rd Appellant. Among other things the Petitioner therein sought certain interim relief in above CP annexed at page 638 Volume-3 which is extracted as under: "a. An Order of Temporary Injunction restraining the Respondents 4, 5 and 6 from either directly or through SGAH, amending or acting upon any amendment to the Articles of Association of the 1st Respondent Company; b. An Order of Temporary Injunction restraining the Respondents 4, 5 and 6 either by themselves, or through their nominees, or through SGAH, from participating in the management of the affairs of the 1st Respondent Company or from in any manner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove court proceedings. b) The Aapico has secured an award from Singapore Arbitration Tribunal holding that Aapico is entitled to ¾ th representation in the Board of SACL on the basis that Aapico currently has majority in SGAH. It is submitted that the Singapore Arbitration Award presently not enforceable since UK Court is yet to finally determine whether Aapico is at all entitled to control of SGAH. c) The Aapico moved the Hon'ble High Court of Madras seeking enforcement of Singapore Award, but High Court is yet to permit enforcement and the same is pending consideration. d) In the meanwhile, Aapico has taken law into its own hands and sought to unilaterally amend the Articles of Association of SACL, firstly, through a postal ballot. It is to state that the amendment to the articles without awaiting the orders of the High Court of Madras is contrary to Section 48 of the Arbitration and Conciliation Act. e) The Board of SACL on 17.12.2021 rejected the requisition as not valid on multiple legal grounds as stated in above paras. f) The Aapico had no quorum to conduct EGM unless the promotors attended the EGM. To get over the same, the Aapico illegally transferred 4 eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of SHA, seeking proportionate representation in the SACL Board as provided in the SHA, appointment of CFO as per Clause 4 and 27 of SHA and other reliefs. Hence, the Learned Senior Counsel submitted that the Appellants have every right to issue notice for calling and convening an EGM and implement the resolutions passed therein in accordance with the law. 49. Having discussed the rival contentions of the parties, this Tribunal intend to deal with the SHA dated 29.09.2018. SHA: Date 29.09.2018: 50. It is an admitted fact that the parties have entered amended and re-stated shareholders agreement dated 29.09.2018. From the preamble, the following are the parties to the SHA viz. i) Aapico Hitech Public Company Ltd. (Incorporated under the laws of Thiland). ii) Aapico Investment Pte. Ltd. (Incorporated under the laws of Singapore) iii) ABT Auto Investment Ltd. (Incorporated under the laws of England and Wales) iv) Sakthi Global Auto Holdings Ltd. (Incorporated under the laws of England and Wales) v) Sakthi Auto Component Ltd. (Incorporated under the laws of India) vi) Sakthi Automotive Group USA, Inc. (Incorporated under the laws of USA). 51. Clause 4 of the SHA deal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition made by a Shareholder under Section 100 of the Companies Act, 2013. Having failed to call the EGM within 21 days, the SGAH became entitled to issue a notice convening an EGM in accordance with Section 100 of the Companies Act, 2013 and accordingly, in exercise of its statutory right, the SGAH issued a notice dated 29.12.2021 under Section 100 of the Companies Act calling for an EGM of SACL to be held on 25.01.2021 by video conference at 10 a.m. for passing resolutions relating to appointment of Aapico Nominee Directors and removal of the ABT Nominee Directors (Page 550 of Volume-3). The EGM notice was sent to the Members and also all the Directors of SACL and followed due procedure as contemplated under the Companies Act, 2013. 57. When the CP was listed on 17.01.2022, the Counsel appearing for SSL without filing any application or documents on records made an oral mention and pressed for an urgent stay on the EGM scheduled to be held on 25.01.2022. Having, heard the matter by the NCLT on 18.01.2022, the Counsel appearing for the Appellants had given an undertaking that the EGM scheduled to be held on 25.01.2022 will take place, however, the implementation of the resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision of law, two situation arises for calling the EOGM. The Board on its own may call an EOGM of the Company. On the requisition of the Members of the Company who hold not less than one tenth of paid-up share capital. If the Board does not call the meeting despite requisition given by the member of the Company, the requisitionists may call the meeting themselves within a period of three months from the date of requisition. In the present case, the requisitionist calling an EGM was given a notice on 15.11.2021. However, the Board rejected the calling of the EGM by the requisitionists i.e. SGAH. While so, the SGAH issued notice under Section 100 dated 29.12.2021, calling for the EGM of SACL to be held on 25.01.2022. This Tribunal is of the view that the requisitionists has followed the due procedure of law in issuing a notice for convening an EGM. The Shareholder of the Company has every right to issue a notice calling for an EGM. However, in the first instance the SACL Board rejected the notice of the requisitionists calling EGM. This Tribunal is of the view that the Shareholder of the SACL rightly exercised its statutory right in calling EGM of the Shareholders and there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus on winding up." At para 95 the Hon'ble Supreme Court held as: "The holders of the majority of the stock of a corporation have the power to appoint, by election, directors of their choice and the power to regulate them by a resolution for their removal. And, in injunction cannot be granted to restrain the holding of general meeting to remove a director and appoint another." At para 99 held as under: "Again in Bentley Stevens Vs. Jones, it was held that a shareholder had a statutory right to move a resolution to remove a director and that the Court was not entitled to grant an injunction restraining him from calling a meeting to consider such a resolution." At para 100 held as under: "Thus, we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to 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 Section 173(2) of the Companies Act, there shall be annexed to the notice o the meeting a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not open to the Company Law Board to issue injunction with regard to functioning of the company." At para 62 the Hon'ble High Court has held: "For the reasons stated above, the impugned order passed by the Hon'ble Company Law Board cannot be sustained. Consequently, these appeals are allowed and the decision of the Hon'ble Company Law Board, staying implementation of the decision taken in the EGM is ordered to be set aside." 66. Respondents' citations: (i) Cosmo Steels Pvt. Ltd. & Ors. Vs. Jai Ram Das Gupta & Ors. (1978) 1 SCC 215 (ii) Gordon Woodroffe and Company Ltd. UK Vs. M/s Gordon Woodroffe and Company Ltd. Chennai & 6 Ors. (1998) III CTC 589, Para 46, 47. The Hon'ble High Court of Madras held at para 47 as under: "That apart as we have seen above, the High Court has granted injunction with reference to the shares held by Trident Investments & Portfolio Services Pvt. Ltd. Hence, no one other than Tracstar or Trident can exercise the voting rights of 6.84%. In paragraph 120 of the petition there is an averment to the following effect: "Even the amount paid by Tracstar and Shoe Specialities for acquisition of the shares in Gordon Woodroffe (India) were fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge in the ownership of shares, there is no change in control of the company on account of such change in ownership. The said observation of the Hon'ble High Court is not applicable to the present facts of the case. 68. The Learned Counsel for the Respondents relief upon the judgment of the Hon'ble Supreme Court in re-V.S. Krishnan (iii) (supra), the Hon'ble Supreme Court observed that the claim "legitimate expectation" cannot be extended to and there is no specific promise that the petitioners would be given directorship permanently. The said observation of the Hon'ble Supreme Court is in different context and therefore the said observation is not applicable to the facts of the present case. Further, the Learned Counsel for the Respondent relief upon the judgment in re-M.S.D.C. Radharamanan. The Hon'ble Supreme Court while dealing with the powers of Sections 397, 398, 402, 433 and 443 held that the jurisdiction the Company Law Board having been couched in wide terms and as diverse reliefs can be granted by it to keep the company functioning. Further it is held that the Company Law Board would exercise its jurisdiction the powers conferred on it by statute. There is no quarrel wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 45 days from the date of receipt of such requisition the meeting may be called and held by the requisitionists themselves within a period of 3 months from the date of the requisition. Failing to call the meeting by the SACL Board, the requisitionist itself convened a meeting of EOGM on 25.01.2022 is in accordance with law. When a shareholder has a right to call and convene a meeting, more particularly EOGM, the EOGM cannot be restrained as held by the Hon'ble Supreme Court in LIC Vs. Escort. Further, the NCLT ought not to have granted injunction in implementing the decision / resolutions passed by the shareholders in EGM held on 25.01.2022 unless a prima-facie finding is recorded that the decision is prejudicial to the public interest or the company at large. In the present case, the Learned NCLT passed the impugned order restraining the Appellants in giving effect to any resolutions that was passed at the EGM held on 25.01.2022 till the disposal of the Company Petition, in our view is without any proper analysis and no finding recorded with regard to how the outcome of the resolution / decision is prejudicial to the public interest or the company at large. The Learned NCLT merel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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