TMI Blog2022 (8) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... unilaterally take law into their own hands. As per the provisions of Section 100(4) of the Companies Act, 2013 if the Board does not within 21 days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than 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 - 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 merely recorded the pending proceedings before the Hon ble High Court of Madras and UK Court. The NCLT ought to have seen that whether the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. 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 and contrary to 2nd Respondents articles and 2018 SHA, continue to be on the Board of Directors of SACL (2nd Respondent). 4. The impugned order has resulted in an absurd yet unfortunate situation where the appellants through SGAH or not being allowed to manage and take control of the Board of Directors, who own 77.04% in SACL by SGAH, while the 1st respondent which has a negligible shareholding of allegedly 0.85% in SACL, continues to control the SACL Board. The current SACL Board is incompetent and caused SACL to commit several non-compliances, statutory violations and misgovernance. By the impugned order the appellants are restrained from exercising its corporate and contractual rights. 5. The Learned Senior Counsel further submitted that under Article 12 of the SACL Articles read with Clauses 4.1, 4.3 and 4.14 of 2018 SHA, the Aap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate 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 3rd Respondent filed I.A. No. 882/2020 before the NCLT inter-alia seeking an interim injunction against the Appellants from amending the Articles of SACL. However, no orders have been passed in the said I.A. by the NCLT. 9. On 05.11.2020 SACL passed resolutions for amending the Articles by postal ballot. Thus, the terms of 2018 SHA came to be incorporated in the Articles of SACL. The Articles as amended were taken on record by the ROC Coimbatore on 26.08.2021. Accordingly, on 07.09.2021, the 3rd Appellant issued a letter to the SACL Board seeking resignation of the 1st Respondent ABT Nominee Directors on SACL Board and also issued notice under Section 169 of the Companies Act, 2013 for removal of these nominee directors and requisitioned the SACL Board to call and EGM for passing the necessary resolution. However, the SACL Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 General Meeting (EGM) scheduled to be held on January 25, 2022 as per the attached Agenda and Notice dated December 29, 2021 till the next date of hearing in the matter. (Emphasis added) 16. The above undertaking was accepted by the NCLT, however, the daily order sheet dated 17.01.2022 which was made available on 24.01.2022 wrongly recorded the undertaking as under: Counsel for R3 is directed to file a memo accompanied by an undertaking after serving copy on the other side. In view of undertaking memo being filed by the Respondent Counsel, the report of the meeting should not be effected and the status quo be maintained until further orders by this Tribunal. The Respondent shall file counter within two weeks from today. List the matter on 22.02.2022 for hearing. (Emphasis added) 17. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 respondent filed a detailed counter affidavit and submitted that the appeal is unsustainable in law and on facts. He submitted that the impugned order dated 29.03.2022 passed by the NCLT does not suffer from any infirmity and is passed in the interest of the company. Vide interim order dated 29.03.2022 the NCLT has preserved the status quo in the constitution of the Board of Directors of the 2nd Respondent i.e. SACL. The fact remains that the right of the 3rd Appellant to control the holding company of SACL is disputed and is pending trial in UK Court and the trial is scheduled for July 2022. Further, the foreign award under which the Appellant claims right to Constitute the Board of SACL in its entirety is yet to be held to be enforceable in India and enforcement application filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid 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 aforesaid events happened during a pendency of the Company Petition before the NCLT and without seeking any kind of leave of NCLT. 27. It is submitted that the 2nd Respondent i.e. SACL (target company) has grown to great heights and is a leader in design and manufacture of steering knuckles and breaking parts. It has a global base and the Aapico wants to tap into this potential and seeking to unlawfully gaining illegal profits by ousting the present management. As stated supra vide a requisition dated 15.11.2021 the SGAH called EGM to be held on 25.01.2022 and the notice convening to EGM is proposed to removal of 5 of the existing directors and appointment of 5 new directors. The Board of SACL in its meeting dated 17.12.2021 after a detailed considerations rejected the requests for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 effect to any resolution purportedly passed at the EGM held by the requisitionists on 25.01.2022 till the disposal of the present Company Petition. 34. The Learned Senior Counsel for the Appellant herein contend that the interim order passed by the Learned NCLT is contrary to law and facts and prayed this Bench to vacate the interim order passed by the NCLT. 35. The 1st Respondent in CP No. 25/2022 is Shakthi Auto Component Limited (SACL), in which the Appellants and some of the Respondents are the shareholders. Even the 1st Respondent herein (Petitioner) arrayed the SACL as the 1st Respondent and made allegations against the Appellants herein. 36. This Tribunal intend to give the shareholding pattern of SACL as per the pleadings of the parties for be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interfering in the management of its operations or finances; c. An Order of Temporary Injunction restraining the Respondents 4, 5 and 6 either by themselves or through SGAH, from making any attempts to reconstitute the Board of the 1st Respondent Company; d. An Order of Temporary Injunction restraining the Respondents from in any manner acting upon or giving effect to any resolution purportedly passed at the EGM allegedly held by the requisitionists on 25.01.2022. 42. The 1st Respondent (Petitioner) in the above CP, made averments that the Aapico issued a special notice and requisition dated 07.09.2021 demanding that the board members of SACL including the Chairman of the Group shall tender their resignation so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 equity shares to 4 distinct 3rd parties and the said transfers effected in the month of December, 2021. 46. In rebuttal the Learned Senior Counsel for the Appellant submitted that the ABT-UK created a charge on its 50.01% shares of SGAH in Aapico s favour and the 1st Respondent herein (Petitioner) is not a party to the Share Charge Agreement, therefore, the Petitioner therein cannot question the invocation of pledge by Aapico. Due to defaults of the loan by the ABT-UK, shares in SGAH, the Aapico invoked the share charge and appropriated 50.01% shares of ABT-UK in August, 2019. Thus, the Aapico became 100% shareholder of SGAH as on 15.08.2019 as per law. Though the SGAH holds 77.04% in SACL, the Aapico who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 with Directors and Management. Clause 4.1 the board shall consists up to 8 persons of which; a) Aapico shall be entitled to appoint and maintain in office up to such number of Directors (and to remove any Director so appointed from office and to appoint another in the place of any directors so removed) at all times as is proportionate to their shareholding; and b) ABT Auto shall be entitled to appoint and maintain in office up to such number of directors (and to remove any Director so appointed from office and to appoint another in the place of any directors so removed) at all times as is proportionate to their shareholding. 52. Clause 4.3 of SHA, the rights of Aapico under C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proposed to be passed by the shareholders of SACL will not act upon. 58. It is seen that the EGM scheduled on 25.01.2022 was held and the resolutions were passed, however, the resolutions have not been implemented in view of the undertaking given by the Appellants. Finally, the Learned NCLT passed the impugned order on 29.03.2022. 59. The moot point for consideration is whether the right of the shareholders calling the EGM of the Company in view of the statutory right enshrined in the statute can be interfered with by the Tribunal. Provision of law: 60. Section 100 of the Companies Act, 2013 is deal with calling of extraordinary general meeting. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is no illegality in convening and holding the meeting on 25.01.2022. 62. This Tribunal is also of the view that the amended and re-stated Shareholders Agreement dated 29.09.2018 provides for the appointment of Directors by the Appellants group. As per Clauses 4.1, 4.3, 4.4 and 4.14. Further, Clause 12 of the AOA of the SACL empowers that the Directors of the Company shall be appointed in accordance with the amended and re-stated Shareholders Agreement. 63. It is unequivocal that the Articles regulates the affairs of the Company and the Shareholders have every right to act upon the Articles of the Company. In exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njunction 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 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 treasures, if any, and 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 to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdon 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 funded by Shaw Wallace. Therefore, when the ownership of shares is seriously disputed with reference to 44.48% of shares., how the petitioner can claim that there is a material change in the control of the company by an alteration in the ownership of the company s shares? Even if we assume that there is change in the ownership of shares, there is no change in control of the company on account of such change in ownership . The control of the company is undoubtedly with appellants. i.e. M.R. Chhabria s group. (iii) V.S. Krishnan Ors. Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctorship 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 with respect to the powers to be exercised by the respective Tribunals the powers which conferred by statute on it, the facts in the present case are different. 69. The judgment of the Hon ble Supreme Court in LIC vs. Escorts had laid down the law on the issue of rights of a shareholder to call an EGM and the Tribunals/Courts cannot be restrained from calling a meeting. The Hon ble Supreme Court case, categorically held the rights of a shareholder at para 84. Further, the Hon ble Supreme Court has held that every s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 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 merely recorded the pending proceedings before the Hon ble High Court of Madras and UK Court. The NCLT ought to have seen that whether the requisitionist has right to call for an EGM in accordance with law or not. Admittedly, the 3rd Appellant holding 77.04% of shareholding in SACL. 74. This Tribunal is of the view that the right exercised by the requisitionist is in accordance with shareholder agreement dated 29.09.2018 and in accordance with Articles of Association of the SACL. This Tribunal in uneq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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