TMI Blog2023 (3) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles of Association of the Company, clearly mentions that A Circular Resolution, shall be deemed to have been duly passed by the Board, if it has been approved in writing (which would include confirmation via electronic or other means) by a majority of directors constituting the Board for the time being - Also that, Section 118 (10) of the Companies Act, 2013, enjoins that Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under Section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government. Furthermore, it is latently and patently quite clear that, as per Article 21.3 of the Articles of Association, the Majority, includes the consent of the 1st Appellant. That apart, as per Secretarial Standards-1 clause 6, the Circular Resolutions, have the same effect, as that of passed in the Board Meeting and hence, the Majority Vote, as applicable, for the Board Meeting, equally applies, to the Resolutions, passed by the Circulation, as well - the Circular Resolutions, cannot be said to have been duly approved, by the Majority Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittee to run the day-to-day affairs of the R1 company. and directed the matter to be listed on 11.03.2021, for Counter and hearing. Appellants Pleas: 3. The Learned Practising Company Secretary for the Appellants submits that the impugned order dated 10.02.2021, passed by the National Company Law Tribunal , Division Bench II, Chennai, in CP/794/2020, is liable to be set aside, since the same is opposed to Law , against the Principles of Natural Justice , and further that the Tribunal , had committed an Error , in not granting Stay , on such void Circular Resolutions , as per the Interim Prayers of the Appellants , in the Petition . 4. The contention of the Appellants is that the 1st Appellant / Executive and Promoter Director of the 1st Respondent / Company , has equal rights in the Management of the Company , and he ought to be a part of any type of communications and decisions, taken by the Company , and in fact, the direction issued by the Tribunal , on 10.02.2021 that R3 to R11 , shall consider, creating an Interim Committee , to run the day-to-day affairs of the 1st Respondent Company , without the 1st Appellant , is an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Clause 22.4 of the Articles of Association of the Company , reads as under: A circular resolution shall be deemed to have been duly passed by the Board, if it has been approved in writing (which would include confirmation via electronic or other means) by a majority of directors constituting the Board for the time being . 10. Furthermore, on behalf of the Appellants Clause 21.3 of the Articles of Association is referred to, and the same runs as under: No matter which has not been detailed in the notice, shall be transacted at any meeting of the Board, provided however that with the consent of the majority of the directors of the company (which majority shall include at least 1 (one) MSM Nominee Director (to the extent he / she has not been removed in accordance with these Articles), 1 (one) EM Nominee Director and 1 (one) ADV Nominee Director) a matter not included in the notice may be transacted at the meeting. 11. The Learned PCS for the Appellants points Clause 6 of the Secretarial Standards-1, which enjoins passing of Resolution by circulation and the same is as follows: The Act requires certain business to be approved only at Meetings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the Directors of the 1st Respondent Company , had never received the Circular Resolutions , and in fact, the impugned Circular Resolutions (mentioned in Paragraph (f) of the Volume I of the Appeal Paper Book - Diary No. 108 dated 03.03.2021), Viz. By virtue of these circular resolutions, R9 was given unfretted powers to do the following acts: (i) Curtailing the powers of present board which can only be exercised by approval of IJM (ii) Super imposition of IJM in controlling the Bank accounts of R1 (iii) To appoint service providers to assist IJM (iv) IJM authorised to update company staff and provide assurances (v) To replace the manager of UAE subsidiary with IJM (vi) Amending boards of direct and indirect subsidiaries and associates , were not duly circulated to all the Directors , in terms of Section 175 of the Companies Act, 2013, read with clause 6.2 of the Secretarial Standards on Meetings of Board of Directors (SS-1) read with Clause 22.4 of the Articles of Association ( AoA ). 17. As such, the contention that the Resolutions , were circulated to the Appellant s Advocate on 31.10.2020, is not a justifiable one, as the same would be a predated Circular Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted by the 9th Respondent ( IJM ) and non-executive Directors of the 1st Respondent , on their own, instead of bringing the same to the notice of the Whole Time Company Secretary of the 1st Respondent Company . 23. The stand of the Appellants is that the void Circular Resolutions , were already given effect to, by the 9th Respondent and others, which can be seen in email dated 06.11.2020, in and by which, PKF was asked to start audit work by IJM , which again is an Oppressive act , when such Circular Resolutions , were never circulated to the Appellant . 24. According to the Appellants, the 1st Appellant in the email dated 06.11.2020, had consciously assailed the Authority of the 9th Respondent to send email of the void Circular Resolutions , in the Board Meeting , when the Company Secretary was not given any Notice of such Board Meetings. Indeed, the 9th Respondent, had assumed the Role of a Company Secretary , without any Valid Authorization or Permission from the real Company Secretary of the 1st Respondent / Company . 25. It is represented on behalf of the Appellants that the 8th Respondent is a Related Party to the 1st Respondent / Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s , were passed in respect of the 1st Respondent / Company , were taken on record and he was not only unaware of these Resolutions passed, he understood from the MCA email that the 6th Respondent , had utilised the Services of an External Secretarial Agency , for lodging these Resolutions with the Ministry of Corporate Affairs , although he was the Company Secretary . Submissions of Respondent Nos. 3, 4, 5 and 11: 30. The Learned Counsel for the Respondent Nos. 3, 4, 5 and 11 contends that the 11th Respondent / Global Sports Commerce Pte. Ltd. , is a company, for which, the 9th Respondent , was appointed as an Interim Judicial Manager / IJM , and later as Liquidator . As a matter of fact, the Global , was placed under Judicial Management / Restructuring , as per an Order of the Hon ble Singapore High Court dated 22.10.2020 and the 9th Respondent ( Mr. Tam Chee Chong ), was appointed as an Interim Judicial Manager , and that the 9th Respondent , was directed to take steps to secure the Assets of Global . 31. It is projected on the side of the Respondent Nos. 3, 4, 5, and 11 that one such Asset of Global , is its 77.54% Shareholdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o longer on the Board of Directors of the 1st Respondent / Company , no Interim Committee exists, as on date. Also that, as on date, none of the Members of the earlier Interim Committee , are part of the Board of Directors of the 1st Respondent / Company , which now consists of only the 1st Appellant . 37. The Respondent Nos. 3 to 7 are resigned from the 1st Respondent / Company s Board of Directors , subsequent to the passing of the impugned order . In fact, the 8th Respondent , is also ceased to be a Director of the 1st Respondent / Company , with effect from 30.09.2020. Therefore, the 1st Appellant , presently is the single Director , on the Board of Directors of the 1st Respondent / Company . Also that, no such Interim Committee , can even be appointed in the future, by the Respondent No. 3 to 11 (which were ordered to be considered by the creation of such a Committee , through the impugned order ). Besides this, the 4th Respondent himself, had circulated a Circular Resolution No. 10 of 2020-2021 dated 08.03.2021, to among other things Srinivasan Mangalam ( 2nd Respondent ), who the 4th Respondent , now alleges is no longer a Director . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31 are Respondent Nos.10 and 11, the Financial Investors , in the parent company, Global Sports Commerce Pte. Ltd. ( GSC ), which is the successor-in-interest of Insight . 43. It is represented on behalf of the Respondent Nos. 6, 7 and 10, the Circular Resolutions are governed by Article 22.4, read with Articles 29 to 31 and are not within the purview of Article 21.3. Indeed, Article 21.3 of the Articles of Association , provides that in the event, any matter has not been detailed in a Notice , for Board Meeting , the matter shall not be transacted at the Board Meeting , except with the consent of a majority of Directors (including at least one Nominee Director of the 1st Appellant). 44. It is the stand of the Respondent Nos. 6, 7 and 10 that all the Nominee Directors of the 10th and 11th Respondent , being Respondent Nos. 3 to 7 , gave their written Affirmative Consent , and approved the Circular Resolutions . The requirements of Articles of Association , in respect of reserved matters , were complied with. 45. On behalf of the Respondent Nos. 6, 7 and 10, it is pointed out that mere Defect , in Circulation of Draft Resolutions , does not make it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the Respondent Nos. 6, 7 and 10 points out that the Tribunal , had recognised the creation of Interim Committee, through an Order dated 11.03.2021, and further the 1st Appellant, had not co-operated with the Board of the 1st Respondent / Company, and hence, the Interim Committee , so formed had not functioned thereafter. In fact, the 1st Appellant is continuing to mismanage the affairs of the 1st Respondent / Company. 51. According to the Learned Counsel for the Respondent Nos. 6, 7 and 10, the Investors , were always in Majority and hence, there was no question of endeavouring to wrest control from the Appellants (vide Article 11 of the Articles of Association Page 91 of the Appeal Paper Book). 52. Moreover, the 1st Appellant had expressed his intention to voluntarily exit from the GSC Company Group , on numerous occasions, including before the Tribunal , on 10.02.2021 (vide email dated 09.04.2020 and 14.04.2020 from the 1st Appellant / MSM . Indeed, the 1st Appellant had resigned as Managing Director of the 1st Appellant Company on 01.04.2018, and despite his resignation as Managing Director, the 1st Appellant has continued and always been in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its Meeting, held on 20.07.2020, subject to the approval of the Shareholders at the next Annual General Meeting of the Company. Also that, for the Appointment of 8th Respondent , the Shareholders of the 1st Respondent / Company , had not passed any Resolution , and hence, he ceased to be a Director from 30.09.2020. Also that, the Company Secretary , had failed to knowledge of the Investors and their Nominees i.e. Respondent Nos. 3 to 7, as to the cessation of Mrs. Mangalam Srinivasan (2nd Respondent) and Mr. Balamurugan , IAS. (8th Respondent) as Directors , and therefore the Circular Resolutions , were circulated to Respondent Nos. 2 8, who were not Directors , as on date of Circulation of the Circulation Regulations . In fact, excluding the Signature of the 8th Respondent, the Circular Resolutions , were validly passed. 56. The Learned Counsel for the Respondent Nos. 6, 7 and 10 contends that a Notice , was issued by the Registrar of Companies , Chennai on 08.11.2021, to the 1st Respondent / Company , informing them about the numerous Defaults, committed in relation to the various Sections of the Companies Act, 2013, which took place on account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Debenture Trustee , filed a Petition , before the National Company Law Tribunal , under Section 7 of the I B Code, 2016, in respect of the Defaults in Repayment , continuing from Nov 2019 and later from April 2020, as on this date. 62. The averments made in Section 7 Application, before the Tribunal , is a different subject matter and no submissions are made by the 8th Respondent, because of the fact that the matter is subjudice. The 8th Respondent is a mere Observer / Nominee Director and in fact, the IJM subject matter is between the Appellants and the other Respondents and that the 8th Respondent , has no concern with the same. Contentions of the 9th Respondent: 63. The instant Appeal , is not maintainable against the JM , in his individual capacity, since the JM , is an Officer , appointed by the Singapore High Court , to administer the affairs of GSC and JM , has no personal interest on the affairs of GSC or these Proceedings . Further, any challenge or objection to the JM s functioning, can only be raised before the Court , which appointed the JM . In fact, the JM , was appointed, as Officer of the Court , in Singapore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Board Dated October 2020, circulated to the Petitioner by the 9th Respondent on 5th October 2020. (ii) In ordering the Interim Injunction , restraining the Respondents , from in any manner, communicating to Banks, Financial Institutions, Clients of the 1st Respondent or any other Third Parties that the 1st Appellant / 1st Petitioner, can no longer represent the 1st Respondent / Company . 70. The Appellants in the main CP/794/2020, had sought the undermentioned Final Reliefs : (i) Declaring that the affairs of the Respondent Company, were carried on against the Interest of the Shareholders , and in a manner contrary to Law , by Respondent Nos. 2 to 11. (ii) Declaring that the Circular Resolutions No. 1 to 6 / 2020-2021 dated 3rd November 2020, passed in accordance to the proposals issued by the Board Dated October 2020circulated to the Petitioner by the 9th Respondent on 05.10.2020, is null and void and ultra vires the Articles of Association of the 1st Respondent / Company . (iii) In passing an order of Permanent Injunction restraining the Respondents from in any manner through any resolution of through any other proceedings remove the 1st Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it is latently and patently quite clear that, as per Article 21.3 of the Articles of Association, the Majority , includes the consent of the 1st Appellant . That apart, as per Secretarial Standards-1 clause 6, the Circular Resolutions , have the same effect, as that of passed in the Board Meeting and hence, the Majority Vote , as applicable , for the Board Meeting , equally applies , to the Resolutions , passed by the Circulation , as well. As such, the contra plea(s) , taken on behalf of the Respondents , is not acceded to , by this Tribunal . Viewed in these perspectives, this Tribunal , unhesitatingly, holds that the National Company Law Tribunal , Division Bench II, Chennai, was not correct , in granting the interim reliefs , as prayed for, by the Appellants / Petitioners , in main CP/794/2020, when the Defect in not circulating the Draft Circular Resolutions , goes to the root of the matter. In any event, the Circular Resolutions , cannot be said to have been duly approved , by the Majority Directors , and hence, this Tribunal , holds that the said Resolutions , are Void in Law . 77. Coming to the aspect of the ground reality, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee , is an Otiose one, as held by this Tribunal , in unequivocal term . 82. At this juncture, this Tribunal , pertinently points out that even though, on either side Pleas , were raised, touching upon the merits of the main CP/794/2020, pending on the File of the Tribunal ( NCLT ) and that the Controversies / Claims / Disputes , arising out of SHA , are in connection with SHA / Violation / Invalidity / Termination , etc., this Tribunal , is not delving into the same, as they are not germane , to the ambit of the instant Appeal , and also for arriving at a conclusion in the instant Appeal , based on the facts and circumstances of the instant case, which float on the surface. However, it is open to the concerned Parties , to raise their grievances on factual and legal pedestal, before the Competent Forum , in accordance with Law , if they so desire / advised. 83. Be that as it may, in the light of the detailed foregoing discussions, this Tribunal , keeping in mind of the divergent contentions, raised on either side and taking note of the facts and circumstances of the case, in a conspectus fashion, without any haziness , holds that the Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, the Learned Practising Company Secretary for the Petitioners/Appellants submits that, by means of Circular Resolution No.1 , the 9th Respondent gave all powers of the Board of the 1st Respondent / Company to himself and when the Circular Resolutions , was stayed by this Tribunal , through its Order dated 23.04.2021, passed in Comp. App (AT) (CH) No. 10 of 2021, and in fact, the 9th Respondent had proposed to Sell more than 90% of the Shares of the Company, for which, again, the Control of the Board will be entirely shifted to a new person / party , which is against the Stay Order , passed by this Tribunal on 23.04.2021. 90. In effect, the Plea , taken on behalf of the Petitioners / Appellants is that, the 9th Respondent is endeavouring to flout the Order of this Tribunal dated 23.04.2021, by circumventing and abusing the non-existential position, to gain control of the 1st Respondent / Company. Further, despite the Stay of the Circular Resolution-1, the IJM / JM , has tried to engage with various Stakeholders , to Sell the 1st Respondent / Company , as a whole, as evident from the document, the 9th Respondent , had circulated, which, ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l , which either directs certain things , to be performed by a Person or to Prohibit such person(s) from doing Particular / Certain acts, and that the Person , had knowledge of the said Order . 97. A mere disobedience of an Order of a Court , may not be sufficient to amount to a Civil Contempt . The element of willingness is an indispensable requirement to bring home the charge within the act, as per decision Anil Ratan Sarkar Ors. v. Hirak Ghosh Ors., AIR 2002 SC 1405. 98. It is to be proved that despite having knowledge of such an Order , the person concerned had deliberately and wilfully breached, with an intention of lowering the dignity and image of the Court , as per decision of the Hon ble Supreme Court in Salauddin Ahmed v. Samta Andolan, reported in AIR 2012, SC 3891. Not a Defence : 99. It must be remembered that an Apology , is not a Shield to wriggle out of the Rigour of Law . Further, an Apology , is an act of Contrition , in the considered opinion of this Tribunal . However, it is not meant to operate as an Universal Panacea . 100. No wonder, an Apology , is not to be accepted, if there is No Remorse , No Regret , No R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Jurisdiction , should be sparingly exercised, with due care and caution, as per decision Mrityunjoy Das v. Sayed Hasibur Rahaman (vide Contempt Petition (Civil) No. 202 of 2000 Order dated 16.03.2001), AIR 2001 SC 1293. This Tribunal , keeping in mind of the fact that the void Circular Resolutions , have no longer have any effect, cannot be given effect to, and further that, no such Interim Committee exists and also in the near future, no such Interim Committee , could be appointed, this Tribunal , taking into account all the surrounding circumstances, exercising its sound thinking Judicial Discretion and acting with utmost Care , Caution and Circumspection , as a mitigating circumstance and adopting a pragmatic approach, refrain from imposing any Punishment / Fine for the 9th Respondent , for not adhering to the Interim Order dated 23.04.2021, passed by this Tribunal , in this Appeal , but, as an Eyeopener , ofcourse, keeping in mind of the fact that Be you ever so High, the Law is above you , to Uphold the majesty and dignity of this Tribunal , issues an Advisory Direction that the 9th Respondent , shall act with Utmost Prudence and Diligenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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