9911796707
TMI Blog2024 (2) TMI 1514X X X X Extracts X X X X X X X X Extracts X X X X ..... der Order XXXIX Rule 1 and 2 of the Code of Civil Procedure, 1908, seeks an interim injunction restraining the agents, employees, and officers of the defendant company from proceeding with the voting on a Proposed Resolution dated 10.01.2025. The said Resolution pertains to re-appointment of the plaintiff as Executive Chairperson/Managing Director at its 40th Annual General Meeting [AGM] scheduled for 07.02.2025. The plaintiff further seeks to restrain the defendant company from placing the Proposed Resolution for voting, from declaring the results of any such voting, and from considering or passing any Resolution aimed at removing the plaintiff as Executive Chairperson/Managing Director during the pendency of the suit. Brief Facts 2. The plaintiff currently serves as the Executive Chairperson of Religare Enterprises Limited [REL]. She also holds key positions as Chairperson cum Managing Director of ReligareFinvest Limited and Non-Executive Chairperson of Care Health Insurance Limited and Religare Broking Limited. The defendant-company, REL, is a Core Investment Company incorporated in the year 1984 under the Companies Act, 1956, and registered with the Reserve Bank of India [RBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of three consecutive years, effective from 26.02.2020. According to learned senior counsel, the said Resolution has been passed under Section 196 of the Companies Act, 2013, which does not render the term of an Executive Chairperson, appointed for a fixed tenure exceeding one year, to be liable to retire by rotation. However, the Resolution and its accompanying explanatory statement erroneously recorded that the plaintiff was "liable to retire by rotation," which, according to him, is inconsistent with the provisions of Section 196 of the Companies Act, 2013. 7. According to learned senior counsel, the reference to Section 152 in the explanatory statement further incorrectly suggested that the appointment of the plaintiff was governed by its provisions. According to learned senior counsel, the requirement of retirement by rotation is inapplicable to fixed-term appointments made under Section 196, and such liability, if at all, would only arise upon the expiration of the designated tenure. Additionally, the appointment letter dated 26.02.2020 explicitly stated that the appointment was for a fixed term of three years, automatically terminating upon its completion. 8. Subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once a person is appointed under Section 196[2] for multiple years, the provision for retirement by rotation under Section 152[6] ceases to apply until the completion of the fixed term. The provisions of Section 196[2] override Section 152[6], and any interpretation to the contrary would defeat the legislative intent behind carving out a distinct provision for the appointment of a Managing Director for a term of up to five years. 13. He vehemently contends that the Resolution seeking her re-appointment cannot be put to vote each year when her term is already in force. Furthermore, the proviso to Section 196[2] explicitly states that no re-appointment under this Section can be made earlier than one year before the expiry of the existing term. Given that the current appointment of the plaintiff is valid until 25.02.2028, the phrase "liable to retire by rotation" under Section 152[6] becomes redundant for the duration of her fixed term and any such requirement can only arise once her tenure under Section 196 expires. 14. Learned senior counsel further places reliance on the RBI Master Direction - Core Investment Companies [Reserve Bank] Directions, 2016, dated 25.08.2016, which, acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon to decide the application of the plaintiff under Order XXXIX Rule 1 and 2 of the CPC, seeking to restrain the defendant from proceeding with the proposed Resolution until the disposal of the main suit. 18. Pursuant thereto, several applications have been filed by certain members and stakeholders of the defendant-company, seeking impleadment and raising objections to the relief sought in the present application. However, at this stage, the Court does not consider it appropriate or necessary to entertain or examine the arguments sought to be advanced by the applicants therein in relation to the grant of the injunction sought by the plaintiff. 19. The crux of the present controversy essentially revolves around the claim of the plaintiff that her appointment as the Executive Chairperson/Director of the defendant-company was for a fixed term of five years, commencing from 26.02.2023 to 25.02.2028, and that any action seeking her re-appointment through rotation is legally untenable and procedurally improper. The plaintiff contends that despite her fixed-term appointment, the defendant-company has erroneously proposed a Resolution in the upcoming 40th AGM, seeking her re-appointment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt will be justified in declining to issue injunction. In the instance case the respondent plaintiff was claiming to enforce the contract of service against the management of the institution. The refusal of injunction could not cause any irreparable injury to him as he could be compensated by way of damages in terms of money in the event of his success in the suit. The respondent was therefore not entitled to any injunction order. The District Judge in our opinion rightly set aside the order of the Trial Court granting injunction in favour of the plaintiff respondent. The High court committed error in interfering with that order." 21. The aforesaid principle has been relied upon by this Court consistently in Hari Krishan Sharma v. MCD 1987 SCC OnLine Del 286, I.K. Mehra v. Wazir Chand Mehra 1997 SCC OnLine Del 356, and B.M.L. Garg v. Lloyd Insulations (India) Ltd 1992 SCC OnLine Del 447. In light of this well-settled legal position, it is evident that an applicant seeking an injunction must establish all three essential ingredients, i.e., prima facie case, balance of convenience, and irreparable injury. These ingredients must be satisfied concurrently, and the inability of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iously exercised and only upon clear and satisfactory grounds, otherwise it may work the greatest injury". 25. In Gujarat Bottling Co. Ltd. v. Coca Cola Co (1995) 5 SCC 545, the Supreme Court has held that, apart from the three considerations noted above, the Court shall also look at the conduct of the parties seeking an injunction and may refuse to grant the same if the parties do not appear to have approached the Court with clean hands. The relevant portion of the said decision reads as under:- "47. In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, jurisdiction of the Court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the Court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the Court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the Court has to show that he himself was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is whether monetary compensation alone would be sufficient to redress the harm caused by the denial of injunction. This assessment is inherently case-specific and must be made in light of the particular facts and circumstances of each case. Reference can be made to the decision in the cases of GMNCO Ltd. v. Ravi Gupta (2001) 3 AP LJ 40 (DNC) (Del) and Som Datta Bukders Ltd. v. Kanpur Jal Sansthan 2002 SCC OnLine All 294. 29. Furthermore, with respect to the aspect of irreparable harm, juxtaposing the settled jurisprudence to the specific facts of the instant case, assuming for the sake of argument that the injunction is not granted, thereby requiring the plaintiff to undergo the election process, and further presuming that she is not re-elected as a director at the AGM to be held on 07.02.2025, any harm suffered by the plaintiff would, in any event, be compensable in monetary terms and the said compensation is determinable in terms of the letter of appointment of the plaintiff. In the event that, upon adjudication of the present suit, this Court were to hold that Section 196 of the Companies Act, 2013 prevails over Section 152, thereby rendering the purported removal of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the cases of Jagbir Singh v. Haryana State Agriculture Mktg. Board (2009) 15 SCC 327, Ashok Kumar Sharma v. Oberoi Flight Services (2010) 1 SCC 142 and BSNL v. Kailash Narayan Sharma (2014) 16 SCC 440 among a catena of other decisions. 33. Moreover, the Supreme Court has consistently held that interim relief staying termination should not ordinarily be granted, except in exceptional circumstances where irretrievable consequences would ensue, rendering the final adjudication infructuous or creating a fait accompli. This Court, in Air India Ltd. v. Aditya Beri 2012 SCC OnLine Del 3014 and in Vikas Kumar v. SDMC 2023 SCC OnLine Del 274, following this principle, observed that even if a termination is ultimately held to be illegal and unjustified, the affected party can always be compensated by awarding full salary for the period they remained out of employment. 34. Applying this principle to the present case, the relief sought by the plaintiff effectively amounts to a stay on her purported re-election and apprehended termination by requiring the defendant-company to retain her in the position of Executive Chairperson until the final determination of the suit. However, as establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Act, 2013 (hereinafter referred to as "the Act of 2013") and the rules issued thereunder. The letter further records that the re-appointment was approved by the Nomination and Remuneration Committee (NRC) and the Board of Directors of the defendant-company in their meeting held on 10.08.2022, and was subsequently ratified by the shareholders in the Annual General Meeting (AGM) conducted on 23.09.2022. For the sake of clarity, the relevant portion of the letter dated 24.02.2023 is extracted as under:- "24th February, 2023 Employee ID :63036 Employee Name :Dr. Rashmi Saluja Designation : Executive Chairperson Company Name : Religare Enterprises Limited Letter of Re-Appointment as Executive Chairperson of Religare Enterprises Limited ("REL"/ "Company") Dear Dr. Rashmi Saluja, At the outset, we would like to thank you and acknowledge your unswerving contribution in the success of the Company. We recognize your unconditional dedication and efforts as a key stakeholder in the Company's journey. We are pleased to inform you that on completion of your existing term as Executive Chairperson on 25(tm) February, 2023, you have been re-appointed as Executive Chairpe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure 1. Total Fixed Remuneration Component Name (INR) Per Month Per Annum Basic 19,76,667 2,37,20,000 Allowances & Reimbursements LTA 6,250 75,000 Education Allowance 200 2,400 Additional Allowance 28,63,472 3,43,61,668 Monthly Gross 48,46,589 Gratuity 95,078 11,40,932 Total Fixed Cost (TFC) 49,41,667 5,93,00,000 2. a. Gratuity (If applicable) - As per Gratuity Act, Payable only after completion of 5 continuous year of service in organization b. Total Fixed Remuneration payable by way of salary, dearness allowance and any other allowances may be increased w.e.f. April 01, 2023 by an annual increment of up to 20% on the last Total Fixed Remuneration, payable monthly, in terms of provisions of Schedule V of the Act or such other amount within the limits prescribed by the Act from time to time 2. Variable Pay Performance Linked Incentive: You are eligible for Performance Linked Incentive for each FY which shall be payable in the range of 0% to 150% of the Total Fixed Remuneration appraised in the FY, payable based on measurable performance indicators as decided for the role; and governed by the policy of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions permitted under applicable law including Tax." 39. It is also pertinent to note that while the plaintiff was appointed on 24.02.2023 for a fixed tenure of five years, a careful perusal of the minutes of the Board Meeting dated 10.08.2022 and the Annual General Meeting dated 23.09.2022 reveals that both explicitly stipulated the retirement of the plaintiff by rotation. This clearly indicates that the understanding of the plaintiff that she is liable to retire is not something that was introduced for the first time in 2025, but was well embedded in the earlier Resolutions passed in the aforementioned board and general meetings. 40. Furthermore, the extract of the minutes of the 39th AGM of the defendant-company dated 27.09.2023, specifically Resolution no. 2, reaffirms this position. The said Resolution, inter alia, unequivocally records that the plaintiff, in accordance with the provisions of the Companies Act, 2013, retired by rotation and being eligible, offered herself for re-appointment, which was subsequently approved. This demonstrates that even after 24.02.2023, the plaintiff not only accepted but also subjected herself to re-appointment following her retirement by rot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned Proposed Resolution to be placed before the 40th AGM, the notification for the same was issued on 15.01.2025. However, the instant suit and the accompanying application were filed only on 28.01.2025, nearly thirteen days after the plaintiff admittedly became aware of the resolution. When the matter was first placed before the Court on 29.01.2025, the Court, in the interest of procedural expedition, issued summons in the suit and scheduled the instant application for consideration. Furthermore, the AGM is not a mere discretionary exercise undertaken at the behest of the company but a statutory obligation, deriving its existence, powers, and duties from the Companies Act. Given its inherent significance, any judicial interference with such a statutory exercise carries far-reaching and unforeseen repercussions. The plaintiff, if genuinely aggrieved by the notice dated 15.01.2025, ought to have acted with due diligence and expedition rather than waiting until the eve of the AGM scheduled on 07.02.2025 before approaching this Court. Thus, at this belated stage, any interference by this Court would result in unnecessary inconvenience to all parties concerned. It is trite la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests purely with the share holders of the company and can be decided in an EGM. Calling of an EGM is the power of the share holdersand a perusal of the notice dated 30th June, 2018 clearly shows that the said notice has been issued under Section 100 of the Companies Act.The notice clearly specifies the resolutions that are intended to be passed. The EGM was originally scheduled for 24th July, 2018 but was thereafter postponed. The Plaintiff herein objected that the EGM notice did not give the 14 days' notice period which was required to be given as per law. The question as to whether an injunction can be passed against holding of an EGM has been settled by the Supreme Court in the decision of Life Insurance Corporation (supra) The Supreme Court in the said judgment has categorically held that the power to appoint Directors is with the holders of the majority of the stock. No injunction can be granted to restrain the holding of such a meeting... *** 13. As per this binding dictum, there can be no injunction restraining holding of an EGM. The majority share holders have the power to appoint Directors and the power to regulate them by passing a resolution for removal. The reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n particular, the nature of the concern or the interest, if any, therein of every director, the managing agent if any, the secretaries and treasurers, if any, and the 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 the reasons for the resolutions which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Ltd., has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some Directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions." 46. In the present case, the relief sought by the plaintiff, in effect, challenges the proposed re-election of the plaintiff as a Director in the 40th AGM and thus, seeks her continuation in her current position. However, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unwarranted judicial interference in a democratic and statutory exercise of corporate governance. The proposed course of action of the defendant-company is, prima facie, in consonance with the procedure followed during the earlier re-appointment of the plaintiff, and no apparent legal infirmity has been demonstrated. The challenge of the plaintiff to the Proposed Resolution is primarily based on the alleged misinterpretation of the terms of her appointment, and on these grounds, as noted earlier, a prima facie case justifying the grant of an injunctive relief has not been established. 50. In cases of this nature, unless the plaintiff conclusively establishes that the actions of the defendant-company are entirely de hors the legal provisions and patently erroneous, while also demonstrating a prima facie case and proving that the damages she may suffer are irreparable and cannot be compensated monetarily, the Court must exercise restraint in interfering with the internal management of the company. In the present case, upon a careful examination of the facts and arguments advanced, assessed on the anvil of the established legal principles governing injunctions, the Court is of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
