Court Invalidates Director Appointments, Orders Reinstatement & Audit

The court declared the appointments of Respondent Nos. 2 and 3 as Directors invalid due to lack of proper notice and quorum. The shifting of the registered office without proper authority was deemed null and void. The removal of the Petitioner as a Director was found to be illegal and oppressive, resulting in reinstatement. Allegations of siphoning funds were referred for audit, with liable directors to compensate for any losses. The court set aside the resolutions in question, reinstated the Petitioner, and ordered a special audit, without awarding costs.

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Issues Involved:
1. Illegal appointment of Respondent Nos. 2 and 3 as Directors.
2. Shifting of Registered office without following due process of law.
3. Removal of the Petitioner as a Director.
4. Siphoning of the Funds.

Detailed Analysis:

Illegal Appointment of Respondent Nos. 2 and 3 as Directors:
The Petitioner alleged that Respondent Nos. 2 and 3 were illegally appointed as Directors during a Board Meeting purportedly held on 20/02/2010 without following due process and without proper notice, thereby rendering the appointment null and void. The Petitioner contended that no notice of the meeting was received, and the meeting lacked the required quorum as per the Articles of Association. The Respondents argued that notices were duly served and that the appointments were made in a legally convened EOGM. However, the court found the Respondents' evidence, including the minutes of the EOGM, to be fabricated and the appointments of Respondent Nos. 2 and 3 as Directors were declared non-est, illegal, and set aside.

Shifting of Registered Office without Following Due Process of Law:
The Petitioner alleged that the registered office was shifted without proper authority and due process. The Respondent No. 3 claimed that a circular resolution was passed and circulated, but the Petitioner was not available to sign it. The court found no corroborative material to prove that the notice was duly served upon the Petitioner and declared the Board Meeting where the resolution was passed as null and void, amounting to an act of oppression.

Removal of the Petitioner as a Director:
The Petitioner alleged illegal removal from the office of the Director in an EOGM purportedly held on 24/04/2010 without proper notice and without holding a prior Board Meeting. The Respondent No. 3 argued that the removal was done through a resolution by circulation, which the Petitioner refused to acknowledge. The court found that the Petitioner was removed without following due procedure and without any convincing reason, amounting to an oppressive act. The removal was declared non-est, ultra vires, and illegal, and the Petitioner was reinstated as a Director.

Siphoning of the Funds:
The Petitioner accused Respondent Nos. 2 and 3 of siphoning off funds amounting to Rs. 25,57,517/- for their personal benefit. The Respondents countered that the payments were made to creditors in the due course of business and were duly accounted for. The court decided that the accounts of the Company should be audited by an appointed Chartered Accountant to ascertain any loss caused by siphoning of funds, and any director found responsible would be liable to make good the loss.

Court's Order:
1. The EOGMs held on 20/02/2010 and 24/04/2010 were declared non-est, invalid, and illegal.
2. The appointments of Respondent Nos. 2 and 3 as Directors were declared ultra vires, null, and void, and were set aside. The Company was directed to file appropriate forms showing their cessation as Directors.
3. The resolution for shifting the registered office was set aside, and status quo ante was restored.
4. The resolution removing the Petitioner as a Director was set aside, and the Petitioner was reinstated with all benefits.
5. The newly constituted Board was directed to appoint a Chartered Accountant for a special audit to assess any loss caused by siphoning of funds, with liable directors to make good the loss.
6. No order as to costs.
7. Interim orders, if any, were vacated, and pending C.A.s were disposed of accordingly.
8. A copy of the order was to be circulated to all concerned.

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