Petitioner's Injunction Denied, EGM Decision Upheld, Fiduciary Duty Breach

The petitioner sought injunctions to prevent removal as director and to continue duties related to Unit 'C' of a company. The court found the petitioner's actions, including starting a consultancy service without approval and not assigning patents, breached fiduciary duty. The Extraordinary General Meeting (EGM) removal decision was deemed valid. As the petitioner was no longer a director, relief to carry out Unit 'C' duties was denied. The petition was dismissed for failing to establish oppression or mismanagement, emphasizing shareholders' supremacy in EGM decisions.

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Issues Involved:
1. Whether the petitioner has made out any case seeking injunction restraining the respondents from removing the petitioner from the post of director of the company.
2. Whether the petitioner is entitled to seek a permanent injunction restraining the respondents from interfering with the carrying on duties enjoined on the petitioner in relation to Unit 'C' of the company.
3. To what relief is the petitioner entitled.

Issue-wise Detailed Analysis:

1. Injunction Against Removal as Director:
The petitioner filed under sections 397 and 398 read with sections 402 and 403 of the Companies Act, 1956, seeking to restrain the respondents from removing him as a director. The petitioner received a show cause notice regarding:
- Setting up a consultancy service in the USA.
- Registration of certain patents in the name of his family members.

The petitioner argued that the consultancy service was to promote the company's business and that the patents would be assigned to the company. However, the respondents contended that the petitioner started a parallel business without Board approval, constituting a breach of fiduciary duty. The EGM held on 27.06.2009 resolved to remove the petitioner as director, which was approved by the majority. The Bench found that the petitioner's actions, including starting Devi Consultancy Services (DCS) without Board approval and not assigning patents, constituted a breach of fiduciary duty. The Bench also held that the EGM was conducted in compliance with the Articles of Association and the Companies Act. Therefore, the petitioner's removal was valid and legal.

2. Permanent Injunction to Carry Out Duties Related to Unit 'C':
Since the petitioner was validly removed as a director, he could not continue to carry out duties related to Unit 'C'. The Articles of Association empower the Board to appoint managing/executive directors from among its members. As the petitioner was no longer a director, he had no locus standi to continue as executive director or manage Unit 'C'. The Bench held that the petitioner could not seek relief against the Articles of Association, which are binding on the company and its members.

3. Relief:
The Bench concluded that the petitioner failed to make out a case of oppression or mismanagement. The petition was dismissed, and all interim orders were vacated. The Bench emphasized that the decision of the shareholders in the EGM is supreme, and a director cannot claim the right to continue against the collective decision of the shareholders.

Summary:
The judgment addressed the issues of directorial complaints and fiduciary duties within a family-run company. The petitioner's removal as director was upheld due to his unauthorized establishment of a parallel business and failure to assign patents to the company. The EGM was found to be conducted in compliance with the Articles of Association and the Companies Act. The petitioner's request for a permanent injunction to continue duties related to Unit 'C' was denied, as he was no longer a director. The petition was dismissed, with all interim orders vacated.

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