2015 (4) TMI 1189 - HC - Companies Law

Court affirms denial of interim reliefs in company law case on Board Meeting challenges

S. Natarajan Versus S.V. Global Mills Limited, M. Ethiraj, E. Shanmugam, Sheetala Credit Holding Pvt Limited, Satluj Credit and Holdings Pvt Limited, Twentieth Century APCO Leasing Private Limited, Rajat Chakra Credit and Holdings Limited, Calcom Credit and Holdings Pvt Limited, N. Rajalakshmi, Y. Satyajit Prasad, Dr. K. Shivaram Selvakumar, R. Narayanan

S. Natarajan Versus S.V. Global Mills Limited, M. Ethiraj, E. Shanmugam, Sheetala Credit Holding Pvt Limited, Satluj Credit and Holdings Pvt Limited, ... Issues Involved:1. Validity of the Board Meeting and AGM procedures.2. Allegations of oppression and mismanagement.3. Legality of the paper ballot votes.4. Validity of the ouster of the 7th Respondent as a Director.5. Right to interim reliefs and the principles governing their grant.Issue-wise Detailed Analysis:1. Validity of the Board Meeting and AGM Procedures:The appellants challenged the procedures followed during the AGM on 26.09.2014, particularly the use of paper ballots despite a resolution mandating e-voting. The Company Law Board noted that the agenda for the meeting contemplated only e-voting, and any deviation from this was against Sections 107, 108, and 109 of the Companies Act, 2013, and Rule 20 of the Companies (Management and Administration) Rules 2014. However, the Board concluded that the interim relief sought was akin to granting final relief, which was not permissible at the interim stage.2. Allegations of Oppression and Mismanagement:The appellants alleged that the 7th Respondent's ouster was a result of oppression and mismanagement by the Respondents. They claimed that the 7th Respondent had been instrumental in the company's operations and his removal was to facilitate the diversion of company funds and misuse of property. The Company Law Board, however, found that the allegations needed to be substantiated with more evidence and could not be resolved at the interim stage.3. Legality of the Paper Ballot Votes:The appellants argued that the use of paper ballots by Respondents 2 and 3 was illegal as it contravened the resolution for e-voting. The Company Law Board noted that the Ministry of Corporate Affairs' notification dated 19.03.2015, which permitted paper ballots, was prospective and not applicable to the AGM in question. Despite this, the Board held that the interim reliefs sought were not justified without a full trial.4. Validity of the Ouster of the 7th Respondent as a Director:The appellants contended that the 7th Respondent's removal was illegal and amounted to oppression. They argued that the 7th Respondent had a significant role in the company's management and his removal deprived the Petitioners of their representation. The Company Law Board, however, held that the 7th Respondent's removal was a matter to be decided at the final hearing and not at the interim stage.5. Right to Interim Reliefs and the Principles Governing Their Grant:The appellants sought various interim reliefs, including the reinstatement of the 7th Respondent as a Director and the appointment of an Independent Chairman for meetings. The Company Law Board refused to grant these interim reliefs, stating that they were essentially the same as the final reliefs sought in the petition. The Board emphasized that interim reliefs should not grant final relief and must be based on a prima facie case, balance of convenience, and irreparable loss, which the appellants failed to establish.Conclusion:The High Court upheld the Company Law Board's decision to deny interim reliefs, emphasizing that the issues raised were mixed questions of law and fact, not purely questions of law. The Court directed the Company Law Board to dispose of the main petition expeditiously, within three months, on a day-to-day basis. The appeals were dismissed, and the connected miscellaneous petitions were closed.