2015 (4) TMI 1189 - HC - Companies Law

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

The High Court upheld the Company Law Board's decision to deny interim reliefs in a case involving challenges to Board Meeting and AGM procedures, ... Act of oppression and mismanagement - Existence of questions of law - prohibitory and mandatory injunction seeked - Held that:- The questions that have been raised before this court are not purely questions of law, but are only mixed questions of law and fact, which cannot be entertained by this court. Even though, as per the judgement relied upon by the learned senior counsel for the appellants, a perverse finding or non-consideration of relevant documents can amount to question of law, this court is of view that there is no perversity in the impugned order of the Company Law Board and therefore, the appeals are not maintainable. The interim relief as sought in this case are in the nature of prohibitory and mandatory injunction for which the Petitioners must satisfy the mandatory tests of prima facie case, balance of convenience and irreparable loss. This court feels that the 7th respondent cannot be permitted to continue as a director after he has failed in his endeavour to be re-appointed by virtue of an interim order. Any subsequent act(s) of mismanagement would give rise to a fresh cause of action to the petitioners. Hence, the loss if any cannot be held to be irreparable. The Company Law Board has considered the pleadings and the documents and considering the nature of claims, refused to grant interim orders by giving specific findings. Whether the proceedings held on Annual General meeting on 26.09.2014 is as per law and the implication of the same with regard to allegations of oppression and mismanagement and whether the acts complained constitute independent acts of oppression and mismanagement or not will be determined by the Company Law Board. The Respondents have already filed their counter. Therefore, in the facts and circumstance of the case, the Company Law Board is directed to dispose of the CP.No.62/14 within three months on day to day basis. With the above directions, these Company Appeals are dismissed. 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.