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of <h1>Directors appointed under Share Purchase Agreement can't be removed for alleged breaches; disputes should be resolved through arbitration.</h1> <h3>M. Thimme Gowda Versus SPR Sugars (P.) Ltd.</h3> The court held that the respondents, appointed as directors pursuant to the Share Purchase Agreement (SPA), could not be removed based on alleged breaches ... - Issues Involved:1. Right of respondents 2 & 3 to continue as directors.2. Rendering of accounts by respondents 2 & 3.3. Restraint on respondents 2 & 3 from interfering in the affairs of the Company.Issue-Wise Detailed Analysis:1. Right of Respondents 2 & 3 to Continue as Directors:The petitioners sought a declaration that respondents 2 & 3 have no right to continue as directors of the Company. The petitioners argued that the respondents took control of the Company through misrepresentation and manipulation, and failed to determine and pay fair consideration for the shares as per the Share Purchase Agreement (SPA). The respondents countered that the petitioners' grievances arose from the SPA and thus cannot form the basis of a petition under sections 397/398 of the Companies Act. The court noted that the respondents were appointed as directors pursuant to the SPA, and the petitioners' plea that the respondents cannot be in management was not valid for relief against oppression or mismanagement. The court held that the petitioners cannot seek intervention to declare that respondents 2 & 3 have no right to continue as directors since these prayers arise directly from the alleged breach of the SPA.2. Rendering of Accounts by Respondents 2 & 3:The petitioners requested the court to direct respondents 2 & 3 to render accounts of the Company. The court observed that the grievances and reliefs claimed by the petitioners flowed from the SPA. The court emphasized that the SPA contained specific terms and conditions, including the role of respondents in the management of the Company. The court noted that the petitioners' grievances stemmed from the alleged non-fulfillment of SPA terms by the respondents, and such issues should be resolved through arbitration as stipulated in the SPA. Therefore, the court did not grant the relief of directing respondents 2 & 3 to render accounts.3. Restraint on Respondents 2 & 3 from Interfering in the Affairs of the Company:The petitioners sought to restrain respondents 2 & 3 from interfering in the Company's affairs. The court found that the petitioners' grievances were interwoven with the SPA, which included provisions for management control and share transfer. The court noted that the petitioners had handed over management to the respondents as per the SPA and agreed not to interfere in day-to-day management. The court highlighted that any grievance related to convening an extraordinary general meeting or amending the articles of association arose from the SPA and should be addressed through arbitration. Consequently, the court did not restrain respondents 2 & 3 from interfering in the Company's affairs.Conclusion:The court concluded that the alleged acts of oppression and mismanagement were closely tied to the SPA. The court emphasized that issues arising from the SPA should be resolved through arbitration as per the agreement. The court disposed of the company petition, allowing the petitioners to pursue their grievances through arbitration. All interim orders were vacated.
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