2012 (6) TMI 496 - HC - Companies Law

Court upholds validity of Board Meetings and EGM, dismisses Plaintiff's objections, denies general injunction.

Naina D. Kamani Versus Janson Engineering & Trading (P.) Ltd.

Naina D. Kamani Versus Janson Engineering & Trading (P.) Ltd. - 2011] 109 SCL 400 (BOM.) , [2011] 167 COMP. CAS. 89 (BOM.) Issues Involved:1. Validity of the Board Meeting held on 5th August 1993.2. Validity of the Board Meetings held on 6th August 2009 and 9th October 2009.3. Validity of the Extraordinary General Meeting (EGM) held on 31st August 2009.4. Appointment and attendance of Defendant No. 12 as an alternate Director.5. General injunction against the business operations of Defendant No. 1 Company.Detailed Analysis:1. Validity of the Board Meeting held on 5th August 1993:The Plaintiff challenged the proceedings of the Board Meeting held on 5th August 1993, claiming they were false, fabricated, and fraudulent. The Plaintiff sought a declaration that Defendant No. 6 had no right, title, or interest in the suit flat and was a trespasser. The court noted that the suit was filed in 1997, and an injunction in respect of the 1993 meeting could not be claimed in a Notice of Motion taken out in 2009.2. Validity of the Board Meetings held on 6th August 2009 and 9th October 2009:The Plaintiff attended the Board Meeting on 6th August 2009 but left before the resolutions were passed, claiming ridicule and jeering. The Plaintiff argued that the meeting lacked quorum after her departure. The court held that quorum must be present when the business is transacted, not just at the beginning. The Plaintiff's departure was seen as an attempt to derail the meeting, and the court concluded that the quorum was present, and the business transacted was valid. The court also addressed the attendance of Defendant No. 12 as an alternate Director, stating that his presence was valid despite the Plaintiff's objections.3. Validity of the Extraordinary General Meeting (EGM) held on 31st August 2009:The Plaintiff contended that the notice for the EGM was not received more than 7 days before the meeting. The court clarified that the requirement was for the notice to be sent more than 7 days in advance, not necessarily received. The notice was deemed to have been received on 23rd August 2009, satisfying the requirement. The court found no grounds to invalidate the EGM or the resolutions passed therein.4. Appointment and attendance of Defendant No. 12 as an alternate Director:The Plaintiff argued that Defendant No. 12's attendance was invalid as Defendant No. 2, who appointed him, had returned to the State. The court interpreted Section 313 of the Companies Act, 1956, stating that the alternate Director ceases to hold office only when the appointing Director returns with the intention of resuming business activities. Defendant No. 2's temporary return did not suffice, and Defendant No. 12's attendance was deemed valid.5. General injunction against the business operations of Defendant No. 1 Company:The Plaintiff sought to restrain all business activities of Defendant No. 1 Company, which would result in a complete deadlock. The court emphasized that such relief would be unjust and inequitable, effectively putting a premium on the Plaintiff's default and disrupting the company's operations. The court suggested that the parties seek a fair settlement but refused to grant an injunction that would perpetuate the deadlock.Conclusion:The court upheld the validity of the Board Meetings held on 6th August 2009 and 9th October 2009, as well as the EGM held on 31st August 2009. The Plaintiff's objections regarding quorum and the appointment of Defendant No. 12 were dismissed. The court denied the Plaintiff's request for a general injunction against the company's business operations, emphasizing the need for the company to function as a going concern.