2013 (3) TMI 462 - Board - Companies Law

Company Law Board Orders AGMs Due to Compliance Failures Amid Shareholder Disputes

Dr. Partha Bhattacharya Versus JR & M. Banik (P.) Ltd.

The Company Law Board directed a respondent company to hold Annual General Meetings (AGMs) for multiple financial years due to defaults in compliance ... Petition – u/s 167 of the Companies Act, 1956. The petitioners' case is that the petitioners are Directors and major shareholders of the respondent-company. By reason of the disputes and differences between two groups of shareholders which led to initiation of various proceedings pending before the Court and CLB, it has not been possible for the company to hold its AGMs for the financial years ended 31.3.2009 onwards. Held that:- In the facts and circumstances of the case, the respondent-company is directed to call and hold the Annual General Meetings for the years ended 31.03.2009, 31.03.2020 and 31.03.2011, within 31.08.2012, in accordance with the provisions of the Articles of Association, to conduct the ordinary business of the company. Issues involved:Petition under section 167 of the Companies Act, 1956 seeking directions for holding AGMs for multiple financial years, default in holding AGMs, infighting between shareholders affecting statutory compliance, powers of the Company Law Board to direct AGMs, appointment of an independent Chairman for conducting AGMs.Analysis:The petitioners, who are shareholders and directors of the respondent company, filed a petition under section 167 of the Companies Act, 1956, seeking directions for calling and holding the Annual General Meetings (AGMs) for the financial years ended 31.03.2009, 31.03-2010, and 31.03.2011, to conduct ordinary business. The petitioners highlighted that due to disputes between two groups of shareholders, the company failed to hold AGMs, leading to defaults in statutory compliance. The Registrar of Companies issued default notices for non-filing of annual accounts and returns. The High Court had previously directed the Registrar not to initiate criminal proceedings for these defaults. Despite repeated notices, the respondent company did not appear before the Board.The Company Law Board observed that the company had indeed defaulted in holding AGMs for the mentioned years, emphasizing the statutory obligation for compliance with the Act. The Board noted that infighting between shareholders had led to these defaults, causing prejudice to the company and its members. The provisions of section 167 empower the Board to direct the calling of a general meeting and give consequential directions for the benefit of the company and its members. In light of these circumstances, the respondent company was directed to hold the AGMs for the specified years by a given deadline.Furthermore, an independent Chairman, Shri C.R Das, an ex-Member of CLB, was appointed to conduct the AGMs. The Chairman's remuneration was fixed, and it was mandated that a compliance report be filed with the Board within 15 days of conducting each AGM. The petition was disposed of based on these terms, ensuring the necessary steps for holding the overdue AGMs and fulfilling statutory obligations were taken.This judgment underscores the importance of fulfilling statutory requirements, especially regarding the holding of AGMs, and the powers vested in the Company Law Board to intervene in cases of non-compliance due to internal disputes affecting corporate governance. The appointment of an independent Chairman for conducting AGMs serves to ensure fair and impartial proceedings, ultimately upholding the interests of the company and its shareholders.