Tribunal declares EGM void for non-compliance with Companies Act, reinstates directors and shareholder

The Tribunal declared the EGM purportedly held on 27.07.2015 illegal and void as it did not comply with the Companies Act, 2013. Consequently, the removal of the petitioner and certain respondents from directorship, and the forfeiture of the petitioner's share were deemed illegal and null. The petitioner and certain respondents were reinstated as directors, and the petitioner as a shareholder. The 1st respondent company was directed to rectify the Board of Directors and the Register of Members, with a cost of Rs. 50,000 imposed on respondents R2 to R11 to be paid to the petitioner. The Registrar of Companies, Kerala, was to be informed of the decision.

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Issues Involved:
1. Legality of the EGM purportedly held on 27.07.2015.
2. Legality of the forfeiture of one share held by the petitioner.
3. Legality of the removal of petitioner and certain respondents from directorship.
4. Legality of the appointment/election of certain respondents as directors.

Issue-wise Detailed Analysis:

Issue No. (i): Legality of the EGM purportedly held on 27.07.2015:

The Tribunal found that none of the shareholders received the notice for the EGM purportedly held on 27.07.2015. The respondents failed to provide any documentary evidence such as the notice of the Board Meeting, the EGM, the minutes of the meetings, or proof of dispatch of the notice. The petitioner proved that he was abroad during the date of the purported Board Meeting on 01.07.2015, questioning the authenticity of the notice. The Tribunal concluded that the EGM was either not conducted or, if conducted, not valid as it did not adhere to the procedure under Section 100 of the Companies Act, 2013. The Tribunal deemed the actions of the respondents as a betrayal and disregard for the established procedure.

Issue No. (ii): Legality of the forfeiture of one share held by the petitioner:

The Tribunal noted that the Companies Act, 2013 does not contain any provision for forfeiture of shares, and such provisions, if any, should be in the Articles of Association. The respondents failed to show any such provision authorizing the forfeiture of shares for non-disclosure of residential status. The Tribunal opined that the directors could not use their fiduciary powers to cancel shares to improve their voting power. The forfeiture of the petitioner's share was declared illegal, perverse, and null and void, referencing the ruling in Rashmi Seth v. Chemen (I.) (P.) Ltd.

Issue No. (iii) & (iv): Legality of the removal of petitioner and certain respondents from directorship and the appointment/election of certain respondents as directors:

Given that the EGM purportedly held on 27.07.2015 was declared void, all decisions taken in that meeting, including the removal of the petitioner and certain respondents from directorship and the appointment of certain respondents as directors, were considered void ab initio. The Tribunal highlighted that the removal of the petitioner and certain respondents from directorship and the appointment of new directors were not in accordance with Sections 169 and 162 of the Companies Act, 2013, respectively.

Order:

The Tribunal declared the EGM purportedly held on 27.07.2015 illegal, null, and void. Consequently, the removal of the petitioner and certain respondents from directorship and the forfeiture of the petitioner's share were also declared illegal and void. The petitioner and certain respondents were reinstated as directors, and the petitioner was reinstated as a shareholder. The Tribunal directed the 1st respondent company to rectify the Board of Directors and the Register of Members accordingly within one month and imposed a cost of Rs. 50,000 on respondents R2 to R11, to be paid to the petitioner within three weeks. The Registry was directed to communicate the order to the Registrar of Companies, Kerala, for necessary action.

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