2020 (3) TMI 267 - Tri - Companies Law

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

Ozhukil Padinjarepet Achuthan Kutty Shanthi Versus Aswini Health Care Ltd.

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 ... Territorial Jurisdiction - transfer of the case to Kochi Bench of NCLT - Oppression and Mismanagement. Whether the EGM purportedly held on 27.07.2015 is in accordance with the law and legally tenable? - HELD THAT:- Respondents R2 to R11 seems to have made efforts to usurp the office of the Directors and to gain the control over the Board of Directors of the 1st Respondent Company. Therefore, the removal of the Petitioner and Respondents R12 to R19 from the office of the Directors of the 1st Respondent Company in the EGM purportedly held on 27.07.2015 amounts to acts of oppression by the Respondents R2 to R5. Moreover, it is on record that the appointment of Respondents R6 to R11 as Directors of 1st Respondent Company was made by a single resolution which is also in violation of the provisions of Section 162 of the Companies Act,2013. Whether the forfeiture of one share of ₹ 1000/- fully paid-up and held by the petitioner in the 1st Respondent Company, on 27.07.2015 is in accordance with law and legally tenable? - HELD THAT:- The Respondents R2 to R11 being Directors at the time of forfeiture of the said shares on 27.07.2015, and assuming they were authorised to cancel the shares, we are of the view that legally the Directors of the Company cannot utilise their fiduciary powers over the shares purely for the purpose of cancellation of the shares of the minority shareholders to improve their voting power. The court cannot allow to exercise such powers which might have been delegated by the company to the Board. Therefore, we are of the opinion that there was no authority with Respondents R2 to R11 to forfeit the shares of the Petitioner. The whole action is patently illegal, perverse and is hereby declared as null and void. Whether the removal of petitioner and the Respondents R12 to R19 from the office of directors at the Extra Ordinary General Meeting purportedly held on 27.07.2015 is in accordance with law and legally tenable? - Whether the appointment/election of Respondents R6 to R11, as directors of the company, on 27.07.2015 is in accordance with law or legally tenable? - HELD THAT:- As the Extra ordinary General Meeting purportedly held on 27.07.2015 is declared as void, all the decisions taken in such meeting is considered to be void ab initio. Therefore, the removal of petitioners and R12 to 19 from directorship and appointment of respondents R6 to R11 as directors, dated 27.07.2015 per se are non-operable, null and void. Application disposed off. 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.