Appellate Tribunal Confirms Share Cancellation and Director Removal for Non-Attendance; Dismisses Company Petition.

The Appellate Tribunal overturned the Tribunal's decision, affirming the validity of the Board's cancellation of shares and the cessation of the Petitioners as Directors due to non-attendance at meetings. It upheld the alterations to the Articles of Association, dismissing the directions for appointing additional Directors and a Chairman. The Company Petition was dismissed.

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Issues Involved:
1. Validity of the Board Meeting and Resolutions dated 20.09.2011.
2. Legality of the cancellation of shares held by the 1st Petitioner.
3. Validity of the alteration to the Articles of Association.
4. Legality of the cessation of the Petitioners as Directors.
5. Appointment of additional Directors and a Chairman.

Detailed Analysis:

1. Validity of the Board Meeting and Resolutions dated 20.09.2011:
The Board Meeting held on 20.09.2011 was deemed valid despite the absence of the Petitioners. The Tribunal found that the resolutions passed, including the cancellation of shares held by the 1st Petitioner, were conducted without the presence of the Petitioners, rendering the resolutions invalid. However, the Appellate Tribunal concluded that the Board of Directors had the authority to cancel shares that were found to be illegally allotted, and thus the resolutions were valid.

2. Legality of the cancellation of shares held by the 1st Petitioner:
The Tribunal initially held that the cancellation of 3,32,400 shares of Rs.100 each held by the 1st Petitioner was illegal, invalid, and non-est in law. The Appellate Tribunal, however, found that the allotment of shares to the 1st Petitioner, a foreign citizen, was in violation of FEMA regulations and thus void. Consequently, the cancellation of these shares by the Board was deemed valid and lawful.

3. Validity of the alteration to the Articles of Association:
The Tribunal ordered the deletion of Clauses 31(a), 32, and 39(b) of the Articles of Association, considering them harsh and oppressive. The Appellate Tribunal noted that these amendments were made with unanimous consent, including from the Petitioners, and thus could not be contested later. The alterations were found to be valid and binding.

4. Legality of the cessation of the Petitioners as Directors:
The Tribunal declared the cessation of the Petitioners as Directors, as intimated by the filing of Form 32, to be illegal and non-est in law. The Appellate Tribunal, however, upheld the cessation, noting that the Petitioners had failed to attend three consecutive Board Meetings, thereby vacating their office by operation of law under Section 283(1)(g) of the Companies Act, 1956.

5. Appointment of additional Directors and a Chairman:
The Tribunal permitted the nomination of two more Directors, bringing the total to six, and appointed a Chairman for six months to implement its orders. The Appellate Tribunal found this direction to be beyond the Articles of Association, which limited the number of Directors to four. Additionally, the appointment of a Chairman was deemed unnecessary as the Petitioners failed to establish a case of oppression or mismanagement.

Conclusion:
The Appellate Tribunal set aside the Tribunal's order, validating the cancellation of shares and the cessation of the Petitioners as Directors. The alterations to the Articles of Association were upheld, and the directions for appointing additional Directors and a Chairman were nullified. The Company Petition filed by the Respondents was dismissed.

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