TaxTMI 
TaxTMI 
2007 (7) TMI 404
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....or of the company and the other defendants except defendant No. 12 are the directors of defendant No. 1 company. 4. Defendant No. 1/company made an offer of public issue of equity shares vide prospectus dated 1-5-1992, in which the plaintiff is stated to be a part of the company's management. A part of the finances were obtained from UPSIDC, Kanpur. The plaint sets out the investments made by the various shareholders but it is not necessary to go into the details of the same as the scope of the suit in view of the relief claimed is limited. Suffice to say that apparently disputes arose between the plaintiff on the one hand and the management on the other. This resulted in a letter dated 11-6-1993, being issued to the plaintiff informing him that his nomination as director by the co-promoter was being withdrawn and the plaintiff would cease to be a director with effect from 29-6-1993, the date on which board meeting of the directors had to be held. It is the case of the plaintiff that such withdrawal of nomination is ultra vires and contrary to the provisions of section 284 of the said Act read along with provisions of sections 189 and 190. A resolution was passed thereafter on 2....
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.... 29-6-1993 (exhibit DW1/3) and memorandum and articles of association of defendant No. 1 (exhibit DW1/4). These documents were accordingly proved by the affidavit of Mr. M.P. Singh who was cross-examined by learned counsel for the plaintiff. 8. At the stage when the matter again came up for final hearing, it is the plaintiff who decided to file applications seeking to lead oral evidence. The applications were allowed by the order dated 28-9-2006, subject to costs. The costs were not deposited by the plaintiff and thus on 30-10-2006, it was noticed that suit would have to be heard as it is without evidence of the plaintiff. It is in these circumstances that the matter has now come up for final hearing. The suit has been on board for some time and was listed at serial No. 6 today (effective item No. 3). The matter was taken up on board in the pre-lunch and also in the post-lunch sessions, but none has cared to appear for the defendants. Learned counsel for the plaintiff has thus alone rendered assistance to this court. On hearing learned counsel for the plaintiff, perusal of pleadings and documents and the law cited at Bar, the following findings on the issues are arrived at. "....
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....this sub-section shall apply where the company has availed itself of the option given to it under section 265 to appoint not less than two-thirds of the total number of directors according to the principle of proportional representation. (2) Special notice shall be required of any resolution to remove a director under this section, or to appoint somebody instead of a director so removed at the meeting at which he is removed. (3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting." 12. Learned counsel submits by reference to the aforesaid provisions that such removal, though possible by an ordinary resolution, could only arise in pursuance to a special notice required to be given fourteen days in advance and the removal can only be in a shareholders' meeting. The submission thus is that the board of directors meeting could not have removed the plaintiff. 13. Learned counsel has also drawn the attention of this court to the provisions of sections ....
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....f clause 6.3 of the said promoters/financial collaboration agreement. 5. That in terms of clause 6.3 of the said promoters/financial collaboration agreement and supplementary promoters/financial collaboration agreement, before the allotment of the shares is made, the co-promoters shall obtain suitable letter of agreement/undertaking from such persons agreeing to be bound by the terms and conditions of the said agreement. Hence this undertaking is being executed. 6. That Sh. Ravi Prakash Singh, party of the second part of this undertaking has gone through the terms and conditions of the aforesaid agreements and has agreed to ratify and be bound by terms and conditions of the promoters/financial collaboration agreement and supplementary promoters/financial collaboration agreement. 7. That Sh. Ravi Prakash Singh, nominee of the co-promoters hereby undertakes to always exercise his voting rights in favour of the co-promoters and will do all such acts and deeds as are required to be done by the co-promotors in terms of the aforesaid agreements and nominee of the co-promoters will never exercise their voting rights against the co-promotors." 16. It is thus the plea of the def....
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....consideration. It was urged that the procedure prescribed by section 284, no doubt, provides procedure for removal of a director of a company by ordinary resolution at a meeting of the shareholders of the company. But the selection is not exhaustive. A director may cease to hold office by retirement, dismissal, removal, or by vacating his office voluntarily. He may be removed, by the board of directors or shareholders at a meeting of the company. Section 284 merely provides for removal of a director by shareholders and prescribed procedure for the same, it does not prohibit removal of a director otherwise than in accordance with section 284. Sub-section 7(b) of section 284 lays down that nothing in the section shall be taken as derogating from any power to remove a director which may exist apart from this section. The section itself therefore contemplates removal of a director in addition to the provisions contained in the section. Thus, where the articles of association confer powers on the board of directors to remove the managing director or other directors, such power is not affected by the provisions of section 284. Article 84 of the memorandum and articles of association o....
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....d by the UPSIDC and co-promoters, the board of directors of the company shall consist of nine directors in addition to the directors who may be appointed pursuant to or under any agreement with debenture holders or other financial institutions giving them right to appoint director(s) on the board. Out of nine directors, the UPSIDC shall be represented by three directors including the chairman and the co-promoters shall be represented by six directors including the managing director, out of these six directors to be nominated by the co-promoters, the number of non-rotational directors shall not exceed three. The representation of the UPSIDC and the co-promoters on the board of the company shall be such as to ensure the proportion stipulated in this clause. (h)UPSIDC and the co-promoter shall have right to remove/withdraw their respective nominees on the board of directors. Similarly, they will have a right to provide substitutes thereof." 20. Article 112(a ) of the articles of association provides for strength of the board of directors and who has to make the appointment of the directors. It provides for six directors to be nominated by co-promoters out of which the number of ....