TaxTMI 
TaxTMI 
2011 (2) TMI 1274
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....d oppressive to the shareholders of Zenotech Laboratories Ltd. ('Zenotech'). 3. Pending C. P. No. 83 of 2009, Ranbaxy filed C. A. No. 150 of 2010 under section 186 of the Companies Act, 1956, seeking a direction for convening an extraordinary general meeting of Zenotech immediately to consider the appointment of nominee directors on behalf of Ranbaxy on the board of Zenotech. The appellants herein filed C. A. No. 167 of 2010 seeking a direction to maintain status quo with respect to the affairs of the man-agement of Zenotech alleging that any change in the board of directors of Zenotech would prejudice their interest as well as the company. After hearing both the parties, the Company Law Board by common order dated November 24, 2010 allowed C. A. No. 150 of 2010 and granted permission to Ranbaxy to convene the extraordinary general meeting of Zenotech and consequently dismissed C. A. No. 167 of 2010. However it was observed that the conduct of extraordinary general meeting and the decisions taken thereon should be subject to the final outcome of C. P. No. 83 of 2009 and C. P. No. 51 of 2009. The said common order dated November 24, 2010 is under challenge in the present two appeal....
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....Board under sections 397, 398 and 402 of the Companies Act, 1956, seeking a declaration that the acts of Daiichi Sankyo, Ranbaxy and their directors (arrayed as respondent Nos. 2 to 8 to the said company petition) are prejudicial to the interest of Zenotech and are oppressive against the appellants herein. It was alleged in C. P. No. 51 of 2009 that Ranbaxy after assuming complete control over Zenotech, had started exercising its control in a manner prejudicial to the interest of the Zenotech, its creditors and other stakeholders and also in a manner oppressive to the minority shareholders including the appellants herein. 9. On October 7, 2009 Ranbaxy filed C. P. No. 83 of 2009 under sections 397, 398 and 402 of the Companies Act, 1956, seeking a declaration that the acts of the appellants herein are prejudicial to public interest and oppressive to the shareholders of Zenotech. Both C. P. No. 51 of 2009 and C. P. No. 83 of 2009 are pending before the Company Law Board, Additional Principal Bench, Chennai. 10. Pending the said company petitions, various orders have been passed by the Company Law Board from time to time on the applications moved by Ranbaxy as well as the appellants....
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....ng a major shareholder is entitled to exercise its right to appoint the directors on the board of Zenotech and that the purpose of the extraordinary general meeting sought to be convened by Ranbaxy is only to consider appointment of its nominee directors on the board of Zenotech. Accordingly the application was allowed and extraordinary general meeting was directed to be convened in exercise of the powers conferred under section 186 of the Companies Act, 1956. 16. The said order is assailed before this court mainly on the ground that Ranbaxy had miserably failed to establish that it was impracticable to call extraordinary general meeting so as to grant the relief under section 186 of the Companies Act. It is also contented that since Ranbaxy could not establish any cause of action to invoke section 186 of the Companies Act, the Company Law Board committed a grave error in directing to convene extraordinary general meeting. 17. In the counter-affidavit filed on behalf of Ranbaxy, it is contended that the appeals are not maintainable since the appellants are not the persons aggrieved. It is also contended that no question of law as required under section 10F of the Companies Act ar....
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....hwarting all the attempts by Ranbaxy to have its nominee directors on the board, ought not to have been accepted by the Company Law Board. 21. Per contra, it is contended by learned counsel for the respondents that appellant No. 1 had been acting on his own without the concurrence of the two independent directors appointed by this court and that ever after the appointment of the said two independent directors, appellant No. 1 had terminated the development, licence and supply agreement dated January 31, 2007, without the concurrence of the independent directors. It is also contended that though Ranbaxy appointed three directors in January, 2008, whose appointment was to be confirmed in the annual general meeting, appellant No. 1 did not convene the annual general meeting and even a board meeting was not held, but on the other hand appellant No. 1 filed Form No. 32 declaring that the directors appointed by Ranbaxy had vacated their office with effect from December 31, 2008. It is also explained by learned counsel for the respondents that in the annual general meeting held on February 26, 2010, Ranbaxy could not appoint its nominee directors due to bona fide belief of the restrictio....
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....and the two independent directors appointed by this court by order dated February 23, 2010, in Company Appeal No. 30 of 2009. It is also not in dispute that though Ranbaxy, which is holding 46.85 per cent. of shareholding, is the largest shareholder of Zenotech, it has no nominees on the board of Zenotech. 25. So far as the contention on behalf of the appellants that there is no scope for appellant No. 1 to control the administration of Zenotech on his own is concerned, it is to be noticed that the agreement dated January 31, 2007, was terminated by appellant No. 1 alone in his capacity as the managing director. When the said action was questioned by Ranbaxy, the Company Law Board by order dated May 21, 2010, granted stay of operation of termination notice holding that there was nothing to show that the agreement was terminated after getting the approval of the board of directors of Zenotech. The contention of appellant No. 1 that in his capacity as the managing director he was competent to cancel the agreement as per clause 120 of the articles of association was also not accepted by the Company Law Board. 26. It is also clear from the material available on record that in the ann....
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....agement of the business of Zenotech. It is also alleged by Ranbaxy that appellant No. 1 wanted to divest his shareholding in Zenotech so as to escape accountability for the acts and deeds of mismanagement and that the conduct of appellant No. 1 was injurious to the interest of all the shareholders and the management of Zenotech. 30. From the tenor of the allegations made against each other it is clear that there is no agreement between the two groups with regard to the administration of Zenotech. Admittedly various litigations are pending between the parties. The facts and circumstances undoubtedly give rise to a reasonable presumption that the holding of an extraordinary general meeting for the purpose of appointment of the nominee directors of the Ranbaxy on the board of Zenotech may not be possible without further litigation. 31. The expression "impracticable" employed in section 186 of the Companies Act, in my considered opinion need not be construed as "impossible". The word "impracticable" implies only impracticability from a reasonable point of view and it is sufficient if a reasonable presumption can be drawn from the surrounding circumstances as to the impracticability o....
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....also considered and approved by majority in the annual general meeting. Thus, the purpose for which the extraordinary general meeting was directed to be convened by the Company Law Board has already been served. 35. Viewed from any angle, the appeals are without any substance and accordingly both the company appeals are hereby dismissed. No costs. APPENDIX [2011] 163 COMP. CAS. 547 (CLB) COMPANY LAW BOARD, CHENNAI BENCH Ranbaxy Laboratories Ltd. Versus Dr. Jayaram Chigurpati SMT. LIZAMMA AUGUSTINE, MEMBER C. A. NOS. 150 AND 167 OF 2010 IN C. P. NO. 83 OF 2009 NOVEMBER 24, 2010 T.K. Bhaskar for the Petitioner. S. Chidambaram and Dama Seshadari Nevev for the Respondent. ORDER Smt. Lizamma Augustine, Member ‑ C.A. No. 150 of 2010 and C.A. No. 167 of 2010 in C.P. No. 83 of 2009 C.A. No. 150 of 2010 1. This is an application filed under section 186 of the Companies Act, 1956 ('the Act') and regulation 44 of the Company Law Board Regulations, 1991, seeking permission for convening the extraordinary general meeting of Zenotech Laboratories Ltd. ('Zenotech'). The applicant-Ranbaxy is the petitioner in the company petition filed under sections 397 and 398 read wit....
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....the applicant. The two nominee directors of the applicant avoided the board meetings following which there was no quorum. The annual general meetings for 2008 and 2009 were duly held on February 26, 2010. Though the applicant attended the meetings it did not opt to appoint any director. There is no urgency in convening the annual general meeting. It is a tactic to delay the disposal of the petition. The present board consists of the first respondent and two independent nominees appointed by the High Court. The Zenotech company had already given a notice for arbitration in the US in respect of the development agreements entered into by the company with Ranbaxy. The non-performance of the obligations by Ranbaxy has caused irreparable damage to Zenotech. 3. Ranbaxy is admittedly a major shareholder (47 per cent.) of Zenotech. The present board consists of Dr. Jayaram as the managing director and two independent directors appointed by the hon'ble High Court of Andhra Pradesh. There are serious disputes between Dr. Jayaram and Ranbaxy. In that context, it is impracticable that an extraordinary general meeting will be held at the requisition by Ranbaxy. Evidently, Ranbaxy is eligible to....