TaxTMI 
TaxTMI 
2013 (2) TMI 143
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...., Respondent No.1. Mr. Karan Gambhir is the Managing Director ('MD') of DDIL since the year 2005. 3. DDIL was initially incorporated under the Act on 30th March 1974 as Daulat Ram Dharam Bir Auto Private Limited. Later it was converted into a public limited company with the changed name of Daulat Ram Dharam Bir Auto Limited. Subsequently, the name was further changed to DDIL with a fresh certificate of incorporation, dated 10th May 1999, issued by the Registrar of Companies ('ROC'), Delhi and Haryana. 4. DDIL is a closely held company. Its entire share holding was initially held by the family members of late Mr. Dharambir Gambhir, late Mr. Subhash Gambhir and Mr. Surinder Gambhir (Respondent No.2). Pursuant to a family settlement Respondent No. 2 and his family became promoters of DDIL from 1993 onwards. Two of the sons of Respondent No.2, viz., Mr. Sanjay Gambhir (Appellant No.1) and Mr. Rajiv Gambhir (Respondent No.3) took over the running of the business. DDIL became a dealer of Maruti Suzuki in the year 1996. It is claimed that it is one of the successful dealers of Maruti Suzuki and has won awards. In the year 2005, the family decided to venture into real estate. Through....
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....tatutory authority including the ROC. The additional directors appointed by the A group was sought to be restrained from representing themselves as directors of DDIL or changing the constitution of the BOD. 7. Mr. Karan Gambhir also filed a suit being CS (OS) No. 1297 of 2010 challenging the action of the BOD in seeking to take control of the management of DDIL by ousting the A group. In the suit it was prayed that the notice dated 6th June 2010 issued by Mr. Surinder Gambhir for the purpose of convening an EGM on 3rd July 2010 was illegal, unauthorized and should not to be given effect. A permanent injunction was also sought to restrain the B group from operating bank accounts or issuing any cheques without the signatures of Mr. Sanjay Gambhir. The A group also filed Company Petition No. 92 (ND) of 2010 in the CLB under Sections 397 and 398 of the Act against the B group. On 26th September 2010, the CLB passed an interim order to the effect that the resolutions passed at the Annual General Meeting ('AGM') dated 28th September 2010 shall be subject to the final outcome of the petition. 8. The Appellants (A group) contend that Mr. Surinder Gambhir, Mrs. Uma Kumari, Mr. Kunal G....
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....ny Forms/Resolutions pertaining to DDIL on the websites of the ROC. A direction was sought to restrain Appellant No.1 from using his digital signatures in any manner whatsoever and direct ROC to remove the Form 32 filed by him pursuant to the purported Board meeting and restore the status of the BOD as on 23rd December 2011. On 4th August 2012 Respondent No.2 filed CS (OS) No. 2363 of 2012 seeking similar reliefs. It is stated that the application filed by Respondent No.2 under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure ('CPC') is pending. Proceedings in the CLB 10. Respondent Nos. 3 and 4 filed an application being C.A. No. 417 of 2012 dated 9th August 2012 in the CLB seeking the holding of an EGM of the shareholders of DDIL in the presence of an observer. They sought waiver of the statutory 21 days' advance notice to hold the EGM. It was prayed that ROC should initiate prosecution proceedings against the A group for filing forms containing information false to their personal knowledge misusing the digital signature. 11. Before the CLB, it was contended by the B group that the A Group was in a minority even with the shareholding of 33% whereas the B group wa....
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....observed that since Mr. Karan Gambhir would continue as MD no prejudice would be caused to the A group. 14. Accordingly, by the impugned order dated 22nd November 2012 the CLB allowed the said application and directed DDIL to call an EGM for holding election to the BOD within 15 days. An observer was also appointed to be present at the time of holding the EGM. Submissions of counsel 15. There were three propositions advanced by Mr. K. Datta, learned counsel for the Appellants. He submitted that if the Act envisaged a certain procedure for performing an act, it had to be performed in that manner or not at all. The requirement of Section 169 of the Act could not have been dispensed with. Secondly, he submitted that Section 186 of the Act was in the nature of a special provision and had to be mandatorily complied with. The general power of the CLB under Section 403 of the Act was hedged in by the specific requirement of Section 186 of the Act. Even Section 151 CPC could not be invoked when there was a specific provision in the CPC itself. Thirdly he submitted that by allowing the application of the B group the CLB granted an interim relief that was outside the scope of the....
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.... was disqualified under Section 299 read with Section 283 (1) (i) of the Act from being subsequently appointed as such. There was in any event no warrant for the unilateral decision by Mr. Karan Gambhir that four of the directors of the B group had demitted office. Mr. Bakhru also submitted that the nature of the action under Sections 397 and 398 of the Act was derivative. There could be instances where, as in this case, a minority group of shareholders could oppress the majority. The power of the CLB under Section 403 of the Act was wide enough to issue directions for the proper administration of the affairs of DDIL. It was not circumscribed by Section 186 of the Act. Decision in the appeal 17. The Court proposes first to consider the appeal filed against the impugned order dated 22nd November 2012 of the CLB. At the outset it must be noted that the scope of interference by the Court in an appeal under Section 10 F of the Act is limited to examining substantial questions of law that arise from the order of the CLB. It was explained by the Supreme Court in V.S. Krishnan v. Westfort Hi-tech Hospital Ltd. (2008) 3 SCC 363 (SCC p. 374) as under: "It is clear that Secti....
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....Company." 20. There was therefore a clear acknowledgment by the A group that by that date their directors had been removed from the BOD of DDIL. Further, in para 9 it was acknowledged that "it is the admitted case of the Respondents that Mr. Karan Gambhir is the Managing Director of the Respondent No. 1 company and is as such fully incharge of the divisions under his control. However, the Respondents and their group of Directors are constantly causing hindrance in his discharging his responsibilities as a Managing Director." Interestingly, in para 12 of the application the A group mentions that a meeting of the BOD had been held on 28th March 2012 but does not state anything about the directors of the B group having failed to disclose their interest. 21. The said application by the A group also mentioned that the B group had filed CS (OS) No. 1158 of 2010 (Kunal Gambhir v. D.D. Industries) whereas the A group filed CS (OS) No. 1297 of 2010 (Karan Gambhir v. D.D. Industries). In CS (OS) No. 1297 of 2010 two separate applications were filed by both groups. An order had been passed by this Court on 20th January 2012 in the said applications directing the parties....
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....with it by using the digital signature in his capacity as MD to uphold Form 32 thus purporting to present the CLB and this Court with a fait accompli. 24. As rightly pointed out by Mr. Bakhru, the occasion for Mr. Karan Gambhir to invoke Section 283 (1) (i) read with Section 299 did not arise. A perusal of the minutes of the BOD meeting held on 28th March 2012 read with the notes accompanying the agenda for the meeting reveals that the factum of the exposure of DDIL to the loans advanced to DDPPL was disclosed. It was in the above circumstances that the B group filed Company Application No. 417 of 2012 seeking an order for convening an EGM of the shareholders of DDIL under the supervision of an Observer. 25. The question of law that arises for consideration in the present appeal is whether the impugned order of the CLB overlooks the mandatory requirement of law under Sections 169 and 186 of the Act as urged by the Appellants? Sections 169, 186 and 403 of the Act read as under: "169. Calling of extraordinary general meeting on requisition. (1) The Board of directors of a company shall, on the requisition of such number of members of the company as is sp....
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...., the Board shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly convened the meeting if they do not give such notice thereof as is required by sub-section (2) of section 189. (7) A meeting called under sub-section (6) by the requisitionists or any of them- (a) shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board; but (b) shall not be held after the expiration of three months from the date of the deposit of the requisition. Explanation.-Nothing in clause (b) shall be deemed to prevent a meeting duly commenced before the expiry of the period of three months, aforesaid, from adjourning to some day after the expiry of that period. (8) Where two or more persons hold any shares or interest in a company jointly, a requisition, or a notice calling a meeting, signed by one or some only of them shall, for the purposes of this section, have the same force and effect as if it had been signed by all of them. (9) Any reasonable expenses incurred by the requisitionists by reason of the failure of the Board duly t....
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.... fact begins with the words "Without prejudice to the generality of the powers of the Tribunal...". There is nothing to indicate that while exercising the powers under Sections 402 or 403 of the Act the CLB has to necessarily account for the mandatory requirements of other provisions like Sections 169 or 186 of the Act. The language in fact appears to indicate to the contrary. It permits the CLB to pass orders as long as it is in the interests of the proper conduct of the affairs of the company and it is "just and equitable" to pass such order. Whether in fact the order is justified will of course depend on the facts of each case. 27. It is not possible to accept the submission of the learned counsel for the Appellants that the requirement of a group of shareholders desiring the convening of an EGM having to first make a requisition to the BOD is mandatory and in circumstance can be dispensed with, even by the CLB while making an order under Section 403 of the Act. That interpretation would in fact be contrary to the legislative intent behind Sections 402 and 403 of the Act and dilute the power of the CLB to pass orders which it thinks to be just and equitable in the facts of....