TaxTMI 
TaxTMI 
2016 (12) TMI 421
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....elhi and consequent upon constitution of this Tribunal under the Companies Act, 2013, the matter has been transferred to this Bench and re-numbered. 2. The petitioners 1, 2 and the Respondent No. 2 to 4 are the Directors of the Respondent No. 1 Company holding requisite percentage of equity shares. The main shove of the Petitioners' claim is, without convening any board meeting on 20-03-2015, the Respondents 2 to 4 have illegally inducted Respondents 5 to 7 as 'Directors' of the Company and that the meeting notice and agenda are not served on the petitioners who are directors of the Company, and that the appointment is consequently illegal. Secondly, it has been contended that the petitioners came to know in the first week of March 2015 that on 5.3.2015 the Bank of Baroda (Respondent No. 8) has served a notice under Sec. 13 (2) of the SARFAESI Act, 2002 wherefrom it came to their notice that the Respondents 2 to 4 representing the Company have given 100% corporate guarantee by creating mortgage on the immovable property of the Company on 21.03. 2013 to secure a loan/credit limit of Rs. 5, 95, 76, 764 to M/s Shambhu Steel & Forgings Pvt Ltd, and that the Respondents ar....
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....ing to appointment of Respondents 4 to 7 as Directors) an adverse inference has to be drawn against the respondents. He has further canvassed that mere displaying the statutory form in the website of MCA does not absolve the respondents from proving, as a matter of fact, that the petitioners were given notice of meeting and they have attended and subscribed their signatures to the minutes of the meeting. We will make reference to those points in detail at the appropriate places in the order. 5. The following points arise for our consideration: (1) Whether the creation of mortgage on the assets of the company in favour of Bank of Baroda to secure a loan and credit limit to M/s Shambhu Steel and Forgings Pvt Ltd is not legal? If so whether the said transaction is liable to be declared as illegal, null and void? (2) Whether the appointment of Respondents 5 to 7 as Directors is not legal? If so, whether their appointment is liable to be set aside. 6. Point No. 1: The Company is owning three items of immovable property, namely 2110 Sq. Mtrs, 1740 Sq. mtrs and 2490 sq. mtrs of land in Khasra No 1210 (items purchased on 19.7.2007,01.05.2008, and 30.12.2009 respectively) and there is n....
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....ittedly, no notice was given to Mr. Khaitan, one of the Directors of the company, the resolution passed terminating the services of the appellant was invalid." The Supreme Court in the above case held, as a consequence of invalidity of the meeting, the resolution becomes inoperative. 7. In the light of the above position of law, the question however is whether a notice was not sent to the petitioners, who are admittedly Directors, for the meeting said to have been held on 8.3.2013. We find from the material on record, there is hardly any evidence to prop-up the contention of the respondent that in fact notice was given. In the reply statement, it is only stated that the meeting was held as per rules. There is no specific denial to the assertion of the petitioner that notice of meeting was not issued to him. The following documents are produced by the Respondents to substantiate their contention that the meeting was convened according to statutory requirements. They are: (i) true copy of the Resolutions passed at the meeting on 8.3.2015, certified by the Chairman, (ii) Copy of Form No 8 uploaded on the MCA website showing that resolution was passed at the meeting to create a char....
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....shnaji vs. Mohd Haji Latif AIR 1968 SC 1413=(1968) 3 SCR 1110. Adding to it, there is no explanation from the respondents why the originals are not produced to rebut the specific plea of the petitioners about non service of notice of meeting of Board of Directors. Therefore, we are satisfied to record a finding by drawing adverse inference, that the respondents failed to establish that notice of meeting was served on the Directors, the petitioners herein, for the meeting held on 8.3.2015. This finding of fact next takes us to decide whether the mortgage created by the respondents is void. In view of the law laid down by Shri Parmeshwari Prasad Gupta's case (supra), the resolution is undoubtedly void. Yet, we have certain other important reservation in reaching that conclusion.' That reservation is in the form of legal impediment created by section 402 of the Companies Act, 1956. Sec. 402 reads thus: "Sec. 402-Powers of tribunal under Section 397 or 398: Without prejudice to the generality of the powers of the Tribunal under section 397 or 398, any order under either section may provide for- (a) The regulation of the conduct of the company's affairs in future' (....
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....tion. The Company petition under sec. 397 and 398 is filed on 23.07.2015. It is manifestly beyond three months as mandated by sec. 402(f) of the Act. Clause (f) did not place any rider on the commencement of three months' period except saying within three months before the date of the application'; particularly it is not stated in the clause that three months' time will also commence in the alternative, from the date of knowledge of the alleged fraudulent transaction. Even if that facet of 'knowledge' is also considered, it does not save the relief from being affected by the provision in this case because, in paragraph 6.11 it is stated by the petitioners- "That around 1st week of March, 2015, the Petitioner No. 1 was informed by the Petitioner No. 2 that a notice had been received from Bank of Baroda under Sec. 13(2) of SARFAESI Act, 2012 dated 5.3.2015 at Registered office of the Company. The petitioner was shocked to read the contents of the said notice that the Directors of the Respondent NO. Company had been shown as guarantor for availing the credit facility sanctioned to M/s Shambhu Steel & Forgings Pvt Ltd for an aggregate credit limit of..." It is fur....
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....nk under the provisions of SARFAESI Act, 2012. To that extent during March, 2015 and thereafter till filing of Writ Petition in the High Court, there was no conflict of interest among the Directors, including petitioners and the Respondents 2 to 7. The conflict has cropped up only after dismissal of the Writ Petition by the High Court of Allahabad. It is an admitted fact that Bank has approached the Debt Recovery Tribunal and the proceedings are pending there. We therefore, are constrained to infer that this Tribunal's jurisdiction is invoked by the parties under section 397 and 398 of the Act to foil the proceedings pending before the Debt Recovery Tribunal. This Tribunal for the aforesaid reasons, find that it cannot be declared as such that the mortgage of the Company's property in favour of Bank of Baroda, the 8th Respondent herein, was unlawful, illegal, null and void, as claimed by the petitioners. We place on record that our observations, if any, would not stand in the way of the Debt Recovery Tribunal to decide the validity of mortgage, if raised before it, in accordance with law. It is startling to note, the Bank of Baroda (R8) did not chose to enter appearance t....
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....oach as was adopted in our answer to Point No. 1. This is on factual side of the issue. On legal side also, we find ample force and justification in the arguments of the Ld. Counsel for the petitioners. The Companies Act has provided provisions for the appointment of Directors and Additional Directors. Sec. 255 provides for appointment of directors and proportion of those who are to retire by rotation. It is at every annual general meeting. Sec. 256 deals with ascertainment of Directors retiring by rotation and filling of vacancies. This filling up of vacancy shall be in the annual general meeting of the company. Sec. 258 provides a right to the Company to increase or reduce the number of Directors. This right has to be exercised in the annual general meeting only. Sec. 260 then deals with the appointment of 'additional directors'. This provision reads: "Sec. 260- Additional Directors: directors: Nothing in sections 255, 258 259 shall affect any power conferred on the Board of Directors by the articles to appoint additional directors: Provided that such additional directors shall hold office only up to the date of the next annual general meeting of the company; Provided....