TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 487
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.... Arya in 1962, and, subsequently, metamorphosed into a partnership in 1965 and into the present private limited Company in June 1985 - originally named M/s Prabhat Zarda Factory (Muzpur) Pvt Ltd and later rechristened as PZFIPL on 27th March 1991. The Dramatis Personae 3. First, to introduce the dramatis personae, eschewing honorifics for ease of reference. 4. Lalit Kumar Arya and Rukmini Devi were husband and wife. They had three sons - Jyoti Kumar Arya (hereinafter referred to as "Jyoti"), Pradeep Kumar Arya (hereinafter referred to as "Pradeep") and Vijay Kumar Arya (hereinafter referred to as "Vijay"). 5. Jyoti was married to Malti Devi. The couple had three sons, namely Jai Kumar Arya (hereinafter referred to as "Jai"), Ujjwal Kumar Arya (hereinafter referred to as "Ujjwal") and Gaurav Kumar Arya (hereinafter referred to as "Gaurav"). 6. Pradeep was married to Manju Devi, and had only one son, Purushottam Kumar Arya (hereinafter referred to as "Purushottam"). 7. Vijay married Chhaya Devi. Their children, if any, have no part to play herein. 8. The relative positions of the above listed members of the PZF family tree, in CS (OS) 285/2017, and in the present appeal, with ....
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....d a requisition, from its shareholders, for convening of an Extra Ordinary General Meeting (hereinafter referred to as "EGM") on 26th May 2017, with the following proposals: (i) removal of the plaintiff (Chhaya Devi) as Director/Managing Director of the Company, (ii) setting aside a notice, earlier issued, for approval of an agenda item, dated 31st of May 2014, to terminate the directorship of the defendants, and (iii) appointment of Defendant No 1 (Rukmini Devi) as Managing Director of the Company. 14. On receiving the said requisition, the plaintiff (Chhaya Devi) responded, on 25thApril 2017, alleging that the requisition was not in accordance with Section 169, read with Section 115 of the Companies Act, 2013 (hereinafter referred to as "the Act"), inasmuch as no Special Notice had been served, by the shareholders, on the Company and, instead, the Company had simply been requested to serve notice under Section 169. 15. At this juncture, it would be advantageous to reproduce Sections 115 and 169 of the Act, as under: "115. Resolutions requiring special notice. - Where, by any provision contained in this Act or in the articles of a company, special notice is required of any ....
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....he application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company's costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it. (5) A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board, be filled by the appointment of another director in his place at the meeting at which he is removed, provided special notice of the intended appointment has been given under subsection (2). (6) A director so appointed shall hold office till the date up to which his predecessor would have held office if he had not been removed. (7) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions of this Act: Provided that the director who was removed from office shall not be re-appointed as a director by the Board of Directors. (8) Nothing in this section shall be taken- (a) as deprivin....
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.... have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company within the period specified in sub-section (4). (3) The requisition made under sub-section (2) shall set out the matters for the consideration of which the meeting is to be called and shall be signed by the requisitionists and sent to the registered office of the company. (4) If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition, the meeting may be called and held by the requisitonists themselves within a period of three months from the date of the requisition. (5) A meeting under sub-section (4) by the requisitionists shall be called and held in the same manner in which the meeting is called and held by the Board. (6) Any reasonable expenses incurred by the requisitionists in calling a meeting under sub-section (4) shall be reimbursed to the requisitionists b....
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....f directors of the respondent no 1 i.e. Prabhat Zarda Factory (India) Private Ltd; (f) Declaration that the purported notice dated April 24, 2017 allegedly issued under section 100 of the Companies Act, 2013 is illegal, null and void and not binding upon the company, its shareholders, directors and all concerned; (h) Declaration that the communication dated May 2, 2017 purportedly issued by one Shanker Prasad (respondent no 4) claiming himself to be a director is illegal and bad and has been issued without any authority and is not binding on the company, its board, the shareholders of the company and/or concerned; (i) injunction be passed restraining the company from convening any Extraordinary General Meeting of the respondent no 1 i.e. Prabhat Zarda Factory (India) Private Ltd pursuant to the notice dated April 24, 2017 purporting to be under section 100 read with section 169 of the Companies Act, 2013 or on the basis of any other notice of like nature till the disposal of the company petition; (j) Injunction be passed restraining the company from convening/holding any extraordinary general board meeting of the respondent no 1 company i.e. Prabhat Zarda Factory (India) Privat....
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....speed post as well as one of the approved couriers, returnable on 24.05.2017. Dasti in addition. Dasti notices shall be collected on or before 20.05.2017. The affidavit of service shall be filed prior to the next date of hearing." 27. The plaintiffs proceeded, on 22ndMay 2017, to file yet another suit, i.e. CS (OS) 233/2017, this time against Defendants Nos 2 to 9 (which includes the present appellants), praying for a decree of permanent injunction in favour of the Plaintiffs and against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from threatening and/or harming and/or harassing the Plaintiff No 1 and/or issuing any letter and/or notice and/or document to the Plaintiff No 1 or the Plaintiff No 2 and/or anyone acting on their behalf from acting upon the requisition dated 24.04.2017 and/or objections dated 24.04.2017 and/or notice dated 04.05.2017 and/or letter dated 13.05.2017 and from interfering and/or obstructing and/or hindering the smooth running and functioning of the Plaintiff No 2 company and functioning of the Plaintiff No 1 as the Chairman and Managing Director of the Plaintiff No 2 company and/or doing an....
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....innocent regarding the order, dated 18thMay 2017 supra of the NCLT, as well as all proceedings relating to CS (OS) 225/2017, went on to pass the following order, on IA 6382/2017: "Present suit is a suit for permanent and mandatory injunction. Plaintiff No 1 is the managing director of plaintiff No 2 which is a company duly incorporated under the Companies Act. Plaintiff No 1has 30.4% shareholding in plaintiff No. 2. Defendant No 1 is the brother-in-law of plaintiff No 1 and the brother of her deceased husband. The grievance of the plaintiff is that the defendants are proposing to hold an Extra-Ordinary General Meeting (EGM) which is scheduled for 26.05.2017. The agenda of the meeting has been circulated through a communication dated 24.04.2017. There are 3 agendas, all of which are against the statutory obligations contained in the Companies Act. It is pointed out that as is clear from the communication dated 24.04.2017, the EGM proposes to appoint Smt. Rukmini Devi as the managing director of the company; Rukmani Devi is a 78-year-old lady and in terms of Section 196(3)(a) of the Companies Act, such an appointment cannot be made; no special Resolution has been passed. The 2nd con....
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....ay 2017, the plaintiffs condescended to place, on the record of CS (OS) 233/2017, a copy of the order, dated 18th May 2017 supra passed by the NCLT. 33. The above situation resulted in Defendant No 2 (Jyoti, who is Applicant No 4 in the present appeal) moving IA 6537/2017 in CS (OS) 233/2017, under Order XXXIX Rule 4 of the CPC, for vacation of the stay granted by the learned Single Judge on 23rd May 2017. The said application came up before the learned Single Judge on 25th May 2017, on which occasion notice was issued thereon, returnable on 11th July 2017. Simultaneously, the learned Single Judge cancelled the date, of 9th October 2017, before the Joint Registrar, which was already fixed in the matter. Nothing else is stated in the order dated 25th May 2017, though the plaintiffs have, in sub-para aa) of para 3 of the plaint in CS (OS) 285/2017, stated that the defendants had pleaded, before the learned Single Judge, that the proceedings before the NCLT, and the pendency of CS (OS) 225/2017 had been concealed from her, and that she had refused to accede to the said submission, stating that she had been informed of the said proceedings. 34. The said order, dated 25th of May 2017,....
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.... to be held on 12thJune, 2017, he is taking appropriate steps. It shall be open to the petitioners to take such steps, as may be admissible, in accordance with law since in this case we are not concerned with the meeting which is going to be held on 12thJune, 2017. With the above observation, the specially petitions are dismissed. Pending application, if any, also stands disposed of." (Emphasis supplied) 38. On the basis the liberty granted, by the Supreme Court, in the aforementioned order dated 9th June 2017, the plaintiffs moved the Original Side of this Court by way of a third suit, viz. CS (OS) 285/2017, praying that this Court be pleased "to pass a decree of permanent mandatory injunction in favour of the Plaintiffs and against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from acting upon the Notice dated 02.06.2017 issued by the Defendant No 1 and a decree of permanent mandatory injunction in favour of the Plaintiffs and against the Directors or anyone acting on their behalf from attending/convening any meeting of the Plaintiff No 2 on 12.06.2017 and restraining the Defendant No 1 to from issuing a....
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....der XXXIX Rule 4) and IA 7151/2017 (under Order XXXIX Rules 1 & 2) in CS (OS) 285/2017. These applications need not, however, detain us as, when they were listed before the learned Single Judge on 4th July 2017, it was submitted, on behalf of Defendants 2 to 10 (which include the present appellants before us), that the Board was proposing to convene an EGM, in terms of Section 100 of the Act, independent of the Resolution passed on 12th June 2017, which stood interdicted by the learned Single Judge. On the submission, the Single Judge noted, in the order dated 4th July 2017, thus: " Learned counsel for the defendant Nos 2 to 10 submits that an Extraordinary General Meeting was proposed to be held on 10.07.2017 in terms of Minutes of Meeting dated 12.06.2017. He submits that since this Court had interdicted the Resolutions passed on 12.06.2017, the Board of Director propose to convene an Extraordinary General Meeting in terms of Section 100 of the Companies Act, 2013, independent of the said resolution. It is clarified that if the Board of Directors have any independent right to convene an Extraordinary General Meeting in terms of the Companies Act, 2013, they are at liberty to do....
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....Company, also issued a Notice, dated 10thJuly 2017, of the meeting of the Board having been scheduled on 18th July 2017, and calling on Plaintiff No 1 to attend the said meeting. Nothing, however, turns thereon, as the said notice was, subsequently, withdrawn before court on 26th July 2017, with liberty to issue a fresh notice in accordance with law. 43. The plaintiffs (Chhaya Devi and the Company), thereupon, moved IA 7854/2017 and IA 7856/2017, in CS (OS) 285/2017, the former under Order VI Rule 17, and the latter under Order XXXIX Rules 1 and 2 of the CPC. 44. IA 7854/2017 sought to amend CS (OS) 285/2017. Paras 12A to 12D were sought to be added in the plaint, alleging that the proposal to remove Plaintiff No 1 from the Company, as contained in the notice dated 8thJuly 2017, was illegal. The application also sought to add the following prayers, in the plaint: "ii) A decree of permanent mandatory injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from acting upon the notice dated 08.07.2017 and/or calling/sending any notice for convening any Extraordinary General Meeting of Plaintiff No 2 and from a....
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....id applications, and was accepted by the defendants. Learned counsel appearing for the defendants submitted, to this Court, that, without prejudice to the defendants' defence, it had been decided to defer the meeting, scheduled for 18th July 2017, to 28thJuly 2017. The proceedings were, therefore, renotified for 26th of July 2017. 47. On 26th of July 2017, the learned single Judge noted that no venue, or time, for the rescheduled meeting of 28th of July 2017, was forthcoming. He also observed that the notice, dated 22nd July 2017, issued by Shankar Prasad, did not provide the statutorily required one-week period till the date of the meeting scheduled for 28th July 2017. In the circumstances, the defendants submitted, without prejudice, that they would issue a fresh notice in accordance with law, and in furtherance of the requisition received from the shareholders on 8thJuly 2017 and, therefore, withdrew the notices dated 10th July 2017 and 22ndJuly 2017. In the circumstances, the plaintiffs, too, withdrew IA 7856/2017 without prejudice to the respective rights and contentions of the parties. 48. IA 7854/2017, under Order VI Rule 17 of the CPC, for amendment of the plaint in the t....
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....g any Extraordinary General Meeting of Plaintiff No 2 and from attending/convening the Meeting of the Board of Directors scheduled for 26.08.2017 and also from giving effect to any resolution passed in the Board Meeting of Plaintiff No 2 on 26.08.2017, if convened; iii) A decree of permanent mandatory injunction against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from convening any Board Meeting and/or Extraordinary General Meeting and/or such other meeting of the Plaintiff No 2 without the leave of this Hon'ble Court; iv) A decree of permanent mandatory injunction in favour of the Plaintiffs and against the Defendants restraining them, their agents, servants, representatives and/or anyone acting on their behalf from threatening and/or harming and/or harassing the Plaintiff No 1 and/or issuing any letter and/or notice and/or document to the Plaintiff No 1; v) A decree of perpetual injunction in favour of the Plaintiffs and against the Defendants from interfering and/or obstructing and/or hindering the smooth running and functioning of the Plaintiff No 2 company and functioning of the Plaintiff No 1 as the Managing....
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....mpany in consultation with the Chairman and Managing Director thereof. The notice, dated 8thAugust 2017 had, however, been sent by the defendants without consultation with Plaintiff No 1 who was the MD-cum-Chairman of the Company. (v) The basis of the notice dated 8thAugust 2017 was the earlier notice dated 8thJuly 2017 which, however, was not a "requisition" and could not, therefore, be acted upon. That apart, more than 21 days had elapsed since the notice of 8thJuly 2017. (vi) Standard 1.3.8 of the Secretarial Standards required that each item of business requiring approval at the meeting be supported by a note setting out the details of the proposal. The notice dated 8thAugust 2017 merely had an agenda, without any note or reference papers in support thereof. Neither was any note appended to the "Special Notice" dated 8thJuly 2017 which, too, merely contained a statement that the actions of Plaintiff No 1 were against the interests of the Company. 54. IA 9617/2017 and IA 9618/2017 were both listed before the learned Single Judge on 25th August 2017. However, notice was issued only on IA 9618/2017, with a further direction that no effect be given to any decision taken in the ....
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....as entitled to represent thereagainst. (viii) Curtailment of the statutory rights already enured in favour of Plaintiff No 1, who had been appointed as a whole time Director for a period of 10 years in 2008, required compliance with Section 169 of the Act. In the absence of any reasons, in the notice dated 8thJuly 2017, it could not be said that such compliance had taken place. The said notice had, therefore, been mechanically issued without application of mind. (ix) The judgement in L.I.C. of India v Escorts Ltd, (1986) 1 SCC 264, on which the defendants placed reliance, was not applicable, as the Supreme Court was, in that case, not considering a provision like Section 169, with specifically conferred an opportunity of being heard. (x) This infirmity could not be said to be cured merely by an assurance that the reasons, for removal of Plaintiff No 1, as Director in the Company, would be supplied along with the Explanatory Note for the meeting. The explanatory note had to be prepared by the Directors who convened the meeting, not by the shareholders who had requisitioned the same. If there was no material available on record with the Directors who had convened the meeting, no s....
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.... and FAO (OS) 180/2017. The SLP, preferred thereagainst, was also dismissed by the Supreme Court or 9th of June 2017. (iv) The learned Single Judge erred in granting ad interim relief, as sought in IA 9618/2017, when IA 9617/2017, for amendment of the plaint, was still pending adjudication, notice alone having been issued thereon. Till the amendment was allowed, there was no substantive challenge, to the notice dated 8thAugust 2017, or the proposed meeting of the Board scheduled for 26th August 2017. Interim relief, by way of stay of the said meeting, the challenge to which was still not part of the plaint, could not, therefore, have been granted under Order XXXIX of the CPC. (v) The learned Single Judge erred in distinguishing the judgement in L.I.C. of India (supra). The judgement, rendered in the context of Section 284 of the Companies Act, 1956, which was in parimateria with Section 169 of the Act, clearly held that the shareholders, calling a meeting, were not required to disclose the reasons for the resolutions which they proposed to move at the meeting. Every shareholder had the right to call an EGM of the Company, for the purpose of moving a resolution to remove Directors....
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....ts the following, as irrefutable evidence of the fact that the plaintiffs have been "economical with the truth" and have, thereby, disentitled themselves to any relief from a constitutional court: (i) There is no whisper, anywhere in CS (OS) 225/2017, of the fact that Plaintiff No 1 had already moved the NCLT for interim injunction qua the requisition dated 27th April 2017 and notice dated 4th May 2017. (ii) It does not appear, either from a reading of the order, dated 18th May 2017, passed by the NCLT, or from the record otherwise available before us, that the NCLT was apprised, by the plaintiffs (who were the applicants before the NCLT) of the fact that Plaintiff No 1 had, a day earlier, filed CS (OS) 225/2017, before this Court, seeking reliefs largely similar to those sought from the NCLT. (iii) The plaintiffs, who alone attended the hearing of CS (OS) 225/2017, on 19th May 2017, before the learned Single Judge, apparently did not bring, to the notice of the learned Single Judge, the factum of IA 17/KB/2017 having been filed, by the plaintiffs themselves, before the NCLT, or of the order passed by the NCLT, rejecting the plaintiffs' request for stay on 18th May 2017, i.e. ju....
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....im basis, while issuing notice on IA 9618/2017. (ii) Section 169 (2) of the Act required issuance of special notice, under Section 115, of the resolution to remove the Director, before the resolution could be acted upon. Subsection (3) of Section 169 mandated sending of a copy, of such special notice of resolution, to the concerned director, and sub-section (4) permitted the said Director to represent thereagainst. Further, the 2nd proviso to Section 179 (1) of the Act prohibited the Board from exercising any power, or doing any act or thing, which was required, by the Articles of Association of the Company, to be done by the company in general meeting. In fact, the defendants (i.e. the appellants before us) had admitted, before the learned Single Judge, that Plaintiff No 1 could not be removed from Directorship of the Company without issuance of a Special Notice under Section 115. (iii) The Notice, dated 8th July 2017, while purporting to be a Special Notice under Section 115 of the Act, did not satisfy the requirements of one. It did not seek convening of any EGM, but merely stated that the resolution was intended to be moved as and when the meeting would be convened. Further, ....
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....t, while seeking the challenge a later notice. (iv) There was no justification for passing the impugned order, as the interim relief, which was finally granted thereby, already stood granted, to the plaintiffs, by the earlier order, dated 25th August 2017 supra, passed by this court in IA 9618/2017. This Court had, in the said order, clarified that any decision, taken in the meeting scheduled for 26th August 2017, would not be given effect to, till the next date of hearing. Having granted the said relief, there was no justification, whatsoever, for the learned Single Judge to, vide the impugned order dated the 11th September 2017, restrain the defendants even from acting on the notice dated 8th August 2017, and to finally allow IA 9618/2017 in the said terms. (v) The "concession", recorded as having been given by learned counsel appearing for the defendants, in para 30 of the impugned order, to the effect that Directors, of their own, could not seek to remove another Director, and could only act on a special notice being received, did not represent the correct legal position, as Section 169 (1) entirely empowered the Company, i.e. the Board, to remove any Director or appoint any ....
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.... by the impugned order, by way of final disposal of IA 9618/2017, could as well have been granted by way of interim relief, while issuing notice on the said IA, would also require to be examined in this context. (vi) Has the learned Single Judge erred in distinguishing the judgement in L.I.C. of India (supra)? What is the effect of the said judgement? (vii) Was the notice, dated 8th July 2017, illegal because the reason afforded, therein, for justifying the proposal to remove Plaintiff No 1 from the Directorship of the Company, was woefully inadequate, and would not allow her a meaningful opportunity to represent against the said proposal? Juxtaposed, with this, would be the issue of the appropriate stage at which the Director, whose removal was being proposed, would be entitled to be informed of the complete reasons therefor. Section 102 of the Act would also come into consideration. The judgement of the Kerala High Court in Queens Kuries& Loans (supra) would also be required to be examined in this connection. (viii) Has the learned Single Judge erred in treating the notice, dated 8th August 2017, as having been issued under subsection (2) of Section 100 of the Act, instead of ....
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....agenda set out for the said Meeting was only to discuss whether to issue notice to convene an EGM, pursuant to the Special Notice (referred to as a "requisition" in para 1), dated 8thJuly 2017, received from the shareholders, proposing removal of Plaintiff No 1 from her office as Director of the Company. 67.3. IA 9618/2017 came to be filed, by Plaintiff No 1, in CS (OS) 285/2017, seeking stay of the notice dated 8th August 2017 supra. The following order came to be passed, on 25th August 2017, by the learned Single Judge, on the said application: " Issue notice. Notices accepted by the learned counsel appearing for the defendants. Let reply be filed within 3 days. Rejoinder before the next date. It is clarified that any decision taken in the meeting, scheduled for 26.08.2017, shall not be given effect to till the next date of hearing. Renotify on 30.08.2017." 67.4 The above interim order has effectively not only been made absolute, by the impugned order dated 11th September 2017, but has resulted in entirely prohibiting the defendants (i.e. the appellants before us) from acting upon the notice dated 8th August 2017 or the resolutions passed in the meeting which took place on 2....
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....s well-taken, though the reliance, by him, on Shree Chamundi Mopeds (supra), may not be entirely apt. 67.10 In deference to the submission made by Mr Chandhiok, we proceed to examine Shree Chamundi Mopeds (supra). 67.11 The appellant in Shree Chamundi Mopeds (supra) (hereinafter referred to as "SCM") was tenant in respect of certain premises which belonged to the respondent therein (hereinafter referred to as "the Church"). SCM committed default in payment of rent and, on its failing to purge the default despite communications from the Church, the Church issued a notice, under Section 434 of the Act, to SCM and followed it up with a petition, seeking winding up of SCM, filed before the High Court under section 433(e) of the Act. 67.12 While the said petition, seeking winding up SCM, was pending before the High Court, SCM filed a reference, under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA"),before the Board of Industrial and Financial Reconstruction ("the BIFR"), whereon the BIFR, videorder dated 26th April 1990, found that SCM had become economically and commercially non-viable and deserved to be wound up.....
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....dings against the company would not lie except with the consent of BIFR / AAIFR, where, in respect of such company, (i) an inquiry under Section 16 was pending, or (ii) a scheme referred to in Section 17 was under preparation or consideration, or (iii)a sanctioned scheme was under implementation, or (iv) an appeal under Section 25 relating to the industrial company was pending. (ii) The appeal, filed by SCM, having been dismissed by the AIIFR on 7th January 1991, no proceedings, under the SICA, were pending before the BIFR or the AIIFR, on 21stFebruary 1991, when this Court granted interim relief staying the operation of the order of the AIIFR. (iii) The said stay order of this Court could not have the effect of reviving the proceedings which had been disposed of by the AIIFR vide its order dated 7th January 1991. The Supreme Court held, on this issue, as under : "The said stay order of the High Court cannot have the effect of reviving the proceedings which had been disposed of by the Appellate Authority by its order dated January 7, 1991. While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between qu....
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....e precise issue arising, in the present case, as enunciated in the objection voiced by Mr. Sapra, read with the response of Mr. Chandhiok, is whether the time, statutorily prescribed to act on the notice dated 8th August 2017, or on the resolution arrived at during the meeting dated 26th August, 2017, stood extended by the period of currency of the stay order of this Court, or whether the said period could be excluded therefrom, for the purposes of computation of the period of limitation stipulated in Section 100 (4) of the Act or Rule 23 (2) of the 2014 Rules. Shree Chamundi Mopeds (supra)cannot really be said to be of aid, to us, in finding the answer, though some guidance could possibly be drawn therefrom. 67.19 An answer does, however appear to be directly forthcoming in the judgment of Supreme Court in Kanoria Chemical Industries Limited v UPSEB, (1997) 5 SCC 772- which, incidentally, relied on Shree Chamundi Mopeds (supra). The legal position, in this regard, has been set out with precision and exactitude in para 11 of the report, thus: "It is equally well settled that an order of stay granted pending disposal of a writ petition/suit or other proceeding, comes to an end wit....
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....tain such express statutory empowerment. 68.5 Mr. Chandhiok, who does not seriously join issue, on principle, with Mr Sapra's submission, would seek, instead, to point out that such statutory empowerment of the NCLT is, indeed, to be found in the proviso to Section 169(4) of the Act. Section 169(4), may for ready reference, be reproduced as under: "(4) Where notice has been given of a resolution to remove a director under this section and the director concerned makes with respect thereto representation in writing to the company and requests its notification to members of the company, the company shall, if the time permits it to do so, - (a) in any notice of the resolution given to the members of the company, state the fact of the representation having been made; and (b) send a copy of the representation to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representation by the company), and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company's default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at th....
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.... 68.8 As, perhaps, the most authoritative pronouncement on the issue, the Constitution Bench of the Supreme Court, in Dhulabhai v State of M.P., AIR 1969 SC 78, set out the following 7 clear principles (of which only the first and last are really relevant to the the present case), to be applied for deciding whether a suit was barred under Section 9 of the CPC: "(1) Where the statute gives a finality to the orders of the special Tribunals the civil courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particul....
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....re unable to subscribe to Mr. Sapra's contention that the legislative bar to exercise of jurisdiction, by civil courts, engrafted in Section 430 of the Act, would operate only where the provision in the Act specifically, and in so many words, confers jurisdiction on the NCLT. The provision uses the expression "by or under this Act". Redundancy and tautology, it is trite, are not to be attributed to the legislature. Dilbagh Rai Jarryv U.O.I., (1974) 3SCC 554 enunciates the principle thus: "The legislature is not supposed to indulge in tautology, and when it uses analogous words or phrases in the alternative, each may be presumed to convey a separate and distinct meaning the choice of either of which may involve the rejection of the other." (Emphasis supplied) 68.11 Where, therefore, Section 430 uses the words "by or under this Act" the words "by" and "under" have to be understood as conveying different and distinct meanings. The position in law may, in fact, be treated as covered by the judgement of the Supreme Court in Dr. Indiramani Pyarelal Gupta V. W.R.Natu, AIR 1963 SC 274,which holds as under: "A more serious argument was advanced by learned counsel based upon the submissi....
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.... body to make rules for the purposes of the Act. In such a case these may be duties imposed by those rules, and certainly such duties can be said to be imposed '' under the Act, " although they are not imposed "by the Act." I reject the contention of Mr. Thakor for the appellant that the words "by or under this Act" are limited to duties imposed by some provision of the Act itself." (Emphasis supplied) 68.13 All such proceedings which, therefore, the NCLT would be competent to adjudicate would, consequently, stand excluded from the jurisdiction of Civil Courts. The submission of Mr. Sapra, that, such exclusion would apply only to cases where power is expressly conferred, by one or other provision of the Act, on the NCLT or the NCLAT, has to be rejected in view of the above legal position. 68.14 The issue of whether the civil suit filed by the plaintiffs before this Court was maintainable, or was barred by Section 430 of the Act, would, therefore, depend on whether the NCLT was empowered to exercise jurisdiction, on the issue, under the Act. Mr Chandhiok would rely, for supporting his stand that jurisdiction does stand expressly conferred, by the Act, on the NCLT in respe....
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....of the Act limits the applicability of Section 241, however, to cases where "an order under this Chapter" (i.e. Chapter XVI of the Act, comprising Sections 241 to 246) is sought by the applicant, or is capable of being granted by the Tribunal. The question, therefore, arises, as to whether the cause of action ventilated by the plaintiffs, in CS (OS) 285/2017, and the reliefs claimed therein, would fall within Chapter XVI of the Act. 68.20 Section 242 sets out the powers of the NCLT, in cases where Section 241 can be invoked. The relevant clauses of Section 242 may be quoted thus: "241. Powers of Tribunal. - (1) If, on any application made under section 241, the Tribunal is of the opinion (a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and (b) that the winding of the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up, the ....
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....opinion of the Tribunal, it is just and equitable that provision should be made." [Clauses (b) to (g), (i), (k) and (m) of Section 242 (2) are obviously inapplicable, and no reference, thereto, is being made in the discussion that follows.] 68.21 Does the grievance ventilated by the plaintiffs in CS (OS) 285/2017, or the relief prayed for by them therein, fall within any of the species of cases contemplated by Section 242 of the Act? In our considered opinion, no. 68.22 Section 242 (1) is clearly inapplicable, as it applies only in a case where the Tribunal is of the opinion that "the winding of the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up". Even if the notice, dated 8th August 2017, or the Board meeting of 26th August 2017 proposed therein, were illegal, it cannot be said that any case for winding up of the Company, even prima facie, was made out. 68.23 Adverting, now, to Section 242, clauses (a) to (g) and (i) to (l) thereof are obviously inapplicable. Clause (h) would, in fact, indicate that the reliefs p....
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..... Bhat, J., opined thus: "It is also necessary to note that under section 397, it is not only the oppression that given a cause of action but also the applicant or the applicants shall have to show that that the facts would justify the making of a winding up order on the ground that it is just and equitable that the company should be wound up. In other words it is necessary to show that the facts are such that normally the company could be sought to be wound up under the "just and equitable" clause but such winding up would unfairly prejudice the members. Therefore, I am of the view that section 397 is not an effective forum to grant any relief of an individual member under all circumstances. Similar is the situation under section 398 also. Being a constituent of the company a shareholder has several individual rights and those rights could be enforced by invoking the civil jurisdiction of the courts. Further, the Act nowhere specifically excludes the jurisdiction of the civil courts." (Emphasis supplied) 68.28 Panipat Woollen and General Mills Co. v R. L. Kaushik, 1969 (39) Comp Cas 249 (P & H) is another case in point. The memorandum and articles of Association of the ....
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....d (Iron and Steel) Stockholders Association Ltd, (1978) 48 Com Cas 401 (P & H) was concerned with a situation in which a petition was moved, before the High Court, under Section 166 of the erstwhile Companies Act, 1956, for declaration of a meeting of the Company, held on 28th September 1977, to be illegal and void. Following, interalia, the decision in Panipat Woollen and General Mills Co. (supra), it was held that the petition was competent. Similarly, a suit for declaration that the Annual General Meeting of the Company was illegal, was held to be competent, by the Kerala High Court, in R. Prakasam v Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp Cas 611 (Ker), which went to the extent of holding that the Company Court could not grant relief in such matters. 68.30 The inevitable outcome of the above discussion is that the invocation, by Mr Chandhiok, of Section 430 the Act, to nonsuit the plaintiffs, is misplaced. Per sequitur, CS (OS) 285/2017 has to be held to be competent. 69 Issue No. (iii)- Whether, having elected to submit to the jurisdiction of the NCLT in respect of the notice dated 24th April, 2017, the plaintiffs were estopped or otherwise barred from invoking....
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....nd that the original invocation of jurisdiction of the NCLT was not by the plaintiffs, but by the defendants, by way of Company Petition 136/2014, alleging operation and mismanagement in affairs of the company. This is not, therefore, a case of which the plaintiffs could be accused of forum shopping by invoking the jurisdiction of NCLT and later of this Court for identical reliefs. The resort, by the plaintiffs, to the jurisdiction of the NCLT, by way of IA No. 17/KB/2017, filed in Company Petition No. 136/2014 (supra), was only because the dispute between the plaintiffs and the defendants, was actually in seisin before the NCLT, at the time, in the said company petition. Whether they ought to have done so, and whether the NCLT had the jurisdiction to grant interim relief, as it did, on 18th May 2017, may be moot questions; we forbear from expressing any view thereof, as the order of the NCLT is not under challenge before us. Be that as it may, the filing of the said IA, by the plaintiffs, cannot foreclose their right to invoke the ordinary jurisdiction of this Court for seeking declaration and mandatory injunction. It cannot be, therefore, be said that the plaintiffs wereapproachi....
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....ng IA 9618/2017 even when notice was yet to be issued IA 9617/2017? 71.1 Mr. Chandhiok contends that Order XXXIX of the CPC permits grant of interim injunction only in respect of something which is part of the subject matter in the main suit. He points out that CS (OS) 285/2017, as it stood on the date of passing of the impugned order by the learned Single Judge, did not lay any challenge either to the notice dated 8th August 2017, orthe meeting of the Board to be held on 26th August 2017, as referred to therein. The challenge, in CS (OS) 285/2017 as it stood on the said date - and, in fact as it still stands-was only to the notice dated 2nd June 2107 and the meeting to be held on 12th June 2017 referred to therein. Indeed, it could not have been otherwise, as CS (OS) 285/2017 was filed before the notice dated 8th August 2017 came to be issued. As such, challenging the notice dated 8th August 2017 or seeking restraint, on the defendants, from acting on any resolution taken at the meeting dated 26th August 2017 necessarily required amendment of the plaint by means of an appropriate application under Order VI Rule 17 of the CPC. IA 9617/2017 was such an application. The problem, as ....
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....d by him as an ad interim measure pending disposal of the said IA. The learned Single Judge, at worst,could be said to have erred in finally disposed of IA 9617/2017 instead of keeping it pending and granting ad interim relief, as granted by the presently impugned order. The said submission appears, to us, to be well taken. 71.6 The objection, of Mr.Chandhiok, to the effect that the learned Single Judge ought not to have disposed of IA 9618/2017 by way of the impugned order, while IA 9617/2017 was still pending, stands disposed of accordingly. 72 Issue No. (vi) - Whether the learned Single Judge has erred in distinguishing of the judgment of the Supreme Court in L.I.C. of India (supra)? 72.1 We come, now, to the meat of the matter. 72.2 Much turns on L.I.C. of India (supra) and we propose, therefore, to deal with the said decision in some detail. 72.3 L.I.C. of India (supra), authoritatively authored by O. Chinnappa Reddy, J., presiding over a Constitution Bench, was concerned with the scheme, known as the Portfolio Investment Scheme (hereinafter referred to as "the Scheme"), formulated by the Government of India to encourage investment by nonresidents of Indian nationality or....
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.... of Escorts filing a writ petition, in the Bombay High Court, on behalf of Escorts. The financial institutions, which held 52% shares in Escorts were not, however, in favour of filing the writ petition, or of refusing to register the transfer of shares. One of the said financial institutions, the Life Insurance Corporation (LIC) issued a requisition, to Escorts, to hold an EGM for the purpose of removing 9 of the Directors of Escorts and nominating 9 others in their place. 73.3 Escorts, thereupon, amended the writ petition filed by it before the Bombay High Court, by adding a prayer, therein, for issuance of a declaration that the requisition to hold the meeting, as issued by LIC, was arbitrary and illegal. The High Court allowed the writ petition of Escorts, whereagainst appeals were preferred, to the Supreme Court, by the Union of India, the RBI and the LIC. The operative portion of the judgement of the High Court read, inter alia, as under: "There shall be a declaration that the action of respondent 18 in issuing the impugned requisition notice is contrary to the provisions of Section 284 of the Companies Act and ultra vires the powers vested in the LIC under Section 6 of the ....
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....se the reasons for the resolutions proposed to be moved at the meeting. (vii) The reasons for the resolutions proposed to be moved at the meeting were also immune from judicial review. (viii) Though there was a statutory duty cast on the management, to disclose, in an explanatory note, all material facts relating to the resolution coming up before the EGM, to enable the shareholders to form a judgement on the business with them, the shareholders were not required, at the time of calling the meeting, to disclose the reasons for the resolutions proposed to be moved thereat. Following on the above reasoning, the Supreme Court held that the LIC, as a shareholder of Escorts, had the same right as every other shareholder, to call an EGM for the purpose of moving a resolution to remove some Directors and appoint others in their place, and could not be restrained from doing so, nor was the LIC bound to disclose its reasons for moving the resolution. 73.5 The learned Single Judge has, in 43 of the impugned judgement, sought to distinguish L.I.C. of India (supra) thus: "The judgement of the Supreme Court in Life Insurance Corporation (supra)relied on by the learned counsel for the defen....
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....with respect to the proposed Section 169, states thus: "Clause 169. - This clause corresponds to section 284 of the Companies Act, 1956 and seeks to provide that a company may, by ordinary resolution remove a director (not being a director appointed by the Tribunal under section 242). Where the company has availed itself of the option given to it under section 163 to appoint less than two thirds of the total number of directors according to the principle of proportional representation, then the provisions of this section shall not apply. Special notice by specified number of members shall be required of any resolution, to remove a director or to appoint somebody in place of a director so removed. The clause further provides that the Director shall be entitled to be heard on the resolution at the meeting. A vacancy created by the removal of a director may be filled by the appointment of another director in his place by the meeting at which he is removed. The clause seeks to provide that the director was removed from office shall not be reappointed as a director by the Board of Directors." (Emphasis supplied) 73.8 We are constrained, therefore, to hold that the judgement of the Co....
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....ition from the shareholder, as well as the notice for holding of EGM, in the said case, parallelise the said documents in the present case (except that the notice for convening of the EGM, in that case, was by the requisitionist, as the Board did not act within the time statutorily prescribed). The High Court, after observing that most of the legal controversies arising for consideration stood settled by the judgement in L.I.C. of India (supra), went on to hold thus (in paras 15 to 17, 19 and 25 of the report): "15. A shareholder of a company possessing the numerical strength as required by Act has the right to requisition an extraordinary general meeting. Such a shareholder cannot be restrained by injunction from calling the meeting and he is not bound to disclose the reasons for the resolutions proposed at the meeting. Nor are the reasons for the resolutions subject to judicial review. Though section 169 uses the expression "such number of member of the company" in the plural, yet the requirements of the provisions would be satisfied even if one member holding the requisite number of shares or voting rights makes the requisition. It is also well settled that words in the plural ....
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....l as the notice of meeting are valid. The Supreme Court in LIC's case [1986] 59 Comp Cas 548 has also ruled that no injunction can be granted restraining a shareholder from convening an extraordinary general meeting ..." (Emphasis supplied) 73.11 The position, in law, that (i) there is no obligation to disclose the reasons for removing a person from Directorship of a Company prior to the EGM where such proposal is to be considered, (ii) no injunction, of the decision to hold such EGM, can be granted by the court, and (iii) the said reasons are immune from judicial review, stands reinforced by this decision. 74. Issue No. (vii) - Whether the notice, dated 8 July 2017, was illegal for want of sufficient reasons to justify the proposal to remove Plaintiff No 1 from Directorship of the Company? At what stage were the reasons required to be furnished? What is the effect of the judgement of the Kerala High Court in Queens Kuries& Loans (supra)? 74.1 This issue stands substantially answered by the discussion with respect to Issue No (vi) supra. In view of the authoritative pronouncement, of the Constitution Bench of the Supreme Court in L.I.C. of India (supra), to the effect that ....
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....the opportunity has been given reasonably prior to the taking of the decision, and the decision takes into account the stand of the concerned person, as ventilated during such opportunity, no legitimate grievance, of violation of the principles of natural justice, or non-adherence to the statutory requirements, could possibly be voiced. 74.4 Mr Sapra has placed reliance on the judgement of the Kerala High Court in Queens Kuries (supra), specifically on the following finding, contained in para 9 of the report: "Special notice of the resolution to remove directors required by section 284 of the Act shall be given to the company, not less than 14 days before the meeting at which it is to be moved (section 190 of the Companies Act). The notice must disclose the ground on which the director is proposed to be removed. The disclosure of the ground for removal is a matter of substance and not a form because the directors contained are entitled to make representations in writing at the meeting. The company is bound to send a copy of the representation to every member of the company to whom the notice of the meeting has been sent. It is only after these steps are taken that the resolution ....
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....ore, the notice calling for the meeting had necessarily to set out the specifics of the allegations against the said directors, so that the shareholders at the meeting would be able to impartially adjudicate thereon. Significantly, the High Court found particular fault with the fact that a letter, dated 7th January 1995, which actually set out being a chance against the directors and was the catalyst in prompting the decision to remove them from office, was not circulated with the notice proposing the meeting. This decision substantially echoes the submission of Mr Sapra in the present case. However, the Supreme Court, in appeal therefrom [P. Rajan Rao v B. G. Somayaji, (1995) 83 Comp Cas 662 (SC)], ruled as under: "2. We are satisfied that there was no ground available to the High Court for setting aside the trial court's order refusing to grant the injunction for holding the extraordinary general body meeting (EGM) of the company. We are informed that the EGM is scheduled to be held on 30-3-1995. The injunction granted [B.G. Somayaji v. Karnataka Bank Ltd., (1995) 83 Comp Cas 649 (Kant)] by the High Court is, therefore, vacated. Moreover, the appellants also undertake to cir....
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....der Section 100 of the Act. In case, at such meeting, the decision taken was to issue such a notice, to convene an EGM, it is such notice, if and when issued, which would be liable to be regarded as a notice under Section 100 of the Act. 75.3 Mr. Chandhiok contends - and, we feel, rightly - that the learned Single Judge has not correctly appreciated the import of the notice dated 8th August 2017. As Mr. Chandhiok submits, the said notice was absolutely innocuous in nature, intended only to decide whether to issue a notice under Section 100, for convening of an EGM, or not. The law laid down by the Supreme Court in L.I.C. of India (supra) makes it clear that a notice under Section 100, were it to be issued, could not have been injuncted by the Court. If the notice which might possibly have been issued, consequent to the decision taken at the meeting to be held on 26th August 2017, was itself immune from interlocutory interdiction, we fail to understand how any interiminjunction, staying the operation of the notice dated 8th August 2017, or the decision to be taken at the meeting dated 26th August 2017, could be granted. At the cost of repetition, it needs to be emphasized that no ....
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....the Board on its own accord, would clearly be relatable to Section 100(1) of the Act rather than Section 100 (2) thereof. As the Board, in the meeting to be convened on 26th August 2017, would be acting on its own accord in deciding whether to convene an EGM or not, the aspect of whether the notice dated 8th July 2017 was, or was not, a requisition, ceases to have relevance. 77.2 Infact a reading of the agenda for the meeting of the Board proposed to be held on 26th August 2017, reveals that it does not treat the communication dated 8th July 2017, as a requisition per se but a Special Notice. In any event, as already noted in the previous paragraphs, this distinction does not substantially impact the adjudication of the present appeal. 77.3 Having said that, a reading of the notice dated 8th July 2017 reveals that it has been signed by 9 Directors and does not even purport to be a requisition for convening an EGM. It is, quite clearly, a notice in terms of Section 169(2) read with Section 115 of the Act. The preambular subject to the said notice itself states that it is a "Special Notice u/s 115" of the Act. In that view of the matter, in our opinion, not much can be made of the ....