AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 523
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.... March, 1946 under the erstwhile Companies Act, 1913 and subsequently covered under the Companies Act, 1956. As on 31.3.2009 the paid up capital of the company was 3072 equity shares of Rs. 100/- each out of which 600 equity shares were held by the Govt of Assam and remaining 2472 equity shares were held amongst the shareholders of the company, including some of its employees and ex employees. It is stated that the registered office of the company initially was at AK Azad Road, Gopinath Nagar, Guwahati but due to the dispute between the shareholders and the then Managing Director, Sri Deep Narayana Singh, Original Respondent No.5, the registered office of the company was shifted to Santipur Main Road, House No.16, Near Pragjyotish College, Guwahati by a Board Resolution dated 5.1.2010 vide Resolution No.4. 3. However, in the month of July, 2009 a series of news items were published in varius local newspapers reflecting that the company under the stewardship of DN Singh, the then Managing Director, Original Respondent No.5, since deceased, has been conducting the business of the company in a manner which purportedly violated various laws and rules holding the field which are put ....
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....ent from the office of Managing Director and illegally got himself appointed as Managing Director of the Company. Later on the authorised capital of the company was increased from Rs. 5 lacs to Rs. 10 lacs of Rs. 100/- each. Original R5 then issued 6575 nos of fully paid equity shares of Rs. 100/- in his name and in the name of his supporters (1455 nos of shares on 20.2.2010 (Page 264) and 5260 nos of shares on 15.9.2010 (Page 280)) and filed return of allotment to the office of ROC Shillong. Later on original R5 resigned from the post of Managing Director w.e.f. 16.2.2011 (Page 474)and inducted one Sri Madhav Das as being MD of the company (Page 474). Therefore, the 1st respondent alongwith 19 others preferred company petition before CLB Kolkata alleging oppression as well as mismanagement running the affairs of the company. 5. Notice was issued to the Respondents (appellants herein) who appeared and contested the proceeding alleging several infirmities in petition both factual and legal and prayed for dismissal of the petition. They also stated that the petition is not maintainable. 6. After hearing the parties the NCLT passed the order dated 8.3.2018. The relevant portion ....
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.... including the holding of EOGM as when required to ensure the corporate democracy in running the affairs of the company." 235. Further the company is directed to refund the money, collected from the persons on the dates aforesaid, within a period of six months from the date of receipt of the copy of the order, and that too, with simple interest @10% annually rest from the date of purported purchase of such shares till the repayment of such money in full." 7. Being aggrieved by the said order dated 8.3.2018 the appellants have filed the present appeal praying therein the following reliefs:- a) set aside and quash the impugned order dated 8.3.2018 as being contrary to law. b) Pass such other and further order(s) in favour of the appellants as may be deemed fit and proper in the facts and circumstances of the case. 8. Appellants stated that the profits of the company have consistently increased and the rates of dividend paid to the shareholders including the respondents have also increased and that none of the creditors etc of the company have showed any grievances against the appellant management of the company. Appellants further stated that it is wr....
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....being converted to minority as it is evident that even prior to the issue of shares the Respondents herein were never in majority. 14. Appellants stated that it is settled law that directorial complaints cannot be entertained in a petition under Section 397/398 of the Act unless it is composite complaint and is in the case of a company which is in a nature of quasi partnership. In the facts of the present case, it is clear that the company cannot be said to be a quasi partnership. 15. Appellants stated that the respondents cannot claim any relief leading to rectification of register of member under Section 397/398 of the Companies Act, 1956 when an alternative remedy is available under Section 111 of the Companies Act, 1956. 16. Appellants stated that due to the freezing of the Bank accounts on the basis on the complaint of respondents the company needed fund for its operation and hence the Company raised money by issue of shares to its members on 20.2.2010 and 15.9.2010. Appellants stated that the action of the appellants comes within the dictum of the Hon'ble Supreme Court in Needle Industries (India) Ltd Vs Needle Industries Newey (India) Holding Ltd AIR 1981 SC 1298 be....
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....hat Mr. D.N. Singh committed a fraud against the majority shareholders of the appellant company as well as the said Court of Additional District Judge by filing Misc (Arb) Case No.571/2009 in as much as there cannot be any arbitration agreement between the shareholders on one side and the Board on the other as the same would tantamount to waiving the most basic legal rights of shareholders to appoint and remove the directors as envisaged in the Companies Act and as such the same is inconsistent under Company Law Jurisprudence. Respondents further stated that the provisions of Section 242 of the Companies Act, 2013 specifically rules out possibility of any such agreement between the shareholders and the Board. 23. Respondents denied and disputed that there was any order handed over to the Chairman of the Meeting dated 14.11.2009. Respondents denied and disputed that 19 members present did not vote in view of Stay Order dated 13.11.2009. Respondents further stated that no such pleadings were made before the Learned Company Law Board or the Hon'ble High Court. 24. Respondents stated that the appeal filed by the appellants is wholly frivolous, vexatious, misconceived, not tenable....
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....ing upon the issues framed by the Hon'ble High Court at Guwahati in Comp. Appeal No.3/2014 under Section 10F of Companies Act, 1956. 30. Appellants stated that 2nd appellant was appointed as Additional Director of 1st appellant on 30.1.2010 and his appointment as Director was ratified by the shareholders in the AGM held on 5.5.2010 which was attended by the majority shareholders of the 1st appellant. 2nd appellant was appointed as Managing Director of the Company in Board Meeting held on 25.5.2013 which was attended by other directors and the appointment of 2nd appellant as Managing Director is as per Article 62 of the Articles of Association and the 2nd appellant is the bona fide owner of 1020 equity shares. Appellants stated that there has been no fraud in allotment of shares by the 1st appellant and neither has the NCLT vide its final order dated 8.3.2018 ever given any finding about any fraud in allotment shares by the 1st appellant. 31. Appellants stated that 1st respondent joined company in the year 1991 and 10th respondent joined the company in the year 2003. During the employment these persons became shareholders of the company. These respondents in association with 1....
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....espondents were terminated from the services of 1st appellant as an "employee" which has nothing to do with the shareholding of 1st and 10th respondent and with the case of oppression and mismanagement. 39. Learned counsel for the appellant argued that Civil Judge in Misc Arb No.571/209 passed an injunction order on 13.11.2009 prohibiting any discussion on item No.2 in the agenda notice dated 21.10.2009, which was duly conveyed to the company and all concerned. Learned counsel for the appellant further argued that in the said order the Court restrained the respondents from making any discussions on Item No.2 in the notice dated 21.10.2009 in the EOGM convened on 14.11.2009. The said order was immediately conveyed to company, Respondents and all office bearers. Learned counsel further argued that inspite of this orders, the respondents not only made discussions but also took a resolution removing Late Mr. D.N. Singh, original Respondent No.5, from the post of Director/Managing Director. 40. Learned counsel for the Respondents argued and denied that any order dated 13.11.2009 was handed over to the Chairman of the Meeting dated 14.11.2009 or that the proxy of the State of Assam....
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....7th respondent had no locus as Directors as they were appointed at the EOGM on 14.11.2009 de hors the agenda and in violation of Section 284 of the Companies Act, 1956. Learned counsel for the appellant argued that there were only two agenda items for the Meeting dated 14.11.2009 and the discussions on Item No.2 was stayed by the Court. 43. Learned counsel for the Respondents argued that they admit that there were only two agenda for the said Meeting dated 14.11.2009, however, the shareholders had proposed only agendum i.e. for removal of Late D.N. Singh from the position of the Director of the Company whereas the proposal to remove 2nd respondent from the directorship was proposed by the Board, which has no authority to propose for removal and as such the same was a fraud against the majority shareholders and the company. Learned counsel for the Respondents argued that there was no violation of provisions of Section 284 of the Companies Act, 1956 or its applicability itself in the appointment of 1st respondent. Learned counsel for the Respondents further argued that General Meeting has power to appoint a Director without any agenda under Section 255 of the Companies Act, 1956. ....
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.... is also not legal. 45. Learned counsel for the appellants argued that the Meeting dated 25.11.2009(Page 239) held by the Board of Directors is contrary to the order of the Learned ADJ dated 19.11.2009 (Page 218, Annexure N, Vol II of Respondent). 46. Learned counsel for the Respondent argued that the holding of Board of Directors Meeting on 25.11.2009 is admitted except the contention that there was any violation of the Order dated 19.11.2009 as alleged. 47. We have heard the parties and perused the record. We have perused the order dated 19.11.2009 of ADJ passed in the matter of Deep Narayan Singh Vs Assam Chemical & Pharmaceuticals Ltd. In the said order dated 19.11.2009 the learned ADJ has ordered as under: "Considering the facts and circumstances of the case, the Opposite Parties are directed not to give effect to the resolution (Item No.2) passed in Extra-ordinary General Meeting of the Opposite Party No.1 (Assam Chemicals & Pharmaceutical Pvt Ltd) held on 14.11.2009 regarding removal of the petitioner as its Managing Director of the Assam Chemical & Pharmaceutical Pvt Ltd, till next date." We have already observed in the previous para that the removal of....
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....pany and issued letters to is bankers requiring them to freeze all the accounts of the company, therefore, the appellant were left with no alternative but to raise capital. Appellants also argued that they also approached Gauhati High Court but it took seven years to finally get the required relief. Learned counsel for the appellant argued that Article 28 (Page 226) permits non-members if there is no member willing to purchase shares at fair value. Learned counsel for the appellant further argued that the findings of the NCLT that the increase of authorised share capital on 6.9.2010 at the EOGM is contrary to the MOA and AOA, and it was oppressive, is simply incorrect as there is no violation of MOA or AOA increasing the authorised share capital. 51. Learned counsel for the Respondents argued that with mala fide intention the original Respondent No.5, Mr. D.N. Singh, has illegally and fraudulently allotted 6715 nos of fully paid equity shares of Rs. 100/- of the company (Page 264 and 280) in his name and in the name of his supporters, to deceive the existing share holders, converted the majority share holdings to minority share holding and also filed Return of Allotment in the o....
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....anaging Director as no casual vacancy occurred to fulfil it by appointing any body else. It is also observed in the earlier paragraphs that a Resolution dated 2.3.2010 was adopted in which original petitioners (1st and 2nd respondent herein) were removed as Director/Managing Director of the company. It is formality. In the light of it the conclusion has been drawn that Resolution dated 2.3.2010 in which original petitioners (1st and 2nd respondent herein) have been removed from the post of Director/Managing Director and Director, that these are illegal, null and void is a wrong decision reached by NCLT which cannot be upheld. 55. Further there is no resolution dated 14.11.2011 on record to suggest that R-5 (Original Respondent No.5) was appointed as Managing Director of the Company. The appellant has stated in his appeal at Page 95 (Para xlviii) that "para 234(b) of the impugned order is based on incorrect facts as no Board Meeting ever took place on 14.11.2011 and further Late Mr. D.N.Singh (Respondent No.5 in the Company Petition) had resigned from the service of the company on 15.2.2011 itself. Thus, there was no question of Late Mr. D.N. Singh (Respondent No.5 in the Company....