TaxTMI 
TaxTMI 
2021 (1) TMI 815
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....wife named Mrs. Angoori Agrawal (Petitioner No. 1)they have 1 son and 2 daughters namely Mr. Vinod Agrawal, Mrs. Neeta Gupta (Petitioner No 2) and Mrs. Rekha A kanodia (Petitioner No. 3) son of Neeta Gupta named Mr. Neel P Gupta is the (Petitioner No 4) Mr. Jagdish Agrawal has 3 brothers i.e.Mr. Amarchand Agrawal, Mr. Bhagwati Agrawal(Respondent No 5) and Mr. Rajesh Agrawal (Respondent No 4). Mrs.Shalini Agrawal (Respondent No 2) who is the wife of the Mr. Vinod Agrawal and their daughter Shreyasi Agrawal(Respondent No 3). Submission by the Petitioners: - 3. The Petitioner No. 1 is the Chairperson of the Aaja Residency Private limited and is a Director since 2007. The Petitioner No. 1 is also one of the promoters and shareholders of the Aaja Hotel Pvt. Ltd. 4. The Petitioner submits that the Mr. Vinod Agarwal son of the P1 is carrying separate business from last 25-30 years independently from his father & Family and managing 3 companies i.e., Satkar Electronics Ltd, TVC Skyshop Ltd, TVC Lifescience Ltd. and also had huge borrowings and his company, TVC Skyshop Ltd is under insolvency since 2017. 5. The Petioner mentions that the son of P1 took lo....
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.... not valid notice as per Section 100 of the Companies Act, 2013. Therefore, he mentions that the entire exercise be treated as void ab initio. 11. The Petitioner submits that on 12.02.2020, R3 issued the notice to convene a Board Meeting on 02.03.2020 with an agenda to remove the P1 from the Board of director. The Petitioner objected this via reply dated 25.02.2020. The Petitioner mentions that the Agenda was not passed by the Board as the Respondents since Petitioners were in majority. 12. Thereafter the Respondent wrote to the Auditor- Mr. Shyam Sundar Gupta to share the details of GST and Income Tax, the auditor refused to share the details. 13. On 13.07.2020, the R 4 & 5 issued a notice to convene EOGM on 10.08.2020 via Video Conferencing with an agenda to remove Petitioners from the Directorship of R1 company. The special notice dated 05.02.2020 was considered 'Requisition' to issue notice to convene the EOGM on 10.08.2020 the said notice was considered as a valid requisition but said notice would be barred by limitation and against the provisions of the Section 100 of the Companies Act, 2013.The Respondents have unlawfully removed the Pe....
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....matters for consideration, that it is signed by the requisitionists, and that it has been sent to the registered office of the R1 company, in the present case all conditions are present as per the provision of the Companies Act. Rejoinder by the Petitioners: 18. The Petitioners submits that before the appointment of the R2 and R3 as the Director they were the employees of the company they were responsible for collection of business receipts and depositing the same in the bank. 19. The Petitioners submits that the transfer of the shares to the R4 and R5 was a family settlement and the R4 and R5 were supposed to transfer back the shares to the P1. Findings: 20. The Bench notes that this Petition has been filed by a set of Petitioners P1 to P5 who together hold only 5.8% of the total shareholding in the R1 Company, Aaja Residency Private Limited (ARPL). Similarly, on the Respondent side, R2 to R5 together hold about 54.60% of the total shareholding of the Company R1. To segregate the shareholders both from the Petitioners as well as from the Respondent side, a list has been drawn which is as under:- Sr. No. Nam....
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....carried out by the Respondents R2 to R5 in convening the EGM. 23. I am of the clear view that the grievance against Mr. Vinod Agrawal who is son of Petitioner No.1 (Mrs. Anguri Agrawal) cannot be looked into and no note can be taken of it for the simple reason that he has not been made a party in this Company Petition by the Petitioner. It also becomes untenable to level charges of mismanagement against Mr. Vinod Agrawal as he is neither a shareholder, nor a Director, nor any office bearer, nor holds any position in the Company and is not associated in any manner with the functioning of the Company. Therefore, I do not find any merit in the allegations made by the Petitioner against Mr. Vinod Agrawal of mismanagement especially keeping in view the fact that he is neither a shareholder, nor a Director, nor holds any position in the company and to cap it the Petitioners have not made him a party in this Petition. 24. I also observe that the grievances against R2 and R3 like withdrawal of funds/ illegal operation of bank accounts etc. has not been substantiated by the Petitioners. The Petitioner mentions that R2 and R3 had illegally opened a Bank Account ....
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....rought against R4 and R5 who are mere shareholders of the Company and are neither any Director or any office bearer in the Company. 26. It can be seen from the above that broadly the grievances against the Respondents relating to Oppression and Mismanagement have been brought by the Petitioners because the Respondents are party to calling the EGM held on 10.08.2020. It would be worthwhile to note that till 10.08.2020 i.e. till holding of the EGM, the Petitioners were in full control of the Company.P1 was the Managing Director and together with P2 to P4 was in majority in the Board and had absolute control over the affairs of the Company. Therefore, bringing frivolous charges and alleged acts of commission and omission against the Respondents is an afterthought and mainly emanates from the fact that they were party to calling the EGM held on 10.08.2020 wherein the Petitioners side were removed from the Board of the Company. 27. The main grievance of the Petitioners is that the Resolution passed at the EGM on 10.08.2020, as they claim, should not have been passed and therefore, it is illegal and not valid. In this regard, they have pointed to three....
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....f Section 169 and other applicable provisions of the Companies Act, 2013 and the Rules framed there under, Mrs. Angooridevi Jagdish Agarwal (DIN: 00419828), Mrs. Rekha Anand Kanodia (DIN: 03110996), Mrs. Neeta Paresh Gupta (DIN: 08139490) and Mr. Neel Paresh Gupta (DIN: 08142076), directors of the company, be and is hereby removed from the office of Director of the Company with effect from the date of this meeting" III. It may be noted that on 02.03.2020 meeting of Board of Directors of R1 was held where these requisitions were discussed. The relevant extract of the said Board meeting is as under: CONVENING EXTRA-ORDINARY GENERAL MEETING FOR REMOVAL OF DIRECTOR Thereafter Mrs. Rekha moved to next agenda item in respect of receiving special notice under section 115 of the Companies Act, 2013 from Mr. Rajesh Ramsharan Agarwal and Mr. Bhagwati Agarwal, members of the Company for including the resolution in the agenda for calling the Extra Ordinary General Meeting to be held on Tuesday, 31st March, 2020 at 1.00 p.m. at the registered office of the Company for removal of Mrs. Angooridevi Jagdish Agrawal, Mrs. Rekha Anand Kanodia, Mrs. Neeta Paresh ....
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....n met. I am clearly of the view that the condition as enumerated in Section 100(3) has been clearly met and no format for sending a requisition has either been prescribed or is necessary at all in terms of Section 100 of Companies Act, 2013. The R4 and R5 shareholders together hold 54.60% of the paid-up share capital, have a complete right to call a meeting u/s 100 of the EGM and they have completely complied with the same. In this regard attention of this Bench has also been drawn to Rule 17 of the Companies (Management & Administration) Rules, 2014, which reads as below: 17. Calling of Extraordinary general meeting by requistionists. - (1) The members may requisition convening of an extraordinary general meeting in accordance with sub-section (4) of section 100, by providing such requisition in writing or through electronic mode at least clear twentyone days prior to the proposed date of such extraordinary general meeting. (2) The notice shall specify the place, date, day and hour of the meeting and shall contain the business to be transacted at the meeting - Explanation. - For the purposes of this sub-rule, it is here by clarified tha....
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....ire the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Ltd., has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some Directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions." It is clear from the above Judgment of Hon'ble Supreme Court that the Respondent No.4 and 5 can seek removal of the Directors at the EGM and are not required to state the reason behind such removal. 31. The Petitioners in the CP has mentioned that the resolution passed at the EGM held on 10.08.2020 is illegal as EGM was held 3 months after the date of requisition (05.02.2020). I find it worthwhile to mention that the P1 to P4 as Directors of R1 Company were duty bound to call EGM u/s 100(1) and (2) upon receiving the requisition dated 05.02.2020. Not acting on the same, I feel, tantamount to breach of statutory duty as conferred....
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....ch a notice was sent by the Respondent No.4 and 5 on 13.07.2020. While considering this issue I have also relied on the Judgment of the Hon'ble Supreme Court of India in the case of State of Bihar v. Bihar Rajya Bhumi Vikas Bank Samiti(2018) 9 SCC 472 wherein it was reiterated that where the statute itself does not provide for a penalty or consequence to not adhering to a stipulated timeline, then the provision creating such a stipulation must be considered as directory and not mandatory. 33. In view of the above, I have no doubt in my mind that the failure on the part of P4 and P5 to call an EGM within 3 months is not a fatal flaw which invalidates the resolution passed at the EGM as the requirement to call EGM within 3 months is only directory and not mandatory. 34. To sum up, I have arrived at the following conclusion: i) There is no merit in the contention of the P1 who is the managing Director of the Company and together with P2 to P4 constituted the Majority in the Board of company till 10.08.2020 and had complete control to say that they have been oppressed by the Respondents. The Petitioners charges regarding mismanagement are very frivolous....
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....a family venture in nature of quasi partnership. 3. This Petition has been filed by the Petitioner No.1 on her own behalf and she is Shareholder, Director &Chairperson of the Respondent No.1 Company. The Petitioner No. 1 became the shareholder of the Respondent No.1 Company on 30-04-2004 --i.e. the date of acquisition of Aakash Finstock Private Limited and thereafter, she was appointed as Director. The Petitioners 2 to 4 have been appointed as Directors of the Respondent No. 1 Company since25-05-2018. The Petitioner No. 5 is a Shareholder of the Respondent No.1 Company. All Petitioners reside at/ have registered office at the addresses mentioned in the cause title. The Petitioners totally hold 5.8% of the total paid up share capital in the Respondent No. 1 Company. 4. The Petitioner No. 1 is Mother of Petitioner No.2 and3, and grandmother of Petitioner No.4. 5. The Petitioner No.5 is a Company i.e. Aaja Hotel Private Limited holding 33390 shares (5%) and is a shareholder in the Respondent No.1 Company. 6. The Petitioner1 and Petitioner 5 are holding following equity shareholding, individually and jointly in the Respondent No. 1 Company: ....
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....al 18-1- 2016 26500 Equity shares of Rs. 100 each Anguri Jagidsh Agrawal Rajesh R Agrawal 9. Mr. Jagdish Agrawal died on 20.04.2018 intestate. Following his death, the Petitioner Nos.. 2-4 were appointed as Directors in EGM held on 25-52018 Shortly after the death of Mr. Jagdish Agrawal, Mr. Vinod Agrawal along with his wife Mrs. Shalini Agrawal and Daughter Ms. Shreyasi Agrawal (Respondent Nos. 2 and 3 herein) illegally took possession of all the original documents of both companies from the Registered Office by bringing in professional bouncers. Due to this event, the Petitioners were forced to file an FIR dated 26.05.2018 10. The Respondent Nos. 4 and 5 intervened between the members of the family and requested to appoint Respondent No. 2 and 3 as Directors' of the Respondent No. 1 Company. The Respondent No. 2 and 3 were appointed as Directors' on 19.11.2018 and were given limited powers A/c no 12470200001230 in Bank of Baroda, Malad (East) Branch only till the time further decision is taken on their involvement in the company. 11. Shortly after the appointment, discrepancies were noted, mon....
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....as on 12th February, 2020, the Respondent No. 3 issued notice to convene a Board Meeting on 02.03.2020, with an agenda to remove the Petitioners from the Board Of Directors. The Petitioners objected to the same vide reply dated 25.02.2020. However, the meeting was convened, and since the Petitioners were in majority, the Respondent Nos. 2 and 3 were unable to have the Resolution passed for removal of Petitioners as Directors of the Company. 16. The Respondent Nos. 2 and 3 wrote to the Petitioners vide letters dated 12.02.2020 and 25.02.2020 alleging that the Petitioners have illegally filed documents with the Registrar of Companies without informing them and further alleged that the cash in hand amounting to Rs. 23,71,363/- has been misappropriated at the hands of the Petitioners'. 17. The Respondents wrote to the Auditor Mr. Shyamsundar Gupta, on 28.08.2019, asking him to share the Login details of the GST and Income Tax of the Respondent No.1 Company unilaterally and arbitrarily. The auditor refused to share the said details and mentioned in his reply dated 28.08.2019 that he was not authorized to share any such detail. Subsequently, the Respon....
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....alated without informing the Petitioners'. The same was brought to the notice of the Petitioners' only when the acknowledgement email came through from the Ministry of Corporate Affairs. Further the respondents When they were already made signatory to the Bank Account of BOB, there was no need to open this account without the knowledge of majority of directors. Thus the entire game plan and acts of mismanagement is to take complete control of the company and continue their acts of mismanagement and oppress the promoter group. It is submitted that, the Respondents' have also made use of funds of the Respondent No. 1 Company for their private use. 22. The Respondents' have also transferred an amount of Rs. 5,75,000 to Mr. Vinod Agrawal's Companies. There is ample proof that shows that the Respondents' have a hand in glove arrangement with Mr. Vinod Agrawal, and they have successfully been able to siphon off funds without any reporting to the Petitioners'. 23. The Respondents' have consistently claimed that they are free to do as they please with the Shares since they are shareholders' of the Company. However, it has been explained time and again that the Respondent ....
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....eetings have been duly held. In fact, it is submitted that, in the year 2018, an Extraordinary General Meeting was held on 25/5/2018 and Annual General Meeting was held on 24/09/2018 and AGM for the year 2019 was held on 30.09.2019. 29. Historically the Company was not declaring dividends, as the Promoter Director Late Mr. Jagdish Agrawal was of the Opinion that, it would be beneficial to keep a policy of no dividend so as to plough back the profits in the business for the betterment of the shareholders & company itself. 30. Further, the Respondents' have unlawfully removed the Petitioners' from the Respondent No. 1 Company in the EGM dated 10.08.2020. After the Petitioners' left the meeting in protest, the Respondent Nos. 4 and 5 voted for the removal of the Petitioners' from the Board of Directors. Despite of the objections raised by the Petitioners', various exchange of emails prior to 10.08.2020, the Respondents'' have been unable to accept that their notice dated 13.07.2020 is illegal and that the Resolution so passed at the meeting is infructuous. Submission of the Respondent No. 4 and 5 31. The Respondent No. 4 and ....
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....; 35. The Respondent no. 4 and 5 further submitted pursuant to their notices dated 6th of January, 2020 and 5th of February, 2020 the Petitioner no. 1 was required to discharge her duties as a chairperson and called for board meeting. However, the board meeting was called on 2nd March, 2020 wherein the request for calling for EGM upon requisition was denied. The Respondent No. 4 and 5 exercising their right under section 100(4) of the Companies Act, 2013 issued notice dated 13th July, 2020 to hold the meeting on 10th August, 2020. The Respondent No. 4 and 5 further submitted that no specific form or format of requisition is prescribed in the act and their notices dated 6th January, 2020 read with notices dated 5th February 2020 issued by the Respondent No. 4 and 5 are valid requisition notices issued in accordance with the provision of the section 100(2) of the Companies Act, 2013. 36. The Companies Act, 2013 does not bar of holding the EGM after expiry of 3 months as specified under section 100(4) of the Act, the respondent 4 and 5 also relied upon the MCA circular dated 18th Of March, 2020, 24th March, 2020, 23rd March, 2020, 28th March, 2020 wherein ....
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....e that the board of company was required to act upon the receipt of valid requisition which has not been issued till date. Therefore, the notice dated 13.07.2020 is illegal and untenable and further the resolution passed of the meeting 10.08.2020 is null and void. The section 100(4) of the companies act, mandates that the board meeting in case the board fails to call meting within 45 days of valid requisition, the requisitionist may themselves call and hold the meeting within 3 months from the date of requisition. Hence, the special notices dated 05.02.2020 if it were to be considered as requisition, the period of 3 months expired on 05.05.2020 therefore, the notice dated 13.07.2020 is bad in law and barred by limitation. 42. The notice dated 13.07.2020 is direct violation of MCA circular no. 14/2020 dated 08.04.2020. Findings 43. The legal questions arising for consideration are as under; 1) Whether the notice dated 06.01.2020 and 05.02.2020 amounts to valid requisition as defined under section 100 of the Companies Act, 2013? 2) Whether the law mandates holding of EGM within 3 months of date of requisition as prescribe....
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....nbsp; 48. It is proved beyond doubt that the Petitioner no. 1 was controlling the company and that the Respondent No. 2 and 3 after having being appointed as directors in the year 2018 have tried to interfere with the affairs of the company. The Respondent No. 4 and 5 having being gifted the majority of the shareholding of the Respondent No. 1 company are now trying to take control and by expunging the rights of the Petitioner no. 1. 49. Be that as it may, there has been an utter violation of the mandatory requirement of section 100(2) for calling of the extra ordinary EGM and issuing requisition as mandated under section 100(2) of the Companies Act, 2013. Section 100 is extracted below; "Section 100- Calling of extraordinary general meeting 1) The Board may, whenever it deems fit, call an extraordinary general meeting of the company. 2) The Board shall, at the requisition made by,- (a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries....
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....er the intention of legislature while enacting such provisions of holding meetings. It is a settled law that directory provisions are read as mandatory provisions and vice versa according to the language used in constructing a particular provision. The statute does not provide an extension or deemed extension to conduct meetings at the whims and fancies of parties, but in accordance and within the time limit prescribed by law. 51. In the instant case, the requisition was issued on 06.01.2020 and 05.02.2020, the EGM ought to have been held within 3 months i.e. on or before 05.05.2020. The MCA circular dated 08.04.2020, clarified regarding passing of ordinary and special resolutions by companies under the Companies Act 2013, though the Act did not provide for conduct of meeting through video conference, at para 3 of the circular, it was made clear that Companies wherever unavoidable, the company to follow the procedure prescribed to conduct meetings on or before 30.06.2020 by way of video conference. The MCA circular dated 08.04.2020 is extracted below;- General Circular No. 14/2020 F No 2/1/2020-CL-V Government of India Ministry of Corporate Affairs 5th Floor....
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....eunder: A. For companies which are required to provide the facility of e-voting under the Act, or any other company which has opted for such facility - I. EGMs, wherever unavoidable, may be held through VC or OAVM and the recorded transcript of the same shall be maintained in safe custody by the company. In case of a public company, the recorded transcript of the meeting, shall as soon as possible, be also made available on the website (if any) of the company. II. Convenience of different persons positioned in different time zones shall be kept in mind before scheduling the meeting. III. All care must be taken to ensure that such meeting through VC or OAVM facility allows two way teleconferencing or webex for the ease of participation of the members and the participants are allowed to pose questions concurrently or given time to submit questions in advance on the e-mail address of the company. Such facility must have a capacity to allow at least 1000 members to participate on a first-come-first-served basis. The large shareholders (i.e. shareholders holding 2% or more shareholding). promoters, institutional investors, directors, key managerial pe....
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....behalf of a member who is not able to attend personally. Since general meetings under this framework will be held through VC or OAVM, where physical attendance of members in any case has been dispensed with, there is no requirement of appointment of Accordingly, the facility of appointment of proxies by members will not be available for such meetings. However, in pursuance of section 112 and section 113 of the Act, representatives of the members may be appointed for the purpose of voting through remote e-voting or for participation and voting in the meeting held through VC or OAVM. XI. At least one independent director (where the company is required to appoint one), and the auditor or his authorized representative, who is qualified to be the auditor shall attend such meeting through VC or OAVM XII. Where institutional investors are members of a company. they must be encouraged to attend and vote in the said meeting through VC or OAVM XIII. The notice for the general meeting shall make disclosures with regard to the manner in which framework provided in this Circular shall be available for use by the members and also contain clear ....
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....nnel. the chairpersons of the Audit Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee, auditors, etc. may be allowed to attend the meeting without restriction on account of first-come-first-served principle. IV. The facility for joining the meeting shall be kept open at least 15 minutes before the time scheduled to start the meeting and shall not be closed till the expiry of 15 minutes after such scheduled time. V. Attendance of members through VC or OAVM shall be counted for the purpose of reckoning the quorum under section 103 of the Act. VI. Unless the articles of the company require any specific person to be appointed as a Chairman for the meeting, the Chairman for the meeting shall be appointed in the following manner a. where there are less than 50 members present at the meeting, the Chairman shall be appointed in accordance with section 104; b. in all other cases, the Chairman shall be appointed by a poll conducted in a manner provided in succeeding sub-paragraphs. VII. Atleast one independent director (whore the company is required to appoint one), an....
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....may be adjourned and called later to declare the result. XV, The notice for the general meeting shalt make disclosures with regard to the manner in which framework provided in this Circular shall be available for use by the members and also contain clear instructions on how to access and participate in the meeting. The company should also provide a helpline number through the registrar & transfer agent, technology provider, or otherwise, for those shareholders who need assistance with using the technology before or during the meeting. A copy of the notice shall also be prominently displayed on the website of the company. XVI. in case a notice for meeting has been served prior to the date of this Circular, the framework proposed in this Circular may be adopted for the meeting in case the consent from members has been obtained in accordance with section 101(1) of the Act, and a fresh notice of shorter duration with due disclosures in consonance with this Circular is issued consequently. XVII. All resolutions passed in accordance with this mechanism shall be filed with the Registrar of Companies within 60 days of the meeting clearly indicating....
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....holders, but the interest of the shareholders of the company as a whole. The manner and conduct of issuance of notice of EGM and resolution to remove the Petitioners as Directors is oppressive and amounts to mismanagement of the Company's affairs. 55. The acts of removal of Petitioners as Directors, issuing notice to remove petitioners as Directors of the Company, passing resolution without proper requisition, opening of Bank account without approval of Board, Seeking GST login passwords from the Chartered Account without any authority, transferring of funds and taking over the control of the Company thus constitutes the acts of oppression and mismanagement of the Company and is detrimental to the interest and running of Company. The nature of business of the Company being quasi partnership and it is merely a family feud between the shareholders. 56. CA 1045/2020 in CP 1016/2020, seeking interim reliefs is disposed off, as the main petition is being allowed. 57. This Court doth orders as follows: 1) The waiver application is allowed and it is declared that the acts of removal of petitioners as Directors are oppressive in nature. ....