TaxTMI 
TaxTMI 
2021 (2) TMI 92
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....ed under Section 241 and 242 of the Companies Act, 2013 (hereinafter referred as the 'Act') are inter connected, they are disposed of with this common order. 2. M/s. Forbes Ewart and Figgis Private Limited, was incorporated as a Private Limited company on 21th February, 1947 under the provisions of the Indian Companies Act, VII of 1913 (hereinafter referred as 'the Company') by foreigners and after independence, the company was taken over by Late Mr. Oommen Thomas. The Authorised Share Capital of the company at present is with equity share capital of Rs. 50,00,000 comprising of 1,00,000 shares at Rs. 50 each. The paid-up share capital is Rs. 10,00,000 comprising of 20,000 equity shares of Rs. 50 each. The Registered Office of the Company is at Sebrof House, PB No. 545, Subramaniam Road, Willingdon Island, Ernakulam, Kerala - 682 003. The facts of the cases in brief are as under: - CP/117/KOB/2019 3. On 22.10.2019, the petitioner filed this Company Petition (C.P No. 117/KOB of 2019) before this Tribunal under Section 241 of the Companies Act, 2013 challenging the Board meeting held on 14.10.2019 and its resolutions. The main reliefs sought for by ....
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....riod from 2019 to 2024. iii. Appointment of Mrs Meera Joseph as Independent Director of the company for a period of 2 years from 01.10.2019. iv. Appointment of Mrs Annu Kurien as Independent Director of the company for a period of 2 years from 01.10.2019. AGM passed the said resolution. However, the following resolutions were not passed in the 72nd AGM of the Company held on 30.09.2019: i. Re- appointment of Mr. Paulose Joseph as Managing Director of the Company u/s 196[3] of the Companies Act, 2013 for a period of two years from 01.10.2019. ii. Appointment of Mr Mohan Thomas as Joint Managing Director for a period of 2 years from 01.10.2019. Since Mr Mohan Thomas has already been appointed as Joint Managing Director in AGM held in September 2018 for a period of 3 years, the said proposal was unwarranted and illegal and the same was objected iii. Reappointment of W C Thomas as Whole Time Director of the Company u/s 196[3) of the Companies Act, 2013 for a period of two years from 01.10.2019. iv. Appointment of Mr. Oommen Thomas as the Whole Time Director of the company for a period of 2 years from 01.10.2019. 6. It is furth....
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....commendations for improving the tea business. 8. It is further stated by the petitioner that on 18.10.2019, another Board Meeting was held, without any notice, without any quorum, without the physical presence of the Chairperson of the meeting at the place it was convened and transacted the resolutions. The Meeting was chaired by Respondent No. 3, an Independent Director and that on 01.11.2019 another Board Meeting was held and chaired by Respondent No.3. This meeting was attended by two out of three Directors, i.e., Respondent No. 2 through physical presence at the Registered office and Respondent No. 3 chaired the Meeting through Video conferencing from Delhi when the meeting place is shown as Registered Office at Kochi, which is contrary to the settled position of law. It is further submitted that the said Meeting was conducted on 01.11.2019 in the same way by which it was conducted on 18.10.2019 and hence the said meeting is also contrary to Section 173 (2) of the Act and hence not legally valid. 9. It is the further contended that on 27.01.2020, the 2nd respondent issued a Notice for convening a meeting of Board of Directors of the Company on 04.02.2020 at the Registered....
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....the said Meeting. As there was no quorum, the meeting was adjourned to 14.09.2020. The above-Board Meeting was called by the Petitioner for taking the approval from the Registrar of Companies for seeking extension of time for conducting the 73rd AGM as per the guidelines issued by the Ministry of Corporate Affairs. While so, on 08.09.2020, the Respondent No. 6, the Registrar of Companies, Kerala issued an order extending the time to hold the AGM. Based on the above orders of Respondent No.6, the adjourned meeting of Board which was scheduled on 14.09.2020 was cancelled and the communication to that effect has been sent to the Directors of the Respondent No. 1 Company. 14. Concluding the arguments, the learned counsel for the petitioner submitted that the Respondent No. 2 and 3, after their induction into the Board of Directors started their attempt to weaken the company's financial strength and even suggested to liquidate the Company which itself is a clear case of mismanagement of the affairs of the company. 15. It is further stated that on 29.06.2020, the Respondent No. 2 and 3 and one Dr. Lalitha Thomas, wife of Respondent No. 5 filed another Company Petition - CP/19/KOB/2....
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....t No 1 Company (Petitioner of CP/117/KOB/2019). This 20.93% is the joint shareholding with his mother Mrs Alice Oomen, where R2 is the first named shareholder. He is the father of Respondent No 3. Respondent No. 3 is a shareholder with 3.83% shares and is an employee of the Respondent No.1 Company. 19. This CP has been filed alleging serious non-compliances conducted by Respondent No 2 and 3 as detailed in the CP, stating that this should be put to an end, in the interest of the Company and its shareholders. A summary of the oppressive acts, continuing mismanagement, malafide acts causing loss to shareholders are as follows: i. The appointment of Respondent No 2 is not valid as a prior Board approval as per the substantive requirement u/s 203 has not been obtained, Respondent No 2 is continuing in the Joint Managing Director position in Respondent No 1 Company without applicable Board authority. ii. The appointment of Respondent No 3 does not have Board sanction u/s 188 and Respondent No 2 is providing multiple monetary allowances, benefits and perquisites inconsistent with Respondent No 3's employment contract resulting in personal profit for Respondent No....
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....e for the matters that Respondent No 3 is accusing them of. Respondent No 3 is the accuser, prosecutor, judge and jury on the basis of which he makes his decisions. Under Article 126 (5) of the Articles of Association, the Board of Directors have the power to suspend or dismiss employees but no such power has been delegated to Respondent No 2 in this regard. The exercise of such unilateral actions on his own despite the other Board members trying to intervene constitutes mismanagement by Respondent No 3, which is continuing as on date. vi. In the Annual General Meeting dated September 30, 2019, the shareholders did not even approve a nominal salary increase of Rs. 5,000/- per month to Respondent No 2, which was being drawn from April 1, 2019. Despite knowing this, Respondent No 2 recently purchased a car for Rs. 15,00,000/-, which is a perquisite compensation on his own without any consultation with the Board of Directors, or the shareholders in the General Meeting. As per the past practice of the company, any compensation provided as interim compensation to a Director should be only with prior consultation of the Board and also needs to be ratified by the memb....
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....above averments put forth and documents produced, it is clear that the present case is one of gross oppression and mismanagement, and therefore, this Tribunal should intervene in the matter under Section 241 of the Act and appropriate orders passed. 21. To fortify the above arguments, the learned counsel for the Respondents quoted the following decisions in their written submission: 1. V Sebastian & Others V. City Hospital P Ltd & Ors [1985] 57 Comp Case 453. 2. M Moorthy V Drivers and Conductors Bus service P Ltd [1991] 71 Comp Case 136. 3. Killick Nixon Ltd & Others V. Bank of India & Others [1985] 57 Comp Case 831. 4. Lalitha Rajya Lakshmi M P V. Indian Motor Co (Hazaribagh) Ltd & Others AIR 1962 Cal 127. 5. Shanti Prasad Jain V. Kalinga Tubes Ltd AIR 1965 SC 1535 6. Palghat Exports P Ltd & Others V. T V Chandran & Others [1994] 79 Comp Case 213. 7. Suresh Kumar Sanghi V. Supreme Motors Ltd. [1983] 54 Comp Case 235. 8. Hind Overseas Pvt Ltd. V. Raghunath Prasad Jhunjhunwalla & Others [1976] 3 SCC 259 9. Needle Industries (India) Ltd & Others V. Needle Industries Newey (India) Holding Ltd & Others....
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.... through Board resolutions to clarify the role of R4 and R5, which the Petitioner has not accepted / taken forward. * In light of the powers of the Board under Article 126(5), the Board of Directors can appoint senior employees. * The Petitioner does not have in his mind the best interest of the Company and has ignored the fact that R 1 Company made steady profits over the years and distributed dividends to the shareholders. * Respondent Nos. 4 and 5 are not drawing salaries higher than the Petitioner. * Without prejudice to the above, the Respondents are also willing to hold a general meeting to ratify such appointment through an ordinary resolution and clarification that Respondent No 4/5 shall not perform the role of Manager as defined u/s 2(53) of the Act. 24. The learned counsel for the respondents argued that Respondent Nos. 4 and 5 have not been appointed or re-appointed as Managing Director or Whole Time Director or Manager, which requires approval from the members through a special resolution under Section 196(3) of the Act. The term Manager under Section 2(53), Managing Director under Section 2(54), Whole Time Director under Section ....
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....No 4 has not signed even a single cheque before September 30, 2019. Thus, the transaction which did not even taken place and the decision is not in force cannot constitute an act of oppression. The power to Respondent No 4 was never a sole signatory power but one of the signatories to the accounts. As regards prayer of petitioner to restrain the Respondents No 4 and 5 from entering into the premises of the Company, the Respondents stated that the respondents 4 & 5 hold valid employment contracts and are not acting in the capacity of a Manager, as defined in under Section 2(53) of the Act. 27. The Respondents stated that the Petitioner does not have the support of the majority of the shareholders and he has mismanaged the Respondent No 1 Company since 01.10.2019 and that whether he should be removed / his powers taken over should be left to internal corporate democracy of R 1 Company. The shareholders have the right to remove any Director by ordinary resolution, under Section 169 of the Act. Further, the Respondents 2 and 3 stated that CP No 19/KOB/2020 is also to be considered while determining this prayer. 28. Regarding the prayer of the petitioner to appoint an independent ....
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.... in tea prices, etc. 31. Regarding the allegation that the Petitioner was not given signatory powers in respect of mutual fund accounts of Respondent No 1 Company prior to October 1, 2019, the respondents stated that the power to operate and sign mutual fund accounts was sanctioned by the Board to Respondent No 4. The Petitioner has full access to the mutual fund dematerialized statements, as he is a signatory effective from October 1, 2019. Decisions relating to the operation of bank accounts are part of the managerial powers of Directors. The mere fact that a director is not being associated with operation of the Company's bank accounts does not constitute oppression or mismanagement. In this respect, the learned counsel has relied on the following decisions to support his submissions: i. K. Varadan vs Ambattur Saswatha Nidhi Ltd [2007] 135 CompCas 332 (CLB). ii. Madras Medical Care & Health P Ltd v. Devaki Hospitals Ltd (2008) 83 CLA 47 (CLB) : (2009) 147 CompCas 245 (CLB)) 32. The Respondent No 2 stated that as a Director she has not handed over the keys of the Bungalows because she maintains the premises and that the Petitioner can at any time inspect t....
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....physical quorum. 35. It is further stated that under the Companies (Meeting of Board and its Powers) Rules, for every meeting held through video conference, the scheduled venue of the meeting as set forth in the notice convening the meeting shall be deemed to be the place of the said meeting. Thus, under these rules, the meeting is deemed to be at the registered office of the Company and not at the place where the meetings were chaired. Under Article 119 of the Articles of Association of the Company, the Board may elect a Chairman for its meeting and determine the period for which he is to hold office. Thus, any Director with majority vote can be elected as the Chairman of the Meeting. 36. While concluding the argument, the learned counsel for the Respondents vehemently argued that the Petitioner has not approached this Tribunal with clean hands and he has filed this petition to assume 100% control over R 1 Company by trying to oust the Respondents by stating the following points: * Recruitment of senior personnel as in the case of" Head-Accounts" in early May 2020, which requires Board approval, as per the mandate of the Board. * Absurd, unreasonable and to....
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....ve of value are exempted from taking the consent of the board of directors. A simple way to demonstrate absence of conflict of interest is to prove that existence of special relationship between contracting parties has not affected the transaction and its terms, by following industry benchmarks and past transactions entered by the company. The approval of the board of directors is not necessary to be obtained if the transaction is in the ordinary course of business and on arm's length basis. 39. It is further stated that any activity which is routine and in accordance with the usual customs and practices of a particular business can be described to be in the ordinary course of business. As per Section 188 of the Companies Act, the appointment of an employee (Executive staff) in the ordinary course of business needs no approval of the Board. There were no such allegations raised by anybody from 2017 to till the date of filing of this petition. 40. Regarding the allegation of not disclosing the interest in other companies in violation of Section 184(1), the Respondent No.2 stated that he has disclosed the mandatory information to the Company from time to time. He has never ....
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....e other firm or Company etc. In the instant case, there is no such contract or arrangement having any direct or indirect association with any other company by the 2nd Respondent and hence Section 184(2) is not at all applicable. 44. Respondent No. 2 further stated that he has been using Bungalow No. 6 of the 1st Respondent Company at Fort Cochin since 1980. He has been using the Bungalow as his place of residence from that period and that is the reason why he has given that address as his contact address. It is further stated that he has never used the Bungalow for any other purpose and not handed over the key of the Bungalow to anybody. Section 452 of the Companies Act can be invoked only when the wrongful holding with property or possession of cash by an employee or an officer of a Company. 45. The Respondents further stated that Respondent No. 2 was appointed as Joint Managing Director on 28.09.2018 for a period of 3 years. At that point Mr. Paulose Joseph was also the Managing Director of the Company. The Articles of Association of the Company as well as the legal provisions of the Companies Act permit one or more Managing Directors/ Wholetime Directors in the Company. Wi....
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....ainability of the petition. However, the Respondents have not pressed for considering this issue separately even though, they made it a point in their arguments. The only point raised by the Respondents of CP/19/KOB/2020 was that no oppression and mismanagement in the Company has been made out by the petitioners. The petitioners failed to disclose any legally actionable cause of action accruing in favour of the petitioners to sue for oppression and/ or mismanagement. On the question of maintainability, so far as the law pronounced by several Hon'ble Courts is unambiguous and universally acceptable that where a decision on an issue of law depends upon a decision of facts, it cannot be tried as a preliminary issue in Maintainability Application. If the Bench analyse the legal as well as technical question of maintainability at first, then there is no necessity to proceed with the main Petition. It is evident that it is based upon a pure question of law but it revolves primarily around the facts and several family circumstances of the case as depicted in the main petition. 50. From the records submitted before us, we observe that there was an effort made by both the groups to c....
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....icles of Association and provisions of the Companies Act and whether the proceedings of the meeting and the resolutions passed therein are valid in the eyes of law? ii. Whether the Board of Directors Meetings of the R1 Company held on 18.10.2019, 01.11.2019, 04.02.2020, 21.08.2020 are valid? Whether the proceedings of that meetings and resolutions passed therein are aimed to oppress and abuse the other shareholders including the petitioner and consequently to effect a change in the control and management of Respondent No.1 Company? iii. Whether the petitioner in CP/117/KOB/2019, who acted in his capacity as Director of the Company has failed to comply with the fiduciary duty towards the shareholders? iv. Whether the issue of oppression and/ or mis-management on the part of the Respondents herein in running the affairs of the Company towards the Petitioners No. 1 had been proved or not? 55. After going through the factual matrix in the case, let us examine the allegations in detail from the records produced by the parties before us vis-a-vis the issues framed. Point (i): Board of Directors Meeting dated 14.10.2019: 56. Going through the previou....
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....ociation of Respondent No 1 Company states as under: "115. A Director may at any time, and the secretary, if any, upon the request of a director, shall convene a meeting of the board of directors by giving a notice in writing to every director for the time being in India, and at his usual address in India to every other director." It is also evident that under Article 16, questions arising at any Board meeting shall be decided by a majority of votes and in the case of equal votes, the Chairman shall have a second or casting vote. Under Article 18, the quorum of a meeting of the Board of Directors shall be 1/3 of the total strength or 2 Directors, whichever is higher. Under Article 119, the Board may elect a Chairman of its meeting and determine the period for which he is to hold office. 60. From the above-mentioned Articles, it is clear that the processes for the conduct of the Board Meeting dated October 14, 2019 had been fully complied with by the respondents such as providing due notice for the meeting, quorum and conduct of the meeting at the place as stated in the notice in accordance with law. R3 was properly appointed as the Chairman of the meeting. The Petiti....
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....able to a private limited company. As the appointment of R5 as Whole Time Director was rejected by the AGM dated 30.09.2019, he cannot be indirectly appointed to be an Executive Director but can be a Non-Executive Director of R1 Company. 63. Even before filing of CP/117/KOB/2019, the petitioner sent an email dated 14.10.2019 alleging irregularities in the R1 Company to which the Company sent a reply on 16.10.2019 clarifying the role of R4 in the Company. The extract of the reply produced by the respondents is as under: "Please can you let us what rights of the shareholders of the company have been circumvented by proposing to reappoint Paulose and W.C. as employees of the company under the Companies Act, 2013, they cannot be appointed as Directors because the shareholders have not consented to a special resolution. They are no longer Directors of the Company and their last date as Directors was September 30, 2019. They are not also responsible for the day-to-day operations, which are in your control now and you have the power to conduct the affairs of the Company in your role as Managing Director / Whole Time Director. I want to again reiterate for your reference and be....
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....is the conduct of the affairs of a company in a manner prejudicial to public interest or in manner oppressive to any member or members of the company. Now, prejudice to public interest may not necessarily amount to a prejudice to the complaining member personally. Even in the latter category, the oppression need not be of the members who file a petition. Oppression of other members can also be a grievance for filling a petition. Under Section 397 the same is true of Section 398, which requires examination, not of any personal prejudice to the petitioning members but of prejudice caused to the public interest to the interest of the company. Section 399 cannot throw any further light on this aspect. It merely stipulates qualifications of members who are entitled to come under Section 397 and 398. It prescribes certain minimum qualifications which members should possess such as their numerical strength or the extent of their share capital. Under these provisions, therefore, any personal prejudice to the members for coming before the court is not required. Looked at form a slightly different point of view, even assuming that some personal prejudice is required and even assuming that on....
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....been applied in cases of this type, the circumstances have always, I think, been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy." 66. The judgment of Bhagwati J. in Sheth Mohanlal Ganpatram V. Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd [1964] 34 Comp Cas 777 is not capable of the construction that every illegality is per se oppressive or that the illegality of an action does not bear upon its oppressiveness. The true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a malafide intention or that such violation was burdensome, harsh and wrongful. The designation of an employee need not to give much importance and what was important is the nature of duties. Even if the appointment of R5 as Executive Director- Tea Operations, is no way prejudicial to the public interest or affairs of the Company, the designation 'Executive....
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....e except in accordance with such rules as may be prescribed in this behalf:] Provided also that no dividend shall be declared or paid by a company from its reserves other than free reserves. [Provided also that no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year.] (2) For the purposes of clause (a) of sub-section (1), depreciation shall be provided in accordance with the provisions of Schedule II. (3) [The Board of Directors of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting out of the surplus in the profit and loss account or out of profits of the financial year for which such interim dividend is sought to be declared or out of profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend: Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the ....
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....been, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted. 71. Regarding the resolution passed in regard to the signatory powers to R4 over the company's bank accounts, dematerialized account and applicable mutual fund accounts as also the signatory power to R5 over the Company's Bank account, this Tribunal finds that as both R4 and R5 were ceased to be Directors of the Company, they are not eligible to be appointed as sole signatories of bank accounts/ demat accounts. It is found that thereafter, Respondent No.2 convened another Board of Directors Meeting on 18.10.2019 and passed another resolution to bypass the action taken by them. The legality of the Board Meeting held on 14.10.2019 can be decided as under: 72. By concluding the first issue, this Tribunal is of the view that the meeting held on 14.10.2019 has been conducted with due notice, quorum and therefore, the said meeting is a valid meeting. The resolutions passed in the said meeting are as follows: i. Declaration of interim dividend: Invalid. ii. Appointment of R4 as CEO: Valid. iii. Appointment of R5 as Executive ....
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....rs on that date of the resolution or meeting that is to say, the total strength of the Board after deduction there from the number of Directors, if any, whose places are vacant at the time. Election of Chairman of Board. 119. (1) The Board may elect a Chairman of its meeting and determine the period for which he is to hold office. (2) If no such Chairman is elected, or if at any meting the Chairman is not present within five minutes after the time appointed for holding the meeting, the Directors present may choose one of their number to be Chairman of the meeting. Delegation of powers. 120 (1) The Board may, subject to the provisions of the Act delegate any of its powers to committees consisting of such member or members of its body as it thinks fit. (2) Any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the Board. Election of Chairman of Committee. 121. (1) A committee may elect a Chairman of its meeting. If no such Chairman is elected, or if at any meeting the Chairman is not present within five minutes after time appointed for ho....
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....f directors to that fixed for the quorum, or of summoning a general meeting of the company and for no other purpose. (3) .... xxxx (4) .... xxxx 75. On a careful reading of the afore quoted Articles and the provisions of the Act, on the question to be answered in the present case, this Tribunal is of the view that the Respondent Nos. 2 & 3 have conducted an alleged meeting of the Board on 18.10.2019 under the guise of the request of the petitioner. It is evident from the email dated 11.10.2019 and 12.10.2019 that the meeting which was proposed by the petitioner on 18.10.2019 was advanced to 14.10.2019. That being the position, it is clear from admission of R2 & R3 that the meeting was held without proper notice. Therefore, the alleged meeting held on 18.10.2019 by Respondent Nos. 2 & 3 is declared as illegal. Hence, the resolutions passed in the said meeting is not having any relevance and no legs to stand. 76. Regarding the meeting of Board conducted on 01.11.2019 and 04.02.2020, the petitioner raised two allegations, such as, the quorum for the meeting and the place of conducting the meeting. It is contended that the meetings were attended by two out of th....
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.... through video conferencing mode or other audio-visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio-visual means. (c) A director intending to participate through video conferencing or audio-visual means shall communicate his intention to the Chairperson or the company secretary of the company. (d) If the director intends to participate through video conferencing or other audio-visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf. (e) The director, who desire, to participate may intimate his intention of participation through the electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year. (f) In the absence of any intimation under clause (c), it shall be assumed that the director shall attend the meeting in person. (4) At the commencement of the meeting, a roll call shall be taken by the Chairperson when every director participating through video conferencing or other audio-visual means shall s....
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....who shall identify himself while casting his vote. (10) From the commencement of the meeting and until the conclusion of such meeting, no person other than the Chairperson, Directors, Company Secretary and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board. (11) (a) At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority. (b) The minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or other audio-visual means. (12) (a) The draft minutes of the meeting shall be circulated among all the directors within fifteen days of the meeting either in writing or in electronic mode as may be decided by the Board. (b) Every director who attended the meeting, whether personally or through video conferencing or other audio-visual means, shall confirm or give h....
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....edings in respect of such items to any other Non-interested Director attending the Meeting physically and should not participate in the meeting in respect of such items and not for other matters. 80. Therefore, the meeting was conducted on 01.11.2019 and 04.02.2020 complying the basic provisions for conducting a meeting and the same is valid. But the resolutions passed in the said meetings are similar to that which were taken in the Board of Directors Meeting held on 14.10.2019. Therefore, the resolutions passed are considered to be invalid. 81. With regard to the Board of Directors Meeting held on 21.08.2020, since no evidence has been produced to show that notice was given and, it is considered to be void ab initio and all the resolutions passed in that meeting are invalid. Point (iii): Fiduciary Duty of Directors: 82. Directors are often in a position that enables them to gain pecuniary benefit at the expense of the company or shareholders. It has been established that in such circumstances directors are bound to disregard their own private interests, whenever a regard to them conflicts with the proper discharge of their duties as directors [Imperial Mercantile Cradi....
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....tor shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 84. Articles 125 and 126 of the AoA clearly defines the powers and duties of the Directors. The main allegations raised by the Respondents 2 & 3 (petitioners in CP/19/KOB/2020) against the petitioner (Respondent in CP/19/KOB/2020) is that he is in breach of fiduciary duty and in contravention of the provisions of the Companies Act, 2013 as he failed to disclose that while being the Joint Managing Director or Whole Time Executive Director of the R1 Company, he had also held key managerial positions in three other companies. 85. Petitioner was appointed as Joint Managing Director on September 30, 2017 for one year and then on September 30, 2018 for another 3 years. At the time of appointment, petitioner was Managing Director in Etham Floriex Limited and Managing Director / Director in Acsah Organics Private Limited and Anaihta Gardens Private Limited ("Own Companies"). At the time of appointment in September 30, 2018, he was the Director in Acsah Organics Private Limited and Anaihta Gardens Private Limited. The Petitioner in CP/117/KOB/2019 /Respondent No 2 I....
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....unilateral action being taken by the petitioner, without reference to the Board as per the prevailing mandate. These matters as well clearly demonstrate that the Petitioner has not approached this Tribunal with clean hands and he has filed this petition to assume total control over R 1 Company trying to oust the other Respondents. In this connection, the following points are to be taken into consideration: * Recruitment of senior personnel as in the case of" Head-Accounts" in early May 2020, which requires Board approval, as per the mandate of the Board. * Absurd, unreasonable and totally impractical transfer orders issued to Senior Managers as in the case of Mr Poduval (Cochin to Ettumanoor with 1-day notice) and Mr Ramachandran (Chennai to Ettumanoor). * Respondent No 4 presently holds an Employment Contract appointing him as CEO. In spite of this, the petitioner has been issuing memos to Company personnel that Mr Paulose Joseph has ceased to be an employee of the Company. Point (iv) 90. It is important to note that in every case under Section 241 of the Act, it is obligatory on the part of the complainant to establish "persistent and persisting c....
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.... in breach of his fiduciary duty vice versa, the Respondents were also acting without complying the provisions of the Act or without applying the mind. Even if certain Board Meetings were conducted complying with the provisions of the Act, each of them depicts the same agenda mainly for ratification. 94. While dealing with an application under Section 210 of the English Act (which is similar to Section 397 of the Companies Act, 1956 and Section 241 of the Companies Act, 2013), ROXBURGH, J., put it succinctly that "the purpose of Section 210 of the English Act is not so much to rake up the past as to redeem the future". When the case went on appeal to the court of Appeal in In Re, H.R.Harmer Ltd {1958 (3) All.E.R. 689} Jenkins, L.J., pointed out that: "the phrase 'the affairs of the company are being conducted' suggest prima facie, a continuing process and is wide enough to cover oppression by anyone who is taking part in the conduct of the affairs of the company". 95. The decision In Re, H.R.Harmer along with two other English decisions in Elder's case and Meyer's case, were quoted with approval in one of the earliest decisions of the Hon'ble Supreme ....
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.... of the aforesaid findings, it clearly establishes that both the petitioners in CP/117/KOB/2019 and CP/19/KOB/2020 failed to prove oppression and mismanagement on the part of the respondents therein in carrying on the affairs of the company for the full satisfaction of the directors/ shareholders of the Company. Object and purpose of Sections 241 and 242 of the Act is two-fold. Firstly, to set right the wrongs and secondly, take remedial action to prevent the occurrence of wrongs in future. Since we found that there is no oppression or mismanagement for the reasons stated in the above paragraphs, it is not necessary for this Tribunal to consider any other points raised by the parties. 100. However, the Tribunal is duty bound to pass an order giving suitable directions in accordance with law which is both preventive and curative. In Needle Industries (India) Ltd. versus Needle Industries Newey (India) Holding Ltd. reported in (1981) 51 com. Cases 743 it has been held that power to exercise jurisdiction under Sections 397 and 398 of the Act, 1956 (Section 241 and 242 of Companies Act, 2013) cannot be defeated by mere technicalities. Jurisdiction of the Tribunal/Court under the sai....