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TaxTMI 
TaxTMI 
2022 (8) TMI 322
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....n No. 25/CHE/2022 whereby the NCLT restrained the Appellants from acting upon or giving effect to any resolution passed at the EGM held on 25.01.2022 till the disposal of the Company Petition. Brief Facts: Appellant's Submissions: 2. The Learned Senior Counsel appeared for the Appellants submitted that the resolutions passed by the company i.e. SACL the 2nd Respondent herein (Sakthi Auto Component Limited) at a validly conducted EGM by the requisitionists i.e. the 3rd Appellant herein (Sakthi Global Auto Holdings Limited) SGAHL who is a 77.04% shareholder of SACL. The impugned order dated 29.03.2022 was passed in a petition that was filed in abuse of legal process without effectively hearing the Appellants and without even giving them an opportunity to file a counter to the Company Petition. 3. The Learned Senior Counsel submitted that the 2nd Respondent is a subsidiary of 3rd Appellant. As per Shareholders Agreement dated 29.09.2018 (2018 SHA) and the Articles of Association of the 2nd Respondent read with Shareholder Agreement, the Appellants have right to appointment of additional nominee directors of the Appellants and for removing the current nominee directors of t....
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....s made in the CP are substantially similar to ABT's Company Petition filed though another Sakthi Group Company. It is submitted that no orders have been passed by NCLT in above CP No. 387 of 2020 which was filed by SSL (3rd Respondent). 7. The Learned Senior Counsel further submitted that due to deliberate failure and refusal to honour the terms of 2018 SHA, the Appellants invoked arbitration under the terms of 2018 SHA and issued notice of arbitration on 11.10.2019. However, the ABT UK filed an application in the SIAC Arbitration under Rule 30.1 of the SIAC Rules seeking an adjournment of the Arbitration proceedings. On 30.06.2020 the Arbitral Tribunal in the SIAC Arbitration passed an order allowing the relief sought in the interim relief application whereby the Tribunal directed the ABT UK to undertake all necessary steps and corporate actions to update its Articles of Association to incorporate the relevant terms of SHA with respect to 2nd Respondent Company i.e. SACL. 8. The SACL failed to comply with the interim order of the Tribunal and the 3rd Appellant took corporate steps under the Companies Act, 2013 and issued a postal valid notice on 06.10.2020 for passing the ne....
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....g for the EGM of SACL to be held on 25.01.2022 by video conference at 10:00 am for passing resolutions relating to appointment of Aapico Nominee Directors and removal of the ABT Nominee Directors. The EGM notice was sent to the members and also all the Directors of SACL, hence the procedure contemplated under the Companies Act was strictly followed. 14. While so, the CP was listed before the NCLT on 17.01.2022 however, the NCLT informs all the parties stating that in virtual mode they would not be taking up regular matters, despite the above, the Counsel appearing for the petitioner therein, without filing any application made an oral mention and pressed for an urgent stay on the EGM schedule to be held on 25.01.2022. 15. The Learned NCLT was not inclined to hear the Appellant's arguments opposing the stay of the EGM and to avoid an absolute injunction on the conduct/holding of the EGM on 25.01.2022 and in order to ensure that the EGM could atleast take place and the Appellant's rights not to be frustrated even further, the Appellants offered the following undertaking on 18.01.2022: "Respondent No.2, 3 and 4 hereby undertake to not act upon or implement the resolutio....
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....t the EGM held on 25.01.2022 till the disposal of the Company Petition. 20. It is submitted that without dealing with the contentions raised by the Appellants in their written submissions, the NCLT granted interim relief to the Respondents/Petitioners. The Learned Senior Counsel submitted that the impugned order is an egregious departure from the law settled by the Hon'ble Supreme Court in LIC vs. Escorts Limited & Ors. (1986 (1) SCC 264) wherein the Hon'ble Supreme Court held that the resolutions validly passed at an EGM cannot be stayed. Further it is submitted that the impugned order does not even apply or deal with the applicable standards of law and Supreme Court case law. Further, there is no determination on whether even a prima-facie case for oppression and mismanagement has been made out. The interim relief granted is in effect interferes with the statutory rights in favour of the Appellants as majority shareholders. In support of the contention the Learned Senior Counsel relied upon the judgments of the Hon'ble Supreme Court, and Hon'ble High Courts. 21. In view of the above, the Learned Counsel prayed this Bench to set aside the order dated 29.03.2022 passed by the....
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.... submitted that the Appellants secured an award from Singapore Arbitration Tribunal holding that Aapico is entitled to ¾ representation in the Board of SACL. It is to state that the award itself notes that UK Court is the proper Court to decide on whether Aapico is entitled to control of SGAH (3rd Respondent). In the circumstance, the Singapore Award presently not enforceable since UK Court is yet to finally determine whether Aapico is at all entitled to control SGAH. If Aapico is not entitled to control the SGAH, naturally Aapico is not entitled to control SACL which is only a subsidiary of SGAH. 26. It is submitted that the Aapico on its own requisitioned an EGM of SACL to remove all the present directors of SACL and appoint only Aapico nominees to the board and Aapico wanted to take control of SACL without awaiting Court orders. The Board of SACL on 17.12.2021 rejected the requisition of Aapico as not valid on multiple legal grounds. In the Company Petition it was also contended that Aapico would have had no quorum to conduct to EGM unless the promoters attend the EGM. As stated supra to get over the same Aapico illegally transferred 4 equity shares to 4 distinct third....
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....fore the Hon'ble Madras High Court. Therefore, the Appellants do not satisfy even the threshold tests to call for a requisition EGM. 30. The Learned Counsel for the Respondent also relied upon various judgments of the Hon'ble Supreme Court and the Hon'ble High Courts in support of his case. 31. In view of the reasons as stated above the Learned Counsel prayed this Bench to dismiss the Appeal. Analysis / Appraisal: 32. Heard the Learned Counsel for the respective parties, perused the pleadings, documents and citations relied upon by them. After analysing the pleadings, the moot point for consideration is whether the impugned order passed by the NCLT is in accordance with law or called for any interference. 33. The 1st Respondent herein filed the Company Petition bearing No.25 of 2022 arraying the Appellants and the other Respondents as the Respondents to the said Company Petition filed under Section 241 and 242 of the Companies Act, 2013 alleging certain acts of oppression and mismanagement and the petitioner therein (1st Respondent) pressed certain interim reliefs, however, the Respondents therein objected and opposed for the grant of interim relief. While so, the Le....
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.... 40. On account of defaults under the loan agreements, Aapico appropriated a share charge agreement (i.e. security in respect of the above loans) acquiring the remaining 50.01% shares of ABT-UK's shares in 3rd Appellant. Thus, Aapico holds 100% shares in 3rd Appellant (SGAH). In turn the 3rd Appellant SGAH holds 77.04% shares in SACL. 41. As stated (supra) the 1st Respondent herein filed CP No.25/2022 under Sections 241 to 244 alleging certain acts of oppression and mismanagement in the 2nd Respondent Company (SACL) stating that the Petitioner being a minority shareholder of SACL holding 0.85% of the paid up share capital of SACL. Even the petitioner therein, has given the shareholding pattern of SACL at page 613 Volume-3 admitting that 77.04% shares are held by (SGAH) 3rd Appellant. Among other things the Petitioner therein sought certain interim relief in above CP annexed at page 638 Volume-3 which is extracted as under: "a. An Order of Temporary Injunction restraining the Respondents 4, 5 and 6 from either directly or through SGAH, amending or acting upon any amendment to the Articles of Association of the 1st Respondent Company; b. An Order of Temporary Inj....
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....lenged the invocation of shares before the High Court UK and the High Court has found prima facie case for trial and has directed trial to take place in July, 2022. Therefore, whether Aapico is entitled to control SGAH itself is an issue in the above court proceedings. b) The Aapico has secured an award from Singapore Arbitration Tribunal holding that Aapico is entitled to ¾ th representation in the Board of SACL on the basis that Aapico currently has majority in SGAH. It is submitted that the Singapore Arbitration Award presently not enforceable since UK Court is yet to finally determine whether Aapico is at all entitled to control of SGAH. c) The Aapico moved the Hon'ble High Court of Madras seeking enforcement of Singapore Award, but High Court is yet to permit enforcement and the same is pending consideration. d) In the meanwhile, Aapico has taken law into its own hands and sought to unilaterally amend the Articles of Association of SACL, firstly, through a postal ballot. It is to state that the amendment to the articles without awaiting the orders of the High Court of Madras is contrary to Section 48 of the Arbitration and Conciliation Act. ....
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....gement, governance in SGAH and its subsidiaries including SACL. While so, in November, 2019 Aapico and SGAH invoked arbitration in Singapore against SACL/ABT-UK for various breaches of the SHA, 2018 viz. SACL's failure to amend its Articles of Association to incorporate the relevant terms of SHA, seeking proportionate representation in the SACL Board as provided in the SHA, appointment of CFO as per Clause 4 and 27 of SHA and other reliefs. Hence, the Learned Senior Counsel submitted that the Appellants have every right to issue notice for calling and convening an EGM and implement the resolutions passed therein in accordance with the law. 49. Having discussed the rival contentions of the parties, this Tribunal intend to deal with the SHA dated 29.09.2018. SHA: Date 29.09.2018: 50. It is an admitted fact that the parties have entered amended and re-stated shareholders agreement dated 29.09.2018. From the preamble, the following are the parties to the SHA viz. i) Aapico Hitech Public Company Ltd. (Incorporated under the laws of Thiland). ii) Aapico Investment Pte. Ltd. (Incorporated under the laws of Singapore) iii) ABT Auto Investment Ltd. (Incor....
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....int additional Aapico Nominee Director in accordance with the Articles. (Page 524 Volume-2.) 56. The SACL Board was required to issue a notice calling an EGM on or before 06.12.2021, however, the Board did not issue any notice and the SACL Board called a Board Meeting on 17.12.2021 to consider the EGM requisition. However, the Board did not consider any requisition made by a Shareholder under Section 100 of the Companies Act, 2013. Having failed to call the EGM within 21 days, the SGAH became entitled to issue a notice convening an EGM in accordance with Section 100 of the Companies Act, 2013 and accordingly, in exercise of its statutory right, the SGAH issued a notice dated 29.12.2021 under Section 100 of the Companies Act calling for an EGM of SACL to be held on 25.01.2021 by video conference at 10 a.m. for passing resolutions relating to appointment of Aapico Nominee Directors and removal of the ABT Nominee Directors (Page 550 of Volume-3). The EGM notice was sent to the Members and also all the Directors of SACL and followed due procedure as contemplated under the Companies Act, 2013. 57. When the CP was listed on 17.01.2022, the Counsel appearing for SSL without filing a....
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.... 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 requisitionists 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." 61. From the provision of law, two situation arises for calling the EOGM. The Board on its own may call an EOGM of the Company. On the requisition of the Members of the Company who hold not less than one tenth of paid-up share capital. If the Board does not call the meeting despite requisition given by the member of the Company, the requisitionists may call the meeting themselves within a period of three months from the date of requisition. In the present case, the requisitionist calling an EGM was given a notice on 15.11.2021. However, the Board rejected the calling of the EGM by the requisitionists i.e. SGAH. While so, the SGAH issued notice under Section 100 dated 29.12.2021, calling for the EGM of SACL to be held on 25.01.2022. This Tribunal is of t....
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....ll the attributes of such property. The rights of a shareholder are (i) to elect directors and thus to participate in the management through them (ii) to vote on resolutions at meetings of the company (iii) to enjoy the profits of the company in the shape of dividends (iv) to apply to the Court for relief in the case of oppression (v) to apply to the Court for relief in the case of mismanagement (vi) to apply to the Court for winding up of the Company (vii) to share in the surplus on winding up." At para 95 the Hon'ble Supreme Court held as: "The holders of the majority of the stock of a corporation have the power to appoint, by election, directors of their choice and the power to regulate them by a resolution for their removal. And, in injunction cannot be granted to restrain the holding of general meeting to remove a director and appoint another." At para 99 held as under: "Again in Bentley Stevens Vs. Jones, it was held that a shareholder had a statutory right to move a resolution to remove a director and that the Court was not entitled to grant an injunction restraining him from calling a meeting to consider such a resolution." At para 100 held as und....
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....nd force in the contention raised by the Learned Senior Counsel appearing on behalf of the Appellants. The Hon'ble Company Law Board, cannot issue injunction in implementing the decision to be taken by the shareholders in its meeting, unless the prima-face finding is record that the decision is prejudicial to the public interest or the company at large. At para 47 the Hon'ble High Court has held: "The Hon'ble Supreme Court in the case of Life Insurance Corporation of India Vs. Escorts Ltd. & Ors. (supra) had categorically laid down that it is not open to the Company Law Board to issue injunction with regard to functioning of the company." At para 62 the Hon'ble High Court has held: "For the reasons stated above, the impugned order passed by the Hon'ble Company Law Board cannot be sustained. Consequently, these appeals are allowed and the decision of the Hon'ble Company Law Board, staying implementation of the decision taken in the EGM is ordered to be set aside." 66. Respondents' citations: (i) Cosmo Steels Pvt. Ltd. & Ors. Vs. Jai Ram Das Gupta & Ors. (1978) 1 SCC 215 (ii) Gordon Woodroffe and Company Ltd. UK Vs. M/s Gordon ....
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....e its jurisdiction, although the statute confers such a power on it. 24. It is now a well-settled principle of law that the courts should lean in favour of such construction of statute whereby its jurisdiction is retained enabling it to mould the relief, subject of course, to the applicability of law in the fact situation obtaining in each case." 67. From the analysis of the citations relied upon by respective counsel/parties in so far as the judgments relied upon by the Learned Counsel for the Respondent (ii) (supra) in re- Gordon Woodroffe and Company, the view taken by the Hon'ble High Court of Madras is that even if there is change in the ownership of shares, there is no change in control of the company on account of such change in ownership. The said observation of the Hon'ble High Court is not applicable to the present facts of the case. 68. The Learned Counsel for the Respondents relief upon the judgment of the Hon'ble Supreme Court in re-V.S. Krishnan (iii) (supra), the Hon'ble Supreme Court observed that the claim "legitimate expectation" cannot be extended to and there is no specific promise that the petitioners would be given directorship permanently. The ....
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....tion 100 of the Companies Act, 2013. However, the Respondents have rejected the requisitionist request on 17.12.2021 on the ground that the Director Mr. Yeap is not authorised to requisition EGM on behalf of SGAH. And the Aapico cannot seek to enforce Singapore Award until Madras High Court uphold its validity and the Aapico cannot unilaterally take law into their own hands. 73. Be that as it may, as per the provisions of Section 100(4) of the Companies Act, 2013 if the Board does not within 21 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 45 days from the date of receipt of such requisition the meeting may be called and held by the requisitionists themselves within a period of 3 months from the date of the requisition. Failing to call the meeting by the SACL Board, the requisitionist itself convened a meeting of EOGM on 25.01.2022 is in accordance with law. When a shareholder has a right to call and convene a meeting, more particularly EOGM, the EOGM cannot be restrained as held by the Hon'ble Supreme Court in LIC Vs. Escort. Further, the NCLT ought not to have....