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TaxTMI 
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TaxTMI 
2023 (4) TMI 451
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....ew Delhi [hereinafter "NCLT"]. 2. For convenience, parties to the present appeal, their status before the CLB and their inter se relationship, is depicted as follows: PARTY IN THE PRESENT APPEAL NAME/ DESCRIPTION PARTY BEFORE THE CLB INTER-SE RELATIONSHIP OF THE PARTIES TO THE APPEAL Appellant Ms. Priya Jain Applicant in C.A. No. 79/2015 (for impleadment) Former Shareholder of Respondent No. 3 Respondent No. 1 Laguna Holdings Pvt. Ltd. Petitioner No. 1 Shareholder of Respondent No. 3. Respondent No. 2 Ms. Usha Jain Petitioner No. 2 Shareholder of Respondent No. 3. Respondent No. 3 Eden Park Hotels Pvt. Ltd. Respondent No. 1 The Company in question. Respondent No. 4 CLG Hotels and Resorts Pvt. Ltd. Respondent No. 2 Shareholder of Respondent No. 3. Respondent No. 5 Mr. Sushil Gupta Respondent No. 3 Chairman-cum-Director of Respondent No. 3. Respondent No. 6 Mr. Sandeep Gupta Respondent No. 4 Director of Respondent No. 3. 3. The Impugned Order captures the backdrop of Appellant's grievance, rendering reiteration of facts superfluous; however, a concise overview is presented below for contextual clarity. 3.1 There are two groups of shareholders in....
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....the Impugned Order is liable to be set aside on the following grounds: 4.1 Appellant, along with her father late Mr. D.K. Jain were appointed as the two nominee directors to represent DKJ Group. Appellant has admittedly never been removed or replaced as the nominee director during the lifetime of late Mr. D.K. Jain. Appellant has been a nominee director more than ten years without any complaint. Record would reveal that she had opposed SKG Group as and when they committed illegal acts and always protected the interest of DKJ Group as well as Respondent No. 3. 4.2 Relief under Section 111 of the Act and Section 59 of Companies Act, 2013 for transfer of Appellant's shareholding could not have been sought without impleading Appellant as a party. 4.3 There is no allegation of misconduct against the Appellant. There is also no allegation in the main petition that she had acted against the interests of DKJ Group or colluded with SKG Group. However, in C.A. No. 155/2014, false allegations were made against Appellant to remove her from the position of the nominee director. No date is mentioned in the petition or in C.A. No. 155/2014 regarding Appellant's alleged removal as the Nominee D....
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....lant and this decision was communicated to Board of Directors of Respondent No. 3 on 17th November, 2014. 5.3. Appellant continues to act against Respondent No. 3 as is evident from the prayer clause in C.A. No. 79/2015 wherein she indicates her intent to oppose the company petition. 5.4. Appellant had already transferred her shareholding in Respondent No. 3 to Ms. Usha Jain, which stands recorded in order dated 31st March, 2016 in C.P. No. 36/59/2014. Therefore, Appellant's allegations of her shareholding are completely misconceived and to that extent, Appellant has no ground for impleadment. 5.5. Appellant has failed to satisfy the requirement of Section 405 read with Order 1 Rule 10 of CPC, 1908. CLB has rightly concluded that the presence of the Appellant is not necessary for proceedings initiated by DKJ Group against the SKG Group. 5.6. Appellant's contention of withdrawal of C.A. No. 155/2014 is misconceived as only C.A. No. 154/2014 was withdrawn on 15th July, 2015. ANALYSIS 6. Corporate governance can be a complex matter, especially when it comes to the appointment of directors. Disputes can arise when a nominee director's appointment is subsequently withdrawn by the ....
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....owed to become a party, as to nominee director ship, she cannot continue without the petitioners backing, hence forth, she cannot claim that unless she is made as a party the proceeding, the issues in this petition cannot be adjudicated, especially in a case, where the petitioners made serious allegations against other group alleging that they are not allowed to participate in the functioning of the company and the other group is siphoning the funds of the company, which is prejudicial to the interest of the petitioners group. 8. The Applicant Counsel argued that she is entitled to be impleaded as a party to the proceedings u/s 405 of the Companies Act, 1956 because this Bench has passed an order suspending her to continue as nominee director on Petitioners' behalf without her being heard by this Bench and since she has 50,000 equity shares, she is just and necessary party to this proceeding. 9. On reading Section 405 of the Act 1956, it is obvious that it is applicable to MD or any other director, or manager of a company or any other person, who has not been impleaded as a respondent to the proceeding under sections 397 & 398 of the Act. Here, she is *not a director in the....
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....t believe Ms Priya Jain needs to become a party to the CP, hence this application is dismissed without any costs." 7. The Court perceives no flaw in the aforementioned perspective. (i) DKJ GROUP'S INTERESTS HOLD PRECEDENCE 8. According to the AoA of Respondent No. 3, the DKJ Group is entitled to an equal number of directors on Respondent No. 3's Board, as the SKG Group. The Appellant was a nominee of DKJ Group. Following Mr. D.K. Jain's demise, the Appellant began acting against the interests of her nominating group. Despite DKJ Group's request to SKG Group to not accept Appellant as their nominee director, she continued to act as a nominee director. Due to her lack of cooperation, the DKJ Group intimated CLB that her nomination had been withdrawn and in her place, a new director had been appointed. In such circumstances, when DKJ approached the CLB for interim directions, it was held that SKG Group was under obligation to uphold the interest of DKJ Group and thus, suspended Appellant's directorship. This was only to ensure that DKJ Group's interests are not jeopardised, pending final adjudication of the proceedings in the company petition. (ii) APPELLANT HAS CONTRARY I....
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....o serve on the Board of Directors only if they have the support of the nominating group. The pleadings on record show that the Appellant no longer has the backing of the DKJ Group, which is essential for a nominee director's continuation. Appellant was to further the interests of DKJ group, but since she was not acting in their interests, she risked losing their support and being removed from the board. (iii) NO SUFFICIENT CAUSE UNDER SECTION 405 OF THE ACT 11. The Appellant's reliance on Section 405 of the Act is also misconceived. Section 405 of the Act authorizes the CLB to add directors or "any other person" who was not involved in the proceedings under Section 397 or 398 of the Act. This discretion has to be exercised by the CLB only if there is a valid reason in allowing a person to join the proceedings. In the instant case, since the Appellant no longer has the support of the DKJ Group, she has no right to participate in the proceedings. The Court agrees with the CLB's decision that Appellant has failed to show sufficient cause under Section 405 of the Act to join the proceedings. 12. To make it clear, the Court is not adjudicating whether the Appellant was lawful....