TaxTMI 
TaxTMI 
2024 (2) TMI 1514
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....2370 of 2025 The present application under Order XXXIX Rule 1 and 2 of the Code of Civil Procedure, 1908, seeks an interim injunction restraining the agents, employees, and officers of the defendant company from proceeding with the voting on a Proposed Resolution dated 10.01.2025. The said Resolution pertains to re-appointment of the plaintiff as Executive Chairperson/Managing Director at its 40th Annual General Meeting [AGM] scheduled for 07.02.2025. The plaintiff further seeks to restrain the defendant company from placing the Proposed Resolution for voting, from declaring the results of any such voting, and from considering or passing any Resolution aimed at removing the plaintiff as Executive Chairperson/Managing Director during the pendency of the suit. Brief Facts 2. The plaintiff currently serves as the Executive Chairperson of Religare Enterprises Limited [REL]. She also holds key positions as Chairperson cum Managing Director of ReligareFinvest Limited and Non-Executive Chairperson of Care Health Insurance Limited and Religare Broking Limited. The defendant-company, REL, is a Core Investment Company incorporated in the year 1984 under the Companies Act, 1956, and ....
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.... of the plaintiff as the Executive Chairperson for a term of three consecutive years, effective from 26.02.2020. According to learned senior counsel, the said Resolution has been passed under Section 196 of the Companies Act, 2013, which does not render the term of an Executive Chairperson, appointed for a fixed tenure exceeding one year, to be liable to retire by rotation. However, the Resolution and its accompanying explanatory statement erroneously recorded that the plaintiff was "liable to retire by rotation," which, according to him, is inconsistent with the provisions of Section 196 of the Companies Act, 2013. 7. According to learned senior counsel, the reference to Section 152 in the explanatory statement further incorrectly suggested that the appointment of the plaintiff was governed by its provisions. According to learned senior counsel, the requirement of retirement by rotation is inapplicable to fixed-term appointments made under Section 196, and such liability, if at all, would only arise upon the expiration of the designated tenure. Additionally, the appointment letter dated 26.02.2020 explicitly stated that the appointment was for a fixed term of three years, autom....
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....rplay between both the provisions makes it unequivocally clear that once a person is appointed under Section 196[2] for multiple years, the provision for retirement by rotation under Section 152[6] ceases to apply until the completion of the fixed term. The provisions of Section 196[2] override Section 152[6], and any interpretation to the contrary would defeat the legislative intent behind carving out a distinct provision for the appointment of a Managing Director for a term of up to five years. 13. He vehemently contends that the Resolution seeking her re-appointment cannot be put to vote each year when her term is already in force. Furthermore, the proviso to Section 196[2] explicitly states that no re-appointment under this Section can be made earlier than one year before the expiry of the existing term. Given that the current appointment of the plaintiff is valid until 25.02.2028, the phrase "liable to retire by rotation" under Section 152[6] becomes redundant for the duration of her fixed term and any such requirement can only arise once her tenure under Section 196 expires. 14. Learned senior counsel further places reliance on the RBI Master Direction - Core Investment....
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....eadings to be completed accordingly. By the present order, the Court is called upon to decide the application of the plaintiff under Order XXXIX Rule 1 and 2 of the CPC, seeking to restrain the defendant from proceeding with the proposed Resolution until the disposal of the main suit. 18. Pursuant thereto, several applications have been filed by certain members and stakeholders of the defendant-company, seeking impleadment and raising objections to the relief sought in the present application. However, at this stage, the Court does not consider it appropriate or necessary to entertain or examine the arguments sought to be advanced by the applicants therein in relation to the grant of the injunction sought by the plaintiff. 19. The crux of the present controversy essentially revolves around the claim of the plaintiff that her appointment as the Executive Chairperson/Director of the defendant-company was for a fixed term of five years, commencing from 26.02.2023 to 25.02.2028, and that any action seeking her re-appointment through rotation is legally untenable and procedurally improper. The plaintiff contends that despite her fixed-term appointment, the defendant-company has er....
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....ey. If a party fails to make out any of the three ingredients he would not be entitled to the injunction and the court will be justified in declining to issue injunction. In the instance case the respondent plaintiff was claiming to enforce the contract of service against the management of the institution. The refusal of injunction could not cause any irreparable injury to him as he could be compensated by way of damages in terms of money in the event of his success in the suit. The respondent was therefore not entitled to any injunction order. The District Judge in our opinion rightly set aside the order of the Trial Court granting injunction in favour of the plaintiff respondent. The High court committed error in interfering with that order." 21. The aforesaid principle has been relied upon by this Court consistently in Hari Krishan Sharma v. MCD 1987 SCC OnLine Del 286, I.K. Mehra v. Wazir Chand Mehra 1997 SCC OnLine Del 356, and B.M.L. Garg v. Lloyd Insulations (India) Ltd 1992 SCC OnLine Del 447. In light of this well-settled legal position, it is evident that an applicant seeking an injunction must establish all three essential ingredients, i.e., prima facie case, balance ....
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...."power which the court possesses of granting injunctions whether interlocutory or perpetual (however salutary) should be very cautiously exercised and only upon clear and satisfactory grounds, otherwise it may work the greatest injury". 25. In Gujarat Bottling Co. Ltd. v. Coca Cola Co (1995) 5 SCC 545, the Supreme Court has held that, apart from the three considerations noted above, the Court shall also look at the conduct of the parties seeking an injunction and may refuse to grant the same if the parties do not appear to have approached the Court with clean hands. The relevant portion of the said decision reads as under:- "47. In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, jurisdiction of the Court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the Court, on being approached, will, apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the Court, and may refuse to interfere unless his conduct was free fro....
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....ffice. However, it is not merely the actual impossibility of computing compensation that determines irreparable injury; rather, the key consideration is whether monetary compensation alone would be sufficient to redress the harm caused by the denial of injunction. This assessment is inherently case-specific and must be made in light of the particular facts and circumstances of each case. Reference can be made to the decision in the cases of GMNCO Ltd. v. Ravi Gupta (2001) 3 AP LJ 40 (DNC) (Del) and Som Datta Bukders Ltd. v. Kanpur Jal Sansthan 2002 SCC OnLine All 294. 29. Furthermore, with respect to the aspect of irreparable harm, juxtaposing the settled jurisprudence to the specific facts of the instant case, assuming for the sake of argument that the injunction is not granted, thereby requiring the plaintiff to undergo the election process, and further presuming that she is not re-elected as a director at the AGM to be held on 07.02.2025, any harm suffered by the plaintiff would, in any event, be compensable in monetary terms and the said compensation is determinable in terms of the letter of appointment of the plaintiff. In the event that, upon adjudication of the present su....
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....ses, compensation in lieu of reinstatement has been held to be an adequate and just remedy. Reference can be made to the decisions of the Supreme Court in the cases of Jagbir Singh v. Haryana State Agriculture Mktg. Board (2009) 15 SCC 327, Ashok Kumar Sharma v. Oberoi Flight Services (2010) 1 SCC 142 and BSNL v. Kailash Narayan Sharma (2014) 16 SCC 440 among a catena of other decisions. 33. Moreover, the Supreme Court has consistently held that interim relief staying termination should not ordinarily be granted, except in exceptional circumstances where irretrievable consequences would ensue, rendering the final adjudication infructuous or creating a fait accompli. This Court, in Air India Ltd. v. Aditya Beri 2012 SCC OnLine Del 3014 and in Vikas Kumar v. SDMC 2023 SCC OnLine Del 274, following this principle, observed that even if a termination is ultimately held to be illegal and unjustified, the affected party can always be compensated by awarding full salary for the period they remained out of employment. 34. Applying this principle to the present case, the relief sought by the plaintiff effectively amounts to a stay on her purported re-election and apprehended terminati....
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....efendant-company for a period of five years, commencing from 26.02.2023. This re-appointment has been made in accordance with the applicable provisions of the Companies Act, 2013 (hereinafter referred to as "the Act of 2013") and the rules issued thereunder. The letter further records that the re-appointment was approved by the Nomination and Remuneration Committee (NRC) and the Board of Directors of the defendant-company in their meeting held on 10.08.2022, and was subsequently ratified by the shareholders in the Annual General Meeting (AGM) conducted on 23.09.2022. For the sake of clarity, the relevant portion of the letter dated 24.02.2023 is extracted as under:- "24th February, 2023 Employee ID :63036 Employee Name :Dr. Rashmi Saluja Designation : Executive Chairperson Company Name : Religare Enterprises Limited Letter of Re-Appointment as Executive Chairperson of Religare Enterprises Limited ("REL"/ "Company") Dear Dr. Rashmi Saluja, At the outset, we would like to thank you and acknowledge your unswerving contribution in the success of the Company. We recognize your unconditional dedication and efforts as....
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....other facilities extended to the plaintiff, either explicitly payable in monetary terms or capable of being monetized. For the sake of clarity, the relevant portion of the annexure to the letter dated 24.02.2023 is extracted as under:- "Annexure 1. Total Fixed Remuneration Component Name (INR) Per Month Per Annum Basic 19,76,667 2,37,20,000 Allowances & Reimbursements LTA 6,250 75,000 Education Allowance 200 2,400 Additional Allowance 28,63,472 3,43,61,668 Monthly Gross 48,46,589 Gratuity 95,078 11,40,932 Total Fixed Cost (TFC) 49,41,667 5,93,00,000 2. a. Gratuity (If applicable) - As per Gratuity Act, Payable only after completion of 5 continuous year of service in organization b. Total Fixed Remuneration payable by way of salary, dearness allowance and any other allowances may be increased w.e.f. April 01, 2023 by an annual increment of up to 20% on the last Total Fixed Remuneration, payable monthly, in terms of provisions of Schedule V of the Act or such other amount within the limits prescribed by the Act from time to time 2. Variabl....
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....but not limited to: a. Any overpayment of salary or expenses or payment made to you by mistake or misrepresentation; and/or b. Any outstanding loans or advances made to you by the Company; c. Amounts equal in sum to the amount of any secret/illegitimate profits that you make from the Company's business/interests; and/or d. Any debt owed by you to the Company; and/or e. Any other deductions permitted under applicable law including Tax." 39. It is also pertinent to note that while the plaintiff was appointed on 24.02.2023 for a fixed tenure of five years, a careful perusal of the minutes of the Board Meeting dated 10.08.2022 and the Annual General Meeting dated 23.09.2022 reveals that both explicitly stipulated the retirement of the plaintiff by rotation. This clearly indicates that the understanding of the plaintiff that she is liable to retire is not something that was introduced for the first time in 2025, but was well embedded in the earlier Resolutions passed in the aforementioned board and general meetings. 40. Furthermore, the extract of the minutes of the 39th AGM of the defendant-company dated 27.09.2023, specifically Re....
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.... the plaintiff are correct and that the entire process of subjecting her to retirement by rotation is de hors the statutory scheme of the Companies Act, the plaintiff, being fully aware of such an alleged irregularity, ought to have pursued the appropriate legal recourse at the earliest possible opportunity. At the very least, the final opportunity for the plaintiff to challenge the applicability of Section 152 of the Companies Act would have been prior to the AGM dated 28.05.2020. Even with respect to the impugned Proposed Resolution to be placed before the 40th AGM, the notification for the same was issued on 15.01.2025. However, the instant suit and the accompanying application were filed only on 28.01.2025, nearly thirteen days after the plaintiff admittedly became aware of the resolution. When the matter was first placed before the Court on 29.01.2025, the Court, in the interest of procedural expedition, issued summons in the suit and scheduled the instant application for consideration. Furthermore, the AGM is not a mere discretionary exercise undertaken at the behest of the company but a statutory obligation, deriving its existence, powers, and duties from the Companies Act. ....
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....f a company. Reliance can be placed on the decision of this Court in the case of Ravinder Sabharwal v. XAD INC 2018 SCC OnLine Del 11482. The relevant portion of the said decision reads as under:- "12. A perusal of the above Articles show that the continuation of Directorship of the Plaintiffs till they resign, is not unequivocal but is 'subject to the provisions of the Companies Act'. The power of appointment of Directors in a company vests with the subscribers. In any event, such a power is one which vests purely with the share holders of the company and can be decided in an EGM. Calling of an EGM is the power of the share holdersand a perusal of the notice dated 30th June, 2018 clearly shows that the said notice has been issued under Section 100 of the Companies Act.The notice clearly specifies the resolutions that are intended to be passed. The EGM was originally scheduled for 24th July, 2018 but was thereafter postponed. The Plaintiff herein objected that the EGM notice did not give the 14 days' notice period which was required to be given as per law. The question as to whether an injunction can be passed against holding of an EGM has been settled by the Supreme C....
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....numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review. It is true that under Section 173 (2) of the Companies Act, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein of every director, the managing agent if any, the secretaries and treasurers, if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require 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....
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....lic interest. If the majority shareholders of the company decide to re-appoint the plaintiff, whether as the Director or in any other capacity, they must be allowed to exercise their discretion freely, subject to extant rules and regulations. The scales of convenience do not favor the plaintiff, as granting an injunction at this stage would significantly disrupt the preparations already underway for the scheduled AGM. On the contrary, such an injunction would not only cause considerable inconvenience to the defendant-company and its shareholders but would also amount to unwarranted judicial interference in a democratic and statutory exercise of corporate governance. The proposed course of action of the defendant-company is, prima facie, in consonance with the procedure followed during the earlier re-appointment of the plaintiff, and no apparent legal infirmity has been demonstrated. The challenge of the plaintiff to the Proposed Resolution is primarily based on the alleged misinterpretation of the terms of her appointment, and on these grounds, as noted earlier, a prima facie case justifying the grant of an injunctive relief has not been established. 50. In cases of this nature,....