TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 816
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....istrict Judge"], whereby the Appellant Company has been restrained from convening Board Meetings dated 15.04.2025 and 12.05.2025 concerning the proposed removal of the Respondent(s) from the Directorship of the Appellant Company. 2. These are two connected Appeals arising from similar facts and involving the same Appellant. With the consent of learned counsel for the parties, they are being heard and disposed of by this common order. For the sake of convenience, the facts are being drawn from FAO (COMM) 164/2025 captioned Drharors Aesthetics Private Limited v. Rahul Shawel. FACTUAL MATRIX: 3. A dispute arose between the Appellant Company, engaged in the business of dermatological and aesthetic services, and the Respondent, its erstwhile Director. Pursuant to a Memorandum of Understanding dated 23.09.2023, executed between the Respondent, Dr. Navnit Haror, Dr. Vineeta Pathak, and Mr. Debdulal Banerjee, it was agreed to incorporate a new entity for the purpose of expanding the business, with specific roles delineated for each party. In terms thereof, the Respondent was entrusted with responsibilities relating to growth, franchise development, marketing, and day-to-day operations. ....
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.... written notice for convening Board Meetings. It was specifically contended that the meetings dated 01.04.2025, 04.04.2025, 15.04.2025, and 12.05.2025 were either held or proposed to be held on insufficient notice, thereby violating statutory mandates and depriving the Respondent of a fair opportunity to respond. 7. In support of his plea, the Respondent relied upon the decision of this Court in Chhaya Devi & Anr. v. Rukmini Devi & Ors. 2017 SCC OnLine Del 10290, wherein it was held that any attempt to remove a Director must be preceded by due compliance with Section 169 of the Companies Act, 2013 and must be accompanied by a meaningful opportunity of being heard, including disclosure of reasons and the documentary basis for such proposed removal. 8. The Appellant Company, on the other hand, submitted before the District Judge that the proposed removal was necessitated due to serious financial irregularities, breach of fiduciary duties, and acts of sabotage allegedly committed by the Respondent. It was contended that the notices were duly issued in compliance with the Articles of Association and the applicable provisions of the Companies Act, 2013, and that the Respondent, by inv....
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.... including his refusal to convene meetings, obstruction of internal audits, and withholding access to critical business decisions, had effectively paralyzed the functioning of the Appellant Company. In such circumstances, his removal was necessary to safeguard the interests of the Appellant Company and its shareholders. It was, thus, argued that the interim injunction granted by the District Judge unjustifiably interfered with the Appellant Company's internal management and amounted to judicial overreach. 13. Lastly, it was contended that the disputes raised by the Respondent, including claims relating to unpaid remuneration and allotment of equity shares, are matters squarely covered by the arbitration clause contained in the Shareholders' Agreement, and therefore any adjudication of such disputes, particularly at the pre-arbitral stage, lies beyond the limited scope of Section 9 of the Act, which is intended solely to preserve the subject matter of arbitration and not to grant conclusive or determinative relief. 14. In support of his contentions, reliance was placed by the learned counsel for the Appellant on the judgment of the Supreme Court in Life Insurance Corporation o....
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....ncluding the expansion from two to nineteen wellness centres, his remuneration was withheld, access to official communication systems was suspended, and attempts were made to remove him in a manner contrary to both contractual stipulations and statutory protections. 18. Reliance was placed by the learned counsel for the Respondent on the judgment passed by this Court in Jai Kumar Arya & Ors. v. Chhaya Devi & Anr. 2017 SCC OnLine Del 11436 to submit that the interim protection under Section 9 of the Act may be granted in cases involving procedural impropriety in the proposed removal of Directors, particularly where statutory safeguards under the Companies Act, 2013 are alleged to have been violated. It was submitted that the injunction in that case was justified in order to prevent irreparable harm and to preserve the status quo pending resolution of disputes through arbitration. 19. Lastly, it was submitted that, permitting the Appellant to act on the impugned agendas would cause grave and irreparable prejudice to the Respondent by effectuating his removal without any adjudication on merits, thereby jeopardizing his reputation, equity rights, and position within the Company. It w....
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.... considering serious allegations pertaining to financial irregularities, breach of fiduciary duties, and obstruction of audit processes. These issues, by their very nature, warranted urgent deliberation by the Board. In such circumstances, recourse to the proviso to Section 173(3) of the Companies Act, 2013, which permits shorter notice for the transaction of urgent business, cannot be held to be per se illegal or unjustified. 25. In order to evaluate the legality of the interim injunction granted, it is necessary to briefly examine the scope of Sections 169 and 173(3) of the Companies Act, 2013, which govern the process for removal of a Director and the notice requirements for Board Meetings respectively. The said provisions read as under: "169. Removal of directors. (1) "A company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard: Provided that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two-thirds....
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...., shall be present at the meeting: Provided further that in case of absence of independent directors from such a meeting of the Board, decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any." A plain reading of the above provisions demonstrates that while the statute guarantees a Director the right to a reasonable opportunity of being heard prior to removal, it also expressly permits Board Meetings to be convened at shorter notice, subject to the prescribed conditions. The legislative intent behind Section 173(3) of the Companies Act, 2013 is to ensure that companies are not prevented from acting swiftly in matters of urgency, especially where the Articles of Association so permit. However, the District Judge appears to have overlooked this statutory balance, focusing solely on the short notice period without adequately considering either the urgency involved or the permissibility of convening meetings on shorter notice under the Act. 26. Moreover, the Impugned Order does not record any findings on the existence of a prima facie case, balance of convenience, or irrep....
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....arly where the Companies Act, 2013 provides adequate statutory remedies. In the present case, the injunction granted by the District Judge effectively curtailed the statutory right of the Appellant Company to convene a Board Meeting and deliberate on serious governance issues, a matter squarely within the internal domain of corporate management and not amenable to injunctive interference. 29. The approach adopted by the District Judge also appears to rest on an incorrect appreciation of the settled principles governing the grant of interim relief. No findings have been recorded on the existence of a prima facie case, the balance of convenience, or the likelihood of irreparable harm to the Respondent, each of which is a sine qua non for the exercise of equitable jurisdiction under Section 9 of Act. 30. It is also relevant to consider Section 100(4) of the Companies Act, 2013, which reads as under: Section 100 - Calling of extraordinary general meeting. (4) If the Board does not, within twenty-one 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 forty-five days fr....