Company Law Board
J.P. Srivastava & Sons (Rampur) Pvt. ... vs Gwalior Sugar Co. Ltd. And Ors. on 27 May, 2002
ORDER
A.K. Banerji, J. (Chairman)
1. By means of this application CA 93 of 2002 which was mentioned as urgent, the applicants who are the respondents in C.P. 46 of 2000 have inter-alia prayed for an interim order staying the letter dated 07th May, 2002 by certain shareholders requisitioning an Extra Ordinary General Meeting (EOGM) of M/s Gwalior Sugar Co. Ltd, under Section 169 of the Companies Act, 1956 (the Act) and also to stay the notice dated 08.05.2002 sent on behalf of the petitioner as a consequence thereof.
2. Briefly stated the relevant facts are that the petitioner above named had earlier filed a petition C.P. No. 27 of 1995 before this Board alleging oppression and mismanagement on the part of the Respondents which petition was dismissed as not maintainable under Section 399 of the Act. The appeal filed by the petitioner before the Gwalior Bench of the M.P. High Court was also dismissed and presently the matter is pending in S.L.P. in the Supreme Court, but no interim orders have been passed therein. However, during the pendency of the appeal before the High Court the petitioner filed another Company Petition namely C.P. No. 46 of 2000 before this Board, alleging acts of oppression and mismanagement and seeking a number of reliefs including the removal of the present Board of Directors. The respondents have filed a reply raising the question of maintainability of the said petition under Section 399 of the Act. The petitioners have filed their rejoinder and the petition is fixed for hearing on 14.08.2002 before this Board.
3. The petitioners group has filed another Company petition being C.P. No 21 of 2000 the respondents group (H.K. Srivastava group), Gwalior Sugar Company Ltd, and Sir J.P. Srivastava and Sons M.B. Pvt Ltd (J.P.S. Madhya Bharat in short) which company was equally held by H.K. Srivastava group and J.K. Srivastava group each having only one Director on the Board, H.K. Srivastava died on 03.03.2001 and immediately thereafter the Board of Directors of the said company was reconstituted without giving any representation to the H.K. Srivastava group. J.P.S. Madhya Bharat holds about 40% of the equity shares in Gwalior Sugar Co. Ltd. and after reconstitution of the Board of Directors of Madhya Bharat the J.K.Srivastava group called on E.OG.M. of the Gwalior Sugar Co. for removing the existing management and appointing their group on the Board. The respondent group approached this Board and vide order dated 04.05.2001 this Board directed status quo which existed prior to the death of H.K. Srivastava in the J.P.S. Madhya Bharat would continue. Soon thereafter the petitioners of the C.P. 21 of 2000 moved an application for withdrawal of the said petition which was opposed by the respondents and the matter has been partly heard and is now fixed for hearing on 14.08.2002. The petitioners had filed an appeal against the order of this Board dt 04.05.2001 which was dismissed by the order dt. 11.09.2001 of the Single Judge and the L.P.A. filed against the said Order was dismissed by the Div. Bench on 22.03.2002 with a direction to decide the withdrawal application as early possible. The petitioners in C.P. 46 of 2000 have requisitioned an EOGM under Section 169 of the Act of the shareholders of m/s Gwalior Sugar Co. Ltd. The respondent apprehending that the petitions will take over the control of the Company M/s Gwalior Sugar as they have done in J.P.S. Madhya Bharat has filed the present application C.A. 93 of 2002 before this Board.
4. Ms Bina Gupta learned counsel appearing for the respondent applicant has contended that the J.K. Srivastava group has by calling the requisition meeting is attempting to take control of the Gwalior Sugar Co. by sending a notice under Section 169 of the Act through another Company of theirs namely J.P.S. Rampur the petitioner company. The said notice is not only bad in law as it does not satisfy the ingredients of Section 169 of the Act but is also a gross abuse of process of law in as much as the petitioners are indulging in multiplicity of proceedings in the hope of getting some order to dislodge the present management. The petitions having failed to get an effective interim order in C.P. 46 of 2000 in which the main relief sought by them is to remove the Board of Directors belonging to H.K. Srivastava Group and to take control over the Gwalior Sugar Co. are now trying to get what they have failed to get directly in C.P. 46 of 2000, which has already been fixed for final hearing Therefore, pending the final disposal of C.P. 46 of 2000 the notice dt 08.05/2002 requisitioning the E.O.G.M. be stayed.
5. Ms Ahmadi learned counsel appearing for the petitioner opposite party has on the other hand strongly relying upon the decision of the Supreme Court in the case of L.I.C. of India v. Escorts ltd. (A.I.R. 1986 SC. 1370) has contended that every shareholder of a company has the right to call an extraordinary general meeting in accordance with the provisions of Companies Act. He cannot be restrained for calling a meeting and he is not bound to disclose the reasons for the resolution proposed to be moved at the meeting. Nor are the reasons for the resolution subject to judicial review. Therefore it has been contended that the prayer made in this application for staying the notice of EOGM is misconceived and cannot be granted. It has been further contended that in view of the settled legal position mentioned above it is not necessary to fe any reply to the said application which may be decided on the basis of the legal submission.
6. I have considered the respective submissions of the Counsel for the parties. So far as the legal submissions of Ms Ahmadi are concerned it cannot be disputed that every shareholder subject to the conditions set out in Section 169 of the Act has a right to call on EOGM and normally the said right cannot be interfered with. In the present case at hand however the applicants are challenging the notice under Section 169 of the Act itself as bad in law in as much as it does not satisfy the ingredients of Sub-section 4(a) of Section 169 of the Act. It has been contended that J.K. Srivastava Family Trust which is one of the parties to the letter dated 7th May 2002 requisitioning the meeting has ceased to be effective as per terms of the Trustdeed and has been held so by CLB vide order dated 18.1.99 in C.P. No. 27 f 1995 which order stands confirmed by the decision of the M.P. High Court and the said order has neither been stayed or yet set aside by the Superior Court. Even the Apex Court in the Escorts Case (Supra) (Which was not a case under Section 397/398 has in para 100 of the said judgment held that the right of the shareholder to call an EOGM is subject to the statutorily prescribed procedural and numberical requirements.
7. However this submission cannot be tested at this stage as the petitioner opposite party has not filed a reply to this application to controvert the allegation regarding the validity of notice under Section 169 Sub Section 4(a) of the Act. For the present therefore it is not necessary to go into this matter and it can be kept open to be decided along with the petition if found necessary.
8. On a careful consideration of the matter I am of the view that the balance of convenience lies in favour of maintaining statusquo and not to de-stabilize the management of Gwalior Sugar by permitting the petitioner to hold an EOGM especially when the company petition 46 of 2000 is ready for hearing and a date for the same has already been fixed. The main relief sought in the said petition was for the removal of Shri H.K. Srivastava as Managing Director, Shri Vikram Srivastava as Joint Managing Director and Shri Vir Srivastava as Executive Director from the Board of Directors and to declare the said Board as null and void. It is apparent from the requisition dated 7.5.2002 calling an EOGM that the main business to be transacted in the said meeting was the removal of Shri Vikram Srivastava and Shri Vir Srivastava as Director (Shri H.K. Srivastava having died in the meantime) and to appoint other directors in their place. In effect what has been sought is covered by the relief sought in CP 46 of 2000. Moreover the petitioners group had, after the death of Shri H.K. Srivastava, reconstituted the Board of J.P.S. Madhya Bharat and thereafter had sought to call an EOGM of the Gwalior Sugar for removing of the existing management, which was stayed for this Board vide order dated 4.5.2001 passed in CP 21 of 2000 which order has since been upheld in appeal by the M.P. High Court. If the present EOGM requisitioned by the petitions group vide notice dated 7.5.2002 is to be held it will in effect defeat the order dated 4.5.2001 passed by this Board, which intended that status quo with respect to the Board Gwalior Sugar be maintained. Since there has been no material change in the circumstances that prevailed when the order dated 4.5.2001, I do not consider it appropriate that the status quo in regard to the Board should be sought to be changed now. Further it is also to be noted that the application for withdrawal of CP 21 of 2001 is pending disposal and the matter was adjourned at the request of the counsel for the petitioner therein. Till that application is disposed of voting right on nearly 40% shares held by J.P.S. Madhya Bharat in Gwalior Sugar cannot be executed and this fact has been noted by Division Bench of MP High Court also.
9. Consequently it is hereby directed that the notice dated 8.5.2002 and the letter dated 7.5.2002 by the petitioners group requisitioning the EOGM shall remain stayed till the final disposal of CP 46 of 2000 by this Board.