Company Law Board
S. Arunachalam And Ors. vs Sugavaneswara Spinning Mills Private ... on 28 November, 2007
Equivalent citations: [2008]142COMPCAS611(CLB)
ORDER
K.K. Balu, Vice-Chairman
1. This application is filed by the petitioners under Regulation 44 of the Company Law Board Regulations, 1991 pursuant to the consent order made on 08.09.2006 bringing to an end the disputes raised in the affairs of the Company, for the following reliefs:
(i) to direct that the first applicant continues to be a director of the Company in terms of the order of this Bench dated 18.08.2005 and that the resolution passed at the annual general meting held on 24.08.2005 is invalid;
(ii) to direct that all dividends that were unpaid to the applicants 1 to 6 during the pendency of the dispute be paid in their favour;
(iii) to direct that the receipts that have been issued in the name of the applicants 1 & 6 be re-issued in the names of the respective firms;
(iv) to direct that the articles of association of the Company be amended so as to include therein election of directors under proportional representation, by way of a single transferable vote;
(v) to direct that 944 shares that were to be allotted in terms of the consent order be allotted to the applicants 1 & 6 at Rs. 100/- per share;
(vi) to direct that status quo on the parity of shareholding be maintained at all times and that the applicants be allotted shares in the same proportion as they held in respect of 20737 shares impugned by the applicants; and
(vii) to frame a scheme for the purchase of the shares of the respondents by the applicants.
2. Shri Suresh Balakrishnan, learned Counsel in support of the applicants pointed out the acts of oppression indulged at the instance of the respondents, despite the consent order dated 08.09.2006 and urged to pass a fresh order resolving all the contentious issues, rendering justice in favour of the aggrieved applicants for the following reasons:
• The company petition has not been disposed of by virtue of the consent order dated 08.09.2006 in view of the fact that liberty to apply has been granted by the Bench. While the applicants fulfilled all their obligations under the consent order and repaid the dues of Rs. 52 lakhs payable to the Company by borrowing monies and selling their personal assets, yet they are made to suffer on account of the unfairness suffered by the respondents contrary to the letter and spirit of the understanding reached between the parties and the consent order dated 08.09.2006. Therefore, this Bench has not become functus officio, so as to deny the reliefs as claimed by the applicants.
• The first applicant was not re-elected as director of the Company at the annual general meeting held on 24.08.2005. This is in contravention of the order dated 18.08.2005, wherein this Bench directed that the directors belonging to the petitioners group will continue to be directors irrespective of the decision that may be taken at the said meting until further orders. The consent order dated 08.09.2006 does not negate the order dated 18.08.2005, permitting the directors belonging to the petitioners group to be directors of the Company. The first applicant is entitled to continue to be director of the Company, pursuant to the interim order dated 18.08.2005 and the subsequent consent order dated 08.09.2006, especially when there is no direction in the consent order about the retirement of the first applicant from the office of director. This Bench by yet another order dated 09.04.2007 directed that the respondents will maintain status quo in regard to the management of the Company. Therefore, the first applicant has every right to continue as director of the Company.
• The partnership firms wherein the applicants 1 & 6 are partners have paid various amounts due to the Company which are duly acknowledged by the latter. However, the receipts have been issued in the name of the applicants 1& 6 while the amounts were due from the partnership firms and therefore, the Company ought to have issued receipts in the name of the firms and not the applicants 1 & 6. The Company failed to initiate any action to withdraw the civil suit filed against the applicants for recovery of the dues, in terms of the consent order dated 08.09.2006.
• The Company illegally allotted 20737 shares to the respondents group, without following the prescribed procedure, without any intimation to the petitioners and without the requisite agenda at the board meeting for any such issue of shares, after the settlement reached on 09.10.2006 at a price of Rs. 100/- per share, reducing the petitioners to a minority group, which would constitute an act of oppression. Therefore, the applicants are entitled for the proportionate number of shares, out of 20737 shares allotted by the Company exclusively in favour of the respondents. Consequently, the applicants 1 & 6 are entitled for 10506 shares (9562 + 944) in terms of the consent order. When the respondents have allotted additional shares to themselves at the rate of Rs. 100/- per share, it is not equitable to allot shares in favour of the applicants at the rate of Rs. 260/- per share as stipulated in the consent order dated 26.03.2007. The; respondents in the counter statement to the main petition clearly stated that they are willing to agree for setting aside the lien and sale of the shares of the applicants 1 & 6 provided the outstanding amount due from them is paid to the Company. Thus, the intention of the respondent is only, to recover the money lawfully due to the Company and not to dilute the shareholding of the petitioners.
• The consent order provides inter-alia that the Company will allott shares afresh to the extent of shares held in the name of the "petitioners 1 & 6" and forfeited by the Company. The words "petitioner Nos. 1 & 6" ought to be "petitioners 1 to 6", in view of the fact that all the petitioners have equal right to proportionate allotment of shares so as to maintain the parity in shareholding as at 07.04.2005. This error causing enormous prejudice to the petitioners, is required to be rectified, since the allotment of "944 equity shares" as envisaged in the consent order is applicable only to the applicants 1 & 6. The Company, taking the advantage of this error, decided to allot shares only in favour of the applicants 1 & 6 thereby depriving the other applicants of their lawful claim for shares.
• The first applicant has been a director of the Company for an un-interpreted period of 24 years ever since the year 1983. This is the first time in the entire history of the Company's existence that a director was given retirement by rotation at the annual general meting held on 24.08.2005 with a view to oust the first applicant from the management, which is oppressive and unfair, especially when the Company is a small private company comprising of shareholders closely related to each other and functioning on the principles of quasi-partnership during all these years. Therefore, the first applicant has legitimate expectation to continue to be director of the Company. In the absence of non-inclusion of any term with regard to directorship of the first applicant in the consent order and in the light of the interim order dated 18.08.2005, the respondents are estopped from contending that the first applicant ceased to be director of the Company.
• The consent order specifies that the parity in shareholding of the applicants 1 & 6 will be restored as prevailed prior to 07.04.2005 by allotment of shares as envisaged therein. The applicants duly discharged the debt and they are entitled to their old shareholding. This would imply that they have and always had the shares in their names. Such continuity in shareholding would simply that the benefits of shareholding should be continuous. Therefore, they are entitled to the past dividend and other benefits on the shares as they stood at every annual general meeting since the year 2003 till date, which were denied on the ground that the shares of the applicants 1 & 6 have already been forfeited. However, the respondents have paid only 1.37% by way of dividend for the year 2006-2007 calculating the dividend amount with effect from the date on which the shares were allotted to the applicants on 26.03.2007 as against 25% on the pretext that the consent order envisages the issue of shares "afresh" in favour of the applicants 1 & 6, causing monetary loss to them. The applicants 1 & 6, are similarly entitled for the dividend in respect of the years 2004-2005 and 2005-2006 at the rate declared by the Company, namely, 15% and 25% respectively. The shareholding of all the applicants and the dividend thereon should be reworked according to their rightful entitlement, as they stood prior to 07.04.2005. Any refusal of such past dividends and other benefits payable in favour of the applicants is unjustified.
• The consent order expressly providing that the applicants shall exercise their rights as shareholders shall be construed retrospectively. The applicants were not gifted gold coins which were given to all other shareholders, thereby discriminating the applicants as against the other shareholders.
3. Shri R. Vidhya Shankar, learned Counsel opposed the prayer of the applicants on the following grounds:
• By virtue of the consent order dated 08.09.2006, the company petition came to be finally disposed of on the terms and conditions incorporated therein. The applicants, therefore, cannot seek to modify the consent order, as sought by them. The Bench has become functus officio after passing of the consent order and retains sesin over the matter only to the limited extent of ensuring enforcement of the terms of the consent order. All the prayers claimed in the company application except the issue of receipts in the name of the partnership firms for the payments made in favour of the Company are far beyond the scope of the consent order dated 08.09.2006 and therefore, this Bench cannot enquire into any other allegations other than one relating to enforcement of the consent order.
• The consent order dated 08.09.2006 having become final is binding on the parties. The first applicant was not re-elected as a director of the Company at the annual general meeting held on 24.08.2005 which could not however be implemented on account of the order dated 18.08.2005. With passing the consent order dated 08.09.2006, which finally disposed of the petition the first applicant has no right to continue as a director of the Company but his rights as a shareholder as envisaged in the consent order are safeguarded. In these circumstances, the interim order already passed on 18.08.2005 does not any longer survive. Accordingly, the resolution passed at the annual general meeting, wherein the first applicant was not re-elected was given effect to by the Company. The first applicant is a party to the resolution passed in the annual general meeting held on 24.08.2005, wherein he was not re-elected as a director. The applicants 2, 4 and 5 even now continue to be on the board of the Company and, therefore, there is no question of restoration of directorship to the first applicant. The relationship between the first applicant and the respondent has become strained, as borne out by a series of police complaints falsely lodged by the first applicant against the respondents and therefore, the first applicant's continuance as director will not be in the interest of the Company.
• The Company admittedly gave receipts acknowledging payments in the name of the partners, which would however be given in the name of the partnership firms, in terms of the consent order made by the Bench.
• The impugned allotment of 20737 shares has been made with the knowledge and consent of the petitioners, against the share application money received as early as in the year 2004. The applicants have not chosen to apply for further shares at the relevant point of time. The formal allotment has not been made pending disposal of the company petition and the requisite formalities in this regard have been completed on the disposal of the company petition. The allotment of impugned shares was made on 26.03.2007 after affording due opportunity to the shareholders including the applicants 2 to 5 which was followed by Form No. 2. However, the applicants 2 to 5 did not exercise the option to subscribe for additional shares. There is, therefore, no irregularity in the impugned allotment of shares in favour of the respondents. The annual accounts for the year ended 31.03.2006 have been duly adopted by the members, including the first applicant. Furthermore, this contentious issue is wholly beyond the scope of the company petition and also falls outside the consent order dated 08.09.2006. The allotment of shares made at the board meeting held on 09.10.2006 is in the interest of the Company and does not constitute an act of oppression in the affairs of the Company. The consent order dated 08.09.2006 explicitly provides for restoration of the parity in shareholding of the applicants 1 & 6, which cannot be extended to the other applicants. The various clauses namely 1 to 3 and 6 would categorically show that the allotment of shares and additional shares will be only in favour of the applicants 1 & 6. There cannot be any typographical error in all these clauses of the consent order, as contended by the applicants.
• The shares belonging to the applicants 1 & 6 numbering 9592 were forfeited and subsequently sold at Rs. 260/- per share. Even after appropriation of the sale proceeds of Rs. 24.86 lakhs, an amount of Rs. 38.63 lakhs remained unpaid by the applicants 1 & 6 as on 07.04.2005. The fresh allotment of shares in the place of forfeited 9562 shares and the allotment of additional shares of 944 equity shares restoring the party in shareholding in terms of the consent order dated 08.09.2006 will have to be applied prospectively. The applicants, therefore, cannot claim any dividend or any other benefit for the earlier period especially when their shares came to be forfeited and sold as early as on 07.04.2005.
• The respondents have initiated necessary steps to withdraw the civil proceedings, against the petitioners which are before Lok Adalat, but owing to non-cooperation of the petitioners, the matter has got to be referred back to the civil court. However, the respondents are taking appropriate steps for withdrawing the civil suit filed by them.
4. Shri R. Vidhya Shankar, learned Counsel, in support of his legal submissions relied on the following decisions:
Smt. Neelu Kohli and Ors. v. Nikhil Rubbers P. Ltd. and Ors. (2007) Vol. 137 CC 374 - an application for setting aside or recalling of a consent order is limited to cases where the order incorporates an agreement which is void or voidable at the instance of one of the parties to the proceeding on the ground of fraud, mistake, influence or other similar grounds.
• ITC Limited v. George Joseph Fernandes and Anr. (1989) AIR SC 839 - to show that the consent order could be avoided only in the case of mutual mistake between the parties.
• Mrs. Michelle Jawad-Al-Fahoum v. Indo Saudi (Travels) Private Limited and Ors. (1998) Vol. 93 CC 151 - to show that the Company Law Board has no power to review its own order and that there is no scope either to modify the consent terms or recall the same. The parties are bound by the consent terms as recorded in the consent order.
• LIC of India v. Escorts Limited - Every shareholder of a company has the right, subject to statutorily prescribed procedural and 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 does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting.
• S. Varadarajan v. Venkateswara Solvent Extraction (P) Ltd. and Anr. (1994) Vol. 80 CC 695 - that a shareholder possessing the requisite shareholding has the right to requisition an extraordinary general meting. Such a shareholder cannot be restrained by injunction from calling the meeting and he is not bound to disclose the reasons for the resolutions subject to judicial review. No injunction restraining the holding of the meeting could be granted.
• Vinod Kumar Mittal v. Kaveri Lime Industries Limited and Ors. (2000) Vol. 100 CC 66 - to show that when the petitioner had acted against the interests of a company by writing complaints to various Government authorities resulting in their conducting raids on the company, the shareholders were justified in removing him as the managing director and as such his removal could not be considered to be an act of oppression.
• Dr. K. Balasundaram v. G.K. Steels (Coimbatore) Limited and Ors. (2003) Vol. 117 CC 293 - to show that the communication of the petitioner as a director would result in further litigation which would not be in the interest of the company, the person so acting against the interest of the company could be sent out of the company on receipt of fair consideration for his shares.
5. I have heard the arguments of learned Counsel for the parties. The issue for consideration is whether the applicants are entitled for any of the reliefs claimed by them in the light of the consent order dated 08.09.2006. It is settled law, as decided in a number of decisions cited by Shri R. Vidhya Shankar, learned Counsel, that no consent order could be modified or recalled or reviewed, save on the ground of fraud, mutual mistake or similar other grounds. Against this legal proposition and in the light of various contentious issues raised in the company petition as well as the consent order made on 08.09.2006, the rival claim of the parties, which would result in varying the consent terms, must be considered. The main grievances of the petitioners forming part of the main petition are-
• The petitioners collectively holding 20%, have only three representatives on the board, whereas the respondents 2 to 9 with 28% of the total shares of the Company have as many as eight representatives on the board, which constitutes 50% of the strength of the board of directors of the Company.
• The respondents, by virtue of their majority in the board of the Company, are manipulating the affairs of the Company, doctoring the books of accounts and siphoning of the profits of the Company by means of bogus transactions, thereby depriving the petitioners of their lawful share in the profits of the Company, without discharging their statutory responsibilities.
• The Company bought back 7649 shares from its shareholders in February 2004 at a price of Rs. 250/- per share in gross violation of the requirements of Sections 77AA and 159 of the Companies Act 1956 and without following the norms and prescribed procedures and without convening any board meeting in this behalf.
• The Company issued further shares, immediately after buy back of shares, in favour of the fourth respondent (646 shares) and his wife (491 shares), being the second respondent herein and managing director of the Company, at Rs. 100/- per share without making any offer to any of the shareholders and thereby strengthened their hold in the Company.
• Form No. 2 discloses that 1137 shares have been issued, whereas only an amount of Rs. 1.13 lakhs is reflected as share application money in the balance sheet of the Company for the year ended 31.03.2004.
• The respondents have diversified the business of the Company into totally unrelated areas, without any expertise or experience and without knowledge of the petitioners, which resulted in huge debts incurred by the Company. The respondents have taken major investments decisions without involving the petitioners in any of the affairs of the Company.
• The respondents 2 & 5 are enjoying extraordinary pecuniary and other benefits at the cost of the petitioners and the second respondent has illegally amassed wealth thereby causing serious prejudice to the interest of the Company.
• The respondents are attempting to deprive the petitioners of their shareholding by making lien thereon under the guise of recovery of monies due to the Company.
6. The respondents stiffly contested the company petition and just before initiating the present proceedings, the board of directors of the Company at the meeting held on 13.02.2005 accorded its consent, in pursuance of Clauses 11 and 12 of the articles of association to exercise lien on 4920 shares held by the first applicant and 4642 shares held by sixth applicant on account of non-payment of an aggregate amount of over Rs. 61 lakhs payable by their concerns towards the purchase of yarn from the Company together with interest thereon. Thereafter, in view of non-settlement of the outstanding dues by the applicants 1 & 6, the board of directors of the Company at the meeting held on 24.03.2005 resolved to sell their shares at a price of Rs. 260/- per share in favour of the existing shareholders, upon which 4920 shares belonging the first applicant and 4642 shares held by the sixth applicant have been sold by means of a board resolution passed on 07.04.2005 in favour of as many as 31 shareholders and realised an amount of Rs. 24.86 lakhs, which came to be appropriated towards part satisfaction of the dues of the applicants 1 & 6 and for recovery of the balance amount, the Company has filed a civil suit against the applicants 1 & 6, restricting its claim for Rs. 30 lakhs only. Thereafter, the board reportedly cancelled the share certificates in respect of the sold shares of the applicants 1 & 6 and issued new share certificates to the purchasers and further registered the transfer of such shares in the register of members of the Company. It is, in this context and in view of the fact that (a) the Company is closely held private limited company; and (b) the long standing business relationship between the parties, the contesting parties negotiated for amicable settlement at the intervention of this Bench. After a series of discussions between the parties and their Counsel, the parties have voluntarily agreed to end the disputes which resulted in the consent order dated 08.09.2006, reading thus:
1. The Company will allot shares afresh to the extent of shares held in the name of the petitioner Nos. 1 & 6 and forfeited by the Company, viz. 9562 equity shares.
2. The parity in shareholding of the petitioner Nos. 1 &6 will he restored back as prevailed prior to 07.04.2005 by allotment of proportional additional shares, viz. 944 equity shares in their favour (a), Rs. 260/- per share.
3. The Company will allot shares in terms of Clauses 1 & 2 on receipt of the consideration for the shares from the petitioner Nos. 1 & 6 within three weeks from the date of receipt of consideration.
4. The petitioner Nos. 1 & 6 will repay to the Company a sum ofRs. 52 lakhs towards the dues in full and final settlement within 9 months from this date and interest will be charged after 6 months @ 12% simple on the outstanding balance.
5. The civil suits filed by the 6th petitioner and the Company will be withdrawn unconditionally.
6. The allotment of shares on account of forfeiture of shares and the additional shares will be allotted on receipt of consideration from the petitioner Nos. 1 & 6.
7. The petitioners are entitled to exercise their rights as shareholders of the Company.
Liberty to apply.
The above sequence of events would clearly indicate that 9562 shares held as on the date of company petition by the applicants 1 & 6, came to be sold by the Company during the pendency of the company petition for the amounts outstanding due and payable by them, thereby they ceased to be shareholders of the Company, in which case any right, privilege or benefit which is available to any shareholder can no longer be extended to the applicants 1 & 6. It was, therefore, agreed among the parties that the applicants 1 & 6 would clear their remaining dues and further that it would allot shares afresh, in favour of the applicants 1 & 6 to the extent of the shares held by them and forfeited by the Company namely 9562 equity shares. It is, with a view to restore the parity in shareholding of the applicants 1 & 6 which prevailed prior to 07.04.2005, it was mutually agreed that the, applicants 1 & 6 would be allotted additional shares namely, 944 equity shares at the rate of Rs. 260/- per share. These terms of compromise were consciously and explicitly agreed with reference to the applicants 1& 6 and there was, therefore, no need to consider any allotment of shares in favour of any other applicants. The claim that the parity in shareholding was not extended by mistake is misconceived. It is relevant to point out that specific reference to the applicants 1 & 6 has been made in as many as five out of seven clauses forming part of the consent order dated 08.09.2006. The purported error could not have occurred in almost all the clauses, in the light of the consent order restricting the parity in shareholding only to the applicants 1 & 6 by means of fresh allotment of shares, consequent upon sale of their entire holdings effected by the Company in realisation of the outstanding dues from them. The claim of the other applicants made in this behalf is beyond the scope of the consent order.
7. The applicants 1 & 6 having ceased to be members of the Company pursuant to the forced sale of shares by the Company for their outstanding dues with effect from 07.04.2005 will not be entitled to any of the benefits as shareholders. It is only the members who are entitled to enjoy the profits of the Company in the shape of dividends and receive any other benefit that may be extended by the Company. The applicants 1 & 6 cannot claim any dividend declared by the Company, after they ceased to be members of the Company. It is absolutely made clear that the applicants 1 & 6 would be entitled for any such dividend for the period upto 07.04.2005 and not thereafter. The grievance of the applicants 1 & 6 that the Company has not paid any dividend since 2003 would be justifiable provided that the Company had declared any dividend. In terms of the consent order dated 08.09.2006, the Company will allot 9562 equity shares afresh in favour of applicants 1 & 6, apart from additional 944 equity shares at the rate of Rs. 260/- per share within three weeks of receipt of the consideration from the applicants 1 & 6. There is no material to show that the applicants have remitted any consideration towards the shares to be issued in their favour in terms of the consent order and, therefore, the question of paying dividend to the applicants 1 & 6 declared during the year 2006-2007 does not arise. At the same time, the Company is bound to pay the dividend declared if any in favour of the other shareholders, in view of the fact they continue to be the shareholders of the Company.
The applicants 1 & 6 are claiming gold coins admittedly gifted by the Company in the year 2006 to its shareholders. It is already found that the applicants 1 & 6 are neither enjoying the benefits of shareholders subsequent to April 2005 nor are shares issued to them till date, in terms of the consent order and therefore their grievance on account of non-giving of gold coins by the Company is ill-founded. However, the other applicants, continuing to be the shareholders are entitled to the gold coins gifted by the Company in commemoration of 25 years of completion of the Company, if not already given to them. It is needless to emphasis that the respondents are bound to withdraw the civil suit filed against the applicants and issue proper receipts in the name of the firms/concerns controlled by the applicants 1 & 6, acknowledging closure of the dues owed to the Company as undertaken by the respondents.
8. The shares of the first applicant (4920) and of the sixth applicant (4642) have been sold at the rate of Rs. 260/- per share and the entire sale proceeds have been appropriated towards partial discharge of their dues payable to the Company. Thus, the applicants 1 & 6 have already derived and enjoyed the benefit out of sale of their 9562 shares at the rate of Rs. 260/- per share. It is only on this account that the parties mutually agreed for allotment of shares in favour of the applicants 1 & 6 at the rate of Rs. 260/- per share, as envisaged in the consent order. Therefore the applicants 1 & 6 are bound to remit an amount of Rs. 260/- per share for the shares to be allotted by the Company in their favour. In view of this, the plea that the shares issued in February, 2004 as well as October, 2006 in favour of the respondents were issued at the rate of Rs. 100/- per share will in no way strengthen the arguments of the applicants more so when it was voluntarily agreed that the shares would be allotted in favour of the applicants at the rate of Rs. 260/- per share.
9. The grievances of the applicants on account of the allotment of 20737 shares in favour of the respondents arose only in October, 2006 after disposal of the company petition on 08.09.2006 and cannot be remedied in the present proceedings. It shall also be borne in mind that the impugned allotment of shares is not the subject matter of the company petition filed on 22.02.2005. The cause of action for this grievance arose not only after the presentation of the company petition but also subsequent to the passing of the consent order dated 08.09.2006, disposing the main company petition itself. It is, therefore, impermissible to agitate the impugned allotment of shares in the present application, which however shall not prejudice their right to challenge the alleged oppressive act in a manner known to law. I am not, therefore, inclined to go into the merits of the contentious issue raised in relation to the allotment of 20737 shares before the CLB.
10. The main claim of the first applicant for directorship which is being stoutly resisted by the respondents, in view of the consensus reached between the parties that "the petitioners are entitled to exercise their rights as shareholders of the Company" must be examined against the background of the facts and circumstances of the present case which were in prevalence at the time of drawing the consent order. The question now arises for consideration is regarding the rights of shareholders in a company, which came to be considered by the apex court in LIC of India v. Escorts Ltd. (supra) thus: "(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 share 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." It, therefore, cannot be denied that the rights of a shareholder would include the right to participate in the management. The first applicant claims to be a director for the past 24 years, which remained uncontroverted by the respondents. It may be relevant to point out that when the Company had convened on 18.08.2005 the annual general meeting during the pendency of the company petition the applicants expressed their concern on the possible removal of directors belonging to the petitioners' group and, therefore, this Bench by an order dated 18.08.2005 while permitting the Company to go ahead with the annual general meeting on 24.08.2005, directed that "...the directors belonging to the petitioner group will continue to be the directors, irrespective of the decision that may be taken at the said meeting until further orders...." However, the aforesaid order regarding continuance of the representative of the applicants in the management of the Company has not been brought to my notice by either of the parties. The consent order dated 08.09.2006 came to be passed without taking cognisance of the order dated 18.08.2005 giving scope to modify the consent order and thus the decisions in Smt Neelu Kohli and Ors. v. Nikhil Rubbers P. Ltd. and Ors. (supra) and ITC Limited v. George Joseph Fernandes and Anr. (supra) in a way go in favour of the applicants. The respondents are therefore, in my view, taking advantage of the order dated 08.09.2006 and without referring to the earlier order dated 18.08.2005, successfully excluded the first applicant from the office of director of the Company, which is rather unjustifiable. It cannot be ruled out that the respondents, applying the same yardstick can exclude the remaining directors belonging to the applicants group who are on the board from the post of director under the guise of the order dated 08.09.2006. The exclusion of the first applicant from the office of director ignoring the order dated 18.08.2005 is contrary to the consent order. The first applicant cannot, therefore, be deprived of his directorship in the Company. The criminal complaints lodged by the first applicant against the respondents will not in any way dis-entitle him to be on the board of the Company, especially when the criminal complaints came to be lodged long after the consent order made by the Bench and after removal of the first applicant from the post of director and therefore, the respective parties are to work out their remedies before the competent authorities. It cannot conclusively be asserted that the first applicant has acted against the interest of the Company by mere filing of the complaints against the respondents more so when there is no material to show that the shareholders removed the first applicant from the office of director for having acted against the interest of the Company by filing any false complaint against the respondents. It is in this context, the decisions in Vinod Kumar Mittal v. Kaveri Lime Industries Limited (supra) and Dr. K. Balasundaram v. G.K. Steels (Coimbatore) Limited and Ors. (Supra) will be of little assistance to the respondents to substantiate their claim against the applicants.
11. In view of my foregoing conclusions and in exercise of the powers under Regulation 44, it is hereby ordered as under:
(a) The removal of the first applicant from the office of director of the Company, at the annual general meeting held on 24.08.2005 is declared as invalid and the Company shall file appropriate form in this behalf with the Registrar of Companies, Tamilnadu, Chennai;
(b) The respondents shall pay all the dividend declared, if any, and deliver gold coins to the applicants 2 to 5 in terms of this order, in the event of any default on their part;
(c) The respondents shall pay the dividend as declared, if any, to the applicants 1 & 6 for the period between the year 2003 and March 2005;
(d) The Company will re-issue proper receipts in the name of the firms/concerns controlled by the applicants 1 & 6 for having discharged the liabilities due to the Company, in cancellation of the receipts already issued in favour of the applicants 1 & 6; and
(e) All other contentious issues raised by the applicants are rejected for want of any merits.
12. With the above directions the consent order dated 08.09.2006 stands modified and the parties must act accordingly.