Company Law Board
Shri T.O. Aleyas, Shri Bobby Kuriakose, ... vs St. Mary'S Hotels Private Limited And ... on 14 May, 2004
ORDER
K.K. Balu, Member
1. The petition in C.P.30/2003 ("first petition") is filed by the petitioners collectively holding more than 10 percent of the paid up capital of M/s St. Mary's Hotels Private Limited ("SMHPL") under Sections 397, 398, 402 read with Section 111 of the Companies Act 1956, ('the Act') alleging acts of oppression and mismanagement in the affairs of the SMHPL on account of the illegal transfer of the impugned shares in favour of the second respondent, illegal removal of the petitioners 3 & 4 as directors, thereby disturbing parity maintained among the shareholders, intermittent interference with the day-to-day affairs of the SMHPL, in spite of lawful removal of the second respondent as the Managing Director of the SMHPL, falsification and fabrication of various records of the SMHPL at the instance of the respondents 1 & 2, prejudicing the interests of the SMHPL as well as the petitioners and seeking the following reliefs:
a) to declare that the proceedings of the alleged extraordinary general meeting held on 25.04.2003 are invalid and the resolutions passed thereon are fabricated and therefore null and void;
b) to declare that the notice convening the Board meeting purported to have been held on 03.06.2003 is invalid and any resolution proposed thereon is null and void;
c) to declare that the notice purporting to convene the extraordinary general meeting on 30.06.2003 is invalid in law;
d) to declare that the transfer of 2,20,000 shares from the second petitioner to the second respondent purported to have been approved at the meeting of the Board of directors held on 17.04.2002 is null and void;
e) to rectify the register of members of the SMHPL ensuring equality of shareholding among each branch of the family in accordance with the resolution passed at the Board meeting on 17.04.2002; and
f) to pass an order of permanent injunction against the second and third respondents from interfering with the management of the SMHPL and its Hotel Windsor by the first petitioner.
2. The petition in C.P. 33/2003 ("second petition") is filed by the petitioners collectively holding more than 10 per cent of the paid-up capital of M/s T.O. Abraham and Company Engineers and Contractors Private Limited ("ACECPL") under Sections 397, 398, 402 read with Section 111 of the Companies Act, 1956 ("the Act") alleging acts of oppression and mismanagement in the affairs of the ACECPL, on account of the illegal allotment of shares in favour of the respondents 2 to 5 and the illegal appointment of the respondents 4 & 5 as directors of the ACECPL, in complete exclusion of the petitioners, thereby disturbing parity maintained among the shareholders and prejudicing the interests of the ACECPL as well as the petitioners and seeking the following reliefs :-
a) to declare that the proceedings of the alleged Board Meetings purported to have been held on 15.03.2003 and 20.03.2003 are invalid and the resolutions passed thereon are non-est;
b) to declare that the notice convening the Board meeting purported to have been held on 06.06.2003 is invalid and any resolution passed at the said meeting is non-est, illegal, void;
c) to declare that the notice purporting to convene the extraordinary general meeting on 30.06,2003 is invalid in law and any resolution purported to have been passed at the said extraordinary general meeting is invalid, illegal, null and void;
d) to declare that the respondents 4 and 5 are not directors of the ACECPL and reconstitute the Board of directors of the ACECPL so as to ensure one representative from each branch of the family;
e) to rectify the register of members of the ACECPL to ensure equality of shareholding amongst each branch of the family as was the position prior to the impugned Board meetings dated 15.03.2003 and 20.03.2003; and
f) to declare that the first petitioner was validly appointed as the Managing Director of the ACECPL at the Board meeting held on 22.04.2003 and restrain the respondents from interfering with the functioning of the first petitioner as the Managing Director.
3. The petitioners 1, 3 & 4 and the respondents 2, 3 & 4 are common in both the petitions. SMHPL and ACECPL are closely held by the family members of the petitioners as well as the respondents. The grievances of the parties and the reliefs sought in both the petitions are substantially the same. The documents produced are common to these petitions. In view of this, both the petitions were heard together and as such are being disposed of by this common order.
4. Shri T.K. Seshadri, learned Counsel appearing for the petitioners, while initiating his arguments, elaborated the background of the SMHPL and ACECPL promoted by the St. Mary's Group, Thiruvalla as private limited companies and their promoters, consisting of five brothers, viz., the first petitioner, the second respondent, T.S. Skaria, T.O. Baby and T.O. Kuriakose, all sons of the late Kuruvila Unnittan. Of these five brothers, T.S. Skariah, T.O. Babu and T.O. Kuriakose are no more and survived by their legal heirs, viz., T.S. Skariah by the respondents 3 & 4, T.O. Baby by his wife, the third petitioner and the respondents 5 & 6 and T.O. Kuriakose by his wife, daughter and the petitioners 2 & 4 (C.P. 30/2003). The intention of the promoters was that the legal representatives of each branch would hold 20 per cent of the share capital of the SMHPL & ACECPL, thereby the entire 100 per cent of the share capital would be held by the family members belonging to these five brothers. The St. Mary's Group had originally commenced and parried on construction business in the year 1960 through M/s T.O. Kuriakose & Co., a partnership firm till the demise of T.O. Kuriakose in the year 1984, upon which M/s T.O. Abraham & Co. was formed to carry on engineering construction contracts. The St.Mary's group had diversified into plantation, hotel, finance etc., resulting in the formation of various companies and partnership firms, viz., M/s Cavunal Rubber Estates (P) Ltd; St.Mary's Motors; Travancore Bankers; SMHPL; ACECPL etc. out of the income generated from the construction business for the benefit of the five branches, maintaining parity of shareholding among themselves, as borne out by the deeds of partnership/supplementary partnership/Memorandum and Articles of Association of the various partnership firms and companies (pages 38 - 93 of CP 30/2003) reflecting the representation of the five branches of the family. The SMHPL was incorporated in April, 1996 to engage in the business of hotel project and ACECPL in November, 1999 to execute contracts for Kerala Water Authority and other government agencies. Learned Counsel made efforts to sustain his plea that both the SMHPL & ACECPL form part of the St.Mary's group by referring to the following: -
* the brochure brought out by M/s T.O.Abraham and Company containing particulars of companies and partnership firms belonging to the St.Mary's group;
* the order dated 05.11.1998 of the Income Tax Appellate Tribunal in respect of M/s T.O. Abraham & Co. showing members of the five branches as partners;
* declaration of the second respondent at the family function held on the occasion of betrothal of the fifth respondent that the SMHPL forms part of the St.Mary's group.
* The credit facilities extended by the State Bank of Travancore, City Union Bank etc. in favour of the various companies and partnership firms of the St. Mary's group are secured by personal guarantee and properties belonging to the members of the five branches.
* The categorical admission of the second respondent in his communication dated 15.12.1999 addressed to Kottayam District Co-operative Bank Ltd. that the SMHPL is a member of the St. Mary's group of companies.
* The second respondent in his communication dated 22.08.2000" while requesting for credit facility from City Union Bank Ltd., asserted that ACECPL is promoted by the St. Mary's group.
Shri T.K. Seshadri, learned Counsel pointed out that the first petitioner, the second respondent and the third respondent, son of late T.S. Skaria are subscribers top the Memorandum of Association, each taking 100 shares of Rs. 10/- each and the first directors of the SMHPL. Thereafter, during October, 2001 the second petitioner belonging to the family of late T.O.Kuriakose, became a shareholder. The shares issued and funded out of the construction business as on 19.10.2001 is as under:-
The first petitioner - 3 lakhs The second petitioner - 4 lakhs The second respondent - 3 lakhs The third respondent - 5 lakhs During April, 2002, inter-se transfers were made ensuring parity of shareholding among the five branches. Accordingly, the second petitioner transferred 1,70,000 shares in favour of the fourth petitioner; 80,000 shares in favour of the fifth respondent and 20,000 shares to the sixth respondent. Similarly, the third respondent transferred 1,40,000 shares in favour of the third petitioner 1,30,000 shares in favour of the fourth respondent and 60,000 shares to the sixth respondent, so as to hold 3,00,000 shares by each branch constituting 20 per cent of the SMHPL. The Board of directors at the meeting held on 17.04.2002 approved these transfers bringing out parity of shareholding; appointed the petitioners 3 & 4 as directors and issued share certificates to the petitioners 3 & 4 as well as the respondents 4, 5 & 6. However, the second respondent in collusion with the third respondent had misused the share certificates and certain blank transfers entrusted with them by the second petitioner to effect necessary transfers ensuring parity of shareholding among the five branches, fabricated certain portion of the minutes of the Board meeting held on 17.04.2002, as if the second petitioner had transferred 2,20,000 shares in favour of the second respondent, thereby converting himself from a minority shareholder to a majority shareholder. The purported transfer of 2,20,000 shares by the second petitioner in favour of the second respondent never formed part of the minutes of the Board of directors. This transfer was neither approved at the meeting of the Board of directors on 17.04.2002 nor supported by any consideration. The second respondent falsely filed before Registrar of Companies fabricated records giving'effect to the purported transfer of shares in his favour. Though the second respondent is in custody of the original minutes signed by all the directors, viz.. the first petitioner and respondents 2 & 3 and other records including the original share certificates and the instruments of transfer in respect of the impugned transfer, he has not chosen to produce the same before the CLB, in spite of the notice dated 04.08.2003 for production of the original records. Non-production of the original minutes dated 17.04.2002 of the Board of directors is fatal and copy of the said minutes of the Board meeting cannot be taken as prima facie evidence to prove the transfer of 2,20,000 shares in favour of the second respondent. Article 13(e) of the Articles of Association of the Company stipulates that all the decisions taken at a meeting of Board must be recorded in a minutes book maintained for the purpose and signed by all the drectors present at the meeting. Whereas the minutes of the meeting of the Board of directors held on 17.04.2002 (pages 139 and 140 of the petition) do not contain the signature of the directors present at the meeting of the directors, not meeting the requirement of Article 13(e) and therefore no presumption as envisaged in Section 195 is available. Thus the minutes dated 17.04.2002 are fabricated. If the original minutes of the meeting of the Board of directors dated 17.04.2002 is produced, the resolution in regard to approval of the impugned shares in favour of the second respondent would not be reflected. As the documents are in existence and are in possession of the respondents, there is no need to follow the procedure of giving a notice for production of the documents under Order XI of the Civil Procedure Code or to summon the documents under Order XVI, the CPC as laid down in Agurchand Bhomraj Sowear v. Deochand - AIR 1960 AP 101. Thereafter, the second respondent acted contrary to the interest of the other branches in breach of trust and faith reposed on him and committed various acts of oppression and mismanagement in the affairs of the SMHPL. upon which the first petitioner invoking Article 13(c) gave a written notice dated 07.04.2003 on 12.04.2003 to the second respondent calling upon him to convene a Board meeting. When the second respondent failed to convene any Board meeting within the specified time, the first petitioner caused a notice dated 16.04.2003 convening a Board meeting on 23.04.2003. wherein after removal of the second respondent, the first petitioner was appointed as the Managing Director. Similarly, the second respondent fabricated and filed documents with the Registrar of Companies as if a meeting of the shareholders took place on 25.04.2003 and passed a resolution altering Article 12(a) of the Articles of Association to the effect that the Managing Director shall not retire by rotation during the currency of his appointment and further removed the petitioners 3 & 4 from the office of directors. According to the petitioners, they were not in receipt of any notice for the purported extraordinary general meeting held on 25.04.2003. The relevant provisions of the Act in respect of removal of directors were neither complied with. The respondents have not chosen to produce the minutes of the general body meeting for removal of the petitioners 3 & 4 as directors. No Board meeting was held prior to the extraordinary general meeting removing the petitioners 3 & 4 from the office of directors. There is no record to prove the convening and holding of the extraordinary meeting and the Board meeting, wherein these petitioners were removed as directors of the SMHPL. Mere production of certificates of posting cannot prove service of notice as held in S. Naryanan v. Century Flour Mills Ltd - (1987) 1 CLJ 25 (Mad). Though the respondents contended that the minutes books were removed by the petitioners, they did not chose to lodge any complaint against them. Even if the burden of proof does not lie on a party, the court may draw an adverse inference if he withholds important documents in his possession which can throw light on the facts at issue as held in Gopal Krishnaji Ketkar v. Mohamed Haji Latif - AIR 1968 SC 1413. The respondents have in the present case deliberately withheld these documents and therefore, the CLB must make every presumption against them to their disadvantage consistent with the facts, as held by the apex court in Atyam Veerraju v. Pechetti Venkanna - AIR 1966 SC 629. The second respondent in spite of his removal, styling himself as the Managing Director issued a notice dated 26.05.2003, ignoring the petitioners 3 & 4, being directors for convening a Board meeting on 03.06.2003. By virtue of Section 286, notice of every meeting of the Board of directors of a company must be given in writing to every director, in the absence of which any meeting held by the Board without any such notice would be void. The agenda for the Board meeting did not contain any subject relating to removal of the first petitioner as director of the SMHPL and for convening any extraordinary general meeting of its members: The second respondent had further issued a notice dated 06.06.2003, convening an extraordinary general meeting of shareholders on 30.06.2003 for removal of the first petitioner as director. The notice dated 06.06.2003 is not in accordance with law, especially when, he was not the Managing Director on the dntc of the said notice. Shri Seshadri, learned Counsel pointed out that the requirements of Section 284 dealing with removal of directors are not satisfied. Section 284 (1) and (2) provide as follows: -
"284(1) A company may, by ordinary resolution, remove a director (not being a director appointed by the Central Government in pursuance of section 408) before the expiry of his period of office:
Provided that this sub-section shall not, in the case of a private company, authorize the removal of a director holding office for life on the 1st day of April, 1952, whether or not he is subject to retirement under an age limit by virtue of the articles or otherwise:
Provided further that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under Section 265 to appoint not less than two-thirds of the total number of directors according to the principle of proportional representation. (2) Special notice shall be required of any resolution to remove a director under this section, or to appoint somebody instead of a director so removed at the meeting at which he is removed."
The intention of the legislature according to learned Counsel primarily be gathered from the language used in the section. Consequently, any construction which results in rejection of words as meaningless has to be avoided. The legislative intention is deemed not to waste its words or to say anything in vain, as held by the apex court, while considering the interpretation of statutes in Mithilesh Singh v. Union of India - (2003) 3 SCC 309. Accordingly, a plain reading of Sub-section (1) of Section 284 reveals that a company may, by ordinary resolution, remove a director, not being a director appointed by the Central Government, before the expiry of his period of office. Section 284(2) must be construed as per the wordings thereon which clearly stipulates that special notice shall be required of any resolution to remove a director. This requirement is not satisfied while sending the notice dated 06.06.2003 convening the extraordinary general meeting of the members to remove the first petitioner from the post of director. Furthermore, Section 190 stipulates that every special notice requires resolution, which is rather mandatory. Thus, the resolution passed on 30.06.2003, pursuant to the invalid notice dated 06.06.2003, removing the first petitioner as director of the SMHPL is not valid. The notice dated 06.06.2003 contains explanatory statement under Section 173(2), which is in no way required. With the removal of the petitioners 3&4 and the attempted removal of the first petitioner from the office of directors, the respondents would alone remain as the directors which would constitute an act of oppression, as held in S.T. Ganapathy Mudaliar v. S.G. Pandurangan -(1999) Vol.99 CC 919. The respondents 2 & 3 are preventing the directors from entering the office premises to carry on their responsibilities as directors; attempting to oust the first petitioners' group from the management with the object of taking over the SMHPL. Thus, conduct of the respondents 2 & 3 is oppressive to the other shareholders, more so, when the SMHPL has been established as a quasi partnership among the five branches of the family, which would justify winding up of the SMHPL on just and equitable grounds. Under these circumstances, the first petitioner was compelled to file a civil suit in O.S. No. 271/2003 on the file of the Sub Court at Ernakulam for permanent injunction restraining the second respondent and his agents from interfering with the management of the SMHPL and for declaration that the first petitioner would be entitled to act as the Managing Director of the SMHPL and also for declaration that the purported extraordinary general meeting held on 25.04.2003 is null and void.
Thereafter, the suit in O.S. No. 69/2003 on the file of Sub Judge Court, Thiruvalla came to be filed for the same reliefs, due to lack of jurisdiction to enforce the claim in O.S. No. 271/2003. The suit in O.S. No.252/2003 on the file of the District Munsiff Court, Thiruvalla filed against the fifth respondent restraining him from interfering with partnership business carried on under the name and style of M/s Travancore Bankers came to be settled between the parties. The suit in O.S. No. 654/2003 on the file of the District Munsiff Court, Ernakulam filed by the first petitioner for an order of injunction restraining the respondents from interfering in the affairs of the hotel was settled through common mediators. While, the civil suits have been filed by the petitioners for enforcing their civil rights they have approached the CLB for comprehensive reliefs against the acts of oppression and mismanagement in the affairs of the SMHPL at the hands of the respondents 2 & 3 restoring parity in shareholding and management among the five branches of the family members. Sections 397 and 398 containing special provisions empower the CLB to make appropriate order with a view to bringing to an end the matters complained of in the affairs of the SMHPL in support of which learned Counsel relied on Syed Mahomed Ali v. R. Sundaramoorthy - AIR 1958 MDS 587 to show that Sections 402 and 405 give ample jurisdiction to investigate the charges and such investigation may in certain cases be necessary even to regulate the future conduct of the company for providing against recurrence of such abuses of power by the majority. While, the CLB is seriously concerned with the acts of oppression and mismanagement, the civil suits enforcing one's individual right cannot bar any relief against such acts of oppression and mismanagement in the affairs of the company as held in Santi Prasad Jain v. Kalinga Tubes Ltd. (1965) Vol. XXXV CC 351. The application before the CLB under Section 397 is a representative application claiming relief for and on behalf of the oppressed minority shareholders against the majority shareholders as held in Pramod Kumar Mittal v. Andhra Steel Corporation Ltd - (1985) Vol 58 CC 772. Therefore, there is no bar for the petitioners to claim any relief under Section 402 before the CLB and simultaneously enforce their civil rights in the civil courts. The civil court, according to Shri T.K.Seshadri, learned Counsel, can not usurp the powers of a company court, whose jurisdiction springs from an enactment of parliament and adjudge common law rights on a prior consideration, as held in V.M. Rao v. Rajeshwari Ramakrishnan - 89 L. W 243 and therefore sought for appropriate directions to bring to, an end the matters complained of in CP 30/2003. A series of illegal acts following upon one another and the continuous acts on the part of the majority shareholders being conducted in a manner oppressive to some part of the members would constitute acts of oppression warranting appropriate reliefs as held in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd - (1981) Vol. 51 C.C 743.
5. Shri Arvind P. Datar, learned Senior Counsel, while contenting that the charges leveled against the respondents 1 to 3 do not make out any ease of oppression or mismanagement in the affairs of the SMHPL to invoke jurisdiction of the CLB under Sections 397, 398 and 402, vehemently opposed the theory of five sons of the late Unnittan forming the St. Mary's group and incorporating various business organisations including the SMHPL with equal shareholding among themselves and pointed out that there is no family business concern with the name the St. Mary's group and further that the St. Mary's group has no independent constitution or control in any business venture of the petitioners or respondents. According to the respondents, the second respondent started and nurtured the various businesses of the group, without involvement or participation of the remaining brothers. The SMHPL was incorporated not for the benefit of the five families of the sons of the late Unnittan. The first petitioner, the respondent 2 & 3 were subscribers to the Memorandum of Association, taking 100 shares each and became the first directors of the SMHPL as per the Articles of Association of the Company. The articles do not prescribe that shares shall be allotted or transferred amongst the family members of the petitioners or respondents maintaining parity among themselves. The shareholders have every right to free transferability of shares held by them subject to the articles, without consent of the remaining members of their family. The only restriction as contained in the articles is that any shareholder intending to sell his shares to* any outsider must first offer to the existing shareholders. Similarly the directors are empowered to allot shares to any person as they deem fit and proper. The entire share capital of the SMHPL was fully subscribed and the shares were allotted prior to April 2002. The second petitioner holding 4,00,000 shares had transferred 2,20,000 shares in favour of the second respondent and 1,70,000 shares to the fourth petitioner for valuable consideration. The third respondent had transferred 1,40,000 shares in favour of the third petitioner. These inter-se transfers for valuable consideration as mutually agreed between the transferors and transferees were approved by the Board of directors at the meeting held on 17.04.2002 and duly registered with Registrar of Companies by filing Form No, 23. As a result, the petitioners collectively came to hold 41.33% of the paid-up equity share capital and the respondents 1 & 2 together 58.67% of shares in the Company. There was no understanding among the shareholders to transfer 1,30,000 shares in favour of the fourth respondent and 60,000 shares to the sixth respondent by the third respondent. The respondents 4 to 6 never held shares in the SMHPL and participated in the business of the SMHPL. There was no agreement to allot or transfer any shares in their favour. They are total strange.rs so far as the SMHPL is concerned. The respondents 4 to 6 neither contended that the shares were to be transferred in their favour nor advanced any theory of parity of shareholding. The petitioners cannot plead for the respondents as held in National Agricultural Cooperative Marketing Federation of India v. Union of India - (2003) S SCC 23. The petitioners are claiming a fictitious and illegal transfer in favour of the respondents 4 to 6 with a malafide object of manipulating the majority in the SMHPL. Thus, there was no agreement to allot 3,00,000 shares to each of the five families, maintaining parity of shareholding among themselves.
Shri Datar, learned Senior Counsel, while elaborating a spate of litigations both civil and criminal, initiated by one group against the other urged that certain reliefs claimed in CP 30/2003 are forming part of the civil suits already filed by the petitioners. Among the various civil suits filed by the first petitioner, the suits in O.S. No. 252/03 on the file of the Munsiff Court, Thiruvalla and O.S. No. 654/03 before the Munsiff Court, Ernakulam were dismissed as withdrawn by him. The suit in O.S. No. 271/03 on the file of Sub Judge Court, Ernakulam was not entertained for want of jurisdiction, resulting the civil suit in O.S. No. 69/2003 before the Sub Judge Court, Thiruvalla, against the respondents 1 & 2 and the petitioners 3 & 4 in CP 30/2003, wherein the first petitioner has challenged the minutes of the general meeting of the SMHPL dated 25.04.2003; questioned the right of the second respondent to act as the Managing Director and further claimed that the first petitioner is entitled to continue as the Managing Director of the SMPHL till he is lawfully removed in a properly convened meeting of the Board of directors of the SMHPL and simultaneously sought for an order of injunction restraining the second respondent and his agents from interfering with the management of the SMHPL and its hotel, viz. Windsor Castle. The said suit, contested by the respondents is pending. The petitioners are claiming, inter-alia, the same reliefs in the CP 30/2003 already sought in the civil suit and therefore, the CLB is not to give any finding on the prayers in regard to the proceedings of the extraordinary general meeting held on 25.04.2003 and the restraint order against the respondents 2 & 3 from interfering with the management of the SMHPL and its hotel made under para 8 (a) and (f). In this connection, learned Senior Counsel referred to Anugraha Jewellers Ltd. v. K.R.S. Mani - (2002) vol. III CC 501, wherein the CLB held that when criminal proceedings have already been initiated in the affairs of the company, there is no reason as to why a company petition should have been filed before the CLB.
The grievance of the petitioners that the second respondent styling himself as the Managing Director though already ceased from the said office issued a notice dated 26.05.2003 convening a Board meeting on 03.06.2003, but without any such notice to the petitioners 3 & 4, according to Shri. Datar, learned Senior Counsel, being a technical one, does not survive, especially when the petitioners 3 & 4 already ceased to be the directors at the extraordinary general meeting held on 25.04.2003. Therefore, any resolution passed at the Board meeting held on 03.06.2003, after due notice to the existing directors cannot be challenged for want of notice to the petitioners 3 & 4. The petitioners, therefore, cannot seek for any declaration that the notice dated 26.05.2003 convening the Board meeting held on 03.06.2003 and the resolution passed at such Board meeting are null and void and accordingly the prayer made under para 8 (b) cannot be granted.
Shri Datar, learned Senior Counsel, while referring to the notice dated 06.06.2003 issued by the second respondent convening the extraordinary general meeting held on 30.06.2003 to remove the first petitioner from the post of Managing Director, contended that any such notice issued by the SMHPL, docs not require any special notice, us contemplated in Sub-section (2) of Section 284. According to learned Senior Counsel, a combined reading of Sub-sections (2) & (3) of Section 284 emphasises the requirement of a special notice of any resolution to remove a director, when such a resolution is proposed by a shareholder and not a director. In the present case the notice dated 06.06.2003 convening the extraordinary general meeting to remove the first petitioner from the post of Managing Director was issued by the Board itself, in which case there is no requirement of any special notice. Similarly, Section 190(2) does not lay down the requirement of any special notice, when any resolution is moved by the* Board. Therefore, the notice dated 06.06.2003 convening the extraordinary meeting on 30.06.2003 in strict compliance of the requisite formalities and giving 21 days notice cannot be declared to invalid, as sought by the petitioners in para 8(c).
According to the petitioners, it is only the first petitioner, the second respondent and the third respondent, son of late T.S. Skaria held 100 shares each ever since inception of the SMHPL till October 2001, when further issue of share capital was made, by which the first petitioner and the second respondent came to hold 3 lakhs shares each; the second petitioner 4 lakhs and the third respondent 5 lakhs of shares. No shares were allotted to the family members of late T.O. Baby. The intention among the parties, as claimed by the petitioners, in regard to the inter-se transfers among the members of various branches so as to bring about parity of shareholding among the five branches is not supported by any concrete evidence. The respondents 5 & 6 did not vindicate their grievances before the CLB on account of non-transfer of shares in their favour pursuant to the purported intention among the parties, belying the theory of equal shareholding among the five family members. The minutes of the meeting of the directors of the SMHPL held on 02.11.2001 (page 1 & 2 of Vol.III filed by petitioners) approving certain transfers are concocted to mislead the CLB. Shri Datar, learned Senior Counsel pointed out that the second petitioner in his written complaint dated 31.05.2003 addressed to Registrar of Companies, Cochin (Page 31 of Vol. III filed by the petitioners) categorically staled that he had not executed any documents enabling the transfer of his shares in favour of the second respondent. This runs contrary to the stand taken in the CP 30/2003 that the second petitioner had handed over the blank transfer forms and share certificates to the second respondent in order to effect certain transfers, maintaining parity among the five families. The petitioners have neither challenged the impugned transfer nor questioned disparity in shareholding in any of the civil suits filed by them against the respondents. Learned Senior Counsel further pointed out that the minutes of the meeting of the directors held on 17.04.2002 approving the impugned transfer not having been signed by all the directors present at the meeting in accordance with Article 13(e) do not become invalid, especially when the transfer was duly registered in due compliance of the formalities prescribed under Section 108 of the Act. Therefore, the transfer of 2,20,000 shares in favour of the second respondent cannot be declared as null and void, as sought in para 8 (d). Consequently, there is no justification to rectify the regisler of members in respect of these shares in para 8 (e). Learned Senior Counsel contended that the settled principle of law is that when a person seeks equity, he must come clean hands. Otherwise he cannot seek any remedy in equity, as held in Atmaram Modi v. ECL Agrotech Ltd. - (1999) 98 CC 463. The petitioners having approached the CLB with unclean hands, no reliefs must be granted and therefore sought for dismissal of the company petition.
6. Shri T.K. Seshadri, learned Counsel, by way of reply submitted that while the CLB would consider as to whether the resolution made at the extraordinary general meeting held on 25.04.2003 amending Article 12 (a) by which Managing Director shall not be liable to retire by rot'ation and removing the petitioners 3 & 4 from the post of directors of the SMHPL would constitute an act of oppression, the civil court would adjudicate in O.S. No. 69/2003 the validity of the said resolution. Moreover, a resolution passed by the directors may be perfectly legal and yet oppressive and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company, as held in the ease of Needle Industries (India) Ltd., (Supra). According to the petitioners, the minutes of the meeting of the Board of directors dated 07.09.2001, 19.10.2001 and 02.11.2001 approving certain transfers are only draft minutes, which do not form part of the minutes Book and these resolutions at no point of time have been implemented. Shri T.K. Seshadri, learned Counsel contended that the petitioners have satisfied that the affairs of the SMHPL are being conducted in a manner oppressive to the members and that to wind up the SMHPL would unfairly prejudice such members, but that otherwise the facts would justify the making of a winding-up order on just and equitable grounds as held in C.P. Gnanasambandam v. Tamilnad Transports (Coimbatore) Private Ltd., - (1971) Vol.41 C.C. 26. Shri T.K. Seshadri, learned Counsel, while concluding his submissions, referred to Mrs. Farhat Sheikh v. Eemon Metalo Chemicals (P) Ltd - (1995) 1 CLJ 158 and Rashmi Seth v. Chemon (India) Pvt Ltd - (1995) Vol. 82 CC 563 to show that the directors are in a fiduciary position vis-a-vis the company and must exercise their power for the benefit of the company. Their exercising power to create majority is not permissible. There exists a relationship of a trustee and cestui que trust as between the directors and the company. If this trust is violated, the action of the directors is liable to be intervened by the Court. It is not that law has given absolute liberty to the directors of private companies to deal with their shareholders in any manner they wish. With regard to the issue of additional shares, the responsibility of the directors towards the members becomes all the more onerous in a private company and therefore the courts have applied the quasi-partnership theory in such cases in the past and have granted remedy if the relationship is sought to be disturbed. The petitioners are therefore entitled for appropriate reliefs at the hands of the CLB.
7. Shri Y.T. Aravind Gosh, Counsel, appearing for the respondents 5 & 6 adopted the arguments advanced on behalf of the petitioners.
8. Shri. T.K. Seshadri learned Counsel, while dealing with CP 33/2003 pointed out that the petitioners and respondents 2 & 3 representing each of the five branches of the family are subscribers to the Memorandum of Association of the ACECPL, each taking 1000 shares of Rs. 10/- each and the first directors. When the respondents started acting against the interest of the ACECPL as well as the other group firms and companies, by diverting the business of M/s Tranvancore Bankers through a new firm started independently under the same name and style, the first petitioner by a letter dated 01.03.2003 requested the second respondent, the then Managing Director to convene a meeting of the Board of directors to remove the second respondent from the post of Managing Director and appoint the first petitioner as Managing Director. Since the second respondent failed to convene any meeting of the Board of directors within 7 days as specified in Article 13(c), the first petitioner caused a notice dated 11.04.2003, convening a meeting of the Board of directors on 22.04.2003. The respondents 2 & 3 deliberately did not attend the Board meeting, wherein the second respondent was removed from the post of the Managing Director and first petitioner vyas appointed as the Managing Director for a period of 3 years. However, there was no attempt on the part of the petitioners to remove the second respondent from the post of director. This provoked the second respondent to allot certain shares viz. 1000 shares in favour of the fourth respondent; 6000 shares in favour of the second respondent; 2000 shares in favour of the third respondent and 1000 shares to the fifth respondent, being son of the second respondent at the meeting of the Board of directors said to have taken held on 15.03.2003, when there was no need to issue any shares and appoint the respondents 4 & 5 as additional directors on 20.03.2003. According to the petitioners no meeting was held either on 15.03.2003 or 20.03.2003. The petitioners were neither in receipt of any notice for the alleged meetings. Any resolution passed at the purported meetings is not valid in law. Article 11(b) stipulates that the qualification of directors shall be holding of at least 100 equity shares in the Company. However no shares were held by the fifth respondent at the time of his appointment as director and he was a stranger. These acts of the respondents are with a view to gain control of the management; enhance the shareholding of the respondents' group from 40% to 80% and reduce the majority shareholding of the petitioners into minority, thereby adversely affecting the equality maintained among the five branches, which would constitute acts of oppression, especially when ACECPL is a family company, set up as a quasi partnership for the benefit of all five branches of the family, entitling the petitioners for equitable reliefs, as held in Vijay Krishan Jaidka v. Jaidka Motor Co. Ltd. - (1997) 1 Comp LJ 268. By virtue of Section 286 notice of every meeting of the Board of directors of a company to every director is mandatory, failing which any resolution passed at such meeting is inoperative as held in Parmeshwari Prasad Gupta v. Union of India - (1974) Vol. 44 CC. 1. The second respondent has not produced any document before the CLB establishing the validity of the Board meetings, wherein the impugned shares were allotted and the additional directors were said to be appointed, At the same time, the second respondent filed counter affidavit in C.M.A No 16/2003 on the file of Sub Judge Court, Thiruvalla affirming that all records in respect of the appointment of the additional directors at the meeting held on 14.03.2003 were already produced before the CLB in CP 33/2003. Thus, the stand taken by the second respondent before the Sub Court, Thiruvalla is absolutely false. Inspite of the notice dated 04.08.2003, calling upon the respondents to establish inter-alia service of notice for the Board meetings said to have been held on 15.03.2003 and 20.03.2003, the respondents failed to produce any document, in which case adverse interference must be drawn against the respondents and Shri T.K. Seshadri, learned Counsel reiterated his arguments made in CP 33/2003 in this behalf and pointed out that the respondents in para 47 at page 24 of the counter specifically admitted that no Board meeting was held either on 15.03.2003 or 20.03.2003, in the following words :
"It is denied that it was only at the time of filing these forms that the petitioners were informed of the filing in respect of the meeting of 14.03.2003. The petitioners are well aware of the said meetings and the allegations to the contrary are blatantly false. It is denied that the meeting of 15.03.2003 or 20.03.2003 did not take place or that the resolutions passed therein are null or void or non est. ".
The corrections made in regard to the dates of the Board meetings in the counter tiled before this Bench do not find place in the copy supplied to the petitioners. Moreover, it observed from Form No. 2 dated 15.03.2003 filed before Registrar of Companies (page 92-94 of CP 33/2003) that the impugned allotments were made on 15.03.2003, which belie the statement of the respondents, that the Board meeting was held on 14.03.2003. There are different versions in regard to the date of the Board Meetings viz. 14.03.2003, 15.03.2003 & 20.03.2003. The respondents have categorically pleaded in the plaint dated 08.05.2003 (page 121 - 131 of petition) in O.S. No. 251/2003 on the file of the District Munsiff Court, Thiruvalla that the petitioners have removed the minutes book, attendance register and other records relating to the ACECPL. At the same time, the affidavit dated 09.01.2004 sworn by the second respondent shows that the file containing the records in relation to service of notice since March 2003 was entrusted by him with his advocate, who misplaced the file and could be traced out only by 30.12.2003 and therefore produced these documents before the CLB after filing of the CP 33/2003 showing falsity of the claim of the respondents. The respondents have not chosen to file an affidavit obtained from their advocate to support the theory of loss of records from his custody. Though the respondents have produced the certificate of posting to show that notice was sent to the Board meeting of 14.03.2003 after conclusion of arguments, the same does not figure in the list of documents produced along with the plaint by the respondents filed in O.S. No. 251/2003 on the file of the District Munsiff Court, Thiruvalla. Though, the appendix forming part of the order dated 20.06.2003 in I.A. No. 1334/2003 in O.S. No. 251/2003 (pages 146-165 of CP 33/2003) shows copy of the certificate of posing dated 05.03.2003, yet, the order does not discuss about the said certificate of posting at all. Moreover, copy of the certificate of posting (pages 98 & 99 of vol. C-9 filed by the respondents) is not a certified copy of the certificate produced before the civil Court in O.S. No. 251/2003. The said certificate of posting neither finds place in counter-statement filed by the respondents. Therefore, it cannot be presumed that any Board meeting was held on 14.03.2003 and the alleged Board meeting on 14.03.2003 is a bogus one. Furthermore, there is no evidence to show that shares were offered to the petitioners, before increasing the share capital to meet the statutory requirement of Section 3 (3) of the Act and for refusal of the petitioners to take shares on account of their plan to form a separate construction company for themselves. Section 3 (3) came into effect from 13.12.2000. in which case, the ACECPL ought to have enhanced its paid-up capital to one lakh rupees within a period of two years from such commencement, failing which the ACECPL shall be deemed to be a defunct Company. The impugned allotments were admittedly made after expiry of the prescribed period and the ROC does not have power to take on record Form No. 2 dated 15.03.2003. The delay in complying with the statutory requirement of Section 3 (3) can neither be condoned by in CLB for want of any authority under Section 43 of the Act. In these circumstances, the ACECPL shall be deemed to have been struck off from the register under Section 560 of the Act. There is therefore, no justification for increasing the paid up capital of the ACECPL. Moreover, the petitioners, would not have allowed the allotments exclusively in favour of the respondents' group and appointment of directors excluding the petitioners' group at the Board meetings, which clearly shows that the Board meetings were held without knowledge of the petitioners. Though the second respondent has been removed from the post of the Managing Director, yet he has been styling himself as Managing Director before the various authorities, Courts and Tribunals. Towards this end, the second respondent filed a civil suit in O.S. No. 251 of 2003, now pending before the District Munsiff Court, Thiruvalla seeking for a decree of declaration -
(i) that the second respondent is continuing as the Managing Director of the ACECPL;
(ii) that the first petitioner must be restrained from representing the Company, as the Managing Director and from entering into, any contract with any authorities or persons; and
(iii) that the first petitioner must hand over the minutes book and other statutory records illegally removed from the registered office of the ACECPL.
In view of the interim order passed by the civil court in O.S. No. 251 of 2003 restraining the first petitioner from executing any contract on behalf of the ACECPL, the first petitioner was constrained to file a writ petition before the High Court of Kerala in W.P. No. 1571/2003 seeking a Writ of Mandamus for extension of time to execute necessary agreement with Kerala Water Authority, wherein the High Court by an order dated, 22.05.2003 restrained the Kerala Water Authority from cancelling the work order issued to the ACECPL. In the meanwhile, the District Munsiff Court, Thiruvalla modified its earlier order of injunction by restraining the first petitioner from holding the office of the Managing Director till the election of a Managing Director either at the Board meeting or general meeting of members of the ACECPL. The order of the civil court restraining the first petitioner from representing as Managing Director of the ACECPL and executing any contract with Kerala Water Authority is considering hardship, thereby the ACECPL is likely to loose the benefit of the contract. The respondents are attempting to bring about material charges in the management by alteration of the Board of directors and the ownership in shareholding, which are detrimental to the interests of the shareholders of the ACECPL. Under these circumstances, the petitioners are seeking comprehensive reliefs for restoration of parity in shareholding and management among the live branches of the family and for declaration that the resolutions passed at the Board meetings of 15.03.2003 and 20.03.2003 are null and void and non-est. In the meanwhile, the second respondent had caused a notice dated 26.05.2003 convening it meeting of the Board of directors on 03.06.2003, to remove the first petitioner from the office of director of the ACECPL, which was averted with the interference of the CLB. The agenda enclosed to the notice dated 26.05.2003 did not contain any subject in regard to removal of directors. By virtue of Section 284 read with Section 190, special notice is mandatory for removal of any director, which is not satisfied in the case of removal of the first petitioner from the post of director. In this connection, Shri. T.K. Seshadri, learned Counsel re-enforced his legal submissions made in CP 30/2003. These acts of the respondents are illegal, oppressive, burdensome and arbitrary, entitling the petitioners for appropriate reliefs.
9. Shri Datar, leaned Senior Counsel denying any act of oppression and mismanagement in the affairs of the ACECPL, pointed out that conduct of the first petitioner in removing the second respondent and appointing himself as the Managing Director without any notice for the Board meeting at a time when ACECPL secured a contract for expansion is highly deplorable and disentitles the petitioners for any equitable remedy.
The civil court, while disposing of the interlocutory application in I.A No. 1334/2003 in O.S. No. 251/2003 by an order dated 20.06.2003 upheld the election of the second respondent as the Managing Director for a period of 3 years from 08.09.2001 and further observed that the certificate of posting ' under which the notice was purported to have been sent for the Board meeting held on 22.04.2003 to remove the second respondent from the post of Managing Director does not contain proper seal from the postal authorities. Though the petitioners have preferred an appeal against the said order dated 20.06.2003, no stay has been granted by the appellate Court, While the ACECPL has been incurring losses, Kerala Water Authority awarded to the Company in April 2003 a contract work of supplying and laying pipes involving an amount of Rs. 5.46 crores, which made the petitioners to usurp the management, as borne out by a letter dated 26.04.2003 of Kerala Water Authority (Page 166 of the petition). The first petitioner is only a director, but styles himself as the Managing Director as seen from the Writ petition filed by him against Kerala Water Authority before High Court of Kerala. Kerala Water Authority cancelled the contract awarded to the ACECPL on account of his disturbing attitude in terms of their letter dated 16.06.2003 (Page 171 of Petition). The first petitioner made attempts to register a new company with a deceptively similar name with that of the ACEGPL, before the ROC by fabricating records of a resolution in the name of the ACECPL and by issuing no objection in the name of the ACECPL without knowledge of the second respondent, being the Managing Director as borne out by the correspondence made between the first petitioner and the ROC, (Pages 91-96 of vol.M-3 filed by the respondents), showing the conduct of the first petitioner. The first petitioner stealthily withdrew an aggregate sum of Rs.5 lakhs on 30.04.2003 & 06.05.2003, after becoming the Managing Director from the Company account maintained with City Union Bank, Thiruvalla (Page 79 of vol.M-13 filed by petitioners) thereby increasing the liability of the ACECPL. According to Shri Datar, learned Senior counsel, the notice was sent on 05.03.2003 for the Board meeting held on 15.03.2003 under the certificate of posting being exhibit A- 13 produced in I.A. No. 1334/2003 in O.S. No. 251/20003 on the file of the District Munsiff Court, Thiruvalla and therefore the proceedings of the Board meeting held on 15.03.2003 cannot be declared as invalid. However, no Board meeting was held on 20.03.2003, but the new directors assumed charge on 20.03.2003 and therefore, the relief claimed under para 8 (a) can not be granted.
Shri Datar, learned Senior Counsel, while referring to the notice dated 26.05.2003 convening a meeting of the Board of directors on 03.06.2083 to remove the first petitioner from the post of director, contended that any such notice issued. by the Company, does not require special notice, as contemplated in Section 284 (2) of the Act. According to learned Senior Counsel, a combined reading of Sub-sections (2) & (3) of Section 284 and Section 190(2) reveals the requirement of special notice of any resolution to remove a director, when such a resolution is proposed by a shareholder and not a director. In the present case the notice dated 26.05.2003 convening the meeting of Board of directors to remove the first petitioner from the post of director was issued by the Board itself, in which case there is no requirement of special notice. Therefore, the resolution proposed by the Board in the present case to remove the first petitioner from the post of director is not vitiated for want of special notice. Therefore, the notice dated 26.05.2003 convening the Board meeting on 03.06.2003 satisfying the requisite formalities is valid in law. Therefore, no relief as claimed under para 8 (c) can be granted.
As the respondents 4 & 5 have been validly appointed as directors of the ACECPL at the duly convened meeting after due notice to all directors, the prayer for removing them from the post of directors and reconstituting the Board as claimed in para 8 (d) does not arise, especially when the Article of Association of the Company do not speak of any parity of management among the five branches. According to the respondents, shares were offered to the petitioners before enhancing the paid up capital, which was declined by them and therefore, the petitioners cannot question the impugned allotments and consequently there cannot be any relief of rectification of register of members as prayed in para 8 (e). As the petitioners have been taken the initiative to incorporate a new company for carrying on contract work and they have not interested in the affairs of the ACECPL, on account of the huge liabilities incurred by the Company, the petitioners do not deserve any allotment of shares.
The claim of the first petitioner that he has been validly appointed as the Managing Director at the Board meeting held on 22.04.2003 is the subject matter of the civil suit in O.S. No. 251/2003 on the file of the District Munsiff Court, Thiruvalla, which is pending for adjudication, and therefore, the prayer made under para 8 (f) for declaration that the first petitioner is validly appointed Managing Director of the ACECPL can not be granted in the present proceedings.
After removing the second respondent from the post of Managing Director, the petitioners have removed the records of the ACECPL from the registered office misusing their position as directors. The relationship between the parties became strained as early as in March 2003 resulting in withdrawal of the power of attorney dated 01.04,1996 given in favour of the second respondent by the partners of M/s T.O. Abraham and Company, including the petitioners 1, 3 & 4 and amendment of the partnership deed of the said firm preventing the second respondent to collect any money from Kerala Water Authority on behalf of the firm. Though the partnership deed was said to have been amended, as on 31.03.2003, when the partners wrote a letter to Kerala Water Authority (Page 96 of vol.C-9 filed by respondents), requesting the authority not to disburse any payment to the second respondent, the deed was in fact amended only on 22.04.2003. The first petitioner in his reply dated 04.06.2003 sent to the ROC specially stated that a written notice dated 01.03.2003 signed by majority of directors was issued to the second respondent convening a meeting of the Board of directors. When the second respondent failed to act upon the said notice, the majority of Board of directors issued a notice on 11.04.2003 convening a meeting of the Board of directors on 22.04.2003. Whereas the notices dated 01.03.2003 and 11.04.2003 produced by the petitioners (page 99 & 101 of petition) show that both the notices were signed only by the first petitioner. These notices, according to the respondents are fabricated. Moreover, there was no need to serve the notice dated 01.03.2003 to all the directors, as seen from the certificates of posting (page 100 of CP 33/2003), when the same was addressed to only the second respondent. The minutes of the meeting of Board of directors held on 07.09.2001, 19.10.2001 & 02.11.2001 (page 1 to 4of M-6 of petitioners) are all concocted and fabricated to mislead the CLB.Shri Datar, learned Senior Counsel, while concluding his submissionspointed out that the promoters of the SMHPL and ACECPL elected to availthe advantages of forming limited companies. They voluntarily andknowingly bind themselves by the provisions of the Companies Act, Theirplea that the limited companies must be treated as quasi partnerships cannotbe accepted as held in Kilpest P. Ltd. v. Shekhar Mehra - (1996) Vol.87CC 615. For these reasons, Shri Datar learned Counsel, urged for dismissalof the company petition.
10. Shri. T.K. Seshadri, learned Counsel, in his reply submitted that Sections 397 & 398 containing special provisions, empower the CLB to make appropriate order bringing to an end the matters complained of in the affairs of the ACECPL and investigate the charges and such investigation is necessary to regulate the future conduct of the Company for providing against recurrence of such abuses of power by the majority and reiterated his arguments made in CP 30/2003. Moreover, no civil suit is pending in respect of the reliefs claimed under para 8(a) (b) (c) of CP 33/2003. According to learned Counsel, the petitioners have been evincing keen interest in the affairs of the ACECPL, which made them to file of writ petition in W.P. (e) 1579 of 2003 against Kerala Water Authority seeking extension of time for execution of necessary agreement before the expiry date and obtained a restraint order against Kerala Water Authority from cancelling the work order in the interest of the ACECPL. The properties belonging to the five branches are offered as security for the credit facilities extended by City Union Bank, as borne out by a legal notice dated 24.12.2003 (Page 68 of Vol.IV filed by petitioners) recalling the dues, in respect of which recovery proceedings have already been initiated before the Debt Recovery Tribunal. The first petitioner withdrew an aggregate sum of Rs.5 Lakhs in April 2003 from the ACECPL account with City Union Bank Ltd., for payment of salary to the staff members and balance of Rs. 3,37,200/- was remitted back on to the Bank account as, borne out by the statement of account furnished by the Bank (Page 79 of vol.M-13 filed by respondents); The observation of the District Munsiff, Thiruvalla in I.A. No. 1334/2003 in O.S. No. 251/2003 to that the effect the certificate of posting dated 05,03.2003 does not contain proper seal from the postal authorities cannot impugn the conduct of the petitioners, especially when the said order is under challenge before the appellate Court. Thus the petitioners never acted against the interest of the ACECPL. When the first petitioner offered mortgage of his properties as per the order dated 16.12.2003 of the High Court of Kerala made in WP (C) 39626/2003 to withdraw the cheque amount credited by Kerala Water Authority, the second respondent withdrew the amount on the security offered by the petitioners.
The second respondent indulged in creating forged records, resulting in lodging of a police complaint on 24.11.2003 against him. These sequence of events and the observations of the learned Distirct Munsiff Thiruvalla regarding the management of the affairs of M/s T.O. Abraham & Company by the second respondent in accordance with his whims and fancies made in his order dated 18.11.2003 while disposing I.A.No. 2479/2003 in O.S. No. 383/2003 reveal the conduct of the respondents.
11. I have considered the pleadings and arguments of learned Counsel.
While according to the petitioners, the SMHPL incorporated for the benefit of the representatives of five branches viz.,(1) T.O. Aleyas, (2)T.O. Abraham, (3) T.S. Skaria, (4) T.O. Baby and T.O. Kuriakose, forming part of the St. Mary's group with the intention of each branch of the family holding 20 % of the share capital was unilaterally changed by the act of fabrication of documents at the behest of the second respondent putting forth the illegal transfer of 2.20 lakhs shares of the SMHPL belonging to the second petitioner in his favour, removal of the petitioners 3 & 4 as directors and illegal interference with the affairs of the SMHPL, in spite of the fact that the second respondent has been properly removed as the Managing Director, the respondents are denying every one of these charges. A careful perusal of the voluminous documents before me reveal that the SMHPL was incorporated in April 1996, with the object of carrying on the business of setting up and running hotels, loading houses, motels etc. The first petitioner and the respondents 2 & 3 have subscribed to the Memorandum of Association each taking 100 equity shares of Rs.10/- each and also the Articles of Association. The first petitioner and the. respondents 2 & 3 represent the branches of T.O. Aleyas; T.O. Abraham and the deceased T.S. Skariah respectively. The branches belonging to T.O. Kuriakose and T.O. Baby, both deceased have not subscribed to the Memorandum of Association. The subscribers to the Memorandum and Articles of Association became the first directors of the SMHPL. At present the SMHPL is, engaged in the business of hotel project at Kottayam under the name and style of "THE LAKE VILLAGE" and "WINDSOR CASTLE". The second respondent, in his capacity as the Managing Director of the SMHPL by a communication dated 15.12.1999 (pages 17-21 of Vol. III by petitioners), while seeking financial assistance for the Resort Project "LAKE FIELD" and "WINDSOR CASTLE" Hotel project from Kottayam District Co-Operative Bank Ltd., categorically stated that the SMHPL is a member in the St. Mary's Group of Companies. The brochure brought out by M/s T.O.Abraham And Company (page 40 of Vol. III filed by petitioners), while giving an account of associate Companies, included the SMPHL under the umbrella of the St. Mary's group. The credit facilities extended to the SMHPL by State Bank of Travancore, have been secured inter-alia, by the personal guarantee and properties of the second petitioner, belonging to T.O. Kuriakose, as borne out the loan sanction letter dated 30.05,2002 of SET (page 48 of Vol. M-2 filed by respondents). The second respondent in his capacity as the Managing Director of ACECPL by a communication dated 22.08.2000 while making an application for a cash credit facility limit from City Union Bank Ltd., admitted that ACECPL is a private company promoted by the St. Mary's group, Thiruvalla. The Board of directors of M/s T.O. Abraham and Company by its resolutions dated 05.08.2000 and 24.03.2001 (pages 32 & 33 of Vol. M-4 filed by petitioners) have approved availment of the over-draft facility and the Bank guarantee from City Union Bank Ltd., Thiruvalla against the. security of the properties belonging to among others, members of T.O. Baby & T.O. Kuriakose branches. The legal notice dated 24.12.2003 (Pages 68-72 of Vol.IV filed by petitioners) calling upon the AGECPL and guarantors to settle the outstanding amount of over Rs. 1 crore clearly indicates that the properties belonging to several branches of the family are mortgaged in favour of City Union Bank Limited. The order dated 05.11.1998 of the Income Tax Appellate Tribunal, Cochin Bench (pages 22-30 of vol.III filed by petitioners) pertaining to the assessment of M/s T.O.Abraham & Co. for the block period 01.04.1986, 06.05.1996 reveal that the partners of M/s T.O.Abraham and Co. are the family members belonging to the five branches. These documents which are undisputed unequivocally show that the SMHPL & ACECPL have been projected and treated as members in the St. Mary's group of companies. There are no " outsiders and both companies are wholly and closely held by the family members. The Articles of Association envisages that any shareholder before selling his shares to an outsider, must make first offer to the existing shareholders. By virtue of the Articles of Association of the SMHPL, the directors are empowered to register or decline the transfer of shares to any person or persons or body corporate without assigning any reason what so ever. I do not find any provision in the Articles of Association or any other document in relation to the allotment or transfer of shares to maintain parity in shareholding in the SMHPL among the five branches of the deceased Kuruvila Unnittan either at the time of the incorporation of the SMHPL viz. 08.04.1996 or when further share capital was issued on 19.10.2001 to an aggregate sum of Rs. 14,99,700/- in favour of the second petitioner belonging to T.O. Kuriakose family for the first time, the first petitioner and the respondents 2 & 3. Even at this point of time, no shares were found to be allotted in favour of the family members belonging to the late T.O. Baby. There is nothing on record to establish that the entire share capital of the SMPHL was met from the construction business of the family as pleaded in para 6.4 at page 7 of the CP 30/2003 or profits of the business have been distributed among all the five branches. At this juncture, it is not irrelevant to make a reference to the report of the Registrar of Companies, Cochin dated 10/14.10.2003 made pursuant to serving of copy of the company petition by S/Shri Seshadri and Bhaskar, Advocates on record for the petitioners, under Regulation 14(3) of the Company Law Board Regulations, 1991. The ROC, while furnishing a brief history of the SMHPL and para-wise comments in respect of the averments contained in the CP 30/2003 reported on the further issue of shares by the SMHPL as under :-
"A further issue of shares was made as per the resolution passed in the 4th Annual General Meeting of the company held on 29.09.2000. The issues of shares is as under: -
T.O. Abraham 2,99,900 shares T.O. Aleyas 2,92,900 shares Binu Zachariah 4,99,900 shares Bobby Kuriakose 4,00,000 shares Accordingly shares were allotted to the above persons on 19.10.2001, for which Form. 2 dated 12.11.2001 was filed in this office. The said Form 2 shows that the allotment was made against cash payment. As per the Balance Sheet of the company as at 31.3.2001 the share money advance with the company from the above persons were as under: -
T.O. Aleyas 34,12,500.00 T.O. Abraham 63,67,924.00 Binu Zachariah 2,55,10,765.00 Bobby T. Kuriakose 91,44,000.00 It is far from doubt that as at 31.03.2001, the share money advance was available only in the name of the petitioners 1 & 2 and the respondents 2 & 3 and that the allotment was made in their favour against cash payments. Against this background, the transfer(s) impugned in CP 30/2003 as borne out by the minutes of the Board of directors dated 17.04.2002 (pages 139 & 140 of CP 30/2003) approving the following resolutions must be borne in mind:
(i) the transfer of 1,40,000 shares by the third respondent in favour of the third petitioner;
(ii) the transfer of 1,70,000 shares by the second petitioner to the fourth petitioner;
(iii) the transfer of 2,20,000 shares by the second petitioner to the second respondent;
(iv) the appointment of the petitioners 3 and 4 as directors of SMHPL;and -
(v) the transferees taking delivery of the share certificates.
The resolution at Serial No. (iii) here above, in regard to the transfer of 2,20,000 shares in favour of the second respondent is seriously under dispute. At this juncture Articles 13(e) assumes importance, according to which "All the decisions taken at a Meeting of the Board shall be recorded in a minutes book maintained for the purpose and signed by all the Directors present at the meeting". The minutes dated 17.04.2002, before me, are not signed by the first petitioner and the respondents 2 & 3, being the directors present at the meeting of the Board of directors of the SMHPL, in accordance with Article 13(e). The articles of association are the internal regulations of the company, according to which the directors are bound to act, regulating the internal management of the company. Any act outside the articles is irregular unless ratified by the members. In view of this legal position, unless and until the purported transfer of 2,20,000 shares by the second petitioner in favour of the second respondent is duly ratified by the members, the resolution of the Board of directors at the meeting held on 17.04.2002 in relation to the purported transfer of 2,20,000 shares can neither be implemented nor acted upon by the concerned parties and therefore these shares shall remain with the second petitioner. The remaining resolutions passed at the Board meeting held, on 17.04.2002 are admitted by both the groups and therefore binding on the parties. It is on record that the petitioners through their Counsel issued a notice dated 04.08.2003 calling upon the respondents 2 & 3 to produce following documents:-
"1. Minutes Book Original
a) Board of Directors
b) General Body
- Minutes contain signature of Directors / Shareholders whoare present at the meeting.
2. Evidence for valuable consideration for the alleged purchase of 2,20,000 shares by 2nd Respondent
3. Evidence of service of "lodgement of Transfer" for the allegedshare transfer
4. Evidence for notice for alleged EGM dated 25.04.2003
5. Original Share Certificate for the alleged 2,20,000 shares"
The respondents neither produced nor explained custody of the above records at the time of arguments advanced on their behalf. Pursuant to the resolution of the Board of directors passed on 17.04.2002, the second respondent ought to have taken delivery of the certificates in respect of 2,20,000 shares impugned in CP 30/2003. Whereas, the second respondent neither produced the original share certificates evidencing the transfer of shares in his favour nor controverted taking physical delivery of the share certificates. Therefore, this Bench is bound to draw adverse inference against the respondents 2 & 3 as propounded by the apex court in a number of decisions cited supra by Shri T.K. Seshadri, learned Counsel appearing for the petitioners. I shall now proceed to consider the intention among the parties, as contended in para 6.4 of CP 30/2003 and reiterated by Shri Seshadri, learned Counsel in the course of his arguments, that the second petitioner was to transfer 1,70,000 shares in favour of the fourth petitioner, 80,000 shares in favour of fifth respondent and 20,000 shares to the sixth respondent and further that the third respondent was to transfer 1,40,000 shares to the third petitioner; 1,30,000 shares in favour of the fourth respondent and 60,000 shares to the sixth respondent, ensuring parity of shareholding among the five branches which was said to be given effect to at the Board meeting held on 17.04.2002. The . transfer of 1,40,000 shares belonging to the third respondent in favour of the third petitioner, approved by the Board of directors on 17.04.2002 is not disputed either by the petitioners or the respondents. There is no explanation whatsoever as to why the third respondent was to transfer 1,40,000 shares to the third petitioner, belonging to late T.O.Baby branch at the relevant point of time. The second petitioner in his complaint dated 31.05.2003 made to the Registrar of Companies (page 31 of vol.III filed by petitioners) was only challenging the purported transfer of 2,20,000 shares in favour of the second respondent and never aggrieved by virtue of the reported intention of transferring 80,000 shares in favour of the fifth respondent forming part of late T.O. Baby branch and 1,70,000. shares in favour of the fourth petitioner, the last of which was admittedly approved by the Board of directors on 17.04.2002. Similarly, there is no reason adduced for this transfer of 1,70,000 shares by the second petitioner in favour of the fourth petitioner, both belonging to late T.O. Kuriakose branch. The admitted transfers covered by the Board resolution dated 17,04.2002, viz. 1,70,000 shares in favour of the fourth petitioner and 1,40,000 shares in favour of the third petitioner, must in my view, pursuant to some understanding between the transferors and transferees, in the absence of any proof furnished by the respondents. In spite of the purported intention among the parties, either the fourth respondent or the fifth respondent or the sixth respondent did not even choose to file any affidavit claiming shares from the second petitioner and the third respondent and therefore, these shares, viz. 1 lakh shares said to be intended for the respondents 5 & 6 from the second petitioner and 1.90 lakh shares meant for the respondents 4 and 6 from the third respondent should belong to the second petitioner and the third respondent respectively. As a consequence of my findings, the shareholding of the parties must be as follows: -
The first petitioner 3 lakhs The second petitioner 2.30 lakhs The third petitioner 1.40 lakhs The fourth petitioner 1.70 lakhs The second respondent 3 lakhs The third respondent - 3.60 lakhs
The emerging situation is that the petitioners' group is entitled for 8.40 lakhs and the respondents' group 6.60 lakhs shares which works out at the ratio of 56% and 44% respectively and not as claimed by either of the parties. Consequently, the Board of directors shall appropriately rectify the register of members of the SMHPL on the lines of the above findings.
While the petitioners claim that they never received any notice for the extraordinary general meeting purported to have been held on 25.04.2003 and questioned genuineness of the certificates of posting under which the notices were said to be sent by the respondents, these are vehemently denied by respondents. Furthermore, the first petitioner, in exercise of his individual right is challenging the minutes of the extra-ordinary general meeting held on 25.04.2003 in the O.S. No. 69 of 2003 on the file of Sub-Judge Court Thiruvilla. It shall be borne in mind that the civil court has jurisdiction to adjudicate the validity or otherwise of minutes of the extraordinary general meeting held on 25.04.2003. Whenever an application under Sections 397 & 398, being a representative action, claiming relief for and on behalf of the oppressed minority shareholders is made, the CLB is empowered to make appropriate orders, with a view to bringing to an end the acts of oppression and mismanagement. complained in the application, of which the civil court cannot usurp the powers of the CLB, as held in the decisions cited by Shri T.K. Seshadri, learned Counsel for the petitioners. Therefore, the civil suit cannot be a bar to exercise the powers of the CLB. Under these circumstances, it shall be considered whether the decisions taken at the extraordinary general meeting are oppressive in nature warranting appropriate reliefs, notwithstanding the fact that the validity of the minutes of extraordinary general meeting held on 25.04.2003 is under challenge before the Civil Court. Even if the extraordinary general meeting is perfectly legal, yet may be oppressive. Conversely, if the resolutions are in contravention of the Act, they may be in the interests of the SMHPL and its shareholders as held in Needle Industries (India) Ltd. (supra). As per the Article 12(a), the directors of the SMHPL may from time to time appoint one among them to the office of the Managing Director, who shall not liable to retire by rotation during the period he holds the said office. However, the Board of directors is empowered to remove the Managing Director, before the expiry of the appointed period. Admittedly the second respondent was Managing Director of the SMHPL at the relevant point of time. At the extraordinary general meeting said to have been held on 25.04.2003, attended only by the Managing Director and the third respondent, it was resolved that the Managing Director shall not be liable to retire by rotation during the period he holds that office, thereby taking away the power of the Board of directors to remove the Managing Director during currency of his office. This amendment goes against the collective wisdom of the Board of directors in protecting the interest of the SMHPL. In the process, the second respondent attempted to ensure that he would not be removed from the office of the Managing Director by the Board of directors of the SMHPL, before completion of his term of office. The respondents have not established any benefit derived by the SMHPL on account of the amendment of Article 12(a) of Articles of Association of the Company. This amendment in my view is solely for the second respondents' personal aggrandizement to the detriment of the petitioners and the SMHPL. It is on record that the petitioners 3 & 4 were appointed as directors of the SMHPL only at the Board meeting held on 17.04.2002. There is no cause or justification shown while removing them from the post of directors at the said extraordinary general meeting, irrespective of the validity of the said resolution. The removal of the petitioners 3 & 4 from the office of directors of the SMPHL in my view, is to gain majority on the Board by the respondents' group and therefore, shall be set aside. Against this background the removal of the second respondent at the meeting of the Board of directors held on 23.04.2003, pursuant to the notice dated 07.04.2003, caused under Article 13(c) of the Articles of Association requesting the second respondent to convene a meeting of the Board of directors must be considered. The respondents are questioning the validity of this notice issued under Article 13 (c) and further denied receipt of any notice dated 16.04.2003 convening the Board meeting held on 23.04.2003. It is on record that the second respondent was sought to be removed as the Managing Director at the meeting of Board of directors held on 23.04.2003, wherein only the directors representing the petitioners' group were present. The removal of the second respondent on account of personal animosity between the parties cannot be deemed to be in the interest of the SMHPL, which facilitated the first petitioner to become the Managing Director and liable to be set aside irrespective of the validity of the notices sent by the first petitioner for removal of the second respondent. From the foregoing it is far from doubt that the parties are fighting against each other by removing one against another from the office of director and Managing Director of the SMHPL. These acts would have disastrous consequences in the smooth functioning and affairs of the SMHPL. Similarly, it shall be seen as to whether the notice dated 26.05.2003 convening the meeting of the Board of directors of the SMHPL on 03.06.2003 and the notice dated 06.06.2003 convening the extraordinary general meeting of members of the Company on 30.06.2003 are oppressive of the minority shareholders, warranting interference of this Bench. Therefore, merits of the elaborate arguments made on behalf of either of the parties in regard to validity of notices for removal of the first petitioner from the post of director are not considered in the present proceedings. The second respondent by convening the Board meeting as well as the extraordinary general meeting attempted to remove the first petitioner from the office of the director of the SMPHL and already removed the petitioners 3 & 4 form the post of the directors. By means of this act, the first petitioner who was the subscriber to the Memorandum of Association and the first director of the SMHPL was sought to be removed. With removal of the petitioners 1, 3 & 4 from the office of the directors, there would be no representation from the petitioners' group, which hold majority shares, in my view is oppressive and detrimental to the interest of the petitioners, more so when the SMHPL is a closely held family company. Therefore, the attempted removal of the first petitioner from the post of director, irrespective of the validity of the notices of 26.05.2003 and 06.06.2003 convening the Board meeting on 03.06.2003 and extraordinary general meeting on 30.06.2003 would constitute an act of oppression in the affairs of the Company. Moreover, at the relevant point of time when notices were sent by either parties for the various Board meetings or the extraordinary general meetings discussed here above, the relationship between the parties was very much strained as could be seen from a communication dated 31.03.2003 of partners of M/s T.O.Abraham And Company, including the petitioners 2, 3 & 4 addressed to Kerala Water Authority requesting them not to disburse any payment to the second respondent in view of the fact that the power of attorney executed in his favour to receive payment was withdrawn and further that the partnership deed of the said firm was terminated to restrain the second respondent from receiving any money from Kerala Water Authority on behalf of the firm. When the relationship between the parties was not cordial, it was not prudent or expected of either of the parties to send notices calling for such meetings under certificate of posting. It is not safe to place credentials on the mere certificate of posting, as held in a number of decisions cited supra.
12. As a consequence of the above findings, the petitioners 1, 3, 4 and therespondents 2 and 3 would remain as directors of SMHPL. The secondrespondent shall be the Managing Director till expiry of the appointed period.However, in the next general meeting, all directors would be liable forretirement in terms of Article 11(e). This being the case, since the petitionersare found to be in majority, they would ensure that the respondents holding44% are not excluded from the Board, especially when the SMHPL is aclosely held family company. I, therefore, direct that till the action iscompleted in terms of my direction in the succeeding paragraph, there will berepresentation on the Board in proportion to the shareholding held by theparties. Since the Articles of Association provides for a maximum of 9directors, the petitioners will have four directors and the respondents 3directors. The directors will appoint one among them to the office ofManaging Director in accordance with Article 12(a) of the Articles ofAssociation of SMHPL.
13. I find that the parties before me have developed such animosity among themselves that it would not be practicable and possible to carry on the business together even with representation on the Board in proportion to their shareholding. A large number of civil suits and criminal proceedings initiated against each other and various affidavits and statements filed by the parties before this Bench would conclusively establish that trust and confidence between them no more exist. As a matter of fact, when I sought to ascertain during the hearing whether there could be any possibility of amicable settlement of disputes among the parties, being close relatives, no such settlement could be reached. The SMHPL, in my view cannot at all function smoothly, considering mounting litigations among the parties, as well as irreconcilable differences between major group of shareholders and if these warring group continue to hold shares. In an effort to destroy each other, the parties will not only destroy themselves, but also the SMHPL. The only course by which the interests of the SMHPL and the shareholders could be protected is that there should be parting of ways either by directing the sale of shares held by one group to the other or by division of assets of the SMHPL between the two groups in accordance with their percentage of shareholding. In the present case, I find that the SMHPL has two distinct businesses - One is running of a hotel under the name and style of, "WINDSOR CASTLE" and the other a resort in the name of "THE LAKE VILLAGE" and as such these two businesses could be distributed between the two groups of shareholders. While doing so, it would become necessary to value the SMHPL as a whole and value of these two businesses separately. The petitioners being majority will continue to run the SMHPL with one of the two businesses of their choice, while the other business will go to the respondents, the value of which will be adjusted against the value of their shareholdings. While valuing the SMHPL as a whole, fair value of the shares shall also be determined. If value of the business given to the respondents is more than the value of the shares held by them, the respondents will pay the difference in cash to the SMHPL and vice-versa. Thereafter, the SMHPL would reduce its shares capital to the extent of the shares held by the respondents. Ordered accordingly. The parties will appear before this Bench on 21.07.2004 at 10.30 a.m. to suggest a mutually acceptable name of an independent valuer to value the SMHPL as a whole; value the hotel business as well as the resort business independently and for determination of the fair value of the shares.
14. The issues that arise for my consideration in CP 33/2003 are whether the impugned allotments in favour of the respondents and appointment of the respondents 4 & 5 as directors of the ACECPL, in complete exclusion of the petitioners would constitute acts of oppression in the facts a'nd circumstances of the present case. It is on record that the ACECPL was incorporated in November, 1999 with main objects of carrying the business of executing construction contracts and as builders. The petitioners and the respondents 2 & 3 belonging to five branches of the deceased Unnittan are subscribers to the Memorandum of Association as well as the Articles of Association and the first directors of the ACECPL. Any shareholder of the ACECPL, in terms of the articles, before selling his shares to any outsider must make first offer to the existing shareholders. The directors have the authority to register or decline the transfer of shares in accordance with the provisions of Section 111 to any person or persons or body corporates, without assigning any reason. Though the Articles of Association does not envisage any allotment or transfer of shares to maintain parity in shareholding in the ACECPL among five branches, it is found that the shareholders belonging to the five branches held 1000 shares each maintaining parity till the allotment of the impugned shares made in March, 2003 in favour of respondents 2 to 5. Similarly, parity was maintained on the Board represented by members from each of the five branches till the appointment of the respondents 4 & 5. It is observed' from Form No.2 (pages 86 to 89 of CP 33/2003) filed by the second respondent with the Registrar of Companies on 17.03.2003 that 1,000 equity shares of Rs.10/- each were allotted on 15.03.2003 in favour of the fourth respondent and 6,000 shares in favour of the second respondent. Similarly, Form No.2 (pages 92 to 94 of petition) filed by the second respondent with Registrar of Companies on 25.03.2003 reveals that 2,000 shares were allotted in favour of the third respondent and 1,000 shares in favour of the fifth respondent on 15.03.2003. Thus, no shares were allotted in favour of the petitioners' group. At this juncture, the communication dated 07.05.2003 of the respondents 2, 3 & 5 addressed to the Registrar of Companies, Cochin (pages 106-108 of vol.M-1 filed by petitioners) assumes importance, the relevant portion of which runs as under:-
"On 14.03.2003, meeting of the Board of directors was held with due notice to all the existing directors and as per the agenda 6000 shares were allotted to Sri T.O. Abraham and 1000 shares were issued to Binu Zacharia, Thottathil house, Thuruthicad, Mallapally, and 2000 shares were allotted to Thomas Skaria, Thottathil house, Thuruthicad, and 1000 shares were allotted to Mobin T.Abraham, Thottathil house, Thuruthicad, Mallapally. Considering the volume of work to be executed by the company, Mr. Binu Zacharia and Mobin T Abraham who are qualified Engineers were appointed as additional directors by resolution dated 14.03.2003."
This discrepancy as to whether the impugned shares were allotted on 14.03.2003 or 15.03.2003 remains unexplained. The respondents failed to produce the original records in support of their plea, in spite 'of the notice 04.08.2003 caused by the petitioners. The explanation that the records were misplaced by their advocate, without supported by an affidavit from the advocate concerned is not acceptable. Moreover, mere production of the certificates of posting cannot prove service of notices for these Board meetings and it is not safe to trust such certificates of posting as held in S. Narayanan v. Century Flour Mills Ltd. - (1987) 1 CLJ 25 (supra). When the members belonging to the five branches have been maintaining parity of shareholding since the incorporation of the ACECPL, the allotment of shares in favour of one group excluding the remaining group, in my view, would constitute an act of oppression. The directors being in a fiduciary position, must exercise their power for the benefit of the ACECPL, but, in my view, acted to its detriment by allotting shares in favour of one group excluding the other group. In regard to the appointment of the respondents 4 & 5 as directors of the ACECPL, it is clear from Form No. 32 filed with Registrar of Companies on 24.03.2003 that these directors were appointed on 20.03.2003. Shri Datar, learned Senior Counsel, categorically stated at the time of his oral submissions that no Board meeting was held on 20.03.2003, but the respondents 4 & 5 assumed charged as directors on 20.03.2003. At the same time, the communication dated 07.05.2003 addressed by the second respondent in favour of the ROC (supra) clearly indicates that the respondents 4 & 5 were appointed as additional directors by the resolution dated 14.03.2003. Thus, there is no coherence or transparency in the appointment of directors. Moreover, while the Board has been represented by the members belonging to five branches since the inception of the ACECPL, the appointment of respondents 4 & 5 representing the respondents' group in exclusion of the petitioners' group is in no way justified. It is on record that the first petitioner had issued a notice dated 01.03.2003 pursuant to Article 13(c) (page 99 of the petition) calling upon the second respondent to convene a Board meeting and upon his failure to convene a Board meeting within the specified period, the first petitioner issued a notice dated 11.04.2003 (page 101 of the petition) convening a meeting of the Board of directors on 22.04.2003, wherein the second respondent was removed from the post of the Managing Director and the first petitioner was appointed as Managing Director of the ACECPL. It is abundantly clear that these notices were signed only by the first petitioner. Whereas it is found from the communication dated 04.06,2003 of the first petitioner addressed to the Registrar of Companies (pages 175 to 178 of vol.M-3 filed by respondents) that the notice issued under Article 13(c) and the notice convening the meeting of the Board of directors were signed by the majority directors. The relevant portion of the communication dated 04.06.2003 of the first petitioner reads as under:-
"At this juncture, it is submitted that a specific notice signed by majority of directors has been issued to the former ' Managing Director, Mr. T. O.Abraham on 1.3.2003 for convening a meeting of the Board of directors, which was not acted upon by the said persons. Thereafter the majority of the Director Board members, T.O. Aliyas, Jiju Kuriakose, Abraham Baby, issued a notice on 11.4.2003 for convening a meeting of the Board of directors of the company on 22nd April 2003 with specific agenda, resolution etc. The board meeting was held on the scheduled date. Though the said T.O. Abraham was appeared there, he was not participated in the meeting and deliberately abstained from signing the minutes or attending the meeting."
Therefore, the notices dated 01.03.2003 and 11.04.2003 produced by the petitioners are not in tune with the aforesaid communication made to the ROC and therefore no reliance can be placed on these notices. Consequently, the resolutions passed at the Board meeting held on 22.04.2004, pursuant to the notices dated 01.03.2003 and 11.04.2003, removing the second respondent from the post of Managing Director and appointing the first petitioner as Managing Director cannot be valid.
15. On account of the foregoing conclusions, the following directions are given in CP 33/2003: -
The allotments made in favour of the respondents 2 to 5 and the appointment of the respondents 4 & 5 as directors of the Company are liable to be set aside. However, the same are not done. Though the cure may, perhaps, be more serious than the disease, yet, applying the principles enunciated by the apex court in Needle Industries (India) Ltd. (supra) that the allotments were found to be made in the interest of the ACECPL and to .meet the statutory requirement and also in view of the final order proposed to be passed by me, I am constrained to come to this conclusion. Since, the removal of the second respondent from the post of Managing Director is prima facie not in accordance with law, the second respondent shall continue to be the Managing Director of the ACECPL. The irreconcilable and deadly relationship between the parties as borne out by the reply statement filed on behalf of the petitioners, the relevant portion of which reading as under
"The second respondent forcibly taken away two vehicles used by the petitioners with the help of goondas and the Thiruvalla Police registered a compliant under Section 380 of IPC and now the police authorities have recovered the vehicles and produced before the Magistrate for release. In fact recently, Mr. T.O. Abraham Baby was assaulted by the gang engaged by the second respondent under his leadership and the said Mr. T.O. Abraham Baby sustained fracture and admitted to hospital and the criminal action has been taken cognizance by the police authorities and action is being initiated against the second respondent. Similarly the second respondent assaulted and injured Gigy Kuriakose and he is also hospitalized and the complaint is taken cognisance by the police authorities and a criminal action is in contemplation against the second respondent. There has been a threat from the second respondent against the first petitioner and even charged him that if the first petitioner were to succeed that the second respondent would kill the first petitioner. Such is the harassment by the second respondent against the members of the families of the petitioners against whom the second respondent has a grouse and wanted to eliminate them from St. Mary's Group".
could be remedied and the interests of the both the groups could be safeguarded only when either of the groups sells their shares and part their ways in the interest of the ACECPL. It is on record that the petitioners were taking the initiative to form a new company for running the similar business and that the second respondent is found to be in the helm of affairs of the ACECPL. Therefore, the petitioners will transfer their shares at the value determined by a valuer in favour of the respondents and for the purpose of appointing a valuer acceptable to both the groups, the matter will be called on 21.07.2004 At 10.30. A.M.
16. Accordingly, both the petitions are disposed of in these lines, reserving the right to appoint a valuer and issue consequential directions. No order as to cost.