Company Law Board
Taihan Electric Wire Co. Ltd. And Anr. vs Tdt Copper Ltd. on 26 February, 1998
Equivalent citations: [1999]96COMPCAS415(CLB)
ORDER
A.R. Ramanathan, Member
1. This petition under Section 167 of the Companies Act, 1956 (hereinafter called "the Act")- has been filed by Taihan Electric Wire Company Limited, Korea and Tomen Corporation of Japan against TDT Copper Limited (hereinafter called "the company"), on February 14, 1997. According to the petition the two petitioners hold respectively 63,5 per cent, and 26.5 per cent, of the paid up capital of the company with the balance 10 per cent, held by seven other Indian shareholders. It is stated in the petition that the company was incorporated on November 17, 1993, and the first annual general meeting was held on May 16, 1995. The second annual general meeting relating to the year ended March 31, 1996, was called on August 12, 1996, for which notice was received by the petitioners. On the date of the meeting since only the two petitioners were present the meeting had to be adjourned for want of quorum till August 19, 1996, in accordance with Article 15.1 of the articles of association of the company. On the adjourned date none of the members of the company were present at the meeting and as such till the date of the petition the procedure of the second annual general meeting was not completed. The petitioners, therefore, have prayed for an order to call the annual general meeting with a direction that at least two members present in person or in proxy shall form the quorum.
2. At the first hearing of the petition the petitioners were directed to serve a copy of the petition on all the other seven shareholders with liberty for them to file their reply. The company was also directed to file full details of litigation, if any, between the two groups, namely, the petitioners' group and the Indian shareholders. Thereafter, in accordance with our direction a reply has been filed by Delton Cables Limited representing the Indian shareholders stating that the petition is not maintainable and ought to be dismissed at the outset.
3. According to the reply the Indian shareholders were not even aware that the second annual general meeting was to be held on August 12, 1996, and the petitioners deliberately did not send the notices of the annual general meeting. It is further alleged that even though the board of directors discussed the proposal for calling the second annual general meeting it did not finalise the date of the meeting and certain items now included in the agenda were not placed before the board at all. Further, the petitioners by their own conduct in abstaining from the meeting have committed default and they cannot be allowed to take advantage of their own default. It is further stated that the petitioners have committed various violations and as such should face legal consequences.
4. Malini Sood, advocate, appearing for the objecting shareholder, namely, Delton Cables Limited, stated that the annual general meeting should not be allowed to be held in view of certain controversial matters which are under the consideration of the Principal Bench of the Company Law Board in a petition filed under Section 397/398 of the Act by the objecting party herein. One such controversial matter relates to the appointment of Mr. J. G. Kim, as a managing director of the company. In addition two additional directors who were to retire at the second annual general meeting were to be regularly appointed, thereby depriving the objecting parties of their prerogative to appoint their own directors. Thirdly, the company is proposing as a special business to mortgage the entire properties which is objectionable. Ms. Sood also contended that the accounts are proposed to be passed in the second annual general meeting but her clients have objections to certain transactions which are the subject-matter of the petition before the Principal Bench.
5. Shri Raman Sharma, advocate for the petitioners, stated that the company is a running one and any orders which affect the normal functioning of the company should be avoided. Non-passing of the accounts and shelving the resolution for mortgage of properties for raising finances will adversely affect the normal functioning of the company and will be prejudicial to its interest. Hence, he insisted that the petition should be allowed and the original agenda as contained in the notice should be permitted to be retained for the purpose of the proposed second annual general meeting to be convened under the orders of the Company Law Board.
6. I have considered the pleadings as well as the arguments in the matter. I find from the pleadings that the accounts for the year ended March 31, 1996, have been already approved by the board of directors as well as the auditors. I also gather during the hearing that even the next, i.e., the third annual general meeting has been held. As such the holding of the second annual general meeting is a mere formality but since the time limit as prescribed under Section 166 has already elapsed, the company on its own cannot validly call the second annual general meeting. A default has been committed admittedly and in order to regularise the annual general meeting, intervention of the Company Law Board is required. However, as regards the agenda items there are controversial issues in respect of the items listed under "special business" in the notice of the annual general meeting dated June 20, 1996. In particular the appointment of Mr. J. G. Kim is the subject-matter of the petition before the Principal Bench in respect of which appointment, certain interim orders are already passed. As regards the mortgaging of the properties the objecting parties have their own reservations though such mortgaging may be in the interest of the company. As regards the reappointment of additional directors a question arises whether such reappointment with effect from a back date would be valid. In view of these I consider that all the items listed in the special business should not form part of the proposed second annual general meeting since an annual general meeting could still be held without special business but cannot be held without ordinary business. This does not, however, mean that the resolution regarding mortgaging of properties for raising finance would be totally prevented but the company may have the choice to take up such item in an extraordinary general meeting if so advised and not necessarily in the annual general meeting. In the circumstances, I consider it appropriate that the second annual general meeting to be convened by this order shall transact only the ordinary business as already listed in the notice dated June 20, 1996.
7. In view of the above, it is hereby ordered that :
(1) the company shall call the second annual general meeting to be held on any working day/working hours in the month of March, 1998.
(2) The notice for the second annual general meeting shall be issued by any director as may be decided by the board or by the company secretary by registered post to all the shareholders at least 21 days before the date of the meeting as per the requirement of law.
(3) The agenda for the meeting shall consist of only the ordinary business as listed out in the notice dated June 20, 1996.
(4) The quorum for the meeting shall be as prescribed in Article 15.1 of the articles of association read with Section 174 of the Act.
(5) The meeting shall be chaired by such person as provided in the articles of association of the company.
(6) The chairman of the meeting shall forward a certified copy of the minutes of the meeting to this Bench within seven days of the holding of the meeting.
(7) Liberty granted in case of any difficulty in the implementation of this order.