Company Law Board
Telecommunications Consultants India ... vs Tcil Bellsouth Ltd. And Ors. on 29 November, 2005
Equivalent citations: [2008]142COMPCAS775(CLB)
ORDER
S. Balasubramanian, Chairman
1. The main grievance on which this petition has been filed is that the petitioner has been denied of its rights under the Articles in relation to the management of the 1st respondent company and on that basis various declarations have been sought to redress this grievance.
2. The facts of the case are that the first respondent company, TCIL Bell South Limited (TBL) was incorporated in 1989 as a joint venture company between the petitioner (TCIL) which is a public sector company and M/S Bell South Inc (BSI). The petitioner holds 44.9% shares while BSI held 40% shares and the balance 15.1% shares are held by respondents 3 to 5. In 2002 BSI transferred its holding of 40% shares to the 2nd respondent which is under the control of one Dr. Indu B. Singh. In terms of Article 128 of AOA, the President of the company who would be the chief executive, has to be the nominee of TCIL and accordingly its nominee had been the President all along. In terms of Article 127, the Chairman of TBL has to be the nominee of the 2nd respondent. One Shri Sudhir Saxena being the nominee of TCIL was appointed as the CEO in July 2003 and he continued as such till 6.6.2005 when he resigned. In his place TCIL nominated one Shri A.K. Jolly, a Group General Manager of TCIL as CEO of TBL. However, he was not allowed to function as such after a few days. Aggrieved with this, TCIL filed a suit in a Delhi Court seeking for a direction to the company to allow Shri Jolly to function as CEO. However, no order was passed. In the meanwhile, the board of the company appointed one Dr. S.N. Singh as the acting CEQ with the powers to operate the bank accounts and Dr. Indu Singh was appointed as permanent Chairman. The company also changed the authorized signatories for bank operations. The petitioner complained to the bankers of TBL in this regard due to which the banks had stopped further bank operations. The company filed a writ petition before Delhi High Court and the High Court allowed Dr. S.N. Singh to operate the bank accounts. Aggrieved with this order, the petitioner got itself impleaded in the writ proceeding consequent to which by an order dated 29.7.2005, the High Court clarified that the operation of the bank accounts by Dr S.N. Singh would be, in the ordinary course of business. Thereafter, by another order dated 5.10.2005, the High Court left it to the discretion of the bank to decide which of the two contesting parties had the right to operate the bank account. The LPA filed by the company was dismissed by an order dated 27.10.2005. The company issued a notice dated 7.9.2005 to convene the 16th AGM on 30.9.2005 to pass certain resolutions amending/deleting certain Articles. While according to the petitioners, there was no quorum to transact any business in the AGM, according to the respondents, all the businesses were transacted and all the resolutions as proposed were passed.
3. When the petition was mentioned on 14.11.2005 and interim relief sought, I passed the following order "I have considered the matter carefully. The foundation for seeking the interim reliefs, which have also been incidentally sought for as final reliefs is based on Article 128 of Articles of Association. It is on record that the petitioner has already filed a civil suit claiming for the right to manage the affairs of the company in terms of Article 128 and the said civil suit is still pending. Likewise, the matter relating to bank operation is also pending before the High Court which has posted the matter for further hearing on 11.1.2006. Since both the issues are pending in other fora in proceedings instituted prior in time, to avoid conflict of decisions, I do not propose to consider the reliefs at this stage. However, since the petitioner has questioned the validity of the annual general meeting held on 30.9.2005 on the ground that there was no valid quorum and that the respondents 3 to 5 have also questioned the factum itself of holding of said meeting, I only direct that none of the resolutions passed in that alleged meeting which have so far not been implemented, shall be implemented till the petition is disposed of. Likewise the resolutions which have been implemented will be subject to final order in the petition. Earlier interim orders will continue".
4. The above order was challenged on appeal by the petitioner in Delhi High Court, which, while setting aside the above order, directed that the bank accounts of the company would be jointly operated by the nominee of the petitioner and the 2nd respondent and that the petitioner would send names of three persons for the appointment as President of the company to the 2nd respondent who would give his concurrence for the appointment of one of them as the President and that CLB would appoint an independent Chairman for the next AGM. This order was taken on an appeal to the Supreme Court by the company. The Supreme Court passed the following order on 25.9.2006 "Though this matter was listed for admission, we have heard learned Counsel for the parties at length. It is stated by Mr. C.S. Vaidyanathan, leaned senior counsel for the respondents that the suit which was filed and to which reference was made by the Company Law Board is to be withdrawn and an application for that purpose has already been filed. In that view of the matter, we direct that Company Law Board shall take up the main matter which is stated to be listed tomorrow. If the main matter is disposed of early then there may not be any need for any interim arrangement. If for any reason, the hearing of the main petition is deferred then the Company Law Board shall make interim arrangement taking into account all relevant aspects uninfluenced by any observation made by the High Court in the impugned order. We make it clear that we have not said anything about the correctness of the conclusion. But because of the changed circumstances, it would be appropriate for the Company Law Board to take a fresh decision if necessity so arises. This order is being passed notwithstanding the fact that notice has not been issued to two opposite parties but because of the fact that the main matter is posted tomorrow. It goes without saying that in the interest of the parties the Company Law Board shall make an effort for early disposal of the main matter.... The special leave petition stands disposed of". Thereafter, the petition was heard on merits.
5. Shri Gupta, Senior Advocate, appearing for the petitioner submitted: As long as BSI was a shareholder with 40% shares in the TBL, the affairs of the company were being carried on smoothly. After it transferred it shares to the 2nd respondent, Dr. Indu Singh who is in control of the 2nd respondent, has been trying to eliminate the petitioner from the management of the company. All along the board consisted of 3 nominees of the petitioner, 3 of the 2nd respondent and one of the respondents 3 to 5. The petitioner is the largest shareholder with 44.9% and in the present proceeding, it is also supported by respondents 3 to 5 holding 15.10%. The shareholders' rights have been clearly and specifically spelt out in the Articles. In terms of Article 128, TCIL has the right to the nominate the President and CEO but the 2nd respondent had prevented the petitioner from exercising the said right. One Shri Saxena, an employee of TCIL was sent on deputation to TBL and was functioning as CEO. When he expressed his desire to resign from TCIL, another employee of TCIL was asked to take charge as CEO of TBL in accordance with Article 128 and in accordance with the established practice right from inception, on 6.6,2006. He functioned as such for 3 weeks but on 26th June, 2005, Dr Indu Singh prevented Shri A.K. Jolly from entering the premises of the company and discharging his functions. He also appropriated the room allotted to Shri Jolly and also the car provided to him. Thus, the petitioner was prevented from exercising its legitimate rights under the Articles.
6. The learned Counsel further submitted A board meeting was convened on 30th June, 2005 without any agenda. The nominees of the petitioner Shri A.K. Chandersekar and Shri Parthasarathy attended the meeting and since Dr. Indu Singh did not agree to abide by Article 128 regarding appointment of the TCIL nominee, Shri Jolly as CEO, both the directors left the meeting. However, the 2nd respondent and his nominees alleged to have transacted various businesses - two of them relating to the Articles. In terms of Article 127, the Chairman is to be the nominee of the 2nd respondent and he has to be appointed in consultation with TCIL. However, in that meeting it was purportedly resolved to appoint Dr. Indu Singh as the permanent Chairman, even though there is no concept of permanent Chairman in the Articles. In the same meeting, Dr. S.N. Singh was purportedly appointed as the CEO which is also in violation of Article 128 and the authority to operate the bank accounts was also vested in him. When the nominees of TCIL came to know of the purported resolutions, they sent a letter of protest but even then the minutes were confirmed. Having excluded the petitioner from the management, even from financial transactions, the petitioners had been excluded. As per the previous arrangement, the bank operations were jointly handled by the CEO and one Shri Thangavelu, an official deputed by TCIL. On 12.7.2005, Shri Thangavelu was repatriated to TCIL by TBL and thus the TCIL's participation in and of monitoring financial activities of the company has been curtailed.
7. The learned Counsel further submitted: Another board meeting of the company was allegedly held on 31.8.2005. None of the nominees of the petitioner attended the meeting. In that meeting various resolutions oppressive to the petitioner were purportedly approved for getting the consent of the members in the 16th AGM of the company.
8. The learned Counsel further submitted: The intention of the 2nd respondent to exclude the petitioner from participating in the affairs of the company is further evident from the proceedings of the AGM held on 30.9.2005. By a circular resolution, TCIL had authorized Shri A.K. Chandersekher to represent TCIL in the AGM and accordingly an intimation was sent to the company by a letter dated 20.9.2005, the receipt of which was acknowledged on 22.9.2005 as is evident from Annexure A-33. Likewise, in regard to two shares, two proxies were appointed and the same was communicated to the company and acknowledged by the company (Annexure A-34). However, when the three of them went to the venue of the AGM, they were prevented by Dr. Indu Singh from attending the meeting on the ground that there was no authority for them to attend the said meeting. Even though the letter of authorization of TCIL dated 20.9.2005 duly acknowledged by TBL on 22.9.2005 was shown to Dr. S.N. Singh, he demanded a copy of the board resolution approving the resolution. An attested copy of the same was also produced but was not accepted. Even though Dr. Indu Singh proceeded to conduct the meeting, because of the protest by TCIL's representatives, no meeting was held and all those present left the venue. This fact has also been corroborated by respondents 3 to 5. In other words, shareholders holding 60% of the shares have confirmed that no business was transacted in the meeting held on 30.9.2005. However, before the Delhi High court, the company produced a copy of the purported minutes of the allegedly held AGM on 30.9.2006. From the purported minutes , it came to light that two of the nominees of the petitioner were voted out and Article 127 and 128 of the AOA were amended by which the right of the petitioner to appoint CEO had been taken away. It is inconceivable that the respondents holding only 40% shares in the company could have held the meeting and passed all the alleged impugned resolutions. If the petitioner and the respondents 3 and 5 had attended the meeting, these present resolutions could not have been carried out as they were opposed to the same.
9. The learned Counsel further submitted that even after filing of the present petition, the 1st and 2nd respondents have been acting in a manner oppressive to the petitioner and also have been guilty of mismanaging the affairs of the company. Even though by an order dated 14.11.2005 and 19.12.2005, this Bench had directed that 4 days clear notice should be given for board meetings along with agenda, for a board meeting convened on 10.2.2006, only two days; notice was given that top without complete agenda. Even this notice was given only to one of the nominees of the petitioner and not to all its 3 nominees. The turnover of the company has come down and the loss has also gone up. Further, the petitioner company was asked to release funds to pay the salary for the employees of TBL. The respondents also violated orders passed by the High Court in regard to bank operations. As per the directions of the High Court, the petitioner communicated 3 names for the position of CEO of TBL for the concurrence of the 2nd respondent of which the 2nd respondent gave concurrence for one Shri S.K. Verma for appointment of CEO. Even though, Shri Verma visited the company premises for assuming charge as CEO on 19.9.2006, he was not allowed to assume charge on the ground that his appointment had to be approved by the board meeting convened on 5.10.2006. Even though the company has justified this action on the ground that CEO will have to be a joint signatory which can be approved only by the board, yet, no such stipulation was there in the order of the High Court. This it is apparently clear that the 2nd respondent does not want the association of the petitioner, even though it is the principal promoter of the company, to participate in the affairs of the company. Accordingly, all the resolutions passed in the board meetings on 30.6.2005 and 31.8.2005 as also in the AGM held on 30.9.2005 should be declared as null and void as also all the actions taken by TBL on the basis of these resolutions. The petitioner should be permitted to appoint the CEO in terms of Article of 128 of the AoA.
10. Shri Bakhru appearing for the 3rd to 5th respondents submitted: The AGM convened on 30.9.2006 was adjourned without transacting any business and therefore his clients had left the venue. In terms of Article 68, shareholders holding 50% of the voting rights alone would constitute quorum and therefore, the 2nd respondent alone, holding only 40% shares could not have held the meeting. Further, since the company is a public company, the quorum for the AGM is 5 members and therefore, the 2nd respondent alone could not have constituted the quorum. Since the meeting was adjourned, it was held next week on 7th Oct. 2005 at the same address and venue. Neither the petitioner nor the 2nd respondent was represented and only respondents 3 to 5 were present and all the resolutions were rejected. Therefore, the question of any resolution including amendment to Articles allegedly passed in the meeting held on 30.9.2005 is factually incorrect and the minutes have been fabricated.
11. Mrs. Nalini Chidambarm, Sr. Advocate appearing for the 1st and 2nd respondents submitted: The petitioner has issued an advertisement in newspapers on 13.2.2006 inviting expression of interest for disinvesting its share held in TBL. This being the case, it is not in the public interest to entertain the present petition as the petitioner has no further interest in the company. The 2nd respondent has already filed an application CA 108 of 2006 seeking for a direction to the petitioner to sell its shares to the respondents in proportion to their holding at a fair value. This way, the entire disputes could come to an end. The petitioner has contended in its reply to the said application that the 2nd respondent has no right of first refusal as there is no joint venture between the petitioner and the 2nd respondent. This contention is incorrect. Since the 2nd respondent acquired shares of TBL from BSI with the consent of petitioner and since Indu Singh, a nominee of the 2nd respondent was appointed as Chairman of the company with the consent of the petitioner in terms of Section 127 of the AOA, the 2nd respondent has the right of first refusal as was vested in BSI. Notwithstanding this factual position, since petitioner itself has issued an advertisement expressing its interest to sell its shares and since the 2nd respondent is willing to purchase the shares, if the said application is allowed, the entire disputes could come to an end.
12. She further submitted: The petitioner has miserably failed to make out a case for winding up of the company on just and equitable grounds and it has been held by Delhi High Court in Capro India Ltd. (UK) v. ro Maruti Limited 128 DLT 425 that unless winding up on just and equitable grounds is made out and that it is established that such winding up would be prejudicial to the interests of the petitioner, no relief under Section 397 can be granted. On this ground alone the petition deserves to be dismissed. Since respondents 3 to 5 are supporting the petitioner, they collectively hold 60% shares in the company. Therefore, majority cannot allege oppression against minority. In the prayers in the petition, various declarations have been sought. Only a civil court is competent to entertain prayers for declarations as held in Mohanlal Ganapatram v. Shri Sayaji Jubilee Cotton and Jute Mills Ltd. . Further, it is the petitioner which is guilty of oppression and mismanagement. The petitioner removed Dr. Indu Singh from the Chairmanship of TBL in the 16th board meeting held on 30.6.2004 in violation of Article 127. Likewise, it also removed Saxena as CEO and directed him to hand over charge to Shri A.K. Jolly who was not even a board member. Further, without attending the board meeting held on 30.6.2005, the petitioner dragged the company to the civil court. Its nominees stopped the bank operations forcing the company to approach the High Court. It had also removed the minutes book from the registered office of the company in violation of Section 193 of the Act with malafide intention and the same is still in its custody. It has also not been releasing the legitimate dues of the company and is misusing the company funds for paying salaries to its own employees who are not working for the company. Its nominees absented from three consecutive board meetings without taking leave of absence and therefore were disqualified from functioning as directors in terms of Section 283(1)(g) of the Act. By this various acts of commission and omissions, the petitioner has caused various difficulties in the functioning of the company. It has been held by the Supreme Court in Needles Industries case (19813 SCC 333) that conduct of parties is relevant in deciding a matter under Sections 397/398 of the Act.
13. On merits, the learned Counsel submitted: In so far as appointment of Shri A.K. Jolly is concerned, the petitioner did not follow the proper procedure. In terms of Article 128, it is the Board which has the power to appoint the CEO provided he is the nominee of TCIL and his appointment is consented to by the 2nd respondent. On 6.6.2005, notices had already been issued for holding the 69th Board meeting on 30.6.2005. This being the case, there was no need for the removal of Shri Saxena and asking him to hand over charge to Shri Jolly who is not even a director on the board of the company. That is the reason why in the board meeting held on 30.6.2005, the directors did not approve the unilateral action of TCIL in appointing Shri Jolly as CEO. As a matter of fact, in the same meeting, TCIL was advised to send 3 names so that the 2nd respondent could give its consent for appointment of CEO in accordance with Article 128. In terms of Article 128, the petitioner could not have forced anyone as CEO without the consent of the 2nd respondent. Dr. S.N. Singh was appointed only to look after the responsibility of CEO till appointment of a regular CEO and accordingly he was delegated all the powers including operation of bank accounts. Even the High Court has allowed Dr. S.N. Singh to operate the bank accounts in view of the said resolution. The nominees of the petitioner did not participate in the Board meeting on 30.6.2005. If they had attended that meeting and indicated their nominee for the post of CEO, the same could have been approved. Instead, they moved the civil court. Its nominees also stopped the bank operations. As decided in the board meeting, instead of sending three names, by a letter dated 18.8.2005, TCIL contended that there was no provision in Article 128 to suggest 3 names. In so far as appointment of Dr. Indu Singh as permanent Chairman is concerned, in terms. of Article 119, the power of managing the affairs of the company rests with the board and in terms of Article 110, the board can appoint its Chairman without taking the consent of any shareholder. Accordingly, the board decided to appoint Dr. Indu Singh as the permanent Chairman. Shri Thangavelu was repatriated only because he refused to sign cheques for payment of electricity bill. In so far as AGM on 30.9.2005 is concerned, convening of the said meeting was approved in the board meeting held on 30.8.2005. Notice for the meeting was sent to all shareholders with 21 days notice. After ascertaining that quorum was present, the Chairman conducted all the businesses and the resolutions were passed by the shareholders present and the minutes were signed by the Chairman. In that meeting the respondents 3 to 5 and the 2nd respondent collectively holding 55% shares in the company were represented and they had also signed the attendance register. It is true that the representative of the petitioner was not allowed to participate since he had not produced the board resolution of the petitioner to participate and vote on behalf of the petitioner. Even though, the respondents 3 to 5 attended the meeting and participated in the proceeding and also voted for the resolution, now with malafide intention, now they claim that the meeting was adjourned and held one week thereafter and all the resolutions were defeated. It is a settled law that in terms of Sections 194/195 of the Act, the minutes signed by the Chairman is a conclusive proof of the proceedings of the AGM.
14. The learned Counsel further submitted that even otherwise, none of the resolutions passed in the AGM could be considered to be oppressive to the petitioner as is evident from the following: So far as the resolutions passed in the AGM are concerned, the following points are to be noted:
(i) The amendments in the Articles of Association were carried out by the shareholders as per the request of the petitioner itself vide its letters dated 26.5.2005.
(ii) Ther old Article 127 was in respect of appointment of Chairman of the nominee of BSI or its affiliate with the consent of TCIL (petitioner). Since Article 110 of the respondent company already provides for the appointment of Chairman by its Board of Directors, this article was removed with the consent of all the members. Similarly, the old Article 128 empowered its Board of Directors to appoint a person as its CEO based on the nomination received from TCIL (petitioner) with the consent of BSI or its affiliate. This article was also removed with the consent of all the directors and shareholders in view of difficulty in getting nomination and consent of the members. In the amended Article at 127, the Board has been given power to appoint a Managing Director and in amended; Article 128, the Board has been authorized to define the power of the Managing Director. The above changes are not prejudicial to any member or against the interest of the respondent company. The name of the respondent company has been changed from TCIL BELLSOUTH LIMITED to TBL INTERNATIONAL LIMITED which is again without prejudice to any member.
(iii) The members present voted against the resolutions reappointing Mr. G.D. Gaiha and Mr. Chandrashekher A.K. as director in the respondent company. Needless to say that this is absolutely in accordance with the provisions of the Companies Act which in any case cannot be considered as oppression. In any case these persons have not been attending the Board Meetings consecutively for the last three meetings.
15. In so far as the affidavit of the 3rd to 5th respondent, the learned Counsel submitted that they have not produced any evidence to show that the adjourned meeting was held and that all the resolutions were defeated. Therefore, their affidavit cannot be relied on and the fact is that with their participation, all the resolutions were carried through in the AGM on 30.9.2005.
16. In rejoinder, Shri Gupta submitted: The contention of the learned Counsel for the respondents that the declarations sought can be given only by a civil court and not by the Company Law Board has no substance. In terms of Section 397 read with Section 402 of the Act, this Board has the power to pass such orders as it may deem fit to put an end to the acts complained of including making such declarations as it deems fit. Similarly, the contention that majority cannot file a petition under Sections 397/398 is also fallacious. In Ramashankar Prosad v. Sindri Iron Foundry Pvt. Ltd. , the court has held that since in terms of Section 399, only a lower limit but not an upper limit has been fixed for filing a petition under Sections 397/398, of the Act, even a majority shareholder can institute a proceeding under these sections. Likewise in Tea Brokers Pvt. Ltd. v. Hamendra Barooah 1998 5 CLJ 463 Cal, the petition has been filed by majority shareholder alleging that they have been converted into a minority by acts of the then existing minority shareholders. In so far as the stand of the respondents that since the petitioner has expressed its intention to disinvest, it should be directed to sell shares to the respondents is concerned, the same cannot be taken cognizance of by this Board. The petitioner has only called for invitation of expressions of interest for disinvestments advisors and valuation agents for petitioner's disinvestments of holding in TBL. It does not mean that the petitioner has already decided to disinvest its shares in the company. As a matter of fact till date TCIL has not received any bid from potentional bidders to acts as disinvestments advisors. No disinvestments can take place without appointment of a advisor as per the guidelines of Government of India. Further, the petitioner has filed this petition alleging oppression and mismanagement in the affairs of the company and this petition has to be heard on merits and the respondents being in minority cannot demand to purchase the shares held by the petitioner which holds the largest percentage of shares in the company. In Dale & Carrington Investment P Ltd. v. P.K. Prathapan , the Supreme Court has held that a majority cannot be directed to sell its shares to the minority. In so far as the contention that no case has been made out for winding up of the company on just and equitable grounds is concerned, admittedly, the company is in the nature of a quasi partnership wherein each partner has been given some rights and when the exercise of such rights is denied, the company can be wound up on just and equitable grounds.
17. I have considered the pleadings and arguments of the counsel. The respondents have raised the issue that majority cannot file a petition under Sections 397/398. The leaned counsel for the petitioner has relevantly cited the cases of Tea Brokers and Sindri Iron Works Limited wherein it has been held that even majority could file a petition under these Sections. A reading of these Sections themselves would indicate that these Section do not talk of minority or majority. While Section 397 deals with cases of oppression, Section 398 deals with mismanagement in the affairs of a company without making any reference to whether the oppression or mismanagement has to be by the majority or minority. It is only Section 399 which prescribes the qualification and as long as the petitioner qualifies in terms of this Section, the petition is maintainable irrespective of whether he is a minority or majority. In the present case, the petitioner holds over 44% shares in the company and as such satisfies the provisions of Section 399. Even otherwise, even though the petitioner is the largest shareholder in the company, it holds only 44.9 shares and a such cannot be considered to be the majority not withstanding the support of the 3rd to 5th respondents.
18. In so far as the contention that this Board has no powers to make declarations, being the prerogative of civil courts, this contention is not sustainable. The reliance of the respondents on Mohanlal case on this point is misplaced. In that case, in paragraph 49 of the judgment, the court has only held that if an action of the directors is illegal or invalid, the company and the shareholders may take appropriate action in a court of law challenging the validity of such action, but a petition under Sections 397 or 398 is not an appropriate remedy for the purpose. In the same paragraph, the court has further held that even a decision in accordance with law, if found to be oppressive or prejudicial to the interest of a company, then such decisions can be struck down by the court under Section 397 or Section 398. In the present case, the petitioner has challenged certain decisions taken in the board meetings and the AGM as not only being in violation of Articles but also as oppressive. In terms of Section 402 of the Act, if declarations are necessary to put an end to the acts complained of, such a declaration could be made by this Board. Therefore the objection that the Board has no power to make declaration is not sustainable.
19. The next preliminary contention of the respondents is that since the petitioner has expressed its intention to disinvest, it should be directed to sell its shares to the respondents and there is no need to adjudicate on the petition. It is to be noted that the main contention of the petitioner in this petition is that it has the right of management in the company by appointing the CEO and the assertion of this right has nothing to do with its intention to disinvest. As a matter of fact, if its right as claimed is upheld, the value of its shares would go up. Further even if the petitioner were to disinvest after following the due process established by the Government, the respondent could always participate and the process of disinvestment cannot be short circuited as sought for by the respondents. As a matter of fact the granting of such a relief, as held by the Supreme Court in Dale and Carrington case would amount to putting a premium on conduct of oppression, if established.
20. Before I deal with the merits of the case, it would be relevant to extract the Articles in question. Article 127 reads "The board of directors shall have a Chairman. As long as BSI are one of his affiliate shall continue to own any share, the Chairman shall be designated by BSI or its affiliate in mutual agreement with TCIL ". Article 128 reads " The President shall be the Chief Executive Officer of the company ana shall give general supervision and direction to the daily affairs of the company, subject to the direction of the board of directors. As long as TCIL shall hold any shares, the board of directors shall appoint as President the person nominated by TCIL in mutual agreement with BSI or its affiliate
21. From the present proceeding and also from the other proceeding, it is apparently clear that the disputes between the parties have arisen out of knee jerk reactions of the parties on matters which could have been easily resolved by mutual discussions. The genesis of the dispute as it appears from all the proceedings, is the direction of TCIL to Shri Sinha to hand over the charge of CEO to Shri Jolly. The admitted fact is that Shri Sinha was en executive of TCIL on deputation as CEO of TBL. It is also an admitted fact, that he had expressed his desire on 6.6.2005 to resign from TCIL effective from 6.8.2005. Therefore, as rightly pointed out by TCIL, in its e-mail to Dr Indu Singh on 8th June, (Annexure at Page 114 of the petition), it would not have been proper to continue him as the CEO of TBL after the date of letter of resignation . In this circumstance, no fault could be found in the direction of TCIL to Shri Sinha to hand over charge to some on else immediately, in the present case to Shri Jolly. Immediately thereafter, TCIL also sent an e-mail to Dr Indu Singh on 8.6.2005 as follows: "Sudhir Saxena CEO TBL has submitted his resignation today. Being on the roles of TCIL, I do not think it proper after his resignation to retain him in TBL. We accordingly requested our senior officer Mr. A.K. Jolly, Group General Manager to take charge in TBL immediately, recall him Mr. Saxena to rejoin TCIL till his release after expiry of is notice period. Mr. Jolly will be shortly contacting you for help and cooperation. He will continue to carry out all on going projects and orders on hand and submit his plans to TBL Board for approval. Mr. Jolly's CV in brief is as follows: ....I belief you have given your convenient date for next TBL board meeting as 30th June". By a communicated dated 27.6.2005 addressed to CMD of TCIL, Dr. Indu Singh, expressing his objection to the appointment of Shri Jolly in strong terms also referred to Article 128 to state that TCIL could not have taken the unilateral action without the consent of the board of directors of TBL (Annexure A-7). Thereafter, by an office note dated 28.6.2005, Dr. Indu Singh issued directions for taking away the car provided to Dr. Jolly and also the office room allotted to him. This action provoked TCIL to file a suit seeking for appropriate directions. Further, by repatriating Shri Thangavelu, who was a joint signatory to bank operations, to TCIL, the petitioner was excluded from participating in the financial operation of the company, which resulted in TCIL writing to the bankers to operate the bank accounts.
22. However, the conduct of TCIL also in demanding that only a particular person to be appointed as President/CEO is not in accordance with Article 128, according to which, the consent of the 2nd respondent is necessary and therefore when as per the decision taken in the board meeting held on 30.6.2005, the company wrote to TCIL to suggest 3 names for taking consent of the 2nd respondent, TCIL should have proposed 3 names instead of insisting that the only person nominated by it should be appointed as the President. No consent can be forced. This attitude of TCIL perhaps forced the 2nd respondent to propose deletion of Article 128. However, in view of what has transpired later regarding the appointment of the President, the entire issue has now become historical and irrelevant and therefore, other than noting that TCIL is also jointly responsible for the long drawn disputes, I close this issue.
23. In so far as the AGM convened on 30th September, 2005 is concerned, from the sequence of events, it is apparently clear that the conduct of Dr. B. Indu Singh had been highly oppressive to the petitioner. First the authorized representative of the petitioner was prevented from attending the meeting in spite of TCIL having informed TBL the Shri Chandrasekar would represent TCIL in the AGM, and this intimation had also been acknowledged by TBL on 22.9.2005. However, Dr. Indu Singh refused to take cognizance of the same when produced during the AGM. In terms of Article 77, where a corporation is a member, the board resolution appointing a person to represent the company duly authenticated by a director or the Secretary could be lodged with the company prior to the meeting or presented at the meeting. According to the petitioner, when Dr Indu Singh demanded a copy of the Board resolution, extract of the circular board resolution duly certified by the CS of TCIL was also produced. This was also not accepted. It is to be noted that there are effectively only 3 shareholders, namely, the petitioner, the 2nd respondent and respondents 3 to 5 as a group. TCIL is the largest shareholder holding 44.9% shares in the company. Therefore, in all fairness, the representative of TCIL, who was also incidentally, a director TBL should have been allowed to participate in the meeting on the basis of the authority produced or in the alternative the meeting should have been adjourned to enable TCIL to produce another resolution, if so required. Failure to do either of these would indicate that Dr. Indu Singh, did not want TCIL to participate in the AGM as with its participation, many of the resolutions having the effect of ouster of TCIL from the management could not be passed. Denial of the legal and proprietary rights of a shareholder to participate in a general meeting, that to an AGM is an act of grave oppression more so, when proposals to deprive him of certain rights vested in him by the Articles were to be considered in that meeting. Therefore, even assuming, as contended by the 2nd respondent that the said meeting was held and resolutions were passed, the meeting itself has to be declared as invalid for the reasons of being oppressive.
24. However, even the factum of holding the meeting is in dispute. While according to the petitioner, corroborated by the 3rd to 5th respondents, the meeting was adjourned, according to the 2nd respondent, the meeting continued and various resolutions were carried through. The admitted fact is that petitioner did not participate. In. terms of Article 68, the quorum for a general meeting is members holding 50% of the total voting power. Therefore, the 2nd respondent holding only 40% shares could not have carried on with the AGM unless respondents 3 to 5 holding 15.1% shares participated in that meeting. Considering the fact that there is already an arbitration proceeding pending between the 3 to 5th respondent and the 2nd respondent, it is inconceivable that the 3rd to 5th respondents could have participated in the meeting in which resolutions which had the effect of the 2nd respondent taking complete control over the company were allegedly passed. Further, if the respondents 3 to 5 did not participate, even the quorum of 5 members would not be present. Therefore, the meeting having been held without a quorum is invalid. Further, according to the alleged minutes, two directors representing TCIL who came up for re-election were voted out by all the members present. Voting out the two nominees of the petitioner holding 44.9% shares in the company itself would be a highly oppressive action especially when it was done after denying the participation of the nominees of TCIL from the meeting. In that meeting Article 127 and 128 were purportedly deleted and in their place new Articles had been purportedly incorporated. By deleting the Article 128 and introducing a new Article, the right of the petitioner to appoint President/CEO had been taken away. Taking away the powers conferred on a shareholding having 44.9% shares, without its consent is itself highly oppressive. Further, after amending the Article, the AGM had purportedly appointed Dr. S.N. Singh, as CEO for 4 years. The cumulative effect of the resolutions allegedly passed in the said meeting is that the petitioner holding 44.9% shares in the company which had all along controlled the management has not only been deprived of that right but has completely been eliminated from participating in the management of the company. It is to be noted that the petitioner is one of the promoters of the company and 2nd respondent came to the company only subsequently by acquiring the shares of another promoter-BSI. Therefore, while it is crystal clear from the averments of both TCIL and 3rd to 5th respondents collectively holding 60% shares that no business was transacted in the AGM, even assuming that businesses transacted in that meeting, as I have noted in the earlier paragraph, none of the resolutions prejudicial to the petitioner could be held to be valid as they are highly oppressive to the petitioner. It has been contended that in terms of Section 194/195 the minutes signed by the Chairman of the meeting is conclusive evidence of the businesses transacted in that meeting. In Section 195 it is specifically provided" that such a presumption could be drawn unless contrary is proved. In the present case, when circumstances have established that no business could have been transacted in that meeting, the question of applying the provisions of these sections does not arise. Therefore, I hold that in the absence of the petitioner and the respondents 3 to 5 the AGM could not have been held for want of quorum and even if it had been held the resolutions passed thereat have no validity. This being the case, Article 127 and 128 will remain as they were before the said meeting and the nominees of the petitioner will continue to function as directors. In this connection, I may also refer to the stand of the 3rd to 5th respondents that the said adjourned AGM was held on 7.10.2005 and all the resolutions were defeated. This stand can not be accepted for want of any documentary evidence.
25. With my finding that no businesses could have been transacted in the AGM held on 30.9.2005 for want of quorum and therefore all the resolutions allegedly passed thereat are invalid, the other issues that remain for a decision are the appointment of the President/CEO and bank operations. During the hearing it was informed that subsequent to the order of Delhi High Court, the petitioner had given a list of 3 names for appointment of President/CEO and the 2nd respondent has given consent for appointment of Shri S.K Verma as the President/CEO. If he has not already taken over charge, he will do so immediately under the authority of this order, which shall be noted and ratified in the next Board meeting. In so far as the bank operations are concerned, I find that in terms of Article 121, the Board has the power to authorize anyone to operate the bank account. Therefore, the first board meeting which should be held within 15 days from the date of this order, the Board may take decision regarding bank operations. Since I have held that the 16 AGM convened on 30.9.2005 has not been held/properly held, I also direct the Board of the company to convene the 16th AGM with such agenda as it may decide, within a period of 45 days. In case, any of the parties desire that the said meeting should be chaired or observed by a nominee of this Board, an application be made after issue of notice for the AGM.
26. The petition is disposed of in the above terms with no order as to cost.