Deepak Kishan Chhabria & Anr vs Orbit Electricals Pvt. Ltd. & Ors on 28 August, 2024

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National Company Law Appellate Tribunal

Deepak Kishan Chhabria & Anr vs Orbit Electricals Pvt. Ltd. & Ors on 28 August, 2024

This Appeal has been filed challenging order dated 31.12.2019 passed by National Company Law Tribunal, Mumbai Bench in MA 1449 of 2019 in CP No.47/NCLT/MB/MAH/2016 ("CP No.47 of 2016") by which Company Appeal (AT) No.64 of 2020 2 order, Application MA No.1449 of 2019 filed by the Appellant in Company Petition No.47 of 2016 has been dismissed. The Appellant aggrieved by the order has come up in this Appeal.

2. Background facts and sequence of events necessary to be noted for deciding this Appeal are:

(i) The parties shall be referred herein with their first name.

Pralhad P. Chhabria (hereinafter referred to as "Pralhad") came to India from Karachi in the year 1945. His brother Kishan P. Chhabria ("Kishan") joined him after two years. They entered into the business of manufacturing of cable and pipes fittings.

(ii) The Appellant No.1 - Deepak K. Chhabria ("Deepak") is son of Kishan and Appellant No.2 - Vini Chhabria ("Vini") is wife of Deepak. Respondent No.1 is Private Limited Company of Chhabria family. Respondent No.2 in the Appeal, Prakash Pralhad Chhabria is son of Pralhad. Respondent No.5 - Aruna Katara is daughter of Pralhad. Respondent No.6 - Kishan K. Chhabria is brother of Pralhad. Respondent No.8 - Vijay Kishan Chhabria is son of Kishan. Respondent No.7 - Priya Chhabria is wife of Vijay Chhabria. Respondent Nos. 3 and 4 are Independent Directors of Respondent No.1. Respondent No.9 - Meena D'Sa is Sr. Vice President - Finance of Respondent No.1, who is in-charge of Board Meetings.

(iii) Both the brothers, i.e. Pralhad and Kishan established Finolex Cables Limited ("FCL") in the year 1974 and Finolex Industries Company Appeal (AT) No.64 of 2020 3 Limited ("FIL") in the year 1981. In the year 2010-2011, it was decided by Pralhad and Kishan to amalgamate 14 investment companies into Respondent No.1 on the basis of concern received from various market advisories. The High Court of Judicature at Mumbai approved the scheme of amalgamation vide order dated 29.07.2011 between 14 of such investment companies as Transferors and Respondent No.1 as the Transferee Company. Consequent to amalgamation between the investment companies, the share ratio between Pralhad and Kishan was computed as 88.10% to Pralhad and 7.30% to Kishan as per swap ratio of shareholding in investment companies.

(iv) Kishan claimed that it was orally agreed between the family to equal distribution of shareholding in Orbit. A letter dated 21.07.2011 was issued by Pralhad, denying existence of any family arrangements between them. A letter was again sent by Kishan to Pralhad asserting arrangement of 50% rights, which was denied by Pralhad. On 11.10.2011, an MoU was executed between two listed Companies being FCL and FIL, in which Clause-5 provided that both the Companies shall not utilize their voting right to each other to displace or remove Prakash from the Post of Managing Director or to which he may be elevated to in FIL and Deepak from the post of Managing Company Appeal (AT) No.64 of 2020 4 Director or any other higher to which he may be elevated to in FCL.

(v) On 12.03.2012, Pralhad formed a private Trust by executing Trust Deed known as Pralhad Chhabria Trust ("PC Trust")by settling a sum of Rs.11,000/- on the Trust. The beneficiary of Trust was Pralhad for his life time. Post Pralhad's death, the beneficiaries were named to be person from Pralhad and Kishan family. The beneficiaries included - Aruna Katara, daughter of Pralhad; Deepak and Vijay sons of Kishan; and Prakash, son of Pralhad.

(vi) On 15.03.2012, Pralhad gifted 4,274 equity shares of Orbit each held by him to Prakash and Aruna, son and daughter of Pralhad. On 15.03.2012, Pralhad also transferred 10 shares of Orbit to PC Trust. On 20.08.2012, a Supplementary Trust Deed was executed.

(vii) On 28.08.2012, Orbit passed a Board Resolution introducing Article 59 in Articles of Association (hereinafter referred to as "AoA"), which stipulates authority to represent the Orbit after Pralhad ceases to be Director in various Finolex Group Companies.

(viii) On 15.10.014, Pralhad executed a 'WILL'. The WILL contained arrangement of the family and also contemplated that all the properties will be bequeathed to the respective persons stated in the WILL, if and only they are not disposed of by Pralhad till Company Appeal (AT) No.64 of 2020 5 his death and Pralhad continue to own them as on date of the WILL. In event Pralhad dispose of any of the properties before his death, the concerned legatee will not claim or have any right in respect of such property or on its sale proceeds.

(ix) A Notice dated 26.03.2016 was received by Deepak regarding holding of Board Meeting of Respondent No.1 on 31.03.2016.

(x) On 28.03.2016, Pralhad executed a Gift Deed, gifting 100,300 shares to his son Prakash. On 28.03.2016, a Share Transfer Certificate was also executed by Pralhad, transferring 100,300 shares of Orbit to Prakash.

(xi) On 31.03.2016, Deepak visited the venue of Meeting and signed the attendance sheet.

(xii) The case of the Appellant is that Deepak after signing, left and he had conversation with Ms. Meena D'Sa, which conversation was recorded by Deepak. According to the Appellant, Board meeting was not held on 31.03.2016. The case of the Respondent is that Board Meeting was held on 31.03.2016 and Board passed a Resolution approving the transfer of 100,300 shares of Pralhad to Prakash. Share Transfer Form also bore the stamp. The stamp duty of Rs.3.60 crores was paid on Share Transfer Form. In the Meeting held on 31.03.2016, several other agenda items were approved, which included, purchase of 61,00,000 shares of I2IT Pvt. Ltd. from FCL.

(xiii) Pralhad Chhabria died on 05.05.2016.

Company Appeal (AT) No.64 of 2020 6

(xiv) On 21.06.2016, Board Meeting of Respondent No.1 took place, where the Minutes of Meeting dated 31.03.2016 were confirmed.

(xv) On 16.11.2016, the Appellant filed a Company Petition No.47 of 2016 alleging 'oppression' and 'mismanagement' in Respondent No.1 under Section 241 and 242 of the Companies Act, 2013.

(xvi) The AGM of Respondent No.1 was to convene on 21.11.2016 and an Application for interim relief was filed by the Appellant in Company Petition No.47 of 2016 praying for restraining the holding of the AGM. On 18.11.2016, the interim order was passed by Adjudicating Authority, directing for conducting of AGM of 21.11.2016 and discussing the ordinary business of Respondent No.1 Company. However, the restraint order was issued with regard to special business through which a sum of Rs.12 crores is to be alienated to an institution and further sum of Rs.9.90 crores was to be written off.

(xvii) Civil Suit No.1418 of 2016 was filed by Appellant No.1 for enforcement of oral family arrangement and cancellation of Gift Deed dated 28.03.2016.

(xviii) An AGM of Respondent No.1 was fixed for 25.09.2018 to take a decision of re-appointment of Chairman of FCL, since Deepak five years' tenure had expired.

Company Appeal (AT) No.64 of 2020 7 (xix) In Suit No.88 of 2016, filed by Deepak in Pune District Court, an Application for interim injunction was filed by Deepak. In the interim injunction, the Plaintiff sought injunction against Defendant Nos.1 to 3 from jointly and/or severally through Defendant No.3 abstaining from voting or voting in any manner against re-appointment of Deepak as Executive Chairman of FCL. The Civil Judge, Sr. Division vide order dated 19.09.2018, rejected the interim injunction Application filed by Plaintiff - Deepak. Against the order dated 19.09.2018, rejecting the interim relief, Deepak filed an Appeal before the Bombay High Court. Bombay High Court vide its order dated 21.09.2018, held that 'let the Board Meeting take place on 22nd September, 2018 and it would be subject to the decision of this appeal'.

(xx) AGM of Respondent No.1 took place on 22.09.2018. The Board passed Resolution that Orbit would vote against Deepak's re- appointment at FCL's AGM, which is to be held on 25.09.2018. Deepak, despite the Board Resolution of Orbit to vote against re-appointment of Deepak as Executive Chairman of the FCL, voted in favour of re-appointment as Executive Chairman of FCL, despite Orbit i.e. a 30.7% shareholder of FCL. After the above requisition was given by Prakash, who is a shareholder, holding 74.52% of Orbit's equity share to requisition an Extra Ordinary General Meeting ("EOGM") of Orbit's shareholders for Company Appeal (AT) No.64 of 2020 8 the purpose of passing Resolution to delete existing Article 59 of the Articles of Association ("AoA")and replace the same and delete Article 60.

(xxi) In the Meeting of Board of Directors of the Orbit, a Resolution was passed on 03.04.2019, calling for EOGM of Respondent No.1. Notice agenda dated 09.04.2019 was issued, convening the EOGM of Respondent No1, which notice contained a 'Special Business' at Item No.1, amendment of Article 59 of the Articles of Association of Company and Item No.2 - Deletion of Article 60 from the Articles of Association of the Company. (xxii) On 12.04.2019, MA No.1449 of 2019 was filed by the Appellant in Company Petition No.47 of 2016. In the Application various prayers were made by the Appellant, including staying of the EOGM of Orbit on 03.05.2019. One of the prayers in the MA was also to stay the implementation of Resolution passed in the EOGM meeting proposed to be held on 03.05.2019. It is to be noted that Deepak had also filed an Application in Suit No.1418 of 2016 praying for injunction restraining the Defendants from any way altering the provision of Articles of Association as of 30.09.2014. The Pune District Court on 01.12.2020 rejected the application for interim injunction filed by Deepak in the suit.

(xxiii) MA No.1449 of 2019 came for consideration before the NCLT, 01.05.2019 was the date fixed for hearing, but on the said date Company Appeal (AT) No.64 of 2020 9 NCLT informed that it being pre-occupied with some urgent work, cannot take up the matter and it was observed that even if the Meeting is on 03.05.2019 approving the proposed amendment, the decision of the amendment shall be subject to objection to be raised on the next date of hearing already listed for 07.05.2019. MA No.1449 of 2019 ultimately was heard and order was reserved.

(xxiv) Orbit issued Notices for Board Meeting, acting upon the amended Article 59.

(xxv) MA No.3057 and 3058 of 2019 was filed in MA No.1449 of 2019 for urgent interim relief. On 13.09.2019, the NCLT declined to grant any interim relief in MA No.3057 and 3058.

(xxvi) In September - October 2019 MA No.1449 of 2019 was heard and reserved for orders. On 31.12.2019, NCLT passed the impugned order, dismissing MA No.1449 of 2019. Aggrieved by which order this Appeal has been filed under Section 421 of the Companies Act, 2013.

3. In this Appeal pleadings were completed and order was reserved on 21.09.2023. While reserving the judgment, the earlier Bench directed the parties to maintain Status Quo as was available prior to EOGM dated 03.05.2019 till the judgment is delivered by the Tribunal. Against the order dated 21.09.2023, Civil Appeal No.6108 of 2023 was filed by Respondent No.1 - Orbit Electricals Pvt. Ltd. AGM of FCL was to take place on 29.09.2023, the Hon'ble Supreme Court vide its order dated 26.09.2023 Company Appeal (AT) No.64 of 2020 10 vacated the interim order passed by this Tribunal while reserving the judgment on 21.09.2023. The Hon'ble Supreme Court noticed in the order dated 26.09.2023 that any action, which is to be taken on proposed Resolution No.4 pertaining to the appointment of the Executive Chairman of FCL in the AGM, shall be subject to the outcome of the Appeal which is pending before this Tribunal. After 26.09.2023 order of the Hon'ble Supreme Court, the AGM of FCL took place on 29.09.2023 and voting was concluded, but the Scrutinizer, who has to submit a Report on e-voting conducted on 29.09.2023, did not declare the result. In Civil Appeal No.6108 of 2023, a Contempt Application was filed impleading Deepak and Scrutinizer. On 13.10.2023, in the morning session, in the Contempt Petition, the Hon'ble Supreme Court passed an order issuing notice in the Contempt Petition and further directing that the Scrutinizer shall in compliance with the order of the Hon'ble Supreme Court dated 26.09.2023, to declare the result of AGM, which was held on 29.09.2023 forthwith and NCLAT shall proceed to declare its judgment after it is duly apprised of the fact that the result of the AGM has been declared. The judgment was delivered by this Tribunal on 13.10.2023 in this Company Appeal (AT) No.64 of 2020, ignoring the order dated 13.10.2023 passed by the Hon'ble Supreme Court in the morning session, i.e., before the Scrutinizer submitted its Report, the judgment was delivered by this Tribunal. The Scrutinizer submitted its Report on 13.10.2023 at 02:40 P.M. declaring the voting result on Item No.4, which Item was for re-appointment of Mr. Deepak Chhabria as a whole time Director designated as Executive Company Appeal (AT) No.64 of 2020 11 Chairman of the Company for period of five years w.e.f. 01.07.2023 to 30.06.2028. The voting on the Resolution was only 27.66% in favour, where as 72.34% votes were against the Resolution.

4. The Contempt Application No.1195 of 2023 came before the Hon'ble Supreme Court on 30.10.2023 for hearing. After hearing the Contempt Application, the Hon'ble Supreme Court set aside the judgment of this Tribunal dated 13.10.2023, having been held to be passed in violation of the Hon'ble Supreme Court order dated 13.10.2023. The Hon'ble Supreme Court also made the observation that Scrutinizer has acted in concert with Deepak Kishan Chhabria to delay the declaration of the result of the AGM, effectively in breach of the directions that were issued by the Hon'ble Supreme Court on 26.09.2023. The Hon'ble Supreme Court directed Deepak Kishan Chhabria to pay a sum of Rs.one crores to the Prime Minister's Relief Fund and Scrutinizer was directed to pay a sum of Rs. ten lakhs to the Prime Minister's Relief Fund. The Hon'ble Supreme Court further directed in the judgment that proceedings in the Appeal shall be listed before a Bench presided over by the Chairperson for hearing and final disposal of the Appeal. The Hon'ble Supreme Court further observed that "We have not made any observations on the merits of the rival contentions"

and the proceedings was disposed of.

5. It was after the order of the Hon'ble Supreme Court dated 30.10.2023, this Appeal has been listed before this Bench for hearing. The hearing of the Appeal was fixed in post lunch sessions from 29.07.2023 to Company Appeal (AT) No.64 of 2020 12 02.08.2024. Hearing was completed on 02.08.2024, on which date judgment was reserved.

6. We have heard Shri Ramji Srinivasan, learned Senior Counsel appearing for the Appellants; Shri Janak Dwarkadas, learned Senior Counsel appearing for Respondent No.1; and Shri S.N. Mukherjee, learned Senior Counsel appearing for Respondent No.2.

7. Shri Ramji Srinivasan, learned Senior Counsel submits that Board Meeting dated 31.03.2016, in which it is clamed that 100,300 shares were transferred by Pralhad in favour of his son Prakash was never held. It is submitted that no Agenda Item for the Board meeting dated 31.03.2016 was received by the Appellant, which would have contained any Agenda Item pertaining to transfer of shares by Pralhad in favour of Prakash. It is submitted that as per AoA, no member of Pralhad family or Kishan family can transfer any shares without notice to the Board. It is submitted that the Appellant - Deepak went to the venue of the Meeting and also met Meena D'Sa and had conversation with her, which conversation was recorded and filed by the Appellant. No Member of the Board being present, the Appellant returned after signing the attendance register. Transfer of shares of 100,300 in the Board Meeting dated 31.03.2016 is wholly illegal and against the AoA and it was on the basis of the said transfer of shares that Prakash is now claiming to yield majority shareholding and has been convening the AGM's and passing various Resolution on the strength of the shares, which have been illegally transferred to Prakash. It is submitted that the Gift Deed dated 28.03.2016, by which Prakash claims to have Company Appeal (AT) No.64 of 2020 13 received 100,300 shares is insufficiently stamped, which document is under adjudication of the Stamp Authorities. It is submitted that the Appeal arises out of the order dated 31.12.2019, which was passed in MA filed by the Appellant in MA No.1449 of 2019. It is submitted that Resolution passed in the Board Meeting dated 03.05.2019, amending Article 59 and deleting Article 60 is contrary to the provisions of AoA and against the Companies Act, 2013. It is submitted that Article 59 and Article 60 as it existed in the AoA were amended and added by Board Resolution dated 30.09.2014 under the Chairmanship of Pralhad. The Articles 59 and 60 are entrenched Articles within the meaning of Section 5, sub-section (4) of the Companies Act, 2013 and the amendment dated 30.09.2014 by which Articles 59 and 60 were brought in the AoA were unanimously passed and in the meeting dated 03.05.2019 held by the AGM Resolution for amending Article 59 and deleting Article 60 was not unanimously passed, since the Appellant - Deepak has dissented the Resolution. Hence, the amendment of Article 59 and deletion of Article 60, cannot be held to be in accordance with law. The Resolution passed in the Meeting dated 03.05.2019, being illegal and contrary to the provisions of AoA and the Companies Act, 2013, the Adjudicating Authority committed error in rejecting MA No.1449 of 2019, whereas sufficient case has been made out by the Appellant to restrain the Board Resolution amending Article 59 and deleting Article 60. It is submitted that the Civil Suits filed by Deepak being Civil Suit No.1418 of 2016 was based on the family arrangement and the Gift Deed dated 28.03.2016 and the rejection of interim injunction Company Appeal (AT) No.64 of 2020 14 application therein has no bearing on Company Petition No.47 of 2016, which was filed for oppression and mismanagement and the reliance of Adjudicating Authority in the impugned order, on the order passed in the Civil Suit has no bearing. The observation of the Adjudicating Authority that transfer of shares in favour of Prakash was duly approved, is not in accordance with law. Transfer of shares is not in accordance with AoA. The Adjudicating Authority also failed to consider that Articles 59 and 60 could not have been amended. The observation of the Adjudicating Authority that there is no evidence to establish that Articles 59 and 60 are entrenched Articles is erroneous. The said amendments were carried by Pralhad in the Meeting headed by Pralhad himself, who amended the Articles to bring the same in accord with Section 5, sub-section (4) of the Companies Act, which Resolution was passed on 30.09.2014 unanimously by all the Members present. The Adjudicating Authority also committed error in holding that since, only because Resolution on 03.05.2019 was passed by majority of Members, who have attended the Meeting, the same is in accordance with law based on the norms of corporate democracy. The Adjudicating Authority further erred in observing that Applicant, who is in minority, having minimal percentage of shareholding, their case ought to be rejected. It is submitted that there is no conflict in Section 113 of the Companies Act and Article 59 of AoA. It is submitted that Trust was created by Pralhad on 12.03.2014, which was in recognition of equal rights of both the Group, i.e. Pralhad Group and Kishan Group. On the death of Pralhad, entire shareholding of Pralhad required to be transmitted to the Trust and Company Appeal (AT) No.64 of 2020 15 no voting rights could have been exercised by Prakash in pursuance of alleged transfer of shares allegedly approved on 31.03.2016. The Gift Deed, which is insufficiently stamped and is under adjudication, cannot be relied for any transfer of shares. It is submitted that Company Petition, which was filed by the Appellant in the year 2016, has not proceeded on account of various dilatory tactics adopted by the Respondent. It is submitted that the Respondent, who filed an Application on maintainability of the Company Petition, when the Company Petition was to be heard, which Application came to be rejected on 05.12.2018 by the NCLT against, which an Appeal was also filed by the Respondent, which too was dismissed on 13.03.2019 and this Tribunal has directed for expeditious hearing of the Company Petition, which Company Petition is still pending and has not yet been decided. It is submitted that Company Petition was based on oppression and mismanagement against the Appellant and all subsequent act on the strength of the illegal transfer of shares, cannot be recognized and Adjudicating Authority committed error in rejecting IA No.1449 of 2019 filed by the Appellant. The Adjudicating Authority was required to declare the Resolution passed in the AGM dated 13.05.2019 as illegal and ought to have restrained the implementation of the Resolution. On the strength of Resolution dated 13.05.2019, subsequently Article 59 was amended by the Respondent to the prejudice of the Appellant. It is again reiterated that orders passed by District Court and the Bombay High Court arising out of interim injunction application in the suits filed by Deepak and Vijay, are not relevant for deciding the Company Petition No.47 of 2016 and reliance Company Appeal (AT) No.64 of 2020 16 on the said order is wholly inappropriate. It is submitted that order passed by Adjudicating Authority deserves to be set aside and the Appeal be allowed.

8. Shri Janak Dwarkadas, learned Senior Counsel appearing for Respondent No.1 contends that the submission of the Appellant that there was any family arrangement between the two Groups, i.e., Pralhad Group and Kishan Group that their shareholding has to be equal, is wholly incorrect. There was neither any understanding or family arrangement that both Group should have equal shareholding. Shri Janak Dwarkadas has referred to letters, which were written by Kishan to Pralhad, claiming that KPC family should get 50% benefit, which letters were immediately replied by Pralhad claiming on 21.07.2011 and 08.08.2011 denying any such existence of any family arrangement. It is submitted that the correspondence between Kishan and Pralhad are part of the pleadings in the suit No.1418 of 2016, which has been filed by Deepak himself. It is submitted that MoU dated 11.10.2011 relied by the Appellant in no manner helps the Appellant in the present case. The MoU was executed on behalf of FCL by Deepak and by Prakash on behalf of FIL and at the time of execution of MoU, Deepak has only 0.06% shareholding in FCL and Prakash has 0.12% shares. Both FCL and FIL are not party to the present proceedings, hence MoU is wholly irrelevant. It is submitted that Trust Deed dated 12.03.2012 is a private Trust by Pralhad and Pralhad continued to be beneficiary to the Trust during his life time. It is post Pralhad death that beneficiary are named. Pralhad was fully entitled to deal with the Company Appeal (AT) No.64 of 2020 17 shares during his left time. Even after execution of the Trust Deed dated 12.03.2012, Pralhad has gifted 4,274 equity shares of Orbit each to Prakash and Aruna, which is a clear pointer that Pralhad was owner of shares of Orbit and he dealt with transfer of shares even after execution of Trust Deed. It is further submitted that in the Trust only 10 shares were transferred by Pralhad on 15.03.2012. With respect to the WILL dated 15.10.2014, it was contended that WILL itself clearly provided that properties will belong to the respective person, if only they are not disposed of by Pralhad till his death. WILL clearly contemplate that Pralhad shall continue to be owner of the shares and other assets. Learned Counsel further submits that WILL, which has been relied by the Appellant and is subject matter in Civil Suit filed by Deepak and Vijay, the same cannot be relied as the same is disputed and pending adjudication. Replying to the allegation of the Appellant that there was no valid transfer of shares in favour of Prakash by Pralhad on 28.03.2016, it is contended that transfer of shares was effective by signing the Transfer Form by Pralhad on 28.03.2016, which Transfer Form was duly stamped. Pralhad had every right to gift 100,300 shares to his son, since the Pralhad was owner of his shares for his life time. The Board Meeting was held on 31.03.2016, where Appellant has also signed and the Board has approved the transfer of shares in favour of Prakash by Pralhad. Pralhad also resigned as Chairman and nominated the Prakash as the Chairman. The Minutes of the Meeting dated 31.03.2016 were further ratified on 21.06.2016. The Deepak's allegation that Board Meeting was not held is wholly incorrect. It is Company Appeal (AT) No.64 of 2020 18 submitted that the present Appeal arises out of the order dated 31.12.2019 passed by NCLT and hence, the issue in this Appeal is to the correctness of the order dated 31.12.2019, which in turn relates to the Meeting of EOGM held on 03.05.2019. It is submitted that in the Meeting, Orbit Board on 22.09.2018 has passed a Resolution against Deepak's re-appointment. However, contrary to the Board's Resolution, Deepak has proceeded to vote in favour of himself for re-appointment as Executive Chairman in FCL and succeeded his re-appointment for five years from 01.07.2018 to 30.062023. The decision of Board, is a decision of Board of Respondent No.1. When the Board has resolved that Deepak should vote against re-appointment, Deepak had no jurisdiction to vote in favour of his re-appointment. Deepak has erroneously perpetuate his position in FCL, despite Orbit 30.7% shareholder not wanting him to remain its whole time Director/ Executive Chairman. The requisition Notice was given by Prakash, who was holding 74.52% of Orbit equity shares, to convene an EOGM to amend the Article 59 and delete Article 60. Notice of the EOGM was issued on 09.04.2019, which was challenged by MA No.1449 of 2019. EOGM was convened on 03.05.2019 where two special business Resolutions were passed with requisite majority for amendment of Article 59 and deletion of Article 60.

9. Shri S.N. Mukherjee, learned Senior Counsel appearing for Respondent No.2 has advanced submissions with regard to amendment of AoA as was approved on 03.05.2019. Shri Mukherjee submits that Article 59 and Article 60, which were brought by amendment dated 30.09.2014, cannot be held to be entrenched Articles, within the meaning of Section 5 Company Appeal (AT) No.64 of 2020 19 sub-section (4) of the Companies Act, 2013. It is submitted that the Minutes of the Meeting dated 30.09.2014, indicate that Special Resolution was passed for amendment and out of thirteen Members, only four Members were present in the Meeting dated 30.09.014 and for Article to be entrenched Article, the amendment has to be approved by all the Members of the Company. The Resolution dated 30.09.2014 was not passed by all the thirteen Members, who were the Members of the Orbit on 30.09.2014. Hence, it cannot be said that amendment was as per Section 5, sub-section (4). By virtue of the provisions of the Companies Act, the AoA, in the EOGM held on 03.05.2019, the Article 59 was amended and Article 60 was deleted. The learned Counsel for Respondent has referred to Form MGT-14, which was sent on 30.09.2014, informing about the amendments in AoA, which Form clearly mentions that amendment was made by Special Resolution. The Form also clearly indicate that Resolution was a Special Resolution for alteration of Articles, under Section 14 of the 2013 Act and there was no reference of Article 5. It is submitted that there was no foundation made in MA 1499 of 2019 that Articles 59 and 60 are entrenched Articles, which submission was advanced only at the time of hearing of the Application. The scope of this Appeal is limited to the extent of order dated 31.12.2019, which is subject matter of challenge in the Appeal. The validity of transfer of 100,300 shares from Pralhad is not an issue in this Appeal, which is pending consideration before the NCLT in Company Petition No.47 of 2016. The validity of the Board Meeting dated 31.03.2016 is subject matter of the Company Petition No.47 of 2016, while the validity of the Gift Deed is Company Appeal (AT) No.64 of 2020 20 subject matter of Civil Suit No.1418 of 2016, which, suit was filed by the Appellant himself. The order impugned has been passed by the Adjudicating Authority after considering all relevant submissions and pleadings of the parties, which order, does not warrant any interference.

10. We have considered the submissions of learned Counsel for the parties and have perused the records.

11. Before we proceed to enter into rival submissions of the parties, we need to notice the prayers in the Appeal and the scope of the Appeal. In the Appeal, following reliefs have been prayed:

"(a) Set aside the Impugned Order dated 31st December 2019;

(b) To pass necessary orders and/or directions to stay the implementation of resolutions purportedly passed at the EoGM dated 3rd May 2019, till the final hearing of the Company Petition, and also the votes cast contrary to the provisions of Article 59 and in furtherance of the resolution passed by the Board of Respondent No.1 on 14th September 2019, at the AGM of FCL;

(c) Interim and ad-interim reliefs in respect of prayers clauses (a) to (b) hereinabove;

(d) Any other appropriate order(s) as this Hon'ble Appellate Tribunal deems fit and proper, to protect the interests of Appellants and in the interest of justice, equity and good conscience."

12. From the prayers made in the Appeal, it is clear that the Appellant prayed to set aside order dated 31.12.2019 and to stay the implementation of the Resolution passed in EOGM dated 03.05.2019 till the final hearing of the Company Petition. The Adjudicating Authority in the impugned order has also observed that MA No.1449 of 2019 has a limited scope of Company Appeal (AT) No.64 of 2020 21 adjudication and while adjudicating MA No.1449 of 2019, the merits of the main petition must not be influenced in any manner to cause prejudice to either of the litigants. In paragraph 17 of the impugned order, the Adjudicating Authority made following observations:

"17. To conclude, it is pertinent to place a finding on record that the main Petition i.e. C.P.47/241-242/NCLT/MB/2016 is yet to be decided. Thus, this Application has a limited scope of adjudication so that the merits of the main petition must not be influenced or in any manner may cause prejudice to either of the litigants. While deciding this Misc. Application we have taken due care and hereby clarify that the bone of contention as per this Application was pertaining to a Meeting held on 03.05.2019, which according to us deserves to be approved and at this stage no interference is required."

13. The order of the Adjudicating Authority dated 31.12.2019 is under challenge, where the prayers made in MA No.1449 of 2019 were rejected and the Adjudicating Authority has approved the meeting dated 03.05.2019. The learned Counsel for both the parties have also mainly addressed their submission, keeping in mind limited scope of the Appeal.

14. From the submissions of the parties and the materials on record, following questions arise for consideration in this Appeal:

(I) Whether the amendments made in the Articles of Association in Extra Ordinary General Meeting held on 30.09.2014 amending Article of Association, Article 59 and Article 60 were to be treated to be entrenched Articles as referred to in Section 5, sub-sections (3) and (4) of the Companies Act, 2013?

Company Appeal (AT) No.64 of 2020 22

(II) Whether the amendment of Articles 59 and deletion of Article 60 could be done by a special Resolution as passed in the AGM dated 03.05.2019 or for amendment of Article 59 and deletion of Article 60, requirement was that all Members of the Company to agree for amendment, i.e., all 12 Members as existing on the relevant date?

(III) Whether the Adjudicating Authority committed error in approving the meeting held on 03.05.2019 by the impugned order?

(IV) Whether nominee under Section 113 of the Companies Act is bound to exercise his powers as per the decision of Board of the Company?

(V) Whether the result of the Annual General Meeting held on 29.09.2023 on Resolution No.4 with regard to reappointment of Deepak as Executive Chairman of the FCL need to be interfered with in this Appeal?

(VI) The relief, if any, to which the Appellant is entitled to in this Appeal?

Question No.(I)

15. The subject matter of the Appeal is the Resolution passed in EOGM of Respondent No.1 held on 03.05.2019. IA No.1449 of 2019 was filed by the Appellant before the NCLT on 12.04.2019 after the Notice dated 09.04.2019 was issued convening the AGM of the Orbit Electricals Pvt. Ltd. on 03.05.2019. Before we come to the Notice dated 09.04.2019 and the Company Appeal (AT) No.64 of 2020 23 Resolution taken on 03.05.2019, it is useful to notice the prayers made in IA No.1449 of 2019 by the Applicant, which are as follows:

"a) That this Hon'ble Tribunal be pleased to pass necessary orders or direction to restrain the Respondents from acting in furtherance to the Requisition Notice dated 18th March 2019 issued by Respondent No. 2. the illegal Board Resolution passed on 3rd April 2019 and the Notice dated 9th April, 2019 calling for Extra-ordinary General Meeting of Respondent No. 1;

b) That this Hon'ble Tribunal be pleased to pass necessary orders or directions deferring the date of the Extra-ordinary General Meeting proposed to be held on 3rd May 2019 or pass necessary orders restraining Respondents from ding the Extra-Ordinary General Meeting till the final hearing and disposal of the captioned petition,

c) In the Alternate to prayers (a) & (b), this Hon'ble Court be pleased to pass necessary orders or directions staying the implementation of resolution(s) passed in the Extra-Ordinary General Meeting proposed to be held on 3rd May 2019, till the final hearing and disposal of the present petition;

d) That this Hon'ble Tribunal be pleased to restrain Respondent No.2 from exercising any rights, voting rights or otherwise, in respect of 100,300 disputed shares of Respondent No.1 Company, the transfer of which is under challenge before this Hon'ble Tribunal'

d) That this Hon'ble Tribunal be pleased to direct the Board of Respondent No.1 to not to hold any meeting till transfer of 16,619 undisputed shares lying in PPC's name to the Pralhad Chhabria Trust.

f) Interim and ad-interim reliefs in respect of prayer clauses (a) to (e) hereinabove;

h) Any other appropriate order(s) as this Hon'ble Tribunal deems fit and proper, to protect the interests of Applicant No.1 and in the interests of justice, equity and good conscience."

Company Appeal (AT) No.64 of 2020 24

16. The Application MA No.1449 of 2019 came for consideration before the NCLT on 01.05.2019, on which date the Adjudicating Authority directed the Application to be listed for hearing on 07.05.2019. The Adjudicating Authority did not pass any order restraining the convening of meeting on 03.05.2019. The order dated 01.05.2019 passed by NCLT is as follows:

"1. The Learned Senior Advocates of both sides are present.

2. An Application MA-1449/2019 is mentioned for Urgent Hearing today, on the ground that an Extra Ordinary General Meeting of the Respondent No. 2 Orbit Electricals is to be convened on 03.05.2019. The Petitioner is raising objection.

3. Today the Bench is pre-occupied with some urgent work, hence during Chamber discussion with the Senior Lawyers of both sides, it is communicated that even if the Meeting is on 03.05.2019 approving the proposed amendment, the decision of the amendment shall be subject to objection to be raised on the next date of hearing already listed for 07.05.2019.

4. This Application and the Petition shall be heard on 07.05.2019 at 10.30 AM. To be placed FIRST ON BOARD."

17. A Notice for EOGM of Orbit Electricals was issued on 09.04.2019, where under Special Business, Item No.1 and Item No.2 mentions following:

"SPECIAL BUSINESS:

Item No. 1

Amendment of Article 59 of the Articles of Association of the Company To consider, and, if thought fit, to pass the following resolution(s) as a Special Resolution:

"RESOLVED THAT pursuant to the provisions of Sections 5, 14 and other applicable provisions, if any, of the Companies Act, 2013, including any statutory modification or re-

enactment thereof for the time being in force and Rules Company Appeal (AT) No.64 of 2020 25 framed there under, as amended from time to time, the existing Article 59 of the Company's Articles of Association be and is hereby amended to delete the existing Article 59 and to substitute the following Article 59 in place thereof:

*59. The Board of Directors shell:

(a) if it is a member of a company within the meaning of this Act, by resolution of its Board of Directors, authorize such person as it thinks fit to act as its representative at any meeting of the company, or at any meeting of any class of members of the company in which the company is a legal or beneficial owner of securities;

(b) if it is a creditor, including a holder of debentures, of a company, by resolution of its directors authorise such person as it thinks fit to act as its representative at any meeting of any creditors of the company held in pursuance of this Act or of any rules made there under, or in pursuance of the provisions contained in any debenture or trust deed, or otherwise, as the case may be The person authorised by resolution by the Board of Directors shall be entitled to exercise the same right and powers including the right to vote by proxy, voting and/or by postal ballot on behalf of the company as the company could exercise if it were an individual member, creditor or holder of debentures of the company."

"RESOLVED FURTHER THAT the Directors be and are hereby severally authorized to file, sign, verify and execute all such e-forms, papers or documents, as may be required and do all such acts, deeds, matters and things as may be necessary, usual, expedient and Incidental for giving effect to this Resolution, Including agreeing to any condition as may be required or suggested by the Registrar of Companies and/or any statutory/regulatory authority, or to authorise any official of the company to give effect to the foregoing resolution."

Item No. 2

Deletion of Article 60 from the Articles of Association of the Company To consider, and, if thought fit, to pass the following resolution(s) as a Special Resolution:

"RESOLVED THAT pursuant to the provisions of Sections 5, 14 and other applicable provisions, if any, of the Companies Act, 2013 including any statutory modification or re- enactment thereof for the time being in force, and Rules framed thereunder as amended from time to time, the existing Article 60 be and is hereby deleted and the existing Articles Company Appeal (AT) No.64 of 2020 26 61 to 109 be and are hereby renumbered as Articles 60 to 108. "RESOLVED FURTHER THAT the Directors be and are hereby severally authorized to file, sign, verify and execute all such e-forms, papers or documents, as may be required and do all such acts, deeds, matters and things as may be necessary, usual, expedient and incidental for giving effect to to any condition as may be required or suggested by this Resolution, Including agreeing the Registrar of Companies and /or any statutory/regulatory authority, or to authorise any official of the company to give effect to the foregoing resolution.""

18. Article 59 was introduced by Minutes of the Meeting of the Board of Directors by Resolution dated 28.09.2012, where one of the Agenda Item No.3 was "to consider the approve alterations in Articles of Association of the Company". Under Item No.3, where the Chairman informed the Board that in order to make appropriate regulations to enable the smooth functioning of the Company, it was proposed to amend Articles of Association of the Company. At Item No.3, following was recorded:

"3. The Chairman informed the Board that in order to make appropriate regulations to enable the smooth functioning of the Company it was proposed to amend Articles of Association of the Company.

"RESOLVED THAT pursuant to Section 31 and other applicable provisions, if any, of the Companies Act, 1956, or subject to such modification and re-enactment thereof and subject to the approval of shareholders in General Meeting, new set of Articles of Association as tabled before the Meeting be and is hereby read and adopted."

"RESOLVED FURTHER THAT Mr. Pralhad P. Chhabria, Director of the Company and / or Mrs. Meena D'Sa, Authorised Signatory be and are hereby authorized to do all such acts, deeds and things and to sign all such documents, Company Appeal (AT) No.64 of 2020 27 papers and writings as may be necessary to give effect to the resolution.""

19. Under 'Any other Businesses', under Resolution (D), following was noted:

"D. The Chairman informed the Board and it was necessary to review the Authorised persons to represent the Company U/s 187 at General Meetings of the Bodies Corporate "RESOLVED THAT In supersession of all previous resolutions and pursuant to Section 187 of the Companies Act, 1956, following persons be and are hereby authorized on behalf of Company to represent the Company at General/ Court Convened Meetings of the Shareholders and Meetings of the Debenture holders of respective Bodies Corporate (Including adjournment thereof, if any) whose shares and Debentures are held and/or would be held by the Company and any other matters pertaining to respective companies shall be as mentioned below, and such authority shall remain in force till the liquidation of winding up of the Company, Name of Company Authorised Representative Finolex Cables Limited - Mr. Deepak K. Chhabria or his nominee Finolex Industries Limited - Mr. Prakash P. Chhabria or his nominee Finolex Plasson (India) - Mr. Vijay K. Chhabria or his Limited nominee I2IT Private Limited - Mrs. Aruna M. Katara or her nominee Finolex Infrastructure - Mr. Pralhad P. Chhabria Limited and/or Mr. Kishan P. Chhabria Finprop Advisory Services - Mr. Pralhad P. Chhabria or his Limited nominee Magnum Machine - Mr. Pralhad P. Chhabria or his Technologies Limited nominee Company Appeal (AT) No.64 of 2020 28 "RESOLVED THAT a copy of this resolution be forwarded to the Companies concerned for their reference and record in respect of such investee Company only."

There being no other business, the meeting ended with a vote of thanks to the Chair."

20. Notice was given for convening the AGM of the Orbit Electricals on 03.09.2014, where at Special Business at Item No.3 and 4 of the Notice, following was mentioned:

"SPECIAL BUSINESS:

1. To consider and, if thought fit, to pass with or without modification, the following resolution as an Special Resolution:

"RESOLVED THAT subject to the provisions of section 203, Articles of Association of the Company and other applicable provisions, if any, of the Companies Act, 2013 and the Rules made thereunder (including any statutory modification or re- enactment thereof) subject to the consent of the Members in General Meeting Ms. Aruna Mukesh Katara (DIN: 00043607) be and is hereby appointed as Vice-Chairman of the Company not liable to retire by rotation and without any monetary remuneration from the Company."

4. To consider and, if thought fit, to pass, with or without modification, the following resolution as a Special Resolution:

"RESOLVED THAT pursuant to Section 14 and other applicable provisions, if any, of the Companies Act, 2013 including any statutory modification or re-enactment thereof for the time being in force, and Rules made thereunder and subject to necessary statutory approvals and modifications if any consent of the members be and is hereby accorded to alter the regulations contained in the existing Articles of Association by incorporating the new regulations in line with Company Appeal (AT) No.64 of 2020 29 the applicable provisions of the Companies Act, 2013 and the Rules made there under and accordingly to adopt the new regulations in the Articles of Association as per the amended Articles of Association."

"AND RESOLVED FURTHER THAT any of the following Directors of the Company namely: Mr. P P Chhabria, Dr Snil U Pathak and Mrs Aruna M Katara or Mrs Meena D'Sa, Senior Vice President - Finance of the Company be and are hereby authorized to do all such acts, deeds, matters and things as may be considered necessary, usual, proper or expedient to give effect to the aforesaid resolutions.""

21. On 03.9.2014 itself, Explanatory Statement with regard to Item No.4 was also circulated, which is as follows:

"2. EXPLANATORY STATEMENT FOR ITEM No.4 The management of your Company proposes to alter the Articles of Association in order to make appropriate regulations to enable the smooth functioning and succession planning of the Company. It was proposed to amend Article Nos.15A, 26 31(d), 35, 38, 39, 42, 43, 57(g), 60 and 106 of the Articles of Association of the Company.

Further it was proposed to alter the Articles of Association of the Company to bring it in Consonance with the provisions of Companies Act, 2013 and the Rules made thereunder as notified by the Ministry of Corporate Affairs.

In terms of Section 14 and other applicable provisions of the Companies Act, 2013, approval of members of the Company by Special Resolution is required for alteration of Articles of Association of the Company. Accordingly the proposed resolution is to seek the approval of the members for the same.

A copy of the altered Articles of Association is annexed hereto and shall be available for inspection of members during the working Company Appeal (AT) No.64 of 2020 30 hours at the Registered Office of the Company and also at the Annual General of Meeting.

None of the Directors are interested or concerned in the said resolution.

BY ORDER OF THE BOARD OF DIRECTORS FOR ORBIT ELECTRICALS PVT. LTD.

Sd/-

CHAIRMAN/ DIRECTOR Place: Pune Date: September 3, 2014"

22. In pursuance of the Notice dated 03.09.2014, AGM of Respondent No.1 was held on 30.09.2014, on which date new Regulations in the AoA as per the amendments were adopted, in line of the applicable provisions of the Companies Act, 2013. Minutes of the AGM dated 30.09.2014, as brought on the Appeal are as follows:

"MINUTES OF THE ANNUAL GENERAL MEETING OF ORBIT ELECTRICALS PRIVATE LIMITED HELD AT THE REGISTERED OFFICE OF THE COMPANY AT 'HARMONY' 5, ICS COLONY, GANESHKHIND ROAD, PUNE 411 007 ON TUESDAY THE SEPTEMBER 30, 2014 AT 4.00 P.M. MEMBERS PRESENT:

Mr. Pralhad P. Chhabria Member of Authorised Representative of Pralhad Chhabria Trust Ms. Aruna Kumesh Katara Member Mr. Deepak Kishan Chhabria Member Ms. Vini Deepak Chhabria Member The required quorum being present, the proceedings of the Meeting were commenced.

Mr. P. P. Chhabria, Chairman took the chair.

1. The Notice convening the meeting was taken as read with the consent of the members.

Company Appeal (AT) No.64 of 2020 31

2. The Auditor's Report was read out in the Meeting.

3. The Chairman then placed for the consideration of the meeting the adoption of Directors' Report and Audited Accounts for the year ended March 31, 2014 along with the Auditors' Report thereon. The Chairman briefly described the financial performance of the Company and invited comments/ queries, if any, from the members on the accounts. As no member had any query, Mr. P.P Chhabria, proposed the following resolution which was seconded by Mr. Deepak Chhabria, which when put to vote was passed unanimously.

"RESOLVED THAT Balance Sheet as at March 31, 2014 and the Profit and Loss Account for the year ended on that date together with the Report of the Directors and the Auditors be and are hereby received, approved and adopted. "RESOLVED FURTHER THAT any one Director of the Company be and is hereby authorized to sign any Document either physically or digitally and to file necessary forms with Registrar of Companies, Pune."

4. The Chairman informed the members that the Auditors of the Company, M/s B. K. Khare & Co., Chartered Accountants, retire at the conclusion of this Annual General Meeting and are eligible for re-appointment. Thereafter the following resolution was proposed by Mr. P.P Chhabria, and seconded by Ms. Aruna Mukesh Katara, which when put to vote was passed unanimously.

""RESOLVED THAT pursuant to the provisions of section 139(1) and 142 of the Companies Act, 2013 M/s. B. K. Khare & Co, Chartered Accountants, Pune (FRN 105102W) the retiring auditors be and are hereby appointed as appointed as Statutory Auditors of the Company for period of 3 (Three) years subject to ratification by the members at every Annual General Meeting commencing from the conclusion of this Annual General meeting until the conclusion of Annual General Meeting for the year 2017.

5. The Chairman informed that it was proposed that appointment of Ms. Aruna Mukesh Katara (DIN: 00043607) as Vice-Chairman of the Company which will benefit the Company. Thereafter the following resolution was proposed by Mr. P.P Chhabria, and seconded by Mr. Deepak Kishan Chhabria Katara, which when put to vote was passed unanimously-

"RESOLVED THAT subject to the provisions of section 203, Articles of Association of the Company and other applicable provisions, if any, of the Companies Act, 2013 and the Rules made thereunder (including any statutory modification or re- enactment thereof) subject to the consent of the Members in General Meeting Ms. Aruna Mukesh Katara (DIN: 00043607) be and is hereby appointed as Vice-Chairman of the Company Company Appeal (AT) No.64 of 2020 32 not liable to retire by rotation and without any monetary remuneration from the Company."

6. The Chairman informed that it was proposed to alter the Articles of Association of the Company to bring it in Consonance with the provisions of Companies Act, 2013 and the Rules made thereunder as notified by the Ministry of Corporate Affairs. In terms of Section 14 and other applicable provisions of the Companies Act, 2013, it requires approval of members of the Company by Special Resolution, the following resolution was proposed by Mr. P.P Chhabria, and seconded by Mr. Deepak Kishan Chhabria Katara, which when put to vote was passed unanimously.

"RESOLVED THAT pursuant to Section 14 and other applicable provisions, if any, of the Companies Act, 2013 including any statutory modification or re-enactment thereof for the time being in force, and Rules made thereunder and subject to necessary statutory approvals and modifications if any consent of the members be and is hereby accorded to alter the regulations contained in the existing Articles of Association by incorporating the new regulations in line with the applicable provisions of Companies Act, 2013 and the Rules made there under and accordingly to adopt the new regulations in the Articles of Association as per the amended Articles of Association."

"AND RESOLVED FURTHER THAT any of the following Directors of the Company namely: Mr PP Chhabria, Dr Sunil U Pathak and Mrs Aruna M Katara or Mrs Meena D'Sa, Senior Vice President Finance of the Company be and are hereby authorized to do all such acts, deeds, matters and things as may be considered necessary, usual, proper or expedient to give effect to the aforesaid resolutions."

7. The meeting then ended with a vote of thanks to the Chair."

23. On same day, Form No.MGT.14 was submitted by the Company, where the date of Notice was mentioned as 03.09.2014 and date of Resolution was mentioned as 30.09.2014 and Section of the Companies Act, under which Resolution was passed was referred as Section 14, sub- section (1) and subject matter of the Resolution. Form No.MGT.14 at Item II, contains following information:

Company Appeal (AT) No.64 of 2020 33

24. The AoA of Respondent No.1 is submitted on 30.09.2014 along with Form No.MGT.14. Articles 59 and 60 of the AoA, are as follows:

"59. Authority to represent the Company at General / Court Convened Meetings of the Shareholders and Meetings of the Debenture holders of respective Bodies Corporate (including adjournment thereof, if any) whose shares and Debentures are held and/ or would be held by the Company and any other matters pertaining to the respective companies shall always vest with Mr. Pralhad P. Chhabria and only upon Mr. Pralhad P. Chhabria ceased to be Director and Chairman of the Company for any reason whatsoever, the said authority shall be as mentioned below, sand such authority shall remain in force till; the liquidator or winding up of the Company:

                   Name of Company                Authorised Representative


                   Finolex Cables Limited     -   Mr. Deepak K. Chhabria or his
                                                  nominee
                   Finolex Industries         -   Mr. Prakash P. Chhabria or
                   Limited                        his nominee


Company Appeal (AT) No.64 of 2020                                              34
                    Finolex Plasson (India)     -   Mr. K.P. Chhabria or his
                   Limited                         nominee
                   I2IT Private Limited        -   Mrs. Aruna M. Katara or her
                                                   nominee
                   Finolex Infrastructure      -   Mr. Pralhad P. Chhabria
                   Limited                         and/or    Mr.    Kishan     P.
                                                   Chhabria
                   Finprop Advisory            -   Mr. Pralhad P. Chhabria or his
                   Services Limited                nominee
                   Magnum Machine              -   Mr. Pralhad P. Chhabria or his
                   Technologies Limited            nominee
                   Any other Company           -   Mr. Pralhad P. Chhabria or his
                                                   nominee

60. This Memorandum of Association and Articles of Association of Orbit Electricals Pvt. Ltd. approved by the Company in its General Meeting heled on September 8, 2012 and as altered and amended in general meeting held on November 23, 2013 and as further altered and amended in general meeting held on September 30, 2014, shall hereinafter not be amended through alteration, addition or deletion of any clauses herein, during the life of 60 years of the Pralhad Chhabria Trust or any further extension of 60 years or such longer period as may be permitted under the laws then prevailing in the country.

For this purpose, the present Chairman of the Company, Mr. Pralhad Parsram Chhabria, has deposited copy of the Memorandum of Association and Articles of Association duly signed/ initialed by him in original and as updated from time to time, for identification with four members of the Company i.e. Mr. Prakash P. Chhabria, Mr. Deepak K. Chhabria, Mr. Vijay K. Chhabria and Mrs. Aruna M. Katara."

25. The first question, which needs to be considered as to whether by Resolution dated 30.09.2014, Articles 59 and 60 shall be considered as entrenched Articles within the meaning of Companies Act under Section 4, sub-section (4).

Company Appeal (AT) No.64 of 2020 35

26. In Companies Act, 1956, Section 26 provided that a private company limited by shares, be registered with the memorandum, articles of association signed by the subscribers of the memorandum prescribing regulations for the Company. Section 26 of the Companies Act, 1956 is as follows:

"26 - Articles prescribing regulations.

There may in the case of a public company limited by shares, and there shall in the case of an unlimited company or a company limited by guarantee or a private company limited by shares, be registered with the memorandum, articles of association signed by the subscribers of the memorandum, prescribing regulations for the company"

27. It is relevant to notice Section 5, sub-sections (3) and (4) of the Companies Act, 2013, which are as follows:

"5.(3) The articles may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with.

(4) The provisions for entrenchment referred to in sub-section (3) shall only be made either on formation of a company, or by an amendment in the articles agreed to by all the members of the company in the case of a private company and by a special resolution in the case of a public company .

28. There was no concept of entrenched articles in 1956 Act, as now has been brought by Section 5, sub-sections (3) and (4). An entrenchment provision in the Articles, which identifies special provisions, which can be altered only, if the conditions or procedure, which are much more Company Appeal (AT) No.64 of 2020 36 restrictive than those applicable in the case of special resolution as is applicable for altering any provision of the Articles are met. We have noticed the rival contentions of the parties, where Appellant's contention is that Articles 59 and 60 as was approved in AGM on 30.09.2014 are entrenched Articles. Section 5, sub-section (4) provides that provisions for entrenchment shall only be made either on formation of a company, or by an amendment in the articles agreed to by all the Members of the Company. The key words in Section 5, sub-section (4) are for provisions for entrancement, which can be made by an amendment in the articles are "in the articles agreed to by all the members of the company in the case of a private company". Thus, AoA can be treated to be entrenched Article when it is agreed to by all the Members of the Company. The key question to be answered is as to whether Resolution dated 30.09.2014, which is claimed to be Resolution for amending the Articles of Association, shall be the decision agreed by all the Member of the Company. The Notice of the Meeting though 03.09.2014 was issued to all the shareholders and at the time of issuance of Notice on 03.09.2014, there were thirteen Members. When we look into the Minutes of the AGM held on 30.09.2014, it is clear that there were only four Members present including Pralhad P. Chhabria, Aruna Mukesh Katara, Deepak Kishan Chhabria and Vini Deeapk Chhabria. The Resolution passed on 30.09.2014, cannot be said to be a Resolution, which was agreed to by all the Members of the Company. In the Meeting held on 30.09.2014, neither Prakash, nor Vijay the brother of Deepak were present. Thus, the Resolution dated 30.09.2014, cannot be Company Appeal (AT) No.64 of 2020 37 said to be agreed to by all the Members of the Company. Hence, the statutory requirement to treat the Articles as entrenched Articles cannot be accepted. The statutory scheme of Section 5, sub-section (4) provides that amendment in the Articles providing for entrenchment shall only be made by an amendment in the Articles agreed to by all the Members of the Company in the case of a private Company. Thus, Articles 59 and 60, which were approved by the Company in the AGM dated 30.09.2014, cannot be held to be entrenched Articles. It goes without saying that entrenched Article within the meaning of Section 5, sub-section (3) can be amended only when its is agreed by all the Members of the Company.

29. We, thus, conclude that from the above discussion, we answer Question No.(I) as follows:

The amendments made in Articles of Association in AGM held on

30.09.2014, amending Articles 59 and 60, cannot be treated to be entrenched Articles as referred to in Section 5, sub-sections (3) and (4) of the Companies Act, 2013.

Question Nos.(II) and (III)

30. Now, we come to the EOGM dated 03.05.2019, which was subject matter of consideration in the impugned order dated 31.12.2019. The Notice convening the EOGM on 03.05.2019 was issued on 09.04.2019. We have noticed above that tenure of Deepak as Executive Chairman was to be considered for extension/ non-extension in the Meeting of the FCL. The Orbit was shareholders of FCL to the extent of 30.7%. The Board of Orbit on 22.09.2018 resolved that Orbit would vote against Deepak's re- Company Appeal (AT) No.64 of 2020 38 appointment for continuing him as Chairman of FCL, to which decision, Deepak was well aware. In spite of the Resolution of the Board of Orbit to vote against continuance of Deepak, Deepak in the Meeting of Orbit, has voted for his continuance and by which decision, Deepak continued for five years from 01.07.2018. After the aforesaid decision, requisition Notice dated 18.03.2019 was given by Mr. Prakash to Orbit Electricals for issuance of Special Notice for convening EOGM of the shareholders of the Orbit to amend Articles 59 and 60 of the AoA. On which requisition Notice, Notice from Orbit dated 09.04.2019 was issued for convening the EOGM. Special Business under Item No.1 and Item No.2 of the Notice dated 09.04.2019 are as follows:

"NOTICE Dear Members, NOTICE is hereby given that an Extraordinary General Meeting (No. 1 of 2019-20) ("EGM") of ORBIT ELECTRICALS PRIVATE LIMITED, (the Company) on the requisition of Mr. Prakash P. Chhabria, who holds 74.52% of the paid-up share capital of the Company, will be held at the Registered Office of the Company at 'Harmony, 5, ICS Colony, Ganeshkhind Road, Pune 411 007 on 3rd May, 2019, Friday, at 11:00 am to transact the following business:

SPECIAL BUSINESS:

Item No. 1

Amendment of Article 59 of the Articles of Association of the Company To consider, and, if thought fit, to pass the following resolution(s) as a Special Resolution: "RESOLVED THAT pursuant to the provisions of Sections 5, 14 and other applicable provisions, if any, of the Companies Act, 2013, including any statutory modification or re-

Company Appeal (AT) No.64 of 2020 39

enactment thereof for the time being in force and Rules framed there under, as amended from time to time, the existing Article 59 of the Company's Articles of Association be and is hereby amended to delete the existing Article 59 and to substitute the following Article 59 in place thereof:

"59. The Board of Directors shall:

(a) if it is a member of a company within the meaning of this Act, by resolution of its Board of Directors, authorize such person as it thinks fit to act as its representative at any meeting of the company, or at any meeting of any class of members of the company in which the company is a legal or beneficial owner of securities;

(b) if it is a creditor, including a holder of debentures, of a company, by resolution of its directors authorise such person as it thinks fit to act as its representative at any meeting of any creditors of the company held in pursuance of this Act or of any rules made there under, or in pursuance of the provisions contained in any debenture or trust deed, or otherwise, as the case may be.

The person authorised by resolution by the Board of Directors shall be entitled to exercise the same rights and powers, including the right to vote by proxy, e-voting and/or by postal ballot on behalf of the company as the company could exercise if it were an individual member, creditor or holder of debentures of the company."

"RESOLVED FURTHER THAT the Directors be and are hereby severally authorized to file, sign, verify and execute all such e-forms, papers or documents, as may be required and do all such acts, deeds, matters and things as may be necessary, usual, expedient and incidental for giving effect to this Resolution, including agreeing to any condition as may be required or suggested by the Registrar of Companies and / or any statutory / regulatory authority, or to authorise any official of the company to give effect to the foregoing resolution."

Item No. 2

Deletion of Article 60 from the Articles of Association of the Company To consider, and, if thought fit, to pass the following resolution(s) as a Special Resolution:

"RESOLVED THAT pursuant to the provisions of Sections 5. 14 and other applicable provisions, if any, of the Companies Act, 2013 including any statutory modification or re- enactment thereof for the time being in force, and Rules framed thereunder as amended from time to time, the existing Company Appeal (AT) No.64 of 2020 40 Article 60 be and is hereby deleted and the existing Articles 61 to 109 be and are hereby renumbered as Articles 60 to 108. "RESOLVED FURTHER THAT the Directors be and are hereby severally authorized to file, sign, verify and execute all such e-forms, papers or documents, as may be required and do all such acts, deeds, matters and things as may be necessary. usual, expedient and incidental for giving effect to this Resolution, including agreeing to any condition as may be required or suggested by the Registrar of Companies and /or any statutory / regulatory authority, or to authorise any official of the company to give effect to the foregoing resolution.""

31. It is also relevant to notice the Statement pursuant to Section 102 of the Companies Act, 2013 with regard to Special Business at Item No.1 and

2. The Statement pursuant to Section 102 of the Companies Act, 2013 at Item No.1 after quoting the existing Article 59, at sub-item (ii), following was stated:

"(ii) At a meeting of the Board of Directors of the company held on 22nd September 2018, the Board of Directors, in respect of its shareholding in Finolex Cables Limited resolved and authorized Mr. Deepak K. Chhabria to act as a representative of the Company at the 50th Annual General Meeting of the shareholders of Finolex Cables Limited to be held on September 25th, 2018 or any adjournment thereof and to attend and vote for and on behalf of the Company at the said Annual General Meeting or any adjournment thereof and to exercise all the rights and powers of a member on behalf of the Company in the same manner as the Company would exercise them if it were an individual member, in the manner set out below on each resolution placed at the said Annual Geneal Meeting of Finolex Cables Limited.

Sr. Resolution(s) Votes to be No. Cast for / Against ORDINARY BUSINESS

1. Adoption of financial statements For (including consolidated financial Company Appeal (AT) No.64 of 2020 41 statements) of the Company for the financial year ended 31st March, 2018 and the reports of the Board of Directors and Auditors thereon.

2. Declaration of dividend @ 200% on For equity shares for the financial year ended 31st March, 2018 (i.e. @ Rs.4/-

per equity share of Rs.2/- each fully paid up) for the financial year ended 31st March, 2018.

3. Appointment of Mrs. Namita V. -

Thapar, Woman Director [DIN:

05318899], who retires by rotation, but though eligible, does not offer herself for reappointment

4. Appointment of Mr. Mahesh Against Viswanathan [DIN: 02780987], who retires by rotation, and being eligible, offers himself for reappointment

5. Ratification of Appointment of M/s. For Deloittee Haskins & Sells LLP, Chartered Accountants, [Firm Registration No.117366W / W100018] as Statutory Auditors till the conclusion of the 51st Annual General Meeting to he held in the financial year 2019-20.

SPECIAL BUSINESS

6. Reappointment of Mr. D.K. Chhabria Against [DIN: 01403799] as Executive Chairman of the Company for a period of five years with effect from 1st July, 2018 to 30 June, 2023

7. Reappointment of Mr. Mahesh Against Viswanathan [DIN: 02780987] as Deputy Managing Director & Chief Financial Officer of the Company for a period of five years with effect from 1st July, 2018 to 30th June, 2023.

8. Ratify remuneration payable to M/s For Joshi Apte & Associates, Cost Accountants, Pune (Firm Registration No.00240) and their appointment as Cost Auditor of the Company for the financial year 2018-19.

9. To offer invite subscriptions for For secured/ unsecured redeemable non-

convertible debentures, in one or more series/ tranches, aggregating upto Rs.150 Crores (Rupees One Hundred Fifty Crores Only) on private placement basis.

Company Appeal (AT) No.64 of 2020 42

10. Payment of Commission to non-whole For time Directors, not exceeding one percent of the net profit of the Company or Rupees Two Crore, whichever is lower, as may be determined by the Board in each financial year. With effect from 1st April, 2018 upto 31st March, 2023.

11. Approval of the Company to continue For to purchase optical fibre from Corning Finolex Optical Fibre Private Limited, being related Party Transaction(s).

Mr. Deepak K. Chhabria, however, did not follow all the instructions given by the Board of Directors and voted against the instructions in respect to some of the resolutions."

32. The aforesaid clearly notices that Board Resolution was against reappointment of Deepak K. Chhabria as Executive Chairman of the Company, however, Deepak did not follow the instructions of the Board and voted against the instructions. With regard to Item No.2, following is the Statement:

"Item No. 2

DELETION OF ARTICLE 60 OF THE ARTICLES OF ASSOCIATION OF THE COMPANY:

(xiv) Article 60 inter alia provides that the Memorandum of Association and Articles of Association of the company as approved in the latest general meeting held on September 30, 2014, shall hereafter not be amended through alteration, addition or deletion of any clauses herein, during the life of 60 years of the Pralhad Chhabria Trust or any further extension of 60 years or such longer period as may be permitted under the laws then prevailing in the country.

(xv) Article 60 of the Articles of Association is reproduced below: Company Appeal (AT) No.64 of 2020 43

*60. This Memorandum of Association and Articles of Association of Orbit Electricals Pvt. Ltd. approved by the Company in its General Meeting held on September 8, 2012, as altered and amended in general meeting held on November 23, 2013 and as further altered and amended in general meeting held on September 30, 2014, shall hereafter not be amended through alteration, addition or deletion of any clauses herein, during the life of 60 years of the Pralhad Chhabria Trust or any further extension of 60 years or such longer period as may be permitted under the laws then prevailing in the country.

For this purpose, the present Chairman of the Company, Mr. Pralhad Parsram Chhabria, has deposited copy of the Memorandum of Association and Articles of Association duly signed / Initialed by him in original and as updated from time to time, for identification with four members of the Company I.e. Mr. Prakash P. Chhabria, Mr. Deepak K. Chhabria, Mr. Vijay K. Chhabria and Mrs. Aruna M. Katara."

(xvi) The present Article 60, as read and understood, is unenforceable and void under Indian Law and therefore it is essential that the Article 60 be deleted with immediate effect.

The subsequent Articles are proposed to be renumbered as Articles 60 to 108.

(xvii) The Board of Directors of the Company would like to clarify that a copy of the Notice issued by the Requisitionist is being sent along with this Notice with a view to provide the relevant background concerning Item No. 1 of Special business to be transacted at the Extraordinary General Meeting. A copy of the Requisition Notice is annexed hereto (Annexure)."

33. The EOGM was held on 03.05.2019. The result of the Meeting are contained in the Report of Scrutinizer, which has been brought on the Company Appeal (AT) No.64 of 2020 44 record along with the Appeal. The Report of Scrutinizer in Form No.MGT.13 dated 03.05.2019 is as follows:

"FORM No.MGT-13 Report of Scrutinizer(s) [Pursuant to Section 109 of the Companies Act, 2013 and Rule 1(2) of the Companies (Management and Administration) Rules, 2014) To Chairman, Orbit Electricals Private Limited, Harmony, 5, ICS Colony Ganesh Khind Road Pune-411007 Extra-Ordinary General Meeting of the Equity Shareholders of Orbit Electricals Private Limited on the requisition of Mr. Prakash P. Chhabria, who holds 74.52% of the paid-up share capital of the Company, held on Friday, May 3rd 2019 at 11.00 A.M. at Registered Office of the Company situated at Harmony, 5, ICS Colony, Ganeshkhind Road, Pune 411007.

Dear Sir, We, CS Vinayak S. Khanvalkar, Partner of M/s KANJ & Co., LLP Pune and Mrs. Ritu P. Chhabria, member, appointed as Scrutinizers at the Extra- Ordinary General Meeting of the Equity Shareholders of Orbit Electricals Private Limited, on the requisition of Mr. Prakash P. Chhabria, who holds 74.52% of the paid-up share capital of the Company held on Friday, 3rd May 2019 at 11.00 A.M. at Harmony 5, ICS Colony, Ganeshkhind Road, Pune 411007 submit our report as under:

1. After the time fixed for closing of the poll by the Chairman, ballot box kept for polling was locked in our presence.

2. The locked ballot box was subsequently opened in our presence and poll papers were reconciled with the records maintained by the Company.

3. The Result of the poll is as under:

a) Resolution No.1 (Special Resolution) Company Appeal (AT) No.64 of 2020 45 To consider and approve alterations in Articles of Association of the Company by deleting the existing Article 59 and to substitute the new Article 59 in place thereof.

Voted in favour of the resolution:

              Number of members         Number of       % total number of
               present and voting      votes cast by     valid vote cast
                   (in person)             them
                        7                1,15,436            91.74%


            Voted against the resolution:
              Number of members       Number     of % total number of
               present and voting     votes cast by valid vote cast
                   (in person)        them
                        5                10,396            8.26%


            Invalid votes:
                 Number of members               Number of votes cast by
                  present and voting                     them
                      (in person)
                          NIL                             NIL

The resolution is passed with requisite majority

b) Resolution No.2 (Special Resolution) To consider and approve alterations in Articles of Association of the Company by deleting the existing Article 60 and the existing Articles 61 to 109 renumbered as Articles 60 to 108.

Voted in favour of the resolution:

              Number of members         Number of       % total number of
               present and voting      votes cast by     valid vote cast
                   (in person)             them
                        7                1,15,436            91.74%

            Voted against the resolution:
              Number of members         Number of       % total number of
               present and voting      votes cast by     valid vote cast
                   (in person)             them
                        5                 10,396                8.26%

            Invalid votes:



Company Appeal (AT) No.64 of 2020                                             46
                  Number of members           Number of votes cast by
                  present and voting                 them
                      (in person)
                          NIL                           NIL

The resolution is passed with requisite majority

4. The poll papers and all other relevant records were sealed and handed over to the Chairman for the safe keeping Thanking you, Yours faithfully, Sd/- Sd/-

            CS Vinayak Khanvalkar         Ritu Prakash Chhabria
            Partner                       Member
            KANJI & Co. LLP          Oribt Electricals Private Limited.
            Company Secretaries Pune

            Place: Pune                      Place: Pune
            Date: 3rd May 2019               Date: 3rd May 2019"

34. A perusal of the above Report of Scrutinizer indicates that in EOGM dated 03.05.2019 in favour of Resolution No.1 to alter Articles 59 by deleting existing Article 59 and substituting new Article was voted in favour by 91.74% and votes against the Resolution were only 8.26%. Similarly on Resolution No.2 for deletion of existing Article 60, votes in favour of Resolution were 91.74% and votes against the Resolution were 8.26%. The aforesaid makes it clear that the Resolution dated 03.05.2019 was not passed by unanimously by all the Members of the Company. The submissions, which have been advanced on behalf of the Appellant is that the Resolution dated 03.05.2019 for altering Article 59 and deleting Article 60 were required to be passed by all the Members of the Company need to be answered. Section 14 of the Companies Act, 2013 provides for alteration of Articles. Section 114 of the Companies Act provides for Ordinary and Company Appeal (AT) No.64 of 2020 47 Special Resolution. Section 114, sub-section (2), which deals with the Special Resolution provides as follows:

"114.(2) A resolution shall be a special resolution when--

(a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution;

(b) the notice required under this Act has been duly given; and

(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting."

35. After the Resolution dated 03.05.2019 Form No.MGT-14 was submitted, which mentions alteration of Articles by Special Provision. In Details of resolution at Item No.I of the Form No.MGT-14, following was stated:

Company Appeal (AT) No.64 of 2020 48

36. We have already considered the question as to whether Articles 59 and 60 can be treated to be entrenched Articles within the meaning of Section 5, sub-section (4), so as to require agreement by all the Members of the Company. We have already held that Articles 59 and 60 cannot be treated to be entrenched Articles, for amending of which, agreement of all the Members required. The amendment in Article 59 and deletion of Article 60 was made in exercise of power under Section 14 by Special Resolution. The Resolution dated 03.05.2019 was passed as a Special Resolution, which is apparent from the result of the Scrutinizer as extracted above. Thus, we are of the view that alteration of Article 59 and deletion of Article 60 was fully permissible by Special Resolution and it did not require agreement of all the Members of the Company, Articles 59 and 60 being not entrenched Articles as held above. Thus, it cannot be held that Resolution passed by EOGM on 03.05.2019 was not in accord with the provisions of the Companies Act, 2013 and the Articles of Association. We, thus, answer Question Nos. II and III as follows:

Ans. to Question : The amendment of Article 59 and No.(II) deletion of Article 60 could be done by Special Resolution as passed in EOGM dated 03.05.2019 and there was no requirement of agreement by all the Members of the Company, i.e., all twelve Members, as existing on the relevant date.

Company Appeal (AT) No.64 of 2020 49

(Pralhad Prakash Chhabria having died on 05.05.2016, reducing the Member numbers from 13 to 12).


        Ans. to Question            :   The Adjudicating Authority did
        No.(III)
                                        not   commit     any     error   in
                                        approving the EOGM held on
                                        03.05.2019.



Question No.(IV)

37. Section 113 of the Companies Act provide for representation of corporations at meeting of Companies and of creditors. The question to be answered is as to whether a representative/ nominee under Section 113 of the Companies Act is bound to exercise his power as per the decision of the Company or he having been appointed a representative of the Company is free to exercise his right, as per his discretion. Sub-section (2) of Section 113 throws a clear light on the statutory intendment. Sub-section (2) provides that a person authorised by resolution under sub-section (1) shall be entitled to exercise the same rights and powers, including the right to vote on behalf of the body corporate, which he represents as that body could exercise if it were an individual member. What is manner and exercise of a representative of the Corporation at the meeting of Companies is, as per the decision of the Body, which has authorized individual Member to cast his vote. Authorised representative is merely an Agent of the Company and is bound to act as per directions of the Board or Board of Directors. The learned Counsel for the Respondent has referred to and relied on the judgment of the Hon'ble Supreme Court in the matter of Life Company Appeal (AT) No.64 of 2020 50 Insurance Corporation of India vs. Escorts Ltd. and Ors. - (1986) 1 SCC 264. The Hon'ble Supreme Court in paragraph 84 of the judgment enumerated the rights of the shareholder. The rights enumerated of shareholders, does not include right to represent the Company. The right of representation of Company is not an individual right of shareholder.

38. The Hon'ble Supreme Court in Bacha F. Guzdar vs. Commissioner of Income Tax Bombay - AIR 1955 SC 75 has held that a shareholder got no interest in the property of the Company. In paragraphs 9, 10 and 11 of the judgment, following was held:

"9. It was argued by Mr Kolah on the strength of an observation made by Lord Anderson in IRC v. Forrest [IRC v. Forrest, (1924) 8 TC 704 at p. 710] that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word 'assets' in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them.

10. The interest of a shareholder vis-à-vis the company was explained in Charanjit Lal Chowdhury v. Union of India [Charanjit Lal Chowdhury v. Union of India, 1950 SCC 833 at p. 862 : 1950 SCR 869 at p. 904] . That judgment negatives the position taken up on behalf of the appellant that a Company Appeal (AT) No.64 of 2020 51 shareholder has got a right in the property of the company. It is true that the shareholders of the company have the sole determining voice in administering the affairs of the company and are entitled, as provided by the articles of association, to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders. The dividend is a share of the profits declared by the company as liable to be distributed among the shareholders.

11. Reliance is placed on behalf of the appellant on a passage in Buckley's Companies Act, 12th Edn., p. 894, where the etymological meaning of "dividend" is given as dividendum, the total divisible sum but in its ordinary sense it means the sum paid and received as the quotient forming the share of the divisible sum payable to the recipient. This statement does not justify the contention that shareholders are owners of a divisible sum or that they are owners of the property of the company. The proper approach to the solution of the question is to concentrate on the plain words of the definition of agricultural income which connects in no uncertain language revenue with the land from which it directly springs and a stray observation in a case which has no bearing upon the present question does not advance the solution of the question. There is nothing in the Indian law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders. The true position of a shareholder is that on buying shares an investor becomes entitled to participate in the profits of the company in which he holds the shares if and when the company declares, subject to the articles of association, that the profits or any portion thereof should be distributed by way of dividends among Company Appeal (AT) No.64 of 2020 52 the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole as Lord Anderson puts it."

39. Shri Ramji Srinivasan, learned Senior Counsel for the Appellant during his submission has placed reliance on judgment of the Hon'ble Supreme Court in (2005) 11 SCC 73 in Claude-Lila Parulker (Smt) vs. Sakal Papers (P) Ltd. & Ors. in support of his submission that in the Meeting dated 31.03.2016, no shares could have been transferred without notice to the Members, as per the provisions of AoA. He has placed reliance on paragraphs 44 and 62 the above judgment of the Hon'ble Supreme Court, where the Hon'ble Supreme Court has laid down following:

"44. The notices issued in respect of the 93 and 3417 shares were not in keeping with the articles as far as Articles 58 to 63 were concerned. As we have already observed, notices to willing members or to selected persons under Article 58 must succeed and not precede the actual operation of Article 57-A. The notices issued by Respondents 2, 3 and 4 also did not constitute the Directors as the transferor's agents for the purposes of selling the shares in terms of Article 59. There was, in the circumstances, no question of the transferors selling their shares to any third party under Article 63 unless proper notice had been issued to the second and third category of persons if any. There was also no question of the transferor invoking Article 61 bypassing the right of a willing member or selectee, if any, to negotiate a fair price.

62. Apart from the violation of Section 108 as far as the registration of shares is concerned, the meeting of the Board of Directors at which the Company recorded the transfer was invalidly held. According to Article 93 of the Articles of Association of the Company:

"Every notice of a meeting of the Company shall specify a place, date and hour of the meeting, and shall contain a Company Appeal (AT) No.64 of 2020 53 statement of the business to be transacted thereat. No general meeting, annual or extraordinary, shall be competent to enter upon, discuss or transact any business which has not been specifically mentioned in the notice or notices upon which it was convened. In every notice there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy or, where one or more proxies are allowed, to attend and vote instead of himself and that the proxy need not be a member of the Company."

In the notice for the meeting held on 21-9-1985, there was no mention whatsoever, let alone a statement, relating to the transfer of the 3417 and 93 shares to the Pawars. At the same meeting, Respondents 5 and 10, were appointed as Additional Directors although their shares were not yet entered in the Company's Register of Members."

40. Learned Counsel appearing for the Respondent has also placed reliance on judgment of the Hon'ble Supreme Court in (2021) 9 SCC 449

- Tata Consultancy Services Ltd. vs. Cyrus Investments Pvt. Ltd. & Ors. in support of his submission that even in cases where the Tribunal finds that the removal of a Director was not in accordance with law or was not justified on the facts, the Tribunal cannot grant relief under Section 242, unless the removal is found to be oppressive or prejudicial. The Hon'ble Supreme Court in the above case has also laid that that there may be cases where the removal of a Director might have been carried out perfectly in accordance with law and yet may be part of a larger design to oppress or prejudice the interests of some members and in such cases the Tribunal can grant a relief under Section 242. The learned Counsel for the Respondent has placed reliance on paragraph 128, 129, 130 and 131 of the Company Appeal (AT) No.64 of 2020 54 judgment to support his submissions that Board can take up an Agenda where there is lack of confidence.

41. Reliance on the above cases by the parties is essentially with regard to Meeting of Board of Directors of the Orbit held on 31.03.2016. We already observed that the issue pertaining to Board Meeting dated 31.03.2016 is pending consideration in the Company Petition No.47 of 2016. Hence, we have refrained from making any observation with regard to respective submissions of both the parties, the course which was also adopted by the Adjudicating Authority while passing the impugned order as noted above. We, thus, are of the view that correctness or validity or Board Meeting dated 31.03.2016, needs no comment while deciding this Appeal.

42. In view of the above discussions, we answer Question No.(IV) as follows:

Ans. to Question : A representative under Section 113 No.(IV) of the Companies Act, 2013 is bound to exercise his representation as per the decision of the Board of the Company. In event Board has not given any specific decision for exercise of power, the representative is free to exercise his representation as per his will.

Question No.(V)

43. We have noticed that the tenue of Deepak as Executive Chairman of the FCL was extended for five years in meeting held on August 2018, which Company Appeal (AT) No.64 of 2020 55 term was till 30.06.2023. An AGM was convened on 29.09.2023 during pendency of this Appeal in this Tribunal for considering the Resolution for reappointment of Deepak as a whole time Director designated as Executive Chairman in the Company for a period of five years. As noted above, judgment was reserved in the Appeal on 21.09.2023 by earlier Bench. While reserving the judgment, following interim order was passed:

".....we propose to direct the parties to maintain Status Quo as was available prior to EOGM dated 03.05.2019 till the judgement is delivered by this Tribunal ..."

44. Against the order dated 21.09.2023, a Civil Appeal No.6108 of 2023 was filed and Hon'ble Supreme Court in Civil Appeal on 26.09.2023 vacated the interim directions and directed as follows:

"1 The National Company Law Tribunal1 dismissed the application filed by the first respondent for the grant of interim relief by an order dated 31 December 2019. The first respondent is in appeal before the National Company Law Appellate Tribunal.

2 Admittedly, no interim relief operated in favour of the first respondent during the pendency of the appeal. 2 The appeal has been heard and orders were reserved by the NCLAT on 21 September 2023. However, while reserving orders, the NCLAT has directed the parties "to maintain status quo as was available prior to EOGM dated 03.05.2019" till the judgement is delivered. No reasons have been indicated by the NCLAT even prima facie for issuing the interim order, particularly in the context of the fact that there was no interim relief operating since the dismissal of the application for interim relief on 31 December 2019. It is admitted that no relief was obtained by the first respondent in the proceedings before the Bombay High Court, as well.

Company Appeal (AT) No.64 of 2020 56

3 In the circumstances, we vacate the interim direction as noted above. The Annual General Meeting (AGM) of the company, Finolex Cables Limited is to take place on 29 September 2023. Any action which is taken on proposed resolution No 4 pertaining to the appointment of the Executive Chairperson shall be subject to the outcome of the appeal which is pending before the NCLAT.

4 Subject to the aforesaid modifications, the appeals are allowed and the impugned order is set aside to the aforesaid extent. 5 Pending applications, if any, stand disposed of."

45. As noted above, the Meeting was held on 29.09.2023, on which date voting was conducted, but the result of the voting could be submitted by the Scrutinizer only on 13.10.2023. The Scrutinizer Report dated 13.10.2023 has been filed by an affidavit dated 16.10.2023 filed by the Appellant, bringing on record the Consolidated Scrutinizer's Report dated 13.10.2023. From the Scrutinizer Report dated 13.10.2023, it is clear that Resolution No.4 for reappointment of Mr. Deepak Chhabria, votes in favour of him was 27.66%, whereas votes against the Resolution was 72.34%, which result was declared by the Scrutinizer subject to outcome of the Appeal, which is pending before this Tribunal. We have further noticed that on 13.10.2023, the Hon'ble Supreme Court while hearing the issue noticed under the Contempt Application, has directed the Scrutinizer to declare the result of the AGM and further directed this Tribunal to declare the judgment in the pending Appeal, after it is duly apprised of the fact that result of the AGM has been declared. Subsequently, on 30.10.2023, the Hon'ble Supreme Court set aside the judgment of this Tribunal dated 13.10.2023 deciding the present Appeal and directed the Appeal to be Company Appeal (AT) No.64 of 2020 57 heard afresh. When we read judgment of the Hon'ble Supreme Court dated 13.10.2023 passed in the morning session, it is clear that Hon'ble Supreme Court directed to declare the judgment in the pending Appeal, after it is duly apprised of the fact that the result of the AGM has been declared. Now the Appellant has brought on record the Consolidated Scrutinizer's Report, which has noticed the voting on the Resolution No.4, which Resolution was voted against by 72.34% votes and the Resolution to reappoint Deepak Chhabria has not been approved in the AGM held on 29.09.2023. While deciding this Appeal finally, we do not find any reason to interfere with the AGM held on 29.09.2023.

46. In view of the above, we answer Question No.(V) as follows:

Ans. to Question No.(V) : The result of AGM held on 29.09.2023 on Resolution No.4 with regard to re-appointment of Mr. Deepak Chhabria as Executive Chairman of the FCL, need no interference in this Appeal.

Question No.(VI)

47. Now we come to the last question as to relief, to which the Appellant may be entitled in this Appeal.

48. We have noticed above that Company Petition was filed by the Appellant under Section 241 and 242 of the Companies Act, 2013 on 16.11.2016. The challenge to the maintainability of the Company Petition was repelled by the Adjudicating Authority as well as this Tribunal. We Company Appeal (AT) No.64 of 2020 58 have noticed above that Application MA No.645 of 2017 filed by Prakash Pralhad Chhabria, questioning the maintainability of Company Petition No.47 of 2016 was rejected on 05.12.2018, against which order Company Appeal (AT) No.39 of 2019 was filed by Prakash Pralhad Chhabria and Orbit, which Appeal was disposed of by this Tribunal on 13.03.2019, directing the parties to appear before the Tribunal for early hearing of the Company Petition. It is relevant to notice that Company Petition, which was filed on 16.11.2016, is still awaiting for its final decision, whereas the NCLT has been engaged by the parties by filing different Applications, including MA No.1449 of 2019, which was decided on 31.12.2019 and impugned in the present Appeal. We have already observed that while deciding this Appeal, we are not expressing any opinion on the merits of the Company Petition No.47 of 2016, which is pending final adjudication. The NCLT was also careful in observing while deciding MA No.1449 of 2019 that decision of MA in no manner should prejudice the rights and contentions of the parties in the main Company Petition.

49. Now, when we are deciding this Appeal finally, we are of the view that NCLT should proceed to decide the Company Petition No.47 of 2016 finally. The pleadings by both the parties in the Company Petition having already been completed long ago, we are of the view that ends of justice will be served in observing that NCLT shall endeavour to dispose of Company Petition No.47 of 2016 as early as possible, preferably within a period of six months from the date of copy of this order is produced. In result, we decide this Appeal in following manner:

Company Appeal (AT) No.64 of 2020 59

I. The impugned order dated 31.12.2019 passed in MA No.1449 of 2019 is not interfered with.

II. The decision of Annual General Meeting held on 29.09.2023 on Resolution No.4, which took place during the pendency of this Appeal is not interfered with.

III. The NCLT is requested to finally decide the Company Petition No.47 of 2016 expeditiously, preferably within a period of six months from the date of copy of this order is produced.

The parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson [Barun Mitra] Member (Technical) NEW DELHI 28th August, 2024 Ashwani Company Appeal (AT) No.64 of 2020 60

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