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Vimla Yadav, Member

1. Company Petition No. 106/2003 under Sections 397and 398 of the Companies Act, 1956 (hereinafter to be referred to as 'the Act') has been filed by Dr. Ashok P. Arbat the petitioner who is one of the two subscribers to Memorandum and Articles of Association and the Promoter of the respondent company previously known as Ketki Research Institute Medical Sciences Pvt. Ltd. which was incorporated on 3.3.1993 and later converted into a public limited company with effect from 18.4.1995. In this company petition, the petitioner has alleged his illegal removal as CMD of the company; his illegal removal/vacation of office as director of the company under Section 283(1)(g) of the Act; illegal allotment of 70,000 equity shares to the respondent Nos. 2,3 and 4; non maintenance of requisite statutory records; mismanagement of the affairs of the company by a close coterie without any transparency their acts being detrimental to the interest of the company's shareholders and public at large. The petitioner has prayed CLB to pass such orders to relieve the company from the mismanagement, oppressive, harsh and unreasonable conduct of the respondents and to stop such acts of the respondents which are prejudicial to the interest of the shareholders and the company and the public at large; to declare void and illegal the appointment of R-2 as CMD and reinstate the petitioner as CMD; direct that the EOGM requisitioned by the petitioner under Section 169 of the Act be ordered to be convened to consider the matter for the removal of the Company's directors namely, Dr. Meena Patil (Arbatt), Shri Raj Kumar Rathi and Dr. Riaz Khan and appointment of three new directors namely Shri Anandrao Gharad, Shri S.K. Jain and Shri Madhukar Mehkare in place of the Directors so removed; direct the ROC, Maharashtra to convene the 10th and 11th Annual General Meetings of the company to transact the ordinary business for the years 2001-2002, 2002-2003, so that the obligations of the company towards the shareholders of the company and the creditors be discharged.; direct that the allotment of shares made by Board of Directors of the company on 10.8.2002 of 70000 equity shares be declared as void and illegal and the directions may be issued by the Hon'ble Bench for allotment of the equity shares against the petitioner and other share application money of Rs. 37,29,501/- lying pending with the company, since long and earlier to this allotment dated 10.8.2002; issue directions under Section 234(1) of the Act, to submit explanation for illegal removal of the petitioner from the office of the Chairman and Managing Director of the company and filing of Form No. 32 with the ROC; that the petitioner being the minority shareholder of the company be granted relief under Section 397 and 398 of the Companies Act, 1956 by way of removing illegally appointed self styled Managing Director, Dr. Meena Patil (Arbat), Respondent No. 2 and prosecuting the Respondent No. 3 Dr. Raj Kumar Rami and Respondent No. 4 Dr. Riaz Khan, who are hand in glove with the respondent No. 2 in mismanagement of the affairs of the company, further the respondents also be removed from the directorship of the company; that the petitioner be granted immunity from all the business transactions and activities of the company done by respondents No. 2 and 4 during the period from 17.9.2001 till date.

3. Shri Gagan Sanghi, Counsel for the petitioner contended that the petitioner who was the single largest shareholder and a promoter director was holding the post of CMD with the approval of the Board of Directors with effect from 1995. As a part of the planned conspiracy by respondent Nos. 2,3 and 4 by allegedly illegally holding meetings on 3.9.2001 and again on 17.9.2001 i.e. just before the 9th AGM which was scheduled to take place on 29.9.2001 the respondents resolved illegally and amended the provisions of the Company's Articles of Association relating to appointment and reappointment of CMD and reduced the tenure of office from the period of 5 years to 2 years to be occupied by the directors by rotation. In the meeting illegally convened on 17.9.2001 R-2, 3 and 4 of the Board of Directors of the company the respondents removed the petitioner from the office of Chairman-cum- Managing Director of the company without the knowledge to the petitioner of the Board's meetings conducted on 3.9.2001 and on 17.9.2001. The petitioner came to know of the same from a notice dated 29.9.2001 circulated by R-2 under her signatures to be placed on the notice Board of the company for the information of the staff and others. It was vehemently contended that the petitioner had not been served with any notice for the Board Meetings held on 3.9.2001 and 17.9.2001. Further it was contended that the respondents' plea that the petitioner has vacated his office as a director of the company because he failed to attend the meetings of the Board of Directors on 17.9.2001, 9.11.2001, 21.12.2001 and 28.1.2002.is false and his removal is illegal as no such notices were received in these meetings and till date no resolutions of the members/shareholders of the company have been passed pursuant to Section 28 of the Act to oust the petitioner from the office of the director. Responding to the argument of the respondents that the petitioner must prove that he has not received the notices for the Board Meetings dated 17.9.2001,9.11.2001,21.12.2001, the petitioner placed reliance on various judgments wherein it has been held that in case of disqualification under Section 283(1)(g), the onus of proving despatch of notices and its receipt by the director is on the company and not on the director. It was further contended that the petitioner cannot be expected to prove a negative fact i.e. he did not receive the notices as only a positive fact can be proved i.e. the notices were sent by the company and received by the petitioner. Responding to the respondents' arguments that since the trial court in R. Cs. No. 2791/2001 filed by the petitioner has recorded a finding that the notice dated 13.9.2001 for the Board meeting dated 17.9.2001 had been served with the said notice has been found to be false and thus, no reliance can be placed on the statement by the petitioner that he has not received the notices for the Board meetings on 9.11.2001 and 21.12.2001, it was contended that this argument is without any merit and is based on misconception of the law applicable in India.

11. Further, the counsel for the respondents replying to the petitioner's contention that the petitioner is not subjected to any of the disqualification specified in Section 283 of the Act and continues to be the director of the company in view of Article 35 of the Articles of Association of the company argued that the contention of the, petitioner in this regard is totally baseless and devoid of any merits. On 28.1.2002 the petitioner deemed to have vacated his office as a director of the company, it was taken note by the Board in view of the provisions of Section 283(1)(g) of the Act. The attention of the CLB was drawn to the averments made at page 28 para XII of the reply to the petition, wherein it was stated that the petitioner deemed to have vacated his office as a director of the company because he failed to attend the meeting of the board of directors on 17.9.2001; 9.11.2001; 21.12.2001 and 28.1.2002. It was argued that since the petitioner has failed to attend more than three consecutive board meetings of the company he is deemed to have vacated his office in view of the provisions of Section 283(1)(g) of the Act. It was argued that the notices of all the Board Meetings were duly sent to the petitioner and the petitioner had full knowledge of the meetings of the board of directors of the company. Therefore, the requirements of Section 286 of the Act was also followed by the company. It was pointed out that the fact regarding the valid service of the notices of the Board Meeting can also be confirmed from the order dated 22.10.2001 passed by the Civil Court, Nagpur in Civil Suit No. 2971/2001 in a Civil Suit filed by the petitioner. The order dated 22.10.2001 clearly mentions that the petitioner was validly served with the notices of the Board Meeting dated 3.9.2001 and 17.9.2001. It was argued that the removal of the petitioner as a director is legal and valid in the eyes of law. Responding to the petitioner's argument that the interim order dated 22.10.2001 has merged with the final order, wherein the civil suit was dismissed for want of jurisdiction, therefore, once the civil suit is dismissed the interim order has no bearing and the same is null and void, it was contended that the said contention of the petitioner is devoid of any merits as the order dated 22.10.2001 was passed on a civil suit filed by the petitioner seeking temporary injunction on the respondents. The interim order was passed after hearing both the parties at length and after perusing the records and submissions of the respondents. Further replying to the petitioner's contention that since the civil suit was dismissed for want of jurisdiction the interim findings of the civil court is liable to be ignored it was argued that the said argument of the petitioner is not legally tenable. It is pertinent to note that the civil suit was dismissed only on the ground of want of jurisdiction. Further, the civil suit has not been dismissed on merit's wherein the interim orders passed are in nullified or cancelled in any way. Further the order dated 22.10.2001 was passed after hearing both the sides in detail. Therefore, the observations made in order dated 22.10.2001 is final and binding on the parties. The subsequent dismissal of the suit confirms the fact, that the order was correctly made and that finding cannot be overruled and the petitioner cannot in law agitate the same issues again. The two cases relied upon by the petitioner, it was pointed out are not at all applicable as the same only provides "Res Judicata - Principle of - it is the decision on an issue, and not mere a finding on an incidental question to reach such decision, which operates as Res Judicata." Therefore, it was argued that the contention of the petitioner as regards the removal as a director concerned is liable to be ignored, as the removal is legal and valid in the eyes of law, in view of the provisions of Section 283(1)(g) of the Act and in view of the various notices served upon the petitioner.

16. Considering this case on merits, I find that except meeting the petitioner's removal as CMD in view of the amendment of the Act, the respondents have failed in refuting the allegations regarding removal of the single largest shareholder of the company who was also the original subscriber and promoter of the respondent company by resorting to the provisions of Section 283(1)(g) of the Act; issue of additional shares of 70 lakhs without making an offer to the petitioner by resorting to Section 81(1A) of the Act taking shelter under the plea that it was to clear of the loan to SICOM for which the petitioner had pledged his own residence; non-maintenance of statutory records of the respondent company and non filing of statutory returns of the company on time. As regard the petitioner's contention that the notices for the Board Meetings on 17.9.2001, 9.11.200121.12.2001 and 28.1.2002 referring to his rejoinder at page 13 in para 24, it is settled law that mere production of the certificates of posting issued by the Postal Authorities would not be a conclusive proof of having served the communication upon the addressees. Onus to prove posting of notices of meetings rests with the sender who has to establish posting by sufficient corroborative evidence. The onus to prove that notices were sent is on the respondent company, which onus, the company has not discharged. The respondents contention that the petitioner vacated his office by operation of law provided in Section 283(1)(g) fails in view of non service of proper notice. Any omission to serve a special notice on the director sought to be removed constitutes denial of his/her statutory right of reply. In the absence of such notice to the director, any resolution for his removal would be vitiated by such omission. I do not see any other material substantiating the fulfilment of the requirements of Sections 284 and 190 before removing the petitioner from the post of Director. Moreover, the petitioner is one of the promoter directors of the company who was also CMD from the inception of the company. Further, the respondents' contention that the Civil Court, Nagpur's interim order dated 22.10.2001 in Civil Suit No. 2971/2001 filed by the petitioner mentioning that the petitioner was validly served with the notices of Board Meetings dated 3.9.2001 and 17.9.2001 would operate as rest judicata against the petitioner, has been squarely met by the petitioner's detailed arguments given above which for the reasons of prolixity I refrain from repeating. Once it is held that the judgment in previous suit is without jurisdiction, then the principles of rest judicata would not apply. Further, besides the two meetings mentioned in the interim order there are other meetings as well regarding which the onus of service has also not been discharged. Furthermore, the respondents' plea further gets refuted by the petitioner's correctly held contention that an interim order merges in the final order and ceases to operate/survive after a final order is passed. It is true that an interim order is passed in the light of the final order and not vice versa. In this matter the civil suit was dismissed for want of jurisdiction and, therefore, there is no interim order dated 22.10.2001 in existence which operates against the petitioner. In these circumstances, the resolution passed to remove the petitioner as director is oppressive, warranting appropriate relief.