Jaideep Halwasiya vs A. A. Infraproperties Pvt. Ltd. & Ors

[Arising out of Order dated 21st February, 2020 passed by the National Company Law Tribunal, Kolkata Bench, Kolkata in I.A. No. 131/KB/2020 in C.P. No. 264/KB of 2020]

IN THE MATTER OF:

Jaideep Halwasiya S/o Late Madan Mohan Halwasiya, Residing at Belair, Flat - 18A, 9A, Alipore Park Place, Kolkata - 700 027. ...Appellant

Vs

1. AA Infraproperties Private Limited, Having registered office at 375, Prince Anwar Shah Road, Kolkata - 700 016.

2. South City Projects (Kolkata) Limited, Having registered office at 375, Prince Anwar Shah Road, Kolkata - 700 016.

3. Man Mohan Bagree, Residing at B-89/2, Metropolitan Coop Housing Society, Kolkata - 700105.

4. Jugal Kishore Khetawat, Residing at 19A, Sarat Bose Road, P. O. Elign Road, Kolkata - 700 020.

5. Rajendra Kumar Bachhawat, Residing at 2, Upper Wood Street, Park Street, Circus Avenue, Kolkata - 700 016.

6. Pradeep Kumar Sureka, Residing at 3/1, Loudon Street, Kolkata - 700 017. ....Respondents -2-

Present:

For Appellant: Mr. Maninder Singh, Senior Advocate with Mr. Arshit Anand and Mr. Parijat Sinha, Advocates.

For Respondents: Mr. Harish Salve, Senior Advocate with Mr. Ejaz Maqbool, Advocate for Respondents No. 1 and 3.

Mr. Nakul Dewan, Senior Advocate with Mr. Abhijeet Sinha and Ms. Anushka Shah, Advocates for Respondent No. 2.

Mr. Abhrajit Mitra, Senior Advocate for Respondents No. 4 to 6.

BANSI LAL BHAT, J.

This appeal, filed by 'Shri Jaideep Halwasiya', minority shareholder of

Respondent No. 1 - 'M/s AA Infra Properties Pvt. Ltd.'(for short 'the Company')

assails the impugned order dated 21st February, 2020 passed by National

Company Law Tribunal, Kolkata Bench, Kolkata (hereinafter referred to as

'the Tribunal') on C.A. No. 131/KB/2020 in CP No. 264/KB/2020 declining

grant of interim relief across the ambit of Section 242(4) of the Companies

Act, 2013 (hereinafter referred to as 'the Act'). Vide impugned order the

Tribunal declined to record findings on the factual controversy as regards

serving of notices of AGM dated 24th September, 2019 and EoGM dated 4th

Company Appeal (AT) No. 55 of 2020 -3-

January, 2020 to the Appellant before trying the main petition though at the

same time it observed that there was prima facie evidence on record indicating

that the notices of both the meetings were given to the Appellant. The

Tribunal further observed that allowing interim relief as claimed in the

Company Petition would tantamount to allowing the main petition.

Resultantly C.A. No. 131/KB/2020 pending inquiry in main petition stands

rejected.

2. To have a conspectus of the controversy involving allegations of

oppression and mismanagement as regards the affairs of the Company

emanating from the Appellant, it would be appropriate to briefly advert to the

factual matrix of the case setup before the Tribunal and also projected in

appeal before us. Admittedly, there are two groups of shareholders in the

Company. Minority shareholders group comprises of the Appellant holding

12.5% shares whereas the majority group comprises of Respondent No. 2

holding 87.5% shares in the Company. Several allegations of oppression and

mismanagement as regards management and operations of the Company

leveled by the Appellant with some instances in the nature of not being served

notice of AGM dated 24th September, 2019 and notice of EoGM dated 4th

January, 2020 form the subject matter of inquiry in the Company Petition

which is pending. It is during the pendency of the Company Petition that the

Appellant sought interim relief alleging that Respondents No. 2 to 6 in

collusion and connivance with each other illegally appointed Respondent No.

4 to 6 in the Company as Directors in the Annual General Meeting dated 24th

Company Appeal (AT) No. 55 of 2020 -4-

September, 2019 and ousted that Appellant from Directorship in the EoGM

dated 4th January, 2020. All these acts of commission attributed to

Respondents 2 to 6 are alleged to have been done without giving notice to the

Appellant. Interim Relief was sought on the strength of these allegations

claiming that the resolutions passed in such meetings were bad in law and

void ab initio. Appellant further alleged that the acts of the Respondents,

being oppressive in nature, are prejudicial to his interest in the Company.

Respondents have refuted the allegations and pleaded that notice of the

meetings in which the resolutions inducting Respondents No. 4 to 6 in the

Company as Directors and removing Appellant from the post of Director were

passed, were given well in advance to the Appellant. It was further pleaded

that the majority shareholder was within its rights to pass such resolutions

appointing other persons as Directors and removing the existing Director

including the Appellant.

3. Shri Maninder Singh, Senior Advocate representing the Appellant

submits that the Company is a Private Limited Company incorporated by the

Appellant and his wife in 2009. Respondent No. 2 and its affiliates/ associates

under the control of Respondent No. 3 - Mr. Man Mohan Bagri are the majority

shareholder group whereas Appellant is a minority shareholder group. It is

submitted that Respondent No. 2 and other Respondents are illegally trying

to usurp control over the Company by forcing ouster of Appellant from Board

of Directors and appointing Respondents No. 4 to 6 as Directors of the

Company. It is submitted that Respondents 2 and 3 adopted a modus

Company Appeal (AT) No. 55 of 2020 -5-

operandi creating an impression that Respondent No. 4 to 6 were appointed

at a meeting of the Company held on 24th September, 2019 and subsequent

to this alleged AGM an EoGM was held on 4th January, 2020 wherein

Appellant was removed from Board of Directors. It is submitted that neither

the alleged AGM nor the alleged EoGM were held. It is submitted that while

the Tribunal observed that the factual controversy in regard to holding of such

meetings required the parties to lead evidence, the Tribunal relied on prima

facie evidence without even taking into account that no evidence documentary

or otherwise would even indicate that such meetings were held. It is

submitted that the finding as regards prima facie case is based on no evidence

and manufactured and fraudulent documents have been relied upon by the

Tribunal. It is pointed out that there is no resolution nor any minutes of the

alleged Board Meeting dated 22nd June, 2019 to show that the two Directors

of the Company decided to hold AGM on 24th September, 2019. It is

submitted that no minutes as required under Section 118 of the Act have

been produced by the Company to support its plea. It is further submitted

that as regards alleged agenda and notice dated 6th June, 2019, no notice or

agenda was ever circulated. Documents relied upon by Respondents in this

regard are ex-facie fabricated as they do not bear the signatures and are not

on letter head of the Company. Thus the alleged notice or agenda cannot

substitute the statutory requirement. As regards alleged notice dated 5th

August, 2019, it is submitted that the same is a manufactured document. The

notice was never served on Appellant or any other shareholder of the

Company Appeal (AT) No. 55 of 2020 -6-

Company. Even service was not effected through the prevalent mode of

service. It is further submitted that Annual Returns were filed without holding

an AGM and that on the date of alleged meeting Respondent No. 3 was not

even in India. Subsequently, efforts were made to whitewash the concoction

by claiming it to be a clerical error and stating that the AGM was attended by

Mr. Parimal Ajmera - an employee of Respondent No.2 though he was neither

a Director nor an employee of the Company. It is therefore submitted that

Mr. Parimal Ajmera could not have substituted Respondent No. 3 who was

the only Director at the alleged AGM of the Company. It is submitted that

since Appellant did not attend any meeting purportedly held on 24th

September, 2019, the minimum required quorum of General Meeting as per

Section 103(1)(b) of the Act was not present. Such meeting would therefore

have no meaning and cannot be said to exist in law. Thus, it is contended

that AGM dated 24th September, 2019 is non-est and the resolutions passed

on that date deserve to be stayed. Learned counsel for Appellant further

submits that initially Respondents claimed that Mr. Manmohan Bagri, the

other Director of the Company had attended meeting dated 24th September,

2019 but when confronted with evidence that Mr. Manmohan Bagri was not

in India on 24th September, 2019, Respondents changed their stand by

contending that Mr. Parimal Ajmera had attended the meeting. This was a

complete u-turn demonstrating fabrication of documents and that no meeting

was held on 24th September, 2019. It is further submitted that no

authorization in favour of Mr. Parimal Ajmera has been filed by Respondents

Company Appeal (AT) No. 55 of 2020 -7-

who could also not chair any meeting as he was not the Chairperson of the

Board or a Director. It is only the Appellant who could have authorized Mr.

Parimal Ajmera to Chair any such meeting. Such authorization not being

there, it cannot be said that the meeting was held on 24th September, 2019.

It is accordingly submitted that all actions pursuant to an alleged AGM dated

24th September, 2019 are non-est. As regards, EoGM dated 4th January,

2020, it is submitted that there is not even a single document to show that

the removal of Appellant as Director of Company was discussed. It is

submitted that the case setup in regard to holding of EoGM is fraudulent. It

is further submitted that the only purported ground for removal of the

Appellant as a Director from the Board of the Company is in relation to the

affairs of a Foreign Company - 'M/s Indocean Developers Pvt. Ltd.'

incorporated in Sri Lanka. However, the Act does not permit the affairs of a

foreign company to be taken into consideration for any such decision to be

taken by the shareholders of the Company. The affairs of a foreign company

cannot be relevant for the purpose of convening a meeting of Members of any

Company under the Act. It is submitted that Section 102 of the Act does not

envisage or permit the affairs of a foreign company to be taken into

consideration for any decision to be taken at any General Meeting of the

shareholders. It is therefore submitted that the purported resolution dated

4th January, 2020 for removal of Appellant as Director from the Company is

entirely illegal and void ab initio. It is submitted that there is no evidence to

show that notice of Board Meeting to be convened on 26th November, 2019

Company Appeal (AT) No. 55 of 2020 -8-

was served on Appellant. The document produced by the Respondents 1 to 3

does not bear the signatures of the Appellant or any person authorized by

him. Same is the case with alleged Board Meeting held on 12th December,

2019. Genuineness of alleged notice for EoGM dated 12th December, 2019 is

disputed. The variation in address is also highlighted. It is submitted that

the very foundation of removal of Appellant from the Board of Directors is

nothing but fraudulent which is sought to be supported by fabricated

documents. Lastly, it is submitted that the Respondents will hijack the affairs

of the Company unless there is intervention by the Court. The Appellant

seeks protection of the interests of the Appellant and also that of the Company

pending adjudicating of the Company Petition.

4. Per contra it is submitted by Mr. Harish Salve, learned senior counsel

appearing on behalf of the Company that the decision to convene AGM on 24th

September, 2019 was taken at the Board Meeting held on 22nd June, 2019,

which was duly attended by the Appellant. Even Annual Accounts for

2018-19 were signed by the Appellant at this Board Meeting. It is further

submitted that the Appellant holding barely 12.5% shares cannot deny the

87.5% shareholder (Respondent No. 2) nominating three more Directors on

the Board of the Company especially when Respondent No. 2 has by way of

loans and securities provided for the banking facility proportionately far more

share. It is pointed out that the Appellant has received and encashed the

dividend cheque on 30th September, 2019 which could not have been done

without holding the General Meeting. It is further submitted that under

Company Appeal (AT) No. 55 of 2020 -9- Section 96 of the Act AGM was required to be conducted before 30th

September and Appellant has not specified as to which steps he has taken for

holding of AGM, if it was not held on 24th September. It is submitted that

there has been delay in filing the Company Petition which has not been

explained. It is submitted that the Appellant has cooked up the story only to

cover up his own misdeeds and belated disputing of AGM is a step in the same

direction. In any case convening of AGM on 24th September, 2019 is the

principal issue in the Company Petition and no interim relief can be granted

in the nature of final relief claimed in the Company Petition. It is submitted

that the Appellant has not challenged EoGM dated 4th January, 2020 and the

resolution passed therein for his removal from the Board of Directors.

Appellant cannot be permitted to make such a prayer by way of his affidavit

dated 6th February, 2020. It is submitted that the EoGM was convened in

accordance with law for which requisition was made by Respondent No. 2 on

25th November, 2019 and Board Meeting was held on 12th December, 2019 in

respect whereof notice was received by the Appellant at his residence. The

Board Meeting was held on 12th December, 2019 convening the EoGM on 4th

January, 2020 and notice in this regard was duly served on the Appellant. It

is further submitted that the Appellant has acted against the interests of the

Company by purporting to reduce Company's shareholding from 100% to

13.84% in IDPL. Such unilateral conduct adversely affected the interest of

the Company which has been challenged before the Commercial High Court

Company Appeal (AT) No. 55 of 2020 -10-

in Sri Lanka. Therefore, Appellant is not entitled to any equitable relief as

claimed in the Company Petition.

5. Mr. Nakul Dewan, learned senior counsel representing Respondent No.

2, while adopting submissions made on behalf of Respondent No. 1, further

submits that all statutory compliances with regard to convening of the AGM

on 24th September, 2019 and the EoGM dated 4th January, 2020 have taken

place. It is submitted that the Courts do not interfere under Section 241/242

of the Act with any statutory lapse by a Company in removing/ appointing a

Director when the majority shareholder is in favour of such removal/

appointment. It is further submitted that Respondent No. 2 apart from being

the majority shareholder had also made direct investment in IDPL so as to

enable it to develop its project called ALTAIR. It is submitted that the

Appellant was attempting to withdraw the securities earlier furnished by him.

A false impression was created by Appellant by stating that he had given a

personal guarantee worth Rs.300 Crore for availing loan facility for IDPL. It

is submitted that the illegal acts of Appellant have caused substantial loss to

the Company and prejudice to Respondent No. 2. Appellant had tried to take

away Respondent No. 2's right of control and management over the Colombo

Project which is being developed by Respondent No. 1's wholly owned

subsidiary IDPL. Thus, Appellant has left Respondent No. 2 financially

exposed to the extent of Rs.788 Crore in the said Company. It is submitted

that in these circumstances no interim relief could be granted to Appellant

even if it is able to establish any statutory lapse on part of Respondent No. 1.

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6. Learned counsel representing Respondents No. 4 to 6, in addition to

submissions made by Respondents 1 and 2 submits that the Appellant had

issues with most of the other Directors and Shareholders of Respondent No.

2, more particularly with Respondent No. 6 and same was true of the other

side as the Appellant held 12.5% shareholding in the Company which was

disproportionately high as compared to its financial exposure. Respondent

No. 6 and other directors agreed to provide Appellant a chance to manage the

development of the Project at Sri Lanka. However, complaints started pouring

in as according to Appellant Respondent No. 6 had taken poor decisions

regarding the Sri Lankan Project which led to delay and cost overrun.

Respondent No. 6 and other Directors, on the other hand, complained of

moneys being siphoned off by the Appellant from IDPL and started insisting

on removing the Appellant from management and control of Sri Lankan

Project and from the Board of Directors of Respondent No. 1. It is submitted

that a settlement was worked out in terms whereof new nominee directors of

Respondent No. 2 were to be inducted in Respondent No. 1 Company and its

subsidiary IDPL. Some developments are said to have taken place with full

knowledge of the Board and consent of both sides for completion of Sri Lankan

Project. It is submitted that in November, 2019 Appellant had filed returns

in Sri Lanka in the name of IDPL reducing 100% shareholding of R-1 to only

13.84% and removing Respondent No. 6 and another nominee Director Shri

R. K. Agarwal from the Board of IDPL. It is thereafter that the Appellant was

Company Appeal (AT) No. 55 of 2020 -12-

removed from the Board of Respondent No.1 in terms of the Board Resolution

and the resolution passed at the EoGM.

7. Heard Learned counsels for the parties and perused the record.

Chapter XVI of the Act deals with prevention of oppression and

mismanagement. Section 241 provides for grant of relief by the Tribunal in

cases of oppression etc. while Section 244 regulates the right of members to

apply under Section 241. Powers of Tribunal to deal with an application

under Section 241 are embodied in Section 242, Sub-section 4 whereof

provides for passing of such interim directions by the Tribunal on the

application of any party to proceedings which it thinks fit for regulating the

conduct of the Company's affairs. The ambit and scope of these provisions

fell for consideration of this Appellate Tribunal in 'Smt. Smruti Shreyans

Shah Vs. The Lok Prakashan Limited & Ors.' in Company Appeal (AT)

No. 25 of 2018 decided on 5th September, 2019, para 15 whereof relevant

for our purpose is reproduced hereinbelow:

"15. Now coming to the issue of grant of interim relief,

be it noticed that Section 241 of the Act dealing with grant

of relief in cases of oppression and mismanagement

provides that any member of a company, eligible in terms of

Section 244 of the Act, may apply before the Tribunal for an

order under Chapter XIV dealing with prevention of

oppression and mismanagement. Such member's complaint

Company Appeal (AT) No. 55 of 2020 -13-

must be in regard to the affairs of the Company that have

been or are being conducted in a manner prejudicial to

public interest or in a manner prejudicial or oppressive to

him or any other member or members or in a manner

prejudicial to the interests of the company or that any

material change has taken place in the management or

control of the company and because of such change it is

likely that the affairs of the company will be conducted in a

manner prejudicial to its interests or its members. Section

241(2) of the Act enables the Central Government also to

apply to the Tribunal for an order under Chapter XIV of the

Act, if in its opinion the affairs of the Company are being

conducted in a manner prejudicial to public interest. Section

242 of the Act dealing with the powers of the Tribunal

empowers it to pass such order as it thinks fit if, based on

application filed under Section 241 it is of opinion that the

company's affairs have been or are being conducted in a

manner prejudicial or oppressive to any member(s) or

prejudicial to public interest or in any manner prejudicial to

the interests of the company and on just and equitable

ground winding up order would be justified but such

winding up would unfairly prejudice such member(s). Sub-

section (2) of Section 242 deals with the nature of

Company Appeal (AT) No. 55 of 2020 -14-

substantive relief that can be granted though same is only

illustrative and not exhaustive. Section 242(4) of the Act

provides for interim relief which the Tribunal may grant for

regulating the conduct of the company's affairs. Such

interim relief can be granted by virtue of an order passed on

the application of any party to the proceeding and such

order can be subjected to terms and conditions which

appear to the Tribunal to be just and equitable. On a plain

reading of these provisions, it is abundantly clear that

pending consideration of application by a member or

member(s) of a Company alleging oppression or

mismanagement, the Tribunal is vested with wide

discretion to make any interim order on the application of

any party to the proceedings, which it thinks fit for

regulating the conduct of company's affairs. Such interim

order can be subjected to terms and conditions which

appear to the Tribunal to be just and equitable. The nature

of interim order would depend upon the nature of complaint

alleging oppression or mismanagement and the relief

claimed therein. A member alleging that the affairs of the

company have been or are being conducted in a manner

prejudicial or oppressive to him or any other member or

prejudicial to the interests of the company must come up

Company Appeal (AT) No. 55 of 2020 -15-

with specific allegations of oppression and mismanagement

and demonstrate that the affairs of the company have been

or are being run in a manner which jeopardizes his interests

or interests of other members or the interests of the

company. Passing of interim order necessarily correlates to

regulating the conduct of company's affairs. It is therefore

imperative that the member complaining of oppression or

mismanagement makes out a prima facie case warranting

grant of relief in the nature of an interim order. The making

of an interim order by the Tribunal across the ambit of

Section 242 (4) postulates a situation where the affairs of

the company have not been or are not being conducted in

accordance with the provisions of law and the Articles of

Association. For carving out a prima facie case, the member

alleging oppression and mismanagement has to

demonstrate that he has raised fair questions in the

Company Petition which require probe. Fairness of

questions depends on the nature of allegations which, if

proved, would entitle the member complaining of oppression

and mismanagement to final relief in terms of provisions of

Section 242."

8. This appeal has a limited scope as it has been preferred against an order

passed under Section 242(4) of the Act declining to grant interim relief.

Company Appeal (AT) No. 55 of 2020 -16-

Considerations for grant of interim relief are well settled. Existence of a prima

facie case besides balance of convenience and irreparable injury being

suffered by a Member of Company alleging acts of oppression and

mismanagement prejudicial to its interest and those of the Company, if there

is no judicial intervention to protect the interests of such Member or the

Company from alleged acts of oppression and mismanagement pending probe

into allegations of oppression and mismanagement in the affairs of the

Company, are the relevant considerations at the stage of grant of interim relief

and Section 242(4) of the Act vests ample powers in the Tribunal to pass such

interim directions as may be necessary for regulating the affairs of the

Company.

9. Adverting to the facts of the instant case be it seen that the Appellant

has made specific allegations of oppression and mismanagement against

Respondents and made strenuous efforts to demonstrate that the affairs of

the Company have been conducted in a manner which seriously jeopardize

his interests. While it is not permissible to return findings of fact qua such

allegations of oppression and mismanagement across the ambit of

interlocutory application under Section 242(4) of the Act as also within the

limited scope of instant appeal, the Appellant is required to make out a prima

facie case warranting grant of interim relief. To demonstrate that the affairs

of the Company were not being conducted in accordance with the provisions

of law and the Articles of Association, the Appellant has raised the issue of

not being served with notice of AGM dated 24th September, 2019 and EoGM

Company Appeal (AT) No. 55 of 2020 -17-

dated 4th January, 2020 which were crucial in so far as his interests as a

stakeholder in the Company were concerned. It is not in dispute that such

meetings were purportedly held to induct Respondents No. 4 to 6 as Directors

and remove the Appellant from the Directorship of the Company. The

Tribunal has observed that the notices of AGM and EoGM were given to the

Appellant. This observation is with reference to some documentary evidence,

genuineness and authenticity whereof besides proof of service is the subject

of controversy in the Company Petition. How and on what basis the Tribunal

made such observation has not been spelt out in the impugned order. We are

conscious of the fact that the issue in this regard forms the core issue in the

Company Petition and the effect of non-service of notices upon the Appellant

in regard to such meetings has serious consequences, one diluting his status

and the other resulting in his ouster. The Tribunal has noticed the allegation

emanating from the Appellant that he did not get notice of both the meetings

and the documents relied upon by Respondents in this regard are fake and

fabricated. It is queer that the Tribunal, while being of the view that there

was factual controversy inter se the parties in regard to service of notices upon

the Appellant for aforesaid meetings and showing its consciousness that issue

in this regard was required to be determined in the main petition on the basis

of evidence tendered by parties, proceeded to observe that there was prima

facie evidence on record indicating that the notices of both the meetings were

given to the petitioner. It further appears that the Tribunal, apart from

treating the notices in regard to the meetings challenged by the Appellant, did

Company Appeal (AT) No. 55 of 2020 -18-

not rely on any other substantive, circumstantial or corroborative proof to

come to a prima facie finding that such notices were given to the Appellant.

The approach adopted by the Tribunal is fundamentally flawed as it could not

solely rely upon documents - Notices herein, service whereof to Appellant was

seriously disputed. The Tribunal ought to have been more careful in drawing

conclusion as regards existence of prima facie case from such questioned

notices, as the consequences flowing from such notices had the deleterious

effect of diluting the status and forcing ouster of Appellant from Directorship

of the Company.

10. Now coming to the pivotal issue of determining whether there was a fair

question raised by Appellant in the Company Petition alleging oppression and

mismanagement at the hands of Respondents be it seen that the Appellant is

admittedly a minority shareholder whilst Respondent No. 2 and its associates

are the majority shareholders. With allegations of Respondent No. 2 and other

Respondents making all efforts to usurp control over the Respondent No. 1

Company through all means, fair or foul, emanating from the Appellant, it is

demonstrated by the Appellant that no resolution or any minutes of Board

Meeting dated 22nd June, 2019, stated to be the edifice of the alleged AGM, is

in existence to even suggest that the two Directors decided to hold AGM on

24th September, 2019. It is contended on behalf of Appellant that adherence

to the statutory requirement under Section 118 of the Companies Act has not

been established by Respondents which justifies drawing of an inference that

neither any such Board Meeting was conducted nor any minutes were

Company Appeal (AT) No. 55 of 2020 -19-

recorded of such Board Meeting. It is also pointed out that no notice or

agenda was circulated in the prescribed manner and bearing signatures of

Appellant. As regards notice said to have been issued on 5th August, 2019,

similar contentions have been raised, it being further pointed out that the

prevalent modes of service have not been resorted to. It has been pointed out

that though Form No. MGT 7 was filed even without holding AGM, the Annual

Report falsely declared that the AGM had been attended by both by Appellant

as well as Respondent No. 3 as Directors. It has been pointed out that the

Appellant never attended any such meeting and Respondent No. 3 was not in

India on that date (page 144-147 of Vol. I of the appeal paper book). It is also

pointed out that after the Respondents realized that fraud played by

Respondent No. 3 in this regard had been discovered, Respondent No. 3

cooked up another false story by setting up the plea that one Mr. Parimal

Ajmera had attended the meeting on his behalf and a clerical error had been

made in the Annual Report. The Appellant has pointed out that that Mr.

Parimal Ajmera was not an employee of the Company and admittedly not a

Director. Thus, he could not have substituted Respondent No. 3, who was

the only other Director on the date of alleged AGM dated 24th September,

2019. No authorization in this regard has been produced by the Respondents

to demonstrate that Mr. Parimal Ajmera had attended as representative of

Respondent No.2 in the alleged AGM. It is submitted on behalf of Appellant

that since the Appellant did not attend any purported meeting on 24th

September, 2019, the minimum required quorum of General Meeting not

Company Appeal (AT) No. 55 of 2020 -20-

being present any resolutions said to have been passed on such date are

required to be stayed. As regards the EoGM dated 4th January, 2020, it is

pointed out on behalf of Appellant that the only ground for removal of

Appellant as a Director from the Board of the Respondent No. 1 Company was

in relation to the affairs of M/s Indocean Developers Pvt. Ltd. Incorporated in

Sri Lanka which is a foreign company and the Act does not permit affairs of a

foreign company to be taken into consideration for any such decision to be

taken by the shareholders of the Company. Reference in this regard is made

to Section 102 of the Act which does not envisage affairs of a foreign company

to be taken into consideration for taking a decision in a General Meeting of

the Shareholders. On the strength of these relevant facts, it is contended on

behalf of Appellant that the ouster of Appellant as Director is entirely illegal.

Since the foundation is bad, it is contended, the entire superstructure is

bound to collapse. The Appellant has demonstrated all these circumstances

to show that it has raised a fair question which requires probe in the Company

Petition. The arguments raised on this score cannot be dismissed offhand.

Given the status of Appellant, it can be safely stated that with existence of

prima facie case in his favour, balance of convenience lies to the side of

Appellant who is faced with the prospect of his interests and legal rights being

seriously jeopardized in the wake of impugned order.

11. For the foregoing reasons, we are of the considered opinion that the

impugned order suffers from grave legal infirmity besides factual frailty. Same

cannot be supported. The appeal is allowed and the impugned order is set

Company Appeal (AT) No. 55 of 2020 -21-

aside. Appointment of Respondents No. 4 to 6 as Directors of the Company

and removal of Appellant as the Director of the Company is stayed till the

decision of Company Petition by the Tribunal.

12. There shall be no orders as to costs. Any observations made in this

judgment shall not be construed as an expression of opinion on the merits of

the case and the Tribunal shall have to arrive at its own findings in the main

petition on the basis of evidence brought on record by the parties.

[Justice Bansi Lal Bhat] Acting Chairperson

[V. P. Singh] Member (Technical)

[Dr. Alok Srivastava] Member (Technical)

NEW DELHI 4th September, 2020

AM

Company Appeal (AT) No. 55 of 2020