Lala Saurabh Verma vs Technotech Synergy Pvt. Ltd. & Ors

1. Lala Saurabh Verma, S/o. Sri Bhupal Prasad Verma, R/o. 10 RI, Mordiha- 216, P.O. - Mordiha, P.S. ThakurgangtiGodda, Jharkhand, India - 813208 Mob: 8825251080 ...Appellant Email: Saurabh.verma1981@gmail.com Versus

1. Technotech Synergy Pvt. Ltd. &Ors. Having Registered office at: 544/A/A-2, Pvt. Off No. 28/F/FL, Acharya Niketan, MayurVihar, Phase-1, Above Liberty Showroom, New Delhi, East Delhi DL 110091 IN Email: abhishekkumar1912@gmail.com 2. Mr. Pankaj Kumar S/o. Naresh Kumar R/o. B-25/11, Ramprasth Colony, Link Road, Ghaziabad, Uttar Pradesh - 201011 India 3. Mr. Abhishek Kumar S/o Shri Ram Shankar DayalKeshri R/o. Shubham, opp. Indira Palace, Hinoo Ranchi, Jharkhand India - 834002 ...Respondents

Present:

For Appellant: Mr. Pawan Sharma, Advocate

For Respondents: Mr. Anuj Tiwari, Mr. Achint Kumar, Ms. Tuhina Misra, Mr. Saurabh Mishra, Mr. Nikhil Anand, Advocates.

Company Appeal (AT) No. 357 of 2019 2

JUDGMENT

Dr. Ashok Kumar Mishra, Technical Member

This Appeal has been filed pursuant to Section 421 of the Companies

Act, 2013 read with Section 241-242 of the Companies Act, 2013 being

aggrieved by the impugned order dated 03.09.2019 passed by the National

Company Law Tribunal, New Delhi Bench in Company Petition No. 219/241-

242/ND/2018.

2. The Brief Facts of the case as stated by the Ld. Counsel for the Appellant

and also appearing in Appeal Paper Book, in a summarised manner, are as

follows:

(a) Respondent No.1/Company was incorporated on 17.10.2012. The

shareholding pattern of the Company are as follows extracted from

Memorandum of Association & Article of Association of R-1:

Company Appeal (AT) No. 357 of 2019 3

Company Appeal (AT) No. 357 of 2019 4

(b) The business of one M/s Thermotech Synergy Pvt. Ltd. was transferred

to Respondent No.1 Company. The transfer of the business is in fact admittedly

on record. Mr. Bhupal Prasad Verma (Father of the Appellant) held 44% shares

R-2 held 16% shares and R-3 held 13% shares in the said company.

(c) The Appellant's experience in the steel sector was the basis of the

development of the Respondent No.1 Company business. R-2 and 3 were

having no experience of the business model carried in R-1 Company. R.No. 2

and 3 were initially opted into the business of Thermotech Synergy Pvt. Ltd.

and subsequently in R-1 Company also due to friendly relations and both of

them were also aligned in other business ventures carried along with the

Appellant.

(d) The dispute erupted in the year 2016 due to taking over some other

business by Respondent No.2.

(e) The dispute arose on account of hijacking of one Ascent Infrabuild Ltd.

carrying Crusher Business wherein all the parties are equal partner including

Respondent No.2.

(f) It is further pertinent to mention here that Respondent No.1 Company

had attained a goodwill in its sector and therefore the Respondent No. 2 and

Respondent No.3 had hand in hand gloves together with a predetermined

objective to hijack the business and affairs of Respondent No.1/Company and

to give effect to the said conspiracy. These Respondents have come together to

oust the Appellant from the directorship of Respondent No. 1/Company by

taking benefit of their collective shareholding against the letter and spirit of

Company Appeal (AT) No. 357 of 2019 5

Corporate Democracy. It is further pertinent to mention here that the business

evolved and growth attained in Respondent Company had accrued solely by the

Appellant's technical and business acumen.

(g) Appellant was served an undated notice of Extra Ordinary General

Meeting ("EGM") schedule on 16.06.2018 issued by Respondent No.3 at the

behest of Respondent No.2 pursuant to a requisition in accordance with the

provisions of Section 100 of the Companies Act, 2013. One of the agenda

proposed to be taken up was to remove the Appellant from the directorship of

the Respondent No.1/Company.

(h) The said undated notice calling "EGM" on dated: 16..06.2018 is issued

by Respondent No.3 pursuant to a requisition dated: 03.05.2018 purportedly

marked to the Board of Directors calling for convening of "EGM" and proposing

for the removal of the Appellant canvassing allegation of financial

mismanagement, fraud and other vague allegations.

(i) It is further stated that the Appellant was also served through email

dated 25.05.2018 a purported undated special notice from Respondent No.2

proposing removal of the Appellant as Director from Respondent

No.1/Company. Further the said notice also draws attention to the Appellant

towards the provisions of Section 169 (4) conferring right on the notice to make

formal representation, if any, against such proposal. The notice states a

deadline for tendering of representation on or before 13.06.2018.

(j) It was also stated that the aforesaid notice calling EGM along with

explanatory statement and the special notice was served to the Appellant vide

Company Appeal (AT) No. 357 of 2019 6

email dated: 25.05.2018, it is further stated that these notices and documents

were not served on to the Appellant by registered post, the Respondent No. 2 in

its email though had made a statement that these notices were also served

upon the Appellant by registered post. The Appellant controverts the said

statement of Respondent No.2 and humbly submits this Hon'ble Bench to call

upon the proof of service to corroborate the narration as made by Respondent

No.3.

(k) The Appellant also challenges the collusive act of Respondent No. 2 and

3 for conspiring, illegally acting in concert with a malign objective to throw out

and deprive the Appellant from the affairs of Respondent No. 1 Company and

also to jeopardise the vested commercial interest of the Appellant held in

Respondent No.1/Company.

(l) The notice calling EGM is bad in law and liable to be declared as null

and void on the following grounds:

(i) No notice of Board Meeting called and Convened for taking note of the

requisition dated: 03.05.2018.

(ii) It is pertinent to mention here that special notice to be given under

Section 115 of the Companies Act, 2013 must disclose the specific grounds

with all supported information on which the director is proposed to be

removed, as disclosure of the ground of removal is of substance and not of form

because the director concerned is entitled to make a representation against the

removal. This disclosure then only gives the Board of Directors a view and

basic statement as provided under Section 102 of the Companies Act, 2013.

Company Appeal (AT) No. 357 of 2019 7

That the constitution of Respondent Company by its nature is a quasi-

partnership and therefore the proposal of exclusion of Appellant from the

directorship of the Company will comprehensively prejudice the interest of the

Appellant who undisputedly held 33% of the issued capital in Respondent

Company. It is settled that if removal proposed is for the purpose of attaining

malafide objective especially in a quasi-partnership Company, the action of

majority constitutes an oppressive against the minority, being the test of

fairness superseded the legality and the procedural compliances. That is also a

settled law where removal of director of a private limited Company which is in a

nature of partnership, such removal constitutes an oppressive act, if the

shareholders instrumental in proposing a resolution for removal are found to

have acted in a malafide manner.

(iii) That Section 102 of the Act, mandates to disclose in explanatory note

that all material facts relating to the resolution before the general meeting to

enable the shareholders to form a judgment on the business before them.

Section 102 of the Companies Act, 2013 is reproduced hereunder for your

ready reference:

"(1) A statement setting out the following material facts concerning each item of special business to be transacted at a general meeting, shall be annexed to the notice calling such meeting, namely:--

(a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of--

(i) every director and the manager, if any;

(ii) every other key managerial personnel; and Company Appeal (AT) No. 357 of 2019 8

(iii) relatives of the persons mentioned in sub-clauses (i) and

(ii);

(b) any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon.

(2) For the purposes of sub-section (1),--

(a) in the case of an annual general meeting, all business to be transacted thereat shall be deemed special, other than--

(i) the consideration of financial statements and the reports of the Board of Directors and auditors;

(ii) the declaration of any dividend;

(iii) the appointment of directors in place of those retiring;

(iv) the appointment of, and the fixing of the remuneration of, the auditors; and

(b) in the case of any other meeting, all business shall be deemed to be special:

Provided that where any item of special business to be transacted at a meeting of the company relates to or affects any other company, the extent of shareholding interest in that other company of every promoter, director, manager, if any, and of every other key managerial personnel of the first mentioned company shall, if the extent of such shareholding is not less than two per cent of the paid-up share capital of that company, also be set out in the statement.

(3) Where any item of business refers to any document, which is to be considered at the meeting, the time and place where such document can be inspected shall be specified in the statement under sub-section (1).

(4) Where as a result of the non-disclosure or insufficient disclosure in any statement referred to in sub-section (1), being made by a promoter, director, manager, if any, or other

Company Appeal (AT) No. 357 of 2019 9

key managerial personnel, any benefit which accrues to such promoter, director, manager or other key managerial personnel or their relatives, either directly or indirectly, the promoter, director, manager or other key managerial personnel, as the case may be, shall hold such benefit in trust for the company, and shall, without prejudice to any other action being taken against him under this Act or under any other law for the time being in force, be liable to compensate the company to the extent of the benefit received by him.

(5) Without prejudice to the provisions of Sub-Section (4), if any default is made in complying with the provisions of this section, every promoter, director, manager or other key managerial personnel who is in default shall be punishable with fine which may extend to fifty thousand rupees or five times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is more."

The explanatory notice as annexed do not provides for all material information

as mandated in the said section, hence the notice as well as the explanatory

statement annexed thereto are illegal and void.

(m) They have also stated that they have made false, dishonest, malicious,

baseless, frivolous and concocted allegations against the Appellant.

(n) The Appellant therefore submits that being the alleged complaints are

pending trial before the appropriate court, unless the allegation are proved, the

Appellant cannot be prejudiced from his legitimate entitlement in Respondent

Company. The facts reflecting the malign objectives of Respondent No.2 by

hand in gloves with Respondent No.3 and further initiating removal of the

Appellant is purely a vexatious and a planned conspiracy against the

Appellant. Hence the proposal of removal is not only bad but a coercive act

Company Appeal (AT) No. 357 of 2019 10

against the interest of the Appellant in Respondent No.1 Company. Therefore in

addition to the statutory ground as relied upon by the Appellant on the

proposal of removal of the Appellant from the directorship of Respondent No. 1

Company deserves to be rejected at threshold on this count also.

(o) It is also pertinent to mention here that considerable amount in crores

are expected to be realised from the clients of the Respondent Company namely

Bhushan Steel, Jindal Steel and Power, BSNL and therefore as a conspiracy

Respondent No. 2 and 3 are initiating to remove the Appellant from Respondent

Company and therefore to disentitle the Appellant right as director and

shareholder on these funds. The said objectives can be easily achieved if the

Appellant is removed from the board of directorship.

(p) NCLT failed to took notice of the fact that an FIR No. 0049 of 2019 was

registered not only against the Appellant but also against Respondent No. 3 at

the instance of Respondent No. 2. The said FIR was registered consequent to

the compliant of Respondent No. 2 alleging forgery and also complaint under

SCST Act, 1989. The matter is still under investigation. The Hon'ble NCLT

further failed to take notice that Respondent No. 2 reconciled with Respondent

No. 3 and they together conspired and hand in gloves to oust the Appellant

from the Respondent Company.

(q) It is further a fact in issue that in case the proposed removal of the

Appellant was prompted and had arisen on account of the said FIR, then for

what reason Respondent No. 3 was exempted. In the present case both

Company Appeal (AT) No. 357 of 2019 11

Respondent No. 2 and 3 are acting in concert against the interest of the

Appellant in Respondent No. 1/Company.

(r) The referred FIR No. 0049 of 2016 registered under SC/ST Act

Investigation is going on since 2016. No charge sheet is filed yet. Respondents

misled Hon'ble NCLT.

3. The Ld. Counsel for the Respondent submitted the followings:

(a) It was submitted by the Ld. Counsel of the Respondent that NCLT

dismissed the matter on the ground that there was no case of Oppression and

Mismanagement as alleged out by the Appellant.

(b) The Appellant falsely agitated allegations of Oppression &

Mismanagement against the Respondents on event of removal of Appellant

from the position of directorship in the Respondent no.1 Company vide an

EOGM and such allegations are vague, baseless, concocted in fanciful manner

and malafide without appreciating the true position of law, therefore the said

Appeal is liable to be dismissed on this ground alone.

(c) Respondent No.1 Company is engaged into the business of operation,

maintenance and housekeeping of recovery coke over batteries of steel

manufacturing companies and associated materials handling and by products

at its four sites.

(d) The Respondent No. 2 & 3 along with the Appellant were involved in

Respondent No.1 Company incorporated on 2012 after diversion from

previously known two firms M/s. Tech Synergy operating site at Wardha,

Company Appeal (AT) No. 357 of 2019 12

Maharashtra and another namely M/s. Thermotech Synergy Pvt. Ltd.

Operating management of Dhenkanal Odhisha site.

(e) On or around FY 2016-2017, huge disparities and unaccountability in

the income & expenses maintained at the active site of the Respondent No. 1

Company had came to the light and the Appellant being in the position of

management refused to give information on the account of disputes in finance

of the Respondent No.1 Company and also abused the Respondents during

enquiry. That the Respondent No. 2 lodged complaint against the Appellant

vide FIR 0049 of 2016 at PS Thakur Gangati, District Godda, Jharkhand.

(f) To ascertain the financial irregularities the Directors/shareholder of the

Respondent No. 1 Company passed Resolution dated 02.02.2017 to appoint a

CA (Chartered Accountant) to conduct Special Audit of the finances of the

Company for the consecutive period starting from FY 2014-15 to FY 2016-17.

Copy of Letter of appointment of Chartered Accountant (CA) are scanned and

produced herein below for ease of conveniences: (Annexure R-5 Pg. 190, Vol -I)

Company Appeal (AT) No. 357 of 2019 13

Company Appeal (AT) No. 357 of 2019 14

(g) Special Audit Report dated 24.05.2017 evidently proved a large scale of

irregularities in the management of Company. Some of which are enumerated

herein below:

Special Audit Observations & Findings

(I) Several expenses were booked and payments released in cash without

maintaining proper supporting bills payment, receipts. For example,

- Worker Fooding & Refreshment

- Guest House Exp

- Conveyance

- House Keeping Exp.

- Mess Exp.

- Safety and Tools

- Business Promotion

- Manpower Mobilization expenses (Bhatia, JSW)

- Site expenses (Bhatia)

(II) Payments amounting to Rs. 362.28 lacs were made in respect of which

no satisfactory explanation were provided by the accounts keeping staff and

onsite staff responsible for releasing payments after verification of bills and

approval of Mgt. Such payments were clubbed under Suspense Head.

(III) There were instances of serious breach of Section 40 A(3) of the Income

Tax Act, 1961 whereby to check the misutilisation of cash and to ensure that

Company Appeal (AT) No. 357 of 2019 15

the payments are made to genuine persons, all payments exceeding Rs. 20,000

are to be made only through a crossed cheque or a crossed bank draft.

Further, there was no system in place of obtaining payment

receipt/acknowledgment from the vendor/suppliers to whom such self-cheques

issued. Onsite staff responsible for disbursements & handling of cash expenses

had custody of blank signed cheques.

(IV) Due to misappropriation of funds, the company is facing cash crunch

situation and not able to pay on time its statutory liabilities like TDS, ESI & PF,

Service Tax etc. Non-payment of statutory dues and filing of return will results

in hefty interest and penalties on the company which in turn adversely impact

the core existence of the Company's business.

(V) Service tax: no service tax liability paid and no return filed for FY 2016-

17.

(h) A copy of the Notice and Agenda notes of the Board Meeting called to be

held on 7th March, 2018 and 21st March, 2018 to consider the following

business:

Agenda for 07.03.2018

Item No. 1: Grant Leave of Absence to Directors:

To consider the grant of leave of absence to Directors who have requested for

the same.

Item No. 2: To take not on the statutory compliances till the quarter ended 31st

December 2017:

Company Appeal (AT) No. 357 of 2019 16

To consider the pending statutory dues payable to Govt. Authorities in respect

of Service Tax, GST, TDS, EPF and ESI and filing of return thereof till the

quarter ended 31st December 2017.

Item No.3: To take on record of financial irregularities reported by Special

Auditors.

The Special Audit Report containing observations and findings of the Special

Auditor regarding financial irregularities in the books of accounts and

misappropriation of funds of the Company.

The Board will consider the Special Audit Report conducted and individually

discussed in 2017 and take rectification measures.

Item No. 4: To take note on the ongoing banking operation practices adopted

by the staff.

The Board has observed serious irregularities in current banking operations

conducted by the staff and persons in charge as reported in Special Audit

Report. The Board observes that the situation demands a strict course of action

to refrain the misappropriation of Company funds.

Item No. 5: To take note on the books of accounts till the quarter ended 31st

December.

To consider the books of accounts drafted by the management till the quarter

ended 31st December 2017.

Company Appeal (AT) No. 357 of 2019 17

Item No. 6: To discuss and finalise the financials for filing of ITR of the

Company.

Due to the financial irregularities reported in the special forensic report and

the irregularities reported therein there has been an inordinate delay in filing of

statutory documents of the company. This has been further delayed as the

documents are being perused by the Hon'ble High Court of Jharkhand.

However, with a change in law that delayed returns cannot be filed after 31st

March 2018, it is imperative to take a call as to what needs to be done.

Item No. 7: To discuss and decide the appointment of Forensic Auditor.

In view of the financial irregularities reported in the Special Audit Report and

on consideration of irregularities in current banking operations, the Board

observes that the situation demands that an exhaustive forensic audit and

investigation should be carried out by an independent agency. The resolution

to be passed at the ensuing Board meeting for appointment of a Forensic

Investigator.

Item No. 8: To consider and take call on the present and future projects of the

company.

To find the best way to take the company forward so that there in unhindered

growth of the company and to eliminate any possible threats for the future

development of the company.

Company Appeal (AT) No. 357 of 2019 18

Item No. 9: To consider and discuss any item, if any, with the permission of

the chair.

Agenda for 21.03.2018

Item No. 1: Grant Leave of Absence to Directors:

To consider the grant of leave of absence to Directors who have requested for

the same.

Item No. 2: To approve minutes of meeting held on 07.03.2018.

Item No. 3: To take note on the statutory compliances till the quarter ended

31st December 2017: To consider the pending statutory dues payable to Govt.

authorities in respect of Service tax, GST, TDS, EPF and ESI and filing of

return thereof till the quarter ended 31st December 2017 and records to be

submitted by the staff/site personnel.

Item No. 4: To take note on the books of accounts till the quarter ended 31st

December.

To consider the books of accounts drafted by the management till the quarter

ended 31st December 2017.

Item No. 5: To discuss and finalise the financials for filing of ITR of the

Company.

Due to the financial irregularities reported in the special audit report and the

irregularities reported therein there has been an inordinate delay in filing of

Company Appeal (AT) No. 357 of 2019 19

statutory documents of the company. This has been further delayed as the

documents are being perused by the Hon'ble High Court of Jharkhand.

However, with a change in law that delayed returns cannot be field after 31st

March, 2018, it is imperative to take a call as to what needs to be done.

Item No. 6: To consider and discuss any item, if any, with the permission of

the chair.

(i) Ld. Counsel of the Respondents also further submitted as follows:

A Special Notice dated 16.05.2018 was issued by the Respondents specifying

the Appellant, the reasons for removal and also served with requisition dated

03.05.2018 along with explanatory statement and Notice of EGM dated

16.06.2018 vide an email dated 25.05.2018.

(j) The requisition of the EGM dated 16.06.2018 were approved for removal

of the Appellant from the position from the Respondent No. 1 Company for

financial mismanagement, fraud revealed from Special Audit Report.

(k) The mismanagement in Company's account unlike siphoning of the

funds more than of Rs. 3 Crore with no satisfactory explanation were

addressed in clause (2) of Special Audit Report dated 24.05.2017.

(l) The Appellant defrauded the Respondent No. 2 & 3 and took advantage

of his positions in the company, siphoned and transferred funds from the

company's account to his own account for the purchase of personal property &

assets for personal use.

Company Appeal (AT) No. 357 of 2019 20

(m) The Appellant had not only defrauded the company but has in abuse of

his fiduciary position, diverted valuable business of the company into his own

firm by the name of M/s. TSPL Coke and Energy and the Respondents were

unknown about the new commencement of firm owned by the Appellant which

is as identical as Respondent No.1 Company.

(n) On or around April 2018, the Appellant has successfully diverted the

business of the Company by undertaking work order from eminent client like

Jindal Saw Ltd. & Bhatia Coke & Energy Ltd. and employing same deceptive

tactics to his firm M/s. TSPL Coke and Energy.

(o) The Appellant upon receipt of the Special Notice dated 16.05.2018

neither bother to send his representation against the EGM Notice to the Board

nor came forward to repudiate the disputes against discrepancies in accounts

of the Respondent No. 1 Company. Nevertheless, the Appellant approached

before the NCLT on grounds of Oppression and Mismanagement against the

Respondents.

4. The Adjudicating Authority has observed in its order dated 03.09.2019

as follows:

"6. After hearing the arguments advances by the Ld. Counsels, this Bench is of the opinion that the EGM, having been requisitioned at the instance of a shareholder, does not require a prior resolution of the Board of Directors to convene one. The petitioner acknowledges being served through email dated 25.02.2018, granting him the opportunity to file his representation on or before 13.06.2018. The said special notice was accompanied by the explanatory note. Since an FIR had already been instituted against him for criminal misappropriation of funds, it cannot be said that the petitioner was totally unaware of the allegations against him. The petitioner was granted opportunity to repudiate the allegations Company Appeal (AT) No. 357 of 2019 21

and explain the discrepancies in the accounts of the respondent company which were clearly pointed out and brought to his notice upon the Forensic Audit Report being received and is a subject matter of criminal prosecution under the FIR lodged against him. No cogent explanation was offered to the allegation of siphoning off the funds. It is further submitted that the petitioner has guilty of forging signatures of the other Directors on the cheques for withdrawing amounts from the bank to which he was one of the joint signatories, which is primarily the subject matter of criminal investigation.

7. In view of the submission made, this Bench does not find any irregularity in convening an EGM for removal of a Director. The same can be requisitioned by a shareholder and a Board meeting is not a prerequisite. The removal of a Director is best left to the respondent company and its shareholder. Directorial complaints should not be entertained by courts and therefore interference of the tribunal in such like matters is totally unwarranted.

8. Before parting with the case, we take note that CA - 822/2019 has been filed after the matter was reserved for orders. A prayer has been made for issuance of directions to the RoC not to take any prejudicial steps for suspension of DINs and to attribute the non-filing of the Statutory Returns due to "Management Dispute". In taking any action the RoC may take note of the period of legal disability of the Respondent Company on account of the Interim stay order of this Bench restraining the respondents from holding any meeting vide its order dated 14.06.2018. As the said orders have been vacated today, the respondents are granted time to carry out upto date statutory compliances within 6 weeks.

9. We do not find that a case of Oppression & Mismanagement has been made out as alleged by the petitioner. The petition is dismissed with the notional costs of Rs. 25,000/-. Interim order restraining the removal of the petitioner as a Director is hereby vacated".

5. We have carefully gone through the pleadings of the parties and extant

provisions of the Act including their written submissions and we are having the

following observations:

Company Appeal (AT) No. 357 of 2019 22

a) It is not in dispute that the Appellant was the Director of the Company

and he is son of one of the promoters of the R-1/Company.

b) It is also not in dispute that the Appellant has not been removed from

the Company.

c) It is also not in dispute that this is a case of friendly relations while

coming into the company, has become now an unworkable condition because

of several allegations against the Appellant.

d) In special audit carried out by Vikas Dahiya and Company, Chartered

Accountants, New Delhi vide its Special Audit Report dated 24th May, 2017 has

observed multiple irregularities during the Financial Year 2013-14 to 2016-17.

The auditor has also observed that huge payments were released in cash

without supporting vouchers, receipts and payment amounting to Rs. 3.62

Crore has been made for which no satisfactory explanation was given by the

Appellant. Illegal encashment of cheques, direct transaction of the funds, non-

compliance of statutory duties of the Respondent No.1 Company etc came to

the light and the same had happened under instruction of the Appellant. There

are irregularities and misappropriation of funds including non-payment of

statutory dues and the special audit has also recommended to carry an

extensive forensic audit to find out the magnitude of misappropriation of funds.

e) All this reveal that there was no case of Oppression & Mismanagement

as alleged out by the Appellant in present Appeal as well as in the Application

filed before the Hon'ble NCLT, New Delhi vide CP-219/241-242/ND/2018 and

the Adjudicating Authority rightly passed the detailed order dated 03.09.2021

Company Appeal (AT) No. 357 of 2019 23

after going through the entire materials placed on records and as such no

irregularities were found in convening an Extra-Ordinary General Meeting

which was requisitioned at the instances of a shareholder and a Board Meeting

is not a pre-requisite as settled principles under Companies Act, 2013. This

Tribunal ought to appreciate the fact that the allegations of siphoning of funds

and fraud purported against the Appellant as per the Special Audit Report are

grave and the Appellant were given ample opportunities to represent himself

after issuance of Special Notice to repudiate the allegations but no cogent

explanation was offered against the discrepancies in the accounts of the

Respondent No. 1 Company.

f) The contention of Appellant that collection of funds by R-2 and 3 on

behalf of R-1 Company will disentitle the right of Appellant as director and

shareholder on these funds is not correct as per Companies Act, 2013 and

related Regulations. The Company distributes dividend out of its profit after tax

after complying with specific conditions laid down under law. The fund

collected from Debtors/clients are not distributed amongst directors and

shareholders.

g) Keeping these in mind, the Board Meetings were convened and suggested

appropriate actions including convening of 'Extraordinary General Meeting'

(EGM) based on requisition of shareholder to remove the Appellant from the

Directorship of the company vide Special Notice dated 16.05.2018 and the

Board has intimated vide letter dated 23.05.2018 to the concerned Director to

defend the various allegations raised in the special notice but no cognizant

Company Appeal (AT) No. 357 of 2019 24

explanation was offered against the discrepancies in the accounts of the

Respondent No.1 company.

h) On further scrutiny, it is also observed that there have not been any

irregularities in convening of EGM for removal of the Appellant. The removal of

the Director is in the hands of the Shareholders depending upon the

eventuality.

i) Hence, we do not find any irregularity in the impugned order. We,

therefore, constrained to uphold the impugned order. The Appeal, therefore,

deserves to be dismissed and is dismissed. No order as to costs.

[Justice Rakesh Kumar] Member (Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical)

New Delhi 21.10.2022 sr/raushan

Company Appeal (AT) No. 357 of 2019