Mahima Datla vs Dr. Renuka Datla

NON­REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2776 OF 2022

MAHIMA DATLA …APPELLANT(S)

VERSUS

DR. RENUKA DATLA & ORS. …RESPONDENT(S)

WITH CIVIL APPEAL NO. 2777 OF 2022

PURNIMA MANTENA …APPELLANT(S)

VERSUS

DR. RENUKA DATLA & ORS. …RESPONDENT(S)

WITH CIVIL APPEAL NO. 2778 OF 2022

INDIRA PUSAPATI …APPELLANT(S)

VERSUS

DR. RENUKA DATLA & ORS. …RESPONDENT(S)

JUDGMENT

Signature Not Verified Leave granted. Digitally signed by ARJUN BISHT Date: 2022.05.10 2. These Civil Appeals have been preferred against the judgment 19:54:26 IST Reason:

dated 17.11.2017, passed by the High Court of Judicature at 2

Hyderabad for the State of Telangana and Andhra Pradesh in

Company Appeal No.14 of 2016, whereby the appeal filed by

respondent Nos. 1 to 3 against the order dated 30.5.2006

passed by Company Law Board (hereinafter to be referred to as

‘CLB’) was allowed.

3. A brief narration of facts necessary for disposal of these appeals

are that the dispute in question relates to a family feud between

mother on one side and her three daughters on the other,

concerning respondent No. 4­Company ((Biological E. Ltd.)

(hereinafter to be referred to as “the Company”) which was

established by G.A. Narasimha ( father of respondent No. 1) in

1953. Dr. Vijay Kumar Datla (father of the appellant­Mahima

Datla) was inducted in the Company on 01.05.1972 and later

appointed as the Chairman and Managing Director of the said

Company. In the year 1998, the appellant­Mahima Datla joined

the Company as a management trainee with her father with the

intent to be groomed her as his successor. Through the years,

she has acclimatized and grown with the aforesaid Company

and in 2004, she was promoted as Senior Vice President

(Biotechnology and Projects).

4. There is no gainsaying that on 14.02.2005, a Will was executed

by (Late) Dr. Vijay Kumar Datla bequeathing his entire 3

shareholdings in favour of appellant­Mahima Datla. On

20.03.2013, Dr. Vijay Kumar Datla died leaving behind

respondent No. 1 and three daughters Ms. Mahima Datla, Ms.

Purnima Manthena, and Dr. Indira P. Raju as his heirs. At the

time of his demise, the shareholding pattern of the Company

was as under:

Sl. No. Name No. of Value in Rs. % of Shares shares

1. Dr. Vijay 400961 400096100 81 Kumar Datla

2. Dr. Vijay 4594 459400 0.93 Kumar Datla (HUF)

3. Mrs. 4357 435700 0.88 Poornima Mantena

4. Mrs. Indira 4357 435700 0.88 P. Raju

5. Miss Mahima 11205 1120500 2.26 Datla

6. Dr. Vijay 1999 199900 0.40 Kumar Datla (Trustee Poornima & Indu Trust)

7. Dr. Vijay 1685 16850 0.34 Kumar Datla 0 (Trustee of Mahima Trust)

8. Poornima 187 18700 0.06 Indira & Mahima 4

9. Dr. Vijay 5813 581300 1.17 Kumar Datla & Dr. (Mrs.) Renuka Datla

10. Miss 14172 1417200 2.86 Mahima Datla & Dr. (Mrs.) Renuka Datla

11. Dr. (Mrs.) 26995 2699500 5.45 Renuka Datla Miss Mahima Datla

12. M/s. V.R. 18425 1842500 3.72 Investment Pvt. Ltd.

13. Mr. Pumedu 250 25000 0.05 Gupta & Mr. Krishna Gupta

Total 495000 49500000 100

5. On 20.3.2013, late Dr. Vijay Kumar Datla, Dr. Renuka Datla

and one G.V Rao were Directors of the Company. It is a matter

of fact that on 06.04.2013, G.V Rao submitted his resignation

letter to respondent No.1 which was later withdrawn on

09.04.2013. Subsequently, in the Board Meeting dated

09.04.2013, Dr. Indira P. Raju was inducted as the Director of

the Company in place of (Late) Dr. Vijay Kumar Datla to fulfil

casual vacancy, which arose on the demise of Dr. Vijay Kumar 5

Datla.

6. On 10.04.2013, another Board Meeting of Directors of the

Company took place, wherein 400961 shares (81%) standing in

the name of (late) Dr. Vijay Kumar Datla were transferred to

appellant­Mahima Datla on basis of a Will dated 14.02.2005,

and also appellant­Mahima Datla and respondent No.5­Purnima

Manthena were appointed as additional Directors of the

Company.

7. Another Board Meeting was convened on 11.04.2013, by which

appellant­Mahima Datla was appointed as the Managing

Director of the Company and 11 shares each were transferred

by appellant­Mahima Datla in favour of Narendra Manthena and

P. Sridhar Raju. The aforementioned Board Meetings dated

09.04.2013, 10.04.2013 and 11.04.2013 were not attended by

respondent No. 1.

8. Thereafter, Annual General Meeting (AGM) of the Company was

conducted on 18.12.2013 by GV Rao, Purnima and Indira

wherein the appellant­Mahima Datla , Purnima and Indira were

duly recognised as Managing Director and Directors

respectively.

9. The respondent No. 1 has alleged that neither she received any

notice nor any agenda of the aforesaid meetings. Respondent

No. 1 contends that holding of board meetings was illegal as an 6

attempt was made to increase the number of members in the

Company only to ensure that she doesn’t have sufficient

shareholding to maintain a petition under Sections 397 and 398

of the Companies Act, 1956 (hereinafter to be referred to as

‘1956 Act’). Further she claims that she attended the Board

Meetings, which were convened on 22.08.2013 and 25.09.2013,

wherein her objections to the agenda were not duly recorded.

10. The respondent No. 1 filed a suit before City Civil Court,

Hyderabad being OS No. 184 of 2014, challenging the illegal

transmission of shares of (Late) Dr. Vijay Kumar Datla in favour

of appellant­Mahima Datla and to declare that the respondent

No. 1 was the absolute owner of all shares in view of Will dated

04.12.1987.

11. The respondent No. 1 also filed Company Petition No. 01 of 2013

under Section 409 of the 1956 Act before the CLB wherein she

sought injunction to stop Annual General Meeting to be held on

18.12.2013. The CLB vide order 17.12.2013, rejected the plea of

the respondent No. 1 on the ground that conducting of AGM

was mandatory under the law. Aforesaid interim order was

challenged before the High Court in Company Appeal No. 01 of

2014, which came to be dismissed with a direction to dispose of

the Company Petition, pending before the CLB, within a period 7

of three months. Later, the respondent No. 1, for reasons best

known to her, withdrew the earlier Company Petition and filed

Company Petition No. 36 of 2014.

12. Without going in­depth of the details of various applications

filed by the parties herein, we can only note that by order dated

30.05.2016, the Company Law Board in Company Petition

No.36 of 2014 framed the following issues:

(i) Whether the petitioner has requisite qualification as contemplated under Section 399 of the Companies Act, 1956 to invoke the jurisdiction of this Bench under Section 397/398 and other provisions of the Companies Act, 1956 and whether any case has been made out even under Section 111­A of the Companies Act, 1956?

(ii) Whether the Board Meetings held on 09.04.2013, 10.04.2013 and 11.04.2013 are legal and valid?

(iii) Whether the transmission of shares to an extent of 4,00,961 equity shares held by (Late) Dr. Vijay Kumar Datla in favour of the 2nd respondent is in accordance with the Articles and Law?

(iv) Whether the A.G.M conducted on 18.12.2013 is legal and valid?

(v) Whether the acts of respondents are oppressive to the petitioner and whether the respondents have committed any acts of mismanagement in the affairs of the R1 Company?

(vi) To what extent (family relationship in a company, whether the respondent Company failed to adhere to the request of the petitioner regarding furnishing the documents and inspection of bocks and accounts of the R1 Company)?

13. By judgment dated 30.05.2016 passed in CP No. 36 of 2014,

CLB in para 100 concluded as under:

“100. As I already held that the petition is not maintainable and the same is dismissed. Even otherwise and in view of the foregoing reasons, the petitioner has not made out any case either on oppression or on mismanagement in the affairs of the Company: The Petition is miserably failed and liable to be dismissed. Accordingly, the C.P. No. 36/2014 is dismissed. In view of the dismissal of 8

the CP, the undertaking recorded by this Bench in its Order dated 06.08.2014 will not bind on the respondents. Any other interim orders operating as on this date stand vacated. All the unnumbered applications pending as on this date stand disposed of. No order as to costs.”

14. On issue No. (i), CLB observed that the respondent No. 1 had

filed O.S. No. 184 of 2014 in the Civil Court to declare that she

was the absolute owner of 4,00,961 shares belonging to (Late)

Dr. Vijay Kumar Datla. The said suit was filed prior to filing the

Company Petition and this Court vide order dated 06.10.2015

also directed to dispose of the civil suit pertaining to the

disputed shares. Thereafter, CLB rejected the relief relating to

Sections 111­A, 58 and 59 of 1956 Act and held that the

petition would be treated as having been filed only under

Sections 397/398, 402, 403, 404, and 406 of the 1956 Act.

Further, CLB held that the respondent No. 1 could not have

acted as a trustee of the two trusts i.e., appellant Nos. 2 & 3

before it, thus, the respondent No. 1 had no locus standi to file

the Company Petition on behalf of aforesaid two trusts.

Moreover, it was held that respondent No.1 did not have support

of 1/10 of the total shareholders to maintain a petition under

Section 397, as prescribed under Section 399 of the 1956 Act,

therefore, the Company Petition was liable to be dismissed as 9

not maintainable.

15. On issue No. (ii), CLB validated the Board Meetings dated

09.04.2013, 10.04.2013 and 11.04.2013 for the reason that

appellant­Mahima Datla was appointed as the Managing

Director of the respondent No.4­Company under Article 145 of

Articles of Association read with Section 269 of 1956 Act. It was

contended before CLB that respondent No.1 was not physically

present in these Board Meetings, however, she was aware of the

action taken in those meetings wherein her daughters were

appointed to the Board of Directors. Approval of appointment of

her daughters by respondent No, 1 is evident from her

announcement letter dated 15.04.2013 addressed to all the

employees of the respondent No.4­Company. The CLB was of

the view that the respondent No.1 being acquiesced in all the

events is estopped from raising the said grievance.

16. With regard to the issue No. (iii) relating to validity of

transmission of 4,00,961 (81%) shares in favour of the

appellant­Mahima Datla, it was observed that the transfer took

place in the Board Meeting dated 10.04.2013 and the

respondent No. 1 had already filed O.S. No. 184 of 2014

challenging the said transmission of shares. It was further held

that the issue relating to inheritance of shares being of civil 10

nature, CLB cannot deal with the same.

17. On issue No. (iv), CLB observed that AGM was held on

18.12.2013, wherein decisions taken in Board Meetings dated

9th, 10th & 11th April, 2013 were ratified by the General Body.

The respondent No. 1 was also a part of the aforesaid AGM,

wherein her renumeration was approved. It was held that the

appointment of appellant­ Mahima Datla, Purnima Manthena,

and Indira Pusapati as Directors which was ratified in AGM,

became final and is binding on the Company and its members.

18. With regard to issue No. (v), CLB observed that the Company

was a profitable Company and it could not be said that its

affairs were being conducted in a manner prejudicial to the

interests of shareholders and public at large. It was held that no

evidence was placed on record by the respondent No. 1 to show

that the affairs of the Company were being conducted in a

manner prejudicial to her interest as a shareholder. Insofar as

the allegation pertaining to mismanagement by the officials of

the Company was concerned, the CLB relied upon the balance

sheets of the Company and held that there was no evidence of

mismanagement. Finally, it was held that the situation did not

warrant winding up of the Company and unless such a situation

exists, no relief could be granted under Sections 397 and 398 of 11

1956 Act.

19. On the last issue No. (vi), the CLB held that no act of oppression

and mismanagement was made out by the respondent No. 1.

The acts complained by her were in the nature of directorial

complaints, which did not make out a case for winding up of the

Company.

20. Aggrieved by the aforesaid order, respondent No. 1 filed an

appeal before the High Court being C.A. No. 14 of 2016. The

High Court, by impugned order dated 17.11.2017, while

allowing the appeal held as under:

a. Acts of Respondent. Nos. 2 to 7 are oppressive; b. The meetings of the Board of Directors held on 09­04­2013, 10­ 04­2013 and 11­04­2013 are null and void and all resolutions passed therein as well as forms/returns filed therein are set aside;

c. Resolutions passed at the Annual General Meeting of the Company held on 18­12­2013 are null and void and forms filed by respondents with regard to resolutions passed at the said AGM are set aside;

d. The Board of Directors of the Company as existing as on today shall stand superseded and respondent Nos.2 to 7 are removed from the Directorship of the Company, and all forms­32 filed for their appointment as Managing Director/Director/Whole Time Director of the Company are declared as null and void ab initio;

e. The transmission of 4,00,691 equity shares held by late Dr. Vijay Kumar Datla to respondent No.2 is illegal, null and void; f. The register of members shall stand rectified by transmission of 1/4th of the 4,00,691 equity shares to appellant No.1, pending decision on the validity of the Will dt.04­12­1987 propounded by appellant No.1 and Will dt.14­2­2005 propounded by respondent No.2 by the competent Civil Court and subject to its decision.

21. Based on the findings stated in the preceding paragraph, the

High Court directed as under:

a. Article 128 of the Article of Association of the Company be substituted as under:

12 "The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of a Boar, the continuing director or directors may act for the purpose of increasing the number of directors to that fixed for the quorum or of summoning a general meeting of the company, but for no other purpose."

b. In exercise of the powers conferred under Section 241 and 242(2)(a) of the Companies Act, 2013 to regulate the conduct of the affairs of Respondent No. 1 Company in future, the appellant no. 1 is authorized to increase number of directors in the Board of the said Company to 3:

c. Part I of Schedule V of the Companies Act, 2013 which prescribes maximum age of 70 years to be a director, shall not apply to appellant no. 1;

d. The appellant no. 1 and the directors nominated by her to the Board shall hold the office for a period of 3 years from the date of their assuming charge notwithstanding anything contained in Section 152(6) of the Companies Act, 2013; e. It is open to appellant no. 1 to appoint a committee of advisors to advise the board for the future management of the Company; f. after the expiry of 3 years period referred to above, fresh Board of directors may be constituted as provided in the Act and Articles of Association of the Company.

22. Questioning the validity of the order of the High Court, present

appeals have been filed.

23. We have heard learned senior counsels for the appellants and

counsel appearing for the respondent No. 1 and have also

perused the record.

24. At the outset, the High Court’s approach in entertaining the

Company Appeal under Section 10­F of 1956 Act and setting­

aside the order dated 30.05.2016 passed by CLB thereunder is

contrary to the scope of the aforesaid Section. The High Court

conducted an elaborate factual analysis in its order which is ex

facie over and above the appellate purview of Section 10­F of 13

1956 Act. Instead of restricting its determination to the

purported questions of law arising from the order of CLB, the

High Court re­appreciated the entire evidence and other

materials on record to give its own factual findings, which runs

contrary to the judgment of this Court in the case of V.S

Krishnan v. Westfort Hi­tech Hospital Ltd. (2008) 3 SCC

363 wherein it was laid down that “it is ordinarily not open to

the Appellate Court to substitute its own discretion for that of

Company Law Board”. Thus, re­appraisal of entire evidence by

the High Court is not permissible.

25. The first question which is required to be answered is whether

the withdrawal of resignation by G.V. Rao was valid or not.

There is no doubt that on 06.04.2013, G.V. Rao addressed a

letter to the Board resigning from the post of Directorship. The

letter explicitly indicated that his resignation should be

acknowledged and Form­32 be filed with the Registrar of

Companies. Further, on 09.04.2013, G.V. Rao himself wrote a

letter seeking withdrawal of his resignation, which was placed in

the meeting of the Board on 09.04.2013. In the resolution

passed therein, there is no protest by the respondent No.1

regarding attendance of Mr. G.V. Rao. Moreover, Dr. Renuka

Datla, by letter dated 15.04.2013, which was addressed to the 14

employees of the Company, welcomed the appointment of

appellant­Mahima Datla as its Managing Director and

appointment of others as Directors. Further, there are

numerous letters such as letter dated 24.05.2013, 22.08.2013,

07.10.2013, 19.10.2013, and 20.10.2013, which clearly

acknowledge Mr. G.V. Rao in the capacity of the Director of the

Company. Respondent No. 1 also participated in the Board

Meetings dated 22.08.2013 and 25.09.2013, without any protest

for continuation of Mr. G.V. Rao as its Director. In this context,

the appellants herein have invoked the Duomatic Principle to

state that the issue of resignation of the Director had lapsed and

Mr. G.V. Rao continued to carry on as the Director in view of the

acquiescence by the respondent No. 1.

26. The Duomatic Principle can be briefly stated as “anything the

members of a company can do by formal resolution in a general

meeting, they can also do informally, if all of them assent to it.” 1

This Principle was derived from the decision In Re: Duomatic

Ltd., [1969] 2 Ch. 365, wherein Buckley, J. held as under:

“where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be.”

27. The enunciation of the aforesaid principle, in the 1 Palmer’s Company Law, 25th Ed. (2020) Paras 7.434 – 7.449. 15

abovementioned case can be traced back to the decision of Lord

Devey in Salmon v. Salmon Co. Ltd., [1897] AC 22,

(hereinafter referred as “Salmon’s case”) wherein it was held

that “a company is bound in a matter intra vires by the

unanimous agreement of its members”.

28. The aforesaid Principle emanating from Salmon’ Case (supra)

has found its utility across various aspects of company law such

as Duomatic Principle, Doctrine of Indoor Management, etc.

This Principle having its origin in common law, is applicable

even in the Indian context.

29. It is, in this context, we must note that application of

Duomatic Principle is only applicable in those cases wherein

bona fide transactions are involved. Fraud is a clear exception

to application of these principles, be it Duomatic Principle or

Doctrine of Indoor Management. In this context, we may refer

to observations in Bowthorpe Holdings Ltd. v. Hills, [2002]

EWHC 2331 (Ch), wherein Sir Andrew Morritt V­C, observed

as under:

“... the transaction must be bona fide or honest. This, in my view, is demonstrated by the qualification of Viscount Haldane in AG for Canada v Standard Trust [1911] AC 498, 505 that ‘the case was not ... a cloak under which a conspiracy to defraud was concealed’, by Younger LJ in In re Express Engineering Works [1920] 1 Ch 466, 471 that ‘no fraud is alleged in respect of this transaction’, and by Lawton LJ in Multinational Gas v Multinational Services [1983] Ch 258, 268 that the members must act in good faith. Thus, in In re Duomatic Ltd [1969] 2 Ch 365, 372 Buckley J cited 16

with approval the view of Astbury J in Parker and Cooper Ltd v Reading [1926] Ch 975, 984 that the transaction must be both intra vires and honest.”

30. In the case at hand, the respondent No. 1 has not proved that

the transfer of shares based on the Will dated 14.02.2005 was a

fraud played on her as well as the Company. From the narration

of the circumstances, wherein appellant­Mahima Datla was

groomed by her father to carry the operations of the Company

clearly points out to his intention to make such Will. In light of

the fact that no allegation of fraud or dishonesty is noticeable in

this case, there is no way to ignore the application of this well­

settled principle.

31. The thrust of the Duomatic Principle is that strict adherence to

a statutory requirement may be dispensed with if it is

demonstrated otherwise on facts, if the same is consented by all

members. In this case at hand, there is overwhelming evidence

to show that respondent No. 1 had accepted Mr. G.V. Rao back

into the Board and her conduct clearly shows that the

resignation dated 06.04.2013 was clearly not accepted.

32. The High Court has clearly fallen into error by not considering

the aspect of application of Duomatic Principle. The

interpretation ascribed by the High Court to Article 129 of the

Articles of Association of the Company is too formalistic and

does not take into consideration inclusion of such well­settled 17

common law principles. There is no scope left for equitable

considerations to be read into the aforesaid provision, which, in

our view, is a patent illegality committed by the High Court

without taking into considerations aforesaid principles. We,

therefore, hold that G.V. Rao never seized to be a Director of the

Company in view of the acquiescence by respondent No. 1, and

he had withdrawn his resignation prior to its acceptance.

33. The second aspect which we are called upon to answer is the

validity of the Board Meetings dated 09.04.2013, 10.04.2013,

and 11.04.2013. The High Court has dealt with the aforesaid

question in two ways. The first reasoning is that G.V. Rao, who

had resigned as Director with effect from 06.04.2014, had no

authority in law to convene aforesaid meetings. In view of the

same, the said meetings were not called as per the terms of law.

The aforesaid reasoning cannot stand the scrutiny of this Court

as this Court has already noted that G.V. Rao continued to be a

Director and his resignation cannot be considered as elucidated

in the earlier discussion.

34. The second line of reasoning taken by the High Court is that

“assuming for the sake of argument without conceding that he

continued as Director and that his resignation was validly

withdrawn, still being the only Director present at the meeting of 18

09.04.2013, and in absence of minimum coram of 2 as

mandated in the articles of associations, it could not have held

the meeting”. It must be noted that the aforesaid meetings were

ratified in the 60th AGM which was called on 18.12.2013. The

High Court has again erred in not accepting the ratification in

the AGM on the footing that G.V. Rao had resigned and could

not have called the AGM or validly conducted the aforesaid

Board Meetings. When the mother had accepted the decisions

taken in the aforesaid Board Meetings, this Court cannot

appreciate the contradictory stand taken by the respondent No.

1 challenging the same before the CLB. A party cannot be

allowed to wax and wane as the contradictory decision tend to

take judicial proceedings to ad nauseam.

35. Lastly, we hold that the directions passed by the High Court in

para 323 of the impugned order are illegal and contrary to the

provisions of Company Act, 2013 (for short “2013 Act”). The

High Court has held that respondent No. 1 will continue to be

the Director of the Company even though she is over 70 years of

age. However, the bare perusal of Section 196 of 2013 Act and

Part­I of Schedule V infers that such a direction is non­est in

law, which are reproduced as under:

“196. Appointment of Managing Director, whole­time 19

director or manager (1) No company shall appoint or employ at the same time a managing director and a manager.

(2) No company shall appoint or re­appoint any person as its managing director, whole­time director or manager for a term exceeding five years at a time:

Provided that no re­appointment shall be made earlier than one year before the expiry of his term.

(3) No company shall appoint or continue the employment of any person as managing director, whole­time director or manager who —

(a) is below the age of twenty­one years or has attained the age of seventy years:

Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;

(b) is an undischarged insolvent or has at any time been adjudged as an insolvent;

(c) has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or

(d) has at any time been convicted by a court of an offence and sentenced for a period of more than six months. (4) Subject to the provisions of section 197 and Schedule V, a managing director, whole­time director or manager shall be appointed and the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions specified in that Schedule:

Provided that a notice convening Board or general meeting for considering such appointment shall include the terms and conditions of such appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments, if any:

Provided further that a return in the prescribed form shall be filed within sixty days of such appointment with the Registrar. (5) Subject to the provisions of this Act, where an appointment of a managing director, whole­time director or manager is not approved by the company at a general meeting, any act done by 20

him before such approval shall not be deemed to be invalid.

Part­I of Schedule V deals with Appointments­

No person shall be eligible for appointment as a managing or whole­time director or a manager (hereinafter referred to as managerial person) of a company unless he satisfies the following conditions, namely:—

(c) he has completed the age of twenty­one years and has not attained the age of seventy years:

Provided that where he has attained the age of seventy years; and where his appointment is approved by a special resolution passed by the company in general meeting, no further approval of the Central Government shall be necessary for such appointment;

Upon the composite reading of the aforementioned provisions

and the Schedule, the relief as granted by the High Court is

contrary to Section 196 of 2013 read with Schedule V of 2013

Act (appointment of Managing Director, whole­time Director or

Manager) which lucidly provides that no person shall be eligible

to be a whole­time Director of a Company after attaining the age

of 70 years unless such appointment is approved by a special

resolution of the Company. In absence of any such special

resolution, the finding rendered by the High Court holding that

such provision would not apply, is against the statutory

provisions of law.

36. Further, the High Court held that the respondent No. 1 and the

directors appointed by her to the Board shall continue to hold 21

office for a period of three years. This direction of the High Court

is non­est in law for being contrary to the provision under

Section 152(6) of 2013 Act and Articles 135 and 136 of

Articles of Association of respondent No.4­Company.

“152. Appointment of directors (6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two­thirds of the total number of directors of a public company shall—

(i) be persons whose period of office is liable to determination by retirement of directors by rotation; and

(ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.

(b) The remaining directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting. (c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent annual general meeting, one­third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one­third, shall retire from office.

(d) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.

(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto. Explanation.—For the purposes of this sub­section, ―total number of directors shall not include independent directors, whether appointed under this Act or any other law for the time being in force, on the Board of a company.” Article 135 of the AoA: Two­thirds of the Directors liable to retire by rotation “135. Not less then two thirds of the total number of directors of the Company for the being shall be person whose period of office is liable to determination by retirement of directors by rotation.”

Article 136 of the AoA: Retirement and Rotation of Directors “136. At every annual general meeting of the Company one third 22

of such of the directors for the time being as are liable to retire by rotation or if their number is not three or multiple of three the number nearest to one third shall retire from office. The ex­officio director and debenture director if any shall not be subject to retirement under this clause and shall not be taken into account in determining the rotation of retirement or the number of directors to retire” (Emphasis Supplied)

Upon the conjoint reading of Section 152(6) along with Articles

135 and 136 of the Articles of Association of respondent No.4­

Company, it is inferred that one­third of the Directors amongst

the total Directors on the Board mandatorily retire by rotation

every year. The direction of the High Court enabling the

respondent No.1 (Dr. Renuka Datla) and the Directors

nominated by her to continue to hold office for three years is in

violation of the said provisions relating to appointment and

retirement of Directors.

37. Insofar as the transfer of disputed shares is concerned, the High

Court applied the rule of succession of a Hindu male, as per

Section 8 of Hindu Succession Act,1956 and granted the

exclusive benefit of transmission of one­fourth of disputed

shares in favour of respondent No.1 (Dr. Renuka Datla) without

ordering the corresponding transmission of the remaining three­

fourth shares in favour of appellants/daughters pending the

outcome of the Original Suit No.184 of 2014. The High Court’s 23

intervention in a question relating to inheritance of shares,

claimed on the basis of the Will dated 04.12.1987, which was

the subject matter of Civil Suit No. 184 of 2014 before Civil

Court, is untenable in Law. Respondent No. 1 is challenging

transmission of 81% shares in O.S. No. 184/2014 before the

City Civil Court, Hyderabad by contending that she has

inherited the same vide Will dated 14.12.1987 executed by Dr.

Vijay Kumar Datla. In given scenario, the High Court

should not have dwelled into the issue of inheritance

and granted ¼ of 4,00,96 shares in favour of respondent No. 1.

In the case of Sangramsinh P. Gaekwad v. Shantadevi P.

Gaekwad, (2005) 11 SCC 314 this Court emphasized upon the

same issue in following words:

“143. It is also not in dispute that the matter relating to her claim to succeed FRG as his Class I heir is pending adjudication in Civil Suit No. 725 of 1991 in the Baroda Civil Court. She claimed title in respect of 8000 shares by inheritance in terms of the Hindu Succession Act. Indisputably, in terms of Section 15 of the said Act she is a Class I heir but the appellants herein contend that the said provision has no application having regard to Section 5(2) thereof as inheritance in the family is governed by the rule of primogeniture. A pure question of title is alien to an application under Section 397 of the Companies Act wherefor the lack of probity is the only test. Furthermore, it is now well settled that the jurisdiction of the civil court is not completely ousted by the provisions of the Companies Act, 1956. (See Dwarka Prasad Agarwal v. Ramesh Chander Agarwal [(2003) 6 SCC 220])

144. A dispute as regards right of inheritance between the parties is eminently a civil dispute and cannot be said to be a 24

dispute as regards oppression of minority shareholders by the majority shareholders and/or mismanagement.”

A perusal of the same makes it clear that the High Court while

dealing with the question under Sections 397 and 398 of 1956

Act ought not to have invoked principle under Hindu Succession

Act to determine the shares of the respondent No. 1 which she

claims to be inherited through the Will dated 14.12.1987 which

was subject matter of OS No. 184/2014.

38. Assuming that on the ground of equity, the High Court decided

to grant benefit to respondent No. 1 mother, the same stands

against the principles of succession under Section 8 of the

Hindu Succession Act as well. It is well recorded that appellant

(Ms. Mahima Datla), respondent No.5 (Purnima Manthena),

respondent No.6 (Indira Pusapati) and respondent No.1 (Dr.

Renuka Datla) being class­I legal heirs of the deceased Hindu

male are equally entitled to the assets of late Dr. Vijay Kumar

Datla. Hence, the division of disputed shares was inequitable on

the touchstone of the Hindu Succession Act also.

39. The High Court erred in ascertaining that the actions of

respondents therein, who hold office in the Company, are

oppressive. Under Section 397 of 1956 Act, an application for

relief can be brought by any member who complain that the 25

affairs of the Company are being conducted in a manner

prejudicial to public interest or in a manner oppressive to any

member or members. The intention of the legislature is that

majority shareholders who oppress the minority shareholders

and conduct the affairs of the company prejudicial to public

interest may invoke the jurisdiction of CLB under Section 397

of 1956 Act. Section 397 reads as under:

“397. Application to Company Law Board for relief in cases of oppression.

(1) Any members of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Company Law board] for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2) If, on any application under sub­ section (1), the Company Law Board] is of opinion­

(a) that the company' s affairs are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members; and

(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding­ up order on the ground that it was just and equitable that the company should be wound up; the Company Law Board] may with a view to bringing to an end the matters complained of, make such order as it thinks fit.”

As per the aforesaid provision, an order could be made on

application made under sub­section (1), if the Court is of the

opinion that (i) the Company’s affairs are being conducted in a

manner prejudicial to public interest or in a manner oppressive 26

of any member or members, and; (ii) the facts would justify the

making of a winding up order on the ground that it was just and

equitable that the Company should be wound up, and; (iii) the

winding up order would unfairly prejudice the Petitioners. This

Court has reiterated this principle time and again in various

judgments and also in the judgment of this Court in Hanuman

Prasad Bagri v. Bagress Cereals (P) Ltd., (2001) 4 SCC 420,

the same principle has been reiterated in following words:

3. Section 397(2) of the Act provides that an order could be made on an application made under sub­section (1) if the court is of the opinion — (1) that the Company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive of any member or members; (2) that the facts would justify the making of a winding­up order on the ground that it was just and equitable that the Company should be wound up; and (3) that the winding­up order would unfairly prejudice the applicants. No case appears to have been made out that the Company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive of any member or members. Therefore, we have to pay our attention only to the aspect that the winding up of the Company would unfairly prejudice the members of the Company who have a grievance and are the applicants before the court and that otherwise the facts would justify the making of a winding­up order on the ground that it was just and equitable that the Company should be wound up. In order to be successful on this ground, the petitioners have to make out a case for winding up of the Company on just and equitable grounds. If the facts fall short of the case set out for winding up on just and equitable grounds no relief can be granted to the petitioners. On the other hand the 27

party resisting the winding up can demonstrate that there are neither just nor equitable grounds for winding up and an order for winding up would be unjust and unfair to them. On these tests, the Division Bench examined the matter before it.”

In the present case, there is no iota of evidence placed by

respondent No.1 that the affairs of the Company were being

conducted in a manner prejudicial to the public interest. From

the Memorandum and Articles of Association it is seen that the

Company is in the business of manufacturing vaccines with

profitability and even did good business during Covid pandemic.

40. The respondent No. 1 has contended that she was not allowed to

register her protest in any of the meetings which flies in the face

of her letter dated 15.04.2013, addressed to the employees of

the Company, welcoming the appointment of appellant­Mahima

Datla as its Managing Director and other appointments. The

High Court has erred by ignoring the impact of letter dated

15.04.2013 signifying consent of respondent No. 1 to the

appointments made to the Board of the Company.

41. During the course of hearing, the counsel representing the

respondent No. 1, though contested the case, but on the other

hand, the three daughters present in the Court also shown

gesture to maintain the respondent No. 1, aged about 75 years 28

by offering to pay her the salary more than that of the

Managing Director along with all emoluments. They have also

offered to pay a lump sum amount with a view that the

Company, which was started by late father of their mother and

flourished by the hard labour of their father, should not go into

losses, as being daughters they owe duty to run the Company

with full of skill and to achieve more heights. It is in this context

that we do not propose to take the above discussion to its logical

conclusion. Rather we feel that this litigation should conclude

on an amicable note. Such harsh conclusions may not be

advisable when we are concerned with a healthy Company

manufacturing vaccines, which are the need of the hour in these

days.

42. In view of the forgoing, the impugned order passed by the High

Court on 17.11.2017 is hereby set aside being contrary to the

provisions of the 1956 and 2013 Acts and the order of the CLB

dated 30.05.2016 is restored with modifications and by adding

the following conditions­ (1) Dr. Renuka Datla shall be appointed as Emeritus Consultant of the Company.

(2) Dr. Renuka Datla will be paid a sum of Rs.65 lakhs per month w.e.f. 01.04.2022 regularly month by month on or before 7th of each month. The payment for current month (April, 2022) may be made by 30th of this month.

29

(3) A further lump sum payment of Rs.10 Crore shall be made to Dr. Renuka Datla by 31.05.2022, which shall be in lieu of all payments, if any, that may be due to her till date and also in lieu of any further increase in monthly payments.

(4) Other facilities to Dr. Renuka Datla will also be provided to her, which include her medical expenses, security, residence, maintenance of cars, club memberships etc., the expenses for which shall also be borne by the Company.

(5) The learned counsel for the appellants in these three appeals have undertaken that they shall get a resolution passed to the above effect by the Board of Directors of the Company and the General Body of shareholders, within one month.

(6) Ms. Sarada Devi, learned counsel for the respondent no.1 ­ Dr. Renuka Datla has stated that Dr. Renuka Datla is present today whom she has consulted, and in lieu of the aforesaid payments to be made and facilities to be provided by the Company, Dr. Renuka Datla as well as the appellants, undertake to put a quietus to the entire litigation between them, which is pending and also undertake not to initiate any further civil or criminal proceedings against each other.

43. Accordingly, the appeals are disposed of.

………….……………….J. (VINEET SARAN)

…...……………………J. (J.K. MAHESHWARI) NEW DELHI;

06.04.2022.

30

ITEM NO.11 COURT NO.9 SECTION XII-A

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) No(s).33217/2017

(Arising out of impugned final judgment and order dated 17-11-2017 in CA No.14/2016 passed by the High Court Of Judicature At Hyderabad For The State Of Telangana And The State Of Andhra Pradesh)

MAHIMA DATLA Petitioner(s)

VERSUS

DR. RENUKA DATLA & ORS. Respondent(s)

(IA No.129931/2017-PERMISSION TO FILE LENGTHY LIST OF DATES and IA No.129932/2017-PERMISSION TO FILE ADDITIONAL DOCUMENTS and IA No.134361/2017-PERMISSION TO FILE ADDITIONAL DOCUMENTS , IA No.6073/2018-CLARIFICATION/DIRECTION AND IA No.58854/2018 APPLICATION FOR DIRECTION, IA No.64381/2018 – CLARIFICATION/DIRECTION, IA No. 84497/2018 - I/A FOR RESTRAINING THE PETITIONER FROM ACTING AGAINST THE ORDERS OF THIS HONBLE COURT AND PERMIT, IA No. 176408/2018 - PERMISSION TO APPEAR AND ARGUE IN PERSON, IA No. 73165/2018 - PERMISSION TO FILE ADDITIONAL, DOCUMENTS/ FACTS/ ANNEXURES, IA No. 73071/2018 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES

WITH SLP(C) No. 33383/2017 (XII-A) (FOR PERMISSION TO FILE LENGTHY LIST OF DATES ON IA 130982/2017 FOR PERMISSION TO FILE ADDITIONAL DOCUMENTS ON IA 130984/2017

SLP(C) No. 33593/2017 (XII-A) (FOR PERMISSION TO FILE LENGTHY LIST OF DATES ON IA 132076/2017

CONMT.PET.(C) No. 2088/2018 in SLP(C) No. 33217/2017 (XII-A) (FOR ADMISSION)

Date : 06-04-2022 These matters were called on for hearing today.

CORAM : HON'BLE MR. JUSTICE VINEET SARAN HON'BLE MR. JUSTICE J.K. MAHESHWARI

For Petitioner(s) Mr. E. C. Agrawala, AOR

Mr. P.S. Raman, Sr. Adv.

Mr. S. Madhusudhan Babu, Adv.

Ms. Archana Sahadeva, AOR

Mr. Shyam Divan, Sr. Adv.

31

Ms. Ritu Bhalla, Adv.

Mr. Manu Krishnan, Adv.

Ms. Riya Basu, Adv.

Ms. Riddhi Vyas, Adv.

Ms. Samiksha Godiyal, Adv.

Mr. S. S. Shroff, AOR

Dr. Abhishek M. Singhvi, Sr. Adv.

Mr. S. Niranjan Reddy, Sr. Adv.

Ms. Raavi Venkata Yogesh, AOR Mr. L. Nidhiram, Adv.

Ms. Twinkle Rathi, Adv.

Mr. Abhishek Sharma, Adv.

For Respondent(s) Mr. Sanjay Kumar Tyagi, AOR

Mrs. K. Sarada Devi, AOR Mr. S. Chakrapani, Adv.

Mr. Chandan Kumar, Adv.

Mr. R. Vijaynandan Reddy, Adv.

UPON hearing the counsel the Court made the following O R D E R

Leave granted.

Heard Mr. Shyam Divan, learned senior counsel appearing for

the appellant in SLP(C)No.33217/2017, Mr. P.S. Raman, learned

senior counsel appearing for the appellant in SLP(C) No. 33593/2017

and Dr. Abhishek Manu Singhvi, learned senior counsel appearing for

the appellant in SLP(C) No. 33383/2017 as well as Ms. K. Sarada

Devi, learned counsel who appears on behalf of the contesting

respondents Dr. Renuka Datla and the Trust.

Appellants in all these three appeals are also present, who

have been identified by their respective counsel.

For the reasons to be given subsequently, all the three

appeals are allowed and the judgment and order of the High Court

dated 17.11.2017 is set-aside and the order of the Company Law

Board dated 30.05.2016 in CP NO.36/2014 is restored adding the 32

following conditions:

(1) Dr. Renuka Datla shall be appointed as Emeritus Consultant of

the Company.

(2) Dr. Renuka Datla will be paid a sum of Rs.65 lakhs per month

w.e.f. 01.04.2022 regularly month by month on or before 7 th of

each month. The payment for current month (April, 2022) may be

made by 30th of this month.

(3) A further lump sum payment of Rs.10 Crore shall be made to Dr.

Renuka Datla by 31.05.2022, which shall be in lieu of all

payments, if any, that may be due to her till date and also in

lieu of any further increase in monthly payments.

(4) Other facilities to Dr. Renuka Datla will also be provided to

her, which include her medical expenses, security, residence,

maintenance of cars, club memberships etc., the expenses for

which shall also be borne by the Company.

(5) The learned counsel for the appellants in these three appeals

have undertaken that they shall get a resolution passed to the

above effect by the Board of Directors of the Company and the

General Body of share holders, within one month.

(6) Ms. Sarada Devi, learned counsel for the respondent no.1 - Dr.

Renuka Datla has stated that Dr. Renuka Datla is present today

whom she has consulted, and in lieu of the aforesaid payments

to be made and facilities to be provided by the Company, Dr.

Renuka Datla as well as the appellants, undertake to put a

quietus to the entire litigation between them, which is

pending and also undertake not to initiate any further civil

or criminal proceedings against each other.

33 Reasons for this order shall follow.

CONMT.PET.(C) No. 2088/2018

In view of the aforesaid order passed today in above three

appeals, the contempt petition is, accordingly, disposed of.

(ARJUN BISHT) (PRADEEP KUMAR) (ASHWANI THAKUR) (COURT MASTER (SH) (BRANCH OFFICER) AR-CUM-PS