(Prayer: This Company Petition is filed under Section 433 and 433[fj of the Companies Act, 1956, praying to wind up the Company M/s. Astric Technologies Private Limited and grant such other and further reliefs as are just.)
1. The facts leading up to this petition are stated to be as follows:
The petitioner is said to be an Engineering graduate, who also holds a Masters degree in Business Administration. In the year 2006, he is said to have conceived of a project in the business of manpower consultancy, owing to its need in the city of Bangalore with its growing IT Sector. Shankar, a class mate of the petitioner is also said to have evinced interest in joining the petitioner in the business. As they required adequate finance, Shankar is said to have associated one Venkatesh, a business man to invest funds. Initially, it was intended to establish a partnership firm. However, in order to enhance their image as a corporate entity, a private limited company was incorporated under the Companies Act, 1956 (Hereinafter referred to as the 'Act', for brevity). It transpires that Shankar's sister, Lokamata, who had worked in the IT industry and who was said to have gained considerable experience, also evinced interest in being part of the Company and she was also brought into the company as a Director. Thus, with the petitioner, Shankar and Venkatesh, each holding 33% share and Lokamata holding 1% of the shares commenced the business. It is stated that it grew from strength to strength and soon had touched a turnover of Rs.48 Crore with a workforce of 3700 employees.
It is stated that the petitioner was a whole time director of the company, while Shankar was said to be the Managing Director of the company. Shankar was said to be handling the financial transactions while the petitioner was working in the field. The petitioner along with Shankar and Venkatesh were authorised signatories on behalf of the company. It is emphasized that though apparently it was structured as a company, in reality, and m essence was a partnership firm and was a company only to appeal to its clients.
2. While matters stood thus, Shankar is said to have token ill and died all of a sudden in February 2013. It then transpires that the elder brother of Shankar, namely, Umesh along with Rangappa Divakar and Mudduraju Rangappa along with other family members and friends - Chetan Bhaskar Shetty, Kodialbail Bhaskar Shetty and Budari Dasappa Basavaraj, had expressed their desire to join the company as its Directors. The share holding of late Shankar is said to have been transferred in the name of Umesh, On the reconstitution of ihe Board of Directors, it is alleged that the newcomers started to function erratically and even though they had no expertise or knowledge of the business, had started to interfere in the functioning of the petitioner and impeded the smooth functioning of the business. It is alleged that Lokamata had also started colluding with her brother and others. It is alleged that the petitioner was literally sidelined and the aforesaid persons, who are arrayed as the respondents, took a dominant position in the company and took over the finances of the company.
The petitioner claims that he had offered his family properties as security for the purposes of raising capital for the company. The sum thus raised was about Rs.5.82 crore is alleged that the respondents deliberately chose not to service the loans, which had been raised on the security of the petitioner's properties and thus sought to jeopardize the same. And on the other hand, the funds of the company were surreptitiously sought to be diverted to the personal accounts of the respondents to the detriment of the petitioner. It is claimed that as on the date of the petition a sum of Rs.15.80 crore was available in the account of the company as against a liability of Rs. 15.21 crore, which included the loans obtained on the security of the properties of the petitioner.
It is also alleged that Venkatesh was also threatened and intimidated to toe the line of the respondents and had been won over by the respondents. It is also the claim of the petitioner that in view of the above circumstances, the business has come to a complete stand still and the sole intention of the respondents is now to siphon the funds of the company and leave it as a shell, while the petitioner's properties are at stake in so far as the outstanding liabilities are concerned. It is the case of the petitioner that the smooth and efficient continuance of the company is no longer a possibility. The mutual trust and confidence, based on which, the respondent - company was formed no longer exists.
3. It is alleged that Umesh and Lokamata had called for an extra-ordmary general body meeting on 6.4.2013, and when the petitioner went to attend the meeting, it is alleged, that he was physically overpowered by Umesh, Lokamata and others and he was forced to affix his signatures to various documents, including what appeared to be notices and minutes of meetings. It is claimed that it is these documents which were utilized in purportedly amending the Articles of Association. And by virtue of which, Umesh was made a permanent member of the Board and it was also sought to be ensured by incorporating an amendment to the effect that without the affirmative vote of Umesh and Lokamata, any resolution passed by the share holders would not be valid.
It is further stated that Lokamata had issued letters to the several bankers of the company to freeze the accounts of the company on the accusation that the petitioner was responsible for several financial irregularities. Public notices in that regard were also said to have been issued in daily newspapers.
4. The petitioner is said to have opposed the actions of the respondents, which lead to the petitioner being completely prevented from entering the office premises of the company. It is stated that on 16.4.2013, the petitioner was summoned to the Chandra Layout police station, on the ground of an enquiry, where Umesh, Lokamata and Diwakar Rangappa were present. It was revealed that Lokamata had filed a complaint against the petitioner making several allegations. It transpires that the police, in a totally one-sided approach and acting without authority of law had demanded that the petitioner accede to the demands of the aforesaid respondents. The first demand was that the petitioner resign from the post of Director of the company. When the petitioner resisted, the police are said to have seized his mobile phone and threatened him with dire consequences and even to arrest him. The petitioner thus claims to hae signed several documents under duress, including certain cheques.
The petitioner claims that the resignation letter, which was one of the documents obtained in the above fashion is said to have been filed with the Registrar of Companies. It is claimed that the petitioner has not been paid his remuneration of Rs.4.50 lakh per month from February 2013. The petitioner also claims to have learnt that his office chamber in the company premises has been ransacked by Umesh and Lokamata and that they have taken custody of all his personal documents. The petitioner is said to have lodged a criminal complaint in that regard before the Court of the Additional Chief Metropolitan Magistrate.
It is in the above alleged background, that the petitioner is before this court seeking that the respondent no.1 company be wound up.
5. Respondents 1 to 5 and 7 to 9 have filed common statement of objections to contend that the petition averments are false and baseless. It is claimed that the idea of starting the first respondent - company was that of the fourth respondent. The late Shankar had, however, taken the initiative of actually starting the company. The petitioner, who was a senior in college to late Shankar, was said to be unemployed at the relevant point of time and had evinced interest in associating himself with the project. Respondent no.2, who is said to have had considerable expertise in the IT Sector, had been inducted from inception. Respondent no.6, who was a jeweller and a family friend of Shankar and his family, had invested in the venture. It is claimed that Shankar and respondent no.2 were responsible for securing the clientele and the petitioner was said to be handling the financial transactions of the company and had also undertaken to arrange for collateral security to raise loans for the business.
It is contended that the petitioner, late Shankar, and respondent no.6 each held 16,500 equity shares in the respondent - company amounting to 33% of the issued and paid up equity share capital of the respondent - company and the remaining 500 equity shares amounting to 1% of the equity share capital was held by respondent no.2. The respondent - company is earning good profits and is repaying loans due to banks. The properties of the brother of the petitioner and late Shankar were offered as collateral security for securing loans from bank, along with the property of respondent no.6. The respondent no.2 was the Chief Operating Officer of the company and she along with late Shankar were instrumental in getting projects from various clients for the respondent company. Though all the directors were given cheque signing authority, since the petitioner was the Chief Financial Officer, the accounts and the financial aspects of the respondent - company were handled by the petitioner and he was signing the cheques and drawing up accounts and presenting them to the Board of Directors. He was interacting with the bankers of the respondent - company, and hence was familiar with the officials of the bankers of the respondent - company.
After the death of late Shankar on 8.2.2013, the petitioner, with a mala fide intention of taking over the respondent - company entirely, demanded the resignation of the respondent no.2. The petitioner and respondent no.6, through a Company Secretary, caused the issuance of a notice dated 28 3.2013 for holding a Board meeting on 2.4.2013, where one of the items on the Agenda was the appointment of the petitioner's wife and the wife of the respondent no.6 as the directors of the company and transmission of the shares of late Shankar. The respondent no.2 is said to have replied to the said notice, by the petitioner, pointing out that the shares held by late Shankar were already transmitted and notice of the meeting was not given to all the directors. The said meeting was subsequently called off by the petitioner as per e-mail dated 2.4.2013.
The petitioner and respondent no.6 opened a bank account with HDFC Bank, by fabricating a resolution without convening a Board Meeting and without the knowledge of late Shankar and respondent no.2, when late Shankar was alive. In respect of this bank account, the petitioner and respondent no.6 got themselves nominated as signatories to that account without the knowledge and concurrence of other directors and had used that paper resolution to represent themselves as the authorised signatories of the respondent - company.
The respondents had vehemently opposed the sale of the shares of late Shankar in the respondent - company proposed by the petitioners since late Shankar along with the respondent no.2 was instrumental in establishing the company and had put in considerable efforts to ensure its successful operation. The respondents having got wind of the huge financial mismanagement of the respondent - company by the petitioner and considering the contribution made by late Shankar and respondent no.2, demanded transmission of shares and majority representation in the Board of the respondent - company. Accordingly, it was decided to induct respondents 3,4,5,7,8 and 9, who are said to have had expertise in different areas which would help the company, as directors of the respondent - company with the petitioner continuing to be a whole time director. It is claimed that prior to the demise of late Shankar, ail the directors of the company, except respondent no.2 had cheque signing authority. The demise of late Shankar necessitated the change of signatories in the bank and therefore, it was decided to make respondent no.3 and 6 along with the petitioner as joint singatories. It was also decided to authorize respondent no.3 and 6 to represent the respondent - company.
It is claimed that on March 30, 2013, the respondents had found, during the review of books of accounts, that the petitioner had unauthorisedly withdrawn cash from the account of the respondent - company to the tune of Rs.65 lakh for his personal use within a span of 13 days apparently with an intention of defrauding the respondent - company. Cash was withdrawn by the petitioner by purportedly borrowing loans from various financial institutions while having produced a fake shareholding pattern, an inaccurate list of the board of directors and a fabricated board resolution, evidently in connivance with the statutory auditor of the respondent - company and respondent no.6 and with the forged signature of respondent no.2.
The petitioner had borrowed the amounts from the financial institutions even though there was no necessity for any funds. The amounts unauthorizedly borrowed by the petitioner are said to be as follows:
i. Bajaj Finance Limited - Rs.29,15,930/- (Rupees twenty nine lakh fifteen thousand nine hundred and thirty)
ii. Kotak Mahindra Bank Limited - Rs.34,04,000/- (Rupees Thirty four lakh and four thousand)
iii. Taia Capital Financial Services Limited - Rs.33,90,080/- (Rupees Thirty three lakh ninety thousand and eighty) and
iv. Religare Finvest Limited - Rs.34,16,056/- (Rupees Thirty four lakh sixteen thousand and fifty six)
The said financial institutions are said to have transferred the amounts to the company's account in State Bank of Mysore, Vijayanagar Branch, Bangalore. The petitioner thereafter is said to have transferred the amounts to HDFC Bank account to make up for the cash withdrawals of an amount of Rs.70,00,000/- the previous day, from the funds of the respondent - company in HDFC Bank account. The respondents claim that the petitioner, after ceasing to be the sole signatory, had clandestinely and with an intent to defraud the respondent - company, had withdrawn the said amounts. He is alleged to have forged the signature of the respondent no.2 in the bank documents, in respect of which respondent no.2 is said 10 have initiated separate criminal action against the petitioner. The petitioner had not informed the banks about the change in authorised signatories of the respondent - company and that the bank accounts could not be operated by him. Therefore it is alleged that he has committed unauthorized acts to the detriment of the respondent - company and its members, by using his influence with the bank officials. The respondent company is said to have issued letters to the above financial institutions to the effect that the said loans were unauthorisedly obtained in the name of the company by the petitioner.
6. In these circumstances, it is contended that there was no other option but to freeze the bank accounts of the respondent - company in order to prevent further unauthroised acts and misuse of the respondent company's funds.
That the respondent - company is said to have received notices from the service tax department and the provident authorities, from which these respondents have learnt that the respondent - company owes huge amounts to the said departments.
That the petitioner, who was acting as the Chief Financial Officer of the respondent - company had systematically siphoned off the amounts to be credited towards service tax and employees provident fund. The petitioner, who, as the Chief Financial Officer and Director of the respondent - company, was custodian of the respondent - company's finances, has defrauded the respondent by withdrawing and using the same. The assets of the respondent should have been held in trust by the petitioner, but the petitioner with an ulterior motive, had withdrawn the cash from the bank and had jeopardized the reputation of the respondent - company and had committed grave fraudulent acts.
It is claimed that when the respondents became aware of the fraud and misappropriation committed by the petitioner, the petitioner is said to have resigned from the Board on 20.4.2013 and had written a letter, to the bankers of the respondent, requesting them to release the security provided for the loans borrowed by the respondent-company. The banks are said to have refused to defreeze the accounts, relying on the letter issued by the petitioner, and insisted that the respondent provide a cash margin equivalent to the value of the collateral security provided by the petitioner. It is claimed that since the respondent was caught in a situation where its funds were in danger of being siphoned off, the respondent had no option but to furnish an amount of Rs.2.19 Crore meant for payment of provident fund and ESI dues as cash margin as required by HDFC Bank. HDFC Bank has created a lien on the said amount of Rs.2.19 Crore in order to facilitate the release of properties belonging to the petitioner and respondent no.6 as collateral. It is stated that the petitioner was absconding ever since the police complaint was lodged against him by respondent no.2. Fearing that there may be other financial irregularities committed by the petitioner during his tenure as a Chief Financial Officer of the company, which the other directors and shareholders had been unaware of and having blindly trusted him with the financial matters of the respondent - Company, the Board of Directors of the company decided to cause an investigation into the financial affairs of the company.
It is alleged that the petitioner after ceasing to be the director, has not returned the respondent- company's car, namely a Maruti Ertiga VDI BS IV bearing Registration No.KA-02-MG- 5762. This vehicle had been given to the petitioner for his official use. It is claimed that the petitioner has no right to retain the said vehicle with him after he ceased to be the Director of the Respondent - company. Inspite of making a demand to return the said vehicle, the petitioner has not returned the some. Accordingly, the respondent - company has filed a complaint, before the Special Court for Economic Offences and the same is said to be pending.
It is said that the petitioner, in order to cover-up all his mis-deeds and fraudulent acts being investigated, has now filed this petition to wind up the respondent - company which is carrying on business, profitably, to the prejudice of all its members, employees and other stakeholders.
It is reiterated that the petitioner has not made out any ground for the winding up of the company nor has established the purpose for which the respondent - company was incorporated is achieved or that the substratum of the respondent - company is lost.
7. In the face of the above allegations and counter allegations, and when the matter was yet to be considered for admission, an application in CA 1886/2013 was filed on behalf of the petitioner, dated 13.9.2013, contending that the respondents had convened an Extra-ordinary General Meeting on 25.9.2013, whereby it was proposed to remove the existing directors of the company and that respondent no.2 was seeking to act as the Chairman and hence sought a stay of the meeting and in the alternative sought that an independent person be appointed to act as Chairman, if there was to be such a meeting. Though the respondents opposed the application by filing their objections, the application was allowed in the following terms :
œORDER
In this case, the applicant has sought for a direction for convening of the extra-ordinary general meeting of the Company, either on 25.09.2013 or on 03.10.2013 and to appoint an independent Chairman to preside over the said meeting.
Learned counsel for the parties submit that the extra-ordinary general meeting of the Company may be convened on 25.09.2013. It is also submitted that the special notice for the removal of Directors has been complied with. They have also no objection to appoint Sri Shreyas Jayasimha, learned advocate, to preside over the said meeting as the independent Chairman and to fix his remuneration at Rs.1,00,000/-.
Submission of the learned counsel for the parties is placed on record.
C.A. 1886/2013 is allowed. The extra-ordinary general meeting of the Company shall be convened on 25.09 2013 at 10.30 a.m. under the Chairmanship of Sri Shreyas Jayasimha, learned advocate, for consideration of the subject matter in the notice which has been sent to the share holders of the Company.
The remuneration of the Chairman is fixed at Rs.1,00,000/-.
The undertaking given on behalf of the first respondent - Company dated 08.08,2013 is continued till next date of hearing."
The Chairman appointed by this court has filed his report dated 8J0.2013, which reads as follows :
"'REPORT OF THE CHAIRMAN OF AN EXTRA ORDINARY GENERAL MEETING OF ASTRIX TECHNOLOGIES PVT. LTD.
I, Shreyas Jayasimha, Advocate, was appointed by this Hcn'ble Court vide order dated 20th September, 2013 to arc as Chairman for the Extra Ordinary General Meeting of the shareholders of Astrix Technologies Pvt. Ltd. (hereinafter referred to as "the said Company"). The EGM was summoned by a notice dated 7th September 2013 and was previously served individually upon the shareholders. The EGM was convened to order and was held on Wednesday, the 25th day of September, 2013 at 10.30 a.m., at #1563, 3rd Floor, 8th Cross, Opp. BMTC Bus
Depot, Chandra Layout, Bangalore - 560 040 pursuant to the order dated 20th September 2013, passed by this Hon'ble Court and I hereby report to this Hon'ble Court as follows:
1. The requisite quorum of the 4 shareholders in person viz. (1) Mrs. Lokamatha Rangappa, (2) Mr. Venkateshachar Krishnachar, (3) Mr. Khathim Kunnummi and (4) Mr. Umesh R. were present at the meeting and the meeting was called "to order". Before the commencement of business as per the agendo contained in the aforesaid notice dated 7th September 2013, Mr. Prashant Bhat, practicing Company Secretary and Mr. Arjun Perikal, Advocate furnished letters thereby requesting to attend the meeting as observes. Copies of the said letters are annexed as Annexures 'A' and 'B' to this report. Mr. Kuiinummi and Mi. Krishnachar objected on the grounds that their representatives were not present and that only members were entitled to attend the EGM. Upon consideration of the objections raised and in view of the fact there is no unequivocal right to attend EGMs as observers, the requests for permission to attend as observers were rejected. At the outset, it was also clarified to the members and there was unanimous agreement amongst the members that the Chairman would not have any casting vote.
2. Before any of the resolutions were put to vote, the shareholders nos. 1 and 4 (Smt. Lokmatha Rangappa and Sri. Umesha R.) objected to the vote placing reliance on Article 12 (iii): Mr. Umesha R be the permanent member of the Board of Directors of the Company and any Resolutions passed at the Board meeting and shareholders meeting are not valid unless affirmative vote is cast by Mrs. Lokamatha Rangappa or Mr. Umesh R.
The preliminary objection to the vote was overruled in view of the fact that the said Article would not come in the way of a vote being he]d as the Article itself contemplate' the validity, of resolutions passed at meetings.
3. The following Resolution No.1 was then proposed by Mr. Kiiathim Kunnummi, shareholder no.3 and seconded by Mr. Venkateshachar Krishnachar, shareholder no.2:
RESOLUTION No.1:
"RESOLVED THAT Mrs. Kharunnisa Khathim, bearing approved Director Identification Number 06540328 be and hereby is appointed as director in the board of directors of the Company.
4. Mr. Khathim Kunnummi, shareholder NO.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him
As per Section 180 (2) I informed the persons present that the poll would be taken within 48 hours of the demand and stated that the details about when the poll would be taken would be informed by me on the same day .i.e., 25'h September 2013. I then proceeded to appoint scrutineers for die poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always be a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
RESOLUTION NO.2
"RESOLVED THAT Mrs. Padmavathi M J, bearing approved Director identification Number 06540316 be and hereby is appointed as director in the board of directors of the Company.
The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956,1 ordered voting by a show of hands on the said resolution. The result of the same was two "for" the resolution and two "against".
6. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him.
demand and stated that the details about when the poll would be taken would be informed by me on the same day i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956. of the two scrutineers to be appointed, one shall always be a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
7. The following Resolution No.3 was then proposed by Mr. Venkateshachar Krishnachar, shareholder no.2 and seconded by Mr. Khathim Kunnummi, shareholder no.3:
RESOLUTION NO.3:
"RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Umesh Rangappa, Managing Director, be and is hereby removed from the office of director of the Company.
8. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him.
As per Section 180 (2) I informed the persons present that the poll would be taken within 48 hours of the demand and stated that the details about when the poll would be taken would be informed by me on the same day .i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always be a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
RESOLUTION NO.4:
"RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mrs. Lokmatha Rangappa, a Director, be and is hereby removed from the office of director of the Company.
The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956,1 ordered voting by a show of hands on the said resolution. The result of the same was two "for" the resolution and two "against".
10. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him.
would be taken would be informed by me on the same day i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always De a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant 3 hat and Mr. K Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
11. The following Resolution No.5 was then proposed by Mr. Venkateshachar Krishnachar, shareholder no.2 and seconded by Mr. Khathim Kunnummi, shareholder no.3:
RESOLUTION NO.5:
"RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Chethan Bhaskar Shetty, a Director, be and is hereby removed from the office of director of the Company.
12. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him
As per Section 180 (2) 1 informed the persons present that the poll would be taken within 48 hours of the demand and stated that the details about when the poll would be taken would be informed by me on the same day i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always be a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
RESOLUTION NO.6:
"RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act. 1956 Mr. Kodialbail Bhaskar Shetty, a Director, be and is hereby removed from the office of director of the Company.
The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956,1 ordered voting by a show of hands on the said resolution. The result of the same was two "for" the resolution and two "against".
14. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him.
would be taken would be informed by me on the same day i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always De a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant 3hat and Mr. K Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
15. The following Resolution No.7 was then proposed by Mr. Venkateshachar Krishnachar, shareholder no.2 and seconded by Mr. Khathim Kunnummi, shareholder no.3:
RESOLUTION NO.7:
"RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Budari Dasappa Basavaraj, a Director, be and is hereby removed from the office of director of the Company.
16. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him.
As per Section 180 (2) 1 informed the persons present that the poll would be taken within 48 hours of the demand and stated that the details about when the poll would be taken would be informed by me on the same day i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always be a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
RESOLUTION NO.8:
"RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Rangappa Divakar, a Director, be and is hereby removed from the office of director of the Company.
The aforesaid resolution was read to the members present. As per Section 177 of the Companies Act, 1956,1 ordered voting by a show of hands on the said resolution. The result of the same was two "for" the resolution and two "against".
18. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him.
would be taken would be informed by me on the same day i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always De a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of tiie Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant 3hat and Mr. K Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
19. The following Resolution No.9 was then proposed by Mr. Venkateshachar Krishnachar, shareholder no.2 and seconded by Mr. Khathim Kunnummi, shareholder no.3:
RESOLUTION NO.9:
"RESOLVED THAT pursuant to the provisions of Section 284 of the Companies Act, 1956 Mr. Mudduraju Rangappa, a Director, be and is hereby removed from the office of director of the Company.
20. Mr. Khathim Kunnummi, shareholder No.3 demanded poll under section 179 of the Companies Act, 1956 after referring to Article 9 (ii) of the Articles of Association, which is extracted as under:
Article 9 (ii) Upon a poll one vote in respect of each share held by him
As per Section 180 (2) 1 informed the persons present that the poll would be taken within 48 hours of the demand and stated that the details about when the poll would be taken would be informed by me on the same day i.e., 25th September 2013. I then proceeded to appoint scrutineers for the poll to be conducted. As per Section 184 (3) of the Companies Act, 1956, of the two scrutineers to be appointed, one shall always be a member (not being an officer or employee of the Company) provided such a member is available and willing to be appointed. However, out of the persons present, shareholder nos. 1, 2, and 4 were also Directors of the Applicant Company and shareholder no.3 was not willing to act as scrutineer. Hence Mr. Prashant Bhat and Mr. K. Jayarama, both practicing Company Secretaries were appointed scrutineers and they accepted their appointment.
21. Subsequently on 25th September itself, I informed the members and the scrutineers that the poll would be conducted on 26th September, 2013 at 10.30 a.m. at my office at Aarna Law, No.5, 2nd Main Road, Vyalikaval, Bangalore - 560 003.
22. Accordingly on 26th September 2013, the shareholders present were requested to cast their votes on the poll papers distributed to them.
23 The shareholders present in the meeting then cast their vote for the aforesaid resolution nos. 1 to 9. After the shareholder's had cast their votes, the Scrutineers verified the poll papers and made their remark at the foot of each poll paper. The remarks of the scrutineers on the poll papers is treated by me as their report on the poll.
24. At this stage, the shareholder nos. 1 and 4 (Smt. Lokmatha Rangappa and Sri. Umesha R.) objected to any statement regarding the result of the vote placing reliance on Article 12 (iii) of the Articles of Association, reproduced hereunder for ready reference:
Article 12 (iii): Mr. Umesha R be the permanent member of the Board of Directors of the Company and any Resolutions passed at the Board meeting and shareholders meeting are not valid unless affirmative vote is cast by Mrs. Lokamatha Rangappa or Mr. Umesh R.
25. In reply, the shareholders nos. 2 and 3 placed reliance on sections 9 and 284 of the Companies Act and stated that the said Article 12 (iii) is contrary to the provisions of the Act and that the Companies Act provisions ought to prevail. In reply to a question, the said shareholders also stated that they had not hitherto initiated proceedings to challenge Article 12.
26. Upon consideration of the objections raised and the reply, J as Chairman decided to only announce the factual position upon conclusion of the poll without commenting further on the validity of proposed resolutions so that the parties may work out their remedies before appropriate fora.
27. On scrutiny of the poll papers by the appointed Scrutineers and as per their report, 4 shareholders present in person representing 50,000 shares had cast their votes validly. Copies of the poll papers are produced as annexures C to F. The factual position upon conclusion of tbe poll on Resolution Nos. 1 to 9 are as under:-
| Poll Paper No. | Name of Shareholder | No. of Equity Shares Held | Manner of Voting |
| 1 | KHATHIM .K | 16,500 | FOR |
| 2 | YENKATESHACHAR .K. | 16,500 | FOR |
| 3 | UMESH .R | 16,500 | AGAINST |
| 4 | LOKAMATHA .R | 500 | AGAINST |
Dated this 8th day of October, 2013.
Sd/-
Shrevas Jayasimha
Chairman"
Subsequent to the filing of the above report, the matter stood adjourned from time to time in the expectation that the matter would be resolved by the parties at a mediation and the parties were directed to appear before the Mediation Centre, Bangalore. The effort now ever, proved to be futile.
8. The contesting respondents refused to abide by the report, dated 8-10-2013, of the Chairman of the Extra-Ordinary General Meeting of the Company. There continued to be allegations of high handed mis-management and oppression on the part of the contesting respondents, notwithstanding, interim orders of this court placing a restraint on them. It is in the above background that the matter was considered for admission.
9. Having regard to the allegations by the petitioner and the equally strong counter allegations against the petitioner by the contesting respondents, this court would have 10 be satisfied that there is material produced before the Court to demonstrate that the management and conduct of the company ought not to be continued, while exercising discretion under Clause (f) of Section 433 of the Companies .Act, 1956. It cannot be said that there is any such clinching material made available by the petitioner. The allegations on both the sides would require a detailed enquiry, which is not contemplated in these proceedings.
The allegations by the petitioner as a minority share holder, are primarily of oppression and mismanagement. The petitioner is provided with a remedy by recourse to Sections 397 and 398 of the Act. The powers of the Court under Sections 397 to 403 have been conferred on the Company Law Board by the Company (Amendment) Act, 1988 (with effect from 31-5-1991). Therefore, in the circumstances of the case the petition is not maintainable and ought to be rejected.
Consequently, the applications CA. 1580/2013, C.A.1581/2013, C.A.2124/2013 and C.A.2382/2013 stand disposed of as well.
But the peculiar circumstance that has been created by the parties of their volition, is in inviting this court to dispose of the application in CA 1886 / 2013, where by mutual consent - an Extra-Ordinary General Meeting of the company was convened under the Chairmanship of an independent member of the Bar, in whom both the sides had reposed confidence. The contesting respondents having found that the tables were turned on them at the said meeting, whether they would be in a position to refuse to abide by the result of the meeting, de-hors the merits of the petition, is a question that looms up for consideration.
The contesting respondent share holders have sought to place reliance on Article 12 (iii) of the Articles of Association in holding that the result of the Extra-Ordinary General Meeting was inconclusive and was not binding on them. The said Article reads as follows :
" Article 12 (iii) : Mr. Umesh R. to be the permanent member of the Board of Directors of the company and any Resolutions passed at the Board Meeting and share holders meetings are not valid unless affirmative vote is cast by Mrs. Lokamata Rangappa or Mr. Umesh R."
Section 284 of the Act provides for the manner of removal of a Director of the company, and notwithstanding anything to the contrary in its Articles, would be removable by an ordinary resolution of which special notice has been given. The Section is general and applies to all Directors and includes all those not retiring by rotation. It applies to permanent Directors or Life Directors and Directors appointed for a fixed term even though they may have been appointed with reference to the Articles or otherwise.
Further, Section 9 of the Act specifically provides that the provisions of the Act would override anything to the contrary in the Articles of Association.
Therefore, the contesting respondents are held bourd by the result of the said meeting. The petitioner is at liberty to enforce the result of the meeting in terms of the report of the Chairman of the Extra-Ordinary General Meeting refeired to hereinabove in the manner known to law.
The application in C.A.550/2014 is ordered accordingly.