C.P. No. 75 of 2011. Case: Tarjit Singh Bakhatawarsingh Batth and Others Vs Ratan Wood P. Ltd. and Others. Company Law Board

Case NumberC.P. No. 75 of 2011
CounselFor Appellant: Mrs. Shaila V. Pathak, Pramod S. Shah and Ms. Radhika Vaiude, Practising Company Secretaries and For Respondents: Ashok Mehta, Practising Company Secretary
JudgesVimla Yadav, Member
IssueCompanies Act, 1956 - Sections 143, 171, 284, 299, 383A, 397, 398
Citation2013 (117) CLA 129 (CLB), 2013 (180) CompCas 124 (CLB)
Judgement DateMarch 22, 2013
CourtCompany Law Board


Vimla Yadav, Member, (Mumbai Bench)

  1. In this order I am considering Company Petition No. 75 of 2011 filed by the petitioners against the respondents under sections 397 and 398 of the Companies Act, 1956 (hereinafter referred to as "the Act") in the affairs of respondent No. 1 company, namely, M/s. Ratan Wood P. Ltd., incorporated on May 5, 1997, having its registered office at Plot No. 46, Sector-8, Gandhidham, Kutch, Gujarat, India-370 201. The authorised share capital of the company is Rs. 75,00,000 divided into 7,50,000 equity shares of Rs. 10 each. The issued, subscribed and paid-up share capital of the company is Rs. 74,11,000 divided into 7,41,100 equity shares of Rs. 10 each. The petitioners hold 24.01 per cent. the respondents hold 72.10 per cent. of the issued, subscribed and paid-up capital of respondent No. 1 company which is a closely held private limited company. The company is into the business of manufacturing processing and trading of wood and wood products. The petitioners' case is that respondent No. 2 in collusion with respondent No. 3 has illegally assumed control over the management and state of affairs of the company. It was pointed out that petitioner No. 1 and respondent No. 2 had incorporated the company in the year 1997 by subscribing to the memorandum of association of the company along with two other persons, viz., Mr. Girdhar Vidhani and Mr. Govind Vidhani. In the year 2007, both these persons, i.e., subscribers of the memorandum of association left the company by transferring their shares to the respondents and petitioners in agreed proportions and by resigning from the directorship of the company. Since then, the control of the state of affairs of the company and its business was with petitioner No. 1 and respondent No. 2 jointly as directors of the company. But on August 14, 2010, respondent No. 2 unilaterally co-opted Mrs. Sukhminder Kaur Ranjitsingh Batth, viz., respondent No. 3 on the board of directors of the company without the knowledge and consent of the petitioner. The petitioners came to know about the disputed appointment of respondent No. 3 from the signatories details of the company available on the MCA-21 portal, Form 32 filed unilaterally by respondent No. 2 for the disputed appointment of respondent no. 3 and annual return (2010) available in the records of the Registrar of Companies. It was pointed out that the annual return and Form 32 have been digitally signed by respondent No. 2. In Form 32 at page No. 3 verification shows the date of the board resolution authorising respondent No. 2 as August 14, 2010. However, petitioner No. 1 being a director of the company did not receive the notice of the board of directors' meeting calling the meeting on August 14, 2010. Further, as per clause 34 of the articles of association of the company, the directors have power to appoint an additional director on the board of the company. Further, as per clause 44 of the articles of association the minimum quorum required for the board meeting is at least two directors. Prior to August 14, 2010, there were only two directors on the board of directors of the company. Further, a copy of the resolution has been attached to the said Form 32, stating to be passed at an extraordinary general meeting held on August 14, 2010. However, none of the petitioners, being shareholders of the company, have received the notice convening the said extraordinary general meeting. Hence, the extraordinary general meeting cannot be said to be validly held. In the absence of the petitioners and without the consent of the petitioners, respondent No. 2 alone has no power to co-opt another director in the company. Hence, the appointment of respondent No. 3 on the board of directors of the company is void ab initio as her appointment has been made without obtaining the consent of petitioner No. 1 and without the approval of the duly constituted board of directors in duly called board meeting. It also can not be said to be validly held on the ground that the notice of the extraordinary general meeting in which the alleged appointment has been made, has not been served on the petitioners as required under clause 25 of the articles of association. Clause 25 of the articles of association provides that any general meeting may be called by giving to the members clear 7 days' or shorter notice than of 7 days, if consent is accorded there to by members of the company holding not less than 90 per cent. of the paid-up share capital of the company. Respondent No. 2 alone cannot issue such notice without the knowledge, of petitioner No. 1, with-out whom the board of directors cannot be properly constituted. Further, respondent No. 2 cannot sign Form 32 for the appointment of respondent No. 3 without the proper authority of the board.

  2. It was contended that the notice dated October, 4, 2010, from the company could not be signed by respondent No. 2 as a chairman for convening the board meeting on October 14, 2010. The petitioners pointed out that the respondents are carrying out the affairs of the company unilaterally by acting in their own discretion and without allowing petitioner No. 1 to participate in the day to day management of the company. The respondents are carrying out the activities of the company oppressive to the interest of the petitioners as shareholders and particularly petitioner No. 1 as a director of the company.

  3. My attention was drawn to a letter dated October 4, 2010, on receipt of which petitioner No. 1 through his representative Mr. Sanjeev T. Singh, practicing company secretary, sent a letter dated October 11, 2010, to respondent No. 2 requesting him to provide the information/documents regarding the disputed appointment of respondent No. 3 as to notice convening the board meeting in which the appointment was considered; Attendance register showing presence of the directors who attended the board meeting; Minutes of the above board meeting and the resolution passed thereat towards appointment of Mrs. Sukhminder Kaur Ranjitsingh Batth (i.e., respondent No. 3) and for necessary authorisations for filing compliances with the Registrar of Companies/Ministry of Corporate Affairs; Notice convening the extraordinary general meeting of the company on August 1, 2010; Attendance register/other relevant record showing presence of the shareholders who attended the extraordinary general meeting; Minutes of the above extraordinary general meeting and resolution passed thereat, etc. In the letter dated October 11, 2010, it is stated that as Mr. Tarjitsingh Batth, viz., petitioner No. 1 has not received any notice of the board meeting nor attended any board meeting nor consented to the proposal of the appointment of any new director, nor signed any minutes, resolution, attendance register, etc., it is not understood as to how a new director has been appointed on the company's board. That...

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