1. The present company application has been filed under Regulation 44 of the Company Law Board Regulations, 1991 by the 2 Respondent in the main company petition praying this Bench, inter alia, to pass an order directing the Company, to call a general meeting for the current year and comply with the provisions of Section 257 of the Companies Act, 1956 and put to vote at the general meeting, the proposal of the Applicant to appoint Mr. Jozef Louis Van den dossche and Ms. Pinkey Hooda as directors of the Company.
2. A narration of the brief facts of the case is that on 06.09.2012, the Applicant issued a notice to the Company proposing the appointment of Mr. Jozef Louis Van den dossche and Ms. Pinkey Hooda as directors of the Company pursuant to provisions of Section 257 of the Companies Act, 1956. The necessary documents were forwarded to the Company along with the requisite deposit of money. The said notice was received by the Company fourteen days before the proposed Annual General Meeting (AGM) dated 27.09.2012 In response to the above notice, the Company by e-mail dated 18.09.2012 wrongfully claimed that the Company is a private limited company and the provisions of Section 257 of the Companies Act are not applicable to it. The Applicant issued a notice dated 19.09.2012 pointing out, inter alia, that the Company was indeed a subsidiary of a public limited company and is bound to comply with the provisions of Section 257 of the Companies Act and stood by its proposal for appointment of the above two persons as directors. In response to the Applicant's letter, the managing director of the Company Mr. S. Balakrisnnan by an e-mail dated 21.09.2012 stated as follows: “Thank you for your mail dated 19.09.2012 Since the settlement proposal is on and the same is being processed by taking into account the intent of all parties, it may not be advisable at this stage to precipitate the issue by appointing any of your nominees on the board”. It is submitted that on 27.09.2012, the date of AGM, the above two persons were present. Mr. S. Balakrishnan, the managing director of the Company chaired the AGM. Mr. Jozef Louis Van den dossche, acting on behalf of the Applicant, signed the attendance register. The representative of the Applicant insisted on the chairman to put to vote the proposal of the Applicant to appoint the above two persons on the board. The chairman refused to take up the proposal on the ground that if the persons proposed are appointed as directors there would never be an amicable solution to the shareholders' dispute. The action of the chairman was illegal. Since the parties could not agree on an amicable solution, the chairman unilaterally adjourned the meeting sine the even though requisite quorum was present. The adjournment of the AGM was objected to by the Applicant vide letter dated 27.09.2012 and called upon the Company to hold the AGM at the earliest. The Company is deliberately not complying with the provisions of Sections 257 and 166 of the Companies Act, 1956 at the instance of the managing director. The Company is a private limited company which is a subsidiary of a public limited company but is not complying with the requirements to be met by the private companies which are subsidiaries of public limited company. The Applicant, as a 51% shareholder can have a say in the management to protect their investment in the Company. In support of his case, the counsel appearing for the Applicant relied upon the following judgments:
(i) Manu/CL/0052/1999 (CLB) in the matter of Smt. Namita Gupta v. Cachar Native Joint Stock Company Ltd. Para 19.
(ii) Manu/DE/0137/1973 (High Court of Delhi) in the matter of Companies Act, 1956 v. In the matter of Motion Pictures Association, Delhi.
3. The Respondents filed a detailed counter and took the following preliminary objections:
(a) The Company Application has been filed by the Applicant represented by Mr. Bomi Daruwala based on the power of attorney dated October 22, 2012, executed by one Ms. Mary Ann Spiegel as Director of the Applicant in his favour, appointing him as lawful attorney to institute and defend proceedings before various forums in India on behalf of the Applicant. It is pertinent to note that there is no statement in the Power of Attorney that the Board authorized Ms. Mary Ann Spiegel, the Director of the Applicant, to appoint such power agents nor is there any board resolution authorizing to appoint the power agent to institute and defend proceedings on behalf of the Applicant in India. The said Power of Attorney has been executed without a board resolution of the Applicant Company and no director has authority to execute the power on behalf of the Applicant. Hence, the Company Application is liable to be dismissed on this ground alone.
(b) It is submitted that the Applicant is entitled to seek the relief in Company Application in the Company Petition filed by Respondent Nos. 1 to 4.
(c) It is submitted that the Applicant has not exhausted the provisions contained in the Companies Act. The Applicant if it wants it may follow Section 169 for the appointment of directors and it need not seek the relief from this Hon'ble Bench. Therefore it is submitted that the Applicant may be directed to exhaust the remedy provided under the Companies Act before approaching this Hon'ble Bench.
(d) Above all, the Applicant has not come before this Hon'ble Bench with clean hands in light of the facts set out herein to be read along with the Company Petition No. 15 of 2008 and rejoinder filed by the Respondent Nos. 1 to 4.
4. It is submitted that the Applicant, 1 Respondent and the 9 Respondent have entered into a foreign collaboration agreement on 02.06.1997 and had agreed to set up a Joint Venture Company, the 5 Respondent herein to manufacture and market wide range of additives for automotive oils and fuels, viscosity improvers and associated services with an authorized capital of Rs. 35 lac consisting of 3,500 equity shares of Rs. 1000/- each. The Applicant holds 51% of the paid-up capital in the 5 Respondent Company, the 1 Respondent and Respondent Nos. 2 to 4 hold 40% and the 6 Respondent holds 9% respectively in the 5 Respondent Company. As per the agreement, the Applicant will provide technical services to the 5 Respondent Company to enable it to manufacture and market the said product. The 5 Respondent herein i.e the target company was incorporated as a private limited company on 24.06.1997 The Applicant Company is the holding Company of 5 Respondent. The 6 Respondent herein is the holding Company of the Applicant. The Applicant's nominee was on the board of the 5 Respondent till January, 2007. The 5 Respondent Company has been maintaining the accounts in accordance with the law and the balance sheets have been approved by the board. The Company also has been sending quarterly accounts to the Applicant. After the change in management of the 6 Respondent herein, the 5 Respondent herein has been sending the quarterly accounts and monthly statements to the 8 Respondent herein. The Applicant proposed to replace the existing auditors of R5 herein and R5 accepted and appointed Deloitte as the statutory auditors in the place of the existing auditors. The auditor submitted its report behind the back of the 2 Respondent herein. The Applicant withdrew its nominee and took no measures to verify the correctness and authenticity of the report received from Deloitte. The Applicant had supplied raw material and technical know-how to the 5 Respondent Company. The Company indebted a sum of Rs. 1,22,83,657/- on 19.02.2007 The Applicant sent a notice u/s 434 of the Act calling upon the Company to pay the amount. The Company sent a reply through its counsel on 23.02.2007 setting out the consequences. The Applicant, without considering the interests of the Company and its shareholders filed CP No. 154/2007 to wind up the Company before the Hon'ble High Court of Madras. The Hon'ble High Court directed the Company to pay a sum of Rs. 15 lac per month to the Applicant till the entire outstanding is liquidated. The Applicant also filed winding up petition against the 5 Respondent. Apart from this, the action of the Applicant in terminating the collaboration agreement on 07.02.2008, clearly shows the oppressive conduct of the Applicant after the change in the management. These acts are detrimental to the interests of the Company. As stated above, the Applicant withdrew its nominee from the board of the R5 Company on 29.01.2007 on its own accord and used Deliotte's report as an excuse to terminate the collaboration agreement and committed breach. In so far as the appointment of Applicant's nominee is concerned, there was no agenda and notice u/s 257 was not circulated to the members in accordance with the provisions of the Act. The resolutions, as discussed in the AGM, were put to vote as per the agenda and they were passed. The allegation, that the AGM has been adjourned sine die, is not correct. However, the meeting went ahead and transacted the agenda set out in the notice convening the AGM. The copy of the minutes of the AGM dated 29.07.2012 was forwarded to the Applicant at its request. The nominees of the Applicant were not appointed on the board of the 5 Respondent herein on the reason that the Applicant being a major shareholder has been acting detrimental to the interests of the Company and other shareholders. On the other hand the Applicant has also been acting at the behest of the 8 Respondent herein against the interests of the Company. The Company has been doing extremely well and declared dividends year after year and no allegation has been made against the management. The Applicant did not contribute anything for the welfare of the Company. In view of the reasons, he requested the Bench to dismiss the Application as devoid of merits. In support of his case, the learned counsel relied upon the following decisions:
(a) (1991) Comp Cases Vol. 70 (Delhi High Court) 388 in the matter of M/S Nibro Limited…Plaintiff v. National Insurance Co. Ltd.…Defendant
(b) (1998) Comp Cases Vol. 92 (Madras High Court) 719 in the matter of Indian Commerce & Industries Pvt. Ltd. v. Swadharma Swarajya Sangha.
(c) (1998) Comp Cases Vol. 93 (Delhi High Court) 750 in the matter of Ferruccio Sias v. Jai Mangaram Mukhi
(d) (1999) Com Cases Vol. 98 (Madras High Court) 151 in the matter of Swadharma Swarajya Sangha v. Indian Commerce & Industries Pvt. Ltd.
5. Heard the learned counsel appearing for the respective parties, perused the pleadings, documents and citations relied upon by them. After analysing the pleadings the only point is whether the Applicant has made out any case to grant the reliefs as prayed for. The preliminary objection of the Respondents herein is that this Company Application has been filed by the Applicant represented by Mr. Bomi Daruwala based on the power of attorney dated 22.10.2012 executed by one Ms. Mary Ann Spiegel as director of the Applicant appointing Mr. Bomi Daruwala as lawful attorney to institute and defend proceedings in various forums in India on behalf of the Applicant. In reply the learned counsel for the Applicant submitted that the Applicant Company was incorporated under the laws of Belgium and Ms. Mary Ann Spiegel as Manager of the Applicant Company was duly authorized to represent the Company acting singly and thus is authorized under the laws of Belgium to execute the power of attorney. In support of the contention, the learned counsel for the Applicant produced an expert opinion on this point. The said opinion reads thus: “Based upon the subject to the assumptions, qualifications and limitations set out in this opinion letter and having regard to such legal considerations as we have deemed relevant and subject to any matters not disclosed to us, we express the opinion that, in so far as Belgian law is concerned, the power of attorney, executed by Ms. Mary Ann Spiegel, acting as Manager of the Company, acting singly was validly executed on behalf of the Company”. I have also perused the power of attorney dated 22.10.2012 produced by the Applicant wherefrom it is evident that the Applicant Company nominated/appointed Ms. Pinkey Hooda and Mr. Bomi F. Daruwala to be true and lawful attorneys for and on behalf of the Company to do the acts and things and also to appear on behalf of the Company in any court or courts or justice in India and file suits, complaints etc. The said power of attorney was signed by Mary Ann Spiegel, as its director. In view of the documents produced and the clarification given by the Applicant, Mr. Bomi Daruwala, who signed the present Application on behalf of the Applicant, is having the power to file this Application. It is for the Applicant Company to appoint, nominate any person of their choice according to their laws. The Application, as such, is maintainable.
6. Now, I would like to deal with the main relief as sought by the Applicant. The grievance of the Applicant is that they issued a notice u/s 257 of the Companies Act, 1956 to the R5 Company to put to vote at the general meeting the proposal of the Applicant to appoint Mr. Jozef Louis Van den bossche and Ms. Pinkey Hooda as directors on the board of the 5 Respondent herein and the same was not considered by the 5 Respondent. In reply, the 5 Respondent herein contended that the Applicant being the holding company of the 5 Respondent herein, proposed to replace the existing auditors. It is further contended that the Applicant withdrew its nominee from the board of R5 Company on 29.01.2007 on its own accord and used Deloitte's report as an excuse to terminate the collaboration agreement and thus committed breach by terminating the agreement. Further the Respondents herein contended that the conduct of the Applicant is detrimental to the interests of the 5 Respondent Company and its shareholders. It is contended that the Applicant terminated the collaboration agreement only to market its products in India under the name of Wynn's, contrary to the collaboration agreement. The termination of the agreement lacks bona fides. Further the Respondents herein contended that in so far as the appointment of the Applicant's nominee is concerned there was no agenda and notice u/s 257 of the Act was not circulated to the members in accordance with the provisions of the Act. Therefore, the question of considering the appointment of the Applicant's nominee was not possible. It is to say that the Applicant issued notice dated 06.09.2012 to the board of directors of 5 Respondent herein stating that “in terms of Section 257 of the Companies Act, 1956, we, Wynn's Belgium BVBA, majority shareholder of Wynn's Mekuba India Pvt. Ltd. (R5) holding 51% of voting capital, hereby give notice that we propose the appointment of following persons as directors of the Company. (1) Jozef Louis Van denn bossche, and (2) Ms. Pinkey Kataria Hooda”. In the above notice the Applicant has categorically stated that “take necessary steps to move the resolution in respect of our proposal at the ensuing AGM of the members of the Company”. There is no dispute with regard to the validity and the power to issue the notice by the Applicant Company. The Respondents herein have not denied the receipt of notice dated 06.09.2012 The Applicant contended that they sent the above notice by e-mail, courier and post to the board of the 5 Respondent. It is also contended that necessary documents were forwarded to the 5 Respondent Company along with the requisite deposit of money. The holding of AGM on 27.09.2012 was not in dispute on the reason that the Company issued notice dated 10.08.2012 in this regard to the shareholders. It is stated in the notice that “15th AGM of the Company will be held on Thursday, the 27th September, 2012 at 11:00 AM at Hotel Ramada Rajpark, 180, TTK Road, Alwarpet, Chennai to transact the ordinary business as stated in the notice”. The notice to the shareholders intimating the holding of 15 AGM was issued subsequent to the notice issued by the Applicant Company u/s 257 of the Act for appointment of directors. Further, Mr. Jozef Louis Van den bossche, vide his letter dated 06.09.2012 intimated the board of 5 Respondent Company expressing his consent to act as director if he is appointed by the board pursuant to Sections 264(2) and 266(1)(a) of the Act. It is categorically stated that he has not been disqualified to act as director. Further, Ms. Pinkey Hooda vide her letter dated 06.09.2012 to the board of R5 Company also expressed her consent to act as director if appointed by the board and also stated that she is not disqualified to act as director. In reply to the above notices dated 06.09.2012, the R2 vide his letter dated 18.09.2012 replied as under: “In the meanwhile, you have sent a letter proposing two of your nominees to be appointed as directors of the Company for reasons best known to you. You had withdrawn your representative earlier, prior to the institution of the above proceedings and threatened the Company by taking steps to sell Wynn's products in India through ITW, India. Since the matter is sub-judice, it may be difficult for us to bring your nominees on the board which may affect the settlement process”. Further it is stated that Section 257 is not applicable since R5 herein is a private limited company. Further, the R5 Company vide its letter dated 08.10.2012 addressed to the Applicant stated that “the appointment of directors was not taken up at the AGM since no agenda was circulated to the members for their appointment” From the minutes of the AGM dated 27.09.2012 it is evident that the AGM was convened as per schedule and transacted the business. Mr. Jozef Louis Van den bossche, representative of the Applicant present in the AGM. It is also recorded in the minutes that a query was raised by the representative of the Applicant that in spite of notice given by them u/s 257 of the Act for appointment of directors why it was not included in the agenda? It is also recorded in the minutes that the chairman explained the circumstances which transpired not to include the appointment of two persons as directors and more particularly pointed out that negotiation for settlement is in the process. The fact remains that the target company i.e the 5 Respondent herein is a private limited Indian company which is a subsidiary of the Applicant Company. Further, the Applicant admittedly is 51% shareholder of the 5 Respondent herein. It is an admitted fact that the Applicant Company issued notice dated 06.09.2012 to the board of directors of R5 Company herein specifying categorically to appoint the two persons as directors in terms of Section 257 of the Act as they are majority shareholders holding 51% voting capital. The Respondents herein have stated that the Applicant Company had withdrawn their representatives earlier and stated that it may be difficult for the 5 Respondent to bring the nominees of the Applicant on the board which may affect the settlement process. The said reasoning by the 5 Respondent is not tenable. Further the Respondents herein have stated that Section 257 is not applicable to the 5 Respondent Company on the ground that the 5 Respondent is a private limited company. The said reasoning is also not tenable on the ground that the target company i.e 5 Respondent is a private limited company which is a subsidiary of the Applicant, which is a public limited company. Therefore, the provisions of Section 257 are applicable to R5 herein. In this regard, Section 257 of the Act is reproduced for better appreciation. Right of persons other than retiring directors to stand for directorship. Sub-section (1) of Section 257:— A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the Company, a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be (along with a deposit of Rs. 500/- which shall be refunded to such person or as the case may he, to such member, if the person succeeds in getting elected as a director). (1A) The Company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting. Sub-section (2) reads thus: Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company.
From the above provision of law, it is mandatory for the Company, after receipt of notice from a eligible person to inform its members of the candidature of that person for the office of director and serve individual notice on the members not less than seven days before the meeting. In the present case, the Applicant has issued notice on 06.09.2012 and duly complied the fourteen days period as per Sub-section (1) of Section 257. Further, the R5 Company being a private limited company which is subsidiary of a public company, hence the said provision is applicable to it. As stated supra, the 5 Respondent Company failed to adhere to the provisions of the Act. The Applicant's have given a clear fourteen days notice to the 5 Respondent herein. As stated supra, the 5 Respondent has not denied receipt of notice. The other reasoning given by the 5 Respondent that the appointment of directors was not included on the reason that negotiation for settlement with regard to the purchase of the shares was in the process, is also not tenable and cannot be a ground to deprive the legitimate right of the majority shareholder. From the perusal of notice and the relevant documents I am of the firm opinion that the Respondents have failed to perform their obligation in considering the request made by the Applicant.
7. The citations relied upon by the learned counsel for the Respondents are not squarely applicable to the facts of the present case. The citations relied upon by the learned counsel for the Applicant in (ii) supra is applicable to the present case. The Delhi High Court, at Para 14 held that “the Company was not having power to waive the fourteen days notice given to it”. In view of the foregoing reasons, I hereby direct the 5 Respondent Company to consider the notice issued by the Applicant Company proposing the appointment of directors as stated in the notice by convening the general meeting of the Company as per Section 257 of the Act. Accordingly, CA No. 192/2012 in CP No. 15/2008 is allowed in respect of prayer (i) and (ii). No orders as to costs.