V.S Krishnan And Others v. Westfort Hi-Tech Hospital Ltd. And Others

K.K Balu, Vice Chairman:— The petitioners collectively holding in excess of one-tenth of the issued share capital of M/s. Westfort Hi-Tech Hospital Ltd. (“the company”) and aggrieved on account of a series of purported acts of oppression and mismanagement in the affairs of the company, namely, illegal (a) convening of the eleventh annual general meeting; (b) issuance of further shares on rights basis; (c) exclusion of the petitioners from the office of directors; (d) election of respondents Nos. 16 to 24, as directors; (e) transfer of shares; and (f) breach of fiduciary duties by respondents Nos. 2 and 3 towards the company as directors; (g) manipulation of minutes of the meetings and other records; (h) statutory violations; (i) irregularities in relation to the investigation centre in the hospital premises of the company, etc., invoked the provisions of sections 397 and 398 of the Companies Act, 1956 (“the Act”) seeking the following reliefs:—

(i) to appoint an administrator for—

(a) regulating the future affairs of the company;

(b) leasing/licensing the area earmarked for the investigation centre; and

(c) realising the outstanding amounts due from respondents Nos. 2 to 4, 22 and 23 in respect of the investigation centre;

(ii) to declare that the annual general meeting held on September 29, 2005, and the resolutions passed thereon are invalid;

(iii) to declare that respondents Nos. 2 to 4 vacated the office as directors under section 283 of the Act;

(iv) to declare that the further issue of shares is illegal and void;

(v) to declare that the election of respondents Nos. 16 to 23 as directors is invalid; and

(vi) to declare that petitioners Nos. 1 to 4 and respondent No. 14 shall be deemed to have been re-elected as directors.

2. Shri T.K Seshadri, learned senior counsel, while initiating his arguments submitted: The first respondent-company was incorporated in April 1994 as a private limited company and later in June 1997 got converted into a public limited company with the main object of developing a Hi-Tech multipurpose hospital at Thrissur, Kerala. The regulations contained in Table A are not applicable to the company except in so far as expressly incorporated in the articles of the company. As at March 31, 2005, the authorised capital of the company is Rs. 9.20 crores divided into 92 lakhs equity shares of Rs. 10 each and the issued, subscribed and paid up capital is Rs. 9.18 crores divided into 91,84,100 equity shares of Rs. 10 each. Respondents Nos. 2 and 3 being husband and wife are subscribers to the memorandum of association of the company. They are promoter directors and are not liable for retirement. The board of directors is empowered to appoint any of its members as managing director, who shall not be subject to retirement by rotation. The second respondent, as managing director has been in charge of the day-to-day management of the company. Respondents Nos. 2 and 3 along with their children, namely, respondents Nos. 4, 22 and 23 had formed a partnership firm prior to incorporation of the company, under the name and style of “Westfort Hospital” which is being run by the partners, while the second respondent happens to be managing director of the firm. The company and the partnership firm are two different entities, which are unconnected except that some of the partners of the partnership firm are also directors of the company, namely, respondents Nos. 2 to 4, 22 and 23 though status of respondents Nos. 22 and 23 as directors is in dispute. The second respondent lured non-resident Indians including the petitioners and others for financial assistance towards development of the Hi-tech multipurpose hospital on the assurance that the doctors who contribute beyond Rs. 10 lakhs and others who are not doctors contributing not less than Rs. 20 lakhs would be given the office of director, as could be seen from the receipts dated January 14, 1998, and March 18, 1998, issued in favour of the fourth petitioner, despite the fact that the directors are required to hold only 2,500 equity shares by way of qualification shares in terms of article 11 of the articles of association of the company. This is the practice followed while appointing directors of the company. The petitioners being natives of Thrissur, but settled down abroad have contributed with their family members to the tune of Rs. 1.28 crores by way of share capital. The fourteenth respondent and his family members have invested more than Rs. 44 lakhs towards the share capital and further extended financial assistance for the development of the hospital. The petitioners invested huge amounts ten years back but no dividend has so far been paid by the company. Petitioners Nos. 1 to 4 and respondents Nos. 2 to 15 were directors, apart from the existence of two vacancies in the board of the company till the impugned annual general meeting held in September 2005. Petitioners Nos. 1 to 4 and other nonresident Indians have been reposing trust and confidence on the second respondent for bringing up the multi-speciality hospital, whereas there has been a change subsequently in the attitude of the second respondent to enrich himself and gain exclusive control over the company to its detriment, as borne out by the following acts of oppression and mismanagement in the affairs of the company:

The proposal to set up a special investigation centre in the hospital premises of the company was approved at the board meeting held on December 15, 2001, after considering the recommendations of a sub-committee consisting of members constituted by the board of directors and on the inducement of the second respondent to permit Westfort Hospital to run the investigation centre. Accordingly, the company leased out a portion of the hospital premises to Westfort Hospital, to set up and manage the investigation centre on a monthly lease amount of Rs. 50,000 apart from a further sum of not exceeding 20 per cent, of net income of the investigation centre, after deducting all the connected expenses. This specific understanding is reflected in the letter dated January 28, 2002, of the second respondent addressed to directors of the company. The board of directors at its meeting held on February 2, 2002, recognised the fact that on account of the investigation centre, the hospital would get not only special investigation facilities but also a reasonable income, both fixed and variable (from the lease rent of Rs. 50,000 per month plus 20 per cent, of the net income). Though an agreement of lease was executed on December 29, 2001, between the company represented by the second respondent and Westfort Hospital represented by the third respondent as its partner, yet the lease agreement was never placed for approval before the board of directors of the company. Kerala State Industrial Development Corporation (KSIDC) which approved the hospital project for financial assistance was raising objections to the establishment of the investigation centre by Westfort Hospital, whereupon the second respondent had proposed at the meeting of board of directors held on May 2, 2002, to foreclose the loan amount of Rs. 135 lakhs availed of from KSIDC by raising loans from the directors, including petitioners Nos. 1 and 2 as well as respondents Nos. 2, 6 to 9 and 15 and accordingly the loan was foreclosed. The second respondent adopted such a tactic solely for the benefit of Westfort Hospital so as to run the investigation centre by the second respondent and his family members, which came to light pursuant to the persistent acts of oppression indulged by him in the affairs of the company. Westfort Hospital paid the rental amount of Rs. 50,000 during the period between October 2002 and March and committed default in payment of the rental for the subsequent period apart from sharing the profits of the investigation centre in terms of the agreement of lease dated December 29, 2001. The partners of Westfort Hospital who are directors of the company deprived the company of its legitimate share in the income from the investigation centre as well as the lawful claim towards monthly rental by taking untenable stand that the payment of monthly rent would arise only, if there is a profit in the investigation centre and that the agreement would be considered only in the profit sharing ratio of 80:20, in terms of a communication dated August 27, of the third respondent. This wilful default by Westfort Hospital is adversely affecting the profitability of the company. The conducts of the partners of Westfort Hospital, who are also directors of the company is against the interest of the company especially when they owe a fiduciary duty to the company as directors. Westfort Hospital further failed to meet the electricity consumption charges in respect of the investigation centre, which apart from the controversy in sharing the profits of the investigation centre, as per the lease agreement came to be deliberated in the board meetings held on September 2, 2004, and December 22, 2004. The board of directors, after detailed deliberations at its meeting on December 22, 2004, had resolved (a) to collect from Westfort Hospital monthly lease rental of Rs. 50,000 and 20 per cent, of the profit from the investigation centre or out source the investigation centre to a third party; and (b) to charge actual electricity consumption charges to the investigation centre from April 2003, onwards. However, the second respondent, as chairman failed to record properly the minutes of the board meeting. The minutes were not confirmed at the immediate subsequent meeting, but were approved with all the discrepancies only at the board meeting held on March 29, 2005, as borne out by the communications dated April 21, 2005, and June 5, 2005, of the seventh respondent and the NRI directors respectively. The changes brought out by these directors were recorded in the minutes of the board meeting held on July 4, 2005. The grievances on account of the investigation centre are not past and concluded transactions, but are continuing up to the date of petition and still persisting which are oppressive of the petitioners. Non-payment of rent and share of profits of the investigation centre are nothing but acts of mismanagement, causing unfair prejudice to the interests of the company and its members. The second respondent while deliberating the issue of renewal of contract in respect of the investigation centre at the board meeting held on March 26, 2006, asserted that “if the Company Law Board order would in any way harm the company, he would immediately close the special investigation centre for ever”. This shows the threatening attitude of the second respondent. All partners in Westfort Hospital are parties before the Company Law Board. Under section 402, the Company Law Board can terminate the lease agreement and give appropriate directions in running of the investigation centre. The prayer sought in relation to the investigation centre intends to bring to an end the acts complained of in the petition. The petitioners are entitled to enforce their statutory rights vested in sections 397 and 398 and cannot be driven to invoke the arbitration clause contained in the agreement of lease.

The second respondent, owner of Westfort Travels, since changed to Cheroor Water Supply and Hotel Krishna Inn made the company to avail of the services of his organisations, as borne out by a copy of the circular dated April 1, 2003, issued by the second respondent as managing director of Westfort Travels, without any sanction from the board of directors and without even disclosing his interest, in a manner prejudicial to the interest of the company and treated the company as his own. The second respondent by his non-disclosure of interest suffered disqualification under section 299 and, therefore, stands vacated the office of director and consequently as managing director under section 283(1)(i) of the Act by operation of law.

The Company Law Board by an order dated October 26, 2005, restrained the company from issuing further shares, which came to be modified on February 13, 2006, permitting issuance of further shares on rights basis and further directed the respondents to intimate the petitioners regarding agenda of any board meeting with at least seven days prior notice. This modified order has been released on February 14, 2006. In the meanwhile, the second respondent issued a notice dated February 14, 2006, to respondents Nos. 7 and 9 convening a meeting of the sub-committee on February 15, 2006, without giving seven days notice to the petitioners as per the order dated February 13, 2006, to transact the issues relating to (i) rights issue; and (ii) share transfer. However, the operation of the order dated February 13, 2006, on a memo filed by the petitioners counsel, was kept in abeyance on February 15, 2006, till 2.30 p.m and after hearing learned counsel for both the parties, the order dated February 13, 2006, came to be stayed till February 28, 2006. When the petitioners preferred an appeal before the Kerala High Court, seeking an order of stay against the issuance of shares, the respondents never even whispered before the High Court either in their counter affidavit dated February 24, 2006, or in the course of their submissions on February 27, 2006 and February 28, 2006, about the issuance of further shares on February 15, 2006, to the tune of Rs. 147 lakhs. It was specifically averred before the High Court that 343 shareholders contributed about Rs. 9.2 crores, without disclosing the impugned allotment of shares for Rs. 147 lakhs by the sub-committee. The High Court pronounced its orders in the appeal filed by the petitioners on March 1, 2006, against which special leave petition was filed on March 2, 2006, before the Supreme Court, which stayed the operation of the order of the Company Law Board dated February 13, 2006, and further ordered to keep the shares on hold. It is, therefore, clear that no further shares were issued till February 15, 2006, by the sub-committee, whereas, the respondents in their counter affidavit dated March 12, 2006, contended for the first time that the company had already issued shares as early as on February 14, 2006, which is absolutely false and fraudulent. The present attempt of the respondents is with a view to circumvent the order of the Company Law Board made on February 13, 2006.

At the purported meeting of the sub-committee the second respondent, his wife and children were allotted 9,72,400 shares and his brother-in-law 25,000 shares. The other 21 shareholders including the newly inducted directors who are respondents Nos. 16 to 23 were allotted only 4,76,000 shares, thereby causing imbalance in the shareholding pattern of the company which must be remedied. These allotments are contrary to the averments sworn in the counter affidavit dated March 12, 2006, that “share applications approximately Rs. 95 lakhs have been committed and many more is willing to invest but for the restraint”. As against 343 shareholders only 28 reportedly applied for the rights shares. Respondent No. 16 holds only 500 shares, but 1,300 shares, as against his entitlement of 125 shares, have been issued without any justification. The second respondent could not have been issued additional shares by the sub-committee in the absence of any decision by the board of directors on renounced shares. In this connection reliance has been placed on (a) Mrs. Senthamarai Munusamy v. Microparticle Engineeers P. Ltd. and S. Munusamy v. Micromeritics Engineers P. Ltd., [2001] 105 Comp Cas 526, wherein this Board held that if further issue of shares results in conversion of a majority into minority or creation of a new majority, then such issue of shares is an act of oppression; (b) Micromeritics Engineers P. Ltd. v. S. Munusamy, [2002] 38 SCL 846 (Mad) : [2004] 122 Comp Cas 150, to show that directors of a company are in a fiduciary position vis-a-vis the company and that the relationship between the directors and the company is of trustee and cestuique trust. Therefore, the directors must exercise their power for the benefit of the company. If the power to issue further shares is exercised by the directors not for the benefit of the company but simply and solely for their personal aggrandisement and to the detriment of the company, the court will interfere and prevent the directors from doing so; and (c) Micromeritics Engineers P. Ltd. v. S. Munusamy and Microparticle Engineers P. Ltd. v. Mrs. Senthamarai Munusamy, [2004] 122 Comp Cas 150 (Mad)) Madras High Court order in L.P.A Nos. 108 and 109 of 2002 dated August 2, 2004—to show that if a member is deprived of his privilege and right it will ordinarily be an act of oppression on such member, which will undoubtedly be harsh, burdensome and wrongful and will necessarily be an act of oppression to the member concerned. Such an act may be even a single act done on one particular occasion, if the effect of such an act will be of a continuing nature and the member concerned is deprived of his rights and privileges for all time to come in future. If the affairs of the company are so conducted as will result in this kind of oppression to any member or members, the affairs of the company must be considered to be as being conducted in a manner oppressive to any member or members as laid down in section 397 of the Act.

The board of directors, including the second respondent at its meeting held on July 4, 2005, decided to induct two directors contributing Rs. 50 lakhs each towards the share capital. When this decision was reiterated at the board meeting held on August 24, 2005, it was only the second respondent, who opposed the majority decision of the directors, with a view to shift the shareholding pattern at the expense of the petitioners. Petitioners Nos. 1 to 4 identified two non-resident Indians who were willing to contribute the capital in terms of the decision of the board of directors to gain directorship of the company, as evidenced from their letter dated July 11, 2005, addressed to the second respondent. The second respondent in his letter dated December 4, 2001, recognised the timely financial support extended by petitioners Nos. 1 to 4 for the day-to-day running of the hospital. Nevertheless, the petitioners and their proposed nominees were unjustly excluded from the board of the company, which is now packed with the kith and kin of the second respondent. There is no justification for any change in the practice of investments from the existing directors or others who may be inducted as directors. The claim of the second respondent that the issuance of further shares was necessitated to clear the bank dues and for future development is contrary to the existing facts. There is no imminent danger of the company's bankers recalling the loans, as could be ascertained from the minutes of the meeting of the board of directors held on July 9, 2005. The notice of annual general meeting does not speak of the funds requirement and the alleged pressure from the company's bankers. The letters dated December 5, 2005, and December 8, 2005, of the company's bankers demanding regularisation of the loans are procured by the respondents subsequent to the holding of the disputed annual general meeting and filing of the petition and must, therefore, be ignored. No such letters issued, if any, at any prior point of time have been produced by the second respondent. There is no pressure from the bankers, as sought to be made out by the second respondent.

Respondents Nos. 7 and 9 were elected as members of the sub-committee in terms of the minutes of the meeting of the board of directors dated January 23, 2006, and accordingly served with notice regarding a meeting of the sub-committee on February 15, 2006, to consider share allotment and transfer. However, the sub-committee which reportedly allotted further shares is constituted only by members of the respondent group, namely, respondents Nos. 2, 3, 16, 18 to 20 and 23, thereby avoided respondents Nos. 7 and 9, belonging to the neutral group. The shares were allotted to these respondents also by the sub-committee, who were interested parties and no disclosure of their interest was made by them. By virtue of section 300, both the resolutions regarding allotment of further shares and registration of the transfer of shares purportedly transacted at the sub-committee are invalid and those committee members shall be deemed to have vacated the office. In view of the contravention of the provisions of section 283(1)(i) and section 299, respondents Nos. 2, 3, 16, 18 to 20 and 23 are no longer directors of the company.

The annual general meeting was convened on September 29, 2005, without serving proper notice on all the shareholders. As a result, there were only 40 members among 343 members participating in the annual general meeting. This shows that there can be no reason why if the other members had been served with notice of the meeting, they should fail to attend enbloc the meeting. No notice was duly given to the petitioners of the special resolution on the issue of further shares as contemplated under section 189(2)(b). The first petitioner who was present in the board meeting, approving the resolution to convene the annual general meeting, never dispensed with the service of notice on him as a shareholder for the annual general meeting. Mere knowledge of the first petitioner regarding the annual general meeting is not adequate under law, since notice for any such meeting is mandatory. The statutory requirement of notice of the annual general meeting cannot be substituted by the acts of the first petitioner in approving the draft notice and giving consent by the petitioners to act as directors. The mere participation of respondent No. 14 in the annual general meeting does not validate the proceedings of the meeting. The notice of the annual general meeting reportedly sent to the petitioners by certificates of posting, which has never been done in the past, is quite inadequate proof to establish service of notice on them. There is nothing to establish as to whether those certificates of posting are in relation to notice of annual general meeting. The letter delivery book, an extract of the relevant pages, shows that notice of the annual general meeting was served in person on certain members living in Ernakulam, Kochi, Raichur, Mumbai, etc., which is quite improbable without any supporting evidence. Any proof of service of notice by certificate of posting must be viewed with suspicion in view of the fact that certificates of posting are notoriously “easily” available and that the certificate of posting is suspect and it does not amount to conclusive proof of service of the notice on any of the addressees mentioned therein, as held in M. S. Madhusoodhanan v. Kerala Kaumudi P. Ltd., [2003] 117 Comp Cas 19 : (2004) 9 SCC 204. The apex court in L.M.S Ummu Saleema (Mst.) v. B.B Gujral, (1981) 3 SCC 317 : AIR 1981 SC 1191 : [1983] 53 Comp Cas 312—held that the certificate of posting might lead to a presumption that a letter addressed and posted, reached in due course the addressee concerned, which is only a permissible and not an inevitable presumption. In S. Narayanan v. Century Flour Mills Ltd., [1987] 1 Comp LJ 25 (Mad)— it has been held that it is not always safe to trust mere certificate of posting. It will only show that certain postal envelopes were put into the post office. Mere posting by itself will not necessarily mean that there was service on the address concerned. It is highly risky to place reliance upon the mere certificate of posting. A notice may be proper, yet the resolution may be void. There are three aspects in a meeting, namely, calling, holding and conducting as envisaged in section 186. When a resolution is bad, any action taken pursuant to such invalid resolution is not valid. This act of the respondents both in their capacity as directors and shareholders is harsh, burdensome and illegal.

The minutes of the annual general meeting would indicate that the members approved the resolution for further issue of shares in accordance with section 81(1A), and not for issuance of rights shares. There is no record or authority to show that the process of rights issue of shares was approved by passing any valid resolution at the annual general meeting. The communication dated October 15, 2005, of the second respondent offering rights shares to members is not in consonance with the section 81(1A) passed at the annual general meeting held on September 29, 2005. Hence, the letter offering rights issue is bad. Under section 173(2) for any item of business to be treated as special business, an explanatory statement setting out material facts concerning such item has to be annexed, which is mandatory. In the present case, neither the notice dated August 24, 2005, convening the annual general meeting nor the explanatory notice discloses material facts pertaining to the resolution on further issue of shares. The company has not complied with the rules prescribed by the Central Government in terms of the Unlisted Public Companies (Preferential Allotment) Rules, 2003. The notice dated August 24, 2005, convening the annual general meeting does not contain the particulars specified in rule 6. The requirements of section 173 are mandatory and not directory and that any disobedience to its requirements must lead to the nullification of the action taken by the members. The special resolution on further issue of shares cannot be amended at the meeting thereby approving the issuance of rights shares. The minutes do not show whether the resolution approving the issue of shares was moved as special resolution. A majority, but not three-fourth of the members of the company as required under section 189(2)(c) passed the resolution for further issue of shares, as borne out by the minutes of the annual general meeting. The approval by a majority of the members would mean 51 per cent, and not three-fourth of the members present at the meeting. Hence, the resolution approving the issue of further shares by a simple majority is contrary to law and invalid. Even if the annual general meeting has been conducted lawfully, it is oppressive of the petitioners and liable to be set aside.

There are sixteen directors excluding respondents Nos. 2 and 3 who are permanent directors. By virtue of article 88 one-third of the sixteen directors are liable to retire at each annual general meeting. While the notices for the 7th, 8th, 9th and 10th annual general meetings, containing the business in relation to appointment of directors consistently give details of the retiring directors, their eligibility and willingness for re-appointment, the notice dated August 24, 2005, convening the eleventh annual general meeting does not disclose such details, in terms of section 173 enabling the shareholders to form their judgment to elect their directors. However, the director's report gives the names of the directors who retire by rotation at the eleventh annual general meeting. At the annual general meeting, eight directors were appointed as against the six directors retired. The election of directors to the two vacancies has been conducted without any notice, as required under section 188(1). There was no agenda as envisaged under section 169(1) for appointing the two directors in the existing vacancies. The company advertised the candidature of the newly appointed persons in the newspapers with minimal circulation, which does not satisfy the spirit of proviso to section 257. The resolution relating to the appointment of directors in the existing vacancy not having been passed by a special resolution with the requisite majority in terms of section 189 of the Act, the appointment of new directors in the vacant position is illegal. The resolution approving the appointment of eight directors does not specify the persons who got elected in the place of the retiring directors. The resolution neither discloses the proposer nor the seconder for any of the resolutions. The ballot papers are not resolutions. It is not known who is contesting against whom at the meeting. It is impossible to identify the six directors elected with notice and the remaining two directors elected without notice. The appointment of eight directors against six vacancies is not tenable. There ought to have been ballot papers for each and every resolution, which in the present case cover other businesses also. The ballot papers do not indicate the particulars of persons contesting in the place of retiring directors. It is clear from copies of the ballot papers on record that the resolutions for appointment of directors have not been voted on individually at the annual general meeting. Further, the minutes of the annual general meeting do not indicate that each of the directors was elected individually, thereby provisions of section 263(1) are contravened and consequently their appointments are void under section 263(2). By virtue of section 263(3), motion has to be proposed at the meeting individually by any member or chairman without which no resolution arises and consequently the same cannot be put to vote. According to Shackleton on Law and Practice of Meetings “motion” being a definite action, does not become a resolution until it has been moved, ordinarily seconded and accepted at the meeting. Dr. K.R Chandratre on Company Meetings: Law Practice and Procedure writes that it is customary at company meetings to formally propose and second a motion so as to be put to vote. When a motion is proposed and seconded, it leads to a debate and voting. Thus, resolution arises from a motion moved at a meeting. A.M Chakraborti on Company Notices, Meetings and Resolutions reports that a motion is proposed by one member and seconded by another. It does not, however, require a seconder unless required by the articles. To put it in a nutshell, there is no resolution without motion. These requirements are not satisfied in any of the impugned resolutions. The eight directors so appointed in contravention of the statutory provisions are harsh and illegal adversely affecting the affairs of the company. By virtue of proviso to subsection (2) of section 263, the retiring directors shall be deemed to have been automatically re-appointed as directors of the company. The petitioners' grievance is improper election of directors and not in relation to any directorial complaints. The rights of a shareholder would include the right to elect directors and, thus, to participate in the management through them, as held in Life Insurance Corporation of India v. Escorts Ltd., [1986] 59 Comp Cas 548 (SC). In this context, conduct and motive of the parties assume relevance. Respondents Nos. 16 to 21 became shareholders by unlawful means. One Purushothaman, at the behest of the second respondent claimed as if he had lost his share certificates and got them replaced by duplicate certificates and thereafter immediately transferred those shares without complying with the requirements of section 108 in the name of his as many as nine relatives including respondents Nos. 16 to 21 just one month prior to the disputed annual general meeting, who were later nominated for directorship. It is impossible to issue duplicate share certificates and effect registration of the transfer of those shares without following the prescribed procedure in favour of respondents Nos. 16 to 21 at the same board meeting held on August 24, 2005. The sixth respondent does not possess a minimum of 2,500 shares, as specified in the articles to qualify for the office of director. Respondents Nos. 16 to 21 became directors investing hardly Rs. 5,000 to Rs. 50,000 unlike in the case of directors prior to the disputed annual general meeting each investing an amount of minimum of Rs. 10,00,000. The board of directors prior to the disputed annual general meeting consisted of a total of 18 directors, of which eight directors represented the non-resident Indians, four directors belonged to the respondents group and the remaining six directors were neutral directors. However, after the impugned annual general meeting the non-resident Indian directors became three in number, while directors belonging to the respondents group got increased to eleven, thereby usurping the power of the board of directors of the company. The shareholding pattern and directorship of the petitioners ought to have been honoured by the second respondent in the light of the understanding between the parties and must have ensured the election of the petitioners as directors by casting their votes in their favour. The second respondent, on the other hand packed the board with his kith and kin and excluded the petitioners, thereby got the illegal majority in the board purely for self-aggrandisement and, therefore, even if the resolutions are beneficial, they are harsh and burdensome.

There are discrepancies in the minutes of the board meeting as brought out by respondents Nos. 6 to 9, 12 and 13 and NRI directors in their letters addressed to the second respondent (pages 171, 173-177 of company petition). The minutes of the board meeting held on December 22, 2004, would indicate that directors noticed the discrepancies recorded in the minutes book and those circulated to the members. However, such recording of discrepancies appearing in the minutes dated December 22, 2004, produced by the petitioners are not reflected in the very same minutes dated December 22, 2004, produced by the second respondent (page 117 of volume A-1). The copy of the minutes of the board meeting held on August 24, 2005, produced by the second respondent along with the Application No. 145 of 2005 does not contain any serial numbers, while the copy of the very same minutes produced by respondents Nos. 1 and 2 at the time of hearing of the company petition bear serial numbers, which evidences the extent of manipulation indulged by the second respondent. The board of directors at the meeting held on December 22, 2004, decided (a) to sign the minutes book by all the directors present, and (b) circulate a copy to the directors within 24 hours in order to avoid discrepancies in the recorded minutes. The second petitioner, therefore, suggested at the board meeting held on March 29, 2005, for appointment of a separate chairman to avoid any such controversies. The grievances of respondents Nos. 6 to 9 are that “the minutes being circulated were not as per the decision taken in the board meeting”. The seventh respondent in his communication dated March 27, 2006, has confirmed that the minutes have been numbered at a subsequent point of time. Therefore, no evidentiary value can be attached in respect of any of the minutes now produced by the second respondent.

The second respondent failed to cause production of the statutory records for authentication by the Commissioner appointed by the Bench, on the plea that those documents have been produced before the Thrissur sub-court. Whereas the second respondent had only produced copies of the ballot papers used at the disputed annual general meeting before the sub-court, Thrissur. The second respondent in his letter dated November 30, 2005, advised the Commissioner that the documents as listed out are available for inspection, but failed to produce them either before the Commissioner or the Company Law Board. The second respondent has neither produced the original minutes, which are absolutely essential, especially when the resolutions are impugned by the petitioners. The Supreme Court in Gopal Krishnaji Ketkar v. Mohamed Haji Latif & Others , AIR 1968 SC 1413—held that when a party in possession of best evidence which would throw light on the issue in controversy withholds it, then the court ought to draw an adverse inference against him notwithstanding that onus of proof does not lie on him. The book containing the minutes of proceedings of the annual general meetings are not drawn and maintained in compliance with section 193(1A) and (IB) of the Act. No presumption can, therefore, be drawn in favour of the validity of the minutes book. The Bench cannot act upon copy of the minutes forming part of the records before it.

3. Shri T.K Seshadri, learned senior counsel, summed up his arguments by drawing support from the following decisions:

Ramashankar Prosad v. Sindri Iron Foundry P. Ltd., AIR 1966 Cal 512—to show that (a) shareholders are entitled to have the affairs of a company conducted in the way laid down by the company's constitution. Members are entitled to expect that their board shall perform its functions as a board and that the proceedings of the directors shall be carried out in a normal and orthodox manner; (b) if the respondents were determined to overthrow the supremacy of the petitioners both in the board and at the general meetings of the company thereby tightening the grip of the petitioners on the management of the company in a manner not resorted to before would amount to an act of oppression; (c) even if the oppression is not of long duration but its effect is continuous and persistent, intervention of the court is warranted; (d) where the majority is eclipsed both on the board and at the general meeting of the company, by the manipulations of the respondent, it is a fit case of winding up under the just and equitable grounds; and (e) any visible departure from the standards of fair dealing, and a violation of the conditions of fair play on which each shareholder who entrusts his money to a company is entitled to rely would constitute oppression.

Shanti Prasad fain v. Kalinga Tubes Ltd., [1965] 35 Comp Cas 351 : AIR 1965 SC 1535—to show that (a) where conduct is burdensome, harsh and wrongful; and (b) lack of confidence between the majority shareholders and the minority shareholders springs from oppression of a minority by a majority in the management of the company's affairs, involving an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder, the courts would invoke the jurisdiction of section 397.

Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., [1981] 51 Comp Cas 743 (SC)—to show that (a) the person complaining of oppression must show that he has been constrained to submit to a conduct, which lacks in probity, conduct which is unfair to him and which causes prejudice to him in the exercise of his legal and proprietary rights as a shareholder; (b) and that a resolution passed by the directors may be perfectly legal and yet oppressive.

4. Shri R. Murari, learned counsel for respondents Nos. 6 to 9, adopted the arguments of Shri T.K Seshadri, learned senior counsel and further reiterated:

Respondents Nos. 7 and 9 formed part of the share allotment and transfer committee, as bome out by a notice dated February 14, 2006, convening the meeting on February 15, 2006, to consider the allotment on right basis and effect share transfer, which was not held in view of the stay order made by the Company Law Board. However, it came to light that the committee allegedly met and allotted shares without participation of these respondents, which are impugned in the present proceedings. The minutes of meetings have been recorded with discrepancies and the minutes books are subsequently numbered as seen from the letters of respondents Nos. 6 to 9 and NRI directors, which are produced before the Bench. The discrepancies are recorded in the minutes of the board meeting held on December 22, 2004. The minutes of the meetings of members as well as the board are not recorded as prescribed in article 98 and no presumption can be applied in respect of any of the meetings of the company. The second respondent and other partners of Westfort Hospital are not honouring the terms of the lease agreement in respect of the investigation centre and, therefore, the same may be directed to run by the company, thereby protecting the interests of the company and its members. The election of directors is in gross violation of the statutory requirements and the directors so irregularly elected at the annual general meeting ought not to have further participated in the affairs of the company and cannot take protection under section 290 of the Act.

5. Shri Durga Rao, learned counsel representing respondent No. 14, adopted the arguments advanced on behalf of the petitioners and further submitted that his client has already withdrawn the civil suit challenging the further issue of shares and election of directors at the eleventh annual general meeting of the company.

6. Shri K.P Dhandapani, learned counsel appearing for respondents Nos. 1 and 2, submitted:

Westfort Hospital constituted by the second respondent and his family members have been running a hospital since the 1989 independently, while the company has been promoted in the year 1994 establishing a high specially hospital by respondents Nos. 2 and 3, who are the promoter directors. These respondents are permanent directors and are not liable for retirement and cannot be removed from the board as envisaged in article 87. At each annual general meeting one-third of the remaining directors for the time being are liable to retire by rotation.

Section 397 does not define “oppression”. The acts complained of in the present petition do not in any way constitute oppression, in the light of the decision of the apex court in Shanti Prasad Jain v. Kalinga Tubes Ltd., [1965] 35 Comp Cas 351 : AIR 1965 SC 1535. Accordingly, what is oppression is left, to courts to decide on the facts of each case whether there is such oppression as calls for action under this section. It is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397. It must be shown that the conduct of the majority shareholders is oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company are being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company's affairs and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary right as a shareholder.

Past and concluded acts complained of by the petitioners, do not fall within the purview of section 397. The Kerala High Court in Palghat Exports P. Ltd. v. T.V Chandran, [1994] 79 Comp Cas 213, held that the object of section 397 is to terminate or prevent an existing, present state of prejudicial, oppressive, harsh, unfair conduct and past conduct or closed affairs are not encompassed in this section. If the affairs which are complained of are not being conducted in present as at the time of filing the petition, they are matters of the past. They have no present existence and so there can be no complaints to bring to an end by an order of the court. Naturally, in such state of affairs, there are no affairs, present or future, to be prevented. The Punjab High Court in Thakur Hotel (Simla) Co. P. Ltd., In re, [1963] 33 Comp Cas 1029, held that mismanagement or misconduct of directors during earlier years is no ground for winding up a company under the “just and equitable” clause or for making an order under section 397, if the mismanagement has seized at the time of the application. The object of section 397 is not “to rake up the past but to redeem the future”. The Allahabad High Court in Raghunath Swamp Mathur v. Liar Swarup Mathur, [1970] 40 Comp Cas 282, held that interference in internal management of companies should take place only on good and compelling grounds. The powers of the court under sections 397 and 398 are designed for removal of an existing and not past oppressive or prejudicial course of conduct of the affairs of the company. They are primarily intended for preventive purposes. The object of the exercise of those powers is either to prevent a winding up or to remove the continuation of harm or reasonable probability of injury to the interests of the company or to the wider public interest.

The purported acts even if illegal may not be oppressive, in support of which reference has been made to Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., [1981] 51 Comp Cas 743 (SC), wherein it has been held that (a) every action in contravention of law may not per se be oppressive for the purpose of section 397 of the Companies Act, 1956; (b) a resolution passed by the directors may be perfectly legal and yet oppressive and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company. An isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful, (c) conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story. The conduct must be continuous acts on the part of the majority shareholders, continuing up to the date of the petition, showing that the affairs of the company are being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough.

The company, running a high speciality hospital is making profits and if ordered to be wound up, the company and its shareholders would seriously be prejudiced. There are no charges of financial irregularities in the affairs of the company levelled against the respondents. The petitioners and respondent No. 14 though continued to be directors since the year 1998 hardly attended the board meetings from time to time. When the petitioners were not elected by the members at the eleventh annual general meeting, they have come out with the present petition with untenable allegations. Every director other than respondents Nos. 2 and 3 is bound to retire one day or other. Any grievances in the capacity as directors cannot be remedied under section 397. No relief under section 397 would arise when if the conduct complained of by the petitioner does not relate to his status as a shareholder as held in R. Ramanathan Chettiar v. A and F Harvey Ltd., [1967] 37 Comp Cas 212 (C.T, Delhi). It is well-settled in Suresh Chandra Marwha v. Lauls P. Ltd., [1978] 48 Comp Cas 110 (P & H), that it is only oppression in the character of a member of a company that can be complained of and not in any other capacity. A shareholder of a company has two kinds of rights, namely, individual rights and corporate rights. Every shareholder can enforce his individual rights singly but corporate rights have to be enforced by the majority. It is only improper or illegal removal from-directorship that may affect the right of a shareholder but not the removal by a general meeting of the company in accordance with the provisions of the Companies Act. Whereas the petitioners have been pressurising the second respondent to induct their own nominees on the board of the company.

The first petitioner approved the draft notice of the annual general meeting and the petitioners have sent consent letters to act as directors, which would show that they are aware of the eleventh annual general meeting as well as the proposal for election of directors and further issue of shares, which was necessitated on account of the pressures exercised by the bankers to regularise the loans. The shares to which the petitioners are entitled are kept in abeyance, which can be subscribed by them.

The proposal for issue of duplicate share certificates to Purushotta-man and transfer of shares by Purushottaman to others were unanimously approved at the board meeting held on August 24, 2005, to which the first petitioner was a party and, therefore, estopped from questioning these transactions. The concurrence of the first petitioner would amount to consent given by other NRI directors. There is no proof of violation of any statutory provisions of law. When the proposal to fill up the vacant posts of directors was deliberated at the aforesaid board meeting, the chairman categorically opposed the admission of new shareholders at par value. Therefore, the petitioners cannot make out any grievances on these accounts.

At the annual general meeting held on September 29, 2005, it was proposed to issue shares to outsiders other than existing members of the company, but the members present approved the issue of further shares on rights basis. The board of directors at the board meeting held on October 15, 2005, approved the further issue of shares on rights basis at a maximum of one share for every four shares held by every shareholder. Therefore, there is no illegality in the issue of further shares on rights basis.

Respondent No. 14 filed a civil suit challenging the validity of the eleventh annual general meeting and the resolutions passed thereon by the members, despite the fact that respondent No. 14 participated in the meeting. However, the civil court while disposing the interlocutory application came to the conclusion that there is no illegality in the annual general meeting conducted on September 29, 2005, against which an appeal has been preferred by respondent No. 14. Respondent No. 14 supporting the petitioners all the time, they are engaged in forum shopping by approaching the Company Law Board, which must be declined in the interest of justice.

At the eleventh annual general meeting but of 343 members only 35 members participated, in spite of sending notices to them under certificate of posting and by personal service on some of the shareholders. No shareholder complained of non-receipt of notice of the annual general meeting. Similarly, during the earlier annual general meeting only 30 members attended and voted. Hence, there is no irregularity in convening holding and conducting the annual general meeting on September 29, 2005. There is an explanatory statement appended to the notice dated August 24, 2005, convening the annual general meeting, furnishing the requisite particulars in relation to increase of share capital, issue of further shares, etc., thereby satisfying the requirements of section 173(2).

The records sought by the advocate Commissioner were in custody of the second respondent's counsel and by the time they could be obtained from counsel time allowed by the Commissioner lapsed. Consequently, the second respondent could not produce the records for authentication by the Commissioner. There has been no manipulation of records as sought to be made out by the petitioners.

There were six directors retiring by rotation at the annual general meeting held on September 29, 2005, out of twenty directors and two vacancies were remaining unfilled. Special notices given by the eight directors showing their intention of candidature for directorship were received by the company after the issue of notice of the annual general meeting but before 14 days of the date of annual general meeting. As per the provisions of the Act, what is required is advertisement in two newspapers, one in Malayalam and one in English having circulation where the registered office of the company is situated. Malayalam daily Deepika and English daily Indian Express are the media of advertisers. The use of ballot papers, which has been the practice of the company, is in no way illegal. The illegality pleaded in election of directors is not either explained or established. Respondent No. 14 attended the annual general meeting and none of the members who participated at the meeting objected to the ballot paper process in transacting the business at the meeting. The provisions of section 257(1) are duly complied with while electing the directors as borne out by the notices issued under section 257 by various persons opting to act as directors, if appointed by the members at the annual general meeting held on September 29, 2005. There is no need to point out who are the six directors appointed against the retiring directors and the two appointed in the existing vacancies.

The grievances regarding the investigation centre and certain terms of the lease agreement duly approved by the board, which contain arbitration clause cannot be the subject of the proceedings under sections 397 and 398. Respondents Nos. 6 and 7 are in favour of the existing arrangement insofar as the investigation centre is concerned. The petitioners have not established whether the facts of the present case would justify the winding up of the company and if so whether it would cause prejudice to the company and its members. The petitioners have not proved any continuous acts of oppression or any acts of mismanagement in the affairs of the company.

7. Shri Dhandapani, learned counsel while emphasising that the company petition must be dismissed, relied on the following decisions:

Nanalal Zaver v. Bombay Life Assurance Co. Ltd., [1950] 20 Comp Cas 179 : AIR 1950 SC 172—to show that (a) conduct of the directors could not be judged on the basis of any assumed fiduciary relationship existing between them and the group, that the directors owed no duty to the group and, therefore, the motive to exclude the group could not be said to be mala fide per se; and (b) even if the motive to exclude the group was a bad motive it did not prejudicially affect the company or the existing shareholders and the presence of such further motive could not vitiate the good motive of finding the necessary funds for the company, no relief can be claimed under section 397.

Lundie Brothers, Ltd., In re, [1965] 35 Comp Cas 827 : [1965] 2 All ER 692 (Ch D)—to show that if no element of lack of probity or fair dealing to the petitioner in his capacity as shareholder in the company has been established, for his having been ousted as working director related to his status as director and not as a shareholder, the petitioner would not be entitled for any relief under section 210 of the Act (English Companies Act).

Bellador Silk, Ltd., In re, [1965] 1 All ER 667 (Ch D)—to show that the presentation of the petition in order to bring pressure for achieving a collateral purpose is an abuse of the process of the court.

Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises P. Ltd., [1991] 72 Comp Cas 211 (Karn)—to show that the relief under sections 397 and 398 of the Companies Act, 1956, is an equitable relief which is entirely left to the discretion of the company court. Because of the equitable and, therefore, discretionary character of the court's jurisdiction, the requirement of good faith on the part of the petitioner is necessary. The question of good faith has to be tested by the conduct of the petitioner as reflected not only in the proceedings before the company court but also in parallel proceedings in civil courts and in other civil litigations in other courts. Even if the allegations of the petitioners, if proved, do make out a case of oppression and mismanagement within the scope of sections 397 and 398 of the Act, mere proof of those allegations would not entitle the petitioners to the reliefs sought for when these reliefs are discretionary reliefs. They will be granted only to persons who approach the court with a clean record.

V.J Thomas Vettom v. Kuttanad Rubber Co. Ltd., [1984] 56 Comp Cas 284 (Ker)—to show that dissatisfaction of a minority of shareholders with the conduct of the affairs of the company by the majority will not normally persuade a court to interfere with the management. It is only when the court has before it reliable evidence where the majority acts against the provisions of the articles of association of the company or of the statute governing it or makes unconscionable use of the majority's power resulting or likely to result in financial loss or where action which could be characterised as unfair and improper is made that the court will exercise its powers under section 397 or section 398 of the Act.

8. I have considered the pleadings and elaborate arguments of learned counsel. The issues, which arise for my consideration, are whether the petitioners have made out a case under section 397/398 and if so, whether the petitioners are entitled for the reliefs claimed in the company petition. It is on record that the company was incorporated in April 1994, as a private limited company, which was later in June 1997, converted into a public limited company with the main object to set up and manage a hi-tech multipurpose hospital. The contribution of petitioners Nos. 1 to 4 and respondents Nos. 2 to 15 made as at February 28, 2005, towards share capital is set out in the company petition (page 191 of volume If) and remains uncontroverted. All groups and their family members, apart from their investment in share capital have extended substantial financial assistance for development of the hospital, which shall include the assistance provided by the petitioners and other directors for closure of the loans availed of from KSIDC by the company. Article 77 provides that the directors are required to hold 2,500 equity shares in the company as qualification shares. However, it is observed that the second respondent secured funds from among others, the petitioners towards directorship, as borne out by the receipts dated January 14, 1998, and March 18, 1998, issued in favour of the second petitioner. The second respondent recognised in his letter dated December 4, 2001, the timely financial support rendered by petitioners Nos. 1 to 4 and respondent No. 14 in his following words:

“…. we have inducted eight professionals considering the need for their expertise for the day-to-day running of our systems. After a lot of discussions as well as faith all these directors invested more than what I expected. Of course you 6/7 directors financially supported as and when problems arose in our project. I am fully satisfied and thankful to each one of you directors especially Dubai and Sharjah directors and I cannot forget the timely support extended by Sharjah and Dubai directors.”

9. The board of directors at its meeting held on July 4, 2005, after due deliberations decided to induct two directors, who can contribute Rs. 50 lakhs each towards share capital of the company in order to case the financial crunch and develop facilities in the hospital. It is, thus, far from doubt that the second respondent has been heavily depending upon the financial backup provided by the non-resident Indians on the understanding to offer directorship to such contributors. The articles do not envisage any concept of NRI directors, but the correspondence on record and various minutes of the board meetings would show that petitioners Nos. 1 to 4, respondent No. 14 and a few other non-resident Indians have been identified and treated as NRI directors. Petitioners Nos. 1 to 4, respondents Nos. 12 and 14, styling themselves as NRI directors advised the second respondent on June 5, 2005, on certain discrepancies in the minutes of the board meeting dated March 29, 2005. Similarly, the joint letter dated July 11, 2005, sent by petitioners Nos. 1 to 4 and respondent No. 14 in favour of the second respondent concerning induction of new directors clearly shows that they have been identified as NRI directors. There is yet another joint communication forwarded by NRI directors to the second respondent pointing out certain discrepancies in the minutes of the board meeting dated December 22, 2004. The board of directors at its meeting held on March 29, 2005, conceded to the demand from NRI directors for a minimum of 14 days notice prior to any future board meetings. Having mobilised huge funds from petitioners Nos. 1 to 4 being non-resident Indians for development of the hospital and offered directorship admittedly since the year 1998, in my considered view, there is a legitimate expectation on the part of petitioners Nos. 1 to 4 for their continuance in the board of directors of the company, which shall, however, be, seen separately in the context of the facts and circumstances of the present case.

10. This Bench by an ex parte interim order made on October 26, 2005, prohibited the company from issuing any further shares, which subsequently on February 13, 2006, came to be modified on account of the financial necessities of the hospital and in public interest and accordingly permitted the company (a) to raise the authorised share capital from Rs. 9.20 crores to Rs. 12 crores; and (b) to issue further shares in the increased authorised share capital to all members on rights basis provided that the company shall, inter alia, forward copy of the agenda for every board meeting, at least seven days in advance by registered post, in favour of the petitioners. The order dated February 13, 2006, permitting the company to issue further shares, released to the parties on February 14, 2006, was, however, stayed on February 15, 2006, by the Bench till February 28, 2006, on the representation of the petitioners that they intended to prefer an appeal before the High Court of Kerala. According to respondents Nos. 1 and 2 the share allotment and transfer committee convened a meeting on February 14, 2006, and allotted further shares to the tune of 9,72,400 on rights basis in favour of the second respondent, his wife and children and 25,000 shares to his brother-in-law, apart from allotting 4,76,000 shares in favour of 21 other shareholders, including the newly inducted directors being respondents Nos. 16 to 23. It has been asserted at the time of arguments that respondents Nos. 7 and 9 being members of the share allotment and transfer committee were not associated at the time of allotment and transfer of shares reportedly transacted on February 14, 2006, by the committee. This assertion has neither been repudiated nor explained by respondents Nos. 1 and 2. It is absolutely relevant to observe that when the petitioners mentioned on February 15, 2006, for stay of operation of the order dated February 13, 2006. Respondents Nos. 1 and 2 never even whispered about the purported allotment of further shares on February 14, 2006, to the tune of Rs. 147 lakhs and the transfer of shares. The company did not choose to forward a copy of the agenda of the meeting of the share allotment and transfer committee to the petitioners, in terms of the order dated February 13, 2006, especially when the committee has discharged the functions of the board of directors of the company. The company further did not raise the plea of allotment of shares both before the High Court of Kerala and the Supreme Court, in the appeal proceedings preferred by the petitioners herein. While disposing of the appeal (Company Appeal No. 5 of 2006), the High Court of Kerala in its order dated March 1, 2006, directed that “the first respondent-company will take steps to inform all the shareholders that the shares issued or allotted to them would be subject to the final order to be passed in the company petition by the Company Law Board”. This direction of the High Court would clearly indicate that no further shares could have been issued on February 14, 2006, as contended now by respondents Nos. 1 and 2. Whereas it has been averred for the first time in the counter affidavit filed by these respondents before this Bench on March 15, 2006, that the impugned shares have been allotted on February 14, 2006. Thus, the impugned allotment of further shares is not in strict consonance with the order dated February 13, 2006.

11. The alleged irregularities in convening, holding and conducting the eleventh annual general meeting of the company and the consequences thereof being the main bone of contention between the parties are now being considered by me. The notice dated August 24, 2005, convening the annual general meeting, contains for transaction, the following business:

(i) to increase the authorised share capital from Rs. 9.20 crores to Rs. 12 crores divided into 1.20 crores equity shares of Rs. 10 each;

(ii) to accord consent of the company under section 81 (1A) to offer or issue any number of shares in the authorised capital to any person(s) whether or not those persons include the members of the company;

(iii) to accord consent under section 293(1)(d) to borrow moneys up to a limit of Rs. 25 crores;

(iv) to adopt the balance-sheet as at March 31, 2005, together with profit and loss account of the company;

(v) to appoint auditors for the company and fix their remuneration; and

(vi) to appoint directors in the place of those retiring by rotation.

12. It is on record that the board of directors including the first petitioner at its meeting held on August 24, 2005, decided to hold the annual general meeting on September 29, 2005, and approved the draft notice incorporating the particulars as to date place and time of the meeting. Petitioners Nos. 1 to 4 forwarded their consent letters in favour of the second respondent offering themselves for re-appointment, if elected at the annual general meeting. The petitioners felt that “the annual general meeting of the company was a routine affair” as borne out by the averments made in the company petition. Respondent No. 14, who has been apparently acting in association with petitioners Nos. 1 to 4 in the affairs of the company and respondents Nos. 6 to 9, reportedly the neutral directors, participated in the annual general meeting held on September 29, 2005. The sequence of events would indicate that petitioners Nos. 1 to 4 must be aware of the annual general meeting held on September 29, 2005. However, whether mere knowledge of the meeting would tantamount to serving notice in terms of section 172 has to be considered. This section provides that notice of every meeting shall be given, among others, to every member of the company whose name appears on its register of members. It is settled law that the provisions of section 172 are mandatory and must be strictly complied with, non-compliance of which invalidates the resolutions passed thereon at the meeting. It is not that the petitioners dispensed with the need for being given any notice of the annual general meeting held on September 29, 2005. The respondents have produced certificates of posting to establish service of notice on the petitioners and other shareholders. The certificate of posting, in the event of disputes among the parties, cannot amount to conclusive proof of service of notice on the addressees. It is not always safe to place reliance on mere certificate of posting, in the absence of any other corroborative evidence such as despatch register, books of account, reflecting the expenses incurred in connection with sending of notices to the petitioners and other shareholders. It will only show that certain postal envelopes have been put into the post office and will not by itself necessarily mean that there has been service on the addressee concerned. The Supreme Court in (a) M.S Madhusoodhanan v. Kerala Kau-mudi P. Ltd., [2003] 117 Comp Cas 19 : (2004) 9 SCC 204; (b) L.M.S Ummu Saleema (Mst.) v. B.B Gujral, (1981) 3 SCC 317 : AIR 1981 SC 1191 : [1983] 53 Comp Cas 312; and (c) S. Narayanan v. Century Flour Mills Ltd., [1987] 1 Comp LJ 25 (Mad), refused to place any credentials on mere certificate of posting. It is, therefore, far from doubt that mere production of certificates of posting will not necessarily mean that there was service of notice of the meeting on the petitioners.

13. By virtue of section 173(1)(a) any business other than ordinary business transacted at an annual general meeting is called special business. Thus, the business relating to the further issue of shares transacted under section 81 (1A) at the annual general meeting held on September 29, 2005, shall be deemed to be special business, in which case, it shall be moved and passed as a special resolution. Section 189(2) stipulates that any special resolution must satisfy the following conditions:

(a) A proper notice convening the general meeting must duly be given to members.

(b) The intention to propose the resolution as a special resolution must be mentioned in the notice of the meeting.

(c) The votes cast in favour of the resolution are three times the votes cast against the resolution.

14. Section 173(2) provides that where any items of special business are to be transacted at the annual general meeting or any other meeting, an explanatory statement setting out the material facts concerning each such item of business shall be attached to the notice of the meeting. This requirement is mandatory and any disobedience to its requirement will lead to the nullification of the action taken in pursuance of such a resolution. Any bare knowledge of the petitioners and other shareholders in regard to the annual general meeting do not make them aware of material facts relating to the business concerned. The notice dated August 24, 2005, convening the eleventh annual general meeting containing, inter alia, the special business in relation to the issue of shares reads as under:

“To consider, and if thought fit, to pass the following resolution as a special resolution.

Resolved that consent of the company be and is hereby accorded under section 81(1A) of the Companies Act, 1956, to offer or issue any number of shares in the authorised capital of the company to person(s) whether or not those person(s) include the members of the company or not, in such manner and subject to such terms and conditions as the board may, in the absolute interest of the company, deem fit.”

15. The explanatory statement annexed to the notice dated August 24, 2005, relating to the issue of shares reads, thus:

“Offer of further shares by the company to persons other than members requires consent of the company in a general meeting and, therefore, this item of business is placed before you for consensus.

None of the directors are concerned or interest to this item of business.”

16. A perusal of the resolution proposed at the annual general meeting for issue of further shares and the connected explanatory statement are general in nature and lack details. It will not be possible for the shareholders, without particulars of funds requirement as well as utilisation of such funds to form their opinion in order to subscribe for the shares proposed to be issued by the company. In this context, the Unlisted Public Companies (Preferential Allotment) Rules, 2003, assumes relevance. Rule 6 contemplates that any explanatory statement as required by section 173 shall contain the following particulars:

(a) the price or price band at which the allotment is proposed;

(b) the relevant date on the basis of which price has been arrived at;

(c) the object/s of the issue through preferential offer;

(d) the class or classes of persons to whom the allotment is proposed to be made;

(e) intention of promoters/directors/key management persons to subscribe to the offer;

(f) shareholding pattern of promoters and others classes of shares before and after the offer;

(g) proposed time within which the allotment shall be completed; whether a change in control is intended or expected.

17. The particulars as required under the Unlisted Public Companies (Preferential Allotment) Rules, 2003, do not find place in the explanatory statement annexed to the notice dated August 24, 2005, proposing further issue of shares in accordance with section 81 (1A) and, therefore, does not meet the mandatory requirements of section 173(2). The resolution, as approved by the members for further issue of shares, does not indicate whether the statutory auditor/company secretary in practice has given any certificate as required under rule 7 of the Rules, 2003, to the effect that the issue of shares is being made in accordance with these rules. It is observed from the copy of the minutes of the annual general meeting held on September 29, 2005, that a majority which means 51 per cent, but not three-fourths of the members of the company in terms of section 189(2)(c) passed the resolution for issue of further shares. If this mandatory requirement is not strictly complied with the special resolution for issue of further shares, though approved by a majority of the shareholders present at the annual general meeting cannot be valid. When the issue of shares is in disobedience of the mandatory requirements, any judicial or quasi-judicial authority will be left with no option but to interfere with the exercise of discretion by the board of directors. The resolution approving the allotment of further shares, being contrary to law, does not exist in the eye of law. In view of this, the plea that non-disclosure of interest at the time of allotment of shares by respondents Nos. 2, 3, 16, 18 to 20 and 23 being members of the share allotment and transfer committee and the consequent disqualification under section 283 become redundant. Further, the resolution of the board of directors to issue further shares on rights basis is not strictly in tune with the resolution passed in accordance with section 81 (1A) by the members at the annual general meeting, which however makes no difference, in the light of its invalidity, for the reasons elaborated hereabove.

18. The relevant articles governing directors and their appointment are summarised as under:

Article 75.—The number of directors shall not be less than three and shall not be more than 20.

Article 87.—The promoter directors, viz., respondents Nos. 2 and 3 will be permanent directors and are not liable for retirement and they cannot be removed from the board.

Article 88.—At each annual general meeting of the company, one-third of the remaining directors, i.e, other than the promoter directors are liable to retire by rotation.

Article 89.—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 to retire shall in default of and subject to any agreement among themselves, be determined by lot.

Article 90.—Every resolution of a general meeting for the appointment of the director shall relate to one-named individual only except as permitted by section 263.

Article 91.—The company at the annual general meeting at which the director retires by rotation may fill-up the vacated office by appointing the retiring director or some other person thereto. This article further prescribes the procedure in the event of the office of retiring director is not filled up at the meeting.

19. As at the disputed annual general meeting of the company, there were 18 directors on the board, out of which respondents Nos. 2 and 3, being promoter directors are not liable for retirement. Thus, six directors out of the 16 remaining directors representing one-third were liable to retire by rotation at the annual general meeting held on September 29, 2005. The directors retiring by rotation must be ascertained in a manner prescribed by article 89. There is no material on record disclosing the particulars of the directors, who were to retire by rotation at the annual general meeting on September 29, 2005, in terms of the relevant article. The notice dated August 24, 2005, convening the annual general meeting does not contain names of the directors who were to retire by rotation at the eleventh annual general meeting, unlike the notices issued for the earlier annual general meetings which contained the particulars of the retiring directors, their eligibility and willingness for re-appointment as directors of the company. The object of furnishing the details of retiring directors in the notice is to enable the shareholders to form their judgment and elect directors of their choice. Section 257 provides that any person other than a retiring director, if he desires to be appointed as director, a notice of his candidature shall be given to the company 14 days before the meeting. The company shall on receipt of such notice inform its members seven days prior to the meeting either by individual notice or by an advertisement caused in at least two newspapers circulating in the place where the registered office of the company is located, about the candidature of such persons for the office of director. It is on record that the company advertised in two newspapers circulating in the place where the registered office of the company is located about the candidature of eight persons for the office of director well within the prescribed seven days before the annual general meeting held on September 29, 2005, in compliance with section 257, yet the fact that the petitioners are not residing in India is well within the knowledge of the respondents.

20. By virtue of section 263, each director shall be appointed by a separate resolution put to vote separately. This is also the requirement of article 90. An appointment of two or more directors by a single resolution is not valid unless all the members present pass a resolution unanimously to the effect that by a single resolution two or more directors would be appointed. Any resolution moved in contravention of section 263 shall be void. It is observed from copies of the ballot papers used at the annual general meeting held on September 29, 2005, that the resolutions for the appointment of directors were voted separately by members, but minutes of the annual general meeting reveal that the appointment was made by a single resolution, which reads, thus:

“The poll was conducted immediately and after scrutiny, the results were declared as follows:

Directors reappointed: Nil

Directors appointed: Dr. V.K Gopalan, Dr. Devi Mohan, R. Ragunandan, K.S.R Chandran, P.A Anirudhan, Adv. M.G Rageev, Dr. M.G Subramaniam, Danesh Mohan.”

21. It is clear that the single resolution approving the appointment of eight directors is not in consonance with article 90 and section 263 and cannot be valid. The resolution does not reveal the proposer or seconder, in line with the commonly accepted practice, as demonstrated by Shri T.K Seshadri, learned senior counsel or who are the six out of the eight directors replaced the retiring directors or who are the remaining two directors appointed at the annual general meeting filling up the vacant situation. When the appointment of directors is discovered to be invalid, their subsequent acts cease to enjoy the protection provided under section 290, thereby causing prejudice to the interests of public and the company. Thus, the conduct complained of is prejudicial and unfairly prejudicial, warranting judicial intervention as held in James Francis Hall v. Gamut Technologies Ltd., and appropriate remedial measures to regulate the affairs of the company in future. It is clear from the votes polled against reappointment of petitioners Nos. 1 to 4 that the second respondent failed to honour the understanding reached with the petitioners by exercising his vote and ensuring the votes of his family members in favour of the petitioners at the annual general meeting held on September 29, 2005. The petitioners admittedly have contributed huge sums of money without any yield for a decade, while respondents Nos. 16 to 23, being children and close relatives of the second respondent became directors with meagre investments. This legitimate expectation of the petitioners from the second respondent and his family members did not materialise, unlike in the past several years. Consequently, the strength of NRI directors, after the annual general meeting got reduced to three in number, while the strength of the directors belonging to the second respondent group increased from three to eleven numbers. The election of close kith and kin of the second respondent to the office of director, in complete exclusion of the petitioners who have been on the board admittedly since the year 1998, to my mind, is a visible departure from the standards adopted by the second respondent and his family members in offering directorship to those who contributed a minimum of Rs. 10 lakhs in case of doctors and Rs. 20 lakhs in case of others. This departure involving an element of lack of probity or fair dealing to the petitioners, in the matter of their proprietary or individual rights as shareholders would constitute oppression, applying the yard stick laid down in (a) Shanti Prasad Jain v. Kalinga Tubes Ltd., [1965] 35 Comp Cas 351 : AIR 1965 SC 1535 and (b) Suresh Chandra Marwaha v. Hauls P. Ltd., [1978] 48 Comp Cas 110 (P & H). The petitioners have every right to elect directors lawfully, as recognised by the Supreme Court in Life Insurance Corporation of India v. Escorts Ltd., [1986] 59 Comp Cas 548, which has been denied to them. The grievances on account of improper election of directors cannot be related to any directorial complaints. When a shareholder is deprived of his lawful privilege and right it will be an act of oppression on such shareholder as affirmed by the Madras High Court in Micromeritics Engineers P. Ltd. v. S. Munusamy, [2002] 38 SCL 846 : [2004] 122 Comp Cas 150.

22. The company leased out a portion of the hospital premises, by virtue of an agreement of lease dated December 29, 2001, in favour of Westfort Hospital to set up and manage the investigation centre on certain terms and conditions. While the company claims the lease rent of Rs. 50,000 per month plus 20 per cent, of the net income from the investigation centre, the third respondent as partner of Westfort Hospital made it categorically clear to the second respondent in her letter dated August 27, 2004, that the demand towards rent plus profit is totally contradictory to the agreement of lease. In this connection, it is relevant to observe that the second respondent in his communication dated January 28, 2002, reiterated that “the partnership firm would pay to the company Rs. 50,000 per month as lease rent and net profit not exceeding 20 per cent, from the total income of the investigative centre”. The deliberations at the board meeting held on February 2, 2002, clearly show that the company, pursuant to the lease arrangement with Westfort Hospital, would get “not only special investigation facilities but also a reasonable income, both fixed and variable (from the lease rent of Rs. 50,000 per month plus 20 per cent, of the net income before deduction of depreciation, financing charges and tax)”. It is reported that Westfort Hospital paid the rental amount of Rs. 50,000 during the period between October 2002, and March 2003, and subsequently failed to honour the terms and conditions of the agreement of lease and further neglected to pay the electricity consumption charges in respect of the investigation centre, which would undoubtedly prejudice the interests of the company. There is no need to go into the controversies which have emerged between the lessor and the lessee of the investigation centre in regard to interpretation of the terms and conditions of the lease agreement. At the same time the second respondent as managing director of the company is duty bound to recover the outstandings as per the lease agreement more so in the light of the fact that the second respondent is also the managing partner of the partnership firm. There is no material, in spite of the deliberations of the directors at various board meetings, to show that the second respondent ever acted prudently to act upon the lease agreement, which is nothing but an act of mismanagement. The second respondent, as director failed in his fiduciary duty towards the company. The grievances on account of the investigation centre have been persisting up to the date of company petition and even thereafter and, therefore, those continuing grievances cannot be matters of past or closed affairs. Therefore, the decisions in (a) Palghat Exports P. Ltd. v. T.V Chandran, [1994] 79 Comp Cas 213 (Ker); (b) Raghunath Swamp Mathur v. Har Swamp Mathur, [1970] 40 Comp Cas 282 (All), will be of little assistances to the respondents. The prejudices being suffered by the company on account of the investigation centre will have to be necessarily remedied with a view to regulate the affairs of the company in future in line with the decision in Thakur Hotel (Simla) Co. P. Ltd., In re, [1963] 33 Comp Cas 1029 (Punj).

23. It is observed that the request of Purushottaman for issue of duplicate share certificate was approved at the meeting of board of directors of the company held on August 24, 2005, against execution of the indemnity bond by him. There is no record to show that duplicate share certificates were issued by the company on the very same date namely, August 24, 2005. However, the resolution passed at the board meeting held on August 24, 2005, shows that the transfer of shares by Purushottaman to other shareholders including respondents Nos. 16 to 21 was unanimously approved. The first petitioner is no doubt is a party to the proceedings of the board meeting held on August 24, 2005. Nevertheless, it has to be borne in mind that the transfer of shares without issue of duplicate share certificates would be in contravention of the mandatory provisions of section 108 and cannot be valid in which case the election of respondents Nos. 16 to 21 to the office of director would be hit by article 77. This article envisages that the directors of the company are required to hold 2,500 equity shares in the company as qualification shares. It is not the case of the company that these respondents apart from the impugned shares are holding any shares in the company. There is no material to show that they have acquired qualification shares within two months after their appointment as directors in terms of section 270 of the Act. The specific charges that the second respondent has been availing of the services of his organisations namely, Westfort Travels and Cheroor Water Supply without sanction from the board of directors of the company and without disclosing his interest in those organisations are just brushed aside without any proper explanation.

24. This Bench by an order dated October 26, 2005, appointed an Advocate-Commissioner to authenticate the statutory and other records of the company. At this juncture, it has to be borne in mind that the company never produced the requisite records for authentication initially on the pretext that the records were produced before the civil court, but later it was contended that they were with the company's counsel. The company is undisputedly in custody of the statutory records, including the minutes books of general and board meetings, but failed to produce the same in discharge of their onerous duty cast on them, to establish the validity of the contentious proceedings. Without going into the contradictory stand taken by respondents Nos. 1 and 2 for non-production of the records, I am bound to draw an adverse inference against these respondents for non-production of the best evidence in their possession, in the light of the proposition laid down by the apex court in Gopal Krishnaji Ketkar v. Mohamed Haji Latif & Others , AIR 1968 SC 1413. Further, there are apparently discrepancies in the minutes as evidenced from the minutes of the board meetings dated December 22, 2004, March 29, 2005, and the various communications of the petitioners and other NRI directors, as pointed out by Shri T.K Seshadri, learned senior counsel. As a result, the relevant minutes of the board meetings recorded and circulated by the second respondent, being managing director of the company do not reflect a true and correct picture of the proceedings of the meetings leaving adverse impact on the functioning of the company. The minutes of the meeting of the board of directors dated December 22, 2004, forming part of the company petition reveal the discrepancies in the minutes of the meeting of the board of directors held on September 29, 2004, which are recorded under item No. 2 of the minutes, thus: “directors noticed discrepancies in the minutes written down in the minutes book and those circulated to the members.” However, the copy of the minutes of the very same board meeting produced by the company does not contain such recitals regarding discrepancies noticed recorded in the minutes of the meeting of the board of directors held on September 29, 2004. The minutes of the board meeting dated, August 24, 2005, a copy of which is filed along with the company application (C.A No. 145 of 2005) does not carry any serial numbers. At the same time, the very same minutes produced along with the counter affidavit filed by respondents Nos. 1 and 2 do contain serial numbers. Though Shri Dhandapani, learned counsel submitted that what has been produced along with the company application is only draft minutes, yet I do not find any such stand taken by the respondents at the time of advancing arguments on the company application. Similarly, none of the minutes of any meeting forming part of the company petition bear any serial number. It is not the case of the respondents that all those minutes are not fair minutes. Article 98 stipu lates that the minutes of the board meeting and general meetings shall be kept in accordance with section 193 of the Act. Section 193 provides, inter alia that within 30 days of the conclusion of the meeting the minutes book has to be written and each page of such recording must be initialled or signed by the chairman and on the last page of such recording the chair man shall sign and put the date. It is observed from copy of the minutes of the annual general meeting held on September 29, 2005, that the same is not in strict compliance with the requirements of section 193. Therefore, no presumption can be drawn in the present case that the annual general meeting has been duly convened and the proceedings have validly taken place in accordance with the relevant articles and provisions of the Act. This conclusion, though inconsistent with the order dated October 22, 2005, of the civil court is reached cautiously in exercise of the equitable jurisdiction on a careful analysis of the legal submissions as well as the materials placed before me, of which the civil court, as evidenced from its order, had no benefit at all and further the jurisdiction so exercised by me is not completely barred.

25. These series of acts of the second respondent, namely, convening the eleventh annual general meeting in violation of the statutory requirements, irregular issuance of further shares, election of respondents Nos. 16 to 23 as directors in contravention of the articles and the Act, exclusion of the NRI directors from the office of the director, non-maintenance and improper maintenance of the statutory records, various statutory violations and inaction in realisation of the outstanding amounts from Westfort Hospital would show that he failed to act in the best interest of the company and committed breach of fiduciary duty reposed on him. All these acts are burdensome, harsh and wrongful, satisfying the yardstick laid down by Shanti Prasad Jain v. Kalinga Tubes Ltd., [1965] 35 Comp Cas 351 : AIR 1965 SC 1535. The shareholders are entitled to see that the company's affairs are being conducted in a manner laid down by its articles and that the proceedings of members and directors are carried out in a normal and orthodox manner, failure of which, warrants interference by the court and now by the Company Law Board as held in Ramashankar Prasad v. Sindri Iron Foundry P. Ltd., AIR 1966 Cal 512.

26. There is ample material to show that the petitioners have been constrained to submit to a conduct of the respondents, which lacks in probity, conduct which is wrongful and unfair to the petitioners and which causes prejudice to them in exercise of their legal and proprietary rights as shareholders, as held in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., [1981] 51 Comp Cas 743 (SC). It is far from doubt that the issue of further shares and the election of directors being violative of several of the statutory requirements, which could be characterised as unfair and improper warranting interference of the court and now the Company Law Board under section 397 or 398 as held V.J Thomas Vettom v. Kuttanad Rubber Co. Ltd. and K.M.J Thomas v. Kuttanad Rubber Co. Ltd., [1984] 56 Comp Cas 284 (Ker). This conduct complained of by the petitioners, without any doubt, does relates to their status as shareholders and all their grievances are in the capacity as shareholders, entitling them for appropriate relief as held by the English court in Lundie Brothers, Ltd., In re, [1965] 35 Comp Cas 827 : [1965] 2 All ER 692 (Ch D), and the Indian court in R. Ramanathan Chettiar v. A and F Harvey Ltd., [1967] 37 Comp Cas 212 (Delhi). In the light of the categorical statement made at the Bar by Shri T.K Seshadri, learned senior counsel, that the petitioners are prepared to lose the office of director provided the election is properly and lawfully conducted by the respondents, the plea of the latter that the present petition has been brought to bring pressure for achieving a collateral purpose is untenable and, therefore, the decision in Bellador Silk, Ltd., In re, [1965] 1 All ER 667 (Ch D), has no application to the facts of the present case. I neither find any lack of good faith on the part of the petitioners, as sought to be made out by the respondents, placing reliance on the decision in Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises P. Ltd., [1991] 72 Comp Cas 211 (Karn), thereby, entitling the former for appropriate reliefs, in exercise of the equitable jurisdiction by the Company Law Board. In view of the gross irregularities pointed out by me in convening, holding and conducting the annual general meeting, all items of business transacted at the impugned meeting ought to be set aside. However, considering the facts that (a) the petitioners have not challenged the adoption of accounts; the appointment of auditors; the increase in borrowing powers of the directors; (b) the adoption of accounts and the appointment of auditors are statutory businesses; and (c) the increase of authorised share capital and other items of business stated herein are in no way prejudicial to the interests of the company or its shareholders, I do not propose to set aside any of these resolutions approved at the eleventh annual general meeting, save the resolutions pertaining to (a) the further issue of shares; and (b) the election of directors of the company. At this juncture, it shall be borne in mind that the annual general meeting of the company for the year 2006 must necessarily be held by September 30, 2006.

27. In view of my foregoing conclusions and (a) in exercise of the powers under section 402; (b) to regulate the conduct of the hospital's affairs in future; and (c) in public interest, the following order is passed:

(I) It is hereby declared that—

(a) the further issue of shares impugned in the company petition is illegal and void;

(b) the election of respondents Nos. 16 to 23 as directors is set aside;

(c) the retiring directors namely, petitioners Nos. 1 to 4 and respondents Nos. 5 and 14 shall be deemed to have been automatically reappointed as directors at the eleventh annual general meeting and shall continue till the date of the twelfth annual general meeting for the year 2006; and

(d) the transfer of shares by Purushottaman in favour of respondents Nos. 16 to 21 and others is invalid. However, Purushottaman is free to transfer his shares in accordance with the law.

(II) The company will convene and hold the twelfth annual general meeting in accordance with law to transact, inter alia, the following businesses:

(a) consideration of accounts, balance-sheet and the reports of the board of directors and auditors for the year 2005–2006;

(b) appointment of directors in the place of those retiring and in the existing vacancies;

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

(d) further issue of shares.

(III) The petitioners as well as respondents Nos. 2 to 15 are at liberty with a view to meet financial requirements, if any, for running the hospital, to contribute any amount by way of unsecured loans carrying interest at the prevailing bank rate to be repaid from and out of the future share application money which may be subscribed by the members, on approving the resolution for further issue of shares at the twelfth annual general meeting.

(IV) Hon'ble Justice Mr. K. John Mathew (Retd.)., Emakulam, will preside over the twelfth annual general meeting of the company, in terms of this order. He is at liberty to take the services of any practising company secretary of his choice, in discharge of this present assignment. The remuneration for the chairman and the practising company secretary fixed in consultation with the company shall be borne by the latter.

(V) The chairman will decide the entire modalities of convening hold ing and conducting of the twelfth annual general meeting in consultation with the company.

(VI) The board of directors of the company shall carry on its business strictly in accordance with the articles and initiate such action in respect of the investigation centre, as may be deemed necessary.

(VII) The chairman of the meeting will forward a report on the proceedings of the twelfth annual general meeting within a week from the conclusion of the twelfth annual general meeting of the company.

28. With the above directions, the company petition stands disposed of. No order as to costs.