B.S.V. Prakash Kumar, Member (Judicial):— The Applicant/P1 mentioned this CA on urgent basis for an order to stay the Board Meeting schedule to be held on 22.06.2016 and to stay the resolutions passed at the meeting dated 04.06.2016.
2. This Applicant counsel says that R2 (e), one of the Joint Managing Directors of R1 held a Board Meeting on 04.06.2016 and passed resolutions to select a Company Secretary and appointing one BK Gupta as additional independent Director in the absence of the applicant and his mother who have been continuing as directors on the Board.
3. The counsel states, the applicant is, in fact, one of the joint managing directors and one Ravindra Chaddha is an independent director on the Board. He further submits, that the applicant, on 28-5-2016, received a notice R2(e) proposing a Board meeting to be held on 4-06-2016 to select a Company Secretary and to deal with any other matter with the permission of the Chair. The applicant and his mother, by that time having already been scheduled to travel overseas from the night of 01-06-2016 till 14-6-2016, suggested R2(e) on the same day conveying that the meeting be convened either on 01-06-2016 or after 14-6-2016, thereby they could be present in person to the meeting. On this suggestion, R2(e) on the same day rescheduled the meeting to 01-06-2016. For there being consensus among them on the date of Board meeting, the applicant recommended two names for the position of Company Secretary in addition to the two names already recommended by R2(e). But two days later, the applicant was surprised to receive another notice on 30-5-2016 rescheduling the Board meeting back to 4-6-2016 with an excuse that the candidates applied for the post of Company Secretary would not be available to the interview on 1-6-2016. The applicant having felt the importance of taking Company Secretary in the company, he again requested R2(e) to arrange atleast Video Conferencing facilitating them to participate in the meeting on 04-06-2016. For which, R2(e) having agreed, the applicant and his mother left overseas on 01-16-2016 as per their schedule, but to the surprise of the applicant, R2(e) mailed on 03-06-2016 to the applicant that the applicant and his mother could not join in the meeting through electronic mode for non compliance of Rule 3 of the Companies(Meetings of Board and its powers) Rules, 2014. Knowing pretty well that R2(e) deployed this ploy to deny participation of the applicant and his mother in the meeting dated 04-06-2016, the applicant sent his staff to the place of Board meeting to arrange video conferencing through Skype. But whereas R2(e) having determined not to allow the applicant and his mother participate in the Board meeting, disconnected Skype facility arranged by the staff of the applicant. When R2(e) started to proceed with holding Board meeting, the independent director Ravindra Chaddha raised objection to pass resolutions for selection of Company Secretary in the absence of other two directors and also to pass a resolution appointing B.K. Gupta as Additional Director when such Agenda is not present in the Agenda items dated 28.5.2016. He raised this objection tor appointment of B.K. Gupta as additional independent director because the proposal for his appointment was not reflected in the agenda items thereby it could not be taken up by the Chair on the ground that this item could be taken under the head of any other matter with the permission of the Chair.
4. The counsel further says that R2(e) has gone ahead to convene another Hoard meeting on 22-6-2016 for confirmation of the minutes of the meeting held on 04-06-2016; for appointment of BK Gupta as non-executive independent Chairman of the company; for appointment of another independent director of the company; for formation of Audit Committee, Nomination and Remuneration Committee and other Committees and for appointment of Chairman of such committees; for statutory compliances, for signing of balance sheet and annual accounts for the year 2013-14 and for fixing the date for the Annual General Meeting of shareholders for the financial year 2013-14. The counsel further submits that these respondents fraudulently held Board meeting on 04-06-2016 and to perpetrate the same fraud, now they want to hold another Board meeting on 22-6-2016 for approving the minutes of 04-06-2016 and to make the person appointed as an independent director in the meeting fraudulently held on 04-06-2016 as Chairman of the company. For having the applicant felt selection of Secretary, appointment of BK Gupta as independent director and confirmation of the same being prejudicial to the rights of the applicant and his mother, moved this application for interim orders restraining the respondents not to hold Board meeting on 22-6-2016 and also for stay of the operation of the resolutions passed in the meeting dated 04-06-2016.
5. When this Bench has asked the counsel of R2(e) as to why video conferencing was denied to the applicant and his mother to participate in the Board meeting held on 04-06-2016 he has reasoned it out saying that Rule 3 of the above Rules mandates that whoever desires to participate fan video conferencing shall intimate his intention of participation through the electronic mode at the beginning of the calendar year to make it valid throughout that calendar year. He says, for there being no intimation from the applicant at the beginning of the calendar year, if at all the applicant and his mother are permitted to participate through electronic mode without intimation at the beginning of the year, it would be in violation of sub Rule (e) of Rule 3, henceforth though R2(e) communicated to the applicant that they would be provided video conferencing, he could not do the same because such video conferencing would be repugnant to Sub Rule 3(e) of Rule 3.
6. He also submits that on 20 March, 2013 Ld. Additional Civil Judge (Senior Division) Lucknow passed an order directing the parties in the family companies to maintain status quo in all the disputed assets which are presently having control and management of their part of the assets and will not interfere each other part of the assets till the pendency of the suit. He says this applicant went upto Hon'ble Supreme Court challenging this order but he could not succeed for getting it reversed. By this order, the management of the U.P. Hotels has to remain continued in the management of R2(e), but whereas, when one of the directors from the group of respondent 2(e) passed away, the equation in the Board changed, ever since this applicant trying to take the advantage the situation. By which, the respondents who are in the management could not even make statutory compliances because of the non cooperation from the applicant side. To get over this situation and to see the statutory compliance made, R2(e) was forced to see an independent director come on the Board so as to smoothen the function of the company and to ensure statutory compliances are met as per the demands of the statute. By these resolutions, the petitioners (applicant and his mother) are not prejudiced and their interest in the company is not affected, therefore, this applicant is liable to be dismissed. He also submits he already moved CA (T) 72/CII/16 on 25-02-2016 for appointment of anyone amongst group B as director of R1 company to balance the Board and the same is pending before this Bench.
7. On hearing the submissions of either side, it appears to me that R2(e), on 30-05-2016 assured the applicant and his mother that he would provide video conferencing facility to participate in the Board meeting to be held on 04-06-2016. With that assurance, the applicant and his mother left overseas on 01-06-2016, hut whereas, soon after they left overseas on 03-06-2016, R2(e) sent another email stating that he could not provide video conferencing as against Sub Rule 3(e) of Rule 3 of the Companies (meeting of Board and his powers) Rules, 2014.
8. These rules having been in existence even before the applicant left overseas, had he felt these rules are in contravention to the assurance given by him, he should not have given such assurance to the applicant. If anybody acts on the assurance given by other side, the other side cannot later back out from the assurance given by it. If at all any person backed out from the assurance given, and if the assured proceeded on that assurance, then such statement is hit by doctrine of estoppel.
9. As to rules mentioned by the respondents side, when I have gone through the entire Rule 3, I understand that this rule is meant for providing video conferencing, indeed it is the duty of the directors convening the Board meeting to inform the other directors regarding the options available to them to participate in the video conferencing mode or other audio video mode or other options available to them to participate through video conferencing or other audio video means. In fact it is the obligation upon the directors convening the meeting to provide every facility to the directors asking video conference and enable them to participate in the Board meeting. Sub Rule 3(e) only says that it intimation is given at the beginning of the calendar year that will remain valid for the entire calendar year, it is not said anywhere that if it is not given at the beginning of the year, video conference is not to be provided in that calendar year, therefore, it does not mean that the directors are not entitled lor video conferencing if intimation is not given at the beginning of the calendar year. It is needless to say when a provision is read, it has to be read wholly and not in pieces, therefore, I do not find any merit in the argument of the respondents counsel saying that video conferencing is not provided because no intimation is given at the beginning of the calendar year.
10. It is no doubt true that upon demise of the one of the directors from B group, the Board equation has been changed, for which R2(e) has already filed an application and the same is pending before this Bench. R2(e) should have pursued for hearing in CA (T) 72/2016, instead of adopting this method to balance the equation in the Board.
11. In view of the same, I hereby believe that holding a Board meeting and passing resolutions by preventing the applicant and his mother participate in the Board is not fair, therefore, I hereby stay the operation of the resolutions passed in the Board meeting held on 04-6-2016 and also to withhold passing resolutions in respect to Item 2 and Item 3 of the Board meeting scheduled to be held at 3 p.m. on 22-6-2016 until further orders in this CP.
12. Since R2(e) has already filed CA (T) 72/2016 in respect to equation in the Board, I believe it is proper to dispose of CA (T) 72/2016 before hearing this CA 8/2016.