BHARAT BHUSHAN Vs. H B PORTFOLIO LEASING LIMITED

JUDGEMENT

(1.) In this suit seeking declaration that the plaintiff was and continues to be a director of the defendant company and also for declaring that the plaintiff has not incurred any disqualification under Section 283(i)(g) of the Indian Companies Act, thereby vacating the office of the director of the defendant-company and for perpetual injunction restraining the defendant from holding that the plaintiff has vacated the office as director and also restraining the defendant from obstructing the plaintiff from discharging his duties and exercising his powers and privileges as a director of the defendant-company, the Plaintiff has moved the application for grant of interim injunction till the disposal of the suit restraining the defendant from holding that the Plaintiff has vacated the office as director and restraining the defendant from obstructing the plaintiff from discharging his duties and exercising his powers and privileges as a director of the defendant company.

(2.) I have heard arguments for deciding this application I.A. 1558/91. It is averred in the plaint that the defendant-company was incorporated on July 23, 1985 and the same was promoted by the plaintiff and his son Vijay Bhushan, who formed one group and Harish Chander Bhasin and his associates who formed the other group and that the plaintiff alongwith his associates as well as Harish Chander Bhasin liold not less than 10% of the paid-up equity capital of the defendant-company. It is mentioned that at the time of incorporation of the company it was agreed between the two groups that the management and control of the company would be exercised by the two groups jointly and the two groups will have an equal share in the management of the company and that name of the company was also taken from the first alphabets of the names of the plaintiff and Harish Chander Bhasin. It is then pleaded that Rule 204(B) of the Memorandum and Articles of Association of the defendant company stipulated nomination by plaintiff and his associates upto maximum of four persons as directors on the Board of Directors of the company. It is then pleaded that the plaintiff was always being intimated by written notice the dates of holding of Board meetings from time to time and plaintiff has .been attending all Board meeting" of which he received a notice in writing till October 1989. It is then alleged that sometime in October 19.89 the relation between the plaintiff and Harish Chander Bhasin became strained as certain differences arose between .the two groups but despite efforts the differences could not be resolved and the discussions in that respect continued in between the period October 1989 and January 1991. It is then pleaded that the plaintiff did not receive any written notice regarding the holding of any meeting of the Board of Directors after October 1989 and had not come to know about holding of any such meeting and in Economic Times dated January 14, 1991, it was published that the defendant was proposing to have a public issue of shares and on making inquiries from the Registrar of Companies the plaintiff learnt that defendant had filed a prospectus for registration in respect of proposed public issue and the said prospectus disclosed the names of the directors which did not include the names of the plaintiff and his son Vijay Bhushan. As such a prospectus in view of the provisions of Companies Act required to be signed by all the directors or their constituted attorneys, Vijay Bhushan in order to ascertain the factual position wrote a letter dated February 13, 1991, to the Registrar of Companies intimating that he had not ceased to be director of the company and the prospectus filed was defective inasmuch as it did not have the signatures of all the directors. It is then pleaded that from the office of the Registrar it was learnt that a statutory form No, 32 had been filed by the defendant intimating the change in the Board of Director's which did not include the names of plaintiff and his son Vijay Bhushan mentioning that they had ceased to be directors on the ground of having incurred a disqualification on account of non-attending three consecutive Board meetings as per provisions of Section 283(l)(g) of the Companies Act and also in terms of Article 101 of the Memorandum and Articles of Association of the defendant-company. So, it is pleaded that the defendant-company had illegally declared that the plaintiff and his son had vacated the office of directors in asmuch as no notice at anytime of any meetings had been received by the plaintiff for the alleged Board meetings which plaintiff in absence of recetpt of any notice or knowledge could not attend. In the alternative, it is pleaded that the plaintiff has exercised his right under Article 104B by nominating himself and others as directors vide letter dated February l8, 1991, and thus, be has become director of the defendant-company and is entitled to have the injunction on that score in any event.

(3.) The suit as well as the application are hotly contested by the defendant compay. It is pleaded that the plaintiff is guilty of suppression of material facts inasmuch as the plaintiff has not disclosed some important facts and thus, he is not entitled to have the equitable relief of injunction. On merits, it is pleaded that the plaintiff and his son Vilay Bhushan had intentionally and deliberately absented from three consecutive meetings of the Board and thus, had incurred the disqualification under the Companies Act as well as under the Memorandum and Articles of Association of the defendant-company and thus, Board meetings are stated to have taken place after written notices had been served on the plaintiff. It is pleaded that the fourth annual general meeting was held on September 27, 1990, in respect of which the notices were duly issued on August 21, 1990, to all the shareholders including the plaintiff and the plaintiff was fully aware since August 21, 1990, that be had vacated the office as a director on his failure to attend three consecutive Board meetings and by virtue of Section 53 of the Companies Act the plaintiff had notice by operation of law that the balance sheet had been duly signed and filed and that he had ceased to be a director of the company. It is also pleaded that the plaintiff had not signed the balance sheet and had also not participated in the Board meeting for approval of the balance sheet. It is pleaded that the plainstiff very well knew that before convening the Annual General Meeting the Board has to finalise the accounts of the company which has to be signed by the directors and thereafter the same were to be presented in the Annual General Meeting and the Annual General Meeting was duly held on the date fixed and the plaintiff did not attend the said meeting at all and thus, the plaintiff has committed gross delay aid laches in bringing this suit belatedly and thus, does not deserve any injunction. The form under Section 32 was staled to have been filed with the Registrar of Companies on September 19, 1990, showing change in the directors consequent upon the plaintiff vacating the office. It was also pleaded that the paid up capital of the company had aggregate 6,60,900 shares whereas the plaintiff has only 500 shares which constitute O.075% and his son Vijay Bhushan's shares constitute only O.015% of the total paid up share capital of the company whereas Harish Chander Rhasin holds 50,100 equity shares. So. it is pleaded that the plaintiff has no sufiicient interesr or state in the defendant company. It is also pleaded that under Article 104B of the Memorandum and Articles of Association, the plaintiff had no authority to nominate any directors inasmuch as the plaintiff and his associates at no point of time commanded 10% holding of the share capital of the company. So, it is pleaded that only in case the plaintiff and his associates fulfilled the prerequisite qualification of holding such share capital that plaintiff could exercise the right to nominate any directors. It is pleaded that the plaintiff is having his own business which is competitive with the business of the defendant and due to his own volition or on account of lack of interest or on account of his own business considerations and/or for reasons best known to the plaintiff, he did not attend the Board Meetings on March 28, June 29, and August 29, 1990, consequtively despite notices being served On him in the same manner as notices were being served earlier of the dates of holding the meetings. It is pleaded that for about 16 months the plaintiff remained silent and it is only on the eve of the public issue and with a view to damage or hurt the said issue that the plaintiff has instituted the present action in a malafide manner. It is also averred that the plaintiff has got published misinformation in the newspapers to narm the public issue of the defendant company and such news appeared in the newspapers "Business" and "Political Observer" dated February 22, 1991, during the pendency of the suit. It is pleaded that the defendant company, in fact, is issuing public convertible debentures both on right basis by letter of offer and also to the members of public. It is also pleaded that the plaintiff wrongly mentioned in his letter nominating the directors that ,Harish Chander Bhasin has also joined in writing the said letter with him which on the face of it is not true.