DILEEP MAKHIJA Vs. ARUN MITTAL

JUDGEMENT

(1.) This order shall dispose of the Plaintiffs' application filed along with the plaint under Order XXXIX Rules 1 and 2 read with Section 151 of the Code of Civil Procedure. The Plaintiffs have prayed for the passing of an ad interim injunction restraining the Defendant Nos.3,4 and 5 from acting as shareholders or directors of Defendant No.6; passing of an ad interim injunction restraining the Defendants from acting on an alleged resolution passed in the alleged illegally convened and conducted Meetings of the Board held on 5.11.2002 and 25.1.2003; passing an ad interim injunction restraining the Defendants from interfering with the smooth running of Geetanjali Hospital. The prayers in the plaint are also similar to these prayers.

(2.) It is not in dispute that Defendant No.6 was purchased by the Plaintiffs and Defendant No.1 from the erstwhile and original shareholders and promoters of Geetanjali Nursing Home Private Ltd. ( Hospital for short ). A Memorandum of Understanding dated 29.9.1992 was entered into between the Plaintiffs and Defendant No.1 along with the promoters Dr.Chander Vir and Dr.Sheila Vir. Subsequently, Dr. Chander Vir and Dr.Sheila Vir transferred their shares in favour of Defendant Nos.1 and 2 and a fresh agreement dated 3.8.1995 was entered into between the Plaintiffs and Defendant No.1. The interpretation of the terms of this Agreement will be the fulcrum of the decision on the application. It is the Plaintiff's case that the Hospital has been running in accordance with the terms of the Agreement dated 3.8.1995 and the Plaintiffs have been appropriating the profession fee collected by them. The Plaintiffs asserted that they have a right to remain permanent Directors of the Hospital and to retain the working chambers in the Hospital and also to restrict new doctors from rendering consultancy from the Hospital. It is also the Plaintiffs' case that while the Hospital was to be managed wholly and solely by Defendant No.1 to the extent of making statutory compliances, maintaining account of revenue received, the day-to-day working of the Hospital was to have been conducted by the Plaintiffs. It is conceded by the Plaintiffs that they hold amongst themselves approximately 20% of the shareholding in the Hospital, the remainder being held almost entirely by Defendant Nos.1 and 2. It has also been conceded that the Plaintiff Nos.1 and 2 have signed Annual Reports, Balance-Sheets as prepared and produced by Defendant No.1, but this was done by them in good faith without reading the contents thereof. It has also been averred that the Plaintiff Nos.1 and 2 have at some occasions signed blank papers on the understanding that the same would be filled up in accordance with statutory requirements. It is pleaded that the Plaintiffs worked with utmost sincerity and dedication, introduced new doctors to the Hospital and thereby increased its turnover from Rs.1,80,994/- on 31.3.1994 to Rs.91,05,652/- as on 31.3.1999. The cause of action for the filing of the present suit is stated to be discovered by the Plaintiffs in January, 2003 on the allotment of shares by Defendant Nos.1 and 2 to Defendant Nos.3, 4 and 5 and their appointment as Directors without the consent and knowledge of the Plaintiffs. It is further pleaded that the Plaintiffs were permitted only a cursory look on the minutes of the Board Meeting, as recently as on 21.1.2003. It is in these circumstances that Defendant Nos.1 and 2 issued the notice dated 22.1.2003 for convening an Extraordinary General Meeting (EGM for short) on 25.1.2003 with the intent of increasing the authorised capital so as to dilute the Plaintiffs holding to less than 10%, thereby depriving them of their rights under Section 399 of the Companies Act. Immediately thereupon, on 23.1.2003 the Plaintiffs served a legal notice on Defendants, thereby requesting for an adjournment of the proposed EGM on 25.1.2003 which was not granted. As a consequence on the Plaintiffs attended this Meeting they allegedly discovered the presence of unauthorised persons there, leaving them with no option but to walk-out in protest. A reading of the Defendant's letter dated 1.2.2003 candidly admits that " the new practice of maintaining the attendance sheet and sending the notice by Registered Post is now pressed into practice only because of your false and frivolous allegations and your taking advantage of the informal atmosphere regarding the service of notice by hand and hence the Meeting of the Board of Directors without obtaining any signatures on the attendance sheet, particularly raised at the Meeting of the Board held on 5.11.2002." Predicated on this statement, Mr.Sudhanshu Batra, learned counsel for the Plaintiffs, has submitted that all decisions of the Board have been rendered unenforceable and non est due to the violation of the mandatory statutory requirement of serving the notice of the meetings on the Plaintiffs. It is further averred that the Plaintiffs on inspecting the records of the Registrar of Companies learnt of the appointment of Defendant Nos.3, 4 and 5 as Directors of the Hospital and the allotment of its share to them.

(3.) The gravamen of the defence to the suit centres on the overwhelming majority shareholding of Defendant Nos.1 and 2, which has already been noted to extend to approximately 80%. Mr. Chaudhary has laboured to highlight that upon attaining 76% shares these Defendants could have passed not only special resolutions, but even those pertaining to the removal of any Director. It is also his submission that in these circumstances there would have been no need whatsoever for these Defendants to fabricate and manipulate the records of the Hospital. It is argued that for this reason the workings of the Board were informal as the Plaintiffs did not evince any interest in the Hospital's management, which situation is manifested by the Plaintiffs' case that they blindly signed documents. Mr.Chaudhary has laid great store on the terms of the Agreement dated 3.8.1995 and has strenuously challenged the Plaintiffs' plea that the Plaintiffs cannot be removed from the Board; he has emphasised that any Director can be removed by an ordinary resolution. He has further contended that the prayers in the plaint and this application ought not to be granted since the acquiescence of the Plaintiffs in the manner of the Hospital functioning is writ large; that they have not remonstrated for issuance of written and/or formal notice throughout the period 1995-2002; that the Plaintiff's have been privy to formal non-adherence of the statutory obligations contained in the Companies Act. Mr. Chaudhary has further submitted that there has been no significant change in the share holding since 1998 and the authorised capital has remained the same. When for the first time the Plaintiffs refused to sign the Balance Sheets, the Meeting scheduled for 25.1.2003 was called. Mr.Chaudhary has strenuously argued that the reliefs are liable to be rejected on the short ground of laches. There is no legal requirement that Directors must also be shareholders, and keeping the 80% shareholding of Defendant Nos.1 and 2 in perspective, any person could have been successfully sponsored by them onto the Board. On this ground also the charge of manipulating and fabricating documents/minutes of the Board Meetings has been repulsed.