2008 COMPCAS 142 775 .

Telecommunications Consultants India Ltd. v. Tcil Bellsouth Ltd. And

Others
Company Law Board (Nov 29, 2006)

CASE NO.

C.P No. 94 of 2005

JUDGES

S. Balasubramanian, Chairman

SUMMARY

Facts:

TBL was incorporated in 1989 as a joint venture between TCIL and Bell South Inc.

TCIL holds 44.9% shares, BSI held 40% shares, and respondents Nos. 3 to 5 held
15.1% shares.

In 2002, BSI transferred its 40% shares to the second respondent, controlled by Dr.
Indu B. Singh.

Disputes arose regarding management rights, leading to legal actions.

Dr. Singh attempted to exclude TCIL from management and financial transactions.

TCIL's attempts to attend meetings were obstructed by Dr. Singh.

Alleged violations of court orders regarding bank operations and management

occurred.

Issues:

1. Denial of management rights to TCIL by TBL.

2. Alleged oppressive and mismanagement actions by both parties.
3. Disputes over resolutions passed in the annual general meeting.
4. Validity of the board's decisions regarding CEO appointment and bank operations.
Decision:

1. The court dismissed the petition, finding that TCIL was not entitled to management

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rights due to lack of joint venture with the second respondent.
2. Both parties were found guilty of oppressive and mismanagement practices.
3. Resolutions passed in the annual general meeting were deemed valid and not prejudicial.
4. The court upheld the board's power to make declarations regarding company affairs.
5. The court directed the board to convene a valid annual general meeting and make
decisions on bank operations within specified timelines.
Rationale:

The court found that TCIL's actions were oppressive, including removal of the CEO
and dragging the company to civil court without attending board meetings.

The court upheld the validity of resolutions passed in the annual general meeting and
rejected the claim that the meeting lacked quorum.

The court affirmed the board's authority to make decisions on company affairs and
directed timely actions to resolve disputes.

Conclusion:

The court disposed of the petition, rejecting TCIL's claims and directing the board to
convene a valid annual general meeting and make decisions on bank operations. No costs
were awarded in the matter.
Case Law:

Dale and Carrington Invt. P. Ltd. v. P.K Prathapan, [2004] 122 Comp Cas 161 : (2005)
1 SCC 212: Majority shareholders can file a petition under sections 397/398 of the
Companies Act.

JUDGMENT

S. Balasubramanian, Chairman: — The main grievance on which this petition has been
filed is that the petitioner has been denied of its rights under the articles in relation to the
management of the first respondent-company and, on that basis, various declarations have
been sought to redress this grievance. The facts of the case are that the first respondent-
company, TCIL Bell- south Ltd. (TBL) was incorporated in 1989 as a joint venture
company between the petitioner (TCIL) which is a public sector company and Bell South
Inc (BSI). The petitioner holds 44.9 per cent. shares while BSI held 40 per cent. shares and
the balance 15.1 per cent, shares are held by respondents Nos. 3 to 5. In 2002, BSI
transferred its holding of 40 per cent. shares to the second respondent which is under the
control of one Dr. Indu B. Singh. In terms of article 128 of the articles of association
(AOA), the president of the company who would be the chief executive, has to be the
nominee of TCIL and, accordingly, its nominee had been the president all along. In terms

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of article 127, the chairman of TBL has to be the nominee of the second respondent. One
Shri Sudhir Saxena being the nominee of TCIL was appointed as the CEO in July 2003
and he continued as such till June 6, 2005, when he resigned. In his place TCIL nominated
one Shri A.K Jolly, a group general manager of TCIL as CEO of TBL. However, he was
not allowed to function as such after a few days. Aggrieved with this, TCIL filed a suit in a
Delhi court seeking for a direction to the company to allow Shri Jolly to function as CEO .
However, no order was passed. In the meanwhile, the board of the company appointed one
Dr. S.N Singh as the acting CEO with the powers to operate the bank accounts and Dr.
Indu Singh was appointed as permanent chairman. The company also changed the
authorized signatories for bank operations. The petitioner complained to the bankers of
TBL in this regard due to which the banks stopped further bank operations. The company
filed a writ petition before Delhi High Court and the High Court allowed Dr. S.N Singh to
operate the bank accounts. Aggrieved with this order, the petitioner got itself impleaded in
the writ proceeding consequent to which by an order dated July 29, 2005, the High Court
clarified that the operation of the bank accounts by Dr. S.N Singh would be, in the ordinary
course of business. Thereafter, by another order dated October 5, 2005, the High Court left
it to the discretion of the bank to decide which of the two contesting parties had the right to
operate the bank account. The LPA filed by the company was dismissed by an order dated
October 27, 2005. The company issued a notice dated September 7, 2005, to convene the
16th annual general meeting (AGM) on September 30, 2005, to pass certain resolutions
amending/ deleting certain articles. While, according to the petitioners, there was no
quorum to transact any business in the annual general meeting, according to the
respondents, all the businesses were transacted and all the resolutions as proposed were
passed.
2. When the petition was mentioned on November 14, 2005 and interim relief sought, I
passed the following order: “I have considered the matter carefully. The foundation for
seeking the interim reliefs, which have also been incidentally sought for as final reliefs, is
based on article 128 of the articles of association. It is on record that the petitioner has
already filed a civil suit claiming for the right to manage the affairs of the company in
terms of article 128 and the said civil suit is still pending. Likewise, the matter relating to
bank operation is also pending before the High Court which has posted the matter for
further hearing on January 11, 2006. Since, both the issues are pending in other fora in
proceedings instituted prior in time, to avoid conflict of decisions, I do not propose to
consider the reliefs at this stage. However, since the petitioner has questioned the validity
of the annual general meeting held on September 30, 2005, on the ground that there was no
valid quorum and that respondents Nos. 3 to 5 have also questioned the factum itself of
holding of said meeting, I only direct that none of the resolutions passed in that alleged
meeting which have so far not been implemented, shall be implemented till the petition is
disposed of. Likewise, the resolutions which have been implemented will be subject to
final order in the petition. Earlier interim orders will continue.”
3. The above order was challenged on appeal by the petitioner in Delhi High Court, which,
while setting aside the above order, directed that the bank accounts of the company would

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be jointly operated by the nominee of the petitioner and the second respondent and that the
petitioner would send names of three persons for the appointment as president of the
company to the second respondent who would give his concurrence for the appointment of
one of them as the president and that Company Law Board would appoint an independent
chairman for the next annual general meeting. This order was taken on an appeal to the
Supreme Court by the company. The Supreme Court passed the following order on
September 25, 2006 : “Though this matter was listed for admission, we have heard learned
counsel for the parties at length. It is stated by Mr. C.S Vaidyanathan, leaned senior
counsel, for the respondents, that the suit which was filed and to which reference was
made by the Company Law Board is to be withdrawn and an application for that purpose
has already been filed. In that view of the matter, we direct that Company Law Board shall
take up the main matter which is stated to be listed tomorrow. If the main matter is
disposed of early then there may not be any need for any interim arrangement. If for any
reason, the hearing of the main petition is deferred, then the Company Law Board shall
make interim arrangement taking into account all relevant aspects uninfluenced by any
observation made by the High Court in the impugned order. We make it clear that we have
not said anything about the correctness of the conclusion. But because of the changed
circumstances, it would be appropriate for the Company Law Board to take a fresh
decision if necessity so arises. This order is being passed notwithstanding the fact that
notice has not been issued to two opposite parties but because of the fact that the main
matter is posted tomorrow. It goes without saying that, in the interest of the parties, the
Company Law Board shall make an effort for early disposal of the main matter… The
special leave petition stands disposed of.” Thereafter, the petition was heard on merits.
4. Shri Gupta, senior advocate, appearing for the petitioner, submitted: As long as BSI was
a shareholder with 40 per cent. shares in the TBL, the affairs of the company were being
carried on smoothly. After it transferred its shares to the second respondent, Dr. Indu
Singh, who is in control of the second respondent, has been trying to eliminate the
petitioner from the management of the company. All along the board consisted of 3
nominees of the petitioner, 3 of the second respondent and one of respondents Nos. 3 to 5.
The petitioner is the largest shareholder with 44.9 per cent. and, in the present proceeding,
it is also supported by respondents Nos. 3 to 5 holding 15.1 per cent. The shareholders'
rights have been clearly and specifically spelt out in the articles. In terms of article 128,
TCIL has the right to nominate the president and CEO but the second respondent had
prevented the petitioner from exercising the said right. One Shri Saxena, an employee of
TCIL, was sent on deputation to TBL and was functioning as CEO . When he expressed
his desire to resign from TCIL, another employee of TCIL was asked to take charge as
CEO of TBL in accordance with article 128 and, in accordance with the established
practice right from inception, on June 6, 2006. He functioned as such for 3 weeks but, on
June 26, 2005, Dr. Indu Singh prevented Shri A.K Jolly from entering the premises of the
company and discharging his functions. She also appropriated the room allotted to Shri
Jolly and also the car provided to him. Thus, the petitioner was prevented from exercising
its legitimate rights under the articles.

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5. Learned counsel further submitted: A board meeting was convened on June 30, 2005,
without any agenda. The nominees of the petitioner, Shri A.K Chandersekar and Shri
Parthasarathy, attended the meeting and since Dr. Indu Singh did not agree to abide by
article 128 regarding appointment of the TCIL nominee, Shri Jolly as CEO and both the
directors left the meeting. However, the second respondent and his nominees alleged to
have transacted various businesses, two of them relating to the articles. In terms of article
127, the chairman is to be the nominee of the second respondent and he has to be
appointed in consultation with TCIL. However, in that meeting, it was purportedly
resolved to appoint Dr. Indu Singh as the permanent chairman, even though there is no
concept of permanent chairman in the articles. In the same meeting, Dr. S.N Singh was
purportedly appointed as the CEO which is also in violation of article 128 and the
authority to operate the bank accounts was also vested in him. When the nominees of TCIL
came to know of the purported resolutions, they sent a letter of protest but even then the
minutes were confirmed. Having excluded the petitioner from the management and even
from financial transactions, the petitioners had been secluded. As per the previous
arrangement, the bank operations were jointly handled by the CEO and one Shri
Thangavelu, an official deputed by TCIL. On July 12, 2005, Shri Thangavelu was
repatriated to TCIL by TBL and thus TCIL's participation in and of monitoring financial
activities of the company has been curtailed.
6. Learned counsel further submitted: Another board meeting of the company was
allegedly held on August 31, 2005. None of the nominees of the petitioner attended the
meeting. In that meeting various resolutions oppressive to the petitioner were purportedly
approved for getting the consent of the members in the 16th annual general meeting of the
company.
7. Learned counsel further submitted: The intention of the second respondent to exclude
the petitioner from participating in the affairs of the company is further evident from the
proceedings of the annual general meeting held on September 30, 2005. By a circular
resolution, TCIL had authorized Shri A.K Chandersekher to represent TCIL in the annual
general meeting and, accordingly, an intimation was sent to the company by a letter dated
September 20, 2005, the receipt of which was acknowledged on September 22, 2005, as is
evident from annexure A33. Likewise, in regard to two shares, two proxies were appointed
and the same was communicated to the company and acknowledged by the company
(annexure A34). However, when the three of them went to the venue of the annual general
meeting, they were prevented by Dr. Indu Singh from attending the meeting on the ground
that there was no authority for them to attend the said meeting. Even though the letter of
authorization of TCIL dated September 20, 2005, duly acknowledged by TBL on
September 22, 2005, was shown to Dr. S.N Singh, he demanded a copy of the board
resolution approving the authorisation. An attested copy of the same was also produced but
was not accepted. Even though Dr. Indu Singh proceeded to conduct the meeting, because
of the protest by TCIL's representatives, no meeting was held and all those present left the
venue. This fact has also been corroborated by respondents Nos. 3 to 5. In other words, the
share holders holding 60 per cent. of the shares have confirmed that no business was

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transacted in the meeting held on September 30, 2005. However, before the Delhi High
Court, the company produced a copy of the purported minutes of the allegedly held annual
general meeting on September 30, 2005. From the purported minutes, it came to light that
two of the nominees of the petitioner were voted out and articles 127 and 128 of the
articles of association were amended by which the right of the petitioner to appoint CEO
had been taken away. It is inconceivable that the respondents holding only 40 per cent.
shares in the company could have held the meeting and passed all the alleged impugned
resolutions. If the petitioner and respondents Nos. 3 to 5 had attended the meeting these,
present resolutions, could not have been carried out as they were opposed to the same.
8. Learned counsel further submitted that even after filing of the present petition, the first
and second respondents have been acting in a manner oppressive to the petitioner and also
have been guilty of mismanaging the affairs of the company. Even though, by orders dated
November 14, 2005 and December 19, 2005, this Bench had directed that 4 days dear
notice should be given for board meetings along with agenda, for a board meeting
convened on February 10, 2006, only two days notice was given that too without complete
agenda. Even this notice was given only to one of the nominees of the petitioner and not to
all its 3 nominees. The turnover of the company has come down and the loss has also gone
up. Further, the petitioner- company was asked to release funds to pay salary for the
employees of TBL. The respondents also violated orders passed by the High Court in
regard to bank operations. As per directions of the High Court, the petitioner
communicated three names for the position of CEO of TBL for the concurrence of the
second respondent of which the second respondent gave concurrence for one Shri S.K
Verma for the appointment of CEO . Even though Shri Verma visited the company
premises for assuming charge as CEO , on September 19, 2006, he was not allowed to
assume charge on the ground that his appointment had to be approved by the board
meeting convened on October 5, 2006. Even though the company has justified this action
on the ground that CEO will have to be a joint signatory which can be approved only by
the board, yet, no such stipulation was there in the order of the High Court. This it is
apparently clear that the second respondent does not want the association of the petitioner,
even though it is the principal promoter of the company, to participate in the affairs of the
company. Accordingly, all the resolutions passed in the board meetings on June 30, 2005
and August 31, 2005, as also in the annual general meeting held on September 30, 2005,
should be declared as null and void as also all the actions taken by TBL on the basis of
these resolutions. The petitioner should be permitted to appoint the CEO in terms of
article 128 of the articles of association.
9. Shri Bakhru appearing for the third to fifth respondents submitted: The annual general
meeting on September 30, 2005, was adjourned without transacting any business and,
therefore, his clients had left the venue. In terms of article 68, shareholders holding 50 per
cent. of the voting rights alone would constitute quorum and, therefore, the second
respondent alone, holding only 40 per cent. shares, could not have held the meeting.
Further since the company is a public company, the quorum for the annual general meeting
is five members and, therefore, the second respondent alone could not have constituted the

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quorum. Since the meeting was adjourned, it was held next week on October 7, 2005, at
the same address and venue. Neither the petitioner nor the second respondent was
represented and only respondents Nos. 3 to 5 were present and all the resolutions were
rejected. Therefore, the question of any resolution including amendment to articles
allegedly passed in the meeting held on September 30, 2005, is factually incorrect and the
minutes have been fabricated.
10. Mrs. Nalini Chidambaram, senior advocate, appearing for the first and second
respondents, submitted: The petitioner issued an advertisement in newspapers on February
13, 2006, inviting expression of interest for disinvesting its shares held in TBL. This being
the case, it is not in the public interest to entertain the present petition as the petitioner has
no further interest in the company. The second respondent has already filed an application
C.A 108 of 2006, seeking for a direction to the petitioner to sell its shares to the
respondents in proportion to their holding at a fair value. This way, the entire disputes
could come to an end. The petitioner has contended in its reply to the said application that
the second respondent has no right of first refusal as there is no joint venture between the
petitioner and the second respondent. This contention is incorrect. Since, the second
respondent acquired shares of TBL from BSI with the consent of petitioner and since Dr.
Indu Singh, a nominee of the second respondent, was appointed as chairman of the
company with the consent of the petitioner in terms of article 127 of the articles of
association, the second respondent has the right of first refusal as was vested in BSI.
Notwithstanding this factual position, since petitioner itself has issued an advertisement
expressing its interest to sell its shares and since the second respondent is willing to
purchase the shares, if the said application is allowed, the entire disputes could come to an
end.
11. She further submitted: The petitioner has miserably failed to make out a case for
winding up of the company on just and equitable grounds and it has been held by the Delhi
High Court in Caparo India Ltd. (U.K) v. Caparo Maruti Ltd., [2007] 140 Comp Cas 481,
that unless winding up on just and equitable grounds is made out and that it is established
that such winding up would be prejudicial to the interests of the petitioner, no relief under
section 397 can be granted. On this ground alone the petition deserves to be dismissed.
Since, respondents Nos. 3 to 5 are supporting the petitioner, they collectively hold 60 per
cent. shares in the company. Therefore, majority cannot allege oppression against minority.
In the prayers in the petition, various declarations have been sought. Only a civil court is
competent to entertain prayers for declarations as held in Sheth Mohanlal Ganpatram v.
Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd., [1964] 34 Comp Cas 777 (Guj) : AIR
1965 Guj 96. Further, it is the petitioner which is guilty of oppression and mismanagement .
The petitioner removed Dr. Indu Singh from the chairmanship of TBL in the 16th board
meeting held on June 30, 2004, in violation of article 127. Likewise, it also removed
Saxena as CEO and directed him to handover charge to Shri A.K Jolly who was not even a
board member. Further, without attending the board meeting held on June 30, 2005, the
petitioner dragged the company to the civil court. Its nominees stopped the bank operations
forcing the company to approach the High Court. It had also removed the minutes book

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from the registered office of the company in violation of section 193 of the Act with mala
fide intention and the same is still in its custody. It has also not been releasing the
legitimate dues of the company and is misusing the company funds for paying salaries to
its own employees who are not working for the company. Its nominees absented from three
consecutive board meetings without taking the leave of absence and, therefore, were
disqualified from functioning as directors in terms of section 283(1)(g) of the Act. By this
various acts of commission and omissions, the petitioner has caused various difficulties in
the functioning of the company. It has been held by the Supreme Court in Needle
Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., [1981] 51 Comp
Cas 743 : (1981) 3 SCC 333, that conduct of parties is relevant in deciding a matter under
section 397/398 of the Act.
12. On merits, learned counsel submitted: In so far as appointment of Shri A.K Jolly is
concerned, the petitioner did not follow the proper procedure. In terms of article 128, it is
the board which has the power to appoint the CEO provided he is the nominee of TCIL
and his appointment has consent to by the second respondent. On June 6, 2005, notices
had already been issued for holding the 69th board meeting on June 30, 2005. This being
the case, there was no need for removal of Shri Saxena and asking him to hand-over charge
to Shri Jolly who is not even a director on the board of the company. That is the reason
why in the board meeting held on June 30, 2005, the directors did not approve the
unilateral action of TCIL in appointing Shri Jolly as CEO . As a matter of fact, in the same
meeting, TCIL was advised to send three names so that the second respondent could give
its consent for appointment of CEO in accordance with article 128. In terms of article
128, the petitioner could not have forced anyone as CEO without the consent of the
second respondent. Dr. S.N Singh was appointed only to look after the responsibility of
CEO till appointment of a regular CEO and, accordingly, he was delegated all the powers
including operation of bank accounts. Even the High Court has allowed Dr. S.N Singh to
operate the bank accounts in view of the said resolution. The nominees of the petitioner did
not participate in the board meeting on June 30, 2005. If they had attended that meeting
and indicated their nominee for the post of CEO , the same could have been approved.
Instead, they moved the civil court. Its nominees also stopped the bank operations. As
decided in the board meeting, instead of sending three names, by a letter dated August 18,
2005, TCIL contended that there was no provision in article 128 to suggest three names.
In so far as appointment of Dr. Indu Singh as permanent chairman is concerned, in terms
of article 119, the power of managing the affairs of the company rests with the board and
in terms of article 110 the board can appoint its chairman without taking the consent of any
shareholder. Accordingly, the board decided to appoint Dr. Indu Singh as the permanent
chairman. Shri Thangavelu was repatriated only because he refused to sign cheques for
payment of electricity bill. In so far as annual general meeting on September 30, 2005, is
concerned, convening of the said meeting was approved in the board meeting held on
August 30, 2005. Notice for the meeting was sent to all shareholders with 21 days notice.
After ascertaining that quorum was present, the chairman conducted all the businesses and
the resolutions were passed by the shareholders present and the minutes were signed by the
chairman. In that meeting respondents Nos. 3 to 5 and the second respondent collectively

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holding 55 per cent. shares in the company were represented and they had also signed the
attendance register. It is true that the representative of the petitioner was not allowed to
participate since he had not produced the board resolution of the petitioner to participate
and vote on behalf of the petitioner. Even though respondents Nos. 3 to 5 attended the
meeting and participated in the proceeding and also voted for the resolution, now with
mala fide intention, now they claim that the meeting was adjourned and held one week
thereafter and all the resolutions were defeated. It is a settled law that in terms of section
194/195 of the Act, the minutes signed by the chairman is a conclusive proof of the
proceedings of the annual general meeting.
13. Learned counsel further submitted that, even otherwise, none of the resolutions passed
in the annual general meeting could be considered to be oppressive to the petitioner as is
evident from the following: So far as the resolutions passed in the annual general meeting
are concerned, the following points are to be noted:
(i) The amendments in the articles of association were carried out by the shareholders as
per the request of the petitioner itself vide its letters dated May 26, 2005.
(ii) The old article 127 was in respect of appointment of chairman of the nominee of BSI
or its affiliate with the consent of TCIL (petitioner). Since, article 110 of the respondent-
company already provides for the appointment of chairman by its board of directors, this
article was removed with the consent of all the members. Similarly, the old article 128
empowered its board of directors to appoint a person as its CEO based on the nomination
received from TCIL (petitioner) with the consent of BSI or its affiliate. This article was
also removed with the consent of all the directors and shareholders in view of difficulty in
getting nomination and consent of the members. In the amended article at 127, the board
has been given power to appoint a managing director and in amended article 128, the board
has been authorized to define the power of the managing director. The above changes are
not prejudicial to any member or against the interest of the respondent-company. The name
of the respondent- company has been changed from TCIL Bell South Ltd. to TBL
International Ltd., which is again without prejudice to any member.
(iii) The members present voted against the resolutions reappointing Mr. G.D Gaiha and
Mr. A.K Chandrashekher as directors in the respondent-company. Needless to say that this
is absolutely in accordance with the provisions of the Companies Act, which, in any case,
cannot be considered as oppression. In any case, these persons have not been attending the
board meetings consecutively for the last three meetings.
14. In so far as the affidavits of the third to fifth respondents, learned counsel submitted
that they have not produced any evidence to show that the adjourned meeting was held and
that all the resolutions were defeated. Therefore, their affidavit cannot be relied on and the
fact is that with their participation, all the resolutions were carried through in the annual
general meeting on September 30, 2005.
15. In rejoinder, Shri Gupta submitted: The contention of learned counsel for the
respondents that the declarations sought can be given only by a civil court and not by the

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Company Law Board has no substance. In terms of section 397 read with section 402 of
the Act, this Board has the power to pass such orders as it may deem fit to put an end to the
acts complained of including making such declarations as it deems fit. Similarly, the
contention that majority cannot file a petition under section 397/398 is also fallacious. In
Ramashankar Prosad v. Sindri Iron Foundry P. Ltd. , AIR 1966 Cal 512 : [ 1966] 1
Comp LJ 310, the court has held that since in terms of section 399, only a lower limit but
not an upper limit has been fixed for filing a petition under section 397/398 of the Act even
a majority shareholder can institute a proceeding under these sections. Likewise, in Tea
Brokers P. Ltd. v. Hemendra Prasad Barooah , [ 1998] 5 Comp LJ 463 (Cal ), the
petition has been filed by majority shareholder alleging that they have been converted into
a minority by acts of the then existing minority shareholders. In so far as the stand of the
respondents that since the petitioner has expressed its intention to disinvest, is concerned it
should be directed to sell shares to the respondents, the same cannot be taken cognizance
of by this Board. The petitioner has only called for invitation of expressions of interest for
disinvestments advisors and valuation agents for petitioner's disinvestments of holding in
TBL. It does not mean that the petitioner has already decided to disinvest its shares in the
company. As a matter of fact till date, TCIL has not received any bid from potential
bidders to acts as disinvestment advisors. No disinvestments can take place without
appointment of advisor as per the guidelines of Government of India. Further, the
petitioner has filed this petition alleging oppression and mismanagement in the affairs of
the company and this petition has to be heard on merits and the respondents being in
minority cannot demand to purchase the shares held by the petitioner which holds the
largest percentage of shares in the company. In Dale and Carrington Invt. P. Ltd. v. P.K
Prathapan, [2004] 122 Comp Cas 161 : (2005) 1 SCC 212, the Supreme Court has held
that a majority cannot be directed to sell its shares to the minority. In so far as the
contention that no case has been made out for winding up of the company on just and
equitable grounds is concerned, admittedly, the company is in the nature of a quasi-
partnership wherein each partner has been given some rights and when the exercise of such
rights is denied, the company can be wound up on just and equitable grounds.
16. I have considered the pleadings and arguments of counsel. The respondents have raised
the issue that majority cannot file a petition under section 397/398. Leaned counsel for the
petitioner has relevantly cited the cases of Tea Brokers P. Ltd. v. Hemendra Prasad
Barooah , [ 1998] 5 Comp LJ 463 (Cal ) and Ramashankar Prosad v. Sindri Iron
Foundry P. Ltd., AIR 1966 Cal 512, wherein it has been held that even majority could file
a petition under these sections. A reading of these sections themselves would indicate that
these sections do not talk of minority or majority. While section 397 deals with cases of
oppression, section 398 deals with mismanagement in the affairs of a company without
making any reference to whether the oppression or mismanagement has to be by the
majority or minority. It is only section 399 which prescribes the qualification and as long
as the petitioner qualifies in terms of this section, the petition is maintainable irrespective
of whether he is a minority or majority. In the present case, the petitioner holds over 44 per
cent. shares in the company and as such satisfies the provisions of section 399. Even
otherwise, even though the petitioner is the largest shareholder in the company, it holds

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only 44.9 per cent. shares and as such cannot be considered to be the majority
notwithstanding the support of the third to fifth respondents.
17. In so far as the contention that this Board has no powers to make declarations, being
the prerogative of civil courts, this contention is not sustainable. The reliance of the
respondents on Sheth Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton and Jute Mills
Co. Ltd., [1964] 34 Comp Cas 777 (Guj) : AIR 1965 Guj 96, on this point is misplaced.
In that case, in paragraph 49 of the judgment, the court has only held that if an action of
the directors is illegal or invalid, the company and the shareholders may take appropriate
action in a court of law challenging the validity of such action, but a petition under section
397 or 398 is not an appropriate remedy for the purpose. In the same paragraph, the court
has further held that even a decision in accordance with law, if found to be oppressive or
prejudicial to the interest of a company, then such decisions can be struck down by the
court under section 397 or section 398. In the present case, the petitioner has challenged
certain decisions taken in the board meetings and the annual general meeting as not only
being in violation of articles but also as oppressive. In terms of section 402 of the Act, if
declarations are necessary to put an end to the acts complained of, such a declaration could
be made by this Board. Therefore, the objection that the Board has no power to make
declaration is not sustainable.
18. The next preliminary contention of the respondents is that since the petitioner has
expressed its intention to disinvest, it should be directed to sell its shares to the respondents
and there is no need to adjudicate on the petition. It is to be noted that the main contention
of the petitioner in this petition is that it has the right of management in the company by
appointing the CEO and the assertion of this right has nothing to do with its intention to
disinvest. As a matter of fact, if its right as claimed is upheld, the value of its shares would
go up. Further, even if the petitioner were to disinvest after following the due process
established by the Government, the respondent could always participate and the process of
disinvestment cannot be short- circuited as sought for by the respondents. As a matter of
fact, the granting of such a relief, as held by the Supreme Court, in Dale and Carrington
Invt. P. Ltd. v. P.K Prathapan , [ 2004] 122 Comp Cas 161 : ( 2005) 1 SCC 212 would
amount to putting a premium on conduct of oppression, if established.
19. Before I deal with the merits of the case, it would be relevant to extract the articles in
question. Article 127 reads: “The board of directors shall have a chairman. As long as BSI
is one of his affiliates it shall continue to own any share, the chairman shall be designated
by BSI or its affiliate in mutual agreement with TCIL.” Article 128 reads: “The president
shall be the chief executive officer of the company and shall give general supervision and
direction to the daily affairs of the company, subject to the direction of the board of
directors. As long as TCIL shall hold any shares, the board of directors shall appoint as
president the person nominated by TCIL in mutual agreement with BSI or its affiliate.”
20. From the present proceeding and also from the other proceeding, it is apparently clear
that the disputes between the parties have arisen out of knee jerk reactions of the parties on
matters which could have been easily resolved by mutual discussions. The genesis of the

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dispute as it appears from all the proceedings is the direction of TCIL to Shri Sinha to
handover the charge of CEO to Shri Jolly. The admitted fact is that Shri Sinha was an
executive of TCIL on deputation as CEO of TBL. It is also an admitted fact that he had
expressed his desire on June 6, 2005, to resign from TCIL effective from August 6, 2005.
Therefore, as rightly pointed out by TCIL, in its e- mail to Dr. Indu Singh on 8th June
(annexure at page 114 of the petition), it would not have been proper to continue him as
the CEO of TBL after the date of letter of resignation. In this circumstance, no fault could
be found in the direction of TCIL to Shri Sinha to hand over charge to some one else
immediately, in the present case, to Shri Jolly. Immediately thereafter, TCIL also sent an e-
mail to Dr. Indu Singh on June 8, 2005, as follows: “Sudhir Saxena, CEO , TBL, has
submitted his resignation today. Being on the roles of TCIL, I do not think it proper after
his resignation to retain him in TBL. We, accordingly, requested our senior officer, Mr.
A.K Jolly, Group General Manager, to take charge in TBL immediately, recall him, Mr.
Saxena, to rejoin TCIL till his release after expiry of his notice period. Mr. Jolly will be
shortly contacting you for help and co-operation. He will continue to carry out all ongoing
projects and orders on hand and submit his plans to TBL Board for approval. Mr. Jolly's
CV in brief is as follows: “… I believe you have given your convenient date for next TBL
board meeting as June 30”. By a communication dated June 27, 2005, addressed to CMD
of TCIL, Dr. Indu Singh, expressing his objection to the appointment of Shri Jolly in
strong terms also referred to article 128 to state that TCIL could not have taken the
unilateral action without the consent of the board of directors of TBL (Annexure A-7).
Thereafter, by an office note dated June 28, 2005, Dr. Indu Singh issued directions for
taking away the car provided to Dr. Jolly and also the office room allotted to him. This
action provoked TCIL to file a suit seeking for appropriate directions. Further, by
repatriating Shri Thangavelu, who was a joint signatory to bank operations to TCIL, the
petitioner was excluded from participating in the financial operation of the company,
which resulted in TCIL writing to the bankers to operate the bank accounts.
21. However, the conduct of TCIL also in demanding that only a particular person to be
appointed as president/CEO is not in accordance with article 128, according to which the
consent of the second respondent is necessary and, therefore, when as per the decision
taken in the board meeting held on June 30, 2005, the company wrote to TCIL to suggest
three names for taking consent of the second respondent, TCIL should have proposed three
names instead of insisting that the only person nominated by it should be appointed as the
president. No consent can be forced. This attitude of TCIL perhaps forced the second
respondent to propose deletion of article 128. However, in view of what has transpired
later regarding the appointment of the president, the entire issue has now become
historical and irrelevant and, therefore, other than noting that TCIL is also jointly
responsible for the long drawn disputes, I close this issue.
22. In so far as the annual general meeting convened on September 30, 2005, is concerned,
from the sequence of events, it is apparently clear that the conduct of Dr. B. Indu Singh
had been highly oppressive to the petitioner. First the authorized representative of the
petitioner was prevented from attending the meeting in spite of TCIL having informed

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TBL that Shri Chandrasekar would represent TCIL in the annual general meeting and this
intimation had also been acknowledged by TBL on September 22, 2005. However, Dr.
Indu Singh refused to take cognizance of the same when produced during the annual
general meeting. In terms of article 77, where a corporation is a member, the board's
resolution appointing a person to represent the company duly authenticated by a director or
the secretary could be lodged with the company prior to the meeting or presented at the
meeting. According to the petitioner, when Dr. Indu Singh demanded a copy of the board's
resolution, extract of the circular of board's resolution duly certified by the CS of TCIL
was also produced. This was also not accepted. It is to be noted that there are effectively
only three shareholders, namely, the petitioner, the second respondent and respondents
Nos. 3 to 5 as a group. TCIL is the largest shareholder holding 44.9 per cent. shares in the
company. Therefore, in all fairness, the representative of TCIL, who was also incidentally,
a director of TBL, should have been allowed to participate in the meeting on the basis of
the authority produced or in the alternative the meeting should have been adjourned to
enable TCIL to produce another resolution, if so required. Failure to do either of these
would indicate that Dr. Indu Singh did not want TCIL to participate in the annual general
meeting, as with its participation, many of the resolutions having the effect of ouster of
TCIL from the management could not be passed. Denial of the legal and proprietary rights
of a shareholder to participate in a general meeting, that too an annual general meeting, is
an act of grave oppression, more so, when proposals to deprive him of certain rights vested
in him by the articles were to be considered in that meeting. Therefore, even assuming, as
contended by the second respondent, that the said meeting was held and resolutions were
passed, the meeting itself has to be declared as invalid for the reasons of being oppressive.
23. However, even the factum of holding the meeting is in dispute. While according to the
petitioner, corroborated by the third to fifth respondents, the meeting was adjourned,
according to the second respondent, the meeting continued and various resolutions were
carried through. The admitted fact is that petitioner did not participate. In terms of article
68, the quorum for a general meeting is members holding 50 per cent. of the total voting
power. Therefore, the second respondent holding only 40 per cent. shares could not have
carried on with the annual general meeting unless respondents Nos. 3 to 5 holding 15.1 per
cent. shares participated in that meeting. Considering the fact that there is already an
arbitration proceeding pending between the third to fifth respondent and the second
respondent, it is inconceivable that the third to fifth respondents could have participated in
the meeting in which resolutions which had the effect of the second respondent taking
complete control over the company were allegedly passed. Further, if respondents Nos. 3
to 5 did not participate, even the quorum of five members would not be present.
24. Therefore, the meeting having been held without a quorum is invalid. Further,
according to the alleged minutes, two directors representing TCIL who came up for re-
election were voted out by all the members present. Voting out the two nominees of the
petitioner holding 44.9 per cent. shares in the company itself would be a highly oppressive
action especially when it was done after denying the participation of the nominees of TCIL
from the meeting. In that meeting articles 127 and 128 were purportedly deleted and in

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their place new articles had been purportedly incorporated. By deleting the article 128 and
introducing a new article, the right of the petitioner to appoint president/ CEO had been
taken away. Taking away the powers conferred on a shareholder having 44.9 per cent.
shares, without its consent, is itself highly oppressive. Further, after amending the article,
the annual general meeting had purportedly appointed Dr. S.N Singh, as CEO for four
years. The cumulative effect of the resolutions allegedly passed in the said meeting is that
the petitioner holding 44.9 per cent. shares in the company which had all along controlled
the management has not only been deprived of that right but has completely been
eliminated from participating in the management of the company. It is to be noted that the
petitioner is one of the promoters of the company and the second respondent came to the
company only subsequently by acquiring the shares of another promoter, BSI. Therefore,
while it is crystal clear from the averments of both TCIL and third to fifth respondents
collectively holding 60 per cent. shares that no business was transacted in the annual
general meeting, even assuming that business was transacted in that meeting, as I have
noted in the earlier paragraph, none of the resolutions prejudicial to the petitioner could be
held to be valid as they are highly oppressive to the petitioner. It has been contended that,
in terms of section 194/195, the minutes signed by the chairman of the meeting is
conclusive evidence of the businesses transacted in that meeting. In section 195 it is
specifically provided that such a presumption could be drawn unless contrary is proved. In
the present case, when circumstances have established that no business could have been
transacted in that meeting, the question of applying the provisions of these sections does
not arise. Therefore, I hold that, in the absence of the petitioner and respondents Nos. 3 to
5, the annual general meeting could not have been held for want of quorum and, even if it
had been held, the resolutions passed thereat have no validity. This being the case, articles
127 and 128 will remain as they were before the said meeting and the nominees of the
petitioner will continue to function as directors. In this connection, I may also refer to the
stand of the third to fifth respondents that the said adjourned annual general meeting was
held on October 7, 2005, and all the resolutions were defeated. This stand cannot be
accepted for want of any documentary evidence.
25. With my finding that no businesses could have been transacted in the annual general
meeting held on September 30, 2005, for want of quorum and therefore all the resolutions
allegedly passed thereat are invalid, the other issues that remain for a decision are the
appointment of the president/ CEO and bank operations. During the hearing it was
informed that subsequent to the order of Delhi High Court the petitioner had given a list of
three names for appointment of president/ CEO and the second respondent has given
consent for appointment of Shri S.K Verma as the president/CEO . If he has not already
taken over charge, he will do so immediately under the authority of this order, which shall
be noted and ratified in the next board meeting. In so far as the bank operations are
concerned, I find that in terms of article 121, the board has the power to authorise anyone
to operate the bank account. Therefore, the first board meeting which should be held
within 15 days from the date of this order, the board may take decision regarding bank
operations. Since, I have held that the 16th annual general meeting convened on September
30, 2005, has not been held/ properly held, I also direct the board of the company to

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convene the 16th annual general meeting with such agenda as it may decide, within a
period of 45 days. In case, any of the parties desire that the said meeting should be chaired
or observed by a nominee of this Board, an application be made after issue of notice for the
annual general meeting.
26. The petition is disposed of in the above terms with no order as to costs.

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