Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 1 IN THE HIGH COURT OF JUDICATUARE FOR RAJASTHAN AT JODHPUR. ORDER Smt. Yogeshwari Kumari vs. The Lake Shore Palace & ors. Hotels Pvt. Ltd. & ors. Company Application I.A.No.11862/08 in S.B. Company Appeal No.3/08 Date of Order: October 21st, 2008. PRESENT HON'BLE MR. PRAKASH TATIA, J. Servashri Vibhu Bakhru, Mrinal Kanti Mandal, Snechasish Mukherjee, Anjay Kothari, Niraj Kumar Jain & Tarun Joshi for the applicants. Servarshri M.S. Singhvi, Arun Bhansali, Vikas Balia and Mr. Ramit Mehta for the respondents. BY THE COURT: In the appeal preferred by the appellants to challenge the order passed by the Company Law Board, Principal Bench, New Delhi dated 4.12.2007 in Company Petition No.32/2007, the appellants, in the present application, have sought interim relief as under:- “i) STAY the operation of the resolutions passed Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 2 at the Board Meeting held on 02.09.2008, including the resolution dt. 02.09.2008 authorising Sh. Pankaj Nandawat-the Officiating Company Secretary of the respondent No.1-Company to be the person authorised under section 187 of the Companies Act, 1956 to attend meeting(s) of the Lake Palace Hotels & Motels Pvt. Ltd., including the EGM on 13.09.2008; ii) DIRECT that the respondent NO.1-Company shall be represented by the appellant No.1 at the EGM of the Lake Palace Hotels & Motels Pvt. Ltd. On 13.09.2008; iii) STAY the operation of the resolution dt. 02.09.2008 to ask the appellant No.1 to explain her conduct as indicated in the letters dt. 18.08.2008 and 21.08.2008 received from the Lake Palace Hotels & Motels Pvt. Ltd. And the statements made by her in reply to C.M. No.67/2008 before the A.D.J.(Fast Track) No.4, Udaipur, within 15 days of receipt of notice, and that after receipt of reply from the appellant No.1, further action as deemed proper be taken by the Board; iv) STAY of the notice dated 02.09.2008 issued to the appellant No.1 pursuant to the resolution dt. 02.09.2008 as mentioned in the said notice; v) RESTRAIN the respondent No.2 from taking any other and/or further steps to remove the appellant No.1 as the nominee Director of the respondent No.1- Company in the Board of Directors of the Lake Palace Hotels & Motels Pvt. Ltd.; vi) PASS ad-interim order(s) and/or direction(s) Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 3 in terms of prayer (i) to (v) above; and vii) PASS such other and/or further order(s) and/or direction(s) as may be deemed just and proper.” The appellants stated that vide impugned order four options have been given to the appellants and the appellants have exercised option no.3 which is as under:- “3. During the hearing, it appeared that the petitioners were mainly concerned with the shares held by the company in Lake Palace Hotel which is one of the main assets of the company. At this Board did in James Fedrick's case, the company will transfer 25.1% of the shares held by it in Lake Palace Hotel at face value to the petitioners and the petitioners will surrender all their shares to the company at face value and cease to be members of the company and the company shall reduce its paid up capital to this extent. Difference, if any, in the value of shares surrendered/transferred, the same shall be adjusted by payment in cash. The 1st petitioner shall cease to be a director of the company and there shall be no payment of Rs.6 lacs as hereto before....” For this, the appellants gave letter dated 7.1.2008 to Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 4 respondent no.1-Company and also to respondent no.2. It is submitted that the Lake Palace Hotels & Motels Pvt. Ltd. is a closely held family company of the family members of Late Maharana Bhagwat Singhji Mewar and respondent no.1-Company holds 49.96% shares in the Lake Palace Hotels & Motels Pvt. Ltd. and appellant no.1 holds 150 equity shares in the Lake Palace Hotels & Motels Pvt. Ltd., as same have been bequeathed to appellant no.1 by her father late Maharana Bhagwat Singh Mewar by registered Will dated 15.5.1984. It is alleged that respondent no.2 is illegally refusing to transfer the said shares in favour of appellant no.1. Both the Companies are controlled and managed by respondent no.2, therefore, despite being separate entities in law, both the Companies are in effect under the same and common management and control. Appellant no.1 was appointed and has been acting as the nominee Director of the Lake Shore Palace Hotel Pvt. Ltd. on the Board of the Lake Palace Hotels & Motels Pvt. Ltd. since the lifetime of the late Maharana Bhagwat Singh. Respondent no.2 in order to deny appellant no.1 her share of legacy in the Lake Palace Hotels & Motels Pvt. Ltd., is refusing to transmit 150 equity shares in her name and now resorting to change and/or alter the shareholdings pattern of the Lake Palace Hotels & Motels Pvt. Ltd. by proposing to increase its authorised share capital from 0.5 crorers to Rs.5 crorers with the view of Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 5 ensuring that appellant no.1 and her group of shareholders is deprived of her legacy and even upon the transmission of said 150 shares bequeathed to appellant no.1 by the said Will of the Late Maharana Bhagwat Singh, appellant no.1 would be a cipher in the Company with a negligible holding. Respondent no.2 called for and has held a Board Meeting of the Lake Palace Hotels & Motels Pvt. Ltd. on 19.8.2008 and has got a resolution approving the increase of the authorised share capital passed at the said meeting. It is submitted that respondent no.2 is also scheming and plotting to remove appellant no.1 as the Nominee Director of respondent no.-1 Lake Shore Palace Hotels Pvt. Ltd. inspite of the fact that she is nominee Director of Lake Shore Palace Hotels Pvt. Ltd. as per the last wish and desire of late Maharana Bhagwat Singh. It is submitted that appellant no.1 has been duly and diligently performing her duties as nominee Director of Lake Shore Palace Hotels Pvt. Ltd. since the time of induction as Director by her father on the Board of the Lake Palace Hotels & Motels Pvt. Ltd.. Appellant no.1 received notice dated 20.8.2008 for Board meeting of the Lake Shore Hotels Pvt. Ltd. held on 2.9.2008, which provides for appointment of authorised representative under Section 187 of the Companies Act for meeting on 13.9.2008. Another notice in the form of supplemental agenda for the Board meeting of respondent no.1-Company on 2.9.2008 has been served Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 6 upon appellant no.1. It is submitted that inspite of order passed by the Company Law Board and even during pendency of the appeal before this Court, the respondent wants to overreach the process of law by acting to the prejudice to appellant no.1. In the meeting on 2.9.2008, the quorum shall comprise of respondent no.3 T.N. Unni whose continuation as Director in respondent no.1-Company is the subject matter of challenge before this Court and an application for direction restraining Shri T.N. Unni from acting as the Director of respondent no.1-Company has also been filed by the appellants. The appellant has recorded her objections by her letter dated 1.9.2008 in respect of the agenda for the Board meeting held on 2.9.2008 (Annexure-4). In the Board Meeting dated 2.9.2008, it has been decided that the Officiating Company Secretary Shri Pankaj Nandawat of respondent no.1-Company shall be the person authorised under Section 187 of the Companies Act, 1956 to attend the EGM of the Lake Palace Hotels & Motels Pvt. Ltd. on 13.9.2008 and appellant no.1 be asked to explain her conduct as indicated in the letters dated 18.8.2008 and 21.8.2008 and the statements made by her in reply to C.M. No.67/2008 before the A.D.J. (Fast Track) No.4, Udaipur within 15 days of receipt of notice and it is threatened that action will be taken thereafter. The appellant stated that respondent no.3's continuation as Director in respondent no.1-Company is illegal and Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 7 the decisions taken by the quorum comprising of respondent no.3 are nonest and bed in law and are liable to be set aside. On these grounds, the appellant sought prayer that resolution dated 31.3.2008 including resolution dated 2.9.2008 authorising Pankaj Nandawa as Officiating Company Secretary of the respondent No.1- Company to be the person under Section 187 of the Companies Act, 1956 to attend the meetings of the Lake Palace Hotels & Motels Pvt. Ltd. including EGM on 13.9.2009 be stayed. The directions be issued to respondent no.1 Company that it will be represented by appellant no.1 at the EGM of the Lake Palace Hotels & Motels Pvt. Ltd. on 13.9.2008. It is also prayed that operation of resolution dated 2.9.2008 to ask appellant no.1 to explain her conduct as indicated in the various letters referred above and reply submitted by her in the court in the case pending in the court of Additional District Judge (Fast Track), be stayed. The appellants also prayed that the respondents be restrained from removing appellant no.1 as the nominee Director of the Lake Palace Hotels & Motels Pvt. Ltd.. Detail reply has been filed by respondent no.2 stating that the option no.3 given to appellant no.1 by the Company Law Board is beyond the jurisdiction of the Company Law Board and is under challenge in the appeal preferred by respondent no.1-Company and, therefore, exercising option no.3 by the appellant no.1 is of Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 8 no consequence. It is submitted that the directions issued by the Company Law Board relating to transfer of shares of the Lake Palace Hotels & Motels Pvt. Ltd. to the appellants can be made only by the Lake Palace Hotels & Motels Pvt. Ltd. and not by respondent no.1-Company,i.e. the Lake Shore Palace Hotels Pvt. Ltd. The respondents also submitted the background as well as the purpose for which appellant no.1 was recommended as nominee Director but appellant no.1-Company totally belied the aims and objects for which she was recommended to be appointed as nominee Director. It is submitted that proposed increase in the authorised share capital of the Lake Palace Hotels & Motels Pvt. Ltd. from Rs.0.5 crorers to Rs. 5 crorers is being done in the best interest of the said Company and the allegations to the contrary made in the present application are totally baseless. It is also submitted that during pendency of the Company Petition, the appellant has twice approached the Company Law Board seeking representation on behalf of the respondent no.1-Company at the Annual General Meeting of the Lake Palace Hotels & Motels Pvt. Ltd. proposed to be held on 28.9.2006 and 29.9.2007. On the first application, it was submitted on behalf of the Company that instead of Shri T.N. Unni, Shri A.C. Jain (the then Administrator, Legal Affairs, Central Office Mewar Palace Organisation Pvt. Ltd.) would represent the Company in the AGM and as such it was held Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 9 that the application did not survive and the second application when mentioned was orally rejected by the Bench. Copies of the applications and the orders passed by the Company Law Board are placed on record as Annexure-R/2 and R/4. Those orders have not been questioned by the appellants by challenging the same before this Court and, therefore, now it is not open for the appellants to claim any such right and question the right of the Board to authorise its representative at the meeting. It is submitted that thereafter decision is to be taken in accordance with law and for that purpose the Company is proceeding by giving appropriate communications to the appellant. It is submitted that appellant no.1 in fact is claiming that she is entitled to act against the interest of the Company and that the Board of respondent no.1- Company would be a silent spectator. The appellant is trying to take benefit to cover her case under the plea of pending litigation. The respondents are not in any manner trying to overreach the process of the court. It is submitted that last four meetings of the Lake Palace Hotels & Motels Pvt. Ltd. and the Lake Shore Palace Hotels Pvt. Ltd. have been represented by the person other than appellant no.1, though she made unsuccessful attempts for representing respondent no.1 at the meetings of the Lake Palace Hotels & Motels Pvt. Ltd. By filing Civil Misc. Applications before the Company Law Board. Even in the last EOGM of the Lake Palace Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 10 Hotels & Motels Pvt. Ltd. Held on 30.4.2008, the appellant no.1 did not apply for restraining Pankaj Nandawat from attending the meeting though the present appeal was pending before this Court. The appellants submitted rejoinder to the reply filed by respondent no.2. Heard learned counsel for the parties and perused the facts of the case. The facts referred in detail show that there may not be necessity of narrating detail arguments which have been advanced by the learned counsel for the parties on the basis of the contentions raised by them in their application, reply and the rejoinder. In view of the facts mentioned above in detail, it is clear that respondent no.1-Company was represented through its authorised another person in the meeting of the Lake Palace Hotels & Motels Pvt. Ltd. on earlier occasion. There is no new fact on the basis of which appellant no.1 can be permitted to hold the position which was earlier and now contrary to the decision taken by respondent no.1-Company, though the decision may have been taken with the participation of respondent-T.N. Unni because of the reason that the said person was already on the Board since long time and initially he was appointed in the Board of Directors on the suggestion given by the respondents and there may be allegation Company Application I.A. No. 11862/08 in S.B.Company Appeal No.3/08 Smt. Yogeshwari Kumari & ors. vs. The Lake Shore Palace Hotels (P) Ltd. & ors. 11 that now Shri T.N. Unni is acting against the interest of appellant no.1. At this juncture, at interim stage, there is no material to hold that the resolution dated 2.9.2008 has been passed with any oblique motive and that fact can be looked into only in appropriate proceedings and in accordance with law. Therefore, respondent no.1-Company cannot be restrained from acting upon the resolution dated 2.9.2008 at this point of time. If any decision is taken against respondent no.1 in pursuance of this resolution dated 2.9.2008, her right to challenge the decision in accordance with law shall remain intact and the appellant can get the relief of proving her case on merit before the appropriate forum. In the present case, no case is made out for any interim order. Hence, this application is dismissed. (PAKASH TATIA),J. mlt