Prof. D. Aravindakshan vs M/s. Agastya Biopharm India Ltd. & Ors.

Justice Sharad Kumar Sharma, Member (Judicial):

The instant Company Appeal being CA (AT) No. 191 / 2019, Prof. D. Aravindakshan (Party-in-person) V. M/s. Agastya Biopharm India Limited & 5 Ors., puts a challenge to the propriety of the Impugned Order / Judgment dated 07.06.2019, as it has been rendered by the learned Adjudicating Authority of National Company Law Tribunal, Bengaluru Bench, in CP No. 53 / 2012, being the proceedings which were drawn under the Sections 235, 237, 397, 398, 402 & 403 of the Companies Act, 1956.

In the Company Petition thus preferred by the present Appellant, it was as a consequence of the decision which had been taken by the Company Law Board, which was preferred by the Appellant as against the aforesaid Firm, by inter alia seeking to declare the Resolution which was passed for removal of the Petitioner as a Chairman / Managing Director of M/s. Agastya Biopharm India Limited, vide Board’s decision dated 12.04.2012, as to be `null and void’ as well as simultaneously relief was also sought for declaration of the Resolution passed in the Board’s Meeting held on 12.04.2012, as to be `null and void’, and further, an additional prayer was sought, for conduct of a detailed investigation into the Books of Accounts of the Company and to pay the remuneration to the Petitioner, as it was fixed by the Shareholders at the Annual General Meeting dated 10.08.2011 and to declare the Petitioner to be the permanent Chairman & Managing Director of the Company.

Before dealing with the history of the litigation which the instant Company Appeal carries, the precise fact which has come out based upon the pleadings raised by the Appellant is that, the Appellant has claimed himself to be the Chief Promoter / Technology provider and the Chairman & Managing Director of the aforesaid Firm called as `M/s. Agastya Biopharm India Limited’ (hereinafter to be called as `The Firm’).

He contends that in the aforesaid capacity, he has invested a sufficiently huge amount to the Project being Rs. 201 Crores, for the purposes of undertaking the manufacturing process of modern medicines.

He has further submitted that based on the detailed Project Report, which was submitted by the manufacturer of modern medicines, he adopted the technology procured from Atech Engineering and Management, a Proprietary Concern which was the Proprietary Concern of the Appellant, apart form that, the Appellant in order to establish his eligibility and credentials, had submitted that he was the Managing Director of Kerala State Drugs & Pharmaceutical Limited, Kerala, he was a Member of Kerala State Coir Corporation Limited and such other various Organisations which he has referred to in the Company Petition.

He has contended that due to the endeavours put in by him to augment the progress of the Company, it expanded its business owing to the recommendations and assistance made by the Government of India, by sanction of Rs.27.25 Crores, for a Biotech Park and also with as a consequence of the effect of providing 36 Acres of Land.

The Appellant has pleaded that because of certain rivalries, which he has contended to have developed on account of his business activities with Mr. Santosh Madhavan and Mr. Muhammad Majeed, the business activities suffered. But here, we are not venturing into those aspects because those criminal acts complained of absolutely a subject matter of the Criminal Writ Petition being WP(C) No.27450 / 2009, because of which consequentially, the investigation was conducted by Crime Branch of Kerala Police, which has been registered as CC No. 611 / 2008, though later on, at the request of the Appellant, it was made the subject matter of the Writ Petition (C) No. 27450 / 2009 which has now been laid to rest.

In the Company Petition thus preferred by the Appellant, the relief which has been sought for, has been precisely referred to hereinabove is extracted hereunder:-

The learned Adjudicating Authority after considering the rival contentions, particularly in the context of the response given by the Appellant in the Rejoinder Affidavit and Sur-Rejoinder Affidavit, to the Counter Affidavit, filed by the Respondents to the Company Petition has drawn the details of history of litigation as agitated by the Appellant and later on, ultimately, had come to a conclusion that owing to the observation which has been made in the response / counter affidavit dated 09.07.2012 filed by the Respondent, the Petitioner was ultimately found to have been initially removed from the Office of the Managing Director, as well as from the Office of the Director, by virtue of the powers vested with the Board under Article 73 of the Articles of Association of the Company.

It was vehemently argued by the Respondents, before the learned Adjudicating Authority, that the Appellant was engaged in Forum Shopping and has engaged himself in multiple litigations for same cause of action or even a dead cause of action, so as to sustain his relief for being re-inducted as the Chairman & Managing Director of the Company in question.

Ultimately, after dealing with the entire perspectives, particularly as referred to in Para 4 of the Impugned Order / Judgment, the learned Adjudicating Authority had ultimately observed and came to the conclusion that owing to the past conduct of the Appellant and particularly with regards to the decision taken under Article 73 of the Articles of Association of the Company to be read with Section 2 (26) of the Companies Act, the Resolution of the Board of Directors of the Company was passed and communicated to the Registrar of Companies too, by virtue of which the Appellant was divested of his Authority to continue to function any further as the Chairman & Managing Director or even the Director of the Firm in question.

The instant Company Petition was instituted subsequent to the Board’s Meeting which was held on 12.04.2012, as a consequence of which, the Appellant was already removed from being the Managing Director of the Firm.

The learned Adjudicating Authority in the impugned judgment has observed, that for the same cause of action, the Appellant has been instituting multiple civil proceedings with an objective to somehow regain over the Office of the Managing Director of the Firm in question, which otherwise, it has been observed in the Judgment that looking to the conduct of the Appellant he would not be able to sustain to maintain the Company Petition for seeking a relief to re-activate himself as the Managing Director of the Firm, because of the fact that he suffered from the prima facie discrepancies, as it has been enshrined under Section 267 of the Companies Act, 1956, which prescribes for certain restrictions, that the persons suffering from the discrepancies as provided under Section 267, will not be entitled and eligible to hold the Office of the Managing Director of the Company, the Appellant falls within the statutory restrictions contemplated under Section 267 of the Companies Act.

Section 267 of the Companies Act, 1956, is extracted hereunder:-

Apart from the implications of the provisions contained under Section 267 of the Companies Act, the learned Adjudicating Authority has observed that a Litigant who intends to seek an equitable relief or even a legal relief for that purpose he / she should approach the `Court’ / `Tribunal’, with clean hands and owing to the details which has been discussed in the Impugned Judgment, the Appellant has been found to be engaging into multiple proceedings, and accordingly, the learned Adjudicating Authority has rightfully come to a conclusion that the Appellant cannot sustain the Company Petition for the purpose of relief to continue as a Managing Director or even as a Director of the Company, because, the Petitioner was not removed from the position of a Director at the first instance or by mistake, rather he was given ample opportunities to mend his ways till a final decision of his removal from the Office of Director of the Company was taken.

The learned Adjudicating Authority has observed that the Petitioner / Appellant, under the guise of the matter being sub-judice has refused to cooperate with the Company in managing the affairs and had not availed the opportunity given to him, as against the decision of his final removal from the position of a Director, as detailed above in the Impugned Judgment.

Ultimately, the learned Tribunal has precautionarily observed that the `Court(s)’ / `Tribunal(s)’, should refrain itself from interfering into the matters of internal administration of the Company, subject to the condition, that the action which is complained of, and which is the subject matter of challenge is prescribed within the provisions of the Articles of the Company and the provisions of the Company Law governing the act.

Subject to the aforesaid finding, the Company Petition was dismissed, ruling thereof that the Appellant has failed to substantiate his allegations even at the time of the exchange of pleadings and at the time of hearing, for grant of any relief which he has prayed for, before the learned Adjudicating Authority.

While, putting a challenge to the Impugned Judgment, as it had been rendered by the learned Adjudicating Authority on 07.06.2019, the Appellant has instituted this Company Appeal on various grounds, contending thereof that the Judgment which has been put to challenge suffers from an apparent perversity, because, the other proceedings which has been undertaken by the Appellant, at his behest may not cloud his rights to press his relief by preferring the Company Petition and consequentially, the Company Appeal too, for grant of relief to be inducted as a Director / the Managing Director of the firm in question.

Heard the Appellant-in-person and the Learned Counsel appearing for the Respondent Nos. 1 to 6.

What is astonishing is that, the Appellant still vehemently presses his relief to be re-inducted as Managing Director, in spite of the facts which have been brought on record by way of a Counter Affidavit filed by the Respondents, giving details with regards to the conduct of the Appellant of involving himself in the affairs of the mismanagement of the firm in question, coupled with the contention that since his removal from the Post of Managing Director and consequential removal from the Post of Director has attained its finality, owing to the bar created by the provisions contained under Section 267 of the Companies Act, he ought not to be permitted to be granted the relief as it has been prayed for, in the Company Petition before the learned Adjudicating Authority.

Further, in support of his contentions, the Learned Counsel for the Respondent Nos. 1 to 6, have drawn the attention of this Tribunal to the multifaceted proceedings which the Appellant has drawn for the purposes of enforcing his rights and in the first instance, the sequence being that of the:

Overall, the consequential effect would be that, as of now, when this Company Petition is being heard on merits, the two legal embargos which are to be overcome by the Appellant, i.e. once in the proceedings of his choice, filed by him by instituting Suit No. 5357 / 2014, as against the Order removing him from the post of Chairman & Managing Director, that has attained finality on 01.03.2024 with its dismissal, the effect of the same would be that he loses his authority to continue to occupy the post of CMD, because of the embargo created by the Judgment and Decree of 01.03.2024. Apart from that, the removal of him from the post of CMD by a Decree of 01.03.2024, would further be strengthened from the Decree of 27.06.2012 as passed in Suit No. 127 / 2013, preferred by the Appellant as against his removal from the post of Director. Thus, his removal as Managing Director and Directors has been judicially held valid, in a proceedings taken by him.

Logically, once the removal of him from the post of Director is affirmed by the Judgment of 27.06.2012, he could not be permitted and be eligible too, to continue to function on the post of CMD, as he has prayed for in the Company Petition at hand.

Besides this, the finding which has been recorded by the learned Adjudicating Authority, pertaining to the disabilities suffered by the Appellant to continue anymore as a Director or the Managing Director of the Company, owing to the decision in respective Suits and the Notices dated 25.05.2012 for the EGM, as it was held on 27.06.2012, in which the Appellant was removed from the Post of a Director of the Company and because of the consequential decisions taken in the respective Suits, the Appellant has been legally held out to be incompetent to continue with the post of a Director or in the post of the Managing Director, owing to the embargos created by Section 267 of the Companies Act, 1956.

After having heard the Appellant-in-person and the Learned Counsel for the Respondent Nos. 1 to 6 at length, and after giving a thoughtful consideration to the rival contentions, we are of the view that, owing to the determination already made by the Courts of Law, and that too in the proceedings drawn at the behest of the Appellant for seeking himself to be inducted on the post of a Director or the Managing Director of the Firm, though the latter would be possible only when he holds an eligibility to be a Director of the Company, he cannot be a CMD, because of the decision taken by the Board as reflected to be in violation of the provisions contained under the Articles of Association of the Company, holding him to be incompetent to continue with the post of the Director and the CMD as it has been observed in the Impugned Judgment under challenge.

Looking to the past conduct of the Appellant and owing to the legal embargos created by Article 73(2) of Table A of the Articles of Association, as well as the implications of Section 267 of the Companies Act, 1956, and the determination which has been made by Judgments of the Courts, the Appellant is not entitled for grant of relief as prayed for, in the Company Petition No. 53 / 2012 (TP) No. 37 / 2016, holding thereof that the Resolution which was passed for the removal of the Petitioner as Chairman / Managing Director, of the Company in question, as well as the decision of the Board held on 12.04.2012, were absolutely justified and was well within the ambit of the powers vested with the Board, under the Articles of Association. Thus, the declaration made by the Resolution of the Board as it was held on 12.04.2012, was well within the frame work of Law, which does not call for any interference by this Tribunal in the exercise of its Appellate Jurisdiction under Section 61 of the I & B Code, 2016.

Based on the aforesaid reasons and the fact that the Appellant has already been determined to be incapacitated by the Judgments of the Court to be a Director or the Managing Director, the Appellant is not entitled for grant of any relief in the instant Company Appeal. The Company Appeal (AT) No. 191 / 2019 lacks merit and the same is accordingly dismissed.