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Judgment
S. Ravindra Bhat, J.
I.A. Nos. 7914/2009 & 11610/2009
This common order will dispose of the plaintiff''s application for temporary injunction to restrain the defendants in any manner representing to the general public as its Managing Director and the defendants'' application under Order 39, Rule 4 CPC seeking vacation of the ex parte stay granted by the Court.
The plaintiff seeks declaration that the defendant cannot act as its Managing Director subsequent to 31.03.2009 and also that all acts claimed to have been done by him from that date are null and void. This includes alleged appointment of one Shri Sanjiv Bhavnani as Additional Director of the company and Inderjeet Goyal as Manager (Administration).
The plaintiff claims to have been incorporated in Mumbai with its corporate office in Delhi. It claims to be created through a joint venture agreement dated 4.8.2006 executed by ZyXEL Communication Corporation, a limited liability company established under the laws of China and the defendant No. 1 with the object of marketing, distributing, selling and providing services for all ZyXEL products related to broadband data network, information technology etc. The material contentions in the suit are that the defendant by letter dated 25.3.2009 submitted his resignation as Managing Director w.e.f. 31.3.2009. The plaintiff claims that the resignation letter was duly accepted by the Board of Directors of the Company on 27.3.2009 and accordingly the first defendant ceased to be its Managing Director from the date mentioned in the resignation letter. The plaintiff claims that despite this conceded position, the defendant No. 1 acted contrary to the resignation letter and unauthorizedly issued a letter of appointment on 20.04.2009 by impersonating himself as the Managing Director and appointing third defendant as Manager (Administration); it is also stated that the second defendant was appointed as Additional Director and for that purpose, the first defendant, without any authority from the plaintiff proceeded to file Form-32 application before the Registrar of Company in respect of the said two defendants on 23.04.2009.
This Court had by an ex parte order dated 17.6.2009 restrained the first defendant from making any false statement or representing himself to be the Managing Director of the plaintiff company and further restrained from asserting or exercising any rights as the Managing Director in the plaintiff company, till the disposal of the suit. That injunction has subsisted, till date.
The plaintiff relies upon the letter of resignation signed by the first defendant as also the copy of the Minutes of the Board Meeting dated 27.3.2009. It has, in addition, placed on the record, a copy of the Form-32 filed on its behalf in June, 2009, intimating the Registrar of Companies about the resignation of the first defendant and the appointment of Mr. Kerming Chen as Managing Director.
The defendants argue - in the written statement as well as through the Counsel - that even though the resignation letter and its submission to the Board of Director of the plaintiff company are not denied, the plaintiff has suppressed certain material facts as to the circumstances in which it was accepted and signed. It is submitted that the plaintiff is a creation of a joint venture understanding in terms of which its management was to be in accordance with the conditions spelt out in the said agreement of 4.8.2006. It is argued that the parties had certain differences which led to an understanding in 2008, which culminated sometime in February-March, 2009, whereby the first defendant was to step down as Managing Director and continue to function in the plaintiff company as Director and General Manager. It is argued that in terms of this understanding, a nominee of other joint venture partner was to be the Managing Director for three years.
The defendants'' contention is that the plaintiff company resiles from the understanding arrived at and purported to act unilaterally as is evident from the action in proceedings to file the Form-32 and place on record of the Registrar of Companies.
It is also argued, in addition, that the procedure for appointment of Managing Director was not complied with. The defendant points out to the joint venture agreement, which according to him stipulates the manner in which the Resolution for this purpose was to be passed. Specific reference was made to Article 39. It is stated that the Board meeting was not conducted as stipulated in the said agreement. Learned Counsel further argues that the plaintiff has obtained an ex parte order by suppression of material facts. He points to page-73 of the list of documents which contains the Resolution of the Board of Directors dated 27.03.2009 and states that in the said document, the first defendant was authorized to file Form-32 even after the resignation which clearly showed that the parties had arrived at some understanding. Elaborating, it is contended that there would have been no occasion or reason for the Managing Director to act on behalf of the company after ceasing to hold that position. Learned Counsel emphasized that the plaintiff, however, has placed on record another document i.e. copy of the said Resolution dated 27.03.2009, filed with the Form-32 before the Registrar of Companies which significantly omits any mention of authority given to the first defendant.
The Court has considered the submissions. As is evident from the preceding discussion, the defendant does not deny having resigned from the Board of Directors of the plaintiff company w.e.f. 31.3.2009. He also does not deny that the Board of Directors of the plaintiff''s company did accept the resignation submitted by him w.e.f. 31.3.2009 by a Board Resolution. His defence is that the parties i.e. the plaintiff company and the other joint venture partners had another understanding (though not embodied, in any written document) whereby the first defendant was to continue in the Board of Directors of the plaintiff, act as General Manager, and in addition that, the joint venture partner of the plaintiff, could nominate another Additional Director. The defendants additionally says that the procedure in Constituting the Board meeting and for appointment or accepting resignations of the Managing Director was not followed, as prescribed for in the joint venture agreement as well as under the Companies Act and further that the plaintiff has willfully and deliberately suppressed material facts and made false representations to the Court.
The Court is mindful of the fact that at the present stage, only the prima facie facts are to be considered. It is not as if a detailed trial and in depth scrutiny of the materials is to be carried out. The preceding discussion would show that in the essential particulars, the first defendant does not deny having resigned from the plaintiff''s Board of Directors as Managing Director w.e.f. 31.3.2009. The explanation that he was really empowered to continue for some more time is sought to be bolstered by the fact that he was empowered to take the necessary and consequential steps towards intimating the authorities. However, the defendant has been unable to show through any documentary evidence (let alone any written agreement about the understanding alleged by him) or even through contemporaneous letters that indeed such understanding or agreement embodying what he alleges had in fact existed. If that were the case (i.e. that the first defendant was empowered to continue despite his having resigned from the Board), nothing prevented him from insisting that the true position ought to be recorded in the Board Minutes dated 27.3.2009. Furthermore, no explanation is forth coming as to why even a letter of protest - in the event of what he states as an omission or deliberate breach of the understanding - was not registered by him through any document. All these explanations have been brought out only in the written statement and the application seeking vacation of stay.
So far as the defendant''s argument regarding the procedure to be followed is concerned, that is a matter of trial as to whether that omission or irregularity fundamentally breached the agreement or any term or was in violation of law so as to entitle him to continue as Managing Director. The Court also notices that the defendant has not counter claimed in these proceedings. During the course of submissions, it was argued that the defendant has invoked arbitration clause embodied in the joint venture agreement. However, as far as the claim in the present proceedings is concerned, in view of the above reasons, the Court is of the opinion that the interim injunction granted has to be confirmed.
For the above reasons, I.A. No. 7914/2009 is allowed. The order dated 17.6.2009 is hereby confirmed and shall bind the parties till disposal of the suit. I.A. No. 11610/2009 is accordingly rejected for the same reasons.
CS (OS) 1135/2009
Parties are directed to admit or deny each others'' documents, within four weeks through exchange of affidavits.
List before the Joint Registrar on 11th May, 2010, for scrutiny.
List before the Court on 3rd December, 2010, for framing issues.