Ujwala Jagdale v. Jagdale Industries Pvt.
Ltd
Facts of the case:
Jagdale Industries Pvt. Ltd incorporated on 30.06.1994 is mainly in
the business of manufacturing pharmaceuticals. Originally
incorporated as a public company, it later converted into a private
limited company in 2015.
Late Shri Nagaraja Rao is the founder of the company and
husband of respondent 6, and the father of petitioner 1 and
respondent 2 and 3. After the demise of Mr Rao, respondent 6
became the chairman and director of the company, and the
petitioner 1, her husband and respondents 2 and 3 were also part
of the board of directors of the company.
Shares of Mr Rao were distributed among the petitioner,
respondents 2 and 3.
Husband (Petitioner 2) of petitioner 1 is a Professor in Medicine
and a noted diabetologist.
First respondent wanted to sell his stake in the company for 70
crores which did not materialise.
On 15th March 2017, respondent 6 transferred her shares to
petitioner 1 through a legal way. That did not go well with
respondents 2 and 3, and they gave a requisition to the Company
Secretary to convene a meeting for removal of the petitioners as
well respondent 6 from the post of Director and for appointment of
respondents No. 4 and 5 as Directors.
Board meeting was held on 30th March 2017 and the transfer of
shares to petitioner 1 was approved and a notice was issued for
convening EGM on 25.04.2017 to remove the petitioners and
respondent 6 from the position of directors. The board convened
on 25th April 2017 and they were subsequently removed from their
respective positions.
In the same board meeting respondents 4 and 5 who were wives
of respondents 2 and 3 respectively were appointed as directors.
They had no prior experience in this field.
Respondent 6 filed a preliminary objection stating that she along
with her husband were subscribers to the memorandum of
association and that the actions of respondents 2 and 3 were
highly arbitrary and reprehensive.
The company's goods ORSC were sold to Johnson and Johnson,
and the 1st applicant was paid an interim dividend of Rs.
54,25,52,705/-, according to the respondents Nos. 2 and 3.
Respondents 1 to 5 also filed an preliminary objection stating that
the petitioners are interfering with the Company's operations and
mismanaging its finances. The petitioners, according to
respondents Nos. 2 and 3, are exploiting their status as Directors
of the Company by bullying the employees.
Main Legal Issue Involved:
Main legal issue involved here is to give a ruling on whether the
removal of both the petitioners and respondent 6 by respondents 1
to 5 was following the rule of law and conformed to all the
regularities to be followed while removing someone from the board
of directors. The court had to see whether there was any act of
oppression on the petitioners by respondents 2 and 3. The petition
was filed under section 241 of Companies Act, 2013.
Judgement of the court:
Since the petitioners are Directors and shareholders, the action is
against probity, good behaviour, and is harsh and wrong. The first
petitioner owns 42.04 percent of the company's stock. Since 2002,
she has served as Director. Respondent No. 6 is the mother of
Respondents Nos. 2 and 3, and she was a signatory to the
Memorandum of Association as well as the chairman of the board
of directors. As a result, the action of eliminating them is harsh
and wrong, and therefore oppressive in nature. As a result, the
resolution dated April 25, 2017 must be stayed, and the petitioners
and Respondent No. 6 must be reinstated to their positions in the
Company prior to the resolution date.
