MAHIMA DATLA vs. DR. RENUKA DATLA

1 NON­REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2776 OF 2022 MAHIMA DATLA …APPELLANT(S) VERSUS DR. RENUKA DATLA & ORS. …RESPONDENT(S) WITH CIVIL APPEAL NO. 2777 OF 2022 PURNIMA MANTENA …APPELLANT(S) VERSUS DR. RENUKA DATLA & ORS. …RESPONDENT(S) WITH CIVIL APPEAL NO. 2778 OF 2022 INDIRA PUSAPATI …APPELLANT(S) VERSUS DR. RENUKA DATLA & ORS. …RESPONDENT(S) J U D G M E N T Leave granted.  Signature Not Verified Digitally signed by ARJUN BISHT Date: 2022.05.10 19:54:26 IST Reason: 2. These Civil Appeals have been preferred against the judgment dated 17.11.2017, passed by the High Court of Judicature at 2 Hyderabad for the State of Telangana and  Andhra Pradesh in Company Appeal No.14 of 2016, whereby   the appeal filed by respondent   Nos.   1   to   3   against   the   order   dated   30.5.2006 passed by Company Law Board (hereinafter to be referred to as ‘CLB’)   was allowed.  3. A brief narration of facts necessary for disposal of these appeals are that the dispute in question relates to a family feud between mother   on   one   side   and   her   three   daughters   on   the   other, concerning   respondent   No.   4­Company   ((Biological   E.   Ltd.) (hereinafter   to   be   referred   to   as   “the   Company”)   which   was established by G.A. Narasimha ( father of respondent No. 1) in 1953.   Dr. Vijay Kumar Datla (father of the appellant­Mahima Datla) was inducted in the Company on 01.05.1972 and later appointed as the Chairman and Managing Director of the said Company. In the year 1998, the appellant­Mahima Datla joined the Company as a management trainee with her father with the intent to be groomed her as his successor. Through the years, she has acclimatized and grown with the aforesaid Company and   in   2004,   she   was   promoted   as   Senior   Vice   President (Biotechnology and Projects). 4. There is no gainsaying that on 14.02.2005, a Will was executed by   (Late)   Dr.   Vijay   Kumar   Datla   bequeathing   his   entire 3 shareholdings   in   favour   of   appellant­Mahima   Datla.   On 20.03.2013,   Dr.   Vijay   Kumar   Datla   died   leaving   behind respondent No. 1 and three daughters Ms. Mahima Datla, Ms. Purnima Manthena, and Dr. Indira P. Raju as his heirs. At the time of his demise, the shareholding pattern of the Company was as under:

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5. On 20.3.2013,  late  Dr. Vijay Kumar Datla,  Dr. Renuka Datla and one G.V Rao were  Directors of the Company.  It is a matter of fact that on 06.04.2013, G.V Rao submitted his  resignation letter   to   respondent   No.1   which   was   later   withdrawn   on 09.04.2013.   Subsequently,   in   the   Board   Meeting   dated 09.04.2013, Dr. Indira P. Raju was inducted as the Director of the Company in place of (Late) Dr. Vijay Kumar Datla  to fulfil casual vacancy, which arose on the demise of Dr. Vijay Kumar 5 Datla.   6. On 10.04.2013, another Board Meeting     of Directors of the Company took place, wherein 400961 shares (81%) standing in the name of (late) Dr. Vijay Kumar Datla were transferred to appellant­Mahima Datla on basis of a Will dated 14.02.2005, and also appellant­Mahima Datla and respondent No.5­Purnima Manthena   were   appointed   as   additional   Directors   of   the Company. 7. Another Board Meeting was convened on 11.04.2013, by which appellant­Mahima   Datla   was   appointed   as   the   Managing Director of the Company and 11 shares each were transferred by appellant­Mahima Datla in favour of Narendra Manthena and P.   Sridhar   Raju.   The   aforementioned   Board   Meetings   dated 09.04.2013, 10.04.2013 and 11.04.2013 were not attended by respondent No. 1.  8. Thereafter, Annual General Meeting (AGM) of the Company was conducted   on   18.12.2013   by   GV   Rao,   Purnima   and   Indira wherein the appellant­Mahima Datla , Purnima and Indira were duly   recognised   as   Managing   Director   and   Directors respectively.  9. The respondent No. 1 has alleged that neither she received any notice nor any agenda of the aforesaid meetings. Respondent No. 1 contends that holding of board meetings was illegal as  an 6 attempt  was made to increase the number of members in the Company   only   to   ensure   that   she   doesn’t   have   sufficient shareholding to maintain a petition under Sections 397 and 398 of the Companies Act, 1956 (hereinafter to be referred to as ‘1956 Act’). Further she claims that she attended the Board Meetings, which were convened on 22.08.2013 and 25.09.2013, wherein her objections to the agenda were not duly recorded. 10. The   respondent   No.   1   filed   a   suit   before   City   Civil   Court, Hyderabad being OS No. 184 of 2014, challenging the illegal transmission of shares of (Late) Dr. Vijay Kumar Datla in favour of appellant­Mahima Datla  and to declare that the respondent No. 1 was the absolute owner of all shares in view of Will dated 04.12.1987. 11. The respondent No. 1 also filed Company Petition No. 01 of 2013 under Section 409 of the 1956 Act before the CLB wherein she sought injunction to stop Annual General Meeting to be held on 18.12.2013. The CLB vide order 17.12.2013, rejected the plea of the respondent No. 1 on the ground that conducting   of AGM was   mandatory   under   the   law.   Aforesaid   interim   order   was challenged before the High Court in Company Appeal No. 01 of 2014, which came to be dismissed with a direction to dispose of the Company Petition, pending before the CLB, within a period 7 of three months. Later, the respondent No. 1, for reasons best known to her, withdrew the earlier Company Petition and filed Company Petition No. 36 of 2014. 12. Without going  in­depth  of  the  details  of  various  applications filed by the parties herein, we can only note that by order dated 30.05.2016,   the   Company   Law   Board   in   Company   Petition No.36 of 2014 framed the  following issues: ( i)   Whether   the   petitioner   has   requisite   qualification   as contemplated under Section 399 of the Companies Act, 1956 to invoke the jurisdiction of this Bench under Section 397/398 and other provisions of the Companies Act, 1956 and whether any case   has   been   made   out   even   under   Section   111­A   of   the Companies Act, 1956? (ii) Whether the Board Meetings held on 09.04.2013, 10.04.2013 and 11.04.2013 are legal and valid? (iii) Whether the transmission of shares to an extent of 4,00,961 equity shares held by (Late) Dr. Vijay Kumar Datla in favour of nd the 2  respondent is in accordance with the Articles and Law? (iv) Whether the A.G.M conducted on 18.12.2013 is legal and valid? (v)   Whether   the   acts   of   respondents   are   oppressive   to   the petitioner   and   whether   the   respondents   have   committed   any acts of mismanagement in the affairs of the R1 Company? (vi) To what extent (family relationship in a company, whether the respondent Company failed to adhere to the request of the petitioner regarding furnishing the documents and inspection of bocks and accounts of the R1 Company)? 13. By judgment dated 30.05.2016 passed in CP No. 36 of 2014, CLB  in para 100 concluded as under: “100. As I already held that the petition is not maintainable   and   the   same   is   dismissed.   Even otherwise and in view of the foregoing reasons, the petitioner has not made out any case either on oppression or on mismanagement in the affairs of the Company: The Petition is miserably failed and liable to be dismissed. Accordingly, the C.P. No. 36/2014 is dismissed. In view of the dismissal of 8 the CP, the undertaking recorded by this Bench in its Order dated 06.08.2014 will not bind on the respondents. Any other interim orders operating as   on   this   date   stand   vacated.   All   the unnumbered applications pending as on this date stand disposed of. No order as to costs.” 14. On issue No. (i), CLB  observed that the respondent No. 1 had filed O.S. No. 184 of 2014 in the Civil Court to declare that she was the absolute owner of 4,00,961 shares belonging to (Late) Dr. Vijay Kumar Datla. The said suit was filed prior to filing the Company Petition and this Court vide order dated 06.10.2015 also   directed   to   dispose   of   the   civil   suit   pertaining   to   the disputed shares.  Thereafter,  CLB rejected the relief relating to Sections 111­A, 58 and 59   of 1956 Act   and held that the petition   would   be   treated   as   having   been   filed   only   under Sections 397/398, 402, 403, 404, and 406 of the 1956 Act. Further,   CLB held that the respondent No. 1 could not have acted as a trustee of the two trusts i.e., appellant Nos. 2 & 3 before it, thus, the respondent No. 1 had no  locus standi  to file the   Company   Petition   on   behalf   of   aforesaid     two   trusts. Moreover, it was held that respondent No.1 did not have support of 1/10 of the total shareholders to maintain a petition under Section 397, as prescribed under Section 399 of the 1956 Act, therefore, the Company Petition was liable to be dismissed as 9 not maintainable. 15. On   issue   No.   (ii),   CLB   validated   the   Board   Meetings   dated 09.04.2013,   10.04.2013   and   11.04.2013   for   the   reason   that appellant­Mahima   Datla     was   appointed   as   the   Managing Director of the respondent No.4­Company under Article 145 of Articles of Association   read with Section 269 of 1956 Act. It was contended before CLB  that respondent No.1 was not physically present in these Board Meetings, however, she was aware of the action taken in   those meetings wherein   her daughters were appointed to the Board of Directors. Approval of appointment of her   daughters   by   respondent   No,   1   is   evident   from   her announcement   letter   dated   15.04.2013   addressed   to   all   the employees of the respondent No.4­Company. The CLB   was of the view that the respondent No.1 being acquiesced in all the events is estopped from raising the said grievance.  16. With   regard   to   the   issue   No.   (iii)   relating   to   validity   of transmission   of   4,00,961   (81%)     shares     in   favour   of     the appellant­Mahima Datla,  it was observed that the transfer took place   in   the   Board   Meeting   dated   10.04.2013   and   the respondent   No.   1   had   already   filed     O.S.   No.   184   of   2014 challenging the said transmission of shares. It was further held that the issue relating to inheritance of shares being of civil 10 nature, CLB  cannot deal with the same. 17. On   issue   No.   (iv),   CLB     observed   that   AGM     was   held   on 18.12.2013, wherein decisions taken in Board Meetings dated th th th 9 , 10   & 11   April, 2013 were ratified by the General Body. The respondent No. 1 was also a part of the aforesaid AGM, wherein her renumeration was approved.   It was held that the appointment of appellant­ Mahima Datla,  Purnima Manthena, and Indira Pusapati as Directors which was ratified in AGM, became final  and is binding on the Company and its members. 18. With regard to issue No. (v), CLB observed that the Company was  a  profitable  Company  and  it could  not be said  that its affairs   were   being   conducted   in  a  manner   prejudicial  to  the interests of shareholders and public at large. It was held that no evidence was placed on record by the respondent No. 1 to show that   the   affairs   of   the   Company   were   being   conducted   in   a manner prejudicial to her interest as a shareholder. Insofar as the allegation pertaining to  mismanagement by the officials of the Company was concerned, the CLB relied upon the balance sheets of the Company and held that there was no evidence of mismanagement. Finally, it was held that the situation did not warrant winding up of the Company and unless such a situation exists, no relief could be granted under Sections 397 and 398 of 11 1956 Act. 19. On the last issue No. (vi), the CLB held that no act of oppression and mismanagement was made out by the respondent No. 1. The acts complained by her   were in the nature of directorial complaints, which did not make out a case for winding up of the Company. 20. Aggrieved   by   the   aforesaid   order,   respondent   No.   1   filed   an appeal before the High Court being C.A. No. 14 of 2016. The High   Court,   by   impugned   order   dated   17.11.2017,   while allowing the appeal held as under: a.   Acts of Respondent. Nos. 2 to 7 are oppressive; b.  The meetings of the Board of Directors held on 09­04­2013, 10­ 04­2013 and 11­04­2013 are null and void and all resolutions passed therein as well as forms/returns filed therein are set aside; c.     Resolutions   passed   at   the   Annual   General   Meeting   of   the Company held on 18­12­2013 are null and void and forms filed by respondents with regard to resolutions passed at the said AGM are set aside; d. The Board of Directors of the Company as existing as on today shall stand superseded and respondent Nos.2 to 7 are removed from the Directorship of the Company, and all forms­32 filed for   their   appointment   as   Managing   Director/Director/Whole Time Director of the Company are declared as null and  void ab initio ; e.   The transmission of 4,00,691 equity shares held by late Dr. Vijay Kumar Datla to respondent No.2 is illegal, null and void; f.   The register of members shall stand rectified by transmission of th 1/4  of the 4,00,691 equity shares to appellant No.1, pending decision on the validity of the Will dt.04­12­1987 propounded by   appellant   No.1   and   Will   dt.14­2­2005   propounded   by respondent No.2 by the competent Civil Court and subject to its decision. 21. Based on the findings stated in the preceding paragraph, the High Court directed as under: a. Article   128   of   the   Article   of   Association   of   the   Company   be substituted as under:  12 "The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of a Boar, the continuing   director   or   directors   may   act   for   the   purpose   of increasing the number of directors to that fixed for the quorum or of summoning a general meeting of the company, but for no other purpose." b. In   exercise   of   the   powers   conferred   under   Section   241   and 242(2)(a) of the Companies Act, 2013 to regulate the conduct of the affairs of Respondent No. 1 Company in future, the appellant no. 1 is authorized to increase number of directors in the Board of the said Company to 3: c. Part   I   of   Schedule   V   of   the   Companies   Act,   2013   which prescribes maximum age of 70 years to be a director, shall not apply to appellant no. 1; d. The appellant no. 1 and the directors nominated by her to the Board shall hold the office for a period of 3 years from the date of their assuming charge notwithstanding anything contained in Section 152(6) of the Companies Act, 2013; e. It is open to appellant no. 1 to appoint a committee of advisors to advise the board for the future management of the Company; f. after the expiry of 3 years period referred to above, fresh Board of   directors   may   be constituted   as   provided   in   the   Act   and Articles of Association of the Company. 22. Questioning the validity of the order of the High Court, present appeals have been filed.  23. We have heard learned senior counsels for the appellants and counsel   appearing   for   the   respondent   No.   1   and   have   also perused the record. 24. At the outset, the High Court’s approach in entertaining the Company Appeal under Section 10­F of 1956 Act and setting­ aside the order dated 30.05.2016 passed by CLB thereunder is contrary to the scope of the aforesaid  Section.  The High Court conducted an elaborate factual analysis in its order which is  ex facie   over and above the appellate purview of Section 10­F of 13 1956   Act.   Instead   of   restricting   its   determination   to   the purported questions of law arising from the order of CLB, the High   Court   re­appreciated   the   entire   evidence   and   other materials on record to give its own factual findings, which runs contrary   to   the   judgment   of   this   Court   in   the   case   of   V.S Krishnan v. Westfort Hi­tech Hospital Ltd. (2008) 3 SCC 363   wherein it was laid down that “ it is ordinarily not open to the Appellate Court to substitute its own discretion for that of Company Law Board ”. Thus, re­appraisal of entire evidence by the High Court is not permissible.  25. The first question which is required to be answered is whether the withdrawal of resignation by G.V. Rao was valid or not. There is no doubt that on 06.04.2013, G.V. Rao addressed a letter to the Board resigning from the post of Directorship. The letter   explicitly   indicated   that   his   resignation   should   be acknowledged   and   Form­32   be   filed   with   the   Registrar   of Companies. Further, on 09.04.2013, G.V. Rao himself wrote a letter seeking withdrawal of his resignation, which was placed in the   meeting   of   the   Board   on   09.04.2013.   In   the   resolution passed therein,   there is no protest by the respondent No.1 regarding attendance of Mr. G.V. Rao. Moreover,   Dr. Renuka Datla, by letter dated 15.04.2013, which was addressed to the 14 employees   of   the   Company,   welcomed   the   appointment   of appellant­Mahima   Datla   as   its   Managing   Director   and appointment   of   others   as   Directors.   Further,   there   are numerous letters such as letter dated 24.05.2013, 22.08.2013, 07.10.2013,   19.10.2013,   and   20.10.2013,   which   clearly acknowledge  Mr. G.V. Rao in the capacity of the Director of the Company.   Respondent   No.   1   also   participated   in   the   Board Meetings dated 22.08.2013 and 25.09.2013, without any protest for continuation of Mr. G.V. Rao as its Director.  In this context, the appellants   herein have invoked the Duomatic Principle to state that the issue of resignation of the Director had lapsed and Mr. G.V. Rao continued to carry on as the Director in view of the acquiescence by the respondent No. 1.  26. The Duomatic Principle can be briefly stated as “anything the members of a company can do by formal resolution in a general 1 meeting, they can also do informally, if all of them assent to it.” This Principle was derived from the decision  In Re: Duomatic Ltd. , [1969] 2 Ch. 365, wherein Buckley, J. held as under: “where it can be shown that all shareholders who have a right   to   attend   and   vote   at   a   general   meeting   of   the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be.” 27. The   enunciation   of   the   aforesaid   principle,   in   the th 1 Palmer’s Company Law, 25 Ed. (2020) Paras 7.434 – 7.449. 15 abovementioned case can be traced back to the decision of  Lord Devey   in   Salmon   v.   Salmon   Co.   Ltd. ,   [1897]   AC   22, ( hereinafter referred as   “ ”) wherein it was held Salmon’s case that   “a   company   is   bound   in   a   matter   intra   vires   by   the unanimous agreement of its members”. 28. The aforesaid Principle emanating from   Salmon’ Case   (supra) has found its utility across various aspects of company law such as   Duomatic   Principle,   Doctrine   of   Indoor   Management,   etc. This Principle having its origin in common law, is applicable even in the Indian context. 29. It   is,   in   this   context,   we   must   note   that   application   of Duomatic Principle is only applicable in those cases wherein bona fide  transactions are involved. Fraud is a clear exception to application of these principles, be it Duomatic Principle or Doctrine of Indoor Management. In this context, we may refer to observations in  ,  [2002] Bowthorpe Holdings Ltd. v. Hills EWHC 2331 (Ch), wherein Sir Andrew Morritt V­C, observed as under: “... the transaction must be bona fide or honest. This, in my view,   is   demonstrated   by   the   qualification   of   Viscount Haldane in AG for Canada v Standard Trust [1911] AC 498, 505   that   ‘the   case   was   not   ...   a   cloak   under   which   a conspiracy to defraud was concealed’, by Younger LJ in In re Express Engineering Works [1920] 1 Ch 466, 471 that ‘no fraud is alleged in respect of this transaction’, and by Lawton LJ in Multinational Gas v Multinational Services [1983] Ch 258, 268 that the members must act in good faith. Thus, in In re Duomatic Ltd [1969] 2 Ch 365, 372 Buckley J cited 16 with approval the view of Astbury J in Parker and Cooper Ltd v Reading [1926] Ch 975, 984 that the transaction must be both intra vires and honest.” 30. In the case at hand, the respondent No. 1 has not proved that the transfer of shares based on the Will dated 14.02.2005 was a fraud played on her as well as the Company. From the narration of   the   circumstances,   wherein   appellant­Mahima   Datla   was groomed by her father to carry the operations of the Company clearly points out to his intention to make such Will. In light of the fact that no allegation of fraud or dishonesty is noticeable in this case, there is no way to ignore the application of this well­ settled principle. 31. The thrust of the Duomatic Principle is that strict adherence to a   statutory   requirement   may   be   dispensed   with   if   it   is demonstrated otherwise on facts, if the same is consented by all members. In this case at hand, there is overwhelming evidence to show that respondent No. 1 had accepted Mr. G.V. Rao back into   the   Board   and   her   conduct   clearly   shows   that   the resignation dated 06.04.2013 was clearly not accepted. 32. The High Court has clearly fallen into error by not considering the   aspect   of   application   of   Duomatic   Principle.   The interpretation ascribed by the High Court to Article 129 of the Articles of Association of the Company is too formalistic and does not take into consideration inclusion of such well­settled 17 common   law   principles.   There   is   no   scope   left   for   equitable considerations to be read into the aforesaid provision, which, in our view, is a patent illegality committed by the High Court without   taking   into   considerations   aforesaid     principles.   We, therefore, hold that G.V. Rao never seized to be a Director of the Company in view of the acquiescence by respondent No. 1, and he had withdrawn his resignation prior to its acceptance.  33. The second aspect which we are called upon to answer is the validity of the Board Meetings dated 09.04.2013, 10.04.2013, and 11.04.2013. The High Court has dealt with the aforesaid question in two ways. The first reasoning is that  G.V. Rao, who had resigned as Director with effect from 06.04.2014, had no authority in law to convene aforesaid meetings.  In view of the same, the said meetings  were not called as per the terms of law. The aforesaid reasoning cannot stand the scrutiny of this Court as this Court has already noted that G.V. Rao continued to be a Director and his resignation cannot be considered as elucidated in the earlier discussion. 34. The second line of reasoning taken by the High Court is that “assuming for the sake of argument without conceding that he continued   as   Director   and   that   his   resignation   was   validly withdrawn, still being the only Director present at the meeting of 18 09.04.2013,   and   in   absence   of   minimum   coram   of   2   as mandated in the articles of associations, it could not have held the meeting”. It must be noted that the aforesaid meetings were th ratified in the 60   AGM which was called on 18.12.2013. The High Court has again erred in not accepting the ratification in the AGM  on the footing that  G.V. Rao had resigned and could not have called the   AGM or validly conducted the aforesaid Board Meetings. When the mother had accepted the decisions taken   in   the   aforesaid   Board   Meetings,   this   Court   cannot appreciate the contradictory stand taken by the respondent No. 1   challenging   the   same   before   the   CLB.   A   party   cannot   be allowed to wax and wane as the contradictory decision tend to take judicial proceedings to ad nauseam. 35. Lastly, we hold that the directions passed by the High Court in para 323 of the impugned order are illegal and contrary to the provisions of Company Act, 2013 (for short “2013 Act”). The High Court has held that respondent No. 1 will continue to be the Director of the Company even though she is over 70 years of age. However, the bare perusal of Section 196 of  2013 Act and Part­I of Schedule V infers that such a direction is non­est in law, which are reproduced as under: “ 196.   Appointment   of   Managing   Director,   whole­time 19 director or manager ( 1 ) No company shall appoint or employ at the same time a managing director and a manager. ( ) No company shall appoint or re­appoint any person as its 2 managing director, whole­time director or manager for a term exceeding five years at a time: Provided that no re­appointment shall be made earlier than one year before the expiry of his term. ( 3 ) No company shall appoint or continue the employment of any   person   as   managing   director,   whole­time   director   or manager who — ( ) is below the age of twenty­one years or has attained the age a of seventy years: Provided that appointment of a person who has attained the age   of   seventy   years   may   be   made   by   passing   a   special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person; ( b )   is   an   undischarged   insolvent   or   has   at   any   time   been adjudged as an insolvent; ( c )  has   at   any   time   suspended   payment   to  his   creditors   or makes, or has at any time made, a composition with them; or ( d ) has at any time been convicted by a court of an offence and sentenced for a period of more than six months. ( 4 ) Subject to the provisions of section 197 and Schedule V, a managing   director,   whole­time   director   or   manager   shall   be appointed and the terms and conditions of such appointment   and   remuneration   payable   be   approved   by   the Board   of   Directors   at   a   meeting   which   shall   be   subject   to approval by a resolution at the next general meeting of the company   and   by   the   Central   Government   in   case   such appointment is at variance to the conditions specified in that Schedule: Provided that a notice convening Board or general meeting for considering   such   appointment   shall   include   the   terms   and conditions   of   such   appointment,   remuneration   payable   and such other matters including interest, of a director or directors in such appointments, if any: Provided further that a return in the prescribed form shall be filed within sixty days of such appointment with the Registrar. ( 5 ) Subject to the provisions of this Act, where an appointment of a managing director, whole­time director or manager is not approved by the company at a general meeting, any act done by 20 him before such approval shall not be deemed to be invalid. ­ Part­I of Schedule V deals with Appointments No person shall be eligible for appointment as a managing or whole­time director or a manager (hereinafter referred to as managerial   person)   of   a   company   unless   he   satisfies   the following conditions, namely:—  (c) he has completed the age of twenty­one years and has not attained the age of seventy years:  Provided that where he has attained the age of seventy years; and   where   his   appointment   is   approved   by   a   special resolution   passed   by   the   company   in   general   meeting,   no further approval of the Central Government shall be necessary for such appointment;  Upon the composite reading of the aforementioned provisions and the Schedule, the relief as granted by the High Court is contrary to Section 196  of 2013 read with Schedule V of 2013 Act (appointment of Managing Director, whole­time Director or Manager) which lucidly provides that no person shall be eligible to be a whole­time Director of a Company after attaining the age of 70 years unless such appointment is approved by a special resolution   of   the   Company.   In   absence   of   any   such   special resolution, the finding rendered by the High Court holding that such   provision   would   not   apply,   is   against   the   statutory provisions of law. 36. Further, the High Court held that the respondent No. 1 and the directors appointed by her to the Board shall continue to hold 21 office for a period of three years. This direction of the High Court is   non­est   in   law   for   being   contrary   to   the   provision   under Section 152(6) of   2013 Act   and   Articles 135 and 136   of Articles of Association of  respondent No.4­Company.  “152. Appointment of directors (6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two­thirds of the total number of directors of a public company shall— (i) be persons whose period of office is liable to determination by retirement of directors by rotation; and (ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. (b) The remaining directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting. (c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent   annual   general   meeting,   one­third   of   such   of   the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one­third, shall retire from office. (d)   The   directors   to   retire   by   rotation   at   every   annual   general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot. (e) At the annual general meeting at which a director retires as  aforesaid, the company may fill up the vacancy by appointing the  retiring director or some other person thereto. ― Explanation.—For the purposes of this sub­section,  total number of   directors   shall   not   include   independent   directors,   whether appointed under this Act or any other law for the time being in force, on the Board of a company.” Article 135 of the AoA: Two­thirds of the Directors liable to retire by rotation “135. Not less then two thirds of the total number of directors of  the Company for the being shall be person whose period of office  is liable to determination by retirement of directors by rotation.” Article 136 of the AoA: Retirement and Rotation of Directors “136. At every annual general meeting of the Company one third 22 of such of the directors for the time being as are liable to retire by rotation or if their number is not three or multiple of three the number nearest to one third shall retire from office. The ex­officio director and  debenture   director  if   any  shall   not  be  subject  to retirement under this clause and shall not be taken into account in determining the rotation of retirement or the number of directors to retire” (Emphasis Supplied) Upon the conjoint reading of Section 152(6) along with Articles 135 and 136 of the Articles of Association of respondent No.4­ Company, it is inferred that one­third of the Directors amongst the total Directors on the Board mandatorily retire by rotation every   year.   The   direction   of   the   High   Court   enabling   the respondent   No.1   (Dr.   Renuka   Datla)   and   the   Directors nominated by her to continue to hold office for three years is in violation   of   the   said   provisions   relating   to   appointment   and retirement of Directors. 37. Insofar as the transfer of disputed shares is concerned, the High Court applied the rule of succession of a Hindu male, as per Section   8   of   Hindu   Succession   Act,1956   and   granted   the exclusive   benefit   of   transmission   of   one­fourth   of   disputed shares in favour of respondent No.1 (Dr. Renuka Datla) without ordering the corresponding transmission of the remaining three­ fourth  shares   in  favour   of   appellants/daughters   pending   the outcome of the Original Suit No.184 of 2014. The High Court’s 23 intervention   in   a   question   relating   to   inheritance   of   shares, claimed  on the basis of the Will dated 04.12.1987, which was the subject matter of Civil Suit No. 184 of 2014 before Civil Court, is untenable in Law. Respondent No. 1 is challenging transmission of 81% shares in O.S. No. 184/2014 before the City   Civil   Court,   Hyderabad   by   contending   that   she   has inherited the same vide Will  dated 14.12.1987 executed by Dr. Vijay   Kumar   Datla.   In   given   scenario,   the   High Court should   not     have     dwelled     into   the   issue of inheritance and  granted ¼ of  4,00,96 shares in favour of respondent No. 1. In the case of   Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad , (2005) 11 SCC 314  this Court emphasized upon the same issue in following words: It is also not in dispute that the matter relating to her “143.  claim   to   succeed   FRG   as   his   Class   I   heir   is   pending adjudication in Civil Suit No. 725 of 1991 in the Baroda Civil Court.   She   claimed   title   in   respect   of   8000   shares   by inheritance   in   terms   of   the   Hindu   Succession   Act. Indisputably, in terms of Section 15 of the said Act she is a Class I heir but the appellants herein contend that the said provision   has   no   application   having   regard   to   Section   5(2) thereof as inheritance in the family is governed by the rule of primogeniture.   A   pure   question   of   title   is   alien   to   an application under Section 397 of the Companies Act wherefor the lack of probity is the only test. Furthermore, it is now well settled that the jurisdiction of the civil court is not completely ousted by the provisions of the Companies Act, 1956. (See Dwarka Prasad Agarwal v. Ramesh Chander Agarwal [(2003) 6 SCC 220])   144.    A dispute as regards right of inheritance between the parties is eminently a civil dispute and cannot be said to be a 24 dispute as regards oppression of minority shareholders by the majority shareholders and/or mismanagement.” A perusal of the same makes it clear that the High Court while dealing with the question under Sections 397 and 398 of 1956 Act ought not to have invoked principle under Hindu Succession Act to determine the shares of the respondent No. 1 which she claims to be inherited through the Will dated 14.12.1987 which was subject matter of OS No. 184/2014.  38. Assuming that on the ground of equity, the High Court decided to grant benefit to respondent No. 1 mother, the same stands against   the   principles   of   succession   under   Section   8   of   the Hindu Succession Act as well. It is well recorded that appellant (Ms.   Mahima   Datla),   respondent   No.5   (Purnima   Manthena), respondent   No.6   (Indira   Pusapati)   and   respondent   No.1   (Dr. Renuka Datla) being class­I legal heirs of the deceased Hindu male are equally entitled to the assets of late Dr. Vijay Kumar Datla. Hence, the division of disputed shares was inequitable on the touchstone of the Hindu Succession Act also.  39. The   High   Court   erred   in   ascertaining   that   the   actions   of respondents   therein,   who   hold   office   in   the   Company,   are oppressive. Under Section 397 of 1956 Act, an application for relief can be brought by any member who complain that the 25 affairs   of   the   Company   are   being   conducted   in   a   manner prejudicial to public interest or in a manner oppressive to any member or members. The intention of the legislature is that majority shareholders who oppress the minority shareholders and conduct the affairs of the company prejudicial to public interest may invoke the jurisdiction of CLB  under Section 397 of 1956 Act. Section 397 reads as under:   “397. Application to Company Law Board for relief in cases of  oppression. (1) Any members of a company who complain that the affairs   of the company are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply   to the Company Law board] for an order under this section, provided such members have a right so to apply in virtue of section 399. (2) If, on any application under sub­ section (1), the Company Law Board] is of opinion­   (a)   that   the   company'   s   affairs are   being   conducted   in   a manner   prejudicial   to   public   interest   or]   in   a   manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member   or   members,   but   that   otherwise   the   facts   would justify the making of a winding­ up order on the ground that it was just and equitable that the company should be wound up; the Company Law Board] may with a view to bringing to an end the matters complained of, make such order as it thinks fit.” As   per   the   aforesaid   provision,   an   order   could   be   made   on application made under sub­section (1), if the Court is of the opinion that (i) the Company’s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive 26 of any member or members, and; (ii) the facts would justify the making of a winding up order on the ground that it was just and equitable that the Company should be wound up, and; (iii) the winding up order would unfairly prejudice the Petitioners. This Court has reiterated this principle time and again in various judgments and also in the judgment of this Court in   Hanuman

the same principle has been reiterated  in following words: 3. Section 397(2) of the Act provides that an order could be made on an application made under sub­section (1) if the court is of the opinion — (1) that the Company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive of any member or members; (2) that the facts would justify the making of a winding­up order on the ground that it was just and equitable that the Company should be wound up; and (3) that the winding­up order would unfairly prejudice the applicants. No case appears to have been made out that the Company's affairs are being conducted in a manner   prejudicial   to   public   interest   or   in   a   manner oppressive of any member or members. Therefore, we have to pay our attention only to the aspect that the winding up of the Company would unfairly prejudice the members of the Company who have a grievance and are the applicants before the court and that otherwise the facts would justify the making of a winding­up order on the   ground   that   it   was   just   and   equitable   that   the Company should be wound up. In order to be successful on this ground, the petitioners have to make out a case for winding up of the Company on just and equitable grounds. If the facts fall short of the case set out for winding up on just and equitable grounds no relief can be granted to the petitioners. On the other hand the 27

In   the   present   case,   there   is   no   iota   of   evidence   placed   by respondent No.1 that the affairs of the Company were being conducted in a manner prejudicial to the public interest. From the Memorandum and Articles of Association it is seen that the Company   is  in  the  business  of   manufacturing  vaccines with profitability and even did good business during Covid pandemic. 40. The respondent No. 1 has contended that she was not allowed to register her protest in any of the meetings which flies in the face of her letter dated 15.04.2013, addressed to the employees of the Company, welcoming the appointment of appellant­Mahima Datla as its Managing Director and other appointments. The High Court has erred by ignoring the   impact of letter dated 15.04.2013   signifying   consent   of   respondent   No.   1     to   the appointments made to the Board of  the Company.   41. During   the   course   of   hearing,   the   counsel   representing   the respondent No. 1, though contested the case, but on the other hand,   the three daughters present in the Court also shown gesture  to maintain the respondent No. 1, aged about 75 years 28 by   offering   to   pay   her   the   salary   more   than   that     of   the Managing Director along with all emoluments. They have also offered   to pay   a lump sum amount with a view   that the Company, which was started by late father of their mother and flourished by the hard labour of their father, should not go into losses, as being daughters they owe duty to run the Company with full of skill and to achieve more heights. It is in this context that we do not propose to take the above discussion to its logical conclusion.  Rather we feel that this litigation should conclude on   an   amicable   note.   Such   harsh   conclusions   may   not   be advisable   when   we   are   concerned   with   a   healthy   Company manufacturing vaccines, which are the need of the hour in these days. 42. In view of the forgoing, the impugned order passed by the High Court on 17.11.2017 is hereby set aside being contrary to the provisions of the 1956 and 2013 Acts and the order of the CLB dated 30.05.2016 is restored with modifications and by adding the following conditions­ (1) Dr. Renuka Datla shall be appointed as Emeritus Consultant of the Company. (2) Dr. Renuka Datla will be paid a sum of Rs.65 lakhs per   month   w.e.f.   01.04.2022   regularly   month   by month on or before 7th of each month. The payment for current month (April, 2022) may be made by 30th of this month.  29 (3) A further lump sum payment of Rs.10 Crore shall be made to Dr. Renuka Datla by 31.05.2022, which shall be in lieu of all payments, if any, that may be due to her till date and also in lieu of any further increase in monthly payments.  (4) Other   facilities   to   Dr.   Renuka   Datla   will   also   be provided to her, which include her medical expenses, security,   residence,   maintenance   of   cars,   club memberships etc., the expenses for which shall also be borne by the Company.  (5)  The learned counsel for the appellants in these three appeals   have   undertaken   that   they   shall   get   a resolution passed to the above effect by the Board of Directors of the Company and the General Body of shareholders, within one month.   (6)   Ms. Sarada Devi, learned counsel for the respondent that Dr. Renuka no.1 ­ Dr. Renuka Datla has stated   Datla is present today whom she has  consulted, and in lieu   of   the   aforesaid   payments   to   be   made   and facilities to be provided by the Company, Dr. Renuka Datla as well as the appellants, undertake to put a quietus to the entire litigation between them, which is pending and also undertake not to initiate any further civil or criminal proceedings against each other. 43. Accordingly, the appeals are disposed of.   ………….……………….J.           ( VINEET SARAN )            …...……………………J. ( J.K. MAHESHWARI ) NEW DELHI; 06.04.2022. 30 ITEM NO.11 COURT NO.9 SECTION XII-A S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal (C) No(s).33217/2017 (Arising out of impugned final judgment and order dated 17-11-2017 in CA No.14/2016 passed by the High Court Of Judicature At Hyderabad For The State Of Telangana And The State Of Andhra Pradesh) MAHIMA DATLA Petitioner(s) VERSUS DR. RENUKA DATLA & ORS. Respondent(s) (IA No.129931/2017-PERMISSION TO FILE LENGTHY LIST OF DATES and IA No.129932/2017-PERMISSION TO FILE ADDITIONAL DOCUMENTS and IA No.134361/2017-PERMISSION TO FILE ADDITIONAL DOCUMENTS , IA No.6073/2018-CLARIFICATION/DIRECTION AND IA No.58854/2018 APPLICATION FOR DIRECTION, IA No.64381/2018 – CLARIFICATION/DIRECTION, IA No. 84497/2018 - I/A FOR RESTRAINING THE PETITIONER FROM ACTING AGAINST THE ORDERS OF THIS HONBLE COURT AND PERMIT, IA No. 176408/2018 - PERMISSION TO APPEAR AND ARGUE IN PERSON, IA No. 73165/2018 - PERMISSION TO FILE ADDITIONAL, DOCUMENTS/ FACTS/ ANNEXURES, IA No. 73071/2018 - PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES WITH SLP(C) No. 33383/2017 (XII-A) (FOR PERMISSION TO FILE LENGTHY LIST OF DATES ON IA 130982/2017 FOR PERMISSION TO FILE ADDITIONAL DOCUMENTS ON IA 130984/2017 SLP(C) No. 33593/2017 (XII-A) (FOR PERMISSION TO FILE LENGTHY LIST OF DATES ON IA 132076/2017 CONMT.PET.(C) No. 2088/2018 in SLP(C) No. 33217/2017 (XII-A) (FOR ADMISSION) Date : 06-04-2022 These matters were called on for hearing today. CORAM : HON'BLE MR. JUSTICE VINEET SARAN HON'BLE MR. JUSTICE J.K. MAHESHWARI For Petitioner(s) Mr. E. C. Agrawala, AOR Mr. P.S. Raman, Sr. Adv. Mr. S. Madhusudhan Babu, Adv. Ms. Archana Sahadeva, AOR Mr. Shyam Divan, Sr. Adv. 31 Ms. Ritu Bhalla, Adv. Mr. Manu Krishnan, Adv. Ms. Riya Basu, Adv. Ms. Riddhi Vyas, Adv. Ms. Samiksha Godiyal, Adv. Mr. S. S. Shroff, AOR Dr. Abhishek M. Singhvi, Sr. Adv. Mr. S. Niranjan Reddy, Sr. Adv. Ms. Raavi Venkata Yogesh, AOR Mr. L. Nidhiram, Adv. Ms. Twinkle Rathi, Adv. Mr. Abhishek Sharma, Adv. For Respondent(s) Mr. Sanjay Kumar Tyagi, AOR Mrs. K. Sarada Devi, AOR Mr. S. Chakrapani, Adv. Mr. Chandan Kumar, Adv. Mr. R. Vijaynandan Reddy, Adv. UPON hearing the counsel the Court made the following O R D E R Leave granted. Heard Mr. Shyam Divan, learned senior counsel appearing for the appellant in SLP(C)No.33217/2017, Mr. P.S. Raman, learned senior counsel appearing for the appellant in SLP(C) No. 33593/2017 and Dr. Abhishek Manu Singhvi, learned senior counsel appearing for the appellant in SLP(C) No. 33383/2017 as well as Ms. K. Sarada Devi, learned counsel who appears on behalf of the contesting respondents Dr. Renuka Datla and the Trust. Appellants in all these three appeals are also present, who have been identified by their respective counsel. For the reasons to be given subsequently, all the three appeals are allowed and the judgment and order of the High Court dated 17.11.2017 is set-aside and the order of the Company Law Board dated 30.05.2016 in CP NO.36/2014 is restored adding the 32 following conditions: (1) Dr. Renuka Datla shall be appointed as Emeritus Consultant of the Company. (2) Dr. Renuka Datla will be paid a sum of Rs.65 lakhs per month th w.e.f. 01.04.2022 regularly month by month on or before 7 of each month. The payment for current month (April, 2022) may be th made by 30 of this month. (3) A further lump sum payment of Rs.10 Crore shall be made to Dr. Renuka Datla by 31.05.2022, which shall be in lieu of all payments, if any, that may be due to her till date and also in lieu of any further increase in monthly payments. (4) Other facilities to Dr. Renuka Datla will also be provided to her, which include her medical expenses, security, residence, maintenance of cars, club memberships etc., the expenses for which shall also be borne by the Company. (5) The learned counsel for the appellants in these three appeals have undertaken that they shall get a resolution passed to the above effect by the Board of Directors of the Company and the General Body of share holders, within one month. (6) Ms. Sarada Devi, learned counsel for the respondent no.1 - Dr. Renuka Datla has stated that Dr. Renuka Datla is present today whom she has consulted, and in lieu of the aforesaid payments to be made and facilities to be provided by the Company, Dr. Renuka Datla as well as the appellants, undertake to put a quietus to the entire litigation between them, which is pending and also undertake not to initiate any further civil or criminal proceedings against each other. 33 Reasons for this order shall follow. CONMT.PET.(C) No. 2088/2018 In view of the aforesaid order passed today in above three appeals, the contempt petition is, accordingly, disposed of. (ARJUN BISHT) (PRADEEP KUMAR) (ASHWANI THAKUR) (COURT MASTER (SH) (BRANCH OFFICER) AR-CUM-PS