COMPANY LAW

CASE LAW SAMPLES

1. Shaky Commodities Private Limited could not hold its 10th annual general meeting for the year
2016 by 30th September, 2016. The company sought extension of time for holding the AGM from
the Registrar of Companies but failed to hold the meeting within the extended time too. Instead, it
held the meeting on 31st March, 2017 and passed resolutions thereat. Certain shareholders have
challenged the validity of these resolutions. Referring to the provisions of the Companies Act,
2013, examine whether the contention of the shareholders shall be tenable. (June 2017)

ANSWER:
The above situation is related to holding of Annual General Meeting u/s 96 of Companies Act, 2013.

As per Section 96 of Companies Act, 2013; an AGM should be held at a date earliest of the following
dates:
a) Within 6 months from the end of financial year
b) Gap between two AGM should not be more than 15 months
Also 2nd or Subsequent AGM can be extended by ROC upto a maximum period of 3 months.

If any default is made in holding the annual general meeting of a company, any member of the
company may make an application to the NCLT to call or direct the calling of, an annual general
meeting of the company and give such ancillary or consequential directions as the Tribunal thinks
expedient. Such directions may include a direction that one member of the company present in
person or by proxy shall be deemed to constitute quorum for the meeting.

The Company and every officer of the Company who is in default shall be punishable with fine
which may extend to Rs.1,00,000/- and in case of continuous default with a further fine which may
extent to Rs.5,000/- for every day during which such default continues.

However, the above situation is relating to holding of AGM after due date by the company
themselves, which is not covered by above section 96 of companies act, 2013.

But the facts of above situations are similar to a decided case law Ruby General Hospital Limited vs.
Sajal Dutta.

In the above stated case law also, company voluntarily held AGM after the due date specified in
Companies Act and question was raised regarding validity of resolutions passed.

The court held that

it is not the mandate of the law that in case of default under section 96 of the Act, it is obligatory
upon the company or the defaulting Directors to approach the NCLT even if they propose to rectify
their mistake and by giving penalty prescribed under section 99 of the Act for the default already
committed, decide to call a meeting of the AGM beyond the time prescribed by law. The object of the
said provision, in our view, is to give right to a member of the company to approach NCLT if the
existing management of the company avoids facing the share holders by not calling any AGM and at
the same time, retains the office. But by that provision, the right of the Directors of the company to
call AGM beyond the date prescribed under section 96 of the Act is not taken away.
Hence, applying the above case law judgment in the given situation, we can conclude that AGM
held after the due date and extension granted is valid in law and hence, all the resolutions passed
at the meeting are valid. However, company and directors shall be liable for action as provided in
Section 99 of companies act, 2013.

2. A2Z Management Serivces Limited is a listed company quoted at Bombay Stock Exchange
Limited. The company closed its register of debenture holders in June and August 2016 for 12 and
21 days respectively. The Chief Financial Officer (CFO) of the company has informed the
Secretary of the company to consider closing the register in December for another 15 days for
some strategic reasons. Referring to the provisions of the Companies Act, 2013, examine the
validity of the above action of the company. (June 2017)

ANSWER:
The above situation is related to Closure for register of debenture holders u/s 91 of Companies Act,
2013.

As per section 91 of companies act, A company may close the register of members or the register of
debenture-holders or the register of other security holders for any period or periods not exceeding in
the aggregate forty-five days in each year, but not exceeding thirty days at any one time, subject to
giving of previous notice of at least seven days or such lesser period as may be specified by
Securities and Exchange Board for listed companies.

In the above situation, company has already closed register for 12 & 21 days i.e 33 days and if
company closes books for another 15 days then the total days will be 33 + 15 = 48 days that is
more than 45 days allowed u/s 91.

Hence, company cannot close the register for another 15 days. Maximum remaining closure is 12
days. The CFO’s action is not valid as per companies act. If company closes register exceeding 45
days then company and every officer of company who is in default shall be liable to penalty of Rs.
5,000 for every day subject to a maximum of Rs. 1,00,000 during which the register is kept closed.