25.04.2017 in removing the petitioners and Respondent No.

6 as Directors and
appointing Respondents No. 4 and 5 as Directors.
14. On the other hand, counsel for Respondents No. 1 to 5 would contend that the
removal of petitioners and Respondent No. 6 is in accordance with law. The EGM has
taken a decision passing a unanimous resolution for removal of petitioners and
Respondent No. 6. Counsel would contend that if the removal of petitioners and
Respondent No. 6 as Directors is in accordance with law, then, it cannot be said their
removal is oppressive. Counsel would contend that majority of shareholders present
in the EGM passed the resolution removing the petitioners and Respondent No. 6 as
Directors which is in the interest of the Company. He would contend that the
resolution duly passed cannot be stayed.
15. The counsel appearing for Respondent No. 6 would contend that Respondent No.
6 is not only the Director, but also she was the Chairman of the Company right from
the date when her husband late Shri R. Nagaraja Rao died in 2005. Counsel would
contend that as per wishes of late Shri Nagaraja Rao and according to the will left by
him, his shares were distributed among the 1st petitioner and Respondents No. 2 and
3 and all the three were appointed as Joint Managing Directors and the mother,
Respondent No. 6 was made as Chairman. Counsel would contend that Respondent
No. 6 developed the Company and presided as Chairman for more than ten years
before her removal as Director. Counsel would contend that Respondents No. 2 and 3
acted inhumanly against their mother Respondent No. 6. She has contributed
enormously for the development of the Company. Due to internal bickering between
Respondents No. 2 and 3, Respondent No. 6 felt the need to transfer her shares in
favour of 1st petitioner being the daughter who is well educated, who has the
capacity to manage the affairs of the company. Aggrieved by the transfer of shares
and further refusal of the mother to step down as Chairman, Respondents No. 2 and
3 have taken the extreme step of removing her as Director even though she was the
subscriber and worked with the founder, her late husband Shri Nagaraja Rao. Counsel
would contend that Respondents No. 2 and 3, in a high handed manner stopped the
facilities which was available to her as Chairman and Director of the Company.
Counsel would contend that there is absolutely no convincing reason given by
Respondents Nos. 2 and 3 for removal of Respondent No. 6 as Director of the
Company. He contended that the action on the part of Respondents No. 2 to 5 is
nothing but an act of oppression and that she is entitled for the same reliefs as
prayed by the petitioners.
16. The admitted facts that late Shri R. Nagaraja Rao Jagadale was the founder of 1st
respondent company. Respondent No. 6 was also subscriber to the Memorandum of
Association of the Company. Late Shri Nagaraja Rao was managing the affairs of the
company till his death in the year 2005. His shareholding was distributed among the
1st petitioner and Respondents No. 2 and 3. It is interesting to note that the 1st
petitioner is holding 42.4% of the shareholding in the 1st respondent company. It is
also an undisputed fact that Respondent No. 6, the mother of 1st petitioner and
Respondents No. 2 and 3 had transferred her entire shareholding in favour of 1st
petitioner. The contention of petitioners that Respondents No. 2 and 3 are totally
dissatisfied with the transfer of shares by Respondent No. 6 to Petitioner No. 1. It is
the contention of the petitioners that Respondents No. 2 and 3 started to act against
the interests of the petitioners and Respondent No. 6 only after Respondent No. 6
transferred her shareholding in favour of 1st petitioner. Admittedly, their father late
Shri Nagaraja Rao died in 2005. The 1st petitioner and Respondents No. 2 and 3
acted as Joint Managing Directors and each of them was allotted a specific branch of

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 the company to be looked after. Running of 1st respondent company from 2005 till
the end of 2016 appears to be normal and there are no major differences among
them. In fact, one unit of the 1st respondent company was sold to a multinational
company M/s. Johnson & Johnson and also dividend was distributed.
17. It is the specific contention of 1st petitioner that she was one of the Directors of
1st respondent company since 2002. In this connection, she has filed proof that she
was Director of the company till her removal in the EGM held on 25.04.2017. Even
during the lifetime of her father, late Shri Nagaraja Rao, she was Director and she
continued to be so even after the death of her father and she was made as one of the
Joint Managing Directors. She is Post Graduate in medicine. Thus, she is a highly
educated Director of the Company. The company is mainly in the business of
manufacturing pharmaceuticals. Her husband, the 2nd petitioner, who is also a
Professor in Medicine and a famous Diabetologist. He was first appointed as Joint
Director and later appointed as Director. This was in the year 2006. So both the
petitioners are on the Board of Directors for a long period of time. Suddenly, some
developments took place following the transfer of shares by the 6th respondent in
favour of the 1st petitioner. In fact, Respondent No. 2, had resigned as Joint
Managing Director and it was also accepted by the Board. It is also undisputed that
on one occasion, Respondent No. 2 wanted to quit from the company by selling his
entire shares which was estimated to Rs. 70 crores. However, for some reason or
other, this was not materialised. It is the contention of the 1st petitioner that she was
prepared to purchase the said shares of Respondent No. 2, but it did not materialise.
18. It is the contention of the petitioner that on 14.03.2017, the Respondents No. 2
and 3 gave a requisition to the Company Secretary to convene meeting for removal of
the petitioners and Respondent No. 6 as Directors and for appointment of
Respondents No. 4 and 5 as Directors. A date was fixed for the Board meeting on
23.03.2017 and notice dated 16.03.2017 was issued. A special notice under Section
169 of the Companies Act, 2013 was also issued. However, the Board meeting was
not held on 23.03.2017. But, it was held on 30.03.2017 and a notice was sent
through E-mail. The share transfer was approved in the said Board meeting. Again,
on 31.03.2017 a Board meeting was held and a notice for convening EGM on
25.04.2017 was issued for removal of the petitioners and Respondent No. 6 as
Directors. The petitioners have filed the notice of Board meeting to be held on
23.03.2017. This notice issued by Respondent No. 2 for convening the EGM for
removal of the petitioners and Respondent No. 6 as Directors and for appointment of
Respondents No. 4 and 5 as Directors is marked as Annexure-'W'. The Company
Secretary issued a notice for EGM to be held on 25.04.2017 which is marked as
Annexure-'Y'. It is the contention of the petitioners that the action for removal of the
petitioners along with Respondent No. 6 as Directors is nothing but an act of
oppression and that there is absolutely no justification for the same.
19. Respondents No. 2 to 5 have simply alleged that the petitioners are interfering
with the management of the company affairs and harassing the employees, etc. This
is said to be the reason for their removal as Directors of the Company. The very
allegation is vague is not by itself a sufficient and justifiable ground for taking the
extreme step of removing the petitioners as Directors. In the light of the admitted
fact that both the petitioners were on the Board for quite a long time including during
the life time of the founder late Shri Nagaraja Rao where the 1st petitioner was
appointed as Director. Respondent No. 6 was also unceremoniously removed as
Director. She is the mother of Respondents No. 2 and 3 and she was the subscriber
to the Memorandum of Association of the Company at the time of its initial formation.

22-09-2017 (Page 6 of 8) www.manupatra.com National Law University, Delhi