Ujwala N.

Jagadale Case
Maanvi Agarwal | BD20035

Facts of the case:

st
The 1 respondent is a company that was originally public limited incorporated on
30.06.1994, later converted into a private limited company in 2015. It was in the business of
manufacturing pharmaceuticals.
The company was established by the late Nagaraja Rao who was the father of the 1 st
petitioner holding the maximum shares – from those held by her on the death of her father
and the rest of the shares transferred by the 6th respondent, the chairman, and director of the
company and subscriber to the MOA of the company. She was the mother of 1 st petitioner
and respondent’s 2nd and 3rd.
All 1st, 2nd, 3rd petitioner and respondents received equal shares of Mr. Rao and made into
Joint Managing Directors while the husband of the 1st respondent was made into a director.
The 2nd respondent wanted to sell his stake for 70 crores while the 1 st one was willing to buy
it.
Respondents’ 2nd and 3rd called for a Board resolution on 25.04.2017 to pass a resolution for
the removal of the petitioners and respondent 6 as Directors and to appoint Respondents 4
and 5 as Directors. They claimed that the procedure was duly followed and following the law.
One unit of the company was sold to Johnson & Johnson and the dividend was distributed.

Main Legal Issue Involved:

The petitioner’s 1 , 2 and respondent 6th have contended that they were removed as
st nd,

directors of the 1st respondent company by an act of oppression. While the respondents, 1-5
contend that the procedure followed the law and by the majority of the shareholders. The
latter claim that the petitioners were interfering with the company’s operations and
mismanaging its finances. At the same time, they also bullied the employees.
The legal issue is to determine the ruling to be given on the fairness of the removal of
applicants 1 and 2 and respondent 6, and whether the removal procedure conformed to the
regularities to be followed. It is also to determine the validity of the prayer for interim reliefs
(a) and (b) sought by the petitioners. The petition was filed under section 241 of the
Companies Act, 2013

The judgment of the Court:

According to the judgment, the allegation against petitioners for interfering with the
management of the company affairs, etc. is simple and vague, thus unjustifiable.
The petitioners were on the Board since the time of the late Nagaraja Rao along with the 6 th
respondent and they were removed without the assertion of convincing reasons, without the
establishment of any loss sustained by the company.

1
Being the directors and members, with the 1st petitioner holding 42.04% of shares it’s clear
that the action against the above went against probity and was wrong and harsh. The result is
the decision taken by the majority shareholder on 25.04.17 is an act of oppression and will be
stayed by allowing the petitioners and Respondent 6 to retain their position in a status quo
ante before the resolution date.