1932R

IN THE

HON’BLE NATIONAL COMPANY LAW TRIBUNAL

XYZ BENCH

IN THE MATTERS OF

ALICENT HIGHTOWER (REPRESENTED BY HERSELF)

PETITIONER

V.

CARAXES AND CO. LTD. (REPRESENTED BY CHIEF EXECUTIVE OFFICER)

RESPONDENT

C.P. NO. XXXX OF 2022

[UNDER SECTION 241 OF THE COMPANIES ACT, 2013, READ WITH RULE 20 OF THE NATIONAL

COMPANY LAW TRIBUNAL RULES, 2016]

AND

VISERYS TARGARYEN (REPRESENTED BY HIMSELF)

 PETITIONER

V.

CARAXES AND CO. LTD. (REPRESENTED BY THE CHIEF EXECUTIVE OFFICER)

RESPONDENT

C.P. NO. XXXX OF 2022

[UNDER SECTION 241 OF THE COMPANIES ACT, 2013, READ WITH RULE 20 OF THE NATIONAL

COMPANY LAW TRIBUNAL RULES, 2016]

ALL CLUBBED FOR HEARING

MEMORIAL ON BEHALF OF THE RESPONDENT

 TABLE OF CONTENTS

INDEX OF AUTHORITIES......................................................................................................ii

STATEMENT OF FACTS ...................................................................................................... iii

STATEMENT OF JURISDICTION......................................................................................... iv

ISSUES FOR CONSIDERATION ............................................................................................ v

SUMMARY OF ARGUMENTS .............................................................................................. vi

ARGUMENTS ADVANCED ................................................................................................... 7

I. THE REMOVAL OF MS. ALICENT AS CEO WAS VALIDLY CARRIED OUT IN ACCORDANCE

WITH THE COMPANIES ACT AND RULES .................................................................................. 7

A. The BoD is Vested with the Power to Remove KMPs ............................................... 7

B. In Any Event, The PNJ were Complied with .............................................................. 8

II. CLAIMS OF OPPRESSION AND MISMANAGEMENT ARE INVALID AND UNFOUNDED ........... 9

A. The Petitioner does not Meet the Criteria to Seek Remedy under Section 241 .......... 9

B. in any event, the threshold to prove oppression and mismanagement is not met ..... 10

PRAYER FOR RELIEF .......................................................................................................... 12

i
 INDEX OF AUTHORITIES

CASES

Ajit Kumar Nag v. General Manager (PJ), Indian Oil Corpn. Ltd., Haldia, AIR 2005 SC 4217.

................................................................................................................................................ 8

Cyrus Investment Pvt Ltd. v. Tata Sons Ltd., (2020) SCC OnLine NCLAT. ......................... 11

K.R.S. Narayana Iyengar v. T.A. Mani, (1959) SCC OnLine Mad 134. ................................. 11

Maneka Gandhi v. Union of India, AIR 1978 SC 597............................................................... 8

P.D. Agrawal v. State Bank of India & Ors., AIR 2006 SC 2064. ............................................ 8

Rajahmundary Electric Supply Corpn. Ltd. v. A Nageshwara Rao, (1955) 2 SCR 1066. ...... 11

Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd. (2021) 9 SCC 449. .................. 9

Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd. 2017 SCC Online NCLAT 261.

.............................................................................................................................................. 10

V.S. Krishnan v. Westfort Hi-tech Hospital Ltd., (2008) 3 SCC 363. .................................... 11

STATUTES

The Companies Act, 2013, § 2 (51) (i), The Gazette of India, pt. II sec. 1 (August 30, 2013) . 7

RULES

The Companies (Meetings of Board and its Powers) Rules, 2014. ........................................... 7

TREATISES

Black’s Law Dictionary, 11th ed. (2019)................................................................................. 11

INTERNATIONAL CASES

In re Albert David Ltd., [1964] 68 CWN 163 .......................................................................... 11

ii
 STATEMENT OF FACTS

Ms. Alicent Hightower was appointed Chief Executive Officer of Caraxes and Co. Ltd.

However, on October 24, 2019, the Board of Directors of Caraxes voted to remove Ms. Alicent

from her position. Ms. Alicent claimed a violation of the principles of natural justice as she

was not provided the opportunity to make a representation before the Board. The proposal was

then approved at the Extraordinary General Meeting with the requisite majority. After her

representation to the Board was denied, she filed an application with the National Company

Law Tribunal (NCLT) challenging the Board's decision to remove her.

Viserys Targaryen, an Independent Director supporting Alicent, suggested that, “commercial

wisdom dictates that the decisions concerning the management and the expansion of the

business carried out by the CEO. However, Ms. Alicent’s decisions were often interfered with

which adversely impacted the performance of Caraxes”. Viserys also approached the NCLT

against Caraxes, claiming oppression and mismanagement. Noting the similarity in issues, the

NCLT clubbed the matters for hearing on October 5, 2022.

Hence, the present matter.

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 STATEMENT OF JURISDICTION

The Respondent, most humbly and respectfully, submit that this Hon’ble Tribunal has the

requisite jurisdiction all of the following matters:

a. C.P. No. xxxx of 2022, filed under Section 241 of the Companies Act, 2013, read with

Rule 20 of the National Company Law Tribunal Rules, 2016

b. C.P. No. xxxx of 2022, filed under Section 241 of the Companies Act, 2013, read with

Rule 20 of the National Company Law Tribunal Rules, 2016

The aforementioned matters have been clubbed for hearing.

All of which is urged in detail in the written submission and is submitted most respectfully.

iv
 ISSUES FOR CONSIDERATION

I. WHETHER MS. ALICENT WAS REMOVED AS CEO IN ACCORDANCE WITH THE

PROCEDURE LAID DOWN IN THE COMPANIES ACT AND RULES?

II. WHETHER OPPRESSION AND MISMANAGEMENT MAY BE CLAIMED?

v
 SUMMARY OF ARGUMENTS

I. THE REMOVAL OF ALICENT AS CEO WAS VALIDLY CARRIED OUT IN ACCORDANCE

WITH THE COMPANIES ACT AND RULES

It is submitted that Ms. Alicent was validly removed as Section 179 of the Companies Act read

with Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 permits the

removal of Key Managerial Personnel. Moreover, there is no violation of principles of natural

justice as the doctrine of audi alteram partem is subject to certain exceptions.

II. CLAIMS OF OPPRESSION AND MISMANAGEMENT ARE INVALID AND UNFOUNDED

It is submitted that firstly, the claim of oppression and mismanagement is not maintainable

under Section 244 of Companies Act, and secondly, that in any event, that the company is not

liable for oppression and mismanagement

vi
 ARGUMENTS ADVANCED

I. THE REMOVAL OF MS. ALICENT AS CEO WAS VALIDLY CARRIED OUT IN

ACCORDANCE WITH THE COMPANIES ACT AND RULES

Ms. Alicent, as Chief Executive Officer (CEO), is considered a “Key Managerial Personnel”

[hereinafter “KMP”], within the meaning of Section 2(51)(i) of the Companies Act, 20131

[hereinafter, “the Act”]. Thus, she is subject to provisions relating to removal of KMPs under

the Act as well as the Companies (Meetings of Board and its Powers) Rules, 20142 [hereinafter,

“the Rules”]. In this context, it is submitted, firstly, that the Board of Directors [hereinafter

“BoD”] is vested with the power to remove key managerial personnel [A]; and secondly, that

in any event, the principles of natural justice were complied with [hereinafter “PNJ”] [B] and

thus, that the removal was carried out in accordance with procedure.

A. THE BOD IS VESTED WITH THE POWER TO REMOVE KMPS

The power to remove KMPs flows from Section 179 of the Act,3 dealing with the powers of

the BoD, read with Rule 8 of the Rules.4 These provisions state that the power to appoint or

remove KMPs shall be exercised by the BoD only by means of resolutions passed at meetings.

Further, the power to remove KMPs does not fall under the list of powers required to be

exercised with the consent of the General Meeting via a Special Resolution under Section 180.5

In the present case, Ms. Alicent’s removal by the BoD fulfils the aforementioned requirements

– removal only by way of resolution. General corporate practice does not substitute as law, and

thus, any deviance from the same would not constitute a violation of the prescribed procedure.

1
The Companies Act, 2013, § 2 (51) (i), The Gazette of India, pt. II sec. 1 (August 30, 2013).
2
The Companies (Meetings of Board and its Powers) Rules, 2014.
3
Supra note 1, at § 179.
4
Supra note 2, at Rule 8.
5
Supra note 1, at § 180.

7
Therefore, it is submitted that the removal of Ms. Alicent via the tabling of a resolution to that

effect by the BoD on October 24, 2019, does not fall contrary to the procedure prescribed under

the Act and Rules.

B. IN ANY EVENT, THE PNJ WERE COMPLIED WITH

Section 424 of the Act requires Tribunals to be guided by the PNJ in their proceedings.

However, the PNJ are subject to certain exceptions. Pertinently, the audi alteram partem rule,

which requires that no one be condemned unheard, does allow for post-decisional hearing in

extraordinary circumstances.

This rule was propounded by the Supreme Court in the case of Maneka Gandhi v. Union of

lndia.6 The Court held that if in the interest of the general public, quick action was fundamental

and it is impractical to manage the cost of a hearing before the decision, it ought to be managed

after the decision. Further, it has been held that the principles of natural justice cannot be put

in a straitjacket formula; instead, it must be seen in circumstantial flexibility.7 The PNJ are not

rigid or immutable, and must yield to and change with exigencies of situations.8

In the present case, it is submitted that the act of tabling the resolution for Ms. Alicent’s

removal constituted an emergent circumstance, requiring prompt action, and thus, it was not

practicable to give Ms. Alicent prior notice of hearing. As CEO, she indulged several activities

against company interests – she started her own business, and allowed activities detrimental to

the company to continue under her supervision. In consideration of the public nature of the

company, as well as the company’s reputation, prompt action was necessary.

However, in consideration of the PNJ, a post-decisional hearing was afforded to Ms. Alicent,

and she was given the opportunity to make her representation to the BoD. Nonetheless, being

6
Maneka Gandhi v. Union of India, AIR 1978 SC 597.
7
P.D. Agrawal v. State Bank of India & Ors., AIR 2006 SC 2064.
8
Ajit Kumar Nag v. General Manager (PJ), Indian Oil Corpn. Ltd., Haldia, AIR 2005 SC 4217.

8
void of merit, the representation was rightly rejected. Thus, it is submitted that the company

complied with the requirements of the audi alteram partem rule in its decision, and thus, the

resolution passed is valid.

II. CLAIMS OF OPPRESSION AND MISMANAGEMENT ARE INVALID AND UNFOUNDED

Oppression and mismanagement are dealt with under Chapter XVI of the Act, and Sections

241 and 244 therein provide for the circumstances and criteria, respectively, in which aggrieved

members may approach the NCLT to seek relief from the Tribunal as mentioned under Section

242. In this context, it is submitted, firstly, that the Petitioner does not meet the criteria to seek

remedy under Section 241 [A], and secondly, that in any event, the threshold to prove

oppression and mismanagement is not met [B].

A. THE PETITIONER DOES NOT MEET THE CRITERIA TO SEEK REMEDY UNDER SECTION 241

In this regard, it is submitted, firstly, that the Petitioner, for reason of not being a member,

cannot seek relief from this Hon’ble Tribunal [i]; secondly, that in any event, the petitioner

lacks the numerical strength required to seek relief, and does not meet the criteria to waive the

requirement.

i. The Petitioner, for Reason of not Being a Member, Cannot Seek Relief from this

Hon’ble Tribunal

The language of Section 241, which allows any member of a company to complain about

oppression and mismanagement, clearly restricts the remedy under Section 242 to only

members, and that too, for raising grievances of as a member and not in any other capacity.9 It

9
Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd. (2021) 9 SCC 449.

9
is submitted that Mr. Viserys, as a former Independent Director, does not meet the requirements

to seek relief since he is not a member of the company.

ii. In any Event, The Petitioner Lacks the Numerical Strength Required to Seek

Relief, and does not Meet the Criteria to Waive the Requirement

Section 244 lists certain requirements of numerical strength for the right to apply for an action

under Section 241. It submitted that even in the event that we consider Mr. Viserys as a fit

member to seek relief from this Hon’ble Tribunal, the numerical requirement is not fulfilled.

Thus, since Mr. Viserys is the only individual approaching this Hon’ble Tribunal, relief cannot

be given.

However, the Tribunal has the discretion to waive this numerical requirement if it deems such

waiver to be necessary. The NCLAT has devised a four-step test to determine whether the

numerical requirement of Section 244 may be waived or not.10 The very first requirement is

that the petitioner must be members of the company in question, and thus, if the petitioners are

not members, the application is to be rejected outright.

In the present case, since Mr. Viserys is not a member of the company, the numerical

requirement cannot be waived, and thus, this application must be rejected as not maintainable.

B. IN ANY EVENT, THE THRESHOLD TO PROVE OPPRESSION AND MISMANAGEMENT IS NOT

MET

However, even if we assume, arguendo, that Mr. Viserys – not being a member, and without

the requisite numerical strength – may file an application before this Hon’ble Tribunal, the

threshold to claim oppression and mismanagement is not met.

10
Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd. 2017 SCC Online NCLAT 261.

10
In terms of Section 242, the NCLT may interfere if it is of the opinion that the company’s

affairs have been or are being conducted in a manner prejudicial to any the interest of a member,

the public, or the company. This test for the NCLT’s interference is high and stray or lone acts,

though wrongful do not amount to oppression or mismanagement.

Oppression means a lack of probity and fair dealing in the affairs of the company to the

prejudice of some members.11 To constitute oppression, it must be proved that there has been

a wrongful act, the conduct of which is mala fide and against good conduct.12 On the other

hand, mismanagement implies that the affairs of the company are being conducted in a manner

prejudicial to public interest or in a manner prejudicial to the interests of the company.13

Additionally, petitioners may only allege oppression in their capacity as members, not in other

roles such as directors.14 Further, prejudice means damage or detriment to one’s legal rights or

claims and prejudicial is defined as unfairly disadvantageous.15 Indian courts have relied on a

foreign interpretation of the term, which states that prejudice is an outcome of the oppression.16

In the present case, it is submitted that oppression is not made out. No wrongful act has been

established by the Petitioner against the Respondent. Further, Mr. Viserys lacks the capacity to

bring a claim of oppression as he is not a member of the company. Thus, in the absence of

oppression, prejudice cannot be established. Thus, it is submitted that claims of oppression and

mismanagement are both invalid, as well as unfounded.

11
Rajahmundary Electric Supply Corpn. Ltd. v. A Nageshwara Rao, (1955) 2 SCR 1066.
12
V.S. Krishnan v. Westfort Hi-tech Hospital Ltd., (2008) 3 SCC 363.
13
In re Albert David Ltd., [1964] 68 CWN 163.
14
K.R.S. Narayana Iyengar v. T.A. Mani, (1959) SCC OnLine Mad 134.
15
Black’s Law Dictionary, 11th ed. (2019).
16
Cyrus Investment Pvt Ltd. v. Tata Sons Ltd., (2020) SCC OnLine NCLAT.

11
 PRAYER FOR RELIEF

Wherefore, in the light of facts stated, issues raised, arguments advanced and authorities cited,

it is most humbly prayed before this Hon’ble Tribunal that it may be pleased to hold that:

a. Ms. Alicent was validly removed from her position as CEO of Caraxes & Co. Ltd

b. Dismiss Mr. Viserys’ petition claiming oppression and mismanagement in the affairs

of the company

and pass any other order in favour of the RESPONDENT which this Court may deem fit in the

ends of justice, equity and good conscience.

All of which is most humbly and respectfully submitted.

12