COMPANY LAW BOARD, CHENNAI BENCH
K.N.
Shanth Kumar
v.
Printers
(Mysore) (P.) Ltd.
K.K.
Balu, Vice Chairman
Petition
No. CP(10) of 2007
March
27, 2007
Section 397/398 of the Companies Act, 1956 – Oppression and
mismanagement - Petitioner was director and editor of respondent a publishing
company - He filed petition under section 397/398 alleging his removal from
post of editor and appointment of second respondent as editor without sanction
of board of directors - CLB, by an exparte interim order, directed respondents
to maintain status quo regarding position of petitioner as editor - Respondents
sought for quashing of said order contending that it had been practice in
company for managing director to appoint editor and petitioner’s appointment as
editor was also not by board of directors, but by second respondent, who was
occupying position of a managing director and, thus, appointment of second
respondent as editor of publications followed by statutory declarations was
decision taken by competent person in normal course of business - Whether since
in terms of articles of association of
company, power of managing director was not absolute, but only subject to
supervision, control and directions of board of directors, appointment or
removal of editor could be made only with sanction of board of directors of
company - Held, yes – Whether, therefore, board of directors of company would
convene meeting to deliberate and decide appointment of editor and till that
process was over, status quo in regard to position of petitioner as editor
would be maintained – Held, yes
The first respondent company, engaged in the business of publishing newspapers and periodicals, was managed by the petitioner, second respondent and the wife of third respondent being the whole time directors under the supervision of the board of directors constituted by among others, three non-executive directors. In a petition filed by the petitioner under section 397/398, alleging his removal from the post of editor and appointment of second respondent in his place the CLB, by an ex-parte interim order, directed the respondents to maintain status quo in regard to position of the petitioner as editor of the publications until further order. The respondents, while urging for vacation of the ex-parte interim order, contended that the change of editorship and consequent filing of declaration as required under the Press and Registration of Books Act, 1867 were not amenable to the jurisdiction of the CLB, and that it had been the practice in the company for managing director to appoint the editor and the petitioner’s appointment as editor was also not by board of directors, but by the second respondent, who was occupying position of a managing director, and, thus, appointment of the second respondent as editor of the publications followed by the statutory declarations was decision taken by the competent person in the normal course of business.
Clause 22(b) of the articles of association of the company stipulated that the managing director would, subject to the supervision, control and directions of the board of directors, have substantial powers of management and would exercise all those powers of the management vested with the board of directors of the company and not specifically required to be exercised only at a meeting of the board of directors of the company. It was, therefore, abundantly clear that the power of managing director was not absolute, but only subject to the supervision, control and directions of the board of directors. The minutes of the board meeting dated 19-10-2001, established the fact that the resignation of the third respondent from the post of director, managing director and editor was accepted by the board of directors of the company. The agenda regarding appointment of editors of the company, pursuant to a communication dated 12-01-2002 of wife of third respondent addressed to the board of directors came to be deliberated at a board meeting, upon which the board felt that there was no need for appointing anyone else as editor in the place of the petitioner, which was concurred by the second respondent. It, therefore, followed that any appointment of editor would only be with sanction of the board of directors of the company. The assertion of the second respondent regarding the alleged removal of the petitioner and his appointment as editor was supported by mere pleadings without any documentary proof whatsoever, save the disputed statutory declarations. The existing records would reveal that appointment of the second respondent as editor was, prima facie, without sanction of the board. Even otherwise, if the joint managing director had exercised his power as claimed by him, such exercise of the power of appointment ought to have been in consultation of the board of directors of the company. In view of the above, the board of directors of the company would convene a board meeting to deliberate and decide the appointment of editor for the publications and arrange to file necessary declarations under the Act, 1867. Any decision of the board of directors taken in that behalf, however, would be subject to outcome of the main petition. Till then, the order of status quo, in terms of the order dated 20-02-2007, would remain in force. [Para 8]