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CASE NO.: Appeal (civil)  1473 of 2008

PETITIONER: Shri V.S. Krishnan & Ors

RESPONDENT: M/s Westfort Hi-tech Hospital Ltd. & Ors

DATE OF JUDGMENT: 21/02/2008

BENCH: Tarun Chatterjee & P. Sathasivam

JUDGMENT: JUDGMENT

CIVIL APPEAL NO.   1473                 OF 2008 (Arising out of SLP (C) No.19882 OF 2006) WITH CIVIL APPEAL NO.    1474 OF 2008 (Arising out of S.L.P. (C) No. 20367/2006) Dr. P.P. Mohanan & Ors.                               .... Appellant (s)                 Versus M/s Westfort Hi-tech Hospital Ltd. & Ors.             .... Respondent(s) AND CIVIL APPEAL NO.      1475 OF 2008 (Arising out of S.L.P.(C) No. 4673/2006) Shri V.S. Krishnan & Ors.                                     .... Appellant (s)                 Versus M/s Westfort Hi-tech Hospital Ltd. & Ors.             .... Respondent(s) AND CIVIL APPEAL NO.  1476   OF 2008 (Arising out of S.L.P. (C) No. 6688/2007) Shri V.S. Krishnan & Ors.                                     .... Appellant (s)                 Versus M/s Westfort Hi-tech Hospital Ltd. & Ors.             .... Respondent(s)

P. Sathasivam, J.

1)      Leave granted. 2)      These appeals are directed against the judgment and  order of the High Court of Kerala at Ernakulam dated   14.11.2006  in Company Appeal Nos. 14/2006, 15/2006,  17/2006 and 18/2006 which were filed against the order  dated 5.7.2006 in Company Petition No.63 of 2005 of the  Company Law Board, Additional Principal Bench, Chennai   and  order dated 1.3.2006 in Company Appeal No.5 of 2006  which was filed against the order dated 13.2.2006 in Company  Appeal No. 145 of 2005 in Company Petition No.63/2005 of  the Company Law Board.  3)      The facts in S.L.P. (C) No. 19882 of 2006 are sufficient to  dispose of all these appeals.           Shri V.S. Krishnan and five others, who filed Company  Petition No. 63 of 2005 before the Company Law Board,  Additional Principal Bench, Chennai under Sections 397 and  398 read with Sections 402, 403 and Schedule XI of the  Companies Act, 1956 are the appellants (Petitioners in SLP (C)  No. 19882 of 2006).  For convenience, we shall refer the  parties as arrayed in Company Petition No. 63/2005 on the  file of the Company Law Board (in short "CLB"). 4)      According to the petitioners, they were collectively

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holding in excess of 1/10th of the issued share capital of M/s  Westfort Hi-Tech Hospital Limited (hereinafter referred to as  "the Company").  Aggrieved on account of a series of purported  acts of oppression and mismanagement in the affairs of the  Company, namely, illegal (a) convening of the eleventh annual  general meeting; (b) issuances of further shares on right basis;  (c) exclusion of the petitioners from the office of directors; (d)  election of respondents 16 to 24 as Directors; (e) transfer of  shares; (f) breach of fiduciary duties by respondent Nos. 2 & 3  towards the Company as Directors; (g) manipulation of  minutes of the meetings and other records; (h) statutory  violations; (i) irregularities in relation to the Investigation  Centre in the Hospital premises of the Company etc. invoked  the provisions of Sections 397 and 398 of the Companies Act,  1956 (hereinafter referred to as "the Act") praying for the  following reliefs: (i)     to appoint an administrator for \026 (a)     regulating the future affairs of the company; (b)     leasing/licensing the area earmarked for the  Investigation Centre; and (c)     realizing the outstanding amounts due from  respondent Nos. 2-4, 22 and 23 in respect of the  Investigation Centre; (ii)    to declare that the annual general meeting held on  29.09.2005 and the resolutions passed thereon are  invalid;          (iii)   to declare that respondent Nos. 2-4 vacated the office  as Directors under Section 283 of the Act; (iv)    to declare that the further issue of shares is illegal and  void; (v)     to declare that the election of respondent Nos. 16-23  as Directors is invalid; and (vi)    to declare that petitioner Nos. 1-4 and respondent  No.14 shall be deemed to have been re-elected as  Directors. In support of their above claims, they placed relevant  materials and cited various instances alleged to have been  committed by the second respondent, who is the Chairman of  the first respondent-Company. 5)      Respondent Nos. 6-9 before the CLB supported the stand  taken by the petitioners.  Respondent No.14 also adopted the  stand of the petitioners and further informed that he has  already withdrawn the civil suit challenging the issue of shares  and election of Directors at the eleventh annual general  meeting of the Company.  6)      The case of respondent Nos. 1 & 2 are - Westfort Hi-Tech  Hospital Ltd. constituted by the second respondent and his  family members have been running the Hospital since 1989  independently, while the Company has been promoted in the  year 1994 establishing a high speciality hospital by  respondent Nos. 2 & 3 who are the promoter Directors.  These  respondents are permanent Directors and are not liable for  retirement and cannot be removed from the Board as  envisaged in Article 87.  At each annual general meeting, one  third of the remaining Directors are liable to retire by rotation.   The alleged acts complained of in the petition do not, in any  way, constitute oppression.  It was pointed out that past and  concluded acts complained of by the petitioners, do not fall  within the purview of Section 397 of the Act.  The Company,  running a high speciality hospital, is making profits and if  ordered to be wound up, the Company and its shareholders  would seriously be prejudiced. There are no charges of  financial irregularities in the affairs of the Company leveled  against the respondents.  The petitioners and respondent  No.14 though continued to be Directors since the year 1998

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hardly attended the Board meetings from time to time.  When  the petitioners were not elected by the members at the  eleventh annual general meeting, they have come out with the  petition with untenable allegations.  Every Director other than  respondent Nos. 2 & 3 is bound to retire one day or the other.   Any grievance in the capacity as Director cannot be remedied  under Section 397 of the Act.  No relief under Section 397  would arise if the conduct complained of by the petitioner does  not relate to his status as a shareholder.  In addition,  respondent Nos. 2 & 3 also furnished various details in  support of their stand and pleaded for dismissal of the  Company Petition. 8)      With the above pleadings and after elaborate arguments  and framing the main issue namely, "whether the petitioners  have made out a case under Sections 397 and 398 and are  entitled for the reliefs claimed in the Company Petition", the  CLB, on 5.7.2006 passed the following order: "I) It is hereby declared that \026 (a)     further issue of shares impugned in the  Company petition is illegal and void; (b)     the election of respondent Nos. 16 to 23 as  Directors is set aside; (c)     the retiring directors namely, petitioner Nos. 1-4  and the respondent Nos. 5 & 14 shall be deemed  to have been automatically re-appointed as  Directors at the eleventh annual general meeting  and shall continue till the date of the twelfth  annual general meeting for the year 2006; and (d)     the transfer of shares by Purushottaman in  favour of respondent Nos. 16 to 21 and others is  invalid.  However, Purushottaman is free to  transfer his shares in accordance with the law. (II)    The Company will convene and hold the twelfth  annual general meeting in accordance with law  to transact, inter alia, the following business: (a)     consideration of accounts, balance sheet and  the reports of the board of directors and  auditors for the year 2005-2006; (b)     appointment of directors in the place of those  retiring and in the existing vacancies; (c)     appointment of and the fixing of the  remuneration of, the auditors; and (d)     further issue of shares. (III)   The petitioners as well as the respondent Nos. 2  to 15 are at liberty with a view to meet the  financial requirements, if any, for running the  hospital, to contribute any amount by way of  unsecured loans carrying interest at the  prevailing bank rate to be repaid from and out of  the future share application money which may  be subscribed by the members, on approving the  resolution for further issue of shares at the  twelfth annual general meeting. (IV)    Hon’ble Mr. Justice K. John Mathew (Retd.)  Ernakulam will preside over the twelfth annual  general meeting of the Company, in terms of this  order.  He is at liberty to take the services of any  practicing Company Secretary of his choice, in  discharge of this present assignment.  The  remuneration of the Chairman and the  Practicing Company Secretary fixed in  consultation with the Company shall be borne  by the latter. (V)     The Chairman will decide the entire modalities of  convening holding and conducting of the twelfth

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annual general meeting in consultation with the  company. (VI)    The Board of Directors of the Company shall  carry on its business strictly in accordance with  the articles and initiate such action in respect of  the Investigation Centre, as may be deemed  necessary. (VII)   The Chairman of the meeting will forward a  report on the proceedings of the twelfth annual  general meeting within a week from the  conclusion of the twelfth annual general meeting  of the company. With the above directions, the company petition  stands disposed of.  No order as to costs."

Aggrieved by the above order, respondents 1 & 2 i.e., M/s  Westfort Hi-Tech Hospital Ltd. and its Chairman, K.  Mohandas filed Company Appeal No. 14 of 2006 before the  High Court of Kerala.  By the impugned judgment, the Division  Bench of the High Court, after taking note of pleadings of both  the parties, rival contentions and materials placed before it,  partially allowed the appeals and partially set aside the order  of the Company Law Board.  The operative portion of the  impugned order of the High Court reads as follows: "\005..We hold that the general body meeting was held with  valid notice.  Issuance of right shares needs no interference  and Company Law Board went wrong in setting aside the  issue of duplicate shares to Purushothaman and subsequent  transfer of his shares.  We also hold that re-appointment of  the retired directors after the date fixed for annual general  body meeting is not correct and that part of the decision is  set aside.  But, we hold that CLB is right in setting aside the  election of eight directors (though for other reasons \026 mainly  for technical irregularity) and special resolution under  Section 81(1A) to issue shares to the public.  We order that  Petitioners and other NRI shareholders shall be given one  month’s time from today to accept the rights shares offered  and it is for them to accept the offer or not.  As offered by the  counsel appearing for the Company and Chairman, NRI  Directors also will be re-appointed to the Board in proportion  to their share holdings as on the date of next annual general  meting to be conducted after the expiry of 30 days from  today.  Company Law Board directed that next annual  general body meeting shall be held on 30.9.2006.  It is stated  that it was not conducted due to pendency of the case.   Therefore, it shall be positively conducted on or before  30.12.2006.  In conducting the 12th annual general body  meeting, procedure suggested by the Company Law Board  shall be complied with and directions in paragraph 7 II, IV,  V, VI and VII are not interfered with.  Till next general body  meeting is held, no policy decision shall be taken by the  Board."

Questioning the above order of the High Court, these appeals  have been filed before this Court by way of special leave. 9)      We heard Mr. C.A. Sundaram and Mr. Shyam Divan,  learned senior counsel for the appellants and Mr. R.F.  Nariman, learned senior counsel for the contesting  respondents. 10)     In order to find out whether the petitioners were  successful in making out a case for interference by the CLB by  invoking Sections 397 and 398 of the Companies Act, it is but  proper to refer those provisions, ultimate decision of the CLB  and the High Court.  Chapter VI of the Companies Act deals  with prevention of oppression and mismanagement.  Section

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397 deals with relief in cases of oppression and Section 398  deals with relief in cases of mismanagement.  Sections 397 &  398 read as under: "397. Application to Tribunal for relief in cases of  oppression \026 (1) Any member of a company who complain  that the affairs of the company are being conducted in a  manner prejudicial to public interest or in a manner  oppressive to any member or members (including any one or  more of themselves) may apply to the Tribunal for an order  under this section, provided such members have a right so  to apply in virtue of section 399. (2)     If, on any application under sub-section (1), the Court  is of opinion \026         (a)     that the company’s affairs are being conducted  in a manner prejudicial to public interest or in a  manner oppressive to any member or members; and         (b)     that to wind up the company would unfairly  prejudice such member or members, but that  otherwise the facts would justified the making of a  winding-up order on the ground that it was just and  equitable that the company should be wound up, The Tribunal may, with a view to bringing to an end  the matters complained of, make such order as it  thinks fit." 398. Application to Tribunal for relief in cases of  mismanagement - (1) Any members of a company who  complain \026 (a)     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; or (b)     that a material change not being a change  brought about by, or in the interests of, any creditors  including debenture holders, or any class of  shareholders, of the company has taken place in the  management or control of the company, whether by an  alteration in its Board of directors, or manager, or in  the ownership of the company’s shares, or if it has no  share capital, in its membership, or in any other  manner whatsoever, and that by reason of such  change, it is likely that the affairs of the company will  be conducted in a manner prejudicial to public interest  or in a manner prejudicial to the interests of the  company, may apply to the Tribunal for an order under this section,  provided such members have a right so to apply in virtue of  section 399. (2)     If, on any application under sub-section (1), the  Tribunal is of opinion that the affairs of the company are  being conducted as aforesaid or that by reason of any  material change as aforesaid in the management or control  of the company, it is likely that the affairs of the company  will be conducted as aforesaid, the Tribunal may, with a view  to bringing to an end or preventing the matters complained  of or apprehended, make such order as it thinks fit." 11)     In a number of judgments, this Court considered in  extenso the scope of Sections 397 and 398.  The following  judgments could be usefully referred to:    (a)     Needle Industries (India) Ltd. and Others vs.  Needle Industries Newey (India) Holding Ltd.  and Others, (1981) 3 SCC 333. (b)     M.S. Madhusoodhanan & Anr. vs. Kerala  Kaumudi (P) Ltd. & Ors., (2004) 9 SCC 204. (c)     Dale and Carrington Investment (P) Ltd. &  Anr. vs. P.K. Prathapan & Ors., (2005) 1

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SCC 212. (d)     Sangramsinh P. Gaekwad & Ors. Vs.  Shantadevi P. Gaekwad (Dead) Through  L.Rs. & Ors. (2005) 11 SCC 314 (e)     Kamal Kumar Dutta & Anr. vs. Ruby  General Hospital Ltd. & Ors. (2006) 7 SCC  613. From the above decisions, it is clear that oppression would be  made out: (a)     Where the conduct is harsh, burdensome and wrong. (b)     Where the conduct is mala fide and is for a collateral  purpose where although the ultimate objective may be in  the interest of the company, the immediate purpose  would result in an advantage for some shareholders vis- ‘-vis the others.   (c)     The action is against probity and good conduct. (d)     The oppressive act complained of may be fully permissible  under law but may yet be oppressive and, therefore, the  test as to whether an action is oppressive or not is not  based on whether it is legally permissible or not since  even if legally permissible, if the action is otherwise  against probity, good conduct or is burdensome, harsh or  wrong or is mala fide or for a collateral purpose, it would  amount to oppression under Sections 397 and 398. (e)     Once conduct is found to be oppressive under Sections  397 and 398, the discretionary power given to the  Company Law Board under Section 402 to set right,  remedy or put an end to such oppression is very wide. (f)     As to what are facts which would give rise to or constitute  oppression is basically a question of fact and, therefore,  whether an act is oppressive or not is  fundamentally/basically a question of fact. 12)     Before going into the claims of both parties, it is useful to  refer the scope of Section 10F of the Companies Act which  provides appeal against the order of the Company Law Board.   Section 10F reads as under: "10F. Appeals against the order of the Company Law  Board  - Any person aggrieved by any decision or order of  the Company Law Board made before the commencement of  the Companies (Second Amendment) Act, 2002 may file an  appeal to the High Court within sixty days from the date of  communication of the decision or order of the Company Law  Board to him on any question of law arising out of such  order:         Provided that the High Court may, if it is satisfied that  the appellant was prevented by sufficient cause from filing  the appeal within the said period, allow it to be filed within a  further period not exceeding sixty days." It is clear that Section 10F permits an appeal to the High  Court from an order of the Company Law Board only on a  question of law i.e., the Company Law Board is the final  authority on facts unless such findings are perverse based on  no evidence or are otherwise arbitrary.  Therefore, the  jurisdiction of the appellate Court under Section 10F is  restricted to the question as to whether on the facts as noticed  by the Company Law Board and has placed before it, an  inference could reasonably be arrived at that such conduct  was against probity and good conduct or was mala fide or for a  collateral purpose or was burdensome, harsh or wrongful.   The only other basis on which the appellate Court would  interfere under Section 10F was if such conclusion was (a)  against law or (b) arose from consideration of irrelevant  material or (c) omission to construe relevant materials.   13)     With this statutory background, let us find out whether  the conduct of respondents 1 and 2 (M/s Westfort Hi-Tech

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Hospital Ltd. & Mr. K.M. Mohandas, Chairman) has been  harsh, burdensome and wrong or mala fide or for collateral  purposes or against probity and good conduct.  In addition, we  have to find out whether such conduct was prejudicial to the  interest of the petitioners/appellants and the conclusion  arrived at by the CLB or the High Court is acceptable in the  facts and circumstances of the case. 14)     According to the petitioners, they are native of Thrissur,  Kerala State but settled abroad and contributed to the tune of  1.28 crores by way of share capital.  It is also their case that  respondent No.2 (the Chairman of the Company) is heavily  depending on the financial assistance provided by these  petitioners (NRIs), on the understanding that they would be  offered directorship permanently.  Article 77 provides that the  Directors are required to hold 2500 equity shares in the  Company as qualification shares.  By pointing out the  contents of letter dated 04.12.2001 of the second respondent,  petitioners have claimed that because of his assurance that  they would be made Directors they contributed more to the  share capital of the Company which eased the financial  crunch and also helped to develop facilities in the Hospital.  In  other words, according to them, the second respondent has  been heavily dependent upon the financial backup provided by  NRIs and the understanding to offer directorship to such  contributors.  It is the grievance of the petitioners that the  second respondent in spite of getting substantial money  towards share capital did not fulfill the promise made by him  as per his letter dated 04.12.2001 addressed to the  petitioners.  On this aspect, the CLB while accepting the stand  of the petitioners has concluded that there is a ’legitimate  expectation’ in favour of the petitioners 1-4 for their  continuance in the Board of Directors of the Company.   15)     The issue of   re-appointment of retired directors on the  theory of ’legitimate expectation’ was considered by the High  Court in detail.  It is the stand of the second respondent  (Chairman of the Company), that there was no specific  promise that these petitioners would be given directorship  permanently.  The materials placed and discussed before the  CLB show that there was full disclosure of retirement of one- third directors and election to that place are in accordance  with the Act and Articles of Association and theory of  ’legitimate expectation’ has no application.  It was also  highlighted before the CLB as well as the High Court that out  of eight directors elected, six were not related to Chairman.  It  was asserted that Chairman and his family stood personal  guarantee to Rs.21.99 crores whereas NRI directors have not  stood personal guarantee for any loan.  Though CLB has  observed that the principle of ’legitimate expectation’ is  applicable in the case of the petitioners, in the light of the  materials placed and the stand taken by the contesting  respondents, we are of the view that the claim ’legitimate  expectation’ cannot be extended to and there is no specific  promise that the petitioners would be given directorship  permanently.  Even otherwise, the same cannot be accepted in  view of the mandate of the statute that 1/3rd of the directors  have to retire in a year by rotation.  Accordingly, we accept the  conclusion arrived at by the High Court and reject the decision  of the CLB on this aspect. 16)     Now let us consider another important issue i.e., validity  of the Annual General Meeting which held on 29.09.2005.   According to the petitioners, there was no proper notice in  terms of Section 172 read with Section 53(1) and (2) of the  Companies Act, hence, they had no knowledge about the said  meeting and in view of the same, the decisions taken in the  said meeting are null and void and not enforceable.  The pith

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and substance of the ground of attack relating to oppression  and mismanagement is the convening of XIth Annual General  Body Meeting without proper notice.  In such circumstances,  we have to find out whether the Annual General Body Meeting,  convened on 29.09.2005, was in violation of the statutory  requirements or not.  According to the second respondent,  XIth Annual General Body Meeting was convened on  29.09.2005 at 11.00 a.m. at Casino Hotels Limited, Trichur.   In fact, in the Board meeting, held on 24.08.2005, a reference  was made to the next Annual General Meeting which states  that the Board decided to hold the meeting on Thursday, the  29th September, 2005 at 11.00 a.m. at Casino Hotels Limited,  Trichur.  It further states that the particulars as to the date,  place and time for the meeting was incorporated in the draft  notice and thereafter it was approved and Sri K. M. Mohandas,  CMD was authorized to sign the same.  It is relevant to  mention that the above Board meeting was attended by the  first petitioner.  In such circumstances, it cannot be claimed  that the first petitioner and his supporters were not aware of  the meeting.          17)     It is relevant to mention that even though the CLB has  noticed respondent No.14 who was acting in association with  the petitioner Nos. 1-4 in the affairs of the company and  respondent Nos. 6-9 other directors participated in the AGM  held on 29.09.2005 raised an apprehension that whether mere  knowledge of the meeting would tantamount to serving notice  in terms of Section 172.  Section 172 of the Act speaks about  the contents and manner of service of notice and persons on  whom the same is to be served.  Sub-section (1) mandates that  every notice of a meeting of a company shall specify the place,  the day, hour of meeting and shall contain a statement of  business to be transacted thereat.  Sub-section (2) mandates  that notice of every meeting of the company shall be given to (i)  every member of the company, in any manner authorized by  sub-sections (1) to (4) of Section 53; (ii) persons entitled to a  share in consequence of the death or insolvency of a member,  by sending it through post in a pre-paid letter addressed to  them by name in India supplied for the purpose by the  persons claiming to be so entitled or until such address has  been so supplied (iii) the auditor of the company, in any  manner authorized by Section 53.  Sub-section (3) makes it  clear that the accidental omission to give notice to, or the non- receipt of notice by, any member or other person to whom it  should be given shall not invalidate the proceedings at the  meeting.  Apart from the above procedure, while sending  notice for any meeting, the procedure prescribed in Section 53  (1) and (2) of the Act has to be followed.  It is the case of  respondent Nos. 1 and 2 that proper notices in terms of  Section 172 read with Section 53 (1) and (2) have duly been  sent to all the share holders including the petitioners in  respect of the AGM dated 29.09.2005.  It was contended on  the side of the petitioners that in the absence of any other  corroborative evidence, it is not safe to accept the notices sent  through ’certificate of posting’ and it cannot be presumed that  the addressee had the knowledge of the meeting.  18)     The High Court has noticed that in the Board Meeting  held on 24.08.2005, it was decided to hold a next AGM on  29.09.2005 at 11.00 AM.  Item No. 4 reads as follows:-         "NOTICE OF THE NEXT ANNUAL GENERAL MEETING: The draft notice for the next Annual General Meeting  was read.  The Board then decided to hold the meeting on  Thursday, the 29th September, 2005 at 11.00 AM at Casino  Hotels Limited, Trichur.  The particulars as to date, place  and time for the meeting was incorporated in the draft  notice, and then it was approved, and Sri K.M. Mohandas,

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CMD was authorized to sign the same." It is clear from the materials placed, the said Board Meeting  was attended by the first petitioner.  Though on the basis of  the said information/knowledge it cannot be construed that  the same would satisfy the mandate of Section 172 read with  Section 53 (1) and (2) of the Act, the fact that a decision was  taken in the Board Meeting held on 24.08.2005 that next AGM  is to be held on 29.09.2005 at 11.00 AM at Casino Hotel,  Trichur cannot be ignored.  In addition to the same, as said  earlier, respondent No.14 and 6 to 9 who are supposed to be  netrual directors participated in the AGM held on 29.09.2005.   It is not the case of the respondent Nos. 1 and 2 or even the  petitioners that notice was dispensed with in respect of the  AGM held on 29.09.2005.  On the other hand, the respondents  have produced certificates of posting to establish the service of  notice on the directors and other shareholders.  It is also  demonstrated that those notices were given under certificate of  posting as provided under Section 53 (1) and (2) and evidence  for the same were also produced.  As pointed out earlier, the  first petitioner, being a party to the Board Meeting wherein  date, place and agenda of the AGM were fixed, cannot make a  complaint along with his supporters that they did not receive  notice of the meeting.  The materials placed clearly show that  NRI directors participated in the meeting and respondent  No.14 who was acting along with the appellants had also  participated.  Section 172 as well as Section 53 emphasized  "giving notice".  We have already adverted to how notice  should be given for AGM as per Section 172 (2) and Section 53  (1) and (2) of the Act.  In view of the fact that the company has  placed materials to substantiate that notices, in terms of the  above provisions, were given, as rightly pointed out by learned  senior counsel for the contesting respondents, statutory  presumption under Section 53 will apply though the said act  is rebuttable.  In view of the fact that there are materials to  show that notices were sent, the burden is on the addressee to  rebut the statutory presumption.  The High Court, on  verification of those materials, has concluded that "postal  receipt with post office seal was produced to show that notice  was sent to all shareholders by certificate of posting in the  correct address as per the report".  Sub-section (2) of Section  53 makes it clear that after expiry of 48 hours a notice duly  addressed and stamped and sent under certificate of posting is  deemed to have been duly served.  In M.S. Madhusoodhanan  vs. Kerala Kaumudi (P) Ltd. (supra), this Court held that the  fact of posting has to be proved by the sender and that  statutory presumption is only a rebuttable presumption.  In  the case on hand, dispatch of notice in time by certificate of  posting was proved.  In addition to the same, the High Court  has very much relied on the fact that first appellant was party  to the Board Meeting which decided the convening of AGM on  29.09.2005.  The above information pressed into service by  respondent Nos. 1 and 2 cannot, lightly be ignored.   19)     It is true that the CLB has found that only 40 out of 300  shareholders attended the meeting.  Based on the same, the  CLB accepted the case of the petitioners and found that the  AGM held on 29.09.2005 was defective.  Before the CLB as  well as the High Court, it was demonstrated by the contesting  respondents that in previous AGM also number of attendance  was below 35.  In the 9th AGM, the persons attended were 32  and 10th AGM, it was 35.  In this regard, it is relevant to refer  in the order in I.A. 4727 of 2005 in O.S. 942 of 2005 which is  a suit filed by respondent No.14.  The Civil Court, based on  the documents produced, has concluded that proper notice  was served on the shareholders with regard to AGM held on  29.09.2005.  The person who filed the said suit had prayed for

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injunction against conducting AGM, participated in the AGM  and in fact he applied for re-election.  Though the  shareholders voted against him and other NRI directors, the  information support stand of the respondents 1 and 2.  The  High Court has rightly concluded that AGM held on  29.09.2005 was legal and acceptable and we agree with the  same.       20)     It is pointed out that the CLB set aside the election of  respondent Nos. 16 to 23 as directors only on the ground that  there is no valid notice.  The discussion in the earlier  paragraphs proves that this finding is not acceptable.  The  High Court verified the notice dated 24.08.2005 sent for AGM  dated 29.09.2005 wherein the names of the retiring directors  were subsequently mentioned.  It was also demonstrated  before the CLB and the High Court that proper advertisement  in the Indian Express and Deepika were given in terms of  Section 157(1)A of the Act.  Though the CLB has not accepted  the same, the High Court has rightly found that the same was  in compliance with the statutory provisions.  There is no error  or illegality in the said finding of the High Court.  21)     The next issue relates to re-appointment of retired  directors on the theory of legitimate expectation which we have  already discussed in the earlier paragraphs.  However, the  High Court found that appointment of 8 directors without a  "specific agenda" is irregular due to technical reason and that  as per the agenda only 6 directors can be elected.  We agree  with the said conclusion.  22)     Now coming to the next issue, namely, allotment of "right  shares" to the public, the CLB has concluded that without a  "special resolution" by 2/3rd majority shareholders cannot be  offered to outsiders.  Inasmuch as the above said conclusion is  in terms of the statutory provisions, the High Court has rightly  approved the same and we are also in agreement with the said  conclusion.  In this respect, it is useful to refer to the decision  of this Court in Needle Industries (India) Ltd. vs. Needle  Industries Newey (India) Holding Ltd. (supra).  It was held  that directors have absolute powers to issue right share  provided they are acting under good faith.  23)     The other issue relates to issuance of duplicate shares of  Purshottaman.  It is relevant to mention that the same Board  approved the said action when the first petitioner also  attended the meeting.  On the other hand, the CLB set aside  the issue of duplicate shares to Purshottaman.  It was pointed  out before the High Court that the said decision was not  challenged in the petition by any of the petitioners and the  decision was taken by the Board of Directors to issue  duplicate shares in place of lost shares.  As said earlier,  transferring the shares of Purshottaman was approved in the  same Board Meeting wherein the first petitioner attended.  It is  also brought to the notice of the Court that duplicate shares  were issued on receipt of indemnity bond as provided under  Section 84(2).  In those circumstances, the High Court has  concluded that indemnity bond and documents produced  would show that share transfer was also effected validly.   Further the decision to issue duplicate shares to  Purshottaman and transfer of the same were not challenged in  the company petition.  In view of the same, we agree with the  ultimate decision arrived by the High Court.  24)     Coming to the allegation as to acts of mis-management  particularly regarding the arrangement with special  investigating centre, it was proved that the agreement with the  special investigating centre was made when the petitioners      1 to 4 as well as their supporting NRI directors were in the  Board and in active management.  However, the High Court  has directed the company auditor to go through the agreement

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with the special investigating centre and also the accounts and  submit a report and thereafter, the same should be placed  before the Board for appropriate action.  The said direction is  reasonable and acceptable.   25)     As rightly pointed out that CLB missed a most basic  principle of Section 397, namely, that mere unfairness does  not constitute oppression.  When the petitioners were given  the right to subscribe to the ’rights issue’ along with all others  in the same proportion, no prejudice, whatsoever, could have  been caused to them.  It is not in dispute even by the  petitioners that the need for more funds was an admitted  position.  In Needle Industries (supra) this Court has pointed  out if there is a need for funds the fact that the directors have  incidentally enriched themselves would not entail a court to  set aside the issue of shares.  In fact, no unfair prejudice has  been caused to the petitioners.  The CLB failed to take note of  all these vital aspects and relied on irrelevant materials.  Apart  from these, it is pointed out that the company having turned  the corner and doing well, it would be fair exercise of  discretion by this Court not to interfere with the High Court  judgment.   26)     In the light of the above discussion, we are of the view  that the impugned judgment of the High Court is fair to both  sides and safeguards the interest of the directors and  shareholders; hence there is no valid ground to interfere under  Article 136 of the Constitution of India.  Consequently, the  main appeal filed by V.S. Krishnan and Others fails and the  same is dismissed.  In view of the said conclusion, other  appeals are also dismissed.  No costs.