IMPORTANT POINTS
(1) Section 108 of Companies Act, 1956 operates independently of Section 286 or Section 300 of Act.
(2) No complaint of oppression could be entertained merely on the ground of failure to attach notice of Board meeting was an act of illegality.
(3) Notice has to be issued to preference shareholders also for meeting and they have right to participate in the meeting.

JUDGMENT :

ARUN MISHRA, J.

1. The appeal arises out of the judgment dated 31.5.2013 passed by the High Court of Delhi, setting aside an order dated 31.1.2006 passed by the Company Law Board in Company Petition No.64/2005.

2. The backdrop facts indicate that the Government of India took a policy decision on 5.7.2002 to disinvest its shares in the Indian Tourism Development Corporation (in short, ‘the ITDC’) which owns various hotel properties; one of them being Indraprastha Hotel, formerly known as Hotel Ashok Yatri Niwas, (hereinafter referred to as “the hotel”).

3. In terms of an approved scheme of Arrangement of Demerger the hotel was transferred to the Respondent No.1 Hotel Queen Road Pvt. Ltd. (in short, ‘HQRL’) which was created as a Special Purpose Vehicle to enable disinvestment. The paid up capital of HQRL was Rs.90 lakhs comprising 9 lakh equity shares of Rs.10 each, of which the Government of India held 89.97% shares. Indian Hotels Co. Ltd. (IHCL) held 10% shares and the balance shares were held by the employees of hotels of ITDC under a Voluntary Retirement Scheme.

4. Pursuant to its decision to disinvest, the Government invited bids for sale of shares in HQRL. The appellant No.3 - Moral Trading & Investment Ltd., in short hereinafter referred to as ‘Moral’, a public limited company, was declared the successful bidder.

5. By a share purchase agreement dated 8.10.2002 Moral acquired the shares of Government of India and IHCL in HQRL for a sum of Rs.45 crores. Out of this, Rs.33.37 crores was obtained by way of loans from banks. 99.97% shares of HQRL being held by Moral, HQRL became Moral’s subsidiary.

6. Appellant No.1, Mr. R.P. Mittal, and the appellant No.2, Mrs. Sarla Mittal, who held the controlling interest in Moral, and the Respondent No.3, Mr. Ashok Mittal, younger brother of the Appellant No.1, Mr. R.P. Mittal were appointed as Additional Directors of HQRL on 8.10.2002, and later, regular Directors at the Annual General Meeting of HQRL held on 28.12.2002.

7. On 30.9.2002 HQRL passed a resolution in its Extra Ordinary General Meeting (EOGM) to change its status from ‘private limited’ to ‘limited’ company. The said resolution was rejected by the Registrar of Companies on the ground of late filing and according to the appellants, HQRL had not filed it again with the Registrar of Companies nor had removed the defects.

8. On 21.12.2002 a Board meeting of HQRL was held. Moral transferred 13 equity shares valued at Rs.10/- per equity share of HQRL to 7 persons, i.e. 2 shares to the appellant No.1, Mr. R.P. Mittal, 3 shares to the appellant No.2, Mrs. Sarla Mittal, one share to the respondent No.3, Mr. Ashok Mittal and 7 shares to 4 daughters of the appellant Nos.1 and 2, R.P. Mittal’s family thus held 99.97% equity shares, as against one equity share held by his brother, Mr. Ashok Mittal.

9. On 28.12.2002 Annual General Meeting (AGM) of HQRL was held in which authorised capital was increased from Rs.90 lakhs to Rs.33 crores. The AGM was attended by Mr. Ashok Mittal. There was an increase of 71 lakh equity shares of Rs.10 each and 25 lakh preference shares of Rs.100 per share and a Special Business Resolution No.10 was passed under section 81(1A) of the Companies Act, 1956 (hereinafter referred to as ‘the Companies Act’). The appointment of Mr. R.P. Mittal, Mrs. Sarla Mittal and Mr. Ashok Mittal to the Board of Directors was approved by the majority of the shareholders of Moral. Mr. R.P. Mittal and Mrs. Sarla Mittal were appointed as whole time Directors. The Memorandum of Association of HQRL was also amended. Article IV (4) of Articles of Association was amended to state that the preference shares would not carry any voting rights.

10. On 19.3.2003, Mr. R.P. Mittal, Chairman of HQRL issued letter to the Respondent No.2 Hillcrest Realty SDN BHD Malaysia (for short, ‘Hillcrest’) inviting subscription in 8.5% cumulative redeemable preference shares of Rs.100 each up to Rs.30 crores. On 3.4.2003, the hotel was closed for renovatio