HONOURABLE SRI JUSTICE M. GANGA RAO AND HONOURABLE SRI JUSTICE V. SRINIVAS

Writ Petition No.27894 of 2022

ORDER: :(order as per Hon'ble Justice M.Ganga Rao,J)

The petitioners three in number are the Directors of the Minority shareholders of the 2nd respondent – Andhra Pradesh Heavy Machinery & Engineering Limited filed this writ petition to issue a writ of mandamus declaring the action of the 2nd respondent in carrying out the amendment to Article 101 (3) of the Articles of Association of the 2nd respondent company proposing to reduce the number of Directors representing the minority shareholders other than Singareni Collieries Company Limited – the 3rd respondent and Andhra Pradesh Industrial Development Corporation – the 4th respondent from three (3) Directors to one (1) Director even before bifurcation of the 2nd respondent company which is included in the IXth Schedule Institutions under the Andhra Pradesh Reorganization Act, 2014 vide Extraordinary General meeting scheduled to be held on 05.09.2022 as being illegal, arbitrary, violative of the provisions of Section 53 and 68 of the A.P. Reorganization Act, 2014 and in violation of the Expert Committee Report headed by Dr.Sheela Bhide, IAS dated

15.3.2018 and consequently to set aside the proposal to amend the Article 101 (3) of the Articles of Association of the 2nd respondent company to reduce the number of Directors representing other than SCCL (3rd respondent ) and A.P.Industrial Development Corporation (4th respondent) from three (3) to one (1) as illegal.

2. The case of the petitioner is that the Andhra Pradesh Heavy Machinery Engineering Limited (for brevity 'APHMEL') was established on 01st September, 1976 as a subsidiary unit of Andhra Pradesh Industrial Development Corporation (for brevity 'APIDC'), a Government of Andhra Pradesh undertaking. The land for the establishment of the said company was acquired from the local farmers of Kondapalli. They were promised of employment in the company so established as well as industrial development in the region. Initially, the share capital was collected from the local farmers also and allotted shares to approximately 42,000 residents of Krishna District where the company is located. Subsequently, the 2nd respondent company was registered as a 'sick industrial undertaking' by Board of Industrial and Financial Reconstruction (BIFR), New Delhi under BIFR Case No.627/1992 As part of the reviving sick industrial undertaking, the 1st respondent State Government among other reliefs, has sanctioned

transfer of shares of the APHMEL - 2nd respondent vide G.O.Ms.No.201 Industries & Commerce (IFR-I) Department dated 21.8.1997. In view of transfer of shares as per G.O.Ms.No.201 dated 21.8.1997, the 3rd respondent SCC Ltd., has become major share holder and took over the 2nd respondent company as its subsidiary company. Accordingly, the composition of Board of Directors has been approved by the amendment of Articles of Association of the company while transferring majority shareholding to the SCC Ltd., to protect the interest and rights of the minority shareholders. The share capital of the 2nd respondent company is R.17.27 crores.

3. As per the provisions of the Andhra Pradesh Reorganization Act, 2014, the 2nd respondent company was included at Sl.No.34 in the IXth schedule to the A.P. Reorganization Act, 2014. The procedure for apportionment of the assets and liabilities of the State owned company such as the 2nd respondent company has to be taken up in accordance with the provisions of Section 53 and 68 of the Reorganization Act, 2014. As per the said provisions, the 1st respondent Government constituted an Expert Committee vide G.O.Ms.No.223 dated 30.5.2014 for demerger of the Government Corporations and companies in IXth Schedule of A.P.

Reorganization Act. The Committee submitted its report on 03.03.2018.

4. The 2nd respondent company after deliberations regarding its demerger first came up in the Board meeting held on 22.12.2016 and the same issue was taken up in detail during 205th Board meeting held on 18.01.2017. The SCCL which is the major shareholder in the 2nd respondent Company was represented by five (5) Directors, APIDC was represented by one (1) Director and other public shareholders were represented by three (3) Directors and in the said meeting the proposal submitted were approved with 5 : 4 majority. The above said proposal was placed before the Expert Committee for demerger as approved in the Board meeting. The petitioners along with Directors of APIDC having informed the Expert Committee that they opposed the above proposal in the Board meeting held on 18.1.2017 on the ground that the 2nd respondent company which is included in IXth Schedule to A.P. Reorganization Act, 2014 should be entirely allotted to the State of Andhra Pradesh as per the Section 53 of the A.P. Reorganization Act, 2014, since all its assets are located in the Residuary State of Andhra Pradesh.

5. Pursuant to the above Board meeting, Extraordinary General Meeting of the 2nd respondent company was convened on 25.3.2017 at 4.00 PM at Singareni Women's Degree College, Kothagudem. On 25.3.2017, there was no sufficient quorum for conducting the Extraordinary General Meeting and it was adjourned to 01.04.2017. In the Extraordinary General Meeting conducted on 01.04.2017, it was resolved to confirm that APHMF continues as a subsidiary to SCCL by virtue of holding 81.54% of the total equity share capital under Section 2 sub section 87 (i) of the Companies Act, 2013 even after bifurcation of the State of Andhra Pradesh under the A.P. Reorganization Act, 2014. The 2nd respondent has placed the above proposal before the Expert Committee on 19.4.2017 for its approval and recommendation. The Director representing APIDC and Directors representing the other public shareholders other than SCCL have opposed the said proposal and requested the Committee that the 2nd respondent Company should be allotted to the State of Andhra Pradesh in its entirety, since the registered office and factory are situated in Kondapalli, Krishna District of Andhra Pradesh. It was also brought to the notice of the Expert Committee that the reason for conducting the Extraordinary General Meeting at Kothagudem was to avoid participation of private shareholders, who are nearly

42,000 members in number and who are residing in and around Krishna District.

6. The 2nd respondent company again conducted a Board meeting on 04.09.2017 for approval of demerger proposal and the same was placed before the Expert Committee for its approval on 31.01.2018. The Expert Committee after examining all the aspects submitted the recommendation. The 2nd respondent company without considering the recommendations of the Expert Committee and bifurcation of the 2nd respondent company as per the procedure under the provisions of A.P. Reorganization Act, 2014 issued the impugned notice dated 23.6.2022 intimating the conduct of the Board of Directors meeting to be held on 30.6.2022. In the said meeting, one of the subjects was to make amendments to the Memorandum of Articles of Association of the 2nd respondent company. The main amendment which is being proposed was amendment to Article 101 (3) of the Articles of Association. The existing and proposed clause under Article 101 (3) is as follows:

Existing clause	Proposed clause
Article 101 (3)<br>- Subject to the	Article 101 (3) – Subject to the
provisions of the Act, so long as	provisions of the Act, so long as
the SCCL and their successors	the SCCL and their successors
and APIDC and their successors	and APIDC and their successors

continue<br>to<br>hold<br>the<br>highest	continue<br>to<br>hold<br>the<br>highest
and second highest amount of	and second highest amount of
the<br>paid-up<br>share<br>capital	the<br>paid-up<br>share<br>capital
respectively<br>among<br>all<br>the	respectively<br>among<br>all<br>the
shareholders, 3 (three) Directors	shareholders, the shareholders
shall be elected, who shall be	other<br>than<br>SCCL<br>and<br>APIDC
liable to retire by rotation, by	have the right to nominate for
the<br>shareholders<br>other<br>than	appointment of 1 (one) Director,
SCCL and APIDC	who shall be liable to retire by
	rotation.

The proposed change is contrary to the provisions of Section 53 and 68 of the A.P. Reorganization Act, 2014 and the Expert Committee report.

7. The 2nd respondent filed its counter stating that the Board of Directors in its 226th meeting held on 12.03.2022 has apprised for alteration of the present articles of association of the company prepared at the time of the incorporation in accordance with the provisions of the Companies Act, 1956 and some amendments were made to it from time to time as per the need. Now in view of the Companies Act, 2013, which has replaced the Companies Act, 1956 and the existing Articles of Association needs to be amended to brought the same in line with the provisions of the Companies Act, 2013 and there are some inconsistencies which needs to be removed. The Board in its 227th meeting held on 30.6.2022 recommended the proposal to make the consequential changes removing the inconsistencies and bringing the Articles of

Association of the Companies in line with the provisions of the Companies Act, 2013 for sanction of Members in the Extraordinary General Meeting through Special Resolution in accordance with the provisions of Section 14 and other applicable provisions of the Companies Act, 2013. As per the Board Resolution, the action of convening the Extraordinary General Meeting on 05.09.2022 was initiated and accordingly, notice of Extraordinary General Meeting was issued intimating the date of the schedule of meeting on Monday i.e., 5th day of September, 2022 at 3.00 P.M through video conferencing (VC)/Other Audio Visual Means (OAVM) for which purpose the Registered Office of the Company shall be deemed to be the venue and the proceedings of the extraordinary general meeting shall be deemed be made there at, to transact the following business:

"Special business: Item No.1

To alter Memorandum of Association of the Company to replace the sections of Companies Act 1956 with the new sections in the Companies Act, 2013:

To consider and if thought fit, to pass the following resolution as Special Resolution:

"Resolved that pursuant to the provisions of Section 13 and other applicable provisions of the Companies Act 2013, the sanction be and is hereby accorded for altering the Memorandum of Association of the Company as brought out in Annexure 1 to the Notice for replacing the sections of Companies Act 1956 with the new sections of the Companies Act, 2013".

Item No.2

To alter, removing inconsistencies and bringing Articles of Association of Company in line with the Companies Act 2013:

To consider and if thought fit, to pass the following resolution as Special Resolution:

"Resolved that pursuant to the provisions of Section 14 and other applicable provisions of the Companies Act 2013, the sanction be and is hereby accorded for alteration of the Articles of Association of the Company as brought out in Annexure 2 to the Notice for effecting consequential changes, removing inconsistencies and bringing Articles of Association of the Company in line with the Companies Act 2013".

8. The 2nd respondent/Company is fully empowered to alter the articles of association, including composition of Board of Directors with the approval of the General Body Meeting. The proposal being moved is no way affects the rights of the minority shareholders as it is only to bring the power of nomination of Directors on the Board apportioned to the share holding and to bring the strength of the Board of Directors to the level of functioning of the Company. The alteration of the articles of association of the 2nd respondent Company by exercising the power under the provisions of Article 14 of the Companies Act, much less, altering the composition of the Board of Directors does not amount to violation of Expert Committee Report. The Expert

Committee under the A.P. Reorganization Act, 2014 nor any order from the Ministry of Home or Corporation Affairs restrict/bar/embargo of such proposal. The petitioner's Directors are elected/nominated by the minority shareholders having 11.84 value of shareholding in the 2nd respondent Company to appoint three (3) Directors. As per the shareholding, they are entitled only one (1) Director. As per Clause 101 (3) of the Articles of Association of the 2nd respondent Company, they are entitled to nominate three (3) Directors which is more their weightage as per the shareholding ratio, but whereas the SCC Ltd., has 82% shareholding and has power to appoint only five (5) Directors on the Board. The total strength of the 2nd respondent Board is ten (10) as per the provisions of the Companies Act. The highest shareholder have control over the company and it is the basic fundamental issue for the organization of the company under the Companies Act. The proposal is not for depriving the shareholders other than SCC Ltd., and APIDC. The other shareholders/minority shareholders are entitled to nominate one (1) Director as per their shareholding ratio. The alteration of composition of the Board of Directors does not amount to violation of the Expert Committee Report nor provisions of the A.P. Reorganization Act, 2014.

9. The writ petition is not maintainable as cause of action of altering the proposed articles of association or to reconstitute Board of Directors is taken by the 2nd respondent Company by exercising the powers under Section 14 of the Companies Act, 2013 and the remedy is before the National Company Law Tribunal. Hence, the writ petition is not maintainable. The writ petition is devoid of merits and is liable to be dismissed.

10. On considering the pleadings and submissions of the counsel, the points that arise for consideration of this Court is thus:

• (1)Whether the 2nd respondent's action by way of impugned notice to alter the Articles of Association of the 2nd respondent Company to reduce the composition of Board of Directors of the Company by exercising the power under Section 14 of the Companies Act, 2013, would violate the provisions of the Section 53 and 68 of the A.P. Reorganization Act, 2014;
• (2)Whether the writ petition is maintainable before this Court when the alternative remedy is provided under the provisions of Section 101 of the Companies Act, 2013 before the National Company Law Tribunal.

11. Point No.1:

We, having considered the facts and circumstances of the case, submissions of the counsel and perused the record placed before this court that the 2nd respondent Company was established on 01.09.1976 as a subsidiary unit of APIDC, a Government of Andhra Pradesh undertaking at Kondapalli of Andhra Pradesh. Approximately, about 42,000 shares were allotted to the local farmers (appears to be in lieu of land acquisition compensation) and residents of the Krishna District, where the Company is functioning. Subsequently, the 2nd respondent Company went on liquidation, on which 2nd respondent was registered with Sick Industrial Undertaking with the Board of Industrial Financial Reconstruction (BIFR), New Delhi vide BIFR.Case No.627/1992. As a part of revival of sick industrial undertaking, the 1st respondent Government has authorized the 2nd respondent Company, to transfer the shares of the 2nd respondent as per G.O.Ms.No.201 dated 21.8.1997 which is as follows:

"(viii) to transfer the existing shares of face value of Rs.362.50 lakhs as well as an amount of Rs.127.77 lakhs (totaling to Rs.490.27 lakhs) to be converted as Andhra Pradesh Industrial Development Corporation (APIDC) equity in Andhra Pradesh Heavy Machinery & Engineering Ltd and transfer the shares to Singareni Collieries Company Ltd at a nominal price of Rs.1/-(one) and to

adjust the balance consideration of Rs.489.27 lakhs against the dues of the Andhra Pradesh Industrial Development Corporation to Government of Andhra Pradesh on account of loans of Rs.282.50 lakhs outstanding in the books of accounts along with interest @ 11%, 12% and 12% respectively upto 31.3.1986."

In view of transfer of shares, the SCC Ltd (Singareni Collieries Company Ltd) took over the 2nd respondent Company as its subsidiary company. The composition of Board of Directors has been approved by amending articles of association of the 2nd respondent Company. The share capital of the 2nd respondent Company is Rs.17.27 Crores and share holding pattern of the Company is:

• " (i) Singareni Collieries Company Limited 81.54%
• (ii) AP Industrial Development Corporation 5.76%
• (iii) Government of Andhra Pradesh 0.86%
• (iv) Other Shareholders (Public) 11.84%"

12. In view of the enactment of the A.P. Reorganization Act, 2014 during bifurcation of the Composite State of Andhra Pradesh into State of Andhra Pradesh and State of Telangana, both the 2nd respondent as well as the 3rd respondent Company are included in the IXth Schedule of the A.P. Reorganization Act, 2014. The 2nd respondent Company has to be administered as per the provisions of the Companies Act, 2013 and its operations are governed by the provisions of Section 68 of the A.P. Reorganization Act, 2014 and

for distribution of assets and liabilities of the 2nd respondent is governed by Section 53 of the A.P. Reorganization Act, 2014. The provisions reads thus:

"53. Assets and liabilities of State undertakings.––

(1) The assets and liabilities relating to any commercial or industrial undertaking of the existing State of Andhra Pradesh, where such undertaking or part thereof is exclusively located in, or its operations are confined to, a local area, shall pass to the State in which that area is included on the appointed day, irrespective of the location of its headquarters:

Provided that where the operation of such undertaking becomes inter-State by virtue of the provisions of Part II, the assets and liabilities of––

(a) the operational units of the undertaking shall be apportioned between the two successor States on location basis; and

(b) the headquarters of such undertaking shall be apportioned between the two successor States on the basis of population ratio.

(2) Upon apportionment of the assets and liabilities, such assets and liabilities shall be transferred in physical form on mutual agreement or by making payment or adjustment through any other mode as may be agreed to by the successor States.

68. Provisions for various companies and corporations.—

(1) The companies and corporations specified in the Ninth Schedule constituted for the existing State of Andhra Pradesh shall, on and from the appointed day, continue to function in those areas in respect of which they were functioning immediately before that day, subject to the provisions of this section.

(2) The assets, rights and liabilities of the companies and corporations referred to in sub-section (1) shall be apportioned between the successor States in the manner provided in section 53.

Thereafter, the 1st respondent constituted an Expert Committee in

consonance with the provisions of the A.P. Reorganization Act,

2014 vide G.O.Ms.No.223 dated 30.5.2014 for demerger of

Government Corporations and Companies in IXth Schedule of the A.P. Reorganization Act, 2014. The Committee consists of the following Members:

• (i) Dr Sheela Bhide, IAS (Rtd.) Chair Person
• (ii) Shri K.V.Rao Member
• (iii) Shri K. Narasimha Murthy Member

The demerger of the 2nd respondent Company first came up in the meeting held on 22.4.2016. After deliberations, it was deferred. The same issue was taken up in detail during 205th Board meeting on 16.1.2017. The 3rd respondent company being a major share holder was represented by five (5) Directors, APIDC was represented by one (1) Director and other shareholders were represented by three (3) Directors. The proposals were approved with 5:4 majority:

"(i) That APHMEL is a subsidiary of SCCL under Section 2 (87) (i) of the Companies Act, 2013 by virtue of the fact that 81.54% of its shares are held by SCCL and therefore there is no need for demerger of APHMEL.

(ii) The only issue to be decided upon is apportionment of 0.86% shares capital amounting to Rs.14,90,100/- held by erstwhile Government of Andhra Pradesh between the successor States of Andhra Pradesh and Telangana in the ratio of 58.32 : 41.68 as mentioned in the Act i.e., allocation of 86,903 equity shares to the present Government of Andhra Pradesh and 62,107 equity shares to the Government of Telangana in APHMEL.

The approved proposal of the Board was placed before the Expert

Committee for demerger. The petitioners along with Directors of

APIDC informed to the Expert Committee that they oppose the demerger resolution in the Board meeting held on 18.1.2017 on the ground that the 2nd respondent Company is included in the IXth Schedule of the A.P. Reorganization Act, 2014. As per Section 53 of the A.P. Reorganization Act, 2014, the entire assets and liabilities of the Company are to be allotted to the State of Andhra Pradesh as its assets are located in the Residuary State of Andhra Pradesh. However, the 3rd respondent company convened meeting on 25.3.2013 at Singareni Women's Degree College, Kothagudem and the Extraordinary General Meeting is adjourned to 01.04.2017 due to lack of sufficient quorum. Accordingly, the Extraordinary General meeting was conducted on 01.04.2017 and passed the following resolution:

"Resolved that pursuant to the provisions of the Companies Act, 2013 and Rules made thereunder and other applicable Statutes, the Managing Director of the Company be and is hereby authorized to submit the proposal to the Expert Committee/ Government /appropriate authority under the Andhra Pradesh Reorganization Act, 2014 for seeking apportionment of 0.86% equity of Andhra Pradesh Heavy Machinery and Engineering Limited amounting to Rs.14,90,100/- held by erstwhile Government of Andhra Pradesh between the successor States of Andhra Pradesh and Telangana in the ratio of 58.32 : 41.68 mentioned in the said Act i.e., allocation of 86,903 equity shares to the present Government of Andhra Pradesh and 62,107 equity shares to the Government of Telangana being the only issue to be resolved under the Andhra Pradesh Reorganization Act, 2014 with respect to Andhra Pradesh Heavy Machinery and Engineering Limited. Further, resolved to confirm

that the operations of the Andhra Pradesh Heavy Machinery and Engineering Limited have been spread all over India as it supplies/extends to various coal companies and other companies throughout India."

The 2nd respondent Company continues to be a subsidiary of SCC

Ltd., by virtue of its holding on 81.54% of the equity share capital

under Section 2 sub Section 87 (i) of the Companies Act, 2013,

even after bifurcation of the State of Andhra Pradesh under the

provisions of A.P. Reorganization Act, 2014. The Expert

Committee in the meeting held on 19.4.2017 opined as follows:

" (i) APHMEL Management should have made every effort to ensure that all the Board Directors were in a position to attend this very important meeting by ascertaining a date convenient for all Directors as is the usual practice in other companies.

(ii) the Expert Committee firmly believes that the rights of the minority shareholders (about 42,000 in number) must be protected under law;

(iii) An opportunity must be given to the minority shareholders to participate in the EGM (Extraordinary General Meeting) where such an important item affecting the future of the ownership of the Company is placed in the agenda for; and

(iv) Meetings of the Board and EGM should be held at a place which is accessible for all the shareholders. Expert Committee directed M.D. APHMEL that the Demerger Proposal should be finalized strictly as per Section 53(1) of the AP Reorganization Act, 2014 and resubmitted after following all due processes.

Again, the 2nd respondent Company conducted Board meeting on

04.09.2017 for approval of the demerger proposal and the same

was placed before the Expert Committee for its approval on

31.8.2018. The Expert Committee after examining all the aspects

laid the following recommendations:

"Recommendations of the Expert Committee:

M/s. AP Heavy Machinery and Engineering Limited which finds place at Serial No.34 in Schedule IX of the AP Reorganization Act, 2014, appears as a distinct and separate entity from M/s.Singareni Collieries Limited which is at Serial Number 7 in Schedule IX. Therefore, the proposal for bifurcation of M/s. APHMEL has to be necessarily prepared only as per the provisions of Sections 68 and 53 of AP Reorganization Act, 2014.

In the case of APHMEL, since all the assets and liabilities are located in the residuary State of Andhra Pradesh, the undertaking shall pass on to the residual State of Andhra Pradesh in its entirety in terms of Section 53 (1) of the AP Reorganization Act. Hence, M/s.APHMEL need not go through the process of demerger."

13. Sri N. Ashwani Kumar, learned counsel for the petitioner would contend that in view of the provisions of Section 53 and 68 of the A.P. Reorganization Act, 2014 and appointment of the Expert Committee for division of the assets and liabilities as per the provisions of Section 53 and 68 of the A.P. Reorganization Act, 2014, the alteration of the composition of the Board of Directors by amendment to clause 101 (3) of the Article of Association and attempts of the 2nd respondent Company having majority shareholders and considering the nomination of five (5) Directors or making attempts to demerger of the 2nd respondent company with the 3rd respondent Company contrary to the provisions of

Section 53 and 68 of the A.P. Reorganization Act, 2014 and all such actions have to be taken only with the approval of the Central Government. The 2nd respondent Company in the name of alteration of the composition of the Board of Directors would not reduce the size of the Board of Directors to the disadvantage of the minority shareholders who are all the way opposing the demerger of the 2nd respondent Company.

14. Sri V. Surender Reddy, learned counsel appearing for the 2nd respondent while reiterating the averments of the counter would contend that the 2nd respondent Company has power and authority under the provisions of the Section 14 of the Companies Act, 2013 to alter the clause 101 (3) of the Articles of Association of the 2nd respondent Company to meet the requirements and functioning of the company as per the provisions of Companies Act, 2013. As the clauses of the existing Articles of Association are not in accordance with the provisions of the Companies Act, 2013, which replaced the Companies Act, 1956, it needs to be altered in line with the provisions of the Companies Act, 2013. The earlier allocation of three (3) Board of Directors out of ten (10) to the minority shareholders who are having 11.84 shareholding is disproportionate to their shareholding ratio in the Company. The power to nominate three (3) Directors by the minority

shareholders is not in accordance with their weightage as per their shareholding ratio and it needs to be altered and they should be given power to nominate only one (1) Director in place of three (3) Directors. Accordingly, a proposal to amend Clause 101 (3) of the Articles of Association of the 2nd respondent Company is brought by way of notice to call for the Extraordinary General Meeting and it is accordingly convened. No specific cause arises for the petitioners to approach this Court and obtain an interim order staying the proceedings in pursuance of the issuance of notice for calling Extraordinary General Meeting, which is illegal and arbitrary.

15. No doubt, the 2nd respondent Company has power under the provisions of Section 14 of the Companies Act, 2013 to alter the clauses of Articles of Association of the 2nd respondent company and to bring the Articles of Association in line with the provisions of Companies Act, 2013. But, in the peculiar circumstances arose in view of bifurcation of the State of Andhra Pradesh as per the provisions of the A.P. Reorganization Act, 2014, the provisions of Section 53 and 68 of the A.P. Reorganization Act, 2014 would attract for managing the affairs of the 2nd respondent company, especially with the Directors nominated by the majority shareholders. Even after inclusion of the 2nd respondent and 3rd

respondent Companies in the IXth schedule of the A.P. Reorganization Act, 2014, the 2nd respondent could not alter the composition of the Directors of the Company to that of one (1) Director instead of three (3) Directors to the minority shareholders other than the SCC Ltd., and APIDC, which could not be allowed in the light of the attempts that are being made by the 3rd respondent SCC Ltd., for passing resolutions for demerger of the 2nd respondent company contrary to the report of the Expert Committee submitted, having consulted the Expert Committee for all its administration for altering the Articles of Association, especially composition of the Directors of the 2nd respondent Company, without approval of the Ministry of Home or Corporate Affairs amounts to violation of the provisions of the Section 53 and 68 of the A.P. Reorganization Act, 2014. Accordingly, the Point No.1 is answered.

16. Point No.2:

In view of inclusion of the 2nd respondent Company and 3rd respondent company in the IXth schedule of the A.P. Reorganization Act, 2014, the division of the Assets of both the companies is governed by the A.P. Reorganization Act, 2014. The Expert Committee has been constituted for that purpose. The Expert Committee has taken a decision not to take any action or

resolutions which affects the division of the assets. Now, under the guise of alteration of the Articles of Association exercising the powers under the provisions of Section 14 of the Companies Act, 2013 and in view of the attempts made by the 3rd respondent Company for altering the composition of the Board of Directors, especially reducing the nomination of the Directors by the shareholders other than SCC Ltd., and APIDC, from the minority shareholders to that of the one (1) Director instead of three (3) Directors allotted in the existing Articles of Association and it will give unbridled power to the 3rd respondent Company to act through its majority nominated Directors of five (5) in the Company to take decision disadvantage to the minority shareholder, which certainly affects the division of assets and liabilities as per the provisions of Section 53 of the A.P. Reorganization Act, 2014. In our considered opinion, the alteration of Memorandum of Articles of Association is in violation of the provisions of Section 68 of the A.P. Reorganization Act, 2014. In the ordinary circumstances, the 2nd respondent company has certainly has power to alter the Articles of Association under Section 14 of the Companies Act, but not in the present circumstances when the 2nd respondent and 3rd respondent Companies are included in the IXth schedule of the

A.P. Reorganization Act, 2014 and at present, there is no exigency to alter the composition of Directors of the Company nor shown any reason to resize the Board of Directors. The existing Board is not in contravention of any provisions of the Companies Act, 2013, which needs to be brought in line with the provisions of the Companies Act, 2013. Hence, the contention of the learned counsel for the 2nd respondent Sri V. Surender Reddy that the 2nd respondent Company has exercised its power under Section 14 of the Companies Act, 2013 and proposed to alter the constitution of the Board of Directors along with alteration of other clauses of Articles of Association to bring in line with the provisions of the Companies Act, 2013 and since the cause of action arise under the provisions of the Section 14 of the Companies Act, 2013, the petitioners have to approach the National Company Law Tribunal (NCLT) constituted under the provisions of the Companies Act, are unsustainable, as the 2nd and 3rd respondents Companies are included in IXth schedule of the A.P. Reorganization Act, 2014. In support of his contention, he relied on the decision of the Apex Court in the case of Union of India Vs. R. Gandhi, President, Madras Bar Association¹ and emphasized on Para-120 (ii) which reads thus:

¹ (2010) 11 SCC 1

" (ii) As NCLT takes over the functions of the High Court, the members should as nearly as possible have the same position and status as High Court Judges. This can be achieved, not by giving the salary and perks of a High Court Judge to the members, but by ensuring that persons who are as nearly equal in rank, experience or competence to High Court Judges are appointed as members. Therefore, only officers who are holding the ranks of Secretaries or Additional Secretaries alone can be considered for appointment as technical members of the National Company Law Tribunal. Clauses (c) and (d) of Sub-section (2) and Clauses (a) and (b) of Sub-section (3) of Section 10FD which provide for persons with 15 years experience in Group A post or persons holding the post of Joint Secretary or equivalent post in the Central or the State Government, being qualified for appointment as Members of Tribunal, are invalid."

He also placed reliance on the judgment of the Hon'ble Supreme Court in the case of Madras Bar Association Vs. Union of India2. There is no dispute with regard to the principle laid down in the decision having bearing in mind the facts of the case. As the 2nd and 3rd respondent companies are included in the IXth schedule of the A.P. Reorganization Act, 2014, the impugned action of the 2nd respondent Company proposing to amend the existing clause 101 (3) of its Articles of Association, thereby altering the composition of the Board of Directors is contrary to the provisions of Section 53 and 68 of the A.P. Reorganization Act, 2014. The petitioners have got every right to approach this Court for the relief sought for in this writ petition. The Hon'ble Supreme Court in the case of

² (2015) 8 SCC 583

Maharastra State Board of WAKF Vs Shaikh Yusuf Bhai Chawla

and others³ , held as under:

" These decisions which were impugned could not have been adjudicated by the Tribunal under Section 6 of the Act. The second aspect which we cannot ignore is that as held by this Court, Article 226 confers a jurisdiction or a power on the High Courts. It is a power under the Constitution. While it may be true that a statute may provide for an alternate forum to which the High Court may relegate the party in an appropriate case, the existence of an alternate remedy by itself cannot exclude the jurisdiction of the High Court under the Constitution. No doubt, it has been a self-imposed restraint which is fairly faithfully adhered to by the High Courts and it is largely a matter of discretion. We find that there are dicta which has held that on the basis of an alternate remedy, a writ petition is not maintainable. We would understand that the position to be that a constitutional remedy cannot be barred or excluded as when the High Court exercises its power under Article 226, it cannot be a case of lack of inherent jurisdiction. No doubt, when High Courts stray outside the limits with reference to certain principles as have been laid down in the decision which we have referred to, it can be corrected. Another factor which is to be borne in mind is that in a case where the High Court has entertained a matter and the matter comes for hearing in this Court in the jurisdiction under Article 136, our woes are compounded by the long passage of time as is demonstrated by the facts of this case. The judgment of the High Court was rendered in the year 2011. This Court is hearing the matter after more than a decade. It is nearly two decades after the filing of the writ petitions that this Court is hearing the matter."

In view of the special circumstances of the case and as held in the above referred decision, this Court entertaining the writ petition

³ 2022 Live Law (SC) 1003

could not be said to be without jurisdiction. Accordingly, the Point No.2 is answered.

17. In view of the above discussion, the Writ Petition is allowed. The impugned notice insofar as proposing to amend the clause 101 (3) of the Articles of Association of the 2nd respondent Company to alter the existing composition of the Board of Directors alone is set aside. There shall be no order as to costs.

As a sequel thereto, miscellaneous petitions, if any, pending shall stand closed.

____________________ M. GANGA RAO, J

________________ V. SRINIVAS, J

Date: .01.2023

CSR

HONOURABLE SRI JUSTICE M. GANGA RAO AND HONOURABLE SRI JUSTICE V. SRINIVAS

W.P.No.27894 OF 2022

DT: .01.2023

CSR