NCLT Cannot Direct EGM Without Proof Of Impracticability; Requisitioning Member Has Absolute Right: NCLAT Chennai

The bench of Judicial Member Justice N Seshasayee and Technical Member Jatindranath Swain observed,

"…While a requisitioning member's right to convene a meeting under Sec.100(4) is absolute, his right to invoke Sec.98 is qualified as it can be invoked only upon proof of the statutory precondition that it has become impracticable to hold a meeting without the intervention of the tribunal.

...Sec.98 is an exceptional jurisdiction which though enables interference with the internal management involved in convening a meeting along the lines predicated by the Act or by the Articles of the company, yet can be exercised only when it is reasonably established that but for the tribunal stepping in with its authority, a meeting along the lines might not take place."

Pearl City Marine Products Pvt. Ltd. became embroiled in a dispute among its directors and shareholders. Velliyattil Muhammed Haneefa Abuthahir and Respondent No 4 were removed from the board in November 2025 following allegations of misconduct by a resolution passed in the Extraordinary General Meeting of the company.

Initially, Hiras K, Respondent No.1 supported their removal but later sought to re‑induct them. On 20 January 2026, Respondent No.1 issued a notice under Section 100 to convene an EGM for reinstating the ousted directors. The board, by majority, rejected the requisition on 9 February 2026.

Instead of exercising his statutory right under Section 100(4) to convene the meeting himself, Respondent No.1 approached the NCLT under Section 98, seeking tribunal intervention to direct the convening of the EGM. The NCLT allowed the petition, prompting an appeal by the company's directors before the NCLAT.

The appellants argued that Section 98 can only be invoked when it is impracticable to convene a meeting in the manner prescribed by law or the company's articles and that in terms of Sec. 100(4) of the Companies Act, 2013, if the Extraordinary General Meeting is not convened despite valid requisition given for the purpose, then those who had requested for the meeting have the right to convene the same under Sec.100(4).

The respondents countered that Section 100(4) is merely an alternative remedy and does not foreclose the independent right to invoke Section 98. It was also argued that the board cannot sit in judgment over the agenda of a requisitioned meeting and must abide by shareholder requests.

The NCLAT examined the statutory scheme and judicial precedents. It noted that Section 100(4) provides shareholders with an absolute right to convene an EGM when the board refuses, while Section 98 is a qualified jurisdiction that can be exercised only upon proof of impracticability.

The tribunal emphasised that corporate governance is anchored in internal democracy, and tribunals must not rush to interfere in management unless it is inevitable that a meeting cannot otherwise be convened.

Referring to the Re: Ruttonjee guidelines, the appellate bench reiterated that courts should exercise Section 98 powers sparingly. The bench observed,

“While the expression 'impracticable' is required to be understood not narrowly but with reasonable elasticity from a plane of ordinary prudence and common sense, yet the tribunal needs to reflect if it has become inevitable that unless it intervenes a meeting possibly could not be convened.”

In the present case, it was noted that Respondent No.1 neither attempted to convene the meeting under Section 100(4) nor provided factual proof of impracticability. Mere division in the board was insufficient to justify tribunal intervention, especially when the company had over 100 shareholders. The bench noted,

“The first respondent needs to be reminded that it may not be appropriate for the tribunal to dilute the fundamental rule associated with the doctrine of internal management of a company to accommodate an act of exceptional authority merely because it is expedient to do so.”

Accordingly, the bench set aside the order of the NCLT and allowed the appeal.

APPELLANTS ADVOCATE/ PROFESSIONAL: Senior Advocate R. Murari with Advocates S. Manjula Devi & Pavan Kumar Gandhi,

RESPONDENTS ADVOCATE/ PROFESSIONAL: Senior Advocate Joseph Kodianthara with Advocates Issac Thomas and Chandapillai Abraham for R1; Senior Advocate P.H. Arvindh Pandian with Advocates Akhil Suresh & Jerin Asher Sojan