Tribunal rules in favor of Petitioner in FCA dispute, awards compensation.

The Tribunal ruled in favor of the Petitioner, stating that the Financial Collaboration Agreement (FCA) is binding on the company. The removal of the Petitioner from the post of Director was deemed invalid, while the removal from the post of Managing Director was upheld. The claim for 25% shareholding was rejected. The Petitioner was awarded compensation of Rs. 105 lakhs with interest and other benefits, and the respondents were directed to purchase the Petitioner's shares at mutually agreed rates. The petition was disposed of with no order as to costs.

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Issues Involved:
1. Binding nature of the Financial Collaboration Agreement (FCA) on the company and shareholders.
2. Validity of the removal of the Petitioner from the post of Managing Director and Director.
3. Entitlement of the Petitioner to 25% shareholding in the company.
4. Entitlement of the Petitioner to exemplary costs and terminal benefits.

Detailed Analysis:

Issue 1: Binding Nature of the FCA on the Company and Shareholders
The Tribunal examined whether the FCA, entered into before the incorporation of the company, is binding on the company and its shareholders. The petitioner contended that despite multiple requests, the FCA was not incorporated into the Articles of Association. The respondents argued that the company was not a party to the FCA, thus it is not binding. The Tribunal noted that the FCA mentioned the company's name and was signed by all shareholders, making it binding on the company. Therefore, the Tribunal ruled in favor of the Petitioner, stating that the FCA is indeed binding on the company.

Issue 2: Validity of the Removal of the Petitioner from the Post of Managing Director and Director
The Tribunal found that the removal of the Petitioner from the office of Director was not in accordance with the provisions of the Companies Act, hence it was invalid. The respondents admitted a typographical error in the notice and minutes of the EGM. The removal of the Petitioner from the post of Managing Director was deemed valid as the majority shareholders have the right to remove the Director under Section 169 of the Companies Act and the Articles of Association. The Tribunal concluded that the action of removing the Petitioner from the post of Managing Director by the majority shareholders cannot be questioned.

Issue 3: Entitlement of the Petitioner to 25% Shareholding in the Company
The Tribunal examined the claim of the Petitioner for 25% shareholding. The FCA indicated that only 10% was allotted to the Petitioner. There was no evidence supporting the Petitioner's entitlement to an additional 15% of shares from R2. Consequently, the Tribunal ruled against the Petitioner on this issue, stating that the claim for 25% shareholding should fail.

Issue 4: Entitlement of the Petitioner to Exemplary Costs and Terminal Benefits
The Tribunal considered the Petitioner's claim for exemplary damages amounting to Rs. 10 Crores. The respondents argued that the Petitioner was entitled to an exit package of around Rs. 1 Crore, including terminal benefits. The Tribunal noted that under Section 202(3) of the Companies Act, the Petitioner is entitled to remuneration for the remainder of his term or for three years, whichever is shorter. The Tribunal ordered a compensation of Rs. 105 lakhs (calculated at Rs. 35 lakhs per annum for three years) with interest at 10% from the date of removal, plus other benefits already offered, to be paid by the company and respondents.

Conclusion:
The Tribunal concluded that the FCA is binding on the company, the removal of the Petitioner from the post of Director was invalid, but his removal from the post of Managing Director was valid. The Petitioner's claim for 25% shareholding was rejected, and he was awarded compensation of Rs. 105 lakhs with interest and other benefits. The respondents were directed to purchase the Petitioner's shares at mutually agreed rates. The petition was disposed of with no order as to costs.

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