TaxTMI 
TaxTMI 
2003 (9) TMI 535
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....eferred as 'the appellant' and original respondents are referred to by their respective numbers before the Company Law Board. The respondent No. 1 is a company incorporated and registered under the Companies Act, 1956. The respondent No. 2 is a director of respondent No. 1 company. The respondent No. 3 was also a director of respondent No. 1 till he resigned on 4th June, 2002 and was replaced by respondent No. 4. The respondent No. 5 purports to be the Managing Director/Manager Special affairs of the respondent No. 1. Respondent Nos. 6 to 9 are the directors purportingly appointed by Enron Mauritius Company and respondent Nos. 10 and 11 are the directors nominated by a IDBI and ICICI respectively. Basic Facts : 2. The Dabhol Power Company, the respondent No. 1 herein, was incorporated on 9th April, 1993 as a Private Company with unlimited liability under the provisions of the Companies Act, 1956 (for short 'the Act'). The respondent No. 1 was promoted by Enron Development Corporation, a company incorporated in the State of Delaware, USA, General Electric Company, a Company incorporated in the State of New York, USA and Bechtel Enterprises, Inc., a Company incorporated in the ....
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....hip and transfer of shares. The terms which were agreed between the promoters were included in the Memorandum and Articles of Association of the respondent No. 1. On December 20, 1994, i.e. soon after the incorporation, a "shareholders agreement" was executed between EMC, CIPM and EEMC and the respondent No. 1. It may be noted that the appellant was not a promoter and consequently was not a party to the shareholders agreement, nay, the appellant was not even incorporated when the shareholders agreement was signed. 6. Since the time the appellant became a shareholder, the respondent No. 1 had 11 Directors on it's Board, out of which 10 were the shareholder directors and one was nominated by Industrial Development Bank of India (for short "IDBI") who was one of the lenders. Out of the 10 shareholder directors. EMC which held 50% of Phase I equity had nominated 5, the appellant who held 30% of the phase I equity had nominated 3 and CIPM and EEMC who held 10% of phase I equity had nominated one director each. In or about September 2001, Industrial Credit and Investment Corporation of India (for short "ICICI"), another lender, nominated one more director and thus on and from Septembe....
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.... No. 1 and from February 2002, Mr. Ravi Bhudhiraja was the sole nominee of the appellant on the Board of the respondent No. 1. Around that time, the respondent No. 1 was unable to pay it's lenders, creditors, suppliers and contractors. Disputes had also arisen between the respondent No. 1 and MSEB regarding the PPA, the computation and payment of the charges for the power purchased. The respondent No. 1 was in financial crisis and around January 2002, it terminated the services of most of it's employees and appointed 18 individuals as core team of consultants to take care of the corporate business and legal matters. In the mean while, IDBI filed a suit in the High Court of Judicature at Bombay and took out a motion for appointment of a Receiver. By an order dated 21st March, 2002, the High Court appointed the Court Receiver as the receiver of the various assets of the respondent No. 1. On or about 2nd April, 2002, the Court Receiver took charge of the various assets of the respondent No. 1. On 28th March, 2002, Mr. Mohan Gurunath resigned as the Managing Director and on 29th March, 2002, six other nominee directors appointed by EMC resigned as directors of the respondent No. 1. On ....
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....was not served on the appellant. According to learned counsel for the appellant, the meeting on 4th June, 2002 was held surreptitiously without notice to the appellant and decisions taken therein were not conveyed to the appellant. On or about 18th June, 2002, the appellant came to know of the replacement of respondent No. 3 by respondent No. 4 as a director nominated by CIPM and the purported appointment of respondent No. 5 as a director of the respondent No. 1. After exchange of some correspondence the appellant filed a petition bearing Company Petition No. 45/02 under section 397 of the Act before the Company Law Board (for short 'CLB') from the order in which the present appeal arises. In the Company Petition, the appellant inter alia alleged that the meeting of the Board of respondent No. 1 held on 4th June, 2002 and the appointment of respondent No. 4 as a director made thereat was illegal, oppressive and unfairly prejudicial to the rights of the appellant as a shareholder and against public interest. 12. Initially, the Company Petition No. 45 of 2002 was filed on 23rd July, 2002 challenging only the legality and validity of the Board meeting dated 4th June, 2002 and the d....
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.... agitated before the Division Bench. By an order dated 30th October, 2002, the Division Bench permitted the appellant to amend the petition before the CLB to include all the issues including the events subsequent to the filing of the petition and requested the CLB to endeavour to dispose of the petition within a period of eight weeks. The petition was heard by the CLB on 17th and 18th February, 2003. By an order dated 2nd April, 2003, the CLB disposed of the petition and that order is challenged in these appeals. Preliminary objection about the maintainability of the appeal 13. Mr. Dwarkadas, learned counsel for the respondent No. 1 submitted that whether the acts complained of by the appellant were oppressive or not was essentially a question of facts. Almost all the findings recorded by the CLB were findings of facts. All issues raised as questions of law in paragraph No. 4 of the appeal memo in Appeal No. 4 of 2003 were questions of facts and not questions of law. An appeal lies only on questions of law under section 10F of the Act which reads as under:- "10F. Appeals against the orders of the Company Law Board.-Any person aggrieved by any decision or order of the Compa....
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....e of some group of shareholders. An act or action may be perfectly legal and yet be oppressive and conversely an irregular and even an illegal act may not be oppressive of any shareholders. For example, declaring of a dividend without there being adequate profits and out of the capital is illegal but may not be oppressive of any shareholders. There can be numerous illustrations of an acts which are contrary to law being done bona fide for the benefit of the company and it's members in general. 16. In Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd. AIR 1981 SC 1298, the Supreme Court (in para No. 49) quoted a passage from the judgment of Bagwati, J. in Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton & Jute Mills Co. Ltd. AIR 1965 Guj. 96, to the effect : "A resolution passed by the directors may be perfectly legal and yet oppressive, and conversely a resolution which is in contravention of law may be in the interests of the shareholders and the Company." The Supreme Court then held : "Neither the judgment of Bhagwati, J. nor the observations in Elder are capable of the construction that every illegality is per se oppressive or that illega....
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....(India) Ltd.'s case (supra ) in support of the proposition that a petition under section 397 of the Companies Act cannot be filed alleging single act of oppression. In paragraph No. 49 of the judgment, the Supreme Court observed : ". . . The true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful. But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed. . . ." (p. 1320) 20. In Suresh Kumar Sanghi v. Supreme Motors Ltd. [1983] 54 Comp. Cas. 235, B.N. Kirpal, J. of the Delhi High Court (as his Lordships then was) following the decision of the Supreme Court in Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp. Cas. 351 quoted : "there must be continuous acts on the part of the majority shareholders, continuing up to the date of the petition, showing that the affairs of the Company were conducted i....
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....n respect of a single act viz., meeting of the directors held on 4th June, 2002 and the decisions taken thereat. Since the act was a single act, Mr. Sibal submitted, the petition could not have been filed under section 397 of the Act. The petition was subsequently amended and further actions viz., the decisions taken at the general meeting on 9th September, 2002 and further nomination of 4 directors made by EMC by a letter dated 8th October, 2002 were also challenged as oppressive acts. It was alleged that all these actions were part of the series of acts designed to oppress the appellant. Mr. Sibal however, submitted that events subsequent to the filing of the petition cannot be taken into consideration. He relied on the observations of the Supreme Court in Shanti Prasad Jain's case (supra). In that case the Supreme Court observed: ". . . In this connection reliance is placed on certain matters which transpired after the application was filed on September 14, 1960. These matters however cannot be taken into account for the application has to be decided on the basis of the facts as they were when the application was made. . . ." (p. 377) As subsequent events cannot be taken i....
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....und that the premises were required for the purpose of building or re-building, or were required for his own use and occupation, for a period of three years from the date of the purchase of the premises was valid and was applicable to the pending suits and appeals. The Division Bench of the High Court had upheld the amendment but struck down the retrospective effect and it's applicability to the pending suits and proceedings. On appeal to the Supreme Court, Krishna Iyer, J. speaking for the majority observed (at paragraph No. 28): "We are satisfied that as far as possible courts must avoid multiplicity of litigation. Any interpretation of a statute which will obviate purposeless proliferation of litigation, without whittling down the effectiveness of the protection for the parties sought to be helped by the legislation, should be preferred to any literal, pedantic, legalistic or technically correct alternative. On this footing we are prepared to interpret section 13 of the Amendment Act and give effect to section 4 of that Act. How do we work it out? We do it by directing the plaintiffs in the two cases to file fresh pleadings setting out their grounds under clauses (f) and/or (....
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....Articles of Association, EMC was entitled to appoint six directors in it's own right by virtue of it's holding of more than 60% of the equity share capital and nomination of the four persons as directors by it as per Articles of Association cannot be regarded as an act of oppression. It was not even alleged in the petition that the said four nominees had performed any further acts or taken any actions which were oppressive. Mere nomination of four directors by EMC in exercise of its right under the article 10 of the Articles of Association cannot be construed as oppressive. If the act of appointment of four directors by EMC is held to be not oppressive and excluded for the purpose of this petition, then the allegations of oppression would be only against CIPM and EEMC each who themselves were minority shareholders, holding only 10% equity each. Mr. Sibal submitted that the oppressive acts giving rise to a petition under section 397 of the Act must be acts of oppression by majority shareholders against minority shareholders. There can be no oppression of one group of minority shareholders by another group of minority shareholders nor can there be an oppression of majority shareholde....
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....ecifically invited my attention to the following observations made in paragraph No. 40 of the judgment: "It is necessary to refer briefly to the relevant part of the pleadings before examining the charge of oppression made by the holding company against a group of the minority shareholders of NIIL. . ." (p. 1316) He then submitted that Supreme Court specifically considered the charge of oppression made by a majority shareholder against minority shareholders and did not dismiss the petition at the threshold on the ground that petition under section 397 of the Act could be filed only for an oppression of minority shareholders by majority shareholders. The fact that the petition was ultimately dismissed on merits was immaterial and what was material was that the Supreme Court did not dismiss the petition on the ground that majority shareholders cannot complain of an oppression at the hands of minority shareholders. 28.1 Mr. Seervai also referred to and relied upon a judgment of a Single Judge of the Calcutta High Court in Hungarford Investments Trusts Ltd.'s case (supra). In paragraph 57 of the judgment it was observed : "A Division Bench of this Court in Ramashankar Prosa....
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.... on the enforcement of that right in that manner can be imposed by judicial interpretation unless such restriction can be found expressly or by necessary implication in the statute itself. In today's commercial world, it is possible that even a minority shareholder can cause oppression of the majority. In fact, Mr. Sibal himself in the latter part of his argument submitted that the appellant who is a minority shareholder is by oblique methods causing an oppression of majority shareholders by preventing the respondent No. 1 company from lawfully persuing arbitration proceedings lawfully instituted by it. The said allegation, if correct, itself would be an act of oppression of the majority shareholders by minority shareholders. It cannot be said that if minority shareholders are oppressed by majority shareholders, the oppressed would have the special remedy, but if minority shareholder oppresses majority shareholder, the oppressed would not have the special remedy provided under section 397 of the Act. I am therefore, of the opinion that a petition under section 397 of the Act is maintainable by members who complain of the oppression even if they do not form the minority shareholders....
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....nt No. 1 was a quasi partnership. The respondent No. 1 has only four shareholders. They had entered into a shareholders agreement and had agreed to carry out the business in accordance with the shareholders agreement. Things which were a ground for dissolution of a partnership would also be a ground for winding up of the respondent No. 1; it would not be necessary to prove a complete deadlock in the management of the respondent No. 1 to invoke the principle of "just and enquitable" for winding up of the respondent No. 1. In support, Mr. Andhyarujina relied upon the decision of the House of Lords in Ebrahimi & West Bourne Gallaries 1973 A.C. 360. In the Ebrahimi & West Bourne Gallaries' case (supra ), the House of Lords allowed winding up of the company holding that a limited company was more than a legal entity with a personality in law of it's own but, there was a room in the company law for recognition of the fact that behind it, or amongst it, there were individuals with rights, expectations and obligations inter se which were not necessarily submerged in the company structures equally always enabled the court in subject the exercise of legal rights to equitable considerations. ....
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....issolution of a partnership may apply squarely if apparent structure of the company is not the real structure and on piercing the veil, it is found that in reality, it is a partnership. On the allegations and submissions in the present case, we are not prepared to extend these principles to the present company." 33. In the present case also, I am not inclined to hold that the respondent No. 1 in reality is a quasi partnership and that equitable considerations exist which would justify pressing of an order for winding up. Sometimes a small family business or partnership business is converted and incorporated into a company in order to have the advantages of a limited liability. I am conscious that it is not always necessary that there should be a pre-existing family business or partnership for applying the principle of quasi partnership to a company but, the pre-existence of a partnership or family business is certainly a factor which would to be taken into consideration while considering the real nature of the company. Secondly, in a company which is quasi partnership, the business is usually a small business at least in the beginning, though it may grow in course of time. Th....
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....as so oppressive that that the appellant had completely lost faith in the majority shareholders and consequently it was just and equitable to wind up the respondent No. 1. He submitted that EEMC and CIPM has virtually hijacked the respondent No. 1 by appointing majority of the directors either by themselves or by securing nomination of their own employees as nominee directors of EMC. They have grabbed the management of the respondent No. 1 by packing the board with their own men resulting into total loss of confidence. 35. In Shanti Prasad Jain's case (supra) the Supreme Court observed (at page 366 of 35 Comp. Cases): ". . . As has already been indicated, it is not enough to show that there is just and equitable cause for winding up of the company, though that must be shown as preliminary to the application of section 397. . . . The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the Company's affairs, and such oppression must involve at least an element of lack of ....
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....nner oppressive of the appellant. Decisions taken at the Board meeting were illegal and oppressive. The holding of the Board meeting without notice to the appellant was illegal. Mr. Andhyarujina relied upon the judgment of the Supreme Court in Parmeshwari Prasad Gupta v. Union of India AIR 1973 SC 2389, in support of the contention that the requirement of notice was mandatory and resolutions passed at the meeting of the Board of directors without prior notice to all the directors were invalid. In the case of Parmeshwari Prasad Gupta's case (supra) notice was not given to one of the directors and he was not present at the meeting. In para No. 11 of the judgment the Supreme Court referred to a passage form the Halsbury's Laws of England to the effect : "It is essential that notices of the meeting and of the business to be transacted should be given to all persons entitled to participate and that if a member whom it is reasonably possible to summon is not summoned, the meeting will not be duly convened, even though omission is accidental or due to the fact that the member has informed the officer whose duty its to serve notice that he need not serve notice on him." Relying on th....
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....he decision taken by the said two directors in co-opting and/or appointing Mr. Freeman as a director was illegal for want of quorum. Article No. 2 of the Articles adopts Regulations set forth in Table E of the Companies Act which itself incorporates all of the Regulations of Table A except some regulations. Regulation 75 of Table A reads : "The continuing directors may act notwithstanding any vacancy in the Board, but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or summoning the general meeting of the company, but for no other purpose." The main purpose of Regulation 75 is to ensure that the Board does not become non-functional for want of quorum and that is the reason why continuing directors are authorised to appoint a director or directors to the extent necessary to form the quorum or to call for a general meeting. Regulation 75 thus permits the continuing directors to convene a Board meeting for the purpose of increasing the number of directors to that fixed for the quorum. As there were only....
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....lected, the members whose noting power has not been taken into account in making a nomination under the preceding two sentences shall, by a majority vote of the voting power not so taken into account, nominate a candidate(s) so that 10 shareholder Directors in the aggregate are in office. 10.3 The Members agree to vote in favour of the appointment of the candidates nominated pursuant to Article 10.2 or Article 10.4 at a general meeting of the company. 10.13 Directors other than shareholder directors shall be elected by members having a majority of the shares. The Members agree to procure the election of individuals as directors (other than shareholder directors) to the extent required under the Financing Agreements." 40. Article No. 10.1 prescribes the minimum number of directors to be '3' and maximum number of directors to be '13'. The scheme of the article No. 10 contemplates shareholder directors who are nominees of the shareholders appointed under the article Nos. 10.2 and 10.3 and other directors. The shareholder directors cannot exceed 10. Articles prescribe maximum number of directors to be '13'. Thus, 3 more directors other than shareholder directors can be appoint....
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....28 of it's judgment. It is thus, clear that the real intention of the appellant in challenging appointment of Mr. Freeman is for collateral purpose of making the respondent No. 1 non-functional by ensuring that the total number of directors of the respondent No. 1 are reduced below the quorum prescribed by the Articles. Looked at from this angle, even if it is held that the appointment of Mr. Freeman in the meeting of 4th June, 2002 was illegal, it cannot be said to be oppressive of the appellant as it was made to make the Board functional. If at all there is an oppression, it is by the appellant who wants the respondent No. 1 to be without an effective management without there being a quorum for meetings of the Board and it is for this reason that the appellant appears to have declined the offer made by the respondents to substitute Mr. Freeman with the nominee of the appellant if it chose to appoint one as a director of the respondent No. 1. (D)Replacement of Mr. Allison by Mr. Walsh 41. In the meeting of the Board dated 4th June, 2002, Mr. Allison resigned and Mr. Walsh who was nominated in his place was appointed as a director. Though initially, the validity of replacemen....
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.... contended that under the article No. 10.7, the directors could not only waive the notice of the meeting altogether but could, in any event, waive the requirement as to the period of the notice and accept shorter notice as valid. If a shorter notice could be valid then the notice of the meeting could be as short as few minutes and can be given just prior to the meeting when the directors assembled on 4th June, 2002. The agenda could then be circulated along with such notice. 44. Relying upon two judgments of the Calcutta High Court in Mohta Bros. (P.) Ltd. v. Calcutta Landing & Shipping Co. Ltd. [1970] 40 Comp. Cas. 119 and of this Court in P.S. Offshore Inter Land Services (P.) Ltd. v. Bombay Offshore Suppliers & Services Ltd. [1992] 75 Comp. Cas. 583 , Mr. Sibal submitted that the contention about absence of agenda cannot be considered in the absence of pleadings. In Mohta Bros. (P.) Ltd.'s case (supra) a Division Bench of the Calcutta High Court observed: ". . . In our view, this contention on behalf of the respondent is well founded. Full particulars must be given by a petitioner in an application under sections 397 and 398 of the Act of acts of mismanagement and oppressi....
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....ion to the item discussed with the permission of the chair and who took part in the discussions without any demur be subsequently allowed to contend that the resolution was bad in law because it was not specifically included in the agenda ? In my opinion, not. If a director himself cannot raise an objection, no shareholder be allowed to do it. If allowed, it would open a back door challenge by a director who participates in the resolution without any objection and challenges the resolution subsequently through a shareholder, who could be his own nominee. In P.S. Offshore Inter Land Services (P.) Ltd.'s case (supra), also it was contended that no agenda for the Board meeting was forwarded even though it was stated in the notice of the meeting that agenda would follow. After referring to the judgment of the Supreme Court in the case of Parmeshwari Prasad Gupta (supra), this Court held that the alleged defect was curable and declined to interfere in view of the subsequent conduct of the parties (see page Nos. 604 and 605 of the report). Mr. Sibal also referred to and relied upon the judgment of a Division Bench of Delhi High Court in Smt. Abnash Kaur v. Lord Krishna Sagar Mills Ltd. [....
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.... void. This finding is assailed by respondent Nos. 2 to 5 by filing an appeal bearing (lodging) No. 6 of 2003. The meeting of the Board dated 4th June, 2002 can be divided into two parts. In the first part, Mr. Allison was replaced by Mr. Walsh by nomination by CIPM and Mr. Freeman was co-opted/appointed as a director. Replacement of Mr. Allison by Mr. Walsh is not challenged before me. In the second part the meeting was continued after appointment of Mr. Freeman and establishment of quorum, and some decisions were taken by the reconstituted Board. This second part of the meeting can be construed as a separate and independent meeting of the reconstituted Board. There is nothing in law which prevents two Board meetings being held one after the other. The only possible objections about absence of notice and absence of agenda for this second meeting of the reconstituted Board have been considered and rejected earlier. Therefore, the finding of the CLB that further decisions taken in the meeting dated 4th June, 2002 after reconstitution of the Board were illegal is required to be set aside. Assuming however, that the holding of the Board meeting of the reconstituted Board on 4th June, ....
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....d that was not against the interests of the respondent No. 1. All other liabilities were disputed and were to be contested. Therefore, the said decision was not against the interests of respondent No. 1 and certainly not oppressive of the appellant. Continuation of the arbitration proceedings was also a decision which was in the interest of the respondent No. 1. If the respondent No. 1 succeeds in the arbitration, it would receive money by way of compensation and/or damages. May be that compensation would be required to be paid by MSEB-holding company of the appellant, or the Government of Maharashtra or the Union of India. The interest of the appellant as a member of the respondent No. 1 and the interest of the appellant as a subsidiary of MSEB are clearly conflicting. The recovery of money through the arbitration proceedings is for the benefit of the respondent No. 1 and all it's creditors and members including the appellant in the capacity as a member. The fact that the compensation may come from the coffers of the Government of Maharashtra or MSEB is against the interest of the appellant. The money would come to the respondent No. 1 and for the benefit of the respondent No. 1. ....
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....entitled to nominate two directors by virtue of it's 14.15 per cent equity holding but was entitled to nominate only one director. In my opinion, the said finding is correct for the reasons mentioned below: Under the article No. 10.1 the respondent No. 1 is to have minimum '3' and maximum '13' directors. Under the article No. 10.2, 10 directors are to be elected by the shareholders in the manner mentioned therein. Article No. 10.2 consists of only three sentences. The first sentence says that each member is entitled to nominate one candidate for election to the Board in respect of each 10 per cent of the total voting power (voting power in the present case is proportionate to the equity shareholding) held by it. In the present case, EMC would be entitled to nominate six candidates on account of its 65.85 per cent voting power. The appellant would be entitled to nominate one director by virtue of it's 14.15 per cent voting power and EEMC and CIPM each would be entitled to nominate one director by virtue of 10 per cent voting power held by each of them. This makes a total of nine shareholder directors. Second sentence of article No. 10.2 lays down that members who do not hold voti....
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....er, it being minority of unutilised 10% of the voting power, could not nominate one additional director. Therefore, the stand taken by the CIPM and EEMC that appellant was not entitled to nominate second director was lawful. At the meeting of 9th September, 2002, the appellant nominated two persons viz., Mr. A.K. Mago and Mr. R.B. Budhiraja for the post of directors. CIPM and EEMC objected to the nomination of two persons and requested the appellant to nominate only one. The appellant did not agree. CIPM and EEMC then suggested that the resolutions regarding election of two persons nominated by the appellant as directors be put to vote separately. This would have enabled the CIPM and EEMC to vote in favour of the appointment/election of one nominee of the appellant and to vote against the appointment/election of the second nominee which was not the appellant's right. However, as section 263 of the Act is not applicable to the respondent No. 1 being a private company, the appellant insisted upon putting to vote the resolution for appointment of its 2 nominee directors, as a single resolution. EEMC and CIPM voted against the said resolution as voting in favour of the resolution would....
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....erform their reciprocal promise contained in the article No. 10.3. 53. In para No. 32 of its order, the CLB has held that CIPM, EEMC and EMC should have supported appointment of 2nd nominee director of the appellant on equitable grounds especially because place for one more director was unfilled under the article No. 10.13. As stated earlier, the appellant was entitled to nominate only one director by virtue of 14.15% of the voting power. This decision of the CLB regarding appointment of the 2nd nominee director by the appellant is assailed by the respondents by filing an appeal bearing lodging No. 6 of 2003. The challenge appears to be correct. The minimum number of directors required to form a quorum were elected in the general meeting of 9th September, 2002. The members have agreed to the manner in which directors should be appointed/elected and the provision regarding the manner of appointment of directors have been made in the Articles. There was no occasion for the CLB to interfere in the said arrangement unless the Articles were breached and such breach, in the opinion of the CLB was oppressive. In my opinion, there was no oppression of the appellant. The CLB could have p....
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....or duties with respect to the property or records of the company; and (b)the Board of Directors of the Company shall continue to manage the Company's affairs in all respects: Provided that should the JPLs consider at any time that the Board of Directors of the Company is not acting in the best interests of the Company and creditors of the Company and the creditors of Enron Group, the JPLs shall the power to report the same to this Court and seek such directions from this Court as the JPLs are advertised as appropriate." 56. The order of the Supreme Court of Mauritius is clear that the power of managing the EMC was not vested with the JPLs but its Board of directors continued to have the power to manage the affairs of EMC in all respects. Mr. Andhyarujina however, contended that the order of the Supreme Court of Mauritius, insofar as it conferred powers of management on the Board of Directors of EMC, was illegal, null and void and should be ignored. He invited my attention to the prayers in paragraph No. 38 of the Bankruptcy petition made before the Supreme Court of Mauritius and order passed by the Supreme Court of Mauritius on 9th May, 2002, and contended that the Supreme....
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....so as to rehabilitate the company. In Rishabh Agro Industries Ltd. v. PNB Capital Services Ltd. [2000] 101 Comp. Cas. 284 ^1, the Supreme Court observed : ". . . It is contended that after the order of the winding up and appointment of the liquidator, the board of directors had no jurisdiction to move the BIFR by passing a resolution. Such a submission cannot be accepted. In a winding up petition the liquidator is appointed to protect the assets of a company for the benefit of its creditors, secured and unsecured and others. It is not the function of the official liquidator to start the process of rehabilitation of the company as is aimed at under the Act. Despite appointment of the official liquidator, the board of directors continue to hold all residuary powers for the benefit of the company which includes the power to take steps for its rehabilitation. . . ." (p. 292) 57. Secondly, a foreign law - the ( Mauritius) Companies Act, 1984 cannot be interpreted by us on the basis of interpretation put upon the provisions of the (Indian) Companies Act, 1956, even if some of the provisions (regarding provisional liquidators) appear to be similar. It would be preposterous to hold t....
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....filled in, within about six months of the resignation by previous nominee directors. This period cannot be said to be unreasonable, especially taking into consideration that EMC itself was facing a bankruptcy proceedings in the Supreme Court of Mauritius. It must however be noted that the persons who is nominated by EMC as a shareholder directors under the article No. 10.4 do not automatically become directors immediately on their nomination. The said nominees would have to be elected in the general meeting and till such general meeting is held, the article No. 10.4 obliges the Board to co-opt and appoint the nominees as a directors. Article 10.4 reads as under :- "10.4 Any Shareholder Director nominated and appointed pursuant to this Article 10 may at any time be removed and substituted by the Member that nominated such Shareholder Director. The Members agree to procure that any election pursuant to Article 10.3 and any such removal and/or election shall take place at a general meeting of the Company to be held as soon as reasonably practicable after receipt from the applicable Member of a written notice served on each of the other Members or specifying the removal and/or elect....
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.... affairs of the Company, in future." 61. The allegation in the petition are that continuation of the arbitration proceedings in London is against the interests of the State of Maharashtra and the power sector in India and as such it is prejudicial to public interest. Mr. Andhyarujina submitted that the MSEB/State of Maharashtra have lawfully terminated the PPA and the respondent No. 1 has unnecessarily dragged MSEB, the Government of Maharashtra and the Government of India in the arbitration proceedings before the Arbitral, Tribunal in London. The arbitral proceedings are said to be against the interest of the people in the State of Maharashtra because if an order for payment of compensation or damages is passed in the said arbitral proceedings, the MSEB, the Government of Maharashtra and the Government of India would be required to pay huge amount of money to the respondent No. 1, out of public ex chequer and the people of the State of Maharashtra would suffer. Buying of a power at an exorbitant rate charged by the respondent No. 1 is not in the interest of the people of the State of Maharashtra and therefore, it is not in public interest to continue the arbitral proceedings. T....