TaxTMI 
TaxTMI 
2013 (9) TMI 283
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....oes not state to whom the 24 per cent. of the shares of petitioner No. 4 should be restored and also the numbers do not match). (iii)To restore directorship of petitioner No. 1 in respondent No. 1 company. (iv)To annul the increase in authorised share capital from Rs. 50 lakhs. (v)To annul the further allotment of shares beyond 5 lakhs shares. However, since cancellation of shares of value of Rs. 171.86 crores could be oppressive to the company, as an alternative prayer-the petitioners should be given the option to subscribe for 24 per cent. of the present capital of the company to the petitioners. (vi)To declare the appointment of respondents Nos. 4 to 6 as directors as invalid and to debar them from acting as directors of VSLP. 3. It all started on October 11, 1999, when Anitha Impex Ltd. (petitioner No. 4), a UK based company (incorporated on October 5, 1993, in London) entered into an agreement with the Rajasthan State Electricity Board to establish and maintain a generating station with 150 MW capacity in Sirohi or Jodhpur District in the State of Rajasthan, after incorporating a company in India under the Companies Act, 1956. The power generated was agreed to b....
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....of the company as on April 2, 2002, was Rs. 1 lakh and the same was fully subscribed by petitioners Nos. 1 and 2. They would point out that being a foreign entity shares could never have been held by Anita Impex (petitioner No. 4) without compliance of the law on foreign exchange. Form 2 is seen filed only on December 3, 2002, showing an allotment of 2,50,000 equity shares on October 10, 2001 for cash (vide annexure R5-Volume A1). The respondents say there was no bank account for the company on October 10, 2001, since the account was opened only on December 21, 2001. They also say the alleged allotment of 2,50,000 shares on October 10, 2001, is in direct conflict with annexure P11 resolution which specifically mentions that the paid-up and subscribed capital even on April 3, 2002, is Rs. 1,00,000 of Rs. 10 each. 5. The fulcrum of the case is a memorandum of understanding dated April 3, 2002, entered into between respondents Nos. 1 and 8 (annexure P19). The main reliefs claimed in the company petition are solely based on the above memorandum of understanding. The petitioners claim that they had entered into the memorandum of understanding on April 3, 2002, with KSK Energy (respon....
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.... commenced, or rather the commencement and completion of the project is the condition precedent for the payment of consideration. They further point out that the petitioners have taken a contradictory stand as to the company in which they are entitled to 40 lakhs shares. In any event these reliefs based on private agreements cannot be granted in a summary proceeding by this Board, respondents say. 6. The petitioners admit that they have transferred 76 per cent. of the shareholding in respondent No. 1 to KSK Energy (respondent No. 8). But the particulars are not forthcoming. Contrary to the above, they argue that the respondents have no documents to prove the transfer of shares by the petitioners. It is the case of the petitioners that respondents Nos. 2, 3 and 4 had illegally transferred the balance 24 per cent. shares held by them and removed petitioner No. 1 from the post of director, increased the authorised capital and paid-up capital, and allotted shares to others. The petitioners allegedly came to know about this fact during December, 2006 through an advertisement related to the initial public offer proposed by KSK Energy (respondent No. 8), in which the petitioners are no....
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....ares could be allotted by the company as directed by respondent No. 8. It is the specific case of the respondents that after the project had become a non-starter, the petitioners transferred their shares and exited from the company and that Rs. 25 lakhs was paid in cash to the petitioners towards the consideration for 2,50,000 shares illegally allotted to petitioner No. 4. The above shares were originally transferred to respondent No. 4 who in turn transferred them to KSK Energy (respondent No. 8). The new project set up by the company is at a cost of approximately Rs. 900 crores with participation of leading banks and financial institutions in India. The project has commenced generation of electricity. The petitioners have not invested a single rupee. There is no equity in favour of the petitioners. The petitioners have kept quiet for over 8 years before filing the petition even though they had knowledge of the events complained of in the company petition. The conduct of the petitioners would show that they are attempting to blackmail the respondents. The petitioners are guilty of delay and laches and have come with unclean hands, respondents Nos. 1, 2 and 3 say. 9. The fourth ....
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.... is colluding with respondents Nos. 2 and 3 and cooked up a story to cover up the illegal transfer and unauthorised allotment of shares held by the petitioners and also the illegal appointment of directors. The name of the friend from whom respondent No. 4 borrowed Rs. 25,00,000 in cash is not revealed in his counter. No evidence of payment to the petitioners is forthcoming. It is denied that the shares held by the fourth petitioner was transferred to him after receiving Rs. 25,00,000 in cash. 11. Respondent No. 6, a retired Chief Engineer of the Rajasthan State Electricity Board, filed a reply statement adopting the counter affidavit of respondents Nos. 1, 2 and 3. He is a technically qualified professional associated with the evolution and development of energy sector in the State of Rajasthan. Petitioners Nos. 1 and 3 and the KSK group (respondents Nos. 2 and 3) are known to him. On realising that petitioners Nos. 1 and 3 had necessary permission to set up the power plant, respondent No. 6 introduced the KSK group to the petitioners. In the memorandum of understanding between the two groups he is a witness. He is aware that the entire funds for the implementation of the proje....
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....xchanges in India. Respondent No. 7 is a wholly-owned subsidiary of respondent No. 8 and it has brought an investment around Rs. 150 crores including overseas capital, into respondent No. 1 company for the purpose of the new project. The petitioners have not expressed their readiness to bring in the proportionate amount of funds to obtain their shareholding at 24 per cent. 14. Respondent No. 9 is a widely held public limited company with approximately 1,15,000 shareholders and listed with the National Stock Exchange and Bombay Stock Exchange. On July 24, 2007, respondent No. 9 executed a share subscription agreement and power supply agreement with respondent No. 1 company after paying valid and bona fide consideration and purchased 14,44,445 class-A equity shares of Rs. 10 each and 27,85,555 class-A cumulative preferential shares of Rs. 10 each and necessary share certificates have been received in compliance with the Companies Act. Respondent No. 9 is not aware of the involvement of the petitioners in respondent No. 1 company. Respondent No. 9 is not a party to the memorandum of understanding dated April 3, 2002. The entire capital contribution of Rs. 173.50 crores required for....
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....tand. Respondent No. 15 says that the claim, if at all, can be only against respondent No. 8. The Company Law Board has no jurisdiction to entertain the reliefs sought in the company petition. To the knowledge of respondents Nos. 11, 12, 13, 14 and 16, the petitioners had not invested a single rupee nor participated in the 135 MW power project. 17. A rejoinder was filed on behalf of petitioners Nos. 1, 2 and 3 on the reply filed by respondents Nos. 7, 8, 10, 14 and 15. It is contended that since respondents Nos. 7 and 8 are only shareholders of respondent No. 1, they are not aware of the facts and have no access to the books of account, records of respondent No. 1 and therefore they cannot say that the petition is not maintainable. It is argued that respondent No. 10 being only a shareholder of respondent No. 1 it is surprising as to how it is aware of the facts and figures of respondent No. 1 and this only shows the collusion of respondent No. 10 with respondents Nos. 1, 2 and 3. It is argued that the respondents have allotted shares to respondents Nos. 7, 8 and 10 illegally and without the knowledge of and intimation to the petitioners and without holding board meeting, follow....
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....at reliefs and costs. 19. Case laws cited by the petitioners : Ramesh B. Desai v. Bipin Vadilal Mehta [2006] 132 Comp Cas 479 (SC) ; [2006] SC 2996 (page 493 of 132 Comp Cas) : "Sub-rule (2) of Order 14, rule 2 of the Civil Procedure Code lays down that where issues both of law and of fact arise in the same suit, and the court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to (a) the jurisdiction of the court, or (b) a bar to the suit created by any law for the time being in force . . . Under Order 14, rule 2 of the Civil Procedure Code, where issues both of law and of fact arise in the same suit, and the court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined. The jurisdiction to try issues of law apart from the issues of fact may be exercised only where in the opinion of the court the whole suit may be disposed of on the issues of law alone, but the Code confer....
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.... held that the plea of limitation does not arise in the case of proceedings in relation to section 397/398 proceedings." HB Stockholdings Ltd. v. DCM Shriram Industries Ltd. [2009] DE 1851 ; [2010] 156 Comp Cas 54 (Delhi) (page 68 of 156 Comp Cas) : "One of the questions to be considered is whether there is any implied or express bar to the maintainability of the suit. Section 9 of the CPC states that the civil court shall have jurisdiction to try all suits of a civil nature 'excepting suits of which their cognisance is either expressly or impliedly barred'. . . Emphasising that the powers of the court were wide, given the object that is sought to be achieved by the exercise of such power under sections 397 and 398, it was explained that clauses (a) to (g) of section 402 'indicate the widest amplitude of the court's power'. . . An examination of the aforesaid sections clearly brings out two aspects, first, the very wide nature of the power conferred on the court, and, secondly, the object that is sought to be achieved by the exercise of such power with the result that the only limitation that could be impliedly read on the exercise of the power would be that nexus must exist bet....
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....s : Chatterjee Petrochem (I.) (P.) Ltd. v. Haldia Petrochemicals Ltd. [2011] 167 Comp Cas 373 (SC) (headnote) : "The failure of WBIDC and the Government of West Bengal to register the 155 million shares transferred to the joint venture company which could not, strictly speaking, be taken to be failure on the part of the company, was the failure of one of the parties to a private arrangement to abide by its commitments. The remedy in such a case was not under section 397 of the Companies Act, 1956. The alleged breach of the agreements was really in the nature of a breach between two members of the company and not the company itself. It was not on account of any act on the part of the company that the shares transferred to the joint venture company were not registered in the name of the C group. There was, therefore, no occasion for the Company Law Board to make any order either under section 397 or 402 of the Act." Chatterjee Petrochem (Mauritius) Co. v. Haldia Petrochemicals Ltd. [2008] 143 Comp Cas 726 (CLB). Incable Net (Andhra) Ltd. v. Apaksh Broadband Ltd. [2008] 142 Comp Cas 860 (CLB). M. Thimme Gowda v. SPR Sugars (P.) Ltd. [2008] 142 Comp Cas 152 (CLB). Satish....
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....o. 8 came up for consideration in the board meeting held on April 3, 2002 (annexure P11, Volume 1A). In the meeting the chairman (petitioner No. 3) informed the board that the company is initiating change in management by transferring 76 per cent. shares of the company in the name of KSK Energy (respondent No. 8). It further mentioned that the company has only two directors (petitioners Nos. 1 and 2) and 100 per cent. shares are held by the promoter directors equally in the paid-up capital of Rs. 1 lakh consisting of 10,000 shares of Rs. 10 each, that after the transfer of 76 per cent. of shares one promoter director (petitioner No. 2) shall resign from the board and the other promoter (petitioner No. 1) will be appointed as a permanent director, that KSK Energy (respondent No. 8) has agreed that 40 lakhs shares of Rs. 10 each will be issued to the promoter group before the commencement of the project. The draft memorandum of understanding was approved in this board meeting and the 40 lakhs shares was resolved to be taken in the name of petitioner No. 3 or his nominee. On the same day a memorandum of understanding (annexure P19) was entered into between KSK Energy (respondent No. 8....
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....er that the development of the project would be undertaken exclusively by the co-developer in a manner as the co-developer may deem fit ; Now therefore, in consideration of the premises, covenants and agreements hereinafter contained, the parties hereto agree as follows : 1. Representations 1.1 The developer represents that he has carried out the following activities to enable the co-developer to commence work relating to the development of the project : 1.1.1 Incorporated a special purpose company in the name and style Marudhar Power P. Ltd., having its registered office at A-28, Shastri Nagar, Jodhpur-342 003, hereinafter referred to as MPPL unless repugnant to the context thereof as required under the AT and SP. Copies of the memorandum and articles of association and certificate of incorporation of MPPL are enclosed hereto as annexure I. 1.1.2 The developer hereby represents that he has the absolute power and authority to deal on behalf of MPPL the developer further undertakes that any demand or dispute or rights claimed by any other party shall not impair MPPL and the co-developer and that any costs relating to such disputes shall be borne only by the developer.....
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....loper is entitled to nominate any entity or entities for such ownership in concurrence with Mr. Manoj Kanunga, who is presently a director of MPPL." 25. On April 15, 2002, petitioner No. 2 resigned from the board (annexure P20) and the same was accepted by the board in the board meeting held on the same date. On the very same date petitioner No. 3, as per annexure P22 nominated petitioner No. 1 as the permanent director of respondent No. 1 company authorised to own 40 lakhs equity shares referred to in the memorandum of understanding. On April 8, 2002, another memorandum of understanding (annexure P17) was entered into between respondent No. 1 company and Rajasthan State Mineral Development Corporation ("RSMDC") as per which RSMDC agreed to supply and send lignite to the project undertaken by respondent No. 1 company. The agreement contemplated two more separate agreements, i.e., fuel supply agreement after obtaining the requisite statutory clearances such as approval of mining licence from the Ministry of Coal, Government of India, environment clearance from the Ministry of Environment and Forests, and acquire the required land for mining of lignite for phase-I of the project, ....
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....nexure R8, Volume A1). Based on the above letter the Government informed the Rajasthan Vidyuth Prasaran Nigam Ltd., that the Electricity Act, 2003, has come into force with effect from June 10, 2003 and hence there was no way but to reexamine the case afresh under the new law with regard to the project implementation (annexure R8, Volume-A1). By letter dated December 22, 2003, Rajasthan Electricity Regulatory Commission passed an order and dismissed the application of respondent No. 1 for obtaining a licence under the old 1999 Act or exemption thereof (annexure R10, Volume-A1) since the Electricity Act, 2003, came into force on June 10, 2003, consequent to which the provisions relating to grant of licence or exemption from the requirement of the licence contained in the 1999 Act have ceased to be operative. 32. During the period between July, 2003 and September, 2003, the Company Law Board allowed the application filed by the company to shift its registered office from the State of Rajasthan (Jodhpur) to the State of Andhra Pradesh (Hyderabad) (annexure R6, Volume A1). The second annual general meeting of the company was convened on September 13, 2003 and the annual accounts for....
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....2 lakhs equity shares were allotted to KSK Energy (respondent No. 8) (the petitioners are not questioning this allotment). On December 2, 2004, the first petitioner resigned from directorship and the board took the same on record (disputed by the first petitioner). On January 10, 2005, the Registrar of Companies, Hyderabad confirmed the shifting of the registered office to Hyderabad, and the statutory records which were with petitioner No. 1 were taken away to Hyderabad by the respondents. 36. On September 29, 2005, the annual accounts for the year ended March 31, 2005, were adopted in the fourth annual general meeting (annexure R15). On July 1, 2005, Government of Rajasthan gave its in-principle approval for allocation of Gruha (E) Lignite Mine to the company. On February 24, 2006, a public hearing on the planned environmental clearance for the lignite mine was conducted. (The respondents say the petitioner was aware of this hearing). 37. On June 15, 2006, 2,50,000 equity shares of M/s. Anita Impex (petitioner No. 4) was transferred to K. Bapi Raju (respondent No. 4) as approved by the board subject to affixing the deficient share transfer stamps (annexure R25, Volume D). Th....
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....gh their special purpose vehicles LD Holdings Mauritius II Ltd., subscribed to 2.16 crores equity shares and 3.51 crores preference shares in the company by making an investment of Rs. 56.7 crores. On November 1, 2006, the AIM listing of the holding company got completed and the trading in the shares commenced. On November 11, 2006, equity and preference shares were allotted to several entities. On December 21, 2006, the petitioner again sought certain clarifications from the company (annexure P23, Volume A). 40. On January 25, 2007, the company entered into an agreement with the National Security Depository Ltd., for dematerialisation of shares. (The respondents say that movement of original documents like transfer deeds, share certificates for the purpose of dematerialisation was necessitated in connection with the above, and while so the original documents got misplaced, but after verification by both M/s. Khaitan and Co., and NSDL. The respondents are relying on the above circumstantial evidence to support their case). In the extraordinary general meeting convened on March 7, 2007, the authorised capital was increased from Rs. 97 crores to Rs. 163.5 crores. In between the na....
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....legal transfer of 24 per cent. shares of petitioners Nos. 1, 2 and 4 ; g.Illegal and unauthorised increase of authorised capital of respondent No. 1 company from Rs. 50 lakhs to Rs. 174 crores ; and h.Illegal allotment of shares made to various respondents from April 12, 2007, onwards. 43. Evidently, the original registered office was in the residence of petitioners Nos. 1 to 3 and the registered office has been shifted to Hyderabad with effect from September 29, 2004. The decision to change the registered office was taken in the annual general meeting held on September 18, 2002, in which petitioner No. 1 participated (annexure R6, page 92, Volume-1). It is very important to note that, the registered office was originally in the residence of petitioners Nos. 1 to 3. As rightly contended by the respondents all the communications with regard to the change of registered office was delivered at Jodhpur at the address of petitioners Nos.1, 2 and 3. It is pointed out by the respondents that the order of the Company Law Board in allowing the shifting of the registered office was also served on the residential address of the first petitioner, which is the original address of the r....
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....standing to be signed with the eighth respondent-the KSK group. 46. In my considered opinion, annexure P11 document is very crucial in adjudicating the issues involved in this petition. This is an admitted document, produced by the petitioners. It clearly expresses petitioners Nos. 1 and 2 as the only directors, holding 100 per cent. shares, equally in the paid-up capital of Rs. 1 lakh consisting of 10,000 shares of Rs. 10 each. The board meeting held on April 3, 2002, has been attended by petitioners Nos. 1, 2 and 3. It is very important to note that there is no reference in this resolution to the 100 shares issued to petitioner No. 3 on March 8, 2002 and the 2,50,000 shares issued to Anita Impex (petitioner No. 4) on October 10, 2001 and another 100 shares to Pandya on March 8, 2002. Curiously, Pandya is not made a party to the company petition. It is relevant to note that the memorandum of understanding was executed on the very same date, i.e., after annexure P11 board meeting. So it is most probable that the understanding at the time of the memorandum of understanding was that the paid-up capital of respondent No. 1 company is Rs. 1,00,000. Based on the above resolution, I h....
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....preciating the stand of the rival groups. 47. On the issue relating to the shareholding of Anitha Impex (petitioner No. 4) the respondents submitted as follows : "Petitioner No. 4 is a foreign company and it is not a party to the memorandum of understanding. The board resolution dated April 2, 2002, clearly states that the paid-up equity capital of the company is Rs. 1,00,000 divided into 10,000 equity shares of Rs. 10 each with 5,000 equity shares being held equally by petitioners Nos. 1 and 2. As a foreign company, under the Foreign Exchange Laws, the investment has to come into the company in convertible foreign exchange by normal banking channels. This has not been established by petitioner No. 4 despite being specifically called for in the form of interrogatories. After the arguments were over, the petitioner filed a document showing payment of 25 lakhs by petitioner No. 4 to the Rajasthan State Electricity Board. This payment was shown to have made in 1997 much before the incorporation of the company. The petitioner did not state that the allotment was towards it. In fact, such a claim would be acceptance of the illegality in the allotment of 2,50,000 shares to petit....
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....e 124 makes the following admissions : (i)The management of respondent No. 1 was undergoing a change ; (ii)76 per cent. of the shares of respondent No. 1 will be transferred to respondent No. 8 ; and (iii)As on April 3, 2002, there were only two directors and the total capital was 10,000 shares of Rs. 10 each and petitioners Nos. 1 and 2 held 5,000 shares each. Therefore it is clear that on April 3, 2002, neither petitioner No. 3 nor petitioner No. 4 held any shares in respondent No. 1 company. The admission made by petitioners Nos. 1 and 2 is further corroborated by annexure P23 which is a letter dated December 8, 2006, found at page 228 of Volume 1A. This is a letter addressed by petitioner No. 1 to respondent No. 1 company. In the first paragraph of this letter, the following averments are made : 'undersigned and his wife Sucheta Kanunga were the promoter and director of this company and each of us had subscribed 5,000 equity shares of Rs. 10 each as signatories to the memorandum and articles of association of the company'. Therefore even as late as December 8, 2006, there is a clear admission that petitioners Nos. 3 and 4 did not hold any shares in respondent No. 1 ....
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....s. 25 lakhs was mandatorily to be shown in the balance-sheet of respondent No. 1 company, respondent No. 2 and respondent No. 3 suggested and allotted 2,50,000 equity shares to petitioner No. 4 and shown Rs. 25 lakhs as deposit in the balance-sheet (please refer page 86 of the reply of respondents). As this was correct legal position, the balance-sheet was correctly signed by both the parties, i.e., respondent No. 2 and petitioner No. 1. It is pertinent to mention that Form 2 for the allotment of the shares to petitioner No. 4 was signed by respondent No. 3 not by petitioner No. 1 as wrongly mentioned by counsel appearing for respondent (refer page 91 of the reply)." 49. I have already held that the alleged shares held by petitioners Nos. 3 and 4 were not in contemplation under the memorandum of understanding, nor there is a mention of it in the annexure P11, board resolution that immediately preceded the memorandum of understanding. Petitioner No. 4 is also not a party to the memorandum of understanding. There is also no mention in annexure P19, the memorandum of understanding that the third petitioner is signing the memorandum of understanding also on behalf of Anitha Impex. E....
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....s Nos. 2 and 3. This fact is not pleaded in the company petition. This amount is purportedly shown as deposit in the balance-sheet for the year 2001-02 which was signed by respondent No. 2 and petitioner No. 1. It is pointed out that Form 2 for the allotment of shares to petitioner No. 4 was signed by respondent No. 3. As already mentioned Anitha Impex is not a party to the memorandum of understanding nor is it referred to as a shareholder in annexure A11 board resolution. In the above circumstances I am inclined to accept the version of the KSK group, that they were compelled to acknowledge and own the allotments to petitioners Nos. 3 and 4 in view of the substantial investment made by them in the company soon after the signing of the memorandum of understanding and before the first annual general meeting. According to the KSK group by June 14, 2006, respondents Nos. 2 and 3 had caused investment of over Rs. 26 crores into the company. Since the proposed project suffered setbacks, the respondents had to refund the share application money brought in by Aravind Kumar D. Sanghvi (annexure R24 and Volume C). It is at this juncture that Anitha Impex offered to transfer 2,50,000 equity ....
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....reponderance of probabilities in the case, Ihave no difficulty to hold that Anitha Impex (petitioner No. 4) ceased to be a shareholder of respondent No. 1 company and it had no locus standi to file this company petition, and the question of restoring its shareholding in the company cannot be adjudicated under section 111 of the Act. The alleged shareholding of petitioner No. 4 involves complicated questions of facts and law. The evidence tendered by the KSK group raises a suspicion that consideration had passed to petitioner No. 4, but mere suspicion is not conclusive evidence. If the share transfer is illegal and not supported by consideration, the remedy open to petitioner No. 4 is to seek appropriate remedies before a civil court. The point is found against the petitioners. 53. As rightly pointed out by the KSK group, the petitioners have conflicting stands regarding their shareholding in the company. On the date of the memorandum of understanding, petitioners Nos. 1 and 2 held 100 per cent. subscribed and paid-up equity share capital of the company. Subsequently, the KSK group had to own the shareholding of petitioners Nos. 3 and 4 for the reasons discussed above. In the lig....
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....ect had been filed on April 2, 2002, i.e., one day prior to the execution of the memorandum of understanding (annexure R2 copy of Form 2). Prima facie, it is a planned act with some purpose. In respect of 2,50,000 shares allegedly allotted to Anita Impex at the time of incorporation of the company, no Form 2 was filed before the Registrar of Companies, by the Kanunga group. Annexure P11 does not mention anything about it. By August, 2002 the KSK group and its associates had invested substantial amount, besides the efforts to process the various approvals. So as rightly argued, the KSK group had no option but to accede to co-operate with the petitioners and to regularise the back door allotments by back dating the date of allotment of shares to petitioner No. 4, to make good the compliances in respect of the above allotments, since the abandonment of the project at that stage would necessarily result in loss to the KSK group. It is pointed out that in the above circumstances, the KSK group was forced to buy the 2,50,200 shares also in 2006 after giving consideration in cash. The respondents say that it is in the above circumstances that the accounts of 2002 was finalised by includin....
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....SK group. The case of the respondents is that the impugned shares had been misplaced in the process to dematerialise and the present company petition has been filed taking advantage of the situation. This again is a disputed question of fact and such disputes cannot be a case exclusively pertaining to rectification which could be decided by the Company Law Board. 55. Admittedly, the proposed project had become impossible of performance in view of RSMDC (Government) terminating the memorandum of understanding dated April 8, 2002, entered into with the company for supply of fuel, culminating in the abandonment of the project. As rightly, pointed out by learned counsel for the KSK group the contract stood frustrated, having its performance becoming impossible by the refusal of the Government to supply fuel. The memorandum of understanding was terminated on March 20, 2004. In the above circumstances, the continued existence of the company is of paramount importance and it was only the KSK group which was actively pursuing the alternative because of their huge investment in respondent No. 1 company. There is absolutely no evidence to show that the petitioners had invested any amount ....
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....s the common friend of both groups and who signed the memorandum of understanding dated April 3, 2002, as a witness. His signature is available in the memorandum of understanding at page 224, Volume 1A. Since the performance of the project became impossible and the investment by the Kanunga group being nominal, there is nothing extraordinary if they preferred to exit from the company. In the counter filed by the fourth respondent also there is identical reference to the exit of the Kanunga group and the encashment of cheque for raising the consideration of Rs. 25 lakhs and the payment of the same to Anita Impex (petitioner No. 4). Evidently, it was petitioner No. 4 who had deposited Rs. 25 lakhs with the Electricity Board in 1997 for securing annexure P14 agreement. According to the KSK group, the entire exercise occurred in June-July, 2006, at an undisputed period of time which makes their version more believable. The KSK group had produced a copy of the minutes of the board of directors on June 15, 2006, which deals with the transfer of 2,50,000 shares on the basis of a request for transfer of the above shares from Anita Impex to K. Bapi Raju (respondent No. 4) vide Volume D. The....
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.... have a right to nominate one person on the board as a permanent director. The alleged resignation is denied by petitioner No. 1. It is stated that no notice of the board meeting held on December 2, 2004, was received by petitioner No. 1. Since the resignation letter of petitioner No. 1 is not forthcoming, he says that the minutes of the board meeting on December 2, 2004, has been cooked up and he was removed from the Board in breach of the clause in the memorandum of understanding dated April 3, 2002. 58. For the reasons already discussed, it can reasonably be presumed that to facilitate exit of the Kanunga group from the company, petitioner No. 1 has offered to step down as director. Even if the contention of the petitioner is accepted as correct, the remedy available to him is to seek specific performance of the memorandum of understanding dated April 3, 2002, before a civil court, since the relief is solely based on the breach of the conditions in the memorandum of understanding. Evidently, the terms of the memorandum of understanding are not made part of the articles of association, and directorial complaints are not grounds to invoke powers under sections 397 and 398 of th....
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....g the year 2003. This is prima facie evident from the affidavit of respondent No. 6 and the counter affidavit of respondent No. 4. I have already recorded my finding that the Kanunga group also exited from the company, in the background of the realisation that the projected power project had to be abandoned. In this petition under sections 397 and 398, violation of the provisions of the memorandum of understanding has been alleged with the grievance that such violation would amount to an act of oppression against the shareholders. As rightly argued by learned counsel for the respondents the remedy open to the petitioners is to enforce the terms of the memorandum of understanding by filing a civil suit before the appropriate forum. The memorandum of understanding is entered into between the third petitioner and eighth respondent (KSK Energy). 62. As held by the hon'ble Supreme Court in Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 123 Comp Cas 566 ; [2005] 11 SCC 314, paragraph 185 (page 631 of 123 Comp Cas) : "It has to be borne in mind that when a complaint is made as regards violation of statutory or contractual right, the shareholder may initiate a proceeding in a ci....
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....the relevant permission obtained from the Government of Rajasthan and also agreement of transmission and supply of power entered into with the Rajasthan State Electricity Board. The above project became incapable of performance since the Government terminated the memorandum of understanding with respect to the fuel supply to respondent No. 1 company. Who was responsible for the breach of the terms of the memorandum of understanding is a matter to be adjudicated before a civil court. The petitioners claim three rights in the company petition, i.e., (i) to retain the first petitioner as a director of respondent No. 1 company, (ii) to allot 40 lakhs shares in respondent No. 1 company, and (iii) to restore 24 per cent. of the shareholding in respondent No. 1 to the petitioners. The above three rights guaranteed in the memorandum of understanding had been allegedly violated by the KSK group. All the three rights claimed by the petitioners are based on the memorandum of understanding. If at all the petitioners are entitled to any remedy, only the civil court can adjudicate those issues. The respondents have successfully established that the Kanunga group exited from the company after tra....
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....ny after the exit of the petitioners. Even if the petitioners' contention that they are entitled to 24 per cent. shares is accepted, it is not established as to how their rights as shareholders had been prejudicially affected by the appointment of above persons as directors. 68. As already recorded, even if petitioners Nos. 1 and 2 held 24 per cent. of the shares, the petitioners could have held and owned only 2,400 shares out of 17 lakhs shares as on March 31, 2005 (annexure P25, page 254, Volume 1A), which constitutes less than one per cent of the then paid-upcapital. The allotment of shares as detailed at page 254 of company petition is not disputed by the petitioners in the company petition. Since the petitioners ceased to be the shareholders with effect from August 30, 2006, as per the records maintained, the petitioners have no locus standi to challenge the subsequent allotment made as per the decision of the majority. 69. The next issue pertains to the increase in the authorised capital and paid-up capital of the company. The original authorised capital of the company was Rs. 50 lakhs. On September 29, 2004, the authorised capital was increased to Rs. 175 lakhs. On Oct....
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....sociation of the company and that the shares have not been transferred to any other entity. But in the company petition they admit that 76 per cent. of the shareholding has been transferred to the KSK group. It is relevant to note that in this letter there is no mention about the shares held by petitioner No. 2 project being set-up in Rajasthan. This is an indication that they were aware of the construction of the 135 MW project. In the letter dated June 18, 2008 (annexure P24) also petitioner No. 1 mentioned that the company was promoted by himself and his wife being the subscribers to the memorandum and articles of association. There is a categorical admission in the letter that the KSK group has been maintaining the accounts, convening the board and general meetings and also fulfilling all the requirements of law in force. Besides complaining about lack of notice and information about the status of the project, the first petitioner demanded performance of the obligations by the KSK group as envisaged under the memorandum of understanding. The petitioner has been repeatedly writing letters to the company from 2006 but he cared to inspect the records from the Ministry of Corporate....
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....larifies that the 40 lakhs shares are pertaining to KSK Energy (respondent No. 8). His complaint in the letter is that 40 lakhs shares of KSK Energy (respondent No. 8) ought to have been issued to him at Rs. 10 per share as undertaken in the memorandum of understanding. The relevant paragraph is extracted below : "It would be thus apparent that KSK is bound and liable to honour its commitments of issuing and/or transferring ownership of 40,00,000 shares of face value of Rs. 10 per share to me and the consideration for the same has already been received by KSK as mentioned in the memorandum of understanding. KSK has however in the first place not disclosed the said memorandum of understanding and their outstanding obligations thereunder. More importantly KSK has not disclosed that while they are offering shares to the members of public at a premium of Rs. 240 to Rs. 255 per share they are obliged to issue me 40,00,000 shares of face value of Rs. 10 per share, at par, for the consideration already received by them." 71. Yet, another letter has been sent by third petitioner to the KSK group reiterating the obligation under the memorandum of understanding to give him 40 lak....