TaxTMI 
TaxTMI 
2015 (4) TMI 951
X X X X Extracts X X X X
X X X X Extracts X X X X
....he laws of England. The first respondent was incorporated in India on 7.8.2002 as a private limited company, with a different name. Thereafter the first respondent company acquired the partnership business of the appellant in November 2002. (ii) The authorised capital of the first respondent as per the audited balance sheet as on 31.3.2003 was Rs. 2 Crores, divided into 20 lakhs shares of Rs. 10 each. The issued, called up, subscribed and paid up capital of the first respondent was Rs. 64,32,970/-, as on 31.3.2003. But, it rose up to Rs. 1,85,87,700/- as on 31.3.2005; (iii) The first respondent later became a subsidiary of the third respondent. The appellant and the second respondent became its directors; (iv) It appears that one of the secured creditors of the third respondent company namely HSBC Bank, initiated action against the third respondent in England, which resulted in the appointment of the fourth respondent as Joint Administrative Receivers, on 20.4.2006. The Joint Administrative Receivers sold all the shares held by the third respondent in the first respondent company to the second respondent for just one British Pound Sterling. (v) Upon coming to know of the said a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n with regard to the shares of a foreign company (holding company) held in an Indian company (subsidiary company); and (b) whether the appellant was barred by the principles of estoppel, waiver, latches etc., in seeking enforcement of his pre-emptive rights or not. 5. Towards the end of para 8 of its decision, the Company Law Board held that it had jurisdiction to entertain a dispute regarding the sale in United Kingdom, of the shares of the first respondent held by the third respondent. After holding so, the Company Law Board recorded a finding on facts that the appellant was aware of the appointment of Receiver through Annexures A14, A15 and A16 and that the appellant ought to have availed the remedy under the laws of United Kingdom. In other words, the Company Law Board held in para 11 that the question as to whether the Receiver made best efforts to get maximum relief to the creditors of the third respondent and the question whether there was proper advertisement before sale of the shares, are not issues that would come within the jurisdiction of the Company Law Board in Chennai to adjudicate. In addition to this finding, the Company Law Board also held that the appellant was....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... India. Therefore, the Company Law Board concluded in para 8 that the Bench had jurisdiction to entertain a dispute regarding the sale of shares of the first respondent company held by the third respondent. 9. But unfortunately, after having held so, the Company Law Board went on to hold in para 11 that if the appellant was aggrieved by the procedure adopted in England for the sale of the assets of the third respondent company, the remedy was to seek appropriate reliefs under the laws of United Kingdom. To come to the said conclusion, the Company Law Board reasoned that the appellant himself had reserved his rights to initiate suitable legal proceedings in United Kingdom under the Insolvency Laws of United Kingdom. 10. But the Company Law Board failed to look into one important aspect. The shares of the first respondent company held by the third respondent, no doubt constituted a property of the third respondent. But the extent to which the third respondent was entitled to transact upon the said property or deal with the said property, was always subject to the Indian Laws. This can be appreciated, if we have a careful look at some of the provisions of the Indian Companies Act, 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ency Court in England, the purchaser cannot do anything except to come to India and seek redressal in the manner provided by the Indian Companies Act. 16. The Company Law Board has omitted to see another important aspect. Since the first respondent is a Private Limited Company, there were no takers for the shares held by the third respondent in the first respondent company, before the Insolvency Court in United Kingdom. Consequently, the the second respondent, who happens to be the Director of the first respondent company became the loan bidder and he could knock off a large number of shares, literally for a song, namely a token consideration of one Pound Sterling. 17. The Company Law Board had omitted to see that what was challenged by the appellant was not really the procedure adopted by the Insolvency Court in United Kingdom, in bringing the shares to sale. What was agitated by the appellant was that the second respondent, who was a Director of the first respondent, committed a breach of trust and kept the appellant away from the whole episode and bought all the shares for a token consideration. Suppose any one other than the second respondent had purchased the shares, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out of statutory provisions can also be waived. Therefore it is the stand of the respondents that the pre-emptive right of purchase conferred by the Articles of Association and the mandatory provisions of Section 108 of the Companies Act, 1956 can also be waived. 22. But the case of the appellant is that he had no knowledge about the proposal to sell the shares at all. Knowledge is attributed to the appellant, only through a Board Resolution dated 18.09.2006. But the meeting of the Board was purportedly held at Leeds in the United Kingdom. According to the appellant, he had no notice of the meeting of the Board, despite the appellant being the Managing Director. Therefore, the appellant contends that the said Board Meeting held on 18.09.2006 and the Resolution passed therein are all void in view of the decision of the Supreme Court in Parameswari Prasad Gupta vs. Union of India [(1973) 2 SC 543]. It is also contended by the appellant that since the provisions of Section 108 have been held by the Supreme Court to be mandatory, in its decision in Mannalal Khetan vs. Kedar Nath Khetan [AIR 1976 SC 536], the failure to follow the said provision would be fatal to the case of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at there was estoppel by conduct. 28. The finding of the Company Law Board that there was acquiescence on the part of the appellant and that the appellant is guilty of laches, does not appear to be correct. In B.L.Sreedhar vs. K.M.Munireddy [AIR 2003 SC 578], the Supreme Court summarized the doctrine of acquiescence in the following words:- "If a person having right, and seeing another person about to commit, or in the course of committing an act infringing upon that right, stands by in such a manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act."(Duke of Leeds v. Earl of Amherst 2 Ph. 117 (123) (1846). This is the proper sense of the term acquiescence, "and in that sense may be defined as acquiescence, under such circumstances as that assent may be reasonably inferred from it, and is no more than an instance of the law of estoppel by words or conduct."(De Buasche v. Alt.L.R.8 Ch.D.286 (1314). Acquiescence is not a question of fact but of legal inference from facts found (Lata Beni Ram v. Kundan Lall. L.R.261 Ind.Ap.58(1899)"....
X X X X Extracts X X X X
X X X X Extracts X X X X
....res was not made to the appellant. The Company Petition itself was filed in March 2007, within about four months or so of the sale. Therefore, I do not know how the appellant could be held to be guilty of laches. 34. Even according to the Company Law Board, the appellant was informed only on 03.08.2006 that the second respondent was likely to buy out the company and that thereafter a Board Meeting was held on 18.09.2006. The Company Law Board relied upon a mail dated 09.10.2006 sent by the appellant to the Receiver. In the mail, the appellant seems to have protested only about the non-payment of his expenses. Therefore, the Company Law Board came to the conclusion that the appellant did not object to the sale of the shares. 35. But the above conclusion of the Company Law Board is wholly unsustainable. What the appellant wrote after the event had happened, is not of great significance than what the appellant did before the event. Within four months of the sale, the appellant had approached the Company Law Board. The principles of estoppel, acquiescence etc. cannot be invoked on the basis of the conduct that was exhibited post facto. It is only that conduct on the part of a person ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at Article 7 of the Articles of Association contains a specific provision with regard to transfer of shares and their valuation. Article 8 mandates that without the sanction of the Board of Directors, no transfer can be effected. The only exception to Article 8 is that the prescription contained therein will not apply to the transfer of shares of one member to another under the preemptive right. 41. The reliance placed by the respondents upon the alleged meeting of the Board of Directors held on 18.09.2006, cannot be accepted. The meeting of the Board appears to have taken place in the United Kingdom without a proper notice to the Managing Director of the company. The copy of the resolution allegedly passed on 18.9.2006, contains a unilateral declaration that the appellant was informed of the intended sale on 3.8.2006 and that he also indicated that it would be in the interest of the overall benefit of the Indian business that the second respondent bought the Indian arm. But such a unilateral statement cannot be accepted. In the mail dated 3.8.2006, sent by the second respondent to the appellant, he had merely indicated that he was likely to buy out the UK companies from the Recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o act as the agents of the company and were bound to take note of the Articles of Association. Moreover, the Receivership itself appears to have lasted only till the oversees businesses were sold out. In a mail sent by the second respondent, filed as Ex.A17, he had informed the staff of the third respondent that he had completed an agreement with the fourth respondent to take the UK businesses out of Receivership. Therefore, it appears that the third respondent did not go bankrupt, leading to the court appointing some one like an Official Assignee. 43. The learned counsel for the respondents 1 and 2 relied upon the printout of a few e-mails. But these e-mails also do not advance the cause of the respondents. In a mail sent to the second respondent on 21.8.206, one Mr.Satheesh had requested the second respondent to clarify as to how share transfer could be effected and as to what would be the consideration for transfer. In a mail dated 4.9.2006, presumably sent by the second respondent as a reply, he had only indicated that the fourth respondent had agreed in principle to transfer the Indian operations to the second respondent. But still there is no indication in the said mail that....