TaxTMI 
TaxTMI 
2017 (7) TMI 460
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s.Adithya Reddy, Mr.R.Murari, M/s.Preeeti Mohan JUDGMENT 1. The captioned appeals and one set of Cross Objections, have been placed before me, for adjudication. 1.1. The appeals filed being, Company Appeal Nos. 3 and 4 of 2016, assail the judgment and order of the Company Law Board (in short CLB), dated 10.03.2016. 1.2. The Cross Objections bearing No.39 of 2016 have been preferred by respondents 1 to 6 to assail some of the findings recorded in the impugned judgment and order of the CLB, in particular, the finding that respondent No.7, i.e., S.V.Global Mill Limited (in short "SVG") is not a quasi-partnership. 1.3. There are other objections also raised by respondents 1 to 6, to which, I will be making a reference, as I go along with the narration of facts and events. 2. Before I proceed further, let me indicate as to who are the main protagonists in the battle, which has ensued, with regard to the affairs of SVG. 2.1. The appellants, in Company Appeal No.3 of 2016 are, one, Mr.M.Ethiraj (Ethiraj) and his son Mr.E.Shanmugam (Shanmugam). For the sake of convenience, they would be referred to, collectively, as the "controlling group" and, individually, by their respective nam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by arriving at a valuation as per the balance sheet of SVG, obtaining as on 31.03.2015. 2.7. For this purpose, CLB directed appointment of an independent valuer, in the manner, indicated in the impugned judgment. In addition thereto, there were two supplemental directions issued: First, that SVG would not extend loans or, make investments, in associate or related companies, till the report of the independent valuer was submitted. Second, that SVG will obtain ratification from the shareholders, qua the decision taken at the Annual General Meeting ("AGM") held on 29.09.2012, with respect to the use of SVG's property, by its Managing Director, i.e.,Shanmugam, for his residential purposes. This property, which is owned by SVG is situate at New No.5, Old No.3, III Avenue, Boat Club Road, Chennai - 600 028 (hereinafter be referred to as the 'Boat Club Property'). 2.8. Shanmugam, as would be obvious from what is stated above, is a part of the controlling group. 3. Apart from the controlling group, as noticed above, another appeal has been filed, this appeal has been preferred by SVG and, is numbered as: Company Appeal No.4 of 2016. 4. To be noted, the appeals were listed b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... disposal of the Company Appeal 3 of 2016 pursuant to the order passed in the above appeal by its Order dated 18.04.2016, passed by the Hon'ble Court and pass such further and other orders as this Hon'ble Court may deem fit and proper in the circumstances of the case and thus render justice." 5. Thus, after hearing the arguments on 06.07.2016, three (3) aspects of the matter were considered. First, that M/s.Brahmayya & Co., Chartered Accountants, who were carrying out the exercise of share valuation, would take recourse to the profit earning method to value the worth of the shares. This direction was issued, as Mr.Arvind P.Datar, learned senior Advocate, who appeared on behalf of the controlling group, took an objection to the fact that the break-up value method was being employed by the aforementioned valuer, contrary to the principles set forth by the Supreme Court in the following judgments: a) Commissioner of Wealth Tax, Assam Vs. Mahadeo Jalan, AIR 1973 S.C. 1023; and b) Commissioner of Gift Tax, Bombay Vs. Smt.Kusumben D.Mahadevia, AIR 1980 S.C. 769. 5.1. This, of course, was contested by Mr.K.G.Raghavan, learned senior Advocate, who appeared on behalf of Nataraja....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was appointed, with the consent of the counsels for parties. PREFATORY FACTS: 9. In order to adjudicate upon the disputes, which have arisen in the instant matters, one would have to notice the following, broad facts, which have led to the institution of the instant proceedings. 9.1. In this behalf, one would have to, necessarily, allude to the genesis of the birth of SVG. The birth of SVG is rooted in the company, by the name, Binny Limited. It appears that in and about 1987, Binny Limited, which was, a widely held, listed company, having representatives of banks and financial institutions on its Board of Directors (BOD), came to cede controlling interest in favour of four (4) persons and their constituents, namely, late Mr.N.P.V.Ramasamy Udayar (Ramaswamy), Mr.M.Nandagopal (Nandagopal), Ethiraj, and Natarajan. Natarajan was co-opted to the BOD of Binny Limited in June, 1987/January, 1988 (the record shows both dates). Upon the death of Ramasamy, Mr.V.R.Venkatachalam (Venkatachalam), his son, stepped into his shoes. 9.2. Though, exact details have not been provided, the record is indicative of the fact that Natarajan purchased a stake in Binny Limited via respondent Nos.1 to 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to introduction of the new co-promoters and the infusion of funds in Binny Limited. 9.7. The record is suggestive of the fact that new co-promoters decided to part ways and thus, Binny Limited was demerged, in about 2004, into two companies, i.e., Binny Limited and Binny Karnataka Limited. There was distribution of assets and control of associated incorporated companies as well. The details with respect to which, perhaps, are not relevant for the adjudication of the instant case. 9.8. Suffice it to say, that Binny Limited came out of the purview of SICA in 2007. Furthermore, in 2007, SVG was incorporated. 9.9. Natarajan, however, continued to remain as the Director of Binny Limited, despite, the demerger. 10. Within three (3) years, that is, in 2010, once again, a split took place, which resulted in the exit of Nandagopal and Venkatachalam. Towards this end, a Scheme of arrangement qua the demerged entity, i.e., Binny Limited and two Resulting Companies, i.e., SVG and Binny Mills Limited was presented for sanction, before this Court. 10.1. This Court vide order dated 22.04.2010, sanctioned the Scheme. 10.2. Pertinently, immediately, after the demerger, Natarajan was brought ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the appointment from time to time provided that such revised remuneration shall also be in conformity with and within the ceiling of Part II under Section 2 of Schedule XIII to the Companies Act, 1956 or any statutory modifications or re-enactment thereof. Details of Perquisites referred to in the Resolution No:5 1. Free use of furnished accommodation owned or leased by the company with amenities including Water, Gas, Electricity and Furnishings. If no accommodation is provided, the Managing Director is entitled to House Rent Allowance subject to a ceiling of 70% of his salary. The expenditure incurred by the Company on Water, Gas, Electricity and Furnishings will be evaluated as per Income Tax Rules, 1962. 2. XXXXX 3. XXXXX 4. XXXXX 5. XXXXX 6. XXXXX 7. XXXXX 8. XXXXX 9. XXXXX 11.2. Importantly, Natarajan, along with Mr.R.Narayanan (Narayanan), i.e., respondent No.10, who had been appointed as independent Director, were not present at the said meeting. 11.3. To be noted, at some point in time, Narayanan, who was Ex-Chairman of LIC, appears to have resigned from SVG. Since, no relief, in the instant appeals, is sought against him, he has been given up as a party in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dicated that both Ethiraj and Natarajan had offered themselves for reappointment. It may be relevant to note at this stage as a matter of fact, one of the independent directors, who is arrayed as a respondent in both the company appeals, i.e., Mr.Satyajit Prasad, was also to retire on the same date. I have mentioned this aspect, as a submission has been advanced on behalf of Natarajan that the principle of seniority ought to have been followed in deciding, who, out of the two (2), would retire from the BOD. 12.3. The record shows that two days before the AGM, vide letter dated 24.09.2014, Natarajan wrote a letter to Ethiraj, recording therein, briefly, what according to him, were the circumstances, in which, they were brought together. Based on his understanding of their inter-se relationship, which, according to him, was one of partnership, he recounted how interest in Binny Limited was acquired by four (4) co-promoters, which included late Ramasamy, Nandagopal, Ethiraj and himself. Natarajan argued that since, each family was a co-promoter, therefore, the oral understanding subsisting uptill, then, had to be crystallised into a written agreement. This, according to Natarajan, wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d and instead, a direction was sought for disposal of the Review Petitions, albeit, within a time frame of three weeks. 12.8. It appears, respondent Nos.1 to 6, had also filed, in the meanwhile, an application to amend their Company Petition pending before the CLB. This application was filed on 17.12.2015. 12.9. The record shows that on 11.1.2016, respondent Nos.1 to 6 moved an application before the CLB to withdraw the amendment application and, instead, sought leave to move for early hearing in the matter. 13. It is, in this background, the impugned judgment and order dated 10.03.2016 came to be passed in C.P.No.62 of 2014, which has given rise to the instant Company Appeals and Cross Objection, to which I have made a reference at the very outset. SUBMISSIONS ADVANCED BY COUNSELS: 14. The arguments, on behalf of the controlling group, were advanced by Mr.P.S.Raman, Senior Advocate, assisted by Mr.T.K.Bhaskar, while on behalf of SVG, submissions were advanced by Mr.Arvind P.Datar, Senior Advocate, assisted by Mr.Venkatavaradhan. In so far as contesting respondents are concerned, i.e., respondent Nos.1 to 6, submissions were advanced by Mr.K.R.Raghavan, Senior Advocate, assist....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fraud or malafides had been found in the controlling group casting their vote, albeit, against the resolution seeking reappointment of Natarajan, as the Director of SVG; that no findings of oppression of the minority shareholders had been returned and lastly, that no finding was returned as regards the allegation of diversion of funds. (vi) The CLB, contrary to the record, had found: that there was a "practical dead lock" in the running of the affairs of SVG; that there existed a relationship of mutual confidence and good faith, which required the controlling group to vote in favour of the resolution seeking reappointment of Natarajan as the Director of SVG; and that respondent Nos.1 to 5 had a legitimate expectation that they would be represented on the BOD of SVG. (vii) The CLB had failed to notice the fact that Natarajan was appointed as a "non-executive Director" on BOD of SVG for his "advisory skills" and not on account of his abilities to manage the affairs of the said company. (viii) The CLB ought to have noted that neither did Natarajan hold any executive position nor was he part of any Committee of the Board, either, when, he became Director of Binny Limited or, later,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it, against the resolution seeking reappointment of Natarajan as a Director on the Board of SVG, would unfairly prejudice the majority shareholders. (xiii) There was no misuse of the Boat Club Property as alleged at all. The use of the Boat Club Property, as the residence of Shanmugam, Managing Director of SVG, was approved at the BOD Meeting held on 01.09.2012. The minutes of the BOD Meeting held on 01.09.2012 were approved at the subsequent meeting of the Board held on 02.11.2012, at which, Natarajan was present. The allegation of lack of transparency in dealing with the Boat Club Property is therefore, baseless. (xiii)(a) It was further contended that there was nothing on record to show that the use of the Boat Club Property by the Managing Director, pursuant to the approval of the shareholders, had caused any prejudice to SVG or, that, they were better avenues available for deploying the said property for other business purposes. The charge with regard to the alleged misuse of the Boat Club property, qua which, Natarajan had remained silent for nearly two (2) years, was raised, for the first time, when, the Company Petition was filed with the CLB. (xiv) Furthermore, the alle....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... In support of the submissions advanced, reliance was placed on the following judgments: (i).In re : Godrej Industries Ltd., (2014) 184 Comp. Cas 441 (Bom); (ii).In cable Net (Andhra) Limited and Others V. A.P.Aksh Broadband Limited and Others, (2010) 6 SCC 719 ; (iii).Chatterjee Petrochem (I) P. Ltd. V. Haldia Petrochemicals Limited and Others, (2011) 167 Comp Cas 73 (SC); (iv).Shanti Prasad Jain V. Kalinga Tubes Limited, (1965) 35 Comp. Cas 351 (SC); (v).V.S.Krishnan V. Westfort Hi-Tech Hospitals Limited and Others, (2008) 3 SCC 363 ; (vi).Anugraha Jewellers Ltd. and Another V. K.R.S.Mani & Others, (2002) 111 Comp Cas 501 (Mad.); (vii).K.R.S.Mani & Others V. Anugraha Jewellers Limited, 2004 (3) CTC 348 ; (viii).Suresh Kumar Sanghi V. Supreme Motors Ltd and Others, 1983 Comp. Cas 54 235 ; (ix).Public Prosecutor V. T.P.Khaitan and Others, AIR 1957 Mad, 4; (x).Shailesh Harilal Shah and Others V. Matushree Textiles Limited and Others, AIR 1944 Bom 20; (xi).Vardhman Dye-Stuff Industries Private Limited V. M.R.Shah, 2009 (149) Comp Cas 345 (Bom.); (xii).In Re. Astec (BSR) Plc., (1999) B.C.C. 59 ; (xiii).In Re. Blue Arrow Plc., (1987) 3 B.C.C. 618; (xiv).Dale and Carringt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....past relationship. Each of the four (4) persons were holding 19% of the equity stake in Binny Limited. These persons were always shown as promoters in all statutory filings, which included filings made with the Stock Exchange. 17.2. In so far as Natarajan was concerned, shares were held in Binny Limited via respondent Nos.1 to 6, and, accordingly, he was chosen as their nominee on the Board of Binny Limited. According to the learned counsel, the settlement/partition amongst those holding controlling interest in Binny Limited, after its demerger in 2004, took place with the sanction of the 2010 demerger Scheme floated in that behalf. The demerger, which was sanctioned in 2010 by this court, according to Mr.Raghavan, resulted in the birth of three entities, that is, Binny Limited (Demerged Company), SVG Limited (Resulting Company No.1) and Binny Mills Limited (Resulting Company No.2). Learned counsel pointed out that the other three co-promoters, that is, Late Ramasamy's family, represented by, Venkatachalam, Nandagopal and Ethiraj came to hold 55% shares in the aforementioned three companies, albeit, separately, while Natarajan, via respondent Nos.1 to 6 held 19% shares, in eac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce pertaining to passing of shareholders' resolution dated 02.05.2014, whereby, a proposal for granting loan and making investments in companies/associates related to SVG, was approved by the shareholders, albeit, on such terms, as the Board may deem fit. Second, with regard to the decision taken that the Boat Club Property of SVG, which was valued, conservatively at Rs. 300 Crores, was allowed to be used as the residence of Shanmugam vide the BOD's resolution dated 01.09.2012. 17.9. Both instances, according to the learned counsel, showed the propensity of the controlling group to run the affairs of SVG, contrary to its interest. 18. Learned counsel also emphasised the fact that the claim of the appellants that SVG was a widely held company was false to their own knowledge. For this purpose, reliance was placed upon the contents of the communication dated 22.03.2016 addressed by SVG to BSE. Notably, this communication was sent by SVG to BSE much after the passing of the impugned judgment by the CLB. 18.1. A perusal of the said communication would show that SVG itself had taken a stand before the world at large, that it was a "closely held company". 18.2. Learned couns....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h Prasad Juhunjhunwala and Anr., AIR 1976 SC 91 (vii). Needle Industries and Anr., v. Needle Industries Newey, AIR 1981 SC 743 (viii). Re Saul D Harrison & Sons plc. [1995] 1 BCLC 14 (ix). Kilpest Pvt., Ltd., & Ors v. Shekhar Mehra, [1996] 10 SCC 696 (x). ONeill v. Phillips, (1999) UKHL 24 (xi). Sangram Singh Gaekwad and ors. v. Shanta Devi P Gaekwad (Dead) and Ors., [2005] 123 Comp. Case 566 (SC) (xii). M.S.D.C. Radharaman v. M.S.D. Chandrasekara., MANU/SC/1342/2008 (xiii). Probir Kumar Misra v. Ramani Ramaswamy and Ors., (2010) 154 Comp Case 658 (xiv). Re Leeds United Holdings Plc., [1996] 2 BCLC 545 (xv). KN Bhargava and Others v. Track parts of India Ltd., and Ors., [2001] 104 Comp. Cas 611 (CLB) (xvi). Track Parts of India Ltd., and Ors., v. KN Bhargava and Ors., 2000 Cri LJ 310 (xvii). Gurmit Singh v. Polymer Papers, (2005) 123 Comp Cas 486 (xviii). Subash Hostimal Lodha v. Manikchand Promoters, (2007) 140 Comp Cas 512 (xix). Naginder Singh v. RS Infrastructure, (2007) 139 Comp Cas 246 (xx). K Muthusamy P DUrai v. S. Balasubramaniam & Ors., (2011) 167 Comp Cas (167) (Mad) (xxi). Maharastra Power Development Corporation v. Dabhol Power & Ors., (2....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., which were more or less in line with the arguments advanced by Mr.Raman. REASONS : 21. I have heard the learned counsels for the parties and perused the records. 22. The core issue which arises in the appeals is, as to whether the CLB, given the findings that it has returned, ought to have granted, inter alia, the relief of purchase of shares of respondent Nos.1 to 6. 22.1. While respondent Nos.1 to 6 in their Cross Objections, have defended most of the findings and the conclusion reached by the CLB, they have by way of abundant caution, assailed some findings of the CLB, to which, a reference is made hereafter : 22.2. The Cross Objections, broadly, assails the following aspects of the impugned judgment: (i) The CLB has wrongly concluded that SVG was not a quasi-partnership, despite recognising the fact that a relationship of good faith, mutual trust, confidence and understanding subsisted between the controlling group and Natarajan. (ii) Pending the purchase of shares of Natarajan, the CLB ought to have reinstated Natarajan as a Director of SVG, in order to safeguard the interests of respondent Nos.1 to 6. (iii) The CLB, having found the resolution, appointing Shanmugam,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ound of the aforesaid broad facts and submissions made by the counsels and upon perusal of the records, several issues arise for consideration. I intend to deal with each these issues separately. 24. Before I deal with the factual issues, it may be relevant to discuss, particularly, the principles of law, which have been consistently applied by Courts in actions filed under Sections 397 and 398 of the 1956 Act. More importantly, the manner, in which, the Courts in India have exercised powers under Section 402 of the 1956 Act. 24.1. I may also indicate that both sides have placed on record a whole host of case law both involving Indian Courts as well as Courts of foreign jurisdiction. I have decided to discuss the more significant judgments, where, the principles of law have been enunciated and those which have been followed by Courts repeatedly, only to avoid an overload of case law. 24.2. Significantly, the law on the subject involving use of a just and equitable principle has received the attention of Courts, both in Indian and other jurisdictions over a span of 100 years or more. 25. In India, more often than not, the judgments of the English Courts are cited, while dealing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch other on the board, and some third person has to convey communications between them which ought to go directly from one to the other. ........ Certainly, having regard to the fact that the only two directors will not speak to each other, and no business which deserves the name of business in the affairs of the company can be carried on, I think the company should not be allowed to continue. I have treated it as a partnership, and under the Partnership Act of course the application for a dissolution would take the form of an action; but this is not a partnership strictly, it is not a case in which it can be dissolved by action. But ought not precisely the same principles to apply to a case like this where in substance it is a partnership in the form or the guise of a private company ? It is a private company, and there is no way to put an end to the state of things which now exists except by means of a compulsory order. ....... If ever there was a case of deadlock I think it exists here; but, whether it exists or not, I think the circumstances are such that we ought to apply, if necessary, the analogy of the partnership law and to say that this company is now in a state which cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pounds each, of which, the only two (2) shares were issued, one to each of these two (2) persons. One of the shareholders, who was a touring agent, in his previous avatar was appointed as the Secretary and Managing Director of the company, while the other shareholder, who was also a Director, and owned a garage, and three (3) motor buses, agreed shortly, after the formation of the company that the motor buses owned by him should be transferred to the company for 1500 pounds; a transaction, which was consummated with allocation of 1500 shares. Differences arose between the two (2) shareholders. The shareholder, who was the Secretary and Managing Director, decided to terminate his relationship with the other shareholder. The other shareholder treated this statement as a formal resignation and, accordingly, took control of the company. The holder of the single share moved the Court for winding up, which was defended by the holder of 1501 shares. The Court granted the prayer, mainly on the ground that the defendant-shareholder, who held the majority shares, was running the company, in such a way so as to destroy his fellow shareholder's confidence in his impartial administration of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erests of the other shareholder or treat the company and its asset as if they were his own private property. Further, he must avoid acting in such a way as might reasonably be held to make it impossible for the other shareholder to co-operate with him in the management of the company. Upon the admitted facts I think that it appears that the respondent has abused his position as a shareholder possessing a preponderating voting power, and that the petitioner is entitled to the remedy which he asks for. ............. That this is his point of view is fully shown in his agent's letter of 19th December to the magistrates, and I think that he has acted on it to a degree which makes it impossible to expect that the petitioner should any longer have the necessary confidence in him as his co-adventurer. Accordingly, I agree in thinking that it is just and equitable that the company should be wound up. (emphasis is mine) 28. The other most frequently cited case is, the judgment of the House of Lords rendered in : Ebrahimi V. Westbourne Galleries Limited and others, 1973 A.C. 360. 28.1. This was a case, where, one Mr.Nazar, who carried on the business of dealing in Persian and other ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pen to criticism, it is that the courts may sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own; that there is room in company law for recognition of the fact that behind it or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The "just and equitable" provision does not, as the respondent suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the Court to subject the exercise of legal rights to equitable considerations; consideration, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may come in. My Lords, this is an expulsion case, and I must briefly justify the application in such cases of the just and equitable clause. The question is, as always, whether it is equitable to allow one (or two) to make use of his legal rights to the prejudice of his associate(s). The law of companies recognises the right, in many ways, to remove a director from the board. Section 184 of the Companies Act 1948 confers this right upon the company in general meeting whatever the articles may say. Some articles may prescribe other methods : for example, a governing director may have the power to remove (compare In re Wondoflex Textiles Pty. Ltd. [1951] V.L.R. 458). And quite apart from removal powers, there are normally provisions for retirement of directors by rotation so that their re-election can be opposed and defeated by a majority, or even by a casting vote. In all these ways a particular director-member may find himself no longer a director through removal, or non-re-election: this situation he must normally accept, unless he undertakes the burden of proving fraud or mala fides. The just and equitable provision nevertheless comes to his assistance if he can point to, and p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the just and equitable ground. In a given case the principles of dissolution of partnership may apply squarely if the 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. The principle of 'just and equitable' clause baffles a precise definition. It must rest with the judicial discretion of the court depending upon the facts and circumstances of each case. These are necessarily equitable considerations and may, in a given case be superimposed on law. Whether it would be so done in a particular case cannot be put in the strait-jacket of an inflexible formula. 34. In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take any action in the matt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndustries, the Supreme Court emphatically approved the law enunciated both in Yenidje Tobacco Co. Ltd. (1916) 2 Ch 426, and Ebrahimi V. Westbourne Galleries Ltd., 1973 A.C. 360. 30.1. The Court, after examining a plethora of case law on the subject, came to hold that the person complaining of an oppression must show that he was constrained to submit to a conduct which lacked in probity, a conduct which is unfair to him and had caused prejudice to him in the exercise of his legal and proprietary rights as a shareholder. The Court noted the observations of the Gujarat High Court in Sheth Mohanlal Ganpatram V. Shri Sayaji Jubilee Cotton & Jute Mills Co., [1964] 34 Comp Cas 777, and that of English Court in Elder V. Elder and Watson [1952] SC 49, and made the following observations : "...... The question sometimes arises as to whether an action in contravention of law is per se oppressive. It is said, as was done by one of us, N.H. Bhagwati J. in a decision of the Gujarat High Court in Sheth Mohanlal Ganpatram V. Shri Sayaji Jubilee Cotton & Jute Mills Co., [1964] 34 Comp Cas 777, that "a resolution passed by the directors may be perfectly legal and yet oppressive, and conversely a r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terregnum, one, Mr.Mishra was inducted as an Additional Director. At a Board meeting convened by the company, it was resolved that Mehra ceased to be a Director. Mehra, being aggrieved by the fact that the : Articles of Association, had been altered, additional shares had been issued, and he had been removed from the post of Joint Managing Director - instituted petition under Sections 397 and 398 of the 1956 Act. 31.2. The Company Judge, however, thought it fit to try the petition as a winding up action. The matter was carried in appeal. The Division Bench allowed the appeal and set aside the order of the Company Judge. Consequently, the petition was dismissed. Upon an appeal, being preferred to the Supreme Court, the judgment of the Division Bench was set aside and the matter was remanded for fresh consideration. 31.3. On remand, the learned Company Judge dismissed the petition, whereupon, once again, Mehra filed an appeal with the Division Bench. The Division Bench came to the conclusion that no ground for winding up was made out under the 'just and equitable' clause. Furthermore, the Court, having regard to the powers vested upon it under Section 402 of the 1956 Act, d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mended by the Companies Act, 1989, Schedule 19, Paragraph 11. The said provision empowers a member of a company to apply to the Court, for relief, where, inter alia, the affairs of the company have been conducted in a manner, which is unfairly prejudicial to the interests of its members generally, or some of its members. Based on the action, if, the Court is satisfied with regard to its merits, it is empowered to grant such orders as it thinks fit under Section 461(1) of the very same Act, for giving relief in respect of the matters complained of. One of the powers, that is available to the Court is, to direct purchase of the petitioner's shares by other members of the company or the company itself. (See Section 461(2)(d) of the said Act). 32.2. The facts in the instant case were, broadly, as follows : one, Mr.Phillip bought the entire shares of the company by the name Pectel Limited. The company went on to employ one, Mr.O'Neill as its Foreman. Gradually Neill was promoted to the post of a Contracts Manager. Since, Mr.Phillips saw potential in Mr.Neill, he appointed him as a Director and gave him 25% of the shares in the company. It was also indicated to Neill that he wou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n unfair of Mr. Phillips to use his voting powers under the articles to remove Mr. O'Neill from participation in the conduct of the business without giving him the opportunity to sell his interest in the company at a fair price. ....." (emphasis is mine) 32.7. Furthermore, on what is understood by the term "legitimate expectation", in the realm of company law, when, a person is removed from the right of his participation in the company, while he has no opportunity to liquidate his capital upon reasonable terms, the Court explained this principle, which otherwise is used more frequently, in the domain of public law, in the following manner : ".... 6. Legitimate expectations. In In re Saul D. Harrison & Sons Plc. [1995] 1 B.C.L.C. 14, 19, I used the term "legitimate expectation," borrowed from public law, as a label for the "correlative right" to which a relationship between company members may give rise in a case when, on equitable principles, it would be regarded as unfair for a majority to exercise a power conferred upon them by the articles to the prejudice of another member. I gave as an example the standard case in which shareholders have entered into association upon ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contrary to a larger Bench judgements of this Court and in particular Needle industries (supra). It is, however, one thing to say that for the purpose of dealing with an application under Section 397 of the Companies Act, the court would not easily accept the plea of quasi-partnership but as has been held in Needle Industries (supra), the true character of the company and other relevant factors shall be considered for the purpose of grant of relief having regard to the concept of quasi-partnership. .... (emphasis is mine) 34. The Supreme Court, as a matter of fact, reiterated its view expressed in Sangram Singh Gaekwad's case, in M.S.D.C. Radharamanan V. M.S.D.Chandrasekara Raja and another, (2008) 6 SCC 750. This was a case, in which, the father and son, who were Managing Director and Joint Managing Director in the company, got entangled in a lis. This led to filing of a petition under Sections 397 and 398 of the 1956 Act. Even though, CLB, held that no case of mala fide or oppression is made out, it opined that there existed deadlock in the affairs of the company, and therefore, the appellant should purchase the shares of the respondent No.1 at a value to be determined by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is while, that is, between 2003 and 2004, Natarajan continued to be shown in the Annual Reports of Binny Limited as its Director. As a matter of fact, this position continued to subsist right till 2014, that is, even after the 2010 Demerger. The Annual Reports of Binny Limited, clearly, bear this fact out. 35.4. The fact that to the world at large, Natarajan along with other main protagonist was represented as the promoter-Director of Binny Limited is evident from the extract of its own document put in public domain: "DETAILS OF DIRECTORS RETIRING BY ROTATION AND SEEKING REAPPOINTMENT (In pursuance of clause 49 of the Listing Agreement) Name of the Director : i) Mr.V.R.Venkataachalam is one of the Promoter Directors of the company with effect from 11.01.1988, aged 44 years. A graduate in Arts and possess vast experience for more than two decades as Industrial in the growth of textiles, Breweries, Chemicals, Granites, Medical Education and Hospital. He is also instrumental in setting up and managing, Shri Ramachandra Medical Centre having 1050 beds with full spectrum of clinical activities and hi-tech medical care. He is also concerned with other social and voluntary organizati....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., not only held shares in all three companies, but also, had representation on their Board. Natarajan was co-opted on the Board of all three companies, including SVG. 36.3. In so far as the three groups described above are concerned, the Demerger Scheme provided that none of them would hold shares in the company controlled by the other group. In other words, cross holdings were done away with. Consequently, Nandagopal group held 55% shares in Binny Limited; Venkatachalam group held 55% shares in Binny Mills Limited, while the controlling group held 55% share in SVG. Natarajan, as indicated above, held, via his constituents, approximately, 19% of shares in each of the three companies and almost, simultaneously, was appointed as a Director in SVG. The facts are not denied by the appellants. 36.4. As a matter of fact, in the information memorandum published by SVG, the following particulars of the Board were reflected INFORMATION MEMORANDUM S V GLOBAL MILL LIMITED Board : The Board of Directors of the Company constitutes of 1. Mr.M.Ethurajan Promoter Non-Executive Director 2. Mr.M.E.Shanmugam Promoter Non-Executive Director 3. Mr.R.Narayanan Independent, Non-Executive Dir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce, Natarajan was a Non-Executive Director, he was not involved in the day-to-day working of SVG. The expression "Executive Director" or, "Non-Executive Director" has not been defined, either in the 1956 Act or in the 2013 Act. However, under the Companies (Specification of definitions, details) Rules, 2014, the Executive Director has been defined; to mean, a Whole time Director, as defined in the Act. The Act herein would be the 2013 Act. 38.3. Section 2(94) of the 2013 Act provides that a Whole time Director includes a Director in whole time employment of the company. Therefore, an Executive Director would be one who is a Director and is, in whole time employment of the company. Thus, the logical sequitur of this would be that a Non-Executive Director is a Director, who is not in whole time employment of a company. In other words, he is not involved in the day-to-day management of the company. 38.4. It is not Natarajan's case that he was in the whole time employment of the company. Natarajan's case, which is borne out from the record, was that as a part of the Board of SVG, he was involved in the policy formulation of the company, which also enabled him to protect his i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n was shown as a Promoter, both for the reason that it would facilitate a buy-out of his equity stake, first in Binny Limited and, thereafter, in SVG. In this behalf, my attention was sought to be drawn to the events of 2007 and 2013, when, attempts were purportedly made to purchase Natarajan's equity stake. This argument finds a reflection in paragraph Nos.12, 13, 19 to 22 of Ethiraj's letter dated 01.10.2014, addressed to Natarajan. 38.9. The suggestion was, that if, the share transfer took place amongst persons, who were not part of the promoter group, the Take Over Code of SEBI would kick in, compelling the acquirer of Natarajan's interest to make a public offer. In my view, this submission is completely untenable for the reason that right from the time, i.e., 1987-1988, when, Natarajan came on to the Board of Binny Limited, the equity stake held by him, via respondents No.1 to 6, was shown under the head "Promoters". Even according to the appellants, the attempts at purchasing Natarajan's interest was made only in May 2007 and 2013. Therefore, the linkage, sought to be made between the two, is, clearly, an afterthought. 39. This apart, I would like to believe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igh Court of the erstwhile M/s.Binny Mills Limited. The Company is a closely held Company, with the Promoters holding 74.79% and resident Individuals holding approximately 15.18%." (Emphasis is mine) 40.3. As is evident, despite public shareholding, SVG itself has taken a stand that it is a closely held company. In so far as the trading of its shares on Stock Exchange is concerned, the Natarajan block has asserted that SVG's shares are "infrequently traded" on the Stock Exchange. As a matter of fact, the assertion before me, is that, in the previous 12 months, only 1.25% of the shares of SVG were traded on the Stock Exchange. 40.4. These facts have not been controverted by the appellants. 40.5. Given these facts, one is required to consider as to whether or not, the principle of quasi-partnership would apply to a public listed company, as it is the submission of the appellants that the said principle could never apply to a public limited company. While, I will be dealing with other aspects of the relationship subsisting between contesting parties as well, to demonstrate as to why I am of the view that the principle of quasi-partnership would apply in this case, suffice it t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of, provided, the ingredients of clauses (a) and (b) of sub-section (2) of Section 397 of the 1956 Act stand fulfilled. 41.4. Clause (a) of sub-Section (2) of Section 397 requires the CLB to come to a conclusion, having regard to the allegation made, that the affairs of the company are, in fact, being conducted in a manner prejudicial to public interest or in a manner oppressive to any of its member or members. Clause (b) of sub-Section (2) of Section 397 further requires the CLB to make a determination, to the effect, that the facts and circumstances justify passing a winding up order qua the company, on the ground that it is just and equitable to do so, and that, the only reason it would not do so, would be, that, it could unfairly prejudice such member or members, who would have brought the action to court. 41.5. The just and equitable clause could kick-in in myriad situations, including where, in point of fact, a company, say for instance, emerges out of the pre-existing partnership, or, where, there is an agreement or understanding of the kind, amongst some or all the shareholders, that they shall participate in the conduct of business, or where there is in place a restrict....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... held on 26.09.2014, was proper and valid in the eyes of law ? 42.1. In this context, one would have to bear in mind that prior to the convening of AGM of 26.09.2014, the BOD of SVG met on 04.08.2014. At that meeting, amongst others, a decision was taken to convene, as indicated above, an AGM on 26.09.2014. Furthermore, the BOD, also approved the draft notice for convening the said AGM and authorised Ethiraj, as the Chairman to issue the said notice to the members of SVG. Amongst other resolutions, which included approval of Directors' reports, for the year ending 31.03.2014, a decision was also taken to appoint a scrutiniser for the purpose of e-voting to be conducted at the said AGM. Accordingly, the Board appointed one Mr.R.Kannan, Company Secretary, as the scrutiniser for the purpose of conducting e-voting. 42.2. The notice, which was sent to the members, in respect of the AGM to be held on 26.09.2014, amongst other business, placed for consideration of the members, two (2) crucial resolutions : first to appoint a Director, in the place of Ethiraj, who retired by rotation and being eligible, had offered himself for re-appointment; and, second, to appoint a Director, in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....electronic means, to cast paper ballots. Second, the extant provisions of law could not be read in a manner, which would result in taking away, what is termed as an inalienable right of the member/shareholder to cast his or her vote at the General Meeting. 43. I may only indicate that CLB has not categorically ruled on the issue. Therefore, it may be important to note, in this connection, certain provisions of law. 43.1. Section 107 of the 2013 Act, inter alia, provides that, at any General Meeting, resolution put to vote shall be decided by show of hands, unless a poll is demanded under Section 109 or voting is carried out electronically. Section 108 mandates the Central Government to prescribe the class or classes of companies and the manner in which a member may exercise his right to vote by electronic means. Section 109 confers on the Chairman of the meeting, the authority, to order a poll either on his own motion or on the say so of the members, who fall under clause (a) or (b) of Section 109 (1). This exercise can be undertaken, both before or on declaration of the result of voting, on a resolution by show of hands. 43.2. As a matter of fact, in exercise of powers, so conf....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... :- It is clarified that a person who has voted through e-voting mechanism in accordance with rule 20 shall not be debarred from participation in the general meeting physically. But he shall not be able to vote in the meeting again, and his earlier vote (cast through e-means) shall be treated as final. (iii) XXXXX (iv) XXXXX (v) XXXXX (vi) Manner of voting in case of shareholders present in the meeting :- Stakeholders have sought clarity about manner of voting for shareholders (of a company covered under rule 20) who are present in the general meeting. It is hereby clarified that since voting through e-means would be on the basis of proportion of share in the paid-up capital or 'one-share one-vote', the Chairperson of the meeting shall regulate the meeting accordingly. (vii) Applying rule 20 voluntarily :- Stakeholders have referred to words 'A company which opts to' appearing in rule 20(3) and have raised a query whether rule 20 is applicable to companies not covered in rule 20(1). It is clarified that rule 20(3) is being amended to align it with rule 20(1). Regarding voluntary application of rule 20, it is clarified that in case a company not mandated under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tronic means. This offer had been made, as indicated above, based on the provisions of Section 108 of the 2013 Act read with Rule 20 of the CMA Rules, because of which, SEBI had amended clause 35B of its Listing Agreement. 44.1. The General Circular No.20/201 dated 17.06.2014, issued by MCA, merely indicated that the provisions of Section 108 of the 2013 Act read with Rule 20 of the CMA Rules, requiring electronic voting, shall not be treated as mandatory till 31.12.2014. The Circular did not, to my mind, provide that where companies had notified to their members/shareholders that the business fixed at the general meeting, would be transacted via electronic means, such intimation would not bind the concerned company. 44.2. SVG, in this case, had made a representation to the shareholders at large, which included the public shareholders, that the resolutions to be considered at the AGM convened on 26.09.2016, would be vested upon via electronic means. Therefore, once that intimation had been given by SVG upon exercising the option of electronic voting, in my view, no shareholder could, thereafter, have acted in a manner contrary to what had been indicated in the notice convening th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t modifications, the following resolution as an Ordinary Resolution : APPOINTMENT OF MANAGING DIRECTOR RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309, 310 and 317 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, (including any amendment to or enactment thereof) and consent of the members of the Company be and is hereby accorded to the appointment of Mr.E.Shanmugam, as Managing Director for a period of five years with effect from 02.04.2012 upon the terms and conditions as set out below : 1. Salary : Subject to a ceiling of Rs. 5 lakhs per annum 2. Perquisites: As detailed in the explanatory statement. RESOLVED FURTHER THAT the Board of Directors be and is hereby authorised to increase vary or amend the remuneration and other terms of the appointment from time to time provided that such revised remuneration shall also be in conformity with and within the ceiling of Part II under Section 2 of Schedule XIII to the Companies Act, 1956 or any statutory modifications or re-enactment thereof. ........." (emphasis is mine) 45.2. Furthermore, the details of perquisites were provided in item No.5 of the explanatory stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of 70% of the salary. At the very same meeting, the BOD also took a decision to convene an AGM on 29.09.2012. 45.5. The draft notice for convening the said AGM was approved by the BOD, which, as indicated above, included the special business, to which I have alluded to above. The Company Secretary was authorised to issue the said notice qua the AGM. Admittedly, notice issued to the members/shareholders in respect of the AGM, to be held on 29.09.2012 alluded to the proposed appointment of Shanmugam, as the Managing Director, on the terms and conditions indicated hereinabove. There is no dispute that the resolution appointing Shanmugam, as the Managing Director, on the terms indicated above, was carried at the AGM, held on 29.09.2012. This is, clearly, discernible from the BOD Meeting held on 02.11.2012. At this meeting, Natarajan was present. Apart from Ethiraj and Shanmugam, Satyajit Prasad, one of the independent Directors, was also present. 45.6. The BOD, at this meeting, confirmed the minutes of its earlier meeting dated 01.09.2012 as well as took on record, the minutes of AGM held on 29.09.2012. 45.7. The aforesaid facts bring out the following: (i) There was no disclosure....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f corporate governance, which are expected of the listed companies. Respondent Nos.1 to 6, however, are aggrieved by the directions contained in the impugned judgment, whereby, the CLB has directed the SVG to seek a ratification from its shareholders qua the BOD resolution passed vis-a-vis the Boat Club Property, so as to ensure that the business transacted was brought within the bounds of law and adhered to the norms of transparency. 46.2. As a matter of fact, respondent Nos.1 to 6 have filed cross objections in that behalf, to which, I have made a reference above. One of the directions, respondent Nos.1 to 6 have sought via their cross objections is that Shanmugam, should be called upon to vacate the Boat Club Property and pay fair rent for the period that the property was illegally occupied. 47. The questions, which arise for consideration are: (i) Has SVG committed infraction of any provision of law ? (ii) Is the direction contained in the impugned order qua calling upon SVG to seek ratification valid ? 47.1. In so far as the first aspect is concerned, as already indicated above, while the disclosure with regard to the property, which was to be given for use to Shanmugam, as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecision, ought not to have participated in the meeting. Therefore, if, the CLB came to the conclusion that the resolution passed at the AGM was unlawful, then, surely, the occupation of the Boat Club Property by Mr.Shanmugam in the interregnum was not valid either. 47.4. It must be conceded, though, that if, everything else was in order, and, if, a fresh resolution was passed by the shareholders, ratifying the decision taken to allow Shanmugam to use the Boat Club Property as his residence, would relate back to the date when the decision, in that behalf, was taken in the first instance. This, however, may be plausible, if, the only defect in resolution so passed pertained to the factum of disclosure of the particulars of the property, which was to be given for use of Shanmugam. As indicated above, it appears, that no exercise was carried out to value the subject perquisite by the Board of SVG. Therefore, the direction issued to SVG to obtain ratification of the shareholders, is not in order. SVG, to my mind, would have to do a de novo exercise, by placing the matter afresh before the shareholders along with the requisite background material. 47.5. In that behalf, the BOD would ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reappointment on the Board of SVG. 48.4. I may only indicate that, in this connection, respondent Nos.1 to 6 have also averred that SVG, upon a compulsory acquisition of the land, located at Bengaluru, ad-measuring 3 acres and 30 guntas, had received a sum of Rs. 70.13 Crores from the Government of Karnataka, which had also approved a further payment of Rs. 88.11 Crores along with interest at the rate of 8% towards balance consideration. The emphasis was, that the use of these funds needed to be safeguarded considering the past proclivity of the controlling group to divert funds to associate entities/companies. 48.5. The submission of respondent Nos.1 to 6 was, given the background, in which, the aforementioned resolution was passed, it is quite possible that the appellants would attempt to divert the monies received from acquisition of SVG's Bengaluru property, to its related entities/concerns, and that, such acts could only be prevented, if, Natarajan, remained as its representative on the Board, as was the case for the past four (4) years. 48.6. In my opinion, the submission of the appellants that apprehension, by itself, can never form the basis of an act of mismanagemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....troduced to the Udayar group, which, at the relevant time, comprised of Late Ramasamy, Nandagopal and Ethiraj. It would be relevant to note that Nandagopal is the brother of Ethiraj. The three gentlemen, apart from Natarajan, were known as the Udayar group, at the relevant point of time. (ii) Natarajan rendered, it appears, advice on financial and taxation matters to the Udayar group. This brought about his proximity with the other two (2) members of Udayar group, apart from Late Ramasamy, that is, Ethiraj and his brother, Nandagopal. (iii) Apparently, an opportunity for investment of funds and acquiring a company arose, in and about, 1987, in the form of Binny Limited. It appears, according to Natarajan, Binny Limited, at that time, as indicated above, was widely held listed company, which had on its Board, nominees of Banks and financial institutions. Natarajan takes the stand that he saw an opportunity to acquire Binny Limited and, accordingly, took the proposal to Late Ramasamy, Nandagopal and Ethiraj. The result was that the controlling interest in the company, i.e., Binny Limited, was acquired, and in fact, the stand of Natarajan is that he had provided a sum of Rs. 14.00 l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....take over Binny Limited was identified by Ethiraj and Late Ramasamy, and that, this aspect was discussed with one Mr.Venkitaraman, former RBI Governor. It is further averred that it was at his instance, that Natarajan was taken in as an adviser, only to acquire ownership and control of Binny Limited. 49.6. Furthermore, respondent Nos.1 to 6 aver in their Company Petition that along the way the net worth of Binny Limited got eroded, which led to filing of a reference with BIFR, in and about 1992. While, the reference was pending before the BIFR, a Scheme of rehabilitation was preferred, which required infusion of funds. The new co-promoters, who could invest funds, were identified by Natarajan. Consequently, an MOU dated 21.12.1993 was executed between the existing promoters, which included Natarajan and the newly inducted co-promoters. As a result of which, according to respondents No.1 to 6, funds to the tune of Rs. 60.00 Crores in the form of equity and loan were invested in Binny Limited. 49.7. It is also the stand of respondent Nos.1 to 6 that the new co-promoters decided to opt out of Binny Limited and, accordingly, an MOU was executed on 08.05.1996 to freeze the terms of ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... demonstrated, based on the Information Memorandum, filed by SVG that he has been shown as a Promoter. Therefore, Natarajan submits that, when, a decision was taken at the BOD Meeting held on 04.08.2014 to seek reappointment, it was a given that the controlling group would vote in his favour at the AGM to be convened on 26.09.2014. 50.2. Natarajan, thus, takes the stand that it is, in this background, that respondent Nos.1 to 6 cast a favourable vote on a similar resolution concerning, Ethiraj's reappointment, albeit, via electronic means. Natarajan says that, given the background that he had all along been a stake holder, i.e., a partner in the ventures undertaken by the other three persons, i.e., Late Ramasamy, followed by Venkatachalam, M.Nandagopal and Ethiraj, his non-renomination, which, in substance amounted to removal from the Board was an act of oppression. Natarajan says that the association with the aforementioned persons was, in substance a partnership and that, he had, therefore, neither sought nor received any remuneration for the services that he had offered, first to Binny Limited and, then to SVG. 50.3. Having regard to the material on record, I am of the vie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndia) Holdings Limited, AIR 1981 SC 743 and M.S.D.C.Radharamanan V. M.S.D.Chandrasekara Raja and another, (2008) 6 SCC 750). 51.1. As regards the other two (2) aspects, what is required to be borne in mind is that, in the Petition the reliefs sought for are many and varied. Amongst many reliefs sought, there is a prayer made for residuary relief as well, which is generally asked for by litigants, particularly in a petition preferred under Sections 397 and 398 of the 1956 Act, which is that, the CLB may grant any other relief that it may deem necessary. It is not unknown to law that where litigants ask for reliefs, which have a wide ambit, the Tribunal/Courts modulate the reliefs, depending on the jurisdiction, in which, they operate and the power vested upon them in law. To cite an example, while in a Writ Petition and, in an action of a present kind, where Courts/statutory authorities employ equitable jurisdiction, there is latitude available, within the realm of law, to modulate, fashion and forge a relief, which according to it, would ultimately meet the ends of justice. Such a power, perhaps, a Court may not exercise (and I am not foreclosing the possibility altogether), say f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... letter dated 01.10.2014, addressed to Natarajan. The extract of the same, has already been set forth, in my discussion above. 51.5. Having said so, one needs to closely examine as to whether CLB ought to have directed SVG to purchase the shares of Natarajan, in the facts and circumstances of the case, if the controlling group failed to do so. 51.6. In my view, the direction should have been restricted to the controlling group, and that, it ought not to have extended it to SVG. The reason why I say so, is that, the battle for control, and/or representation on the Board of SVG obtained between the controlling group and the Natarajan block. As discussed above, Natarajan was, contrary to what is sought to be portrayed by the appellants, a part of the promoter group and not a mere adviser. Therefore, if, the appellants were desirous of obtaining greater control of SVG, so that, they could have a further "play in the joints", both at the Board level and in the shareholders forum, i.e., meetings, the CLB should have called only upon them to buy the interest of some one like Natarajan to the exclusion of all others including SVG. The public shareholding in the SVG is a reality, which th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es through upon examining a long corporate history of nearly 27 years, spanning between 1987 and 2014. The understanding and trust, which had remained steadfast for nearly three decades was breached, when, Natararajan was not renominated to the Board of SVG. (v) Fifth, the nature of the relationship between Natarajan and the controlling group cannot be given a short shrift by labelling it as "Directorial complaint". While, in isolation, one cannot, but agree, that corporate democracy and shareholders will must prevail these principles need to be tested in the context of facts and circumstances obtaining in each case. Bereft of context, a grievance regarding failure to obtain renomination to the BOD may seem like a Directorial Complaint. (vi) Sixth, the appellants, in my view, cannot use the "Directorial Complaint" argument or even the argument that it is a limited company having public shareholders to deny the Natarajan block its right to sit on the high table, that is, the BOD. When these arguments are put to scrutiny, what does come through, starkly, is that the public shareholders, which approximately, number 9014 are dispersed and, the company, i.e., SVG is run, in substance,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he concept of deadlock need not to be looked at in absolute terms. In my view, any issue, which creates an impediment or a possibility of a logjam in the smooth functioning of the company in the foreseeable future, is an aspect, which ought to be factored in, while examining the tenability of an action instituted under Section 397 and 398 of the 1956 Act. The majority shareholders will always allude to the argument that, since, they have the requisite numbers, whether in terms of shares or members on the Board that they can run the company without a hitch; an argument, if, accepted, would actually mean, that the Court would then give legal credence to the submission that they could run rough shod over the minority. Running of the company requires inclusiveness, which is intrinsic part of any democratic process and cannot, to my mind, be any different, where corporate jurisprudence or governance is involved. 52.1. Therefore, in substance, I find no difficulty in CLB coming to the conclusion that there would be impediments in running the affairs of SVG, as indicated above, and therefore, perhaps, as against the use of the expression "practical deadlock", some other expression, which....