TaxTMI 
TaxTMI 
2017 (7) TMI 460
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....: Mr.T.K.Seshadri, Senior Counsel for M/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 "controll....
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....ice of the shares held by Natarajan block should be determined 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: Co....
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....d cover to this Hon'ble Court and direct that the sealed cover not to be opened pending 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 co....
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....res was carried out and a report was, accordingly, submitted by the designated Chartered Accountant, who, in turn, 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....
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....nded by way of loan, which was both unsecured and interest free. Natarajan, however, claims that it was his intercession in the matter, which led 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....
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....s 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. 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 note....
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....convene an AGM on 26.09.2014. 12.2. Since, Natarajan along with Ethiraj, albeit, in the normal course, were to retire by rotation, the notice issued to the members convening the AGM on 26.09.2014, inter alia, indicated 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, Ethir....
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....Petitions (SLPs), against the order dated 27.04.2015, passed in Company Appeal Nos.13 and 14 of 2014. The SLPs were filed on 10.08.2015. Apparently, on 24.08.2015, when, the SLPs came up for hearing, the same were not pressed 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 ....
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....lic listed company, having 9014 shareholders; that there was nothing in the Articles of Association or by way of an agreement between the contesting parties regarding representation on the Board of SVG by a nominee of respondent Nos.1 to 6; that no 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....
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.... which is an inalienable right of a shareholder cannot be emasculated, simply because e-voting process was put in place, which was not accessed by the controlling group to cast votes at the AGM. Disregarding the votes cast by nearly 57% of the shareholders, albeit, 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 bus....
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....alam. Therefore, the claim of Natarajan that he had partnered the aforementioned persons in running the affairs of Binny Limited or other entities is false. Natarajan, neither exposed himself to any financial risk, nor, was he involved in the day-to-day management of SVG. 15.1. 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 ....
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....ontrolling interest in Binny Limited, in and about 1987. The other persons, according to the learned Senior Advocate, who were concerned with the acquisition of controlling interest in Binny Limited, were Late Ramasamy, Nandagopal, Ethiraj and Natarajan. The fact that these four (4) persons had come together, was based on their 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 Limit....
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....hat part of the scrutiniser's report, which refers to paper ballot, would the resolution seeking reappointment of Natarajan, as the Director of SVG, be shown as having been failed. 17.8. Furthermore, learned counsel submitted that the evidence of mismanagement of the affairs of SVG was evident from two clear instances: First, the instance 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....
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....llowing judgments: (i).Cosmosteels Private Limited V. Jairam Das Gupta and Others, (1978) 1 SCC 215; (ii).In Re Yenidje Tobacco Company Limited [1916] 2 Ch 426 (iii). Loch v. John Blackwoods Ltd, [1924] AC 783 (iv). Thomson v. Drysdale, 1925 S.C. 311 AIR 197 (v). Ebrahimi v. Westbourne Galleries, 1973 AC 360 (vi). Hind Overseas Pvt. Ltd., v. Raghunath 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 3....
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....the absence of any real and substantial deadlock, the CLB could not have directed either the controlling group or, SVG to purchase the subject shares. Furthermore, Mr.Datar, as indicated in my narration above, laid great emphasis on the fact that valuation could not be carried out by adopting the net asset value method in the case of a going concern. 20.1. I must point out Mr.Venkatavaradan, also, independently advanced submissions, 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 conc....
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....perty and pay the fair rent for the period of illegal occupation. (iii) Direct that the Appellants vacate the office of directorship of the 7th Respondent Company with effect from 01.09.2012, as stipulated in Section 283(1)(i) of the Companies Act, 1956. (iv) Direct that Respondent No.11 be reinstated as a Director of the 7th Respondent Company till such time as the shares of these Respondents are purchased in the manner set out in the order....." 23. In the background 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 discu....
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....artnership and, since, the two Directors/shareholders were constantly quarreling, with no hope of reconciliation, there was a lack of confidence ; an attribute so very necessary to run the business. 25.4. The following observations, made by Court bear this out: "..... The matter does not stop there. It is proved that these two directors are not on speaking terms, that the so-called meetings of the board of directors have been almost a farce or comedy, the directors will not speak to each 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 lik....
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....6 and treated the Public Company as one, which was practically a family concern. The principles of quasi-partnership were applied to the company, and accordingly, the just and equitable clause was used to order its winding up. 27. This principle was also applied in the case of : Thomson v. Drysdale 1925 S.C. 311. 27.1. This was a case , where a private company was formed to run a motor transport services by two (2) persons with a nominal capital of 2,000 pounds divided into shares of one thousand 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 rela....
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.... a fortiori of those cases ; and I therefore answer the question whether it is just and equitable that this two-man company should be wound up in the affirmative. .................. On the other hand, in circumstances like the present, it behoves the shareholder who has the 1501 votes to avoid any conduct which would reasonably lead to the inference that he fails to appreciate the fact that it is his duty to use his voting power in the interests of the company as a whole, and that he must not ignore the interests 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....
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....se of Lords, made several seminal observations. The observations made, being apposite to the facts arising in the instant case, are extracted hereafter, as one cannot encapsulate the law better than that, which is enunciated in the opinion of the Lord Wilberforce : "..... My Lords, in my opinion these authorities represent a sound and rational development of the law which should be endorsed. The foundation of it all lies in the words "just and equitable" and, if there is any respect in which some of the cases may be open 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....
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....as been a pre-existing partnership the obligations of which it is reasonable to suppose continue to underlie the new company structure. But the expressions may be confusing if they obscure, or deny, the fact that the parties (possibly former partners) are now co-members in a company, who have accepted, in law, new obligations. A company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it is through the just and equitable clause that obligations, common to partnership relations, 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....
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....squabbles of the Directors connected with powerful groups. Having said to, the Court made the following observations, which are relevant to the case : "..... 32. When more than one family or several friends and relations together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked. Besides, it is only when share-holding is more or less equal and there is a case of complete deadlock 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 equ....
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.... was also relied upon by the appellants to advance their submissions that no case of quasi-partnership was made out in the instant matter. 30. The judgment rendered by the Supreme Court in Hind Overseas Private Limited (cited supra), which was delivered by a Three-Judge Bench, was followed by another significant judgment of the Supreme Court in Needle Industries and another V. Needle Industries Newey (India) Holdings Limited, AIR 1981 SC 743. Interestingly, this judgment of the Supreme Court was also rendered by a Three-Judge Bench. In Needle Industries, 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 & ....
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....s was the matter, in which two persons by the name of : Dubey and Mehra, came together to form a company. They were the first Directors of the company. While Dubey was appointed as the Managing Director, Mehra was appointed as the Joint Managing Director. It appears that the two fell out. Consequently, Mehra stopped attending Board meetings. The Articles of Association of the company, which provided for the management of its business by Dubey and Mehra for life with equal remuneration, were altered and the post of Joint Managing Director was abolished. In the interregnum, 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. C....
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....and must dismiss the appeal filed by Mehra. ....." (emphasis is mine) 31.5. The point to be noted is that, while relief of winding up was denied on the ground that it was not a quasi-partnership, the powers available under Section 402 of the 1956 were exercised, which were sustained by the Supreme Court. 32. The other case, to which I would refer to is the decision of House of Lords in O'Neill and another V. Phillipis and Others, [1999] UKHL 24. 32.1. This was a case, in which, the House of Lords was called upon to interpret the provisions of Section 459(1), as amended 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 dire....
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....991 the company had the characteristics identified by Lord Wilberforce in In re Westbourne Galleries Ltd. [1973] A.C. 360, as commonly giving rise to equitable restraints upon the exercise of powers under the articles. They were (1) an association formed or continued on the basis of a personal relationship involving mutual confidence, (2) an understanding that all, or some, of the shareholders shall participate in the conduct of the business and (3) restrictions on the transfer of shares, so that a member cannot take out his stake and go elsewhere. I agree. It follows that it would have been 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,....
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.... placed strong reliance, thus, cannot be said to be an authority for the proposition that for no purpose whatsoever the principals of quasi-partnership can be applied to an incorporated company. The real character of the company, as noticed hereinbefore, for the purpose of judging the dealings between the parties and the transactions which are impugned may assume significance and in such an event, the principles of quasi-partnership in a given case may be invoked. 243. The ratio of the said decision, with respect, cannot be held to be correct as a bare proposition of law, as was urged by Mr.Desai, being 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, reiterat....
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....was, in the true sense, a widely held Public Limited Company. As a matter of fact, representatives of banks and financial institution had their nominees on its Board. 35.2. Admittedly, in June 1987/January, 1988, Natarajan was, for the first time, appointed as the Director of Binny Limited. In 1993, the net worth of Binny Limited got eroded. Consequently, in and about 1994, a rehabilitation scheme was sanctioned with the help of new co-promoters. 35.3. However, in 2003, the new co-promoters parted ways, which resulted in some of the assets of Binny Limited, being vested in, Binny Karnataka Limited. Pertinently, all this 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 ROTATI....
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....w. This was also the point in time, when, SVG was incorporated, albeit, virtually as a shell company. This was followed by a demerger Scheme, being floated, which was sanctioned by this Court on 22.04.2010. Consequent to the Demerger, Binny Limited, split into three (3) companies, i.e., Binny Limited (Demerged Company); SVG (Resulting Company No.1) and Binny Mills Limited (Resulting Company No.2). Pertinently, Binny Limited came under the control of the Nandagopal group, SVG came under the sway of Ethiraj group and Binny Mills Limited came to be controlled by the Venkatachalam group. Natarajan, however, enjoyed a unique portion; he, via his constituents, 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 cont....
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....tyajit Prasad. 38.1. Therefore, if, Natarajan was only an adviser and, by this, I gather that he was a Chartered Accountant, who was engaged only to give professional advice, in the ordinary and the usual course of events, he would have normally asked and be paid professional fee and nothing more. In this case, Natarajan continued to hold an equity stake right throughout, at first, in Binny Limited, and, thereafter, in the Resulting Companies as well, i.e., SVG and Binny Mills Limited. Surely, if, Natarajan was a mere adviser, he would not have been shown as a Promoter-cum-Non Executive Director of SVG, right after the sanction of the 2010 Demerger Scheme. 38.2. It is also sought to be argued that, since, 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 ....
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....re of this type, the larger the benefit, the greater the risks. Every co-venturer need not necessarily have the same appetite for the risks involved in a given venture. Arrangement with regard to these aspects depends on mutual understanding arrived at amongst co-venturers. The fact that one person/or block has taken less risk as against the other does not necessarily work against the concept of partnership or quasi-partnership. Therefore, the argument of the appellants that Natarajan take any exposure in the form of financial liability does not, in the facts of this case, advance the cause of the appellants. 38.8. I must indicate herein that during the course of arguments, it was sought to be suggested that Natarajan 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 ....
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....proximately 9014 shareholders. It has been contended by respondent Nos.1 to 6, that the shares held by public at large, are not concentrated in one block. Therefore, between the controlling group and Natarajan, they hold 74% of the shares of SVG. There is also no doubt that the shares of SVG are listed on the BSE. However, it is SVG's own stand before the BSE that it is a "closely held company". This is evident from a bare perusal of communication dated 22.03.2016, which was addressed by SVG to the BSE. Paragraph 2 of the said communication, being relevant, is extracted hereafter. ".... 2. M/s.S V Global Mill Limited is a company incorporated under the Companies Act, 1956, as a result of the demerger sanctioned by the Madras High 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 "infreq....
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.... In my view, it must be understood that the principle of quasi-partnership comes into play in an action preferred under Section 397 and 398 of the 1956 Act, via the provisions contained in clause (b) of sub-section (2) of the very same Section. Sub-section (1) of Section 397 vests a right in any member of a company, who carries a grievance with regard to the manner in which, the affairs of the company are conducted to institute an action. The grievance, in this behalf, could be that the affairs of the company, are run, either in the manner prejudicial to the public interest or in a manner oppressive to any member or members. The CLB, on its part, is given the right to pass such orders, as it think fit, which could bring to an end, the matters complained 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-....
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.... be passed that their passage and/or adoption may become difficult, given the fact that the controlling group has only 55% of the equity stake under their control. This coupled with the fact that even according to the appellants, not only is the 26% public shareholding widely dispersed but that Natarajan block does form a formidable minority interest. Therefore, whether or not, one agrees with the use of the expression 'practical deadlock' one would tend to agree with the CLB that given the relationship between the contesting blocks of shareholders, there could arise situations, where impediments may emerge, which may ultimately impact the smooth functioning of SVG. Issue No.4: 42. Whether the casting of paper ballots by the controlling group at the AGM 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 ....
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....vealed that the resolutions, concerning reappointment of Ethiraj and Natarajan as Directors of SVG qua which votes had been cast via electronic means had been carried. However, the report further indicated that the result of the paper balloting was to the contrary, in respect of the resolution concerning reappointment of Natarajan, as the Director. There is no dispute that the contrary result was achieved because the controlling group, had cast their votes against the resolution, concerning the reappointment of Natarajan. 42.5. The appellants, on their part, have raised several submissions, which would, ultimately, boil down to two (2) broad aspects: First, that while voting by electronic means was made available by SVG, it did not preclude members, who had not cast their vote by 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 pro....
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....t of India, Ministry of Corporate Affairs issued a General Circular No.20/201, whereby, having regard to certain practical difficulties, which were, broadly, adverted to in the circular, it was decided not to treat the provisioning of e-voting facilities, mandatory, till 31.12.2014. The said Circular also carried certain clarifications associated with e-voting. For purpose of the instant matter, the relevant clarifications contained in clauses (1), (2), (6) and (7) are set out hereafter : "(i) Show of hands not to be allowed in case of e-voting:- In view of clear provisions of section 107, voting by show of hands would not be allowable in cases where rule 20 of Companies (Management and Administration) Rules, 2014 is applicable. (ii) Participation in the general meeting after voting by e-means :- 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 sharehol....
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....shareholder's rights, it could not be emasculated by preventing paper ballot voting at the AGM, held on 26.09.2014, when, admittedly, they formed the controlling group and had not cast their vote electronically. 44. According to me, there can be no two opinions about the fact that the shareholder's right to vote, which is a statutory right cannot be taken away and needs to be protected, under all circumstances. That having been said, one needs to differentiate between the subsistence of a right and the manner in which the said right is to be exercised. SVG, after its BOD Meeting of 04.08.2014, had categorically indicated to all its members/shareholders, which included its public shareholders via a notice that in respect of the business to be transacted at the AGM held on 26.09.2014, it offered voting by electronic 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 w....
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....pound that a moralistic approach should be adopted by members/shareholders, while, casting their vote, which is sans economic realities and strategic pursuits, control and corporate goals. Suffice it to say that in so far as this aspect of the matter is concerned, the controlling group was, clearly, in the wrong in casting their vote in the manner, which was contrary to the procedure prescribed by SVG qua one and all. ISSUE NO.:5 45. This brings me to the other aspect, which is whether the decision taken to permit Mr.Shanmugam to use Boat Club Property as his residence was right. 45.1. In this behalf, one notices that at the BOD meeting held on 01.09.2012, a decision was taken to place for approval of the shareholders, the following special business: SPECIAL BUSINESS To consider and, if thought fit, to pass, with or without 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 ....
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....s attended by both Ethiraj and Shanmugam and, Satyajit Prasad, one of the two independent Directors, appointed on the Board of SVG. Natarajan was not present at this meeting. 45.4. Clearly, the BOD, on 01.09.2012, had taken a decision to appoint Shanmugam as the Managing Director of SVG for a period of five (5) years, with effect from 02.04.2012, on payment of proposed salary and perquisites. A ceiling qua salary was fixed, which was Rs. 5.00 lakhs per annum. In so far as the perquisites were concerned, the BOD had proposed to the shareholders that Shanmugam, should be given use of furnished accommodation, "owned" or, "leased" by SVG with attendant facilities, such as, water, gas, electricity and furnishings. The BOD, further indicated that, if no accommodation was provided, then, Mr.Shanmugam, would be entitled to a house rent allowance, subject to a ceiling 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....
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....te disclosure as to the property, which SVG, intended to give for use to its Managing Director. To that extent, the independent Director on the Board, i.e., Satyajit Prasad, to say the least, failed to ask the relevant questions or carry out a due diligence; an expectation, which is, in consonance with the provisions of clause 49(d)(1)(b) of the Listing Agreement. Clause 49(d)(1)(b) requires the BODs', i.e., the top management, to conduct themselves with utmost probity. That the other two persons present at the meeting would not have adhered to the expected standards of probity is given, as they were deeply interested in the subject. What was expected is that, the independent director on the Board would ask searing and relevant questions. 46.1. Quite clearly, this standard was not met by the Board of SVG and, therefore, to that extent, it failed to live up to the standards of 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 P....
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....ging Director is entitled to be provided a furnished accommodation, owned or leased by the Respondent Company and once the property came to be vested in the Respondent Company, it is for the board to decide in relation to the utilisation of its properties subject to the approval of the shareholders in accordance with law. This implies that there is lack of transparency with the shareholders in the matter of allowing the aforesaid high value property to the Managing Director for his residential purpose by passing a resolution in the meeting of the Board of Directors where proper quorum was also not present. (emphasis is mine) 47.3. It would seen that CLB disapproved of the resolution passed at the AGM dated 29.09.2012, on the ground of lack of transparency and lack of proper quorum. The reason, perhaps, was that at the BOD of 01.09.2012, Shanmugam was present, who being interested in the decision, 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 concede....
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....SVG, contend that this instance brought forth in the Company Petition, as an act of mismanagement, was completely unsustainable, as it was based on a mere apprehension. Furthermore, it was submitted that it is not, as if, under law, companies are barred from entering into transactions with related-third parties, the only stipulation being that such a transaction should meet the prescribed norms, stipulated in that behalf. 48.3. In this behalf, the provisions of Sections 188 and 185 read with relevant rules, were cited. It was further submitted that there had not been a single instance, between 2010 and 24.09.2014, where an issue had been raised by Natarajan, with regard to diversion or misuse of funds. It was further submitted that the contention of respondent Nos.1 to 6 that only Natarajan could safeguard their interest was not sustainable, as the shareholders had not approved the resolution seeking his 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....
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....een acting in a manner, which was harsh, burdensome and wrongful. This could, perhaps, have an impact on the charge relating to oppression, where, equitable considerations could outweigh legality. Therefore, while, it would be difficult to conclude that the appellants had acted contrary to law in merely passing the resolution under Section 372A of the 1956 Act, this could lend weight to the charge levelled by the minority shareholders that this resolution has the portents of an unfair and prejudicial act. ISSUE NO.:7 49. Which brings me to the last aspect of the matter, as to whether the charge of oppression is made out. 49.1. This, in one sense, is the essence of the Company Petition, which was moved by respondent Nos.1 to 6 before the CLB. The entire burden of the said petition filed by respondent Nos.1 to 6 was, broadly, as follows: (i) Natarajan, who was a Chartered Accountant, with a thriving practice, got introduced 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 ....
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.... in fact, funds had been provided to him via two (2) entities, associated with Ethiraj. These entities being: Swadesimitran Limited and Swadesimitran Printers Private Limited. It is averred that the monies had been provided to respondent Nos.1, 2, 4 and 5. According to the appellants, each of these four (4) respondents, except respondent No.2, were given a sum of Rs. 42.00 lakhs, albeit, by way of loan, while respondent No.2 was advanced a sum of Rs. 42.50 lakhs. This loan was advanced in 1992, which, according to the appellants, has not been repaid by Natarajan to date. 49.4. I must only indicate herein that the appellants have not dilated upon the fact as to how the aforementioned entities, which provided funds to Natarajan were related to Ethiraj. Furthermore, it is not made clear as to why no recovery of the funds said to have been furnished by way of loan was initiated. 49.5. Furthermore, the appellants submit that the opportunity to 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 advi....
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....tely 19% in each of the three (3) companies. The other persons, i.e., Venkatachalam, son of Late Ramasamy, M.Nandagopal and Ethiraj owned and/or controlled nearly 55% of equity stake in each of the three companies, referred to above, without the handicap of cross holding by any other group. The only exception to this was, Natarajan, who, as indicated above, was given a stake in each of the three companies. 50.1. Natarajan says and a fact, which is evident from the record that upon the sanction of demerger in 2010, he was appointed as Director on the Board of SVG, which, otherwise, stood incorporated, albeit, as a shell company in 2007. Natarajan, based on the regulatory filings and the Annual Reports, seeks to demonstrate that he was shown as a promoter and continued to be a Director, on, firstly the Board of Binny Limited; a position, which obtains to date, and thereafter, upon a second demerger, on the Board of SVG. Natarajan, as indicated above, has 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 wa....
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....st aspect relates to the objection taken by the appellants as regards such a relief being granted, inter alia, on the ground that no such prayer was made in the Company Petition. The second aspect relates to whether such a direction could be issued to SVG. Inter related to these aspects is the general objection raised by the appellants that, in any event, such a direction was not called for, in view of the findings rendered in the impugned judgment that the relationship between them, i.e., controlling group and Natarajan was not in the nature of a quasi-partnership. This objection, I have already dealt with and, therefore, I do not wish to go over this aspect again. Suffice it to say, courts have, time and again, reiterated that even where an action under Sections 397 and 398 fails, a Court can, in order to do substantial justice between contesting parties, direct purchase of shares of the aggrieved party (Needle Industries and another V. Needle Industries Newey (India) 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 ....
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....o law, as has been suggested by the appellants. As a matter of fact, the narration of events, as set forth hereinabove, would show that it is the appellants' case, both in correspondence exchanged between the contesting parties and in the pleadings filed before the CLB that Natarajan had, according to them, agreed to sell in 2007, his equity stake, held by him in Binny Limited, Binny Mills Limited and SVG, for a total sum of Rs. 50.00 Crores. According to the appellants, Natarajan reneged on the promise. The appellants go on to state that this offer was reiterated in 2013, when, based on the understanding reached in 2007, they offered to pay, approximately, Rs. 16.66 Crores to purchase Natarajan block's stake in SVG. 51.4. Therefore, even on facts, one cannot find fault with the direction issued by CLB, which compels the controlling group to purchase Natarajan's shares. In this behalf, one may have to go, no further than, peruse the contents of Ethiraj's 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 ....
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.... (ii) Second, the principle of "quasi-partnership" or "in substance a partnership" would apply to the relationship, which subsisted in the first instance, amongst Late Ramasamy, Ethiraj, M.Nandagopal and Natarajan, and after, the death of Ramasamy amongst his son Venkatachalam and the other three gentlemen. (iii) Third, Natarajan, admittedly, did not receive any professional fee. He clearly discharged functions as Director entrusted to him, first on behalf of Binny Limited and, thereafter, on behalf of SVG as well. Over the years, it appears from the record, an understanding was reached between the persons referred to above, that they would have a representative each on the BOD of the concerned company/companies, as the case may be. (iv) Fourth, though there was clearly no written agreement in place an understanding built on trust had been forged, which required each side to ensure the appointment of the nominee of the other side on the Board of the concerned company. This facet comes 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 breache....
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....sued by the CLB on that score, which, in its own wisdom, has tried to do substantial justice between the contesting parties, by compelling the controlling group to purchase the shares of the Natarajan block. This power, as held hereinabove by me, was rightly exercised by the CLB, save and except to the extent it directed SVG to purchase the shares, upon failure of the controlling group to do so. To my mind, this power was available to the CLB, contrary to what has been argued by the counsels. (See : paragraph 51 above). (vii)(a) Therefore, the CLB's endeavour to unlock the asset of the Natarajan block, which has stayed the course along with other co-venturers for nearly three decades, in the given facts and circumstances, does not call for interference, as it is both fair and equitable. (viii). Eighth, the deadlock, as indicated above, need not necessarily be an ingredient of 397 and 398 action. It is only one of the circumstances in which, such an action can be brought to Court. Besides, the 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 compa....
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....ntrolling group should be called upon to purchase the shares of respondent Nos.1 to 6. 56. I must note herein that arguments were advanced on behalf of SVG by Mr.Arvind P.Datar, learned Senior Advocate that net asset method would not be the appropriate method to value the shares of SVG; an objection, which, in a sense, has been taken care of, as the subject shares, have now been valued by Brahmayya & Co., by taking recourse to every known and recognised method involving valuation of shares. 57. To ensure that there is a compliance, the Controlling group and/or its constituents are injuncted from selling, transferring or creating third party interest, qua their shareholding in SVG, till further orders of the NCLT, and in case, a charge or interest has already created by the controlling group, vis-a-vis their equity stake in SVG, the protem charge so created by this direction will stand subordinated to any such prior charge or interest. SVG is also injuncted from registering or recording any request for transfer of shares which are owned or controlled by Ethiraj and Shanmugam and/or its constituents except with the prior permission of NCLT. 57.1. Furthermore, pending the com....